-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J9hKF76X9x/jph/BTenCT4di4kpy6FwQB3oeWs+DGoiouaJn/jAQjBRzo4H2ij2B 4f/IHR0hzD6PEC1LccfiTA== 0001047469-98-045049.txt : 19990101 0001047469-98-045049.hdr.sgml : 19990101 ACCESSION NUMBER: 0001047469-98-045049 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNTHETIC INDUSTRIES INC CENTRAL INDEX KEY: 0000809803 STANDARD INDUSTRIAL CLASSIFICATION: 2200 IRS NUMBER: 133397585 STATE OF INCORPORATION: GA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-28914 FILM NUMBER: 98775455 BUSINESS ADDRESS: STREET 1: 309 LAFAYETTE RD CITY: CHICKAMAUGA STATE: GA ZIP: 30707 BUSINESS PHONE: 7063753121 MAIL ADDRESS: STREET 1: 309 LA FAYETTE ROAD CITY: CHICKAMAUGA STATE: GA ZIP: 30707 10-K 1 FORM 10-K - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K FOR ANNUAL AND TRANSACTION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 33-11479 ------------------------ SYNTHETIC INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 58-1049400 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 309 LAFAYETTE ROAD, CHICKAMAUGA, GEORGIA 30707 (Address of principal executive offices) (Zip Code) (706) 375-3121 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON WHICH TITLE OF CLASS REGISTERED -------------------------------------- -------------------------------------- None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $1.00 PAR VALUE (Title of Class) Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ At December 22, 1998, the aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant was approximately $48,851,000. The number of shares of the Registrant's Common Stock outstanding as of December 22, 1998 was 8,672,382 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held in March 1998 are incorporated by reference in Part III. - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL Synthetic Industries, Inc., a Delaware corporation (the "Company"), manufactures and markets a wide range of primarily polypropylene-based materials designed for support, strength and stabilization applications. The Company's products replace commonly used materials in diverse applications including: floor covering, geotextiles, erosion control, concrete reinforcement and furniture construction fabrics. The Company manufactures and sells more than 2,000 products in over 65 end-use markets predominantly in North America, Europe and the Far East. The Company's products are sold along three principal product lines: carpet backing, construction and civil engineering products, and technical textiles. The Company has a worldwide presence in carpet backing, a fabric used in all modern tufted carpets, and is one of the two leading manufacturers in the U.S. that produce a broad range of primary and secondary carpet backing. The Company's construction and civil engineering products include fiber additives for concrete reinforcement and geosynthetic products used in environmental and infrastructure applications, with such end uses as landfill waste containment and soil stabilization. The Company's technical textile products are comprised of specialty fabrics, industrial yarns and fibers used in furniture and bedding construction and filtration applications. The Company's products are principally sold through direct sales to customers by the Company's sales force and through a broad network of distributors located across North and South America, Europe and the Pacific Rim. HISTORY The Company was founded in 1969 to produce polypropylene-based primary carpet backing. Following the acquisition of the Company in 1976 by a group of private investors, the Company diversified into the manufacture and sale of polypropylene-based industrial fabrics and specialty yarns. Between 1981 and 1983, the Company entered the construction and civil engineering products market, initially by manufacturing woven geotextiles and later through its introduction of Fibermesh-Registered Trademark- fibers for concrete reinforcement. In 1985, the Company added secondary carpet backing to its product offerings. In fiscal 1991, the Company purchased a technical synthetic fabrics operation located in Gainesville, Georgia, from Chicopee, a subsidiary of Johnson & Johnson. In addition to broadening the Company's line of geotextile products, the acquisition gave the Company access to new markets for high performance technical textiles. As a result of improved fiber technology and increased fiber manufacturing capabilities, the Company opened its sixth facility, the nonwoven geotextile plant in Ringgold, Georgia, in 1992, enabling the Company to offer a full line of geotextile products. In 1997, the Company acquired certain assets of the Spartan Technologies division of Spartan Mills (the "Spartan Acquisition"), to enhance the product offering of its furniture and bedding construction line and expand the use of polyester materials in its nonwoven products. On March 18, 1998, as amended November 20, 1998, the Company acquired all of the outstanding shares of Novocon International, Inc., a manufacturer and marketer of steel concrete reinforcing fibers, for $7.3 million (the "Novocon Acquisition"). Synthetic Industries L.P. (the "Partnership") acquired the Company in December 1986. Immediately prior to the November 1, 1996 completion of the Offering (as defined below), all of the issued and outstanding capital stock of the Company (5,781,250 shares), was owned by the Partnership. SI Management L.P. (the "General Partner") is the sole general partner of the Partnership. Synthetic Management G.P. is the sole general partner of SI Management L.P. By virtue of these relationships, Synthetic Management G.P. controls the management and affairs of the Partnership and, therefore, the Company. See "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions". 2 On November 1, 1996, the Company sold 2,875,000 shares of common stock in an underwritten public offering (the "Offering"). The net proceeds to the Company from the sale (after payment of underwriting discounts and commissions and expenses) were $33,681,000. Employees, officers and directors have been granted options to purchase an additional 10% of the Common Stock on a fully diluted basis. The Company's principal executive offices are located at 309 LaFayette Road, Chickamauga, Georgia 30707, and its telephone number is (706) 375-3121. PRODUCTS The Company develops, manufactures and sells a wide array of polypropylene-based industrial fibers and fabrics along its three principal product lines: carpet backing, construction and civil engineering, which comprises environmental/geotextile products and concrete reinforcement products, and technical textiles. The Company manufactures five basic yarn and fiber types, from which approximately 2,000 products are manufactured to serve in excess of 65 end-use markets. The following table sets forth the Company's net sales attributable to each product line, and the percentage of total net sales represented by each, for the past five fiscal years:
YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------------------------------- 1998 1997 1996 1995 -------------------- -------------------- -------------------- -------------------- (THOUSANDS OF DOLLARS) Carpet Backing..................... $ 168,998 45.8% $ 166,219 48.1% $ 146,491 48.9% $ 133,025 49.0% Construction/ Civil Engineering.... 128,318 34.8 114,611 33.2 97,043 32.4 82,933 30.6 Technical Textiles................. 71,680 19.4 64,742 18.7 55,998 18.7 55,469 20.4 --------- --------- --------- --------- --------- --------- --------- --------- Net Sales.......................... $ 368,996 100.0% $ 345,572 100.0% $ 299,532 100.0% $ 271,427 100.0% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 1994 -------------------- Carpet Backing..................... $ 117,791 50.1% Construction/ Civil Engineering.... 68,706 29.3 Technical Textiles................. 48,480 20.6 --------- --------- Net Sales.......................... $ 234,977 100.0% --------- --------- --------- ---------
CARPET BACKING Carpet backing is the Company's oldest and largest product line consisting of primary and secondary fabrics in a variety of styles and widths that are manufactured from polypropylene raw materials. Primary carpet backing is a tightly woven material into which carpet yarn is tufted in the manufacture of broadloom floorcoverings. Secondary carpet backing, which forms the base of the carpet, is the coarser woven fabric that is laminated to the back of tufted broadloom to insure both carpet integrity and dimensional stability. In addition to its broad range of primary and secondary backing, the Company produces SoftBac-TM-, a revolutionary carpet backing system co-developed with Shaw Industries, Inc. ("Shaw"), the Company's largest customer. SoftBac is a soft, flexible carpet backing with a "fleecy" texture that makes it easier to handle and provides for more efficient installation. Along with the ease of handling, SoftBac requires fewer seams since it can bend and fold through problem areas such as tight corners, passageways and closets. The Company entered the modular carpet tile backing market in February 1997 through the Spartan Acquisition. CONSTRUCTION/CIVIL ENGINEERING The Company's construction and civil engineering product line offers two distinct product lines to the construction industry: geosynthetic products and concrete reinforcement fibers. Construction and civil engineering has achieved rapid growth since 1993 when the Company enhanced its channels of distribution for Fibermesh-Registered Trademark- and expanded into the production of nonwoven geotextiles. In 1998, the Company introduced high performance polypropylene fibers and completed the Novocon Acquisition, broadening the polypropylene product line to include steel fibers for reinforced concrete. Within this product line, geotextile products principally serve the environmental and infrastructure markets, with end uses such as landfill waste containment, erosion control and soil stabilization, separation and reinforcement. Fibermesh-Registered Trademark- and Novocon provide reinforcement of conventional and pre-cast concrete. 3 GEOSYNTHETIC PRODUCTS. The Company's geosynthetic product line consists of erosion control fabrics, geotextiles, and soil fibers. These products control erosion and capture sediment; provide filtration, separation and reinforcement of soils; improve engineering properties of native soils; protect landfill liners; and extend pavement life. The specifications of the Company's geosynthetic fabrics and fibers vary depending on specific site conditions, including such factors as slope angles, water flow velocities, climate, runoff, soil profile and ultimate land use. The Company's geosynthetic products generally comply with state agency guidelines pertaining to geosynthetic products issued to date. The Company produces a variety of nonwoven and woven geotextiles for use in landfill, roadway and mining construction. The Company's LANDLOK-Registered Trademark- erosion control products are used in storm water drainage channels, steep slopes and shoreline protection. These products hold the soil in place, while allowing and supporting vegetative growth. LANDLOK-Registered Trademark- products are an environmentally friendly and aesthetically pleasing alternative to rock or concrete erosion control methods. CONCRETE REINFORCEMENT. The Company pioneered the practical use of polypropylene fibers as a secondary reinforcement for concrete with the development and introduction of Fibermesh-Registered Trademark- to the concrete industry in 1983. With the Novocon Acquisition, the Company now offers both steel fibers for primary reinforcement and Fibermesh-Registered Trademark- polypropylene fibers for secondary reinforcement and plastic shrinkage crack minimization. The addition of Fibermesh-Registered Trademark- polypropylene fibers to concrete inhibits the formation of early cracking while providing greater impact, abrasion, and shattering resistance from external forces. The hardened fibrous concrete has lower permeability and a level of toughness (residual strength) not found in plain concrete. Primary applications for Fibermesh-Registered Trademark- are residential and commercial slabs, elevated decks, pre-cast products, shotcrete tunnels, canals and pools, and whitetopping restoration of deteriorated asphalt pavements and parking areas. Specific applications for Novocon's steel fibers include industrial slabs on grade, airport runways, blast resistant structures, and road and water tunnels. TECHNICAL TEXTILES Technical textiles produced by the Company are products and systems that offer high performance solutions for niche markets consisting primarily of specialty fabrics, industrial yarns and fibers. The specialty fabrics are manufactured in a variety of widths, weights, permeability ranges and dimensional configurations primarily from polypropylene and other synthetic fibers. Customers use these fabrics to manufacture products used in diverse applications such as furniture and bedding construction, filtration, and agriculture. Furniture and bedding construction products consist of woven and nonwoven decking and padding, mattress ticking, dust covers, spring insulators and flange materials. The Company also sells its industrial yarns and fibers directly to weavers, knitters, and non-woven manufacturers who produce niche market products such as automobile upholstery and air and water filtration media. MARKETING AND SALES CARPET BACKING. The Company sells its carpet backing products to 91 customers in the carpet industry, most of whom are carpet manufacturers located in the United States. In fiscal 1998, the Company's ten largest carpet backing customers accounted for approximately 85% of its total net sales to the carpet industry. In fiscal 1998, sales to Shaw accounted for approximately 53% of net carpet backing sales and approximately 25% of the Company's total net sales. Shaw is estimated to have 28% of the United States carpet market. The Company's carpet backing products are sold primarily through the Company's sales force that is directed from a central sales office in Calhoun, Georgia. All of the sales managers have significant industry experience and monitor ongoing product requirements, styling changes and competitive trends affecting their customers. 4 CONSTRUCTION AND CIVIL ENGINEERING. The Company's broad product line is marketed in conjunction with its industry expertise in application and material engineering, as well as expertise in construction design and installation, as cost effective, longer lasting alternatives to traditional construction methods. Its ongoing marketing communications program for owners, architects, specifying agencies, including both the public and private sectors, and the engineering community as a whole, is designed to continue to build awareness of both product capabilities and in-house and technical expertise, and to expand interest in and use of concrete reinforcing fibers and geosynthetics. The Company's geosynthetic products are sold primarily in North America to regional and national distributors, installers of landfill liners and various governmental transportation departments, port authorities and waterway commissions. International sales, which comprise approximately 8% of geosynthetic sales, are sold through worldwide distribution networks. In fiscal 1998, the ten largest geosynthetic product customers accounted for approximately 61% of the Company's total net sales in this product line. Fibermesh-Registered Trademark- and Novocon concrete reinforcing fibers are sold through a direct sales force to ready-mix concrete companies and precast concrete product manufacturers located primarily in North America and the United Kingdom. The sales force operates out of eleven regional offices in the United States and in Chesterfield, England. In addition, Fibermesh-Registered Trademark- is sold through a contract with Master Builders, Inc., a worldwide leader in concrete technology. Internationally, in addition to the United Kingdom sales force, construction industry product distributors market concrete reinforcing fibers in over 50 countries. In fiscal 1998, the ten largest concrete reinforcing fiber customers accounted for approximately 12% of the Company's total net sales of this product line. TECHNICAL TEXTILES. The Company sells its specialty fabrics to a diverse group of approximately 400 manufacturers located primarily in North and Central America and the Pacific Rim countries. The Company sells its industrial yarns and fibers to a diverse group of approximately 100 manufacturers located in North America and Europe. In fiscal 1998, the Company's ten largest technical textile customers accounted for approximately 25% of the Company's total net sales of technical textiles. The Company's technical textiles are marketed by salespersons through sales offices in Gainesville and Calhoun, Georgia, Hickory, North Carolina, Tupelo, Mississippi and Chesterfield, England. COMPETITION The markets for the Company's products are highly competitive. In the manufacture and sale of carpet backing, which represented approximately 46% and 48% of the Company's total sales in fiscal 1998 and 1997, respectively, the Company competes primarily with Amoco Fabrics and Fibers Co. ("Amoco") and certain other companies. Amoco has the dominant position in the carpet backing market worldwide. In the United States, only the Company and Amoco produce a broad range of primary and secondary carpet backing in a variety of styles and widths. The Company competes in the carpet backing market primarily on the basis of quality, availability, service, price and product line variety, providing carpet manufacturers with a reliable alternative source of supply to Amoco. In the manufacture and sale of the Company's other products, the Company generally competes with a number of other companies, some of which are significantly larger and have substantially greater resources than the Company. The Company's primary competitors in the construction and civil engineering market are Amoco and T.C. Mirafi Corporation with respect to geotextiles, North American Green, Inc. with respect to environmental and erosion control products, and W.R. Grace & Co., which markets but does not manufacture concrete reinforcement fibers, with respect to concrete reinforcement. The Company competes in the concrete reinforcement fiber market primarily on the basis of product design and technical service. In some applications, Fibermesh-Registered Trademark- and Novocon steel fibers also compete with welded wire fabric on the basis of product performance and cost. The Company competes in the construction and civil engineering market on the basis of product line breadth and quality, price, and the custom design, engineering and other services it provides to customers. With respect to technical textiles, 5 competitors vary depending upon the specific market niche. The Company competes in each segment of the technical textiles market primarily on the basis of service, quality, innovation and product line variety. MANUFACTURING PROCESS Polypropylene, a chemically inert plastic derived from petroleum, is the basic raw material used in the manufacture of primarily all of the Company's products today. The Company believes it is a technological leader in the conversion of polypropylene into woven and nonwoven polypropylene products. The expertise of the Company's research and development and marketing staff has enabled the Company to develop innovative products, frequently in response to specific customer needs. Woven fabrics are produced by interlacing thousands of strands of extruded yarn at right angles to one another. The manner in which the yarn is interlaced determines the type of weave. Woven fabrics are characterized by strength and dimensional stability. The Company's woven fabric products include primary and secondary carpet backing, geotextiles, erosion control fabrics and specialty fabrics for the filtration, construction and agricultural markets. Nonwoven fabrics are produced by first stacking several layers of webbed short length fibers and then entangling the layers by punching barbed needles through the layers. The Company's nonwoven fabric products include geotextiles, erosion control fabrics, furniture and bedding construction fabrics and spill control fabrics. The Company believes that it has state-of-the-art manufacturing capability in both its woven and nonwoven product lines and is one of the most cost-efficient producers in the markets in which it participates. The Company's three primary manufacturing processes are extrusion, weaving and needlepunched nonwovens. EXTRUSION. Much of the Company's expertise has been developed in its extrusion processes. Engineering the polymeric raw materials during the extrusion process creates many of the product's specification properties. In addition to yarns and fibers for conventional end-uses, the Company has also developed value-added products through the use of additives including those that resist sunlight degradation. The Company owns and operates several of the world's largest polypropylene staple fiber lines. Most of the Company's extruded products are consumed internally and become value-added woven and nonwoven fabrics, but some are sold to weavers, knitters, nonwoven producers and convertors. WEAVING. The yarns produced in the Company's extrusion and yarn spinning operations are woven on looms to produce the wide variety of fabrics that the Company sells through all of its marketing divisions. Fabric properties are engineered to industry specifications by altering constituent yarns and weave patterns. Looms are generally interchangeable to weave carpet backing, geotextiles and certain agricultural fabrics. NEEDLEPUNCHED NONWOVENS. The Company has a state-of-the-art needlepunched nonwoven fabric facility. This modern plant produces a new generation of engineered cost-effective fabrics for the geotextile, furniture and bedding construction and chemical spill cleanup markets. The Company maintains a complete rigorous quality control program centered on statistical process control and customer key measures. Each stage of the process from the raw material to the final product is monitored using standard procedures and test methods which satisfy the quality control and consistency standards of ISO 9002 established by the International Standards Organization. In 1997, the Company received ISO 14001 certification for complying with internationally recognized environmental standards-- one of the first companies in the United States to achieve such certification. The Company's production equipment is capable of manufacturing a variety of woven and nonwoven polypropylene products. This versatility enables the Company to alter the product mix within its woven and 6 nonwoven product lines in response to market demand or to take advantage of specific product opportunities. The Company's plants are run on a continuous 24-hour per day basis, seven days a week, 350 days per year. Orders are typically filled from inventory. RESEARCH AND DEVELOPMENT The Company's research and market development is focused primarily on development and as such the Company engages in product design, development and performance validation to improve existing products and to create new products. The Company expended approximately $8.1 million (approximately 2.2% of sales) and $4.2 million (approximately 1.2% of sales) on Company-sponsored research and market development activities in fiscal 1998 and fiscal 1997, respectively. INTERNATIONAL OPERATIONS The Company conducts its foreign sales operations through subsidiaries in Europe and a network of distributors worldwide. The aggregate sales (principally of construction and civil engineering products) by such foreign subsidiaries and marketing divisions were approximately $8.0 million, $6.6 million, and $5.5 million in fiscal year 1998, 1997 and 1996, respectively. International sales from United States operations were approximately $27.0 million, $30.1 and $26.0 in fiscal year 1998, 1997 and 1996, respectively. Total international sales were approximately 9.4%, 10.6% and 10.5% of net sales for fiscal 1998, 1997 and 1996, respectively. RAW MATERIALS Polypropylene, which is a petroleum derivative, is the basic raw material used in the manufacture of substantially all of the Company's products. The Company currently purchases polypropylene in pellet form principally from five suppliers, with Fina Oil & Chemical Company being the Company's largest supplier of polypropylene. These purchases are generally made pursuant to long-standing arrangements. REGULATION The Company is subject to federal, state and local laws and regulations affecting its business, including those promulgated under the Occupational Safety and Health Act and by the Environmental Protection Agency or similar state agencies. Many of the Company's construction and civil engineering products have applications that are subject to building code association guidelines and specifications and highway department guidelines. Obtaining the necessary approvals can delay new product introductions in some areas. Moreover, the enactment of new legislation or the issuance of new guidelines may require the Company to modify its existing geotextile and erosion control fabric products and may also delay the Company's introduction of new geotextiles and erosion control fabric products. The Company's expenditures to date in connection with such federal, state and local laws and regulations have not been material to its operations. The Company believes it is currently in substantial compliance with applicable governmental regulations. ENVIRONMENTAL COMPLIANCE The Company is subject to a broad range of federal, state, and local laws and regulations relating to the pollution and protection of the environment. Among the many environmental requirements applicable to the Company are laws relating to air emissions, wastewater discharges, and the handling, disposal or release of solid and hazardous substances and wastes. Based on continuing internal review and advice from independent consultants, the Company believes that it is currently in substantial compliance with applicable environmental requirements. 7 The Company is also subject to laws, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), that may impose liability retroactively and without fault for releases or threatened releases of hazardous substances at on-site or off-site locations. The Company is not aware of any releases for which it may be liable under CERCLA or any analogous provision. Actions by federal, state, and local governments in the United States and abroad concerning environmental matters could result in laws or regulations that could increase the cost of producing the products manufactured by the Company or otherwise adversely affect demand for its products. For example, certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain polypropylene products. Widespread adoption of such prohibitions or restrictions could adversely affect demand for the Company's products and thereby have a material adverse effect upon the Company. In addition, a decline in consumer preference for polypropylene products due to environmental considerations could have a material adverse effect upon the Company. Most of the Company's manufacturing processes are mechanical and are therefore considered to be environmentally benign. Polypropylene resins are readily recyclable, and the Company recycles post-industrial waste for certain of its products. In addition, each of the Company's manufacturing sites has equipment and procedures for reclaiming a majority of internally generated scrap, thus reducing the amount of waste sent to local landfills. As a result, the Company does not currently anticipate any material adverse effect on its operations, financial condition, or competitive position as a result of its efforts to comply with environmental requirements. Some risk of environmental liability is inherent in the nature of the Company's business, and there can be no assurance that material environmental liabilities will not arise. It is also possible that future developments in environmental regulation could lead to material environmental compliance or cleanup costs. ORDER BACKLOG The Company generally sells its products pursuant to customer orders that are either satisfied out of inventory or from the shipment of newly manufactured products promptly following receipt of an order. Accordingly, the dollar amount of backlog orders believed to be firm is not significant or indicative of the Company's future sales and earnings. EMPLOYEES As of September 30, 1998, the Company employed 2,663 persons in the United States, of whom 593 were salaried employees and the remainder were hourly employees. None of the Company's employees are unionized. The Company has never experienced any strikes and believes its relations with employees to be satisfactory. The Company employs 13 individuals in the United Kingdom. PATENTS AND TRADEMARKS The Company owns or is licensed under several United States and foreign patents. While these patents are helpful to the Company's business, it is believed that a loss of patent exclusivity would not be materially adverse to the Company's business. The Company has registered several of its trademarks, including FIBERGRIDS-Registered Trademark-, FIBERMESH-Registered Trademark-, LANDLOK-Registered Trademark-, and NOVOCON with the United States Patent and Trademark office and with several foreign trademark offices. 8 ITEM 2. PROPERTIES The following table sets forth certain information concerning the Company's manufacturing and distribution facilities. The Company has the option to renew its leases expiring in 1998 and 1999 for additional periods.
SQUARE ACREAGE OF LOCATION FEET PRINCIPAL FUNCTION PROPERTY - - --------------------------------------- ---------- --------------------------------------- ------------------ Owned Facilities Chickamauga, Georgia................... 1,419,943 Manufactures carpet backing, certain 88.0 fabrics, geotextiles and fibers Chattanooga, Tennessee................. 126,432 Manufactures specialty yarns and 10.5 construction products Dalton, Georgia........................ 216,000 Distribution center and multi-product 13.6 warehouse Dalton, Georgia........................ 44,945 Needlepunching of carpet backing 5.0 Ringgold, Georgia...................... 312,450 Manufactures geotextiles and certain 68.5 nonwoven fabrics Alto, Georgia.......................... 117,300 Manufactures certain yarns 42.7 Leased Facilities Leased Through Chickamauga, Georgia................... 143,736 Manufactures carpet backing, certain January 2009 fabrics, geotextiles and fibers Gainesville, Georgia................... 200,000 Manufactures and warehouses certain December 2000 fabrics Westside, Georgia...................... 86,440 Carpet backing warehouse April 1999 Dalton, Georgia 110 Florence........... 36,000 Geosynthetic products warehouse July 1999 Dalton, Georgia 124 Keene.............. 185,000 Woven, nonwoven and geotextile January 1999 warehouse Dalton, Georgia 1408 Coronet........... 31,500 Geosynthetic products warehouse July 1999 Dalton, Georgia 120 Keene.............. 168,300 Geosynthetic products, fiber warehouse April 2003 Dalton, Georgia 2908 North Dug Gap................... 85,000 Carpet backing warehouse September 1998 Cornelia, Georgia...................... 76,000 Assembly of certain fabrics February 1999 Dalton, Georgia Cleveland Highway.................... 104,827 Specialty yarn warehouse February 1999 Dalton, Georgia 2640 Lakeland Drive.................. 160,000 Nonwoven fabrics warehouse April 2003 Dalton, Georgia 1505 Coronet......................... 105,000 Nonwoven fabrics warehouse June 1999 Dalton, Georgia 3011 Parquet........... 105,250 Warehouse certain fabrics September 1999 Hickory, North Carolina................ 46,250 Converting operation July 2000 Wellford, South Carolina............... 42,837 Nonwoven fabrics warehouse March 1999 Chattanooga, Tennessee................. 23,000 Corporate support offices December 2000 Claremont, North Carolina.............. 14,000 Nonwoven fabrics warehouse September 1998 Tupelo, Mississippi.................... 13,500 Nonwoven fabrics warehouse September 1998 Spartanburg, South Carolina............ 236,090 Manufactures certain nonwoven fabrics March 2002
9 Indebtedness under the Company's Revolving Credit and Securitization Agreement, dated as of December 18, 1997, as subsequently amended, is secured by a lien on, and a security interest in, substantially all of the Company's assets, including all real estate, plants, equipment, inventory, accounts receivable and cash. Under the terms of the Credit Facility, the lenders thereunder may exercise certain remedies, including foreclosure, in the event of a default. ITEM 3. CLAIMS AND LEGAL PROCEEDINGS The Company and its subsidiaries are parties to litigation arising out of their business operations. Such litigation primarily involves claims for personal injury, property damage, breach of contract and claims involving employee relations and certain administrative proceedings. The Company believes such claims are either adequately covered by insurance or do not involve a risk of material loss to the Company. In connection with the proposed dissolution of the Partnership, pursuant to an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), the Company, its directors and certain other of the Company's officers who are affiliated with the General Partner have been named in two putative class and derivative action lawsuits filed by certain limited partners of the Partnership. In the first action, filed on February 11, 1997 in the Delaware Court of Chancery and thereafter amended, the plaintiffs have alleged, among other things, breach of contract with respect to the Partnership Agreement which governs the Partnership, breach of the defendants' fiduciary duty to the limited partners and the Company, that the Plan was unlawfully coercive, that the General Partner has allegedly failed to satisfy certain conditions precedent to the right of limited partners to amend the partnership agreement and that certain amendments necessary to implement the Plan violate the terms of the partnership agreement. The plaintiffs sought, among other equitable and legal remedies, removal of the General Partner, dissolution of the Partnership, appointment of a liquidating trustee, to enjoin the implementation of the Plan and compensatory damages in an undetermined amount. On October 23, 1997, the Court preliminarily enjoined the implementation of the Plan, although the Plan was subsequently approved by limited partners on November 7, 1997. On November 7, 1997, the Delaware Supreme Court accepted the defendants' petition for an expedited appeal of this injunction, and briefing and oral argument on the appeal was completed as of January 6, 1998. On March 19, 1998, the Delaware Supreme Court issued an opinion affirming the Court of Chancery's grant of a preliminary injunction and remanded the case for further proceedings. On April 27, 1998, the Court of Chancery granted the motion of certain pro-Plan intervenors to intervene in the action, but denied their motion to disqualify plaintiffs' counsel. On May 14, 1998, the General Partner withdrew the Plan. After the withdrawal of the Plan, plaintiffs, on June 3, 1998, filed a Consolidated Third Amended and Supplemental Class and Derivative Complaint (the "Third Amended Complaint"). The Third Amended Complaint, among other things, eliminated certain requests for relief related to the Plan and added certain allegations related to the Company's Employee Stock Purchase Plan and certain options granted to certain directors and officers of the Company. In addition to the relief sought in prior complaints, the Third Amended Complaint seeks declaratory relief with respect to certain provisions of the Partnership Agreement, the invalidation of the Company's Employee Stock Purchase Plan, the invalidation of certain options granted to the Company's directors and officers, and the invalidation of certain amendments to the Company's certificate of incorporation and bylaws relating to voting by consent and the calling of special meetings. On July 20, 1998, defendants filed a motion to dismiss the Third Amended Complaint. The defendants have denied any allegation of wrongdoing. The second lawsuit was filed in the U.S. District Court of the Northern District of California on May 1, 1997, and thereafter amended. The plaintiff has alleged in his amended complaint various federal securities and proxy violations allegedly arising out of the joint proxy statement and prospectus that was mailed to limited partners in connection with the solicitation of proxies for the vote on the Plan and other related documents. The plaintiff also added the Company as a named defendant, alleging that all defendants acted in concert with, and as agents of, each other; however the plaintiff made no specific independent allegations with respect to the Company. The plaintiff sought, among other equitable and 10 legal remedies, to enjoin the implementation of the Plan and unspecified damages. On November 6, 1997, the Court granted in part the plaintiff's motion for a temporary restraining order enjoining the implementation of the Plan. After the withdrawal of the Plan, defendants, on June 19, 1998, filed a motion to dismiss the claims as moot. On July 17, 1998, plaintiff moved to amend his complaint purportedly to include an additional plaintiff and additional claims for relief, including permanent injunctive relief for any violations of the securities laws in the future. The amended complaint also adds the Partnership as a nominal defendant. On September 24, 1998, the Court denied the defendants' motion to dismiss and granted plaintiff's motion to amend the complaint. The defendants have denied any allegation of wrongdoing. On December 29, 1997, a purported derivative action was filed in the Delaware Chancery Court by a limited partner of the Partnership against certain of the Company's officers and directors with regard to certain stock options plans adopted by the Company in 1994. Both the Partnership and the Company were named as nominal defendants. The plaintiff alleged that the defendants breached their fiduciary duties by adoption of the stock option plans. The plaintiff seeks, among other things, a declaration that the stock options granted under the plans are invalid, the establishment of a constructive trust over the stock options, unspecified compensatory damages and reasonable attorneys' fees and expenses. By order dated June 23, 1998, this action was consolidated with the Delaware action described above. The defendants deny any allegation of wrongdoing and intend to vigorously contest the lawsuit. Based on the Company's review of the allegations made in the above actions to date, the Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company's results of operations or financial condition. The Partnership is a principal stockholder of the Company and certain members of the Company's management control the General Partner. By letter dated October 22, 1998, a demand for indemnification was received from a customer with respect to utilization of Fibermesh-Registered Trademark- in concrete slabs in the State of California. The demand for indemnification pertained to any and all damages relating to their use of the Fibermesh-Registered Trademark- product. No lawsuits have been filed against the Company and based upon the information provided to the Company, the scope of liability and potential damages, if any, cannot be ascertained at this time. The Company has engaged outside counsel to investigate this claim and intends to vigorously defend its product. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this Annual Report. 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is listed on the Nasdaq National Market (the "NNM") under the symbol "SIND". The following table sets forth, for the periods indicated, the high and low prices per share of Common Stock as reported on the NNM.
COMMON STOCK BID PRICE -------------------- HIGH LOW --------- --------- Year Ended September 30, 1997 First Quarter (From November 1, 1996)..................................................... $ 15.750 $ 12.000 Second Quarter............................................................................ 19.750 15.000 Third Quarter............................................................................. 21.250 17.750 Fourth Quarter............................................................................ 28.000 21.125 Year Ended September 30, 1998 First Quarter............................................................................. $ 30.000 $ 24.500 Second Quarter............................................................................ 26.500 21.000 Third Quarter............................................................................. 25.500 13.375 Fourth Quarter............................................................................ 20.125 13.875 Year Ended September 30, 1999 First Quarter (through December 22, 1998)................................................. 18.000 13.250
At September 30, 1998, there were approximately 35 holders of record of Common Stock. The Company has not declared or paid any cash or other dividends on the Common Stock and intends for the foreseeable future to retain its earnings to finance the development of its business and for repayment of debt. The declaration and payment of dividends by the Company are subject to the discretion of the Board. Any future determination to pay dividends will depend on the Company's results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by the Board. In addition, the Credit Facility and the Indenture governing the Company's 9 1/4% Senior Subordinated Notes due 2007 contain restrictions on the Company's ability to declare and pay dividends. ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below for, and as of the end of, each of the fiscal years in the five year period ended September 30, 1998 have been derived from the Company's audited consolidated financial statements. The consolidated financial statements of the Company as of September 30, 1998 and 1997 and for the three-year period ended September 30, 1998 and the accountant's report 12 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED) thereon are included in Item 8 of this Form 10-K. Dollars are in thousands, except share and per share data.
YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ Summary of Operations Data: Net sales.................................. $ 368,996 $ 345,572 $ 299,532 $ 271,427 $ 234,977 Gross profit............................... 122,319 112,385 91,211 76,721 82,672 Operating income........................... 49,317 51,430 38,474 28,687 40,770 Income from continuing operations before provision for income taxes and extraordinary item....................... 30,073 30,691 15,002 5,436 20,020 Income from continuing operations before extraordinary item....................... 18,218 18,150 8,102 1,936 11,420 Extraordinary item--loss from early extinguishment of debt................... -- (11,950) -- -- -- Net income................................. 18,218 6,200 8,102 1,936 11,420 Diluted income per share from continuing operations before extraordinary item..... $ 2.03 $ 2.08 $ 1.37 $ 0.33 $ 1.93 Weighted average shares outstanding........ 8,995,314 8,719,458 5,930,502 5,930,502 5,930,502
AS OF SEPTEMBER 30, ----------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Balance Sheet Data: Working capital............................................ $ 86,265 $ 89,828 $ 64,077 $ 69,039 $ 44,114 Total assets............................................... 440,514 396,591 324,058 312,300 287,933 Long-term debt............................................. 236,843 220,464 194,353 192,048 172,490 Stockholders' equity....................................... 122,645 105,817 65,844 57,756 55,817
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES. SEE "FORWARD-LOOKING STATEMENTS." DOLLARS ARE IN THOUSANDS, EXCEPT PER SHARE DATA. OVERVIEW The Company's net sales in recent years have increased due to a variety of factors, including generally increasing sales volumes as a result of growing demand for the Company's products, the Company's ability to expand its markets through development of new products and acquisitions. The Company's gross profit has increased due primarily to increasing sales volumes, continued diversification of its product line in higher margin business and lower on average polypropylene costs, partially offset by lower average selling prices due to decreases in the price of polypropylene. Polypropylene is the basic raw material used in the manufacture of substantially all of the Company's products today, accounting for approximately 50% of the Company's cost of sales. The Company believes 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) that the selling prices of many of its products have adjusted over time to reflect changes in polypropylene prices. The following table sets forth the percentage relationships to net sales of certain statements of operations items:
YEAR ENDED SEPTEMBER 30, ------------------------------- 1998 1997 1996 --------- --------- --------- Net sales............................................................ 100.0% 100.0% 100.0% Cost of sales........................................................ 66.9 67.5 69.5 --------- --------- --------- Gross profit....................................................... 33.1 32.5 30.5 Selling expenses..................................................... 10.6 9.2 9.2 General and administrative expenses.................................. 8.3 7.7 7.6 Amortization of intangibles.......................................... 0.8 0.7 0.9 --------- --------- --------- Operating income................................................... 13.4 14.9 12.8 Interest expense..................................................... 5.1 5.8 7.6 Amortization of deferred financing costs............................. 0.2 0.2 0.2 --------- --------- --------- Income before provision for income taxes and extraordinary item...... 8.1 8.9 5.0 Provision for income taxes........................................... 3.2 3.6 2.3 --------- --------- --------- Income before extraordinary item..................................... 4.9% 5.3% 2.7% --------- --------- --------- --------- --------- ---------
RESULTS OF OPERATIONS FISCAL 1998 COMPARED TO FISCAL 1997 Net sales for fiscal 1998 were $368,996 compared to $345,572 for fiscal 1997, an increase of $23,424, or 6.8%. Carpet backing sales for fiscal 1998 were $168,998 compared to $166,219 for fiscal 1997, an increase of $2,779, or 1.7%, reflecting higher unit volume, partially offset by lower average selling prices. Construction and civil engineering product sales for fiscal 1998 were $128,318 compared to $114,611 for fiscal 1997, an increase of $13,707, or 12.0%, reflecting increased unit volume in fiber reinforced concrete and geosynthetic product sales. The Novocon Acquisition contributed approximately $7,000 of this revenue. Technical textiles sales for fiscal 1998 were $71,680 compared to $64,742 for fiscal 1997, an increase of $6,938, or 10.7%. Gross profit for fiscal 1998 was $122,319, compared to $112,385 for fiscal 1997, an increase of $9,934, or 8.8%. As a percentage of sales, gross profit increased to 33.1% in fiscal 1998 from 32.5% in fiscal 1997. This increase was primarily due to lower on average polypropylene costs and higher sales volume, partially offset by lower average selling prices. The Company's improvement in gross profit performance also reflects its diversification strategy for its products as well as its primary raw material. The Company expects that sales of construction and civil engineering products will continue to be of increasing importance to the Company's overall sales. Reflecting the success of this strategy, sales of carpet backing, although growing, continue to decrease as a percentage of total sales and now represent 45.8% of fiscal 1998 total net sales. In addition, the Company continues to expand its polyester-based product offerings and, with the Novocon Acquisition, now includes steel fibers in its line of concrete reinforcing fibers. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Selling expenses for fiscal 1998 were $39,358 compared to $31,801 for fiscal 1997, an increase of $7,557, or 23.8%. As a percentage of sales, selling expenses increased from 9.2% in fiscal 1997 to 10.6% in fiscal 1998. General and administrative expenses for fiscal 1998 were $30,857 compared to $26,562 for fiscal 1997, an increase of $4,295, or 16.2%. As a percentage of sales, general and administrative expenses increased from 7.7% in fiscal 1997 to 8.3% in fiscal 1998. The increase in selling, general and administrative expenses was primarily due to an increase in research and market development costs from approximately $4,200 in fiscal 1997 to approximately $8,100 in fiscal 1998, a $2,000 increase in engineering support staff to continue to educate the marketplace about the benefits of the Company's products, and a $1,500 increase in advisory and consulting fees to improve operating efficiencies. Operating income for fiscal 1998 was $49,317 as compared to $51,430 for fiscal 1997, a decrease of $2,113, or 4.1%. As a percentage of sales, operating income decreased to 13.4% in fiscal 1998 from 14.9% in fiscal 1997. This decrease was primarily due to higher selling, general and administrative costs which offset improved gross margins. Interest expense for fiscal 1998 was $18,515 compared to $20,085 for fiscal 1997, a decrease of $1,570, or 7.8%, due to lower average interest rates on an increased level of outstanding debt and the capitalization of interest related to machinery and equipment installation. The effective income tax rate was 39% in fiscal year 1998 and 41% in fiscal 1997 before the effect of the extraordinary item. The provision for income taxes includes the recognition of additional state income tax credits of approximately $600 during fiscal 1998. Income from continuing operations for fiscal 1998 was $18,218 compared to $18,150 for fiscal 1997, an increase of $68. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 1998 was $69,849 compared to $69,011 for fiscal 1997, an increase of $838, or 1.2%. The increase in income before extraordinary item, as well as EBITDA, was primarily due to the factors discussed above. Income per share on a diluted basis for fiscal 1998 was $2.03 compared to $2.08 before extraordinary item for fiscal 1997 on increased weighted average shares outstanding of 275,856 or 3.2%. FISCAL 1997 COMPARED TO FISCAL 1996 Net sales for fiscal 1997 were $345,572 compared to $299,532 for fiscal 1996, an increase of $46,040, or 15.4%. Carpet backing sales for fiscal 1997 were $166,219 compared to $146,491 for fiscal 1996, an increase of $19,728, or 13.5%. This increase was primarily due to higher unit volume in both primary and secondary carpet backing. Construction and civil engineering product sales for fiscal 1997 were $114,611 compared to $97,043 for fiscal 1996, an increase of $17,568, or 18.1%. This increase was primarily due to a 10.5% increase in Fibermesh-Registered Trademark- sales and a 22.3% increase in geosynthetic sales. Technical textiles sales for fiscal 1997 were $64,742 compared to $55,998 for fiscal 1996, an increase of $8,744, or 15.6%, of which the Spartan Acquisition added approximately $8,600. Gross profit for fiscal 1997 was $112,385, compared to $91,211 for fiscal 1996, an increase of $21,174, or 23.2%. As a percentage of sales, gross profit increased to 32.5% from 30.5%. This increase was due to increased sales volume and growth of higher margin business, coupled with slightly lower average polypropylene costs as compared to the prior year. Selling expenses for fiscal 1997 were $31,801 compared to $27,488 for fiscal 1996, an increase of $4,313, or 15.7%. As a percentage of sales, selling expenses remained at 9.2%. General and administrative expenses for fiscal 1997 were $26,562 compared to $22,657 for fiscal 1996, an increase of $3,905, or 17.2%. As a percentage of sales, general and administrative expenses increased from 7.6% to 7.7%. The increase in selling, general and administrative expenses was primarily due to infrastructure expenditures, to support 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) anticipated Company growth, coupled with an increase in research and market development costs from $2,940 in fiscal 1996 to $4,200 in fiscal 1997. Operating income for fiscal 1997 was $51,430 as compared to $38,474 for fiscal 1996, an increase of $12,956, or 33.7%. As a percentage of sales, operating income increased to 14.9% in fiscal 1997 from 12.8% in fiscal 1996. This increase was primarily due to improved gross profits, partially offset by slightly higher selling, general and administrative costs. Interest expense for fiscal 1997 was $20,084 compared to $22,773 for fiscal 1996, a decrease of $2,689, or 11.8%, due to lower average interest rates on the outstanding debt. The effective income tax rate before the effect of the extraordinary item was 41% and 46% in fiscal 1997 and 1996, respectively. The higher rate for 1996 was due primarily to the effect of nondeductible expenses, including the amortization of goodwill, on lower income in fiscal 1996. Income before extraordinary item for fiscal 1997 was $18,150 compared to $8,102 for fiscal 1996, an increase of $10,048. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 1997 was $69,011 compared to $54,074 for fiscal 1996, an increase of $14,937, or 27.6%. The increase in income before extraordinary item, as well as EBITDA, was primarily due to the factors discussed above. Income per share on a diluted basis before extraordinary item for fiscal 1997 was $2.08 compared to $1.37 for fiscal 1996 on increased weighted average shares outstanding of 2,788,956 or 47.0%, resulting from the Offering. Pro forma income per share before extraordinary item, assuming the net proceeds from the Offering and the issuance of the Notes (as defined hereunder) were used to reduce outstanding indebtedness and the shares issued in the Offering were outstanding as of the beginning of each respective period, would have been $2.10 and $1.28 for fiscal 1997 and 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES To finance its capital expenditures program and fund its operational needs, the Company has relied upon cash provided by operations, supplemented as necessary by bank lines of credit and long-term indebtedness. Net cash provided by operating activities was $42,344, $25,129, and $31,421 for the fiscal years ended September 30, 1998, 1997 and 1996, respectively. Net cash provided by operating activities in fiscal 1998 consisted primarily of net income of $18,218 and noncash charges of $26,225. Net cash provided by operating activities in fiscal 1997 and 1996 resulted primarily from net income of $6,200 and $8,102, respectively, after deducting $19,431 for the extraordinary loss on early extinguishment of debt for fiscal 1997 and deducting non-cash charges of $21,026, and $20,723 and net working capital changes of approximately ($21,528) and $2,596 for each respective period. In fiscal 1997 the changes included increased inventory and accounts payable balances resulting primarily from higher inventory quantities and slightly higher on average polypropylene costs. The net proceeds from financing and operating activities in fiscal 1998 were utilized to fund capital expenditures and an acquisition of approximately $46,100 and $6,000, respectively. The remaining balance due for the Novocon Acquisition of $1,302 was paid on December 11, 1998. Capital expenditures planned for fiscal 1999 are approximately $25,000, primarily to expand the capacity of the Company's manufacturing facilities, subject to prevailing market conditions. Capital expenditures in fiscal 1997, including an acquisition, and 1996 were approximately $63,000 and $29,000, respectively. On April 7, 1998, the Company entered into an eight-year capital lease agreement to finance additional equipment of approximately $7,500 with an interest rate of 7.25%. On October 4, 1998, the Company entered into an eight-year capital lease for the acquisition of equipment of $5,300 at an interest 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) rate of 7.03%. The proceeds were primarily used to repay the balance of the May 15, 1996 capital lease of $3,416. On February 11, 1997, the Company issued $170,000 aggregate principal amount of 9 1/4% Senior Subordinated Notes due February 15, 2007 (the "Notes"), which represent unsecured obligations of the Company. The Notes are redeemable at the option of the Company at any time on or after February 15, 2002, at an initial redemption price of 104.625% of their principal amount together with accrued interest, with declining redemption prices thereafter. Interest on the Notes are payable semi-annually on February 15 and August 15 in the amount of $7,863. On November 1, 1996, the Company received net proceeds of approximately $34,000 (after payment of underwriting discounts and commissions and expenses) from the sale of 2,875,000 shares of Common Stock in an underwritten public offering. These proceeds, together with the proceeds received from the issuance of the Notes, were utilized primarily to retire approximately $133,000 of the Company's 12 3/4% Senior Subordinated Debentures due 2002 (the "Debentures"), pay the related call premium and prepayment costs and fees associated with the refinancing of $15,920, pay debt issuance costs of $5,525 and to repay approximately $21,900 of certain outstanding indebtedness under the Company's Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of October 20, 1995, as subsequently amended, among the Company, the lenders party thereto and BankBoston, as agent. In connection therewith, the Company recorded an extraordinary loss of $11,950 during the second quarter of fiscal 1997. On December 1, 1997, the Company redeemed the remaining $7,403 aggregate principal amount of the Debentures at a redemption price of 106.375% of the principal amount thereof, together with accrued interest as of the redemption date. On December 18, 1997, the Company and its lenders, with BankBoston as agent, entered into a new five year credit facility (the "Credit Facility"). The Credit Facility consists of up to a $40 million asset based securitization program, with amounts borrowed through a newly formed subsidiary, Synthetic Industries Funding Corporation, (the "Securitization"), and a $60 million senior secured revolver facility (the "Revolver"). Securitization and Revolver borrowings are collateralized by the Company's accounts receivables and substantially all of the assets of the Company, excluding real property, respectively. Interest on the Securitization is based on the applicable commercial paper rate in effect plus a spread. The Revolver permits borrowings which bear interest, at the Company's option, (i) for domestic borrowings based on the lender's base rate or (ii) for Eurodollar borrowings based on a spread over the Interbank Eurodollar rate at the time of conversion. Spreads for the Securitization and the Revolver borrowings are determined by the operational performance of the Company. At September 30, 1998, the balances under the Securitization and Revolver were $29,162 and $30,022, respectively, at interest rates ranging from 6.27% to 8.5%. The Revolver provides for borrowings under letters of credit of up to $10,000, which borrowings reduce amounts available under the Revolver. At September 30, 1998, letters of credit of $402 were outstanding. The Credit Facility contains covenants related to the maintenance of certain operating ratios and limitations as to the amount of capital expenditures. The Company's ability to pay dividends on its Common Stock is restricted by both the New Credit Facility and the Notes. At September 30, 1998, the availability under the Credit Facility was approximately $30,800. At September 30, 1998, the Company's total outstanding indebtedness amounted to $242,343. Such indebtedness consists of borrowings under the Credit Facility of $59,184, $170,000 aggregate principal 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) amount of the Notes, outstanding capital lease obligations, mortgage, and a short-term note of $13,159. Cash interest paid during fiscal 1998, 1997 and 1996 was $21,232, $23,642, and $23,176, respectively. On November 18, 1998, the Company announced its plans to combine its non-woven manufacturing facilities in the first half of fiscal 1999. The move is expected to increase operating efficiencies by reducing overhead costs and centralizing production in a modern facility. The Company estimates that $5,000 to $6,000 of pre-tax costs will be incurred relating to the plant combination. The combination is expected to be completed in June 1999, and the Company expects pre-tax savings will be approximately $1,500 to $2,000 annually. Based on current levels of operations and anticipated growth, the Company's management expects net cash from operations to provide sufficient cash flow to satisfy the debt service requirements of the Company's long-term debt obligations, including the New Credit Facility and lease agreements, permit anticipated capital expenditures and fund the Company's working capital requirements for the next twelve months. INFLATION AND SEASONALITY The Company does not believe that its operations have been materially affected by inflation during the three most recent fiscal years. While the Company does not expect that inflation will have a material impact upon operating results, there is no assurance that its business will not be affected by inflation in the future. The Company's sales and income have historically been higher in the third and fourth quarters of its fiscal year. While sales and income in the carpet backing and technical textile product lines are not greatly affected by seasonal trends, sales of construction and civil engineering products are lower in the first and second quarters of any given fiscal year due to the impact of adverse weather conditions on the construction and civil engineering markets. Consequently, as sales from construction and civil engineering products continue to increase as a percentage of the Company's total sales, the seasonality of these products' sales will affect total sales and income of the Company to a greater degree. Presented below is a summary of the unaudited consolidated quarterly financial information for the years ended September 30, 1998 and 1997:
THREE MONTHS ENDED -------------------------------------------------- FISCAL 1998 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 - - ---------------------------------------------------------- ------------ ---------- ---------- ------------ Net sales................................................. $ 76,581 $79,271 $104,531 $108,613 Operating income.......................................... 7,221 6,967 17,755 17,374 Net income................................................ 1,345 1,238 7,755 7,880 Income per share.......................................... 0.15 0.14 0.87 0.89 Weighted average shares outstanding....................... 9,117,809 9,080,922 8,940,674 8,841,851 Fiscal 1997 Net sales................................................. $ 70,857 $75,358 $99,112 $100,245 Operating income.......................................... 7,347 9,331 17,823 16,929 Income before extraordinary item.......................... 904 2,160 7,676 7,410 Net income (loss)......................................... 904 (9,790 (a) 7,676 7,410 Income (loss) per share................................... 0.12 (1.09 (a) 0.86 0.82 Weighted average shares outstanding....................... 7,847,168 8,957,155 8,969,031 9,080,956
- - ------------------------ (a) Includes an extraordinary loss of $11,950, or $1.37 per share, from the early extinguishment of debt. See Note 9. 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) YEAR 2000 READINESS DISCLOSURES The Company is preparing its computer systems and hardware to deal with the issues related to the year 2000. This is necessary because certain computer programs have been written using two digits rather than four to define the applicable year. As a result, software may recognize a date using the two digits "00" as the year 1900 rather than the year 2000. Computer programs that do not recognize the proper date could generate erroneous data or cause systems to fail. In addition, many of the Company's vendors and service providers are also faced with similar issues related to the year 2000. In January 1998, the Company formally implemented a plan to become year 2000 compliant. The Company is evaluating and testing business and technical information system hardware and software as to year 2000 compliance and functionality. Planned application testing is 66% complete. The Company's basic integrated software applications, Infinium and CAMS, are represented to be year 2000 compliant by their respective vendors and testing to date has verified vendor representations. Minimal code renovations were necessary in CAMS and have been completed. The last phase of testing is scheduled to be completed on or before March 1999, although test validation processes will be ongoing, thereby providing sufficient time to handle unforeseen contingencies and respond to external year 2000 issues that affect the Company and the Company's business partners. The inventory process and assigning priorities are complete for manufacturing process control, instrumentation and embedded systems. Documentation from respective equipment manufacturers and resources is approximately 85% complete. The Company believes that the repair of this equipment is approximately 95% complete, with all testing of this equipment to be scheduled and completed by mid 1999. Contingency planning for this equipment is in process and scheduled for completion by fiscal year-end 1999. The Company has also been proactive in contact with external business partners to communicate and exchange status information. In fiscal 1998 the costs for addressing year 2000 issues were approximately $225 and have been expensed as incurred. The Company does not believe that future costs will have a material adverse effect on the Company's results of operations or financial condition. In the event that the efforts of this program do not address all potential system problems, the Company is developing contingency plans to ensure that it will be able to operate the critical areas of its business. This process includes developing alternative plans to engage in business activities with customers and suppliers who may not be year 2000 compliant. These plans will be monitored for completion as we approach the year 2000. There can be no assurance that the efforts or the contingency plans related to the Company's systems or those of third parties relied upon will be successful or that any failure to convert, upgrade, or appropriately plan for contingencies would not have a material adverse effect on the Company's results of operations or financial condition. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which must be adopted for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS 130 will not have a material effect on the Company's results of operations or financial condition. Also in June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), which must be adopted for fiscal years beginning after December 15, 1997. Under the new standard, companies will be required to 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) report certain information about operating segments in consolidated financial statements. Operating segments will be determined based on the method that management organizes its businesses for making operating decisions and assessing performance. SFAS 131 also requires companies to report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is currently evaluating the effect SFAS 131 will have on its financial statement presentation. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which must be adopted for fiscal quarters of fiscal years beginning after June 15,1999. SFAS 133 requires the recognition of all derivatives as either assets or liabilities in the statement of financial position and measurement of those instruments at fair value. SFAS 133 will not have a material effect on the Company's results of operations or financial condition FORWARD LOOKING STATEMENTS The discussion of the Company's business and operations in this report includes in several instances forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are based upon management's good faith assumptions relating to the financial, market, operating, and other relevant environments that will exist and affect the Company's business and operations in the future. No assurance can be made that the assumptions upon which management based its forward-looking statements will prove to be correct, or that the Company's business and operations will not be affected in any substantial manner by other factors not currently foreseeable by management or beyond the Company's control. All forward-looking statements involve risks and uncertainties, including those described in this report, and such statements shall be deemed in the future to be modified in their entirety by the Company's public pronouncements, including those contained in all future reports and other documents filed by the Company with the Securities and Exchange Commission. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risks relating to the Company's operations result primarily from changes in interest rates and commodity prices. INTEREST RATE RISK The Company faces minimal interest rate risk exposure in relation to its outstanding debt of $242,343 at September 30, 1998. Of this amount $59,184, under the Credit Facility, is subject to interest rate fluctuations. A hypothetical 10% change in interest rates applied to the fair value of debt would not have a material impact on earnings or cash flows of the Company. COMMODITY PRICE RISK The Company is a purchaser of certain commodities, primarily polypropylene. The Company does not use commodity futures for hedging purposes. Polypropylene is the basic raw material used in the manufacture of substantially all of the Company's products today, accounting for approximately 50% of the Company's cost of goods sold. The price of polypropylene is determined by the supply and demand for the product. Historically, the creation of additional capacity has helped to relieve supply and pricing pressures although there can be no 20 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED) assurance that this will continue to be the case. According to a September 1998 report by Chemical Data Inc., a monthly petrochemical and plastics analysis publication, annual polypropylene capacity in North America is expected to rise from 12.6 billion pounds per year for 1996 to 15.0 billion pounds per year for 1998, and to 19.3 billion pounds per year by the year 2000, a 10.8% compounded growth rate. Although in fiscal 1998 supply increased faster than demand, the Company expects polypropylene prices to remain basically unchanged in fiscal year 1999 as supply and demand stabilize. An increase in the price of polypropylene for a prolonged period without an increase in the selling prices of the Company's products could have a material effect on the Company's earnings and cash flows. The Company believes that the selling prices of many of its products have adjusted over time to reflect changes in polypropylene prices. CURRENCY RISK The Company faces currency risk exposure that arises from translating the results of its United Kingdom operations to the U.S. dollar. The currency risk exposure is not material as the United Kingdom division's operations do not have a material impact on the Company's earnings. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information with respect to this Item is contained in the Company's consolidated financial statements indicated in the Index in Part IV, Item 14 of this Annual Report on Form 10-K and is incorporated herein by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 21 PART III ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY The information required by this item is incorporated herein by reference to the material appearing in the Company's definitive proxy statement for the annual meeting of stockholders to be held in 1999 (the "Proxy Statement") under the captions "Election of Directors" and "Executive Officers." ITEM 11. REMUNERATION OF DIRECTORS AND OFFICERS The information required by this item is incorporated herein by reference to the material appearing in the Proxy Statement under the captions "Election of Directors--Director Compensation" and "Executive Compensation and Other Information." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the material appearing in the Proxy Statement under the caption "Voting Securities and Certain Beneficial Owners". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS SI Management L.P. is the sole general partner of the Partnership. Synthetic Management G.P. is the sole general partner of SI Management L.P. By virtue of these relationships, Synthetic Management G.P. controls the management and affairs of the Partnership and therefore, the Company. The Partnership owns 5,699,194 shares of Common Stock, or approximately 66% of the issued and outstanding shares of Common Stock, and therefore, holds the voting power to determine the outcome of all matters upon which stockholders vote. The partners of Synthetic Management G.P. are the following five Delaware corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed Investments, Inc., Kenner Investments, Inc. and W.G. Wright Investments, Inc. Each of Messrs. Chill, Beckman, Freed, Kenner and Wright is the sole director and the sole stockholder of one of Synthetic Management G.P.'s partners. For further information concerning Messrs. Chill, Freed, Kenner and Wright, see "Executive Officers and Directors of the Company." The Company and the Partnership have entered into a Registration Rights Agreement pursuant to which the Company has agreed that upon request of the Partnership the Company will register under the Securities Act and applicable state securities laws the sale of the Common Stock owned by the Partnership and as to which registration has been requested. The Company's obligation is subject to certain limitations relating to a minimum amount required for registration, the timing of a registration and other similar matters. The Company is obligated to pay any registration expenses incidental to such registration, excluding underwriters' commissions and discounts. In connection with the Company's initial public offering of Common Stock in November 1996, the Company incurred approximately $650,000 of such incidental registration expenses on the behalf of the Partnership. The above description is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which has been filed as an exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 333-9377), filed with the Securities and Exchange Commission on September 13, 1996. On September 19, 1997, the Company and the Partnership entered into the Agreement and Plan of Withdrawal and Dissolution of the Partnership (the "Plan"). Pursuant to the Plan, the Partnership was to be dissolved in two separate phases. The first phase was to be an underwritten public offering of the number of shares of Common Stock that limited partners have elected to sell, and the second phase is to be one to three liquidating distributions of the unsold portions of the Partnership's shares of Common Stock, beginning 180 days after the completion of the public offering. On November 7, 1997, the limited 22 partners approved the adoption of the Plan. However, the implementation of the Plan has been enjoined by courts in Delaware and California in connection with two lawsuits filed by certain limited partners of the Partnership against the Partnership and its general partner (the "General Partner"), among others. See "Claims and Legal Proceedings." Among other equitable and legal remedies, the plaintiff is seeking the removal of the General Partner and the liquidation of the Partnership. The Company is only a nominal defendant in these proceedings and does not presently possess any contractual rights with respect to their ultimate resolution. If, in connection with these lawsuits, the General Partner is removed or resigns, or the Partnership is liquidated under a court-appointed receiver, there can be no assurance that the resulting sale and/or distribution of the Partnership's shares of Common Stock will be made in the same or similar manner as that contemplated by the Plan. The General Partner has denied the allegations of the plaintiff and is vigorously contesting the lawsuits; however, in the event of an adverse ruling, the Company cannot predict the volume and price at which the Common Stock trades might be affected. Lee J. Seidler, a director of the Company, is presently associated with Bear, Stearns & Co. Inc. as Managing Director Emeritus and from time to time receives fees in connection with consulting and referral services to Bear, Stearns & Co. Inc., including the initial public offering and the offering of $170,000,000 aggregate principal amount of the Notes. Dr. Seidler has received from Bear, Stearns & Co. Inc., in connection with such services, approximately $200,000 in fiscal 1997. Jon P. Beckman, a former executive officer of the Company and an affiliate of the General Partner, is being retained as a consultant to the Company. Pursuant to his consulting agreement with the Company, Mr. Beckman will receive, until January 31, 2000, or upon earlier termination of his consulting agreement, $125,000 per year and various insurance coverages, and will be authorized to exercise all stock options awarded to him, subject to applicable vesting provisions. Under this agreement, Mr. Beckman is required to provide the Company with 20 hours of consultation per month, has released the Company from any liability resulting from his employment and has also agreed not to compete against the Company. The Company leases office space under a five-year lease with William Gardner Wright, Jr., one of the Company's executive officers. The term of the lease expires on September 30, 2003 and the rent is approximately $4,300 per month, which the Company believes is within prevailing market rates. Pursuant to a licensing agreement with the Company, W. Wayne Freed, an executive officer of the Company, receives royalties related to the manufacture and sale of a certain product for which Mr. Freed owns all of the U.S. and foreign patents. Under this agreement, Mr. Freed received royalties of $9,900 and $12,646 in fiscal 1998 and 1997, respectively, and will continue to receive such royalties until 2012 or the earlier termination of the licensing agreement. In May 1998, the Company acquired 82,056 shares of Common Stock from the Partnership in exchange for $1,759,085 of amounts receivable from the Partnership in partial settlement of expenses incurred by the Company on behalf of the Partnership during the last several years. The shares were acquired at their fair market value and are held in treasury for issuance under the Employee Stock Purchase Plan (see Note 15 to the financial statements). At September 30, 1998, the remaining balance due the Company from the Partnership was $663,443. 23 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Index to Consolidated Financial Statements:
PAGE NO. OF FINANCIAL STATEMENT ----------------------- (1) Financial Statements: Independent Auditors' Report.......................................................... F-1 Consolidated Balance Sheets........................................................... F-2 Consolidated Statements of Operations................................................. F-3 Consolidated Statements of Changes in Stockholders' Equity............................ F-4 Consolidated Statements of Cash Flows................................................. F-5 Notes to Consolidated Financial Statements............................................ F-6
(b) The Company did not file a Current Report on Form 8-K during the last quarter of the fiscal year covered by this Annual Report. (c) Exhibits: See Exhibit Index immediately following Item 14. (d) No additional financial statements are required to be filed. 24 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Synthetic Industries, Inc. Chickamauga, Georgia We have audited the accompanying consolidated balance sheets of Synthetic Industries, Inc. and subsidiaries as of September 30, 1998 and 1997, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended September 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Synthetic Industries, Inc. and subsidiaries at September 30, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1998 in conformity with generally accepted accounting principles. /S/ Deloitte & Touche LLP Deloitte & Touche LLP New York, New York November 20, 1998 F-1 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, ---------------------- 1998 1997 ---------- ---------- ASSETS CURRENT ASSETS: Cash.................................................................................... $ 285 $ 338 Accounts receivable (Note 4)............................................................ 64,251 60,031 Inventory (Note 5)...................................................................... 52,450 54,139 Other current assets (Note 6)........................................................... 17,309 17,200 ---------- ---------- TOTAL CURRENT ASSETS................................................................ 134,295 131,708 PROPERTY, PLANT AND EQUIPMENT, net (Note 7)............................................... 218,449 182,102 OTHER ASSETS (Note 8)..................................................................... 87,770 82,781 ---------- ---------- $ 440,514 $ 396,591 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable........................................................................ $ 26,438 $ 27,030 Accrued expenses and other current liabilities.......................................... 13,653 11,613 Income taxes payable (Note 10).......................................................... 285 52 Interest payable........................................................................ 2,154 2,467 Current maturities of long-term debt (Note 9)........................................... 5,500 718 ---------- ---------- TOTAL CURRENT LIABILITIES........................................................... 48,030 41,880 LONG-TERM DEBT (Note 9)................................................................... 236,843 220,464 DEFERRED INCOME TAXES (Note 10)........................................................... 32,996 28,430 COMMITMENTS AND CONTINGENCIES (Note 16) STOCKHOLDERS' EQUITY (Note 14) Common stock (par value $1.00 per share, authorized 25,000,000, issued 8,668,750 and 8,656,250, respectively).............................................................. 8,669 8,656 Treasury stock (71,546 and 0 shares, respectively) (Notes 12 and 15).................... (1,534) -- Additional paid-in capital.............................................................. 94,392 94,325 Cumulative translation adjustments...................................................... 171 107 Retained earnings....................................................................... 20,947 2,729 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY.......................................................... 122,645 105,817 ---------- ---------- $ 440,514 $ 396,591 ---------- ---------- ---------- ----------
See notes to consolidated financial statements F-2 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED SEPTEMBER 30, ---------------------------------- 1998 1997 1996 ---------- ---------- ---------- Net sales.................................................................... $ 368,996 $ 345,572 $ 299,532 Costs and expenses: Cost of sales.............................................................. 246,677 233,187 208,321 Selling expenses........................................................... 39,358 31,801 27,488 General and administrative expenses........................................ 30,857 26,562 22,657 Amortization of excess of purchase price over net assets acquired and other intangibles.............................................................. 2,787 2,592 2,592 ---------- ---------- ---------- 319,679 294,142 261,058 ---------- ---------- ---------- Operating income............................................................. 49,317 51,430 38,474 ---------- ---------- ---------- Other expenses: Interest expense, net...................................................... 18,515 20,085 22,773 Amortization of deferred financing costs................................... 729 654 699 ---------- ---------- ---------- 19,244 20,739 23,472 Income before provision for income taxes and extraordinary item.............. 30,073 30,691 15,002 Provision for income taxes (Note 10)......................................... 11,855 12,541 6,900 ---------- ---------- ---------- Income before extraordinary item............................................. 18,218 18,150 8,102 Extraordinary item--Loss from early extinguishment of debt (net of tax benefit of $7,481) (Note 9)................................................ -- 11,950 -- ---------- ---------- ---------- NET INCOME................................................................... $ 18,218 $ 6,200 $ 8,102 ---------- ---------- ---------- ---------- ---------- ---------- Basic earnings per share (Note 13): Income before extraordinary item........................................... $ 2.11 $ 2.10 $ 1.37 Net income per share....................................................... $ 2.11 $ 0.72 $ 1.37 Diluted earnings per share (Note 13): Income before extraordinary item........................................... $ 2.03 $ 2.08 $ 1.37 Net income per share....................................................... $ 2.03 $ 0.71 $ 1.37
See notes to consolidated financial statements F-3 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS OF DOLLARS)
ADDITIONAL CUMULATIVE RETAINED COMMON TREASURY PAID-IN TRANSLATION EARNINGS STOCK STOCK CAPITAL ADJUSTMENTS (DEFICIT) TOTAL ----------- --------- ----------- ------------- ---------- ---------- Balance, October 1, 1995............................. $ 5,781 -- $ 63,519 $ 29 $ (11,573) $ 57,756 Net income........................................... -- -- -- -- 8,102 8,102 Foreign currency translation......................... -- -- -- (14) -- (14) ----------- --------- ----------- ----- ---------- ---------- Balance, September 30, 1996.......................... $ 5,781 -- 63,519 15 (3,471) 65,844 Net income........................................... -- -- -- -- 6,200 6,200 Issuance of common stock............................. 2,875 -- 30,806 -- -- 33,681 Foreign currency translation......................... -- -- -- 92 -- 92 ----------- --------- ----------- ----- ---------- ---------- Balance, September 30, 1997.......................... 8,656 -- 94,325 107 2,729 105,817 Net income........................................... -- -- -- -- 18,218 18,218 Exercise of stock options............................ 13 -- 72 -- -- 85 Treasury stock acquired (Note 15).................... -- (1,759) -- -- -- (1,759) Treasury stock sold (Note 12)........................ -- 225 (95) -- -- 130 Tax benefit from exercise of options................. -- -- 90 -- -- 90 Foreign currency translation......................... -- -- -- 64 -- 64 ----------- --------- ----------- ----- ---------- ---------- Balance, September 30, 1998.......................... $ 8,669 $ (1,534) $ 94,392 $ 171 $ 20,947 $ 122,645 ----------- --------- ----------- ----- ---------- ---------- ----------- --------- ----------- ----- ---------- ----------
See notes to consolidated financial statements F-4 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
YEAR ENDED SEPTEMBER 30, ------------------------------- 1998 1997 1996 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income....................................................................... $ 18,218 $ 6,200 $ 8,102 Adjustments to reconcile net income to cash provided by operations: Extraordinary loss on early extinguishment of debt............................. -- 19,431 -- Depreciation and amortization.................................................. 21,261 18,236 16,299 Deferred income taxes.......................................................... 4,977 2,270 3,400 (Recoveries of) provision for bad debts........................................ (13) 520 1,024 Change in operating assets and liabilities, net of acquisition: Accounts receivable............................................................ (2,478) (9,687) (1,247) Inventory...................................................................... 3,343 (13,634) 6,451 Other assets................................................................... (1,854) (1,566) (647) Accounts payable................................................................. (3,166) 6,803 (3,801) Accrued expenses and other current liabilities................................. 2,046 1,468 2,291 Income taxes payable........................................................... 323 (1,355) (48) Interest payable............................................................... (313) (3,557) (403) --------- --------- --------- Net cash provided by operating activities.................................... 42,344 25,129 31,421 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment....................................... (46,112) (53,980) (29,253) Acquisition of business, net of cash acquired.................................... (6,000) (9,354) -- --------- --------- --------- Net cash used in investing activities............................................ (52,112) (63,334) (29,253) CASH FLOWS FROM FINANCING ACTIVITIES: Net (repayments) borrowings under term loan...................................... (25,000) (20,000) 19,000 Net borrowings (repayments) under the credit facility............................ 43,607 9,427 (20,734) Issuance of 9 1/4% Senior subordinated notes..................................... -- 170,000 -- Redemption of 12 3/4% Senior subordinated debentures............................. (7,403) (132,597) -- Prepayment costs on early extinguishment of debt................................. -- (15,920) -- Proceeds from underwritten public offering....................................... -- 33,681 -- Proceeds from exercise of stock options.......................................... 85 -- -- Proceeds from sale of treasury stock under the Employee Stock Purchase Plan.................................................................. 130 -- -- Repayments of capital lease obligation and other long-term debt.................. (1,002) (660) (342) Debt issuance costs.............................................................. (792) (5,525) (101) --------- --------- --------- Net cash provided by (used in) financing activities............................ 9,625 38,406 (2,177) Effect of exchange rate changes on cash...................................... 90 36 2 --------- --------- --------- NET (DECREASE) INCREASE IN CASH.................................................... (53) 237 (7) CASH AT BEGINNING OF PERIOD........................................................ 338 101 108 --------- --------- --------- CASH AT END OF PERIOD.............................................................. $ 285 $ 338 $ 101 --------- --------- --------- --------- --------- --------- SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid during the year for: Interest......................................................................... $ 21,232 $ 23,642 $ 23,176 Income taxes..................................................................... 5,927 4,145 3,548 SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY Capital lease obligation incurred for purchase of equipment........................ $ 7,500 $ -- $ 5,000 Treasury stock acquired from Synthetic Industries L.P. in exchange for note receivable....................................................................... 1,759 -- -- Payable incurred for acquisition of business....................................... 1,302 -- --
See notes to consolidated financial statements F-5 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 1. ORGANIZATION Synthetic Industries, Inc., a Delaware corporation (the "Company") was a wholly owned subsidiary of Synthetic Industries L.P. (the "Partnership") until November 1, 1996. On that day, the Company completed an underwritten public offering (the "Offering") of an additional 2,875,000 shares of its common stock ("Common Stock"). The Company manufactures and markets a wide range of primarily polypropylene-based materials designed for support, strength and stabilization applications. The Company's products replace commonly used materials in diverse applications including: floor covering, geotextiles, erosion control, concrete reinforcement and furniture construction fabrics. The Company manufactures and sells more than two thousand products in over 65 end-use markets predominately in North America, Europe and the Far East. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany transactions and balances have been eliminated. REVENUE RECOGNITION Revenue from product sales is recognized at the time of shipment. FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign subsidiaries are translated at the fiscal year-end rates of exchange, and the results of operations are translated at the average rates of exchange for the years presented. Gains or losses resulting from translating foreign currency financial statements are accumulated in the cumulative translation adjustments account in the stockholders' equity section of the accompanying consolidated balance sheets. Foreign currency transaction gains and losses are included in results of operations. Foreign currency realized and unrealized gains and losses for the years presented were not material. INVENTORY Inventory is stated at the lower of cost, determined using the first-in, first-out method, or market. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is provided on the straight-line method based on estimated useful lives, as follows: Building and improvements......................................... 25 years Machinery and equipment........................................... 14 years
Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease. Expenses for repairs, maintenance and renewals are charged to operations as incurred. Expenditures which improve an asset or extend its useful life are capitalized. When properties are retired F-6 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in the results of operations. Capitalized interest is charged to machinery and equipment and amortized over the lives of the related assets. Interest capitalized during fiscal 1998, 1997 and 1996 was $2,404, $838 and $392, respectively. INCOME TAXES The Company accounts for income taxes using an asset and liability approach in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"). Under SFAS 109, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in the statement of operations for the period that includes the enactment date. EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED The excess of purchase price over net assets acquired is amortized on a straight-line basis over a period of 20 to 40 years. Excess of purchase price over net assets acquired is assessed for recoverability on a regular basis. In evaluating the value and future benefits of goodwill, its carrying value would be reduced by the excess, if any, of the balance over management's best estimate of undiscounted future cash flows before amortization of the related intangible assets over the remaining amortization period. DEFERRED FINANCING AND INTANGIBLE ASSETS Deferred financing costs are amortized over periods from 5 to 12 years. Intangible assets consist primarily of a Fibermesh-Registered Trademark- trademark and patents on civil engineering products, which are amortized on a straight-line basis over 40 and 15 years, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which must be adopted for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS 130 will not have a material effect on the Company's results of operations or financial condition. F-7 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Also in June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), which must be adopted for fiscal years beginning after December 15, 1997. Under the new standard, companies will be required to report certain information about operating segments in consolidated financial statements. Operating segments will be determined based on the method that management organizes its businesses for making operating decisions and assessing performance. SFAS 131 also requires companies to report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is currently evaluating the effect SFAS 131 will have on its financial statement presentation. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which must be adopted for fiscal quarters of fiscal years beginning after June 15,1999. SFAS 133 requires the recognition of all derivatives as either assets or liabilities in the statement of financial position and measurement of those instruments at fair value. SFAS 133 will not have a material effect on the Company's results of operations or financial condition. RESEARCH AND DEVELOPMENT The Company's research and market development is focused primarily on development and as such the Company engages in product design, development and performance validation to improve existing products and to create new products. The Company expended $8,100, $4,208, and $2,942 in fiscal 1998, 1997, and 1996, respectively. Research and market development costs are expensed as incurred and included in general and administrative expenses. RECLASSIFICATION OF PRIOR FINANCIAL STATEMENTS Certain reclassifications have been made to previous years' financial statements to conform with 1998 classifications. 3. BUSINESS ACQUISITIONS On March 18, 1998, pursuant to a Stock Purchase Agreement, as subsequently amended, the Company acquired all of the outstanding shares of Novocon International, Inc. (the "Novocon Acquisition"), a manufacturer and marketer of steel concrete reinforcing fibers, for $7,302. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired of $5,293 (primarily accounts receivable and inventory of $1,731 and $1,654, respectively), and the liabilities assumed of $4,880 (primarily accounts payable and other debt of $2,545 and $2,335, respectively), based upon the fair market value at the date of acquisition. The excess purchase price over the fair values of the net assets acquired has been recorded as goodwill, which is being amortized on a straight-line basis over 20 years. The operating results of the acquired business have been included in the consolidated statement of operations from the date of acquisition. On February 27, 1997, the Company acquired certain assets of the Spartan Technologies division of Spartan Mills (the "Spartan Acquisition") for approximately $9,400. The Spartan Acquisition has been F-8 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 3. BUSINESS ACQUISITIONS (CONTINUED) accounted for using the purchase method of accounting, and, accordingly, the purchase price has been allocated to the net assets acquired (accounts receivable, inventory, and property, plant and equipment) based on the fair market value (which approximated cost) at the date of acquisition. The operating results of the acquired business have been included in the consolidated statement of operations from the date of acquisition. 4. ACCOUNTS RECEIVABLE Accounts receivable are presented net of the doubtful allowances of $2,714, $2,707 and $3,036 for fiscal 1998, 1997 and 1996, respectively. The Company had net recoveries for the year ended September 30, 1998 of $20 and amounts written off against established allowances of $849 and $2,041 for the years ended September 30, 1997 and 1996, respectively. The Company grants uncollateralized trade terms to most U.S. customers. A majority of the Company's carpet backing sales are with customers located in the state of Georgia. As of September 30, 1998 and 1997, $27,766 and $26,126, respectively of the Company's accounts receivable balances were due from customers located in this state. Net sales to one customer represented approximately 25%, 20% and 18% of consolidated net sales for 1998, 1997 and 1996, respectively. 5. INVENTORY
SEPTEMBER 30, -------------------- 1998 1997 --------- --------- Finished goods.......................................................... $ 37,689 $ 33,572 Work in process......................................................... 7,107 7,427 Raw materials........................................................... 7,654 13,140 --------- --------- $ 52,450 $ 54,139 --------- --------- --------- ---------
6. OTHER CURRENT ASSETS
SEPTEMBER 30, -------------------- 1998 1997 --------- --------- Prepaid supplies........................................................ $ 9,603 $ 9,003 Deferred tax assets (Note 10)........................................... 4,639 5,050 Receivable from Synthetic Industries L.P........................................................ 663 1,800 Insurance receivable.................................................... 1,110 191 Other................................................................... 1,294 1,156 --------- --------- $ 17,309 $ 17,200 --------- --------- --------- ---------
F-9 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 7. PROPERTY, PLANT AND EQUIPMENT
SEPTEMBER 30, ---------------------- 1998 1997 ---------- ---------- Land.................................................................. $ 4,585 $ 4,585 Buildings and improvements............................................ 42,588 35,398 Equipment under capital leases........................................ 12,500 4,973 Machinery and equipment and leasehold improvements.................... 266,972 227,304 ---------- ---------- 326,645 272,260 Accumulated depreciation.............................................. 108,196 90,158 ---------- ---------- $ 218,449 $ 182,102 ---------- ---------- ---------- ----------
Depreciation expense on property, plant and equipment was $17,745, $14,990 and $13,008 in fiscal 1998, 1997 and 1996, respectively. 8. OTHER ASSETS
SEPTEMBER 30, ---------------------- 1998 1997 ---------- ---------- Excess of purchase price over net assets acquired..................... $ 107,379 $ 99,818 Intangible assets..................................................... 3,698 3,546 Deferred financing costs.............................................. 12,443 11,651 ---------- ---------- 123,520 115,015 Accumulated amortization.............................................. 35,750 32,234 ---------- ---------- $ 87,770 $ 82,781 ---------- ---------- ---------- ----------
Amortization expense was $3,516, $3,246 and $3,291 in fiscal 1998, 1997 and 1996, respectively. F-10 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 9. LONG-TERM DEBT
SEPTEMBER 30, ---------------------- 1998 1997 ---------- ---------- Credit facility: Securitization.......................................................................... $ 29,162 $ -- Revolver................................................................................ 30,022 13,420 Term loan portion....................................................................... -- 25,000 9 1/4% senior subordinated notes, due 2007................................................ 170,000 170,000 12 3/4% senior subordinated debentures, due 2002.......................................... -- 7,403 Capital lease obligation (Note 16)........................................................ 10,647 4,083 Other..................................................................................... 2,512 1,276 ---------- ---------- 242,343 221,182 Less current portion...................................................................... 5,500 718 ---------- ---------- Total long-term portion................................................................... $ 236,843 $ 220,464 ---------- ---------- ---------- ----------
CREDIT FACILITY On December 18, 1997, the Company and its lenders, with BankBoston as agent, entered into a new five-year credit facility (the "Credit Facility"). Proceeds from the Credit Facility were used to repay the Fourth Amended and Restated Revolving Credit Agreement dated October 20, 1995. The Credit Facility consists of up to a $40 million asset based securitization program (the "Securitization"), with amounts borrowed through a wholly owned subsidiary, Synthetic Funding Corporation, and a $60 million senior secured revolver facility (the "Revolver"). In conjunction with the Securitization, the Company entered into a five-year agreement with its subsidiary providing for the sale of substantially all of its receivables on a revolving basis. Securitization and Revolver borrowings are collateralized by the Company's accounts receivable and substantially all of the assets of the Company, excluding real property, respectively. Interest on the Securitization is based on the applicable commercial paper rate in effect plus a spread. The Revolver permits borrowings which bear interest, at the Company's option, (i) for domestic borrowings based on the lender's base rate or (ii) for Eurodollar borrowings based on a spread over the Interbank Eurodollar rate at the time of conversion. Spreads for the Securitization and the Eurodollar borrowings are determined by the operational performance of the Company. At September 30, 1998, the balances under the Securitization and Revolver were $29,162 and $30,022, respectively, at interest rates ranging from 6.27% to 8.5%. The Revolver provides for borrowings under letters of credit of up to $10,000, which borrowings reduce amounts available under the Revolver. At September 30, 1998, letters of credit of $402 were outstanding. The Credit Facility contains covenants related to the maintenance of certain operating ratios and limitations as to the amount of capital expenditures. The Company's ability to pay dividends on Common Stock is prohibited under the Credit Facility. F-11 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) 9. LONG-TERM DEBT (CONTINUED) SENIOR SUBORDINATED DEBENTURES AND NOTES On February 11, 1997, the Company issued $170,000 in aggregate principal amount of 9 1/4% Senior Subordinated Notes due 2007 (the "Notes"), which represent unsecured obligations of the Company. The Notes are redeemable at the option of the Company at any time on or after February 15, 2002, initially at 104.625% of their amount, together with accrued interest, with declining redemption prices thereafter. Interest on the Notes is payable semi-annually on February 15 and August 15. In connection with the issuance of the Notes, the Company redeemed approximately $132,600 principal amount of its 12 3/4% Senior Subordinated Debentures due 2002 (the "Debentures") at a redemption price of 111.07% of the principal amount thereof. In addition, the Company repaid $20,000 of its outstanding term loan borrowings as of March 5, 1997. In connection with the early extinguishment of debt, the Company recorded an extraordinary loss of $11,950 (representing call premium and prepayment fees of $15,920 and write off of deferred financing costs of $3,511, net of an income tax benefit of $7,481) during the second quarter of fiscal 1997. On December 1, 1997 the Company redeemed the remaining $7,403 aggregate principal amount of Debentures outstanding at a redemption price of 106.375% of the principal amount thereof, together with accrued interest as of the redemption date. AGGREGATE MINIMUM PAYMENTS AND FAIR VALUE Approximate aggregate minimum annual payments due on long term debt and capital leases (see Note 16), for the subsequent five years, are as follows: 1999, $2,549; 2000, $1,408; 2001, $1,516; 2002, $1,631; 2003, $60,940; and thereafter, $176,212. The fair value of the Company's Notes is estimated to be $169,150 and $176,375 at September 30, 1998 and 1997, respectively. The fair value of the Debentures were estimated to be $7,875 at September 30, 1997. The fair values are based on quoted market prices for the Notes and Debentures in the over-the-counter market. F-12 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 10. INCOME TAXES The sources of income before provision for income taxes are as follows:
YEAR ENDED SEPTEMBER 30, ------------------------------- 1998 1997 1996 --------- --------- --------- United States................................................ $ 28,575 $ 29,609 $ 14,083 Foreign...................................................... 1,498 1,082 919 --------- --------- --------- Earnings before income taxes................................. $ 30,073 $ 30,691 $ 15,002 --------- --------- --------- --------- --------- ---------
The provision for income taxes contributable to the amounts shown above consists of the following:
YEAR ENDED SEPTEMBER 30, ------------------------------- 1998 1997 1996 --------- --------- --------- Current: Federal..................................................... $ 4,875 $ 8,796 $ 2,600 State....................................................... 591 1,120 600 Foreign..................................................... 500 355 300 --------- --------- --------- 5,966 10,271 3,500 --------- --------- --------- Deferred: Federal..................................................... 6,594 1,900 3,200 State....................................................... (705) 370 200 --------- --------- --------- 5,889 2,270 3,400 --------- --------- --------- Total......................................................... $ 11,855 $ 12,541 $ 6,900 --------- --------- --------- --------- --------- ---------
As described in Note 9, the Company recorded a current tax benefit of $7,481 in fiscal 1997 as a result of the early extinguishment of debt. A reconciliation of US income tax computed at the statutory rate and actual tax expense is as follows:
YEAR ENDED SEPTEMBER 30, ------------------------------- 1998 1997 1996 --------- --------- --------- Amount computed at statutory rate............................. $ 10,526 $ 10,742 $ 5,250 State and local taxes less applicable federal income tax benefit..................................................... 978 998 550 Amortization of goodwill...................................... 942 873 873 Tax credits................................................... (991) (405) -- Other nondeductible expenses.................................. 202 181 115 Other, net.................................................... 198 152 112 --------- --------- --------- $ 11,855 $ 12,541 $ 6,900 --------- --------- --------- --------- --------- ---------
F-13 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 10. INCOME TAXES (CONTINUED) The tax effects of significant items comprising the Company's net deferred tax liability are as follows:
SEPTEMBER 30, -------------------- 1998 1997 --------- --------- Property, plant and equipment........................................... $ 31,754 $ 27,345 Trademarks and patents.................................................. 1,242 1,085 --------- --------- Total deferred tax liabilities.......................................... 32,996 28,430 --------- --------- Accounts receivable..................................................... 968 1,018 Inventory............................................................... 749 815 Accrued expenses........................................................ 1,869 2,013 AMT credit carryforward................................................. -- 1,204 State tax credit carryforward........................................... 1,053 -- --------- --------- Total deferred tax assets............................................... 4,639 5,050 --------- --------- Net deferred tax liability.............................................. $ 28,357 $ 23,380 --------- --------- --------- ---------
At September 30, 1998 the Company has available state income tax credits of approximately $1,053 which are available to reduce future state income taxes, subject to statutory limitations, which will expire in 2007. 11. RETIREMENT PROGRAMS For US employees, the Company maintains a trusteed profit-sharing plan ("Plan") which is qualified under Section 401(k) of the Internal Revenue Code. All full-time employees over the age of 21 who have been employed continuously for at least one year are eligible for participation in the Plan. The Company may, but has not elected to, contribute a portion of its profits to the Plan, as determined by the Board of Directors. Employer contributions vest over 1 to 5 years. The Company has elected to match employee contributions to the Plan on a 50% basis but not to exceed 3% of the employee's annual compensation. During fiscal years 1998, 1997 and 1996, the Company contributed $1,117, $1,098 and $999, respectively. The Plan provides for the Company to bear the expense of the administration of the Plan. Pension expense on the foreign plans is not significant. 12. EMPLOYEE STOCK PURCHASE PLAN On February 25, 1998, the stockholders approved the Synthetic Industries, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"), reserving 325,000 shares of Common Stock for issuance under this Plan. The Company adopted the Stock Purchase Plan with an initial option period commencing effective April 1, 1998, and continuing in three-month option periods thereafter. The Stock Purchase Plan permits eligible employees to purchase Common Stock through payroll deductions or lump sum contributions, which may not exceed $25 in a calendar year, at a price equal to 85% of the Common Stock price as reported by NASDAQ at the beginning or end of each option period, whichever is lower. As of September 30, 1998, 10,510shares were purchased out of treasury stock under the Stock Purchase Plan. F-14 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 13. EARNINGS PER SHARE During fiscal year 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The following table reflects the calculation of basic and diluted earnings per share (in thousands of dollars, except share and per share amounts):
FISCAL 1998 FISCAL 1997 FISCAL 1996 ---------------------- ---------------------- ---------------------- BASIC DILUTED BASIC DILUTED BASIC DILUTED ---------- ---------- ---------- ---------- ---------- ---------- Income before extraordinary item............. $ 18,218 $ 18,218 $ 18,150 $ 18,150 $ 8,102 $ 8,102 Weighted average shares outstanding.......... 8,640,901 8,640,901 8,656,250 8,656,250 5,930,502 5,930,502 Affect of stock options using treasury stock method..................................... -- 354,413 -- 63,208 -- -- ---------- ---------- ---------- ---------- ---------- ---------- Total average equivalent shares.............. 8,640,901 8,995,314 8,656,250 8,719,458 5,930,502 5,930,502 Income before extraordinary item per share... $2.11 $2.03 $2.10 $2.08 $1.37 $1.37
Options to purchase 175,500 shares at prices ranging from $17.875 to $21.375 per share were outstanding during 1998 but were not included in the computation of diluted earnings per share, because the options' exercise price was greater than the average market price of the common stock. 14. STOCK OPTIONS DIRECTOR'S PLAN In August 1994, the Company adopted a stock option plan (the "Director's Plan") pursuant to which non-qualified stock options to purchase an aggregate of 125,261 shares of Common Stock were granted to the four non-employee Directors of the Company at an exercise price of $6.83 per share which was determined by reference to the fair market value of the Company's equity at the time such Directors joined the Board. The stock options were fully vested as of October 1, 1996 and have a term which expires on August 4, 2004. The Director's Plan does not provide for any further grants or options thereunder. MANAGEMENT PLAN The Company's 1994 and 1996 Stock Option Plans (collectively, the "Management Plans") for its key employees, provides for the granting of incentive stock options ("ISOs"), as provided in Section 422A of the Internal Revenue Code, and non-qualified stock options. The maximum aggregate number of shares of Common Stock that may be issued under the 1994 Plan and the 1996 Plan is 491,413 and 289,062, respectively. F-15 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 14. STOCK OPTIONS (CONTINUED) Stock option transactions during 1998, 1997 and 1996 are summarized as follows:
SHARES RESERVED FOR ISSUANCE SHARES UNDER AVAILABLE THE MANAGEMENT SHARES FOR WEIGHTED PLANS GRANTED GRANT PRICE AVERAGE PRICE ----------------- --------- ----------- ------------------ ------------- Balance at September 30, 1995............. 491,413 316,697 174,716 $10.72 $ 10.72 Options granted........ 289,062 194,439 -- $10.72 $ 10.72 ------- --------- ----------- ------------------ ------ Balance at September 30, 1996............. 780,475 513,136 267,339 $10.72 $ 10.72 Options granted........ -- 175,500 -- $17.875-$21.375 $ 18.77 ------- --------- ----------- ------------------ ------ Balance at September 30, 1997............. 780,475 688,636 91,839 $10.72-$21.375 $ 12.77 Options granted........ -- 80,900 -- $15.00 $ 15.00 ------- --------- ----------- ------------------ ------ Balance at September 30, 1998............. 780,475 769,536 10,939 $10.72-$21.375 $ 13.01
At September 30, 1998, 506,917 options were exercisable at exercise prices ranging from $10.72 to 21.375 per share. The purchase price of the shares of Common Stock subject to options under the Management Plans must be no less than the fair market value of the Common stock at the date of grant; provided, however, that the purchase price of shares of Common Stock subject to ISOs granted to any optionee who owns shares possessing more than 10% of the combined voting power of the Company ("Ten Percent Shareholder') must not be less that 110% of the fair market value of the Common Stock at the date of the grant. The maximum term of an option may not exceed ten years from the date of the grant, except with respect to ISOs granted to Ten Percent Shareholders which must expire within five years of the date of grant. The Company has elected to continue measuring stock-based compensation using the intrinsic value approach under APB Opinion No. 25 and has adopted the disclosure-only provision of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no compensation expense has been recognized for the options described above. Had compensation costs for the options been determined based on the fair value on the grant date consistent with the provisions of SFAS 123, the Company's net income and diluted income per share would have been changed to the following pro forma amounts:
1998 1997 1996 --------- --------- --------- Pro forma net income............................................ $ 17,640 $ 6,009 $ 8,012 Pro forma income per share...................................... 1.96 0.69 1.35
F-16 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 14. STOCK OPTIONS (CONTINUED) The fair values for the years presented were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:
1998 1997 1996 --------------- --------------- --------------- Dividend yield............................................... None None None Volatility................................................... 64% 33% 33% Risk-free interest rate...................................... 5.5% to 6.8% 6.4% to 6.8% 5.8% to 6.7% Expected life................................................ 4 years 4 years 4 years
The weighted average fair value of options granted in 1998, 1997 and 1996 was $8.04, $10.30 and $5.78, respectively. For options outstanding and exercisable at September 30, 1998, the exercisable price ranges and average remaining lives were:
OPTIONS OUTSTANDING ----------------------------------------------- OPTIONS EXERCISABLE WEIGHTED -------------------------- SHARES AVERAGE AVERAGE SHARES AVERAGE OUTSTANDING REMAINING EXERCISE OUTSTANDING EXERCISE EXERCISE PRICES AT 9/30/98 CONTRACTUAL LIFE PRICE AT 9/30/98 PRICE - - ------------------ ----------- ------------------- ------------- ----------- ------------- $10.72............ 513,136 7.4 $ 10.72 335,743 $ 10.72 $15.00............ 80,900 9.8 15.00 16,300 15.00 $17.875........... 130,500 8.6 17.875 130,500 17.875 $21.375........... 45,000 8.75 21.375 24,375 21.375
15. RELATED PARTY TRANSACTIONS SI Management L.P. is the sole general partner of the Partnership. Synthetic Management G.P. is the sole general partner of SI Management L.P. By virtue of these relationships, Synthetic Management G.P. controls the management and affairs of the Partnership and therefore, the Company. The Partnership owns 5,699,194 shares of Common Stock, or approximately 66% of the issued and outstanding shares of Common Stock, and therefore, holds the voting power to determine the outcome of all matters upon which stockholders vote. The partners of Synthetic Management G.P. are the following five Delaware corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed Investments, Inc., Kenner Investments, Inc. and W.G. Wright Investments, Inc. Each of Messrs. Chill, Beckman, Freed, Kenner and Wright is the sole director and the sole stockholder of one of Synthetic Management G.P.'s partners. For further information concerning Messrs. Chill, Freed, Kenner and Wright, see "Executive Officers and Directors of the Company." The Company and the Partnership have entered into a Registration Rights Agreement pursuant to which the Company has agreed that upon request of the Partnership the Company will register under the Securities Act and applicable state securities laws the sale of the Common Stock owned by the Partnership and as to which registration has been requested. The Company's obligation is subject to certain limitations relating to a minimum amount required for registration, the timing of a registration and other similar F-17 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 15. RELATED PARTY TRANSACTIONS (CONTINUED) matters. The Company is obligated to pay any registration expenses incidental to such registration, excluding underwriters' commissions and discounts. In connection with the Company's initial public offering of Common Stock in November 1996, the Company incurred approximately $650 of such incidental registration expenses on the behalf of the Partnership. The above description is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which has been filed as an exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 333-9377), filed with the Securities and Exchange Commission on September 13, 1996. On September 19, 1997, the Company and the Partnership entered into the Agreement and Plan of Withdrawal and Dissolution of the Partnership (the "Plan"). Pursuant to the Plan, the Partnership was to be dissolved in two separate phases. The first phase was to be an underwritten public offering of the number of shares of Common Stock that limited partners have elected to sell, and the second phase is to be one to three liquidating distributions of the unsold portions of the Partnership's shares of Common Stock, beginning 180 days after the completion of the public offering. On November 7, 1997, the limited partners approved the adoption of the Plan. However, the implementation of the Plan has been enjoined by courts in Delaware and California in connection with two lawsuits filed by certain limited partners of the Partnership against the Partnership and its general partner (the "General Partner"), among others. See "Claims and Legal Proceedings." Among other equitable and legal remedies, the plaintiff is seeking the removal of the General Partner and the liquidation of the Partnership. The Company is only a nominal defendant in these proceedings and does not presently possess any contractual rights with respect to their ultimate resolution. If, in connection with these lawsuits, the General Partner is removed or resigns, or the Partnership is liquidated under a court-appointed receiver, there can be no assurance that the resulting sale and/or distribution of the Partnership's shares of Common Stock will be made in the same or similar manner as that contemplated by the Plan. The General Partner has denied the allegations of the plaintiff and is vigorously contesting the lawsuits; however, in the event of an adverse ruling, the Company cannot predict the volume and price at which the Common Stock trades might be affected. A former executive officer of the Company and an affiliate of the Partnership, is being retained as a consultant to the Company. Pursuant to his consulting agreement with the Company, the former executive officer will receive, until January 31, 2000, or upon earlier termination of his consulting agreement, $125 per year and various insurance coverages, and will be authorized to exercise all stock options awarded to him, subject to applicable vesting provisions. Under this agreement, the former executive officer is required to provide the Company with 20 hours of consultation per month, has released the Company from any liability resulting from his employment and has also agreed not to compete against the Company. The Company leases office space under a five-year lease with one of the Company's executive officers. The term of the lease expires on September 30, 2003 and the rent is approximately $52 per year, which the Company believes is within prevailing market rates. Pursuant to a licensing agreement with the Company, an executive officer of the Company, receives royalties related to the manufacture and sale of a certain product for which the executive officer owns all of the U.S. and foreign patents. Under this agreement, the Company paid royalties of approximately $9 and $13 in fiscal 1998 and 1997, respectively, and will continue to pay such royalties until 2012 or the earlier termination of the licensing agreement. F-18 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 15. RELATED PARTY TRANSACTIONS (CONTINUED) During fiscal 1998 and 1997 the Company paid fees of approximately $125 and $241, respectively, to a law firm in which Mr. Joseph Dana, a director of the Company was a member until May 21, 1997. Effective May 21, 1997, Mr. Dana became employed as Chief Operating Officer and General Counsel of the Company. In May 1998, the Company acquired 82,056 shares of Common Stock from the Partnership in exchange for $1,759 of amounts receivable from the Partnership, in partial settlement of expenses incurred by the Company on behalf of the Partnership during the last several years. The shares were acquired at their fair market value and are held in treasury for issuance under the Employee Stock Purchase Plan. At September 30, 1998, the remaining balance due the Company was $663. 16. COMMITMENTS AND CONTINGENCIES A. LEASE COMMITMENTS On April 7, 1998, the Company entered into an eight-year capital lease agreement to finance $7,500 of equipment at 7.25%. On October 4, 1998, the Company entered into an eight-year capital lease for the acquisition of equipment of $5,300 at an interest rate of 7.03%. The proceeds were primarily used to repay the balance of the May 15, 1996 capital lease of $3,416. The Company also leases certain factory and warehouse buildings and equipment under long-term operating leases expiring periodically through 2009. Future minimum lease payments under noncancelable lease obligations at September 30, 1998, including the October 4, 1998 capital lease are as follows:
CAPITAL OPERATING YEAR LEASES LEASES - - ------------------------------------------------------------------------ --------- ----------- 1999.................................................................... $ 2,111 $ 4,836 2000.................................................................... 2,111 3,319 2001.................................................................... 2,111 1,901 2002.................................................................... 2,111 1,198 2003.................................................................... 2,111 557 Thereafter.............................................................. 5,816 603 --------- ----------- Total minimum lease payments............................................ $ 16,371 $ 12,414 ----------- ----------- Less amount representing interest....................................... 3,841 --------- Present value of net minimum lease payments............................. 12,530 Less current maturities of capital lease obligation..................... 1,207 --------- Long-term capital lease obligation...................................... $ 11,323 --------- ---------
Total rental expense for the above operating leases and other short-term leases for the fiscal years 1998, 1997 and 1996 was $5,813, $4,112 and $4,499, respectively. F-19 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 16. COMMITMENTS AND CONTINGENCIES (CONTINUED) B. CAPITAL EXPENDITURES In fiscal 1999, the Company plans to incur approximately $25,000 in connection with an expansion of its existing manufacturing facilities, primarily to increase capacity, subject to prevailing market conditions. 17. LITIGATION The Company and its subsidiaries are parties to litigation arising out of their business operations. Such litigation primarily involves claims for personal injury, property damage, breach of contract and claims involving employee relations and certain administrative proceedings. The Company believes such claims are either adequately covered by insurance or do not involve a risk of material loss to the Company. In connection with the proposed dissolution of the Partnership, pursuant to an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), the Company, its directors and certain other of the Company's officers who are affiliated with the General Partner have been named in two putative class and derivative action lawsuits filed by certain limited partners of the Partnership. In the first action, filed on February 11, 1997 in the Delaware Court of Chancery and thereafter amended, the plaintiffs have alleged, among other things, breach of contract with respect to the Partnership Agreement which governs the Partnership, breach of the defendants' fiduciary duty to the limited partners and the Company, that the Plan was unlawfully coercive, that the General Partner has allegedly failed to satisfy certain conditions precedent to the right of limited partners to amend the partnership agreement and that certain amendments necessary to implement the Plan violate the terms of the partnership agreement. The plaintiffs sought, among other equitable and legal remedies, removal of the General Partner, dissolution of the Partnership, appointment of a liquidating trustee, to enjoin the implementation of the Plan and compensatory damages in an undetermined amount. On October 23, 1997, the Court preliminarily enjoined the implementation of the Plan, although the Plan was subsequently approved by limited partners on November 7, 1997. On November 7, 1997, the Delaware Supreme Court accepted the defendants' petition for an expedited appeal of this injunction, and briefing and oral argument on the appeal was completed as of January 6, 1998. On March 19, 1998, the Delaware Supreme Court issued an opinion affirming the Court of Chancery's grant of a preliminary injunction and remanded the case for further proceedings. On April 27, 1998, the Court of Chancery granted the motion of certain pro-Plan intervenors to intervene in the action, but denied their motion to disqualify plaintiffs' counsel. On May 14, 1998, the General Partner withdrew the Plan. After the withdrawal of the Plan, plaintiffs, on June 3, 1998, filed a Consolidated Third Amended and Supplemental Class and Derivative Complaint (the "Third Amended Complaint"). The Third Amended Complaint, among other things, eliminated certain requests for relief related to the Plan and added certain allegations related to the Company's Employee Stock Purchase Plan and certain options granted to certain directors and officers of the Company. In addition to the relief sought in prior complaints, the Third Amended Complaint seeks declaratory relief with respect to certain provisions of the Partnership Agreement, the invalidation of the Company's Employee Stock Purchase Plan, the invalidation of certain options granted to the Company's directors and officers, and the invalidation of certain amendments to the Company's certificate of incorporation and bylaws relating to voting by consent and the calling of special meetings. On July 20, 1998, defendants filed a motion to dismiss the Third Amended Complaint. The defendants have denied any allegation of wrongdoing. F-20 SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED) (IN THOUSANDS OF DOLLARS) 17. LITIGATION (CONTINUED) The second lawsuit was filed in the U.S. District Court of the Northern District of California on May 1, 1997, and thereafter amended. The plaintiff has alleged in his amended complaint various federal securities and proxy violations allegedly arising out of the joint proxy statement and prospectus that was mailed to limited partners in connection with the solicitation of proxies for the vote on the Plan and other related documents. The plaintiff also added the Company as a named defendant, alleging that all defendants acted in concert with, and as agents of, each other; however the plaintiff made no specific independent allegations with respect to the Company. The plaintiff sought, among other equitable and legal remedies, to enjoin the implementation of the Plan and unspecified damages. On November 6, 1997, the Court granted in part the plaintiff's motion for a temporary restraining order enjoining the implementation of the Plan. After the withdrawal of the Plan, defendants, on June 19, 1998, filed a motion to dismiss the claims as moot. On July 17, 1998, plaintiff moved to amend his complaint purportedly to include an additional plaintiff and additional claims for relief, including permanent injunctive relief for any violations of the securities laws in the future. The amended complaint also adds the Partnership as a nominal defendant. On September 24, 1998, the Court denied the defendants' motion to dismiss and granted plaintiff's motion to amend the complaint. The defendants have denied any allegation of wrongdoing. On December 29, 1997, a purported derivative action was filed in the Delaware Chancery Court by a limited partner of the Partnership against certain of the Company's officers and directors with regard to certain stock options plans adopted by the Company in 1994. Both the Partnership and the Company were named as nominal defendants. The plaintiff alleged that the defendants breached their fiduciary duties by adoption of the stock option plans. The plaintiff seeks, among other things, a declaration that the stock options granted under the plans are invalid, the establishment of a constructive trust over the stock options, unspecified compensatory damages and reasonable attorneys' fees and expenses. By order dated June 23, 1998, this action was consolidated with the Delaware action described above. The defendants deny any allegation of wrongdoing and intend to vigorously contest the lawsuit. Based on the Company's review of the allegations made in the above actions to date, the Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company's results of operations or financial condition. The Partnership is a principal stockholder of the Company and certain members of the Company's management control the General Partner. By letter dated October 22, 1998, a demand for indemnification was received from a customer with respect to utilization of Fibermesh in concrete slabs in the State of California. The demand for indemnification pertained to any and all damages relating to their use of the Fibermesh product. No lawsuits have been filed against the Company and based upon the information provided to the Company, the scope of liability and potential damages, if any, cannot be ascertained at this time. The Company has engaged outside counsel to investigate this claim and intends to vigorously defend its product. F-21 EX-10.11 2 EXHIBIT 10.11 Exhibit 10.11 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Leonard Chill (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as the President and Chief Executive Officer; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period twenty-five (25) months; provided, however, that on the first day of the second calendar month following the Effective Date, and on the first day of each successive month, such term of employment shall automatically be extended for successive one month periods, providing a minimum remaining 1 term of twenty-four (24) months. Either party may halt future extension by written notice, in which case such term of employment shall be the term in effect when such written notice was given. Notwithstanding the foregoing, this Agreement shall automatically terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is not terminated earlier pursuant to Section 7. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as President and Chief Executive Officer of the Corporation. During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $280,000 per annum for the period from the Effective Date through September 30, 1998, and $300,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual 2 Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by 3 a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive 4 payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 5 For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). 6 (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. 7 (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans, in effect at the time of termination for a period of 18 months following termination of employment. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is 8 under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (C) "Termination Payment" means the sum of: (i) One and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: 9 (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; 10 (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner 11 unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from 12 Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive on or before 120 days following the date of the Change in Control or, if later, for Good Reason, then: 13 (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; and (D) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans and to purchase life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially equivalent to the coverage in effect at the time of termination for a period of 18 months following termination of employment. (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. 14 (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. (4) Certain Supplemental Provisions. Notwithstanding anything herein to the contrary, in the event that any payment received or to be received by Executive in connection with a Change in Control of the Corporation or the termination of Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payment being referred to in the aggregate as "Total Payment") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the Severance Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Severance Payments, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of the tax counsel selected by the Corporation's independent auditors and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, 15 and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. 16 (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: 17 (i) "Restricted Activities" means the rendering of any advertising, marketing, sales, administrative, financial planning or accounting, supervisory, or consulting services. (ii) "Territory" means the continental United States and Canada. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its 18 disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by 19 Executive or furnished to Executive by virtue of his employment with the Corporation. Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (f) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the 20 Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other 21 provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. 22 (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. _____________ (Initialed by Executive) _____________ (Initialed by the Corporation) 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to 23 compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the prior Employment Agreement between the parties and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise 24 to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: Leonard Chill Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though 25 not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- Leonard Chill Title: 27 EX-10.12 3 EXHIBIT 10.12 Exhibit 10.12 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and W. Wayne Freed (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as Vice President of Market Development; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period of five (5) years. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as Vice President of Market Development. 1 During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $168,000 per annum for the period from the Effective Date through September 30, 1998, and $175,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 2 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. 3 (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the 4 end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. 5 Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in 6 Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and 7 dental plans, in effect at the time of termination for a period of 18 months following termination of employment. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 8 (C) "Termination Payment" means the sum of: (i) One and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to 9 the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; 10 (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's 11 base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; 12 Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive for Good Reason, then: (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the 13 incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; and (D) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans and to purchase life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially equivalent to the coverage in effect at the time of termination for a period of 18 months following termination of employment. (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. (4) Certain Supplemental Provisions. Notwithstanding anything herein to the contrary, in the event that any payment received or to be received by Executive in connection with a Change in Control of the Corporation or the termination of Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payment being referred to in the aggregate as "Total Payment") would not be deductible (in whole or in part) as a result of Section 280G of the Code, 14 the payments otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the Severance Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Severance Payments, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of the tax counsel selected by the Corporation's independent auditors and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or 15 arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment 16 made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: (i) "Restricted Activities" means the rendering of any advertising, marketing, sales, administrative, financial planning or accounting, supervisory, or consulting services. (ii) "Territory" means the continental United States and Canada. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. 17 (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his 18 employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by Executive or furnished to Executive by virtue of his employment with the Corporation. Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, 19 solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained 20 in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the 21 Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. (Initialed by Executive) ------------- (Initialed by the Corporation) ------------- 22 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a 23 condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the prior Employment Agreement between the parties and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as 24 such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: W. Wayne Freed Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 25 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- -------------------------------- W. Wayne Freed Title: ------------------------------- 26 EX-10.13 4 EXHIBIT 10.13 Exhibit 10.13 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Ralph Kenner (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as Vice President of Manufacturing; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period twenty-five (25) months; provided, however, that on the first day of the second calendar month following the Effective Date, and on the first day of each successive month, such term of employment shall automatically be extended for successive one month periods, providing 1 a minimum remaining term of twenty-four (24) months. Either party may halt future extension by written notice, in which case such term of employment shall be the term in effect when such written notice was given. Notwithstanding the foregoing, this Agreement shall automatically terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is not terminated earlier pursuant to Section 7. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as Vice President of Manufacturing. During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $171,000 per annum for the period from the Effective Date through September 30, 1998, and $171,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual 2 Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by 3 a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive 4 payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 5 For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). 6 (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. 7 (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive and his covered dependents shall be entitled to continue to be covered at the expense of the Corporation by the same or equivalent hospital, medical, and dental insurance coverage as in effect for Executive immediately prior to termination of his employment, until the earlier of (i) age 65, or (ii) the date Executive has commenced new employment and has thereby become eligible for comparable benefits. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is 8 under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (C) "Termination Payment" means the sum of: (i) One and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: 9 (i) any "person" (as defined under Section 3(a) (9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; 10 (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner 11 unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from 12 Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive for Good Reason, then: 13 (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; (D) Executive and his covered dependents shall be entitled to continue to be covered at the expense of the Corporation by the same or equivalent hospital, medical, dental, accident, disability and life insurance coverage as in effect for Executive immediately prior to termination of his employment, until the earlier of (i) age 65, or (ii) the date Executive has commenced new employment and has thereby become eligible for comparable benefits; and (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. 14 (4) Certain Supplemental Provisions. Notwithstanding anything herein to the contrary, in the event that any payment received or to be received by Executive in connection with a Change in Control of the Corporation or the termination of Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payment being referred to in the aggregate as "Total Payment") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the Severance Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Severance Payments, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of the tax counsel selected by the Corporation's independent auditors and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 15 (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to 16 participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: (i) "Restricted Activities" means the rendering of any administrative, supervisory, or consulting services. (ii) "Territory" means the continental United States and Canada. 17 (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or 18 its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by Executive or furnished to Executive by virtue of his employment with the Corporation. Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. 19 (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's 20 undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 21 P 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. ' 1, et seq. ("FAA"); however, if this clause is 22 unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. ' 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. _____________ (Initialed by Executive) _____________ (Initialed by the Corporation) 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit 23 plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the prior Employment Agreement between the parties and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or 24 provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga; GA 30707 To Executive: Ralph Kenner Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 25 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- Ralph Kenner Title: 27 EX-10.16 5 EXHIBIT 10.16 Exhibit 10.16 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Charles T. Koerner (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as Vice President-Construction/Civil Engineering Division; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period that ends on the date that is the third anniversary of the Effective Date; provided, however, that on the first day of the calendar month next following the first anniversary of the Effective Date, and on the first day of each successive month, such term of employment shall automatically be extended for successive one month periods, providing a minimum remaining term of two years. Either party may halt future extension by written notice, in which case such term of employment shall be the term in effect when such written notice was given. Notwithstanding the foregoing, this Agreement shall automatically terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is not terminated earlier pursuant to Section 7. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as Vice President-Construction/Civil Engineering Division. During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $141,000 per annum for the period from the Effective Date through September 30, 1998, and $151,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual 2 Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by 3 a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive 4 payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 5 For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). 6 (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. 7 (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans, in effect at the time of termination for a period of 18 months following termination of employment. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is 8 controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (C) "Termination Payment" means the sum of: (i) One and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: 9 (i) any "person" (as defined under Section 3(a) (9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; 10 (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner 11 unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from 12 Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive for Good Reason, then: 13 (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; and (D) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans and to purchase life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially equivalent to the coverage in effect at the time of termination for a period of 18 months following termination of employment. (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. 14 (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. (4) Certain Supplemental Provisions. Notwithstanding anything herein to the contrary, in the event that any payment received or to be received by Executive in connection with a Change in Control of the Corporation or the termination of Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payment being referred to in the aggregate as "Total Payment") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the Severance Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Severance Payments, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of the tax counsel selected by the Corporation's independent auditors and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, 15 and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. 16 (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: (i) "Restricted Activities" means the rendering of any advertising, marketing, sales, administrative, supervisory, or consulting services. 17 (ii) "Territory" means the continental United States and Canada. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of geosynthetic or fiber reinforced concrete fabrics and fibers. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 18 (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by Executive or furnished to Executive by virtue of his employment with the Corporation. 19 Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. 20 (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive and the Corporation shall have 21 the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. 22 (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. (Initialed by Executive) ------------- (Initialed by the Corporation) ------------- 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations 23 of Executive hereunder may be assigned or transferred by Executive except that (a) rights to compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the prior Employment Agreement between the parties and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the 24 benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: Charles T. Koerner Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then 25 such clause or provision only shall be held ineffective to the extent of such invalidity, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18 References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- Charles T. Koerner Title: 27 EX-10.17 6 EXHIBIT 10.17 Exhibit 10.17 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th day of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Joseph Sinicropi (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as the Chief Financial Officer; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period that ends on the date that is the third anniversary of the Effective Date; provided, however, that on the first day of the calendar month next following the first anniversary of the Effective Date, and on the first day of each successive month, such term of employment shall automatically be extended for successive 1 one month periods, providing a minimum remaining term of two years. Either party may halt future extension by written notice, in which case such term of employment shall be the term in effect when such written notice was given. Notwithstanding the foregoing, this Agreement shall automatically terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is not terminated earlier pursuant to Section 7. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as Chief Financial Officer of the Corporation. During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $170,000 per annum for the period from the Effective Date through September 30, 1998, and $182,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual 2 Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by 3 a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive 4 payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 5 For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). 6 (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. 7 (iv) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans, in effect at the time of termination for a period of 18 months following termination of employment. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the 8 direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (C) "Termination Payment" means the sum of: (i) Two and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: (i) any "person" (as defined under Section 3(a) (9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or 9 otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the 10 disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: 11 (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; 12 (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive on or before 120 days following the date of the Change in Control or, if later, for Good Reason, then: (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; 13 (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; and (D) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans and to purchase life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially equivalent to the coverage in effect at the time of termination for a period of 18 months following termination of employment. (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. 14 (4) Certain Supplemental Payments by the Corporation. (A) In the event Executive's employment is terminated pursuant to this Subsection, and if in connection therewith it is determined that (i) part or all of the compensation and benefits to be paid to Executive constitute "parachute payments" under Section 280G of the Code, and (ii) the payment thereof will cause Executive to incur excise tax under Section 4999 of the Code, the Corporation, on or before the date for payment of such excise tax, shall pay Executive, in a lump sum, an amount (the "Gross-Up Amount") such that, after payment of all federal, state and local income tax and any additional excise tax under Section 4999 of the Code in respect of the Gross-Up Amount payment, Executive will be fully reimbursed for the amount of such excise tax. (B) The determination of the Parachute Amount, the Base Amount and the Gross-Up Amount, as well as any other calculations necessary to implement this Subsection shall be made by a nationally recognized accounting or benefits consulting firm ("Consultant") selected by Executive and reasonably satisfactory to the Corporation and which has not performed services , other than minor indirect or incidental services, for either the Corporation or Executive for three years prior to the date the Consultant is retained for this purpose. The Consultant's fee shall be paid by the Corporation. (C) As promptly as practicable following such determination and the elections hereunder, the Corporation shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to Executive under this Agreement and shall promptly 15 pay to or distribute for the benefit of Executive in the future such amounts as become due to Executive under this Agreement. (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. 16 (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: (i) "Restricted Activities" means the rendering of any financial planning or accounting services. 17 (ii) "Territory" means the States of Georgia, Tennessee, Alabama, Mississippi, North Carolina, South Carolina, Florida, Louisiana, Kentucky, and West Virginia. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 18 (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by Executive or furnished to Executive by virtue of his employment with the Corporation. 19 Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. 20 (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper 21 jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10 Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is 22 unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. (Initialed by Executive) ------------- (Initialed by the Corporation) ------------- 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit 23 plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the Employment Agreement between the parties dated September 6, 1996, and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or 24 provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: Joseph Sinicropi Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 25 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- Joseph Sinicropi Title: 27 EX-10.18 7 EXHIBIT 10.18 Exhibit 10.18 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Bobby Callahan (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as the Corporate Controller; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period of five (5) years. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as the Corporate Controller. During 1 the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $95,000 per annum for the period from the Effective Date through September 30, 1998, and $103,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 2 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. 3 (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the 4 end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. 5 Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in 6 Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and 7 dental plans, in effect at the time of termination for a period of 18 months following termination of employment. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 8 (C) "Termination Payment" means the sum of: (i) One and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: (i) any "person" (as defined under Section 3(a) (9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") 9 representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; 10 (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: 11 (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; 12 (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive for Good Reason, then: (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; 13 (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; and (D) Executive shall be entitled to a lump sum payment equal to the estimated sum of the premiums that Executive would have to pay to continue to cover Executive and his eligible dependents under the Corporation's group health plans, including medical and dental plans and to purchase life insurance, accidental death and dismemberment insurance and disability insurance coverage substantially equivalent to the coverage in effect at the time of termination for a period of 18 months following termination of employment. (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. (4) Certain Supplemental Provisions. Notwithstanding anything herein to the contrary, in the event that any payment received or to be received by Executive in 14 connection with a Change in Control of the Corporation or the termination of Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payment being referred to in the aggregate as "Total Payment") would not be deductible (in whole or in part) as a result of Section 280G of the Code, the payments otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be reduced until no portion of the Total Payments is not deductible as a result of Section 280G of the Code, or the Severance Payments are reduced to zero. For purposes of this limitation (i) no portion of the Total Payments, the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Severance Payments, shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of the tax counsel selected by the Corporation's independent auditors and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clause (i) or (ii)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, and (iv) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Corporation's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (6) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith 15 to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by 16 any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: (i) "Restricted Activities" means the rendering of any financial planning or accounting services. (ii) "Territory" means the States of Georgia, Tennessee, Alabama, Mississippi, North Carolina, South Carolina, Florida, Louisiana, Kentucky, and West Virginia. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. 17 (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. 18 (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by Executive or furnished to Executive by virtue of his employment with the Corporation. Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from 19 any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further 20 acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be 21 settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. 22 (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. ________________ (Initialed by Executive) ________________ (Initialed by the Corporation) 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the 23 Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the prior Employment Agreement between the parties and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 24 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: Bobby Callahan Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 25 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. - - -------------------------- By: Bobby Callahan Title: 27 EX-10.19 8 EXHIBIT 10.19 Exhibit 10.19 Employment Agreement This Agreement ("Agreement") is made and entered into as of the 24th day of September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc. ("the Corporation") and Joseph Dana (the "Executive"). WITNESSETH: WHEREAS, the Corporation currently employs Executive as the Chief Operating Officer; and WHEREAS, both the Corporation and Executive (the "Parties") desire to state certain terms and conditions of Executive's employment and wish to substitute this agreement for their previous employment agreements; NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the Parties agree as follows: 1. Employment. The Corporation agrees to continue to employ Executive and Executive agrees to continue to serve the Corporation upon the terms and conditions hereinafter set forth. 2. Term. Except as otherwise provided in Section 7 below, the term of employment under this Agreement shall continue from the Effective Date for a period that ends on the date that is the fourth anniversary of the Effective Date; provided, however, that on the first day of the calendar month next following the second anniversary of the Effective Date, and on the first day of each successive month, such term of employment shall automatically be extended for 1 successive one month periods, providing a minimum remaining term of two years. Either party may halt future extension by written notice, in which case such term of employment shall be the term in effect when such written notice was given. Notwithstanding the foregoing, this Agreement shall automatically terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is not terminated earlier pursuant to Section 7. 3. Duties and Extent of Services; Location of Principal Office. During the term set forth in Section 2 above, the Corporation shall employ Executive and Executive shall serve the Corporation as Chief Operating Officer of the Corporation. During the period of his employment, Executive shall devote his full business time and attention to the business and affairs of the Corporation. During such term, Executive's principal office shall be located at 309 Lafayette Road, Chickamauga, Georgia. 4. Compensation. (a) Base Salary. During the term set forth in Section 2 above, the Corporation shall pay Executive a base salary, payable in accordance with the Corporation's standard payroll practices, as follows: $225,000 per annum for the period from the Effective Date through September 30, 1998, and $240,000 per annum, thereafter. Executive's salary may be reviewed from time to time by the Board, to increase the amount of such salary. Executive's salary shall not be reduced during the term of this Agreement. Any increased salary shall become Executive's base salary for purposes of this Agreement. (b) Annual Incentive. During the term set forth in Section 2, above, Executive shall be eligible to participate in the Executive Incentive Plan, or in such successor plan as may be adopted for the provision of annual incentive compensation for senior executives (the "Annual 2 Incentive Plan"). Executive shall be entitled to an incentive payment applicable under the Annual Incentive Plan if the Corporation meets its business plan for the year ("Making Plan"). (c) Stock Options. Executive shall have such rights to stock options under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the Synthetic Industries, Inc. 1996 Stock Option Plan, the Synthetic Industries, Inc. 1994 Stock Option Plan for Non-employee Directors, or any successor stock option plan, or any combination of such plans (collectively, the "Option Plan") as shall be set forth in any applicable stock option agreement. 5. Benefits. During the term set forth in Section 2 above, Executive shall be eligible to participate in all group life insurance, health insurance, disability insurance, survivor income insurance and similar programs maintained by the Corporation and covering executive employees. Participation in any retirement plans maintained by the Corporation shall be as determined under the provisions of such plans. 6. Reimbursement for Expenses. The Corporation shall reimburse Executive for all reasonable business expenses incurred by him on behalf of the Corporation in the performance of his duties hereunder, provided Executive shall account therefore in accordance with the Corporation's business expense policies and procedures. 7. Termination Executive's employment may be terminated prior to the end of the term described in Section 2 only as provided in this Section 7. 3 (a) Termination for Disability. If the Executive becomes unable to substantially perform his duties due to permanent physical or mental disability, as determined by a physician agreed upon by the Corporation and the Executive, his employment pursuant to this Agreement shall terminate. If Executive's employment is terminated on account of disability under this Section 7(a), Executive's rights to compensation and benefits shall be as follows: (i) Executive (or in the event of his death, his estate) shall be paid his base salary accrued through the date of termination of employment. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. (b) Termination on Executive's Death. In the event of termination of employment by reason of the death of Executive, payment of compensation and benefits shall be as set forth below. Payment shall be made to the executor or administrator of Executive's estate, or, in the case of a payment made under a benefit program, to the person or persons who have been designated pursuant to the terms of such program to receive such payments. (i) Executive's base salary accrued through the date of termination of employment. 4 (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his death, Executive's rights under the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under such programs. (c) Termination for Cause. The Corporation shall have the right to terminate Executive's employment for "Cause." If Executive's employment is terminated for Cause, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary accrued through the date of termination of employment. (ii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreements. (iii) Following his termination, Executive's right to participate in the benefit programs described in Section 5, above, including the rights of Executive's dependents to 5 participate in such programs, if any, shall be as determined under the provisions of such benefit programs. For purposes of this Subsection, "Cause" shall mean (1) Executive's conviction of, or plea of, guilty or nolo contendere to a felony (unless committed in the good faith belief that Executive's actions were in the best interests of the Corporation and would not violate criminal law); or (2) gross neglect or gross misconduct in the performance of Executive's duties. Executive shall be given written notice that the Corporation intends to terminate his employment for Cause under this Subsection. Such notice shall specify the particular acts, or failures to act, that give rise to the decision to so terminate employment. In the case of termination for Cause under definition (1), Executive's employment shall be terminated effective as of the date such notice is given, provided, however, that Executive shall be given the opportunity to meet with the Board of Directors of the Corporation within 30 days of the date such notice is given, to be heard with regard to whether he, in good faith, believed that his actions or inactions were both in the best interests of the Corporation and would not violate criminal law. In the case of termination for Cause under definition (2), Executive shall be given the opportunity within 20 days of the receipt of such notice to meet with the Board to defend such acts or failures to act. Executive shall be given seven days after such meeting to correct any particular acts or failures to act, and upon failure of Executive, within such seven day period, to correct such acts or failures to act, Executive's employment by the Corporation shall be terminated. 6 Termination on account of disability, as provided in Section 7(a) above, shall not be considered a termination for Cause under this Section 7(c). (d) Termination Without Cause. (1) The Corporation shall have the right to terminate Executive's employment without Cause as defined in Section 7(c) above. In the event of a termination by the Corporation without Cause, other than (A) following a Change in Control, as defined in Section 7(e) below, or (B) as described in Subsection (2) below, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid his base salary at the rate in effect on the date of termination of employment for a period of one and one-half years from the date of termination. (ii) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, Executive shall be entitled to an incentive payment, in lieu of an incentive payment under the Annual Incentive Plan for the plan year in which his employment terminates, in an amount equal to the payment otherwise determined under the Annual Incentive Plan, as if the Executive were employed by the Corporation to the end of the year of his termination, multiplied by a fraction the numerator of which is the number of weeks Executive was employed during such year, and the denominator of which is 52. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three full plan years immediately preceding his termination of employment. 7 (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Executive and his covered dependents shall be entitled to continue to be covered at the expense of the Corporation by the same or equivalent hospital, medical, and dental insurance coverage as in effect for Executive immediately prior to termination of his employment, until the earlier of (i) age 65, or (ii) the date Executive has commenced new employment and has thereby become eligible for comparable benefits. Termination on account of disability, as provided in Section 7 (a) above, shall not be considered a termination without Cause under this Section 7(d). (2) If Executive's employment is terminated by the Corporation without Cause, as defined in Subsection (e) above, prior to the occurrence of a Change in Control of the Corporation (as defined below), and if it can be shown that Executive's termination (i) was at the direction or request of a third party that had taken steps reasonably calculated to effect the Change in Control of the Corporation thereafter, or (ii) otherwise occurred in connection with, or in anticipation of, the Change in Control of the Corporation, then Executive shall have the rights described in Section 7(e) below, as if a Change in Control of the Corporation had occurred on the date immediately preceding such termination. 8 (e) Termination Following a Change in Control. (1) Definitions. (A) "Act" means the Securities Exchange Act of 1934, as amended. (B) "Affiliate of any specified persons" means any other person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (C) "Termination Payment" means the sum of: (i) Two and one-half times Executive's base salary at the rate in effect on the date of a termination of employment (or, in the event of a termination for Good Reason below, the base salary as in effect immediately before the actions giving rise to Good Reason); plus (ii) Two times the greatest of the incentive payments under the Annual Incentive Plan either paid or accrued in either the Year of the Change in Control or the immediately preceding Year. (D) "Base Amount" means an amount equal to Executive's Annualized Includable Compensation for the Base Period as defined in Section 280(G)(d)(1) and (2) of the Code (as hereinafter defined). 9 (E) "Change in Control" of the Corporation means a Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto, provided that without limiting the foregoing, a Change in Control of the Corporation also shall be deemed to have occurred if: (i) any "person" (as defined under Section 3(a) (9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of which are entitled to vote ("voting stock") representing that percentage of the Corporation's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Corporation combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons (other than the Partnership) holds at any time after such combination, voting stock equal 10 to or greater than thirty-five percent (35%) of all such voting stock determined by reference to the voting securities of the surviving entity, or (b) the Corporation's Directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity; (iv) the shareholders of the Corporation approve any merger, consolidation or share exchange as a result of which the voting stock of the Corporation shall be changed, converted or exchanged (other than a merger solely with a wholly owned subsidiary of the Corporation), or any dissolution or liquidation of the Corporation or any sale or the disposition of 50% or more of the assets or business of the Corporation in a single transaction or in a series of transactions; (v) the shareholders of the Corporation approve any merger or consolidation to which the Corporation is a party or a share exchange in which the Corporation shall exchange its shares for shares of another corporation as a result of which the persons who were shareholders of the Corporation immediately prior to the effective date of the merger, consolidation or share exchange shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger, consolidation or share exchange; (vi) any event that would constitute a Change in Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation 14A promulgated under the Act or any successor thereto or under any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for the term "Corporation," "partner" were substituted for "shareholder" and "interest" were substituted for "stock," "capital stock" or "securities," or 11 (vii) the removal of the entity that constitutes the general partner of the Partnership on the date hereof (the "Incumbent General Partner") or the appointment in a dissolution of the Partnership of a liquidating trustee that is not the Incumbent General Partner unless such appointment was approved by either the Incumbent General Partner or the individuals who constitute the Incumbent Board. (F) "Code" means the Internal Revenue Code of 1986, including any amendments thereto. (G) "Good Reason" means: (i) any breach of this Agreement by the Corporation, including without limitation (a) any reduction during the employment period in the amount of Executive's base salary or aggregate benefits as in effect from time to time, (b) failure to provide Executive with the same fringe benefits that were provided to Executive immediately prior to a Change in Control of the Corporation, or with a package of fringe benefits (including paid vacations) that, though one or more of such benefits may vary from those in effect immediately prior to such a Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole, or (c) any other breach by the Corporation of its obligations to pay compensation under this Agreement; (ii) without Executive's express written consent, the assignment to Executive of any duties which are materially inconsistent with Executive's positions, duties, responsibilities and status immediately prior to the Change in Control of the Corporation, a material change in Executive's reporting responsibilities, titles or offices as an employee and as 12 in effect immediately prior to the Change in Control, or a significant reduction in Executive's title, duties or responsibilities, or in the level of his support services; (iii) the relocation of Executive's principal place of employment, without Executive's written consent, to a location more than 50 miles from Executive's principal place of employment at the time of such Change in Control, or the imposition of any requirement that Executive spend more than 60 business days per year at a location other than such principal place of employment; (iv) any purported termination of Executive's employment for Cause, Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements defined below; Upon the occurrence of any of the events described in (i), (ii), (iii), or (iv) above, Executive shall give the Corporation written notice that such event constitutes Good Reason, and the Corporation shall thereafter have 30 days in which to cure. If the Corporation has not cured in that time, the event shall constitute Good Reason. (H) "Notice of Termination" means a notice which shall indicate the specific termination provision relied upon in this Agreement and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (I) "Person" or "Group" means a "person" or "group," as defined in the definition of "Change in Control" above. (J) "Year" means a calendar year unless otherwise specifically provided. 13 (2) Payments for Termination Following Change in Control. If, following a Change in Control, Executive's employment with the Corporation is terminated by the Corporation other than for Cause, or by Executive on or before 120 days following the date of the Change in Control or, if later, for Good Reason, then: (A) Executive shall be entitled to all compensation and benefits accrued through the date of termination of employment; (B) Executive shall be entitled to the Termination Payment made in a lump sum payment; (C) Executive shall be entitled to any unpaid amount previously fully accrued under the Annual Incentive Plan. In addition, in lieu of future payments under the Annual Incentive Plan, Executive shall be entitled to a payment that equals the average of the incentive payments received by Executive (or fully accrued by him) under the Annual Incentive Plan for the three plan years immediately preceding his termination of employment; (D) Executive and his covered dependents shall be entitled to continue to be covered at the expense of the Corporation by the same or equivalent hospital, medical, dental, accident, disability and life insurance coverage as in effect for Executive immediately prior to termination of his employment, until the earlier of (i) age 65, or (ii) the date Executive has commenced new employment and has thereby become eligible for comparable benefits; and (E) The payments described above shall be made within 2 business days after termination in the event termination is by the Corporation or Executive gives at least 5 business days notice of termination by the Executive. In the case of termination by the Executive 14 without 5 business days notice, the payments shall be made within 10 business days after the termination. Any payments not timely made will accrue interest at 8.5% per annum until made. (3) Vesting of Options upon Change in Control. In the event of a Change in Control, whether or not Executive's employment continues with the Corporation, all options under the Option Plan shall immediately vest on the date of the Change in Control. (4) Certain Supplemental Payments by the Corporation. (A) In the event Executive's employment is terminated pursuant to this Subsection, and if in connection therewith it is determined that (i) part or all of the compensation and benefits to be paid to Executive constitute "parachute payments" under Section 280G of the Code, and (ii) the payment thereof will cause Executive to incur excise tax under Section 4999 of the Code, the Corporation, on or before the date for payment of such excise tax, shall pay Executive, in a lump sum, an amount (the "Gross-Up Amount") such that, after payment of all federal, state and local income tax and any additional excise tax under Section 4999 of the Code in respect of the Gross-Up Amount payment, Executive will be fully reimbursed for the amount of such excise tax. (B) The determination of the Parachute Amount, the Base Amount and the Gross-Up Amount, as well as any other calculations necessary to implement this Subsection shall be made by a nationally recognized accounting or benefits consulting firm ("Consultant") selected by Executive and reasonably satisfactory to the Corporation and which has not performed services , other than minor indirect or incidental services, for either the Corporation or Executive for three years prior to the date the Consultant is retained for this purpose. The Consultant's fee shall be paid by the Corporation. 15 (C) As promptly as practicable following such determination and the elections hereunder, the Corporation shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to Executive under this Agreement and shall promptly pay to or distribute for the benefit of Executive in the future such amounts as become due to Executive under this Agreement. (5) Expenses and Interest. If, after a Change in Control of the Corporation, a good faith dispute arises with respect to the enforcement of the Executive's rights under this Subsection 7(e), or if any legal or arbitration proceeding shall be brought in good faith to enforce or interpret any rights provided under this Subsection 7(e), Executive shall recover from the Corporation any reasonable attorney's fees and necessary costs and disbursements incurred as a result of such dispute, and prejudgment interest on any money judgment or arbitration obtained by Executive calculated at 8.5% per annum from the date that payments to him should have been made under this Subsection. (f) Voluntary Termination. Executive may terminate his employment voluntarily at any time by giving the Corporation two weeks written notice. In the event Executive terminates his employment voluntarily, other than as provided in Subsection 7(e) above, Executive's rights to compensation and benefits shall be as follows: (i) Executive shall be paid salary accrued through the date of termination of employment. (ii) Executive's rights to annual incentive, if any, shall be as determined under the Annual Incentive Plan. 16 (iii) Executive's rights with respect to stock options, if any, shall be determined under the Option Plan and any applicable stock option agreement. (iv) Following his termination, Executive's right to participate in the benefit programs described in Section 5 above, including the rights of Executive's dependents to participate in such programs, if any, shall be as determined under the provisions of such benefit programs. 8. Payment Obligations Absolute. The Corporation's obligation to pay the Executive the compensation and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against him or anyone else. All amounts payable by the Corporation hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Corporation shall be final and the Corporation will not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reason whatever provided that if the Executive is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts or omissions of the Executive in connection with his employment by the Corporation, the Corporation shall be allowed to recover any actual damages it has incurred from such action or omission out of amounts paid or owing him hereunder. 9. Further Obligations of Executive. (a) Definitions. For purposes of this Section, the following definitions apply: 17 (i) "Restricted Activities" means the rendering of any advertising, marketing, sales, administrative, financial planning or accounting, supervisory, or consulting services. (ii) "Territory" means the continental United States and Canada. (iii) "Restricted Businesses" means the manufacture, distribution, and/or sale of fabrics and fibers manufactured from polypropylene resin. (iv) "Confidential Information" means any data or information, other than Trade Secrets, that is valuable to the Corporation and not generally known to the public or to competitors of the Corporation. (v) "Nondisclosure Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vi) "Nonsolicitation Period" means the period beginning on the date of this Agreement and ending two years after the date Executive's employment with the Corporation ends or is terminated for any reason. (vii) "Trade Secret" means information including, but not limited to, any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its 18 disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (b) Trade Secrets and Confidential Information. (i) Trade Secrets. Executive hereby covenants and agrees that he shall hold in confidence all Trade Secrets of the Corporation, its direct and indirect subsidiaries, and/or its customers (the "Associated Companies") that came into his knowledge during his employment by the Corporation and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets without the prior written consent of the Corporation for as long as the information remains a Trade Secret. (ii) Confidential Information. Executive hereby covenants and agrees that, during the Non-Disclosure Period, he will hold in confidence all Confidential Information of the Corporation or of the Associated Companies that came into his knowledge during his employment by the Corporation and will not disclose, publish or make use of such Confidential Information without the prior written consent of the Corporation. (iii) Return of Materials. Upon the request of the Corporation and, in any event, upon the termination of Executive's employment with the Corporation, Executive shall deliver to the Corporation all memoranda, notes, records, manuals or other documents (including, but not limited to, written instruments, voice or data recordings, or computer tapes, disks or files of any nature), including all copies of such materials and all documentation prepared or produced in connection therewith, pertaining to the performance of Executive's services for the Corporation, the business of the Corporation, or containing Trade Secrets or Confidential Information regarding the Corporation's business, whether made or compiled by 19 Executive or furnished to Executive by virtue of his employment with the Corporation. Executive shall also deliver to the Corporation all computers, credit cards, telephones, office equipment, software, and other property the Corporation furnished to Executive by virtue of his employment with the Corporation. (c) Nonsolicitation. (i) Nonsolicitation of Customers. Executive hereby covenants and agrees that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit, directly or indirectly, any business related to the Restricted Businesses from any of the Corporation's customers, including actively sought prospective customers, with whom Executive had contact during his employment with the Corporation. (ii) Nonsolicitation of Employees. Executive hereby covenants that he will not, during the Nonsolicitation Period, without the prior written consent of the Corporation, solicit or attempt to solicit for employment for or on behalf of any corporation, partnership, venture or other business entity any person who, on the last day of Executive's employment with the Corporation or within 12 months prior to that date, was employed by the Corporation or its direct or indirect subsidiaries and with whom Executive had contact during the course of his employment with the Corporation (whether or not such person would commit a breach of contract). (d) Non-competition. (i) Noncompete. Executive hereby covenants that he will not, within the Territory and during the Nonsolicitation Period, without the prior written consent of the 20 Corporation, engage in any Restricted Activities for or on behalf of any corporation, partnership, venture or other business entity which engages in any of the Restricted Businesses. (e) Noncompete Payment. Notwithstanding any other provision of this Agreement, the Parties agree that in consideration of and as an inducement to Executive's undertaking the obligations contained in this Section 9, the Corporation shall pay Executive (or in the event of his death, his estate), within 5 business days after the date of termination of employment, a lump sum payment equal to one-half Executive's annual base salary, as in effect on the date of termination of employment (the "Noncompete Payment"). The parties further acknowledge and agree that should Executive breach any of the covenants contained in this Section 9, the Corporation will suffer material damages, including but not limited to lost business revenues, sales, and customers. Because of the difficulty in quantifying these damages, Executive hereby agrees that, in addition to any other rights the Corporation may have at law or in equity, he shall forfeit the Noncompete Payment upon any breach of the covenants contained in this Section 9. In the event a breach of covenant occurs after the termination of employment, Employee agrees to immediately return the Noncompete Payment to the Corporation. (f) Specific Performance. Executive acknowledges that the obligations undertaken by him pursuant to this Section 9 are unique and that the Corporation likely will have no adequate remedy at law if he fails to perform any of his obligations. Executive therefore confirms that the Corporation's right to specific performance of the terms of this Agreement is essential to protect the rights and interests of the Corporation. Accordingly, in addition to any other remedies that the Corporation may have pursuant to Subsection 9(e), at law, or in equity, the Corporation shall have the right to have all obligations, covenants, agreements and other 21 provisions of this Agreement specifically performed by Executive and the Corporation shall have the right to obtain preliminary and permanent injunctive relief from any court with proper jurisdiction, without having to first submit arbitration, to secure specific performance and to prevent a breach or contemplated breach of the obligations contained in this Section. 10. Arbitration. (a) Except as provided in Subsection 9(f) above, any dispute, controversy, or claim between the parties arising out of, relating to, or concerning this Agreement; the breach, termination, or invalidity of this Agreement; and the scope of this arbitration clause, shall be settled by arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of the AAA then in effect. Any award rendered shall be final and binding on the parties hereto, and judgment may be entered in any court having jurisdiction thereof. Nothing in this section, however, shall prevent the Corporation from seeking immediate relief from a court of competent jurisdiction to enforce the obligations undertaken in Section 9 above without first having to undergo arbitration. (b) The arbitrator shall be mutually acceptable to the parties, or failing agreement, selected pursuant to the Employment Dispute Arbitration Rules of the AAA. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. In rendering the award, the arbitrator shall determine the respective rights and obligations of the parties according the laws of the State of Georgia or, if applicable, federal law. (c) All costs and expenses of the arbitration shall be paid for by the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its own attorneys' fees. 22 (d) It is the specific intent of the parties that this arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any reason under the FAA, then the parties intend that it be governed by the provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq. (e) Both Executive and the Corporation represent and warrant they have read this Section, have had an opportunity to consult with and receive advice from legal counsel regarding this Section, and hereby forever waive all rights to assert that this Section was a result of duress, coercion, or mistake of law of fact. _____________ (Initialed by Executive) _____________ (Initialed by the Corporation) 11. Withholding. Payments required to be made by the Corporation to Executive, his spouse, his estate or beneficiaries, will be subject to withholding of such amounts relating to taxes as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Corporation may, in its sole discretion, accept other provision for payment of taxes as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. 12. Assignability; Binding Nature. This Agreement is binding upon, and will inure to the benefit of, the parties and their respective successors, heirs, administrators, executors and assigns. No rights or obligations of Executive hereunder may be assigned or transferred by Executive except that (a) rights to 23 compensation and benefits hereunder, which rights will remain subject to the limitations hereunder, may be transferred by will or operation of law, and (b) rights under employee benefit plans or programs described in Section 5, above, may be assigned or transferred in accordance with such plans, programs or regular practices thereunder. No rights or obligations of the Corporation under this Agreement may be assigned or transferred except that rights or obligations may be assigned or transferred by operation of law or otherwise pursuant to this Section 12. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business assets of the Corporation by written agreement in form and substance satisfactory to the Executive, as a condition to such transaction, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had occurred. 13. Entire Agreement. This Agreement supersedes any prior agreements, including but not limited to the Employment Agreement between the parties dated May 21, 1997, and, together with such plans and programs as are specifically referred to herein, contains the entire agreement between the parties concerning the subject matter hereof. 14. Amendments and Waivers. This Agreement may not be modified or amended, except by a writing signed by both parties. A party may waive compliance by the other party with any term or provision of this Agreement, or any part thereof, provided that the term or provision, or part thereof, is for the benefit of the waiving party. Any waiver will be limited to the facts or circumstances giving rise 24 to the non-compliance and will not be deemed either a general waiver or modification with respect to the term or provision, or part thereof, being waived, or as to any other term or provision of this Agreement, nor will it be deemed a waiver of compliance with respect to any other facts or circumstances then or thereafter occurring. 15. Notices. Any notice given hereunder will be in writing and will be deemed given when delivered personally or by courier, or five days after being mailed, certified or registered mail, duly addressed to the party concerned at the address indicated below or at such other address as such party may subsequently provide, in accordance with the notice and delivery provisions of this Section: To the Corporation: Attn: Corporate Secretary Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 To Executive: Joseph Dana Synthetic Industries, Inc. 309 Lafayette Road Chickamauga, GA 30707 16. Severability. If fulfillment of any provision of this Agreement, at the time such fulfillment shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be fulfilled shall be deemed reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective to the extent of such invalidity, as though 25 not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 17. Survivorship. The respective rights and obligations of the parties hereunder will survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 18. References. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive will be deemed, where appropriate, to refer to his legal representative or, where appropriate, to his beneficiary or beneficiaries. 19. Headings. The headings of paragraphs contained in this Agreement are for convenience only and will not be deemed to control or affect the meaning or construction of any provision of this Agreement. 20. Governing Law. Except to the extent governed by the FAA as provided in Section 10 above, this Agreement, the rights and obligations of the parties, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Georgia, not including the choice-of-law rules thereof. 26 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: - - --------------------------- Joseph Dana Title: 27 EX-10.26 9 EXHIBIT 10.26 Exhibit 10.26 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. EXECUTIVE DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1996/97 Plan is $50,000,000 Compensation Amount: For achieving Planned Operating Profit: $567,100 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. GP, FM, PN, SY DIVISIONS FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1996/97 Plan is $22,154,000 Compensation Amount: For achieving Planned Operating Profit: $10,000. PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. WOVEN FABRICS DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1996/97 Plan is $37,879,000 Compensation Amount: For achieving Planned Operating Profit: $14,500 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. PERFORMANCE FABRICS DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1996/97 Plan is $1,998,000 Compensation Amount: For achieving Planned Operating Profit: $30,000. INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. PERFORMANCE NONWOVEN DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $110,660 Compensation Amount: For achieving Planned Operating Profit: $7,500 INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. CONSTRUCTION/CIVIL ENGINEERING DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $18,256,000 Compensation Amount: For achieving Planned Operating Profit: $121,800 INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. FIBERMESH DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1996/97 Plan is $ 9,709,000 Compensation Amount: For achieving Planned Operating Profit: $64,000. INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. GEOSYNTHETIC PRODUCTS DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $8,547,000 Compensation Amount: For achieving Planned Operating Profit: $98,000. INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. SPECIALTY YARNS DIVISION FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $245,200 Compensation Amount: For achieving Planned Operating Profit: $10,000 INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. NEW BUSINESS OPPORTUNITIES FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $252,000 Compensation Amount: For achieving Planned Operating Profit: $60,000. INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. NBO TECHNICAL FISCAL YEAR 1996/97 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1996/97 Plan is $981,000 Compensation Amount: For achieving Planned Operating Profit: $12,500. EX-10.27 10 EXHIBIT 10.27 Exhibit 10.27 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. CORPORATE DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Net Income Plan for the 1997/98 Plan is $21,141,000 Compensation Amount: For achieving Planned Operating Profit: $970,688 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. CARPET BACKING DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1997/98 Plan is $42,564,000 Compensation Amount: For achieving Planned Operating Profit: $72,333 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. TECHNICAL TEXTILES DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1997/98 Plan is $9,633,000 Compensation Amount: For achieving Planned Operating Profit: $31,500 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. PERFORMANCE FABRICS DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1997/98 Plan is $2,826,000 Compensation Amount: For achieving Planned Operating Profit: $21,083 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. PERFORMANCE NONWOVEN DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1997/98 Plan is $2,248,000 Compensation Amount: For achieving Planned Operating Profit: $2,750 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. CONSTRUCTION/CIVIL ENGINEERING DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1997/98 Plan is $24,838,000 Compensation Amount: For achieving Planned Operating Profit: $99,750 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. FIBERMESH DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Operating Profit for the 1997/98 Plan is $ 9,548,000 Compensation Amount: For achieving Planned Operating Profit: $30,250 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. GEOSYNTHETIC PRODUCTS DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1997/98 Plan is $15,290,000 Compensation Amount: For achieving Planned Operating Profit: $99,583 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. SPECIALTY YARNS DIVISION FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1997/98 Plan is $3,172,000 Compensation Amount: For achieving Planned Operating Profit: $3,333 PROPOSED INCENTIVE COMPENSATION PLAN SYNTHETIC INDUSTRIES, INC. NEW BUSINESS OPPORTUNITIES FISCAL YEAR 1997/98 Administration: Compensation Committee of the Board of Directors. Qualification to Participate: 1. Employment by participant throughout the fiscal year. 2. Operating Profit must be 80% of Plan. If the planned profit objective; a) is exceeded, then the bonus shall be raised by the ratio that actual profits are to plan, except that a maximum bonus shall not exceed 100% of base salary. b) fails to be reached, but is at least 80% achieved, then the bonus shall be lowered by the ratio that actual profit is to planned profit. If profit falls below 80%, no bonus is earned or payable. Definition: Adjusted Profit for the 1997/98 Plan is ($810,000) Compensation Amount: For achieving Planned Operating Profit: $112,250 EX-10.35 11 EXHIBIT 10.35 Exhibit 10.35 AMENDMENT NO. 4 AND CONSENT to LOAN AND SECURITY AGREEMENT dated as of December 18, 1997 THIS AMENDMENT NO. 4 dated as of December , 1998 is made by and among SYNTHETIC INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the Lenders parties from time to time to the Loan Agreement (as hereinafter defined), and BANKBOSTON, N.A. ("BankBoston"), as the agent (the "Agent") for the Lenders. Preliminary Statements The Borrower, the Lenders and the Agent are parties to a Loan and Security Agreement dated as of December 18, 1997, as amended by Amendment No. 1 dated as of March 11, 1998, Amendment No. 2 dated as of April 15, 1998 and Amendment No. 3 dated as of June 30, 1998 (as so amended and in effect, the "Loan Agreement"; terms defined therein and not otherwise defined herein being used herein as therein defined). The Borrower has requested that the Loan Agreement be amended to permit a conveyance of portions of the real property and improvements included in the Borrower's Ringgold plant and certain of the Equipment therein to the Catoosa County [Georgia] Development Authority, the Borrower's lease back of all such real and personal property and the Borrower's purchase of certain bonds issued by said Authority, and the Lenders and the Agent have agreed, upon and subject to the terms, conditions and provisions of this Amendment, to such requests. Accordingly, in consideration of the Loan Agreement, the Loans made by the Lenders and outstanding thereunder, the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Amendments to Loan Agreement. From and after the Amendment Effective Date, subject to satisfaction of the conditions set forth in Section 2, the Loan Agreement is hereby amended as follows: (a) by amending the provisions of SECTION 1.1 Definitions thereof by adding thereto in appropriate alphabetical order the following additional definitions: CCDA means Catoosa County Development Authority, a public body corporate and politic created and existing under the laws of the State of Georgia. CCDA Bond Property means Real Estate and Equipment described on Schedule 1.1 - CCDA Bond Property and such additional property as may become subject to the CCDA Lease from time to time as a result of a Permitted CCDA Transaction. CCDA Lease means the Lease Agreement dated as of December 1, 1998 between CCDA as lessor and the Borrower as lessee. Catoosa County Bond Indenture means the Indenture of Trust dated as of December 1, 1998 between CCDA and SunTrust Bank, Atlanta with respect to bonds issued by CCDA and repayable solely out of rental payments and other payments made by the Borrower under the CCDA Lease. Catoosa County Bonds means up to $85,000,000 original principal amount of Catoosa County Development Authority Taxable Revenue Bonds (Synthetic Industries, Inc. Project), Series 1998 and any Additional Bonds issued pursuant to (and as defined in) the Catoosa County Bond Indenture. Permitted CCDA Transaction means (a) in one transaction or a series of substantially simultaneous transactions, (i) the sale to CCDA of the Real Estate and Equipment described on Part A of Schedule 1.1 - CCDA Bond Property hereto, subject to the Security Interest, (ii) the lease by the Borrower of such CCDA Bond Property pursuant to the CCDA Lease, (iii) the purchase by the Borrower of [$14,000,000] original principal amount (or such lesser principal amount as CCDA shall issue in connection with its purchase of such CCDA Bond Property) of Catoosa County Bonds and (iv) consummation of the related transactions contemplated by the Catoosa County Bond Indenture in connection with the sale and purchase of such CCDA Bond Property, and (b) any subsequent transaction approved by the Required Lenders in which the Borrower leases property from CCDA (whether or not the property was first conveyed by the Borrower to CCDA) pursuant to the CCDA Lease and substantially contemporaneously purchases Catoosa County Bonds. (b) by amending Section 12.3 Guaranties to add, immediately before the period at the end thereof, the following: or to the Borrower's Guaranty in favor of the Trustee under the Catoosa County Bond Indenture, in respect of the Borrower's obligations under the CCDA Lease (c) by amending Section 12.4 Investments by inserting immediately following the phrase "except that this Section 12.4 shall not apply to Investments in" the following: (a) Catoosa County Bonds issued in connection with Permitted CCDA Transactions or (b) (d) by amending Section 12.7 Merger, Consolidation and Sale of Assets by redesignating clause (f) thereof as clause (g) and inserting a new clause (f) immediately after clause (e) thereof to read as follows: (f) sales of Real Estate and Equipment (including Collateral) to the CCDA in connection with a Permitted CCDA Transaction, 2 (e) by amending Section 12.9 Liens by inserting immediately after the phrase "apply to Liens" the phrase "in favor of the Trustee under the Catoosa County Bond Indenture arising out of Permitted CCDA Transactions, or to Liens"; (f) by amending Section 12.11 Amendments to Other Agreements by inserting immediately after the phrase "Amend in any material respect" the phrase "the Catoosa County Bond Indenture, the CCDA Lease or any document executed and delivered in connection with a Permitted CCDA Transaction, " (g) by amending Section 13.1 Events of Default by adding at the end thereof a new subsection (q) to read as follows: (q) Catoosa County Bonds; Permitted CCDA Transactions. The Borrower shall sell, transfer or otherwise dispose of any Catoosa County Bonds at any time owned by it, other than to a wholly owned Subsidiary; or any conveyance or reconveyance documents (e.g., deeds, bills of sale) executed by CCDA in connection with the consummation of any Permitted CCDA Transaction shall prove to be ineffective for any reason to vest in the Borrower title to the property leased by it as part of such Permitted CCDA Transaction, free of any claim of CCDA or any Person claiming through CCDA. (h) by amending subsection Section 13.2(c) (Other Remedies) by amending clause (vi) thereof in its entirety to read as follows: (vi) at the expense of the Borrower, (i) deliver or cause to be delivered and recorded or filed any conveyance or reconveyance documents executed by CCDA in connection with the consummation of any Permitted CCDA Transaction and (ii) cause any of Inventory or Equipment to be placed in a public or field warehouse, and the Agent shall not be liable to the Borrower on account of any loss, damage or depreciation that may occur as a result thereof, so long as the Agent shall act reasonably and in good faith; (i) by adding thereto a new Schedule 1.1 - Catoosa Bond Property in the form of Annex 1 hereto. Section 2. Consent. Subject to the provisions of Section 3, the Required Lenders hereby consent to the transaction described in clause (a) of the definition "Permitted CCDA Transaction" contained in the Loan Agreement as amended by this Amendment (the "First Ringgold Transaction"). Section 3. Effectiveness of Amendment. This Amendment shall become effective on the first date (the "Amendment Effective Date") on which (a) the Agent has received each of the following, each in form and substance satisfactory to the Agent and the Required Lenders (and in sufficient copies for each Lender): (i) this Amendment duly executed and delivered by the Borrower and each Lender; 3 (ii) a Consent and Confirmation of Guarantor in the form attached hereto as Annex 2 duly executed and delivered by the Subsidiary Guarantor; (iii) a certificate of the Secretary of the Borrower as to the articles or certificate of incorporation and bylaws of the Borrower, corporate resolutions authorizing the transactions contemplated by this Amendment and the incumbency of officers of the Borrower, all as in effect on the Amendment Effective Date; (iv) an amendment to the Pledge Agreement the effect of which is to add as Pledged Collateral thereunder, the Catoosa County Bonds (as defined in the Loan Agreement, as amended by this Amendment), as and when acquired by the Borrower; (v) an irrevocable written instruction to the Trustee under the Catoosa County Bond Indenture (as defined in the Loan Agreement, as amended by this Amendment) to deliver to the Agent, upon presentation of such instruction and tender of the Catoosa County Bonds issued in connection with the First Ringgold Transaction, the Quitclaim Deed, Bill of Sale and any other conveyance or reconveyance documents executed by the CCDA in connection with the First Ringgold Transaction and held by said Trustee pursuant to (and as such items are defined in) the Catoosa County Bond Indenture; (vi) a landlord's lien subordination and waiver in substantially the form attached hereto as Annex 3, executed on behalf of the Catoosa County Development Authority; (vii) a certificate of the Chief Operating Officer or the Chief Financial Officer of the Borrower to the effect that both before and after giving effect to this Amendment, the representations and warranties of the Borrower set forth in the Loan Agreement are true and correct in all material respects, and that, after giving effect to this Amendment and consummation of the First Ringgold Transaction, no Default or Event of Default exists; (viii) an opinion of counsel for the Borrower as to the due authorization, execution and delivery of this Amendment and the other Loan Documents contemplated hereby to be delivered in connection with the effectiveness hereof by the Borrower as to the enforceability of this Amendment, the Loan Agreement as amended hereby and such other Loan Documents, and such other matters as any Lender through the Agent may reasonably request; and (ix) such other agreements, certificates, instruments and other documents as any Lender through the Agent may reasonably request in connection with the transactions contemplated hereby; and (b) the First Ringgold Transaction shall have been consummated strictly in accordance with the terms of the Catoosa County Bond Indenture and the other documents referred to therein required to be executed and delivered as a condition to the initial issuance of Catoosa County Bonds thereunder. 4 Section 4. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders that: (1) it has the corporate power and has taken all actions necessary to authorize it to execute and deliver this Amendment and the other documents contemplated to be delivered by it pursuant to this Amendment and to perform its obligations under the Loan Agreement as amended by this Amendment and under such other documents; (2) this Amendment has been and each such other document when executed and delivered by the Borrower will have been, duly executed and delivered by the Borrower; (3) the Loan Agreement as amended hereby and each such other document, constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms; and (4) the representations and warranties of the Borrower contained in the Catoosa County Bond Indenture and the related documents executed and delivered by the Borrower pursuant thereto and in connection with the First Ringgold Transaction, are true and correct in all material respects on and as of the Amendment Effective Date. Section 5. Effect of Amendment. From and after the effectiveness of this Amendment, all references in the Loan Agreement and in any other Loan Document to "this Agreement," "the Loan Agreement," "hereunder," "hereof" and words of like import referring to the Loan Agreement, shall mean and be references to the Loan Agreement as amended by this Amendment. Except as expressly amended hereby, the Loan Agreement and all terms, conditions and provisions thereof remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. Section 6. Counterpart Execution; Governing Law. (a) Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. (b) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Georgia. 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. SYNTHETIC INDUSTRIES, INC. [Corporate Seal] By: ------------------------------------------ Name: ATTEST: Title: - - ------------------------------ [Assistant] Secretary BANKBOSTON, N.A., as the Agent and as a Lender By: ------------------------------------------ Stephen Y. McGehee Managing Director SANWA BUSINESS CREDIT CORPORATION By ------------------------------------------ Name: Title: SOUTHTRUST BANK, NATIONAL ASSOCIATION By: ------------------------------------------ Name: Title: ANNEX 1 To Amendment No. 4 [SEE FILE COPY FOR INSERTION OF LEGAL DESCRIPTIONS] ANNEX 2 To Amendment No. 4 CONSENT AND CONFIRMATION OF GUARANTOR The undersigned, in its capacity as a Guarantor under the Guaranty (Subsidiary) dated as of March 11, 1998 (as modified or amended to date, the "Guaranty"), in favor of the Lender, hereby expressly acknowledges and confirms, for the benefit of the Borrower and the Lender, that (1) the Guarantor has an economic interest in the financial success of the Borrower and the transactions contemplated by the Loan Agreement and the Amendment, and hereby confirms to the Lender the benefits to the Guarantor by reason of such transactions, (2) such Guarantor has received a copy of Amendment No. 4 and Consent dated as of December , 1998 to the Loan Agreement (the "Amendment") and consents thereto and (3) the Guaranty of which such Guarantor is the maker constitutes a continuing, unconditional guaranty of the Guaranteed Obligations under and as defined in the Guaranty. The undersigned is and continues to be liable under its Guaranty in accordance with the terms thereof, notwithstanding the execution and delivery of the Amendment. Dated: December ___, 1998 NOVOCON INTERNATIONAL, INC. By: ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ Address: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- ANNEX 3 To Amendment No. 4 COUNTY OF CATOOSA) STATE OF GEORGIA) LANDLORD'S WAIVER WHEREAS, BankBoston, N.A., as agent (the "Agent"), for itself and certain other financial institutions (collectively, the "Lenders") and the Lenders have entered into a loan transaction with Synthetic Industries, Inc. (the "Debtor"), the obligations of the Debtor thereunder being secured in part by all equipment and/or inventory of the Debtor (the "Personal Property") found on the premises of the Catoosa County Development Authority located on real estate located at Ringgold, Catoosa County, Georgia, and more particularly described in Exhibit A hereto (the "Premises"); WHEREAS, the undersigned (the "Landlord") has an interest in the Premises as lessor; NOW, THEREFORE, in consideration of the financial accommodations extended by the Lenders to the Debtor which have been applied, in part, to the payment of the purchase price of certain of the Personal Property located on the Premises on the date hereof, and for other good and valuable consideration, the undersigned agrees as follows: (a) That the Personal Property may be located, stored or installed in the Premises from time to time and shall not be deemed a fixture or part of the real estate but shall at all times be considered personal property; (b) That it disclaims any interest in the Personal Property and agrees to assert no claim to the Personal Property while Debtor is indebted to the Lenders or the Agent; (c) That the Agent or its representatives may enter upon the Premises upon notice to but without the consent of Landlord to inspect or remove the Personal Property, and may advertise and conduct a public auction or private sale thereon; (d) That at the option of the Agent said Personal Property may remain upon (without the Agent or the Lenders being deemed to be taking possession of) said Premises after the receipt by the Agent of written notice by the undersigned directing removal thereof for a period of up to 90 days at the rental provided under any lease covering the Premises then in effect to which the Debtor is a party (or, if no such lease is then in effect, at a rental to be agreed upon by the Agent and the undersigned), prorated on a per diem basis to be determined on the basis of a 30-day month, without incurring any other obligations of Debtor; provided that the Agent shall pay the cost of utilities and, to the extent required to be paid by the Debtor, real property taxes during the occupation of the Premises by the Agent; and 6 (e) The Agent and the Lenders agree that, upon a default under any such lease, the undersigned may set-off any security deposit or other rent paid by the Debtor and held by the undersigned in satisfaction of any obligations owing by the Debtor under any such lease. This waiver is binding upon the undersigned and the heirs, personal representatives, successors and assigns of the undersigned and inures to the benefit of the Agent and the Lenders and their respective successors and assigns. Dated as of this _____ day of December, 1998. LANDLORD: CATOOSA COUNTY DEVELOPMENT AUTHORITY By: ------------------------------------- Name: Title: Address: -------------------------------- -------------------------------- -------------------------------- Exhibit A Legal Description of Premises ACKNOWLEDGEMENT STATE OF ------------------ COUNTY OF ------------------ I hereby certify that on this day before me, an officer duly authorized in the state aforesaid and in the county aforesaid to take acknowledgments, personally appeared ___________________________, to me known and known to be the person described in and who executed the foregoing instrument and acknowledged before me that he/she executed the same for the purposes therein contained. Witness my hand and official seal in the county and state last aforesaid this _____ day of _______________, 199__. ------------------------------ Notary Public My commission expires: ------------------------------ [NOTARIAL SEAL] EX-10.36 12 EXHIBIT 10.36 Exhibit 10.36 Exhibit A SYNTHETIC INDUSTRIES, INC. SUPPLEMENTAL SAVINGS PLAN SYNTHETIC INDUSTRIES, INC. SUPPLEMENTAL SAVINGS PLAN Table of Contents ARTICLE I. PURPOSE 1.1 Purpose ARTICLE II. DEFINITIONS 2.1 Account 2.2 Annual Bonus 2.3 Beneficiary 2.4 Change-in-Control 2.5 Code 2.6 Committee 2.7 Company 2.8 Company Matching Account 2.9 Compensation 2.10 Deferral Account 2.11 Deferral Election 2.12 Effective Date 2.13 Employee 2.14 Eligible Employee 2.15 Employer 2.16 Enrollment Period 2.17 401(k) Plan 2.18 Participant 2.19 Plan 2.20 Plan Year 2.21 Subsidiary 2.22 Year of Service ARTICLE III. ELIGIBILITY 3.1 Conditions on Eligibility 3.2 Deferral Election 3.3 Time of Election 3.4 Change of Election ARTICLE IV. ACCRUAL OF BENEFITS 4.1 Participants' Accounts 4.2 Vesting of Accounts 4.3 Company Matching Account Forfeitures 4.4 Death, Disability, or Retirement 4.5 Change-in-Control ARTICLE V. DISTRIBUTIONS 5.1 Commencement of Distribution 5.2 Manner of Distribution 5.3 Form of Payment of Account 5.4 Distributions on Account of Death 5.5 Distributions on Account of Financial Hardship 5.6 Distributions on Demand ARTICLE VI. ADMINISTRATION 6.1 Plan Administration 6.2 Committee Action 6.3 Rights and Duties 6.4 Compensation, Indemnity, and Liability 6.5 Taxes ARTICLE VII. CLAIMS PROCEDURE 7.1 Claims for Benefits 7.2 Appeals ARTICLE VIII. AMENDMENT AND TERMINATION 8.1 Amendment 8.2 Termination of the Plan ARTICLE IV. MISCELLANEOUS 9.1 Limitation on Participant's Rights 9.2 Benefits Unfunded 9.3 Other Plans 9.4 Governing Law 9.5 Gender, Number, and Headings 9.6 Successors and Assigns; Nonalienation of Benefits SYNTHETIC INDUSTRIES, INC. SUPPLEMENTAL SAVINGS PLAN ARTICLE I PURPOSE 1.1 Purpose. The purpose of the Synthetic Industries, Inc. Supplemental Savings Plan is to provide a select group of management employees with the opportunity to enhance their retirement security by deferring any portion of their Compensation that is ineligible for deferral under the Synthetic Industries Inc. 401(k) Retirement Savings Plan (the 401(k) Plan), the Company's qualified retirement plan, due to limits under the law and under the terms or operation of the 401(k) Plan. ARTICLE II DEFINITIONS 2.1 "Account" means the records maintained by the Supplemental Savings Plan Committee that represent each Participant's interest under the Plan. Such interest may be reflected as a book reserve entry in the Company's accounting records, or as a separate account under a trust, or as a combination of both. Each Participant's Account shall consist of at least two subaccounts: a Deferral Account and a Company Matching Account. 2.2 "Annual Bonus" means any bonus paid on an annual basis to the Participant by the Company. 2.3 "Beneficiary" means the person or persons last designated by the Participant, in writing, as entitled to receive such Participant's interest under the Plan in the event of his death. If all designated Beneficiaries predecease the Participant or the Participant fails to designate a Beneficiary, the Beneficiary shall be the estate of the Participant. 2.4 "Change-in-Control" of the Company means a change in control of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("Act") or any successor thereto, provided that without limiting the foregoing, a Change-in-Control of the Company also shall be deemed to have occurred if: (i) any "person" (as defined under Section 3(a)(9) of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act), of capital stock of the Company the holders of which are entitled to vote for the election of 1 directors ("voting stock") representing that percentage of the Company's then outstanding voting stock (giving effect to the deemed ownership of securities by such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of securities by another person or group) equal to or greater than thirty-five percent (35%) of all such voting stock; (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof. Any person becoming a director subsequent to such date whose election, or nomination for election, is, at any time, approved by a vote of at least a majority of the directors comprising the Incumbent Board shall be considered as though he were a member of the Incumbent Board; (iii) the Company combines with another person or entity, whether through a merger, asset sale, reorganization or otherwise, and (a) any person or group of persons holds at any time after such combination, voting stock equal to or greater than thirty-five percent (35%) determined by reference to the voting securities of the surviving entity, or (b) the Company's directors, as of the date immediately before such combination, constitute less than a majority of the Board of Directors of the combined entity. 2.5 "Code" means the Internal Revenue Code of 1986, as amended. 2.6 "Committee" means the committee appointed to administer the Plan pursuant to Section 6.1. 2.7 "Company" means Synthetic Industries Inc., a corporation with its principal place of business in Georgia, or its successor or successors, and any Subsidiary of the Company that has not been expressly excluded from participation by the Company's Board of Directors and that has been a Subsidiary of the Company for at least 3 months. 2.8 "Company Matching Account" means that portion of each Participant's Account that represents his interest in the Plan that is credited pursuant to Section 4.1(b). 2.9 "Compensation" means those amounts included in the definition of Compensation under the 401(k) Plan (except the amount of a Participant's Annual Bonus) plus any amounts deferred by the Participant under this Plan. For purposes of this Plan, Compensation shall be determined without regard to the limits of Section 401(a)(17) of the Code. 2.10 "Deferral Account" means that portion of each Participant's Account that represents his interest in the Plan that is credited pursuant to Section 4.1(a). 2 2.11 "Deferral Election" means a Participant's election to defer a portion of his Compensation and/or his Annual Bonus, which election must be made in a manner authorized by and within an applicable Enrollment Period. 2.12 "Effective Date" means the date on which the Company or the Committee designates as the date on which any Deferral Election may first become effective under this Plan. 2.13 "Employee" means any common-law employee of the Employer. 2.14 "Eligible Employee" means any Employee who satisfies the criteria for participation in the Plan, as established from time to time by the Committee. An Employee's status as an Eligible Employee will be reviewed by the Committee prior to each Enrollment Period, and an Employee who no longer satisfies the criteria for participation shall not be permitted to make a Deferral Election under this Plan during the next Plan Year. 2.15 "Employer" means the Company or a participating Subsidiary. 2.16 "Enrollment Period" means the following: (a) For the 1998 Plan Year only and with respect to payroll periods occurring on or after the Plan's Effective Date, the thirty (30) day period preceding the Effective Date; (b) For all subsequent Plan Years and with respect to payroll periods occurring on or after January 1, the month of December; and (c) For a new Employee who is an Eligible Employee as of his date of hire and with respect to the payroll periods occurring on or immediately after the date thirty (30) days from his date of hire, the thirty (30) day period following his date of hire. (d) For an existing Employee who is an Eligible Employee for a Plan Year but who did not make a Deferral Election under this Plan for that Plan Year because of a mistake of fact by the Committee in determining the Employee's eligibility for that Plan Year, with respect to the payroll periods occurring on or immediately after the date thirty (30) days from the date of his notification by the Committee in writing of his eligibility, the thirty (30) day period following his notification in writing by the Committee. 3 2.17 "401(k) Plan" means the Synthetic Industries, Inc. 401(k) Retirement Plan, as it may be amended from time to time. 2.18 "Participant" means any Eligible Employee who makes a Deferral Election pursuant to Section 3.2. Any Employee who has an interest under the Plan shall also be considered a Participant, even though such Employee is, for any particular Plan Year, ineligible to make a Deferral Election. 2.19 "Plan" means the Synthetic Industries, Inc. Supplemental Savings Plan, as it may be amended from time to time. 2.20 "Plan Year" means the twelve (12) month period beginning January 1st and ending on December 31st. 2.21 "Subsidiary" means any corporation in which the Company owns a majority of the voting or capital interest. 2.22 "Year of Service" means a Plan Year in which an Employee has at least 1,000 hours of service, including periods prior to the effective date of the Plan. Hours of service shall be credited in the same manner as under the 401(k) Plan. ARTICLE III ELIGIBILITY 3.1 Conditions on Eligibility. An Eligible Employee shall become a Participant in the Plan as of the date he makes an effective Deferral Election. 3.2 Deferral Election. Each Participant may elect to defer any whole percentage of his Compensation and/or Annual Bonus. A Participant's Deferral Election under this Plan shall be effective with respect to his Compensation and/or Annual Bonus without regard to whether such Compensation and/or Annual Bonus are subject to a Deferral Election under the 401(k) Plan. 3.3 Time of Election. A Participant's Deferral Election with respect to his Compensation shall be effective only if made during the applicable Enrollment Period. Further, a Participant's Deferral Election with respect to his Annual Bonus shall be effective only if made prior to each Plan Year for which the Annual Bonus is payable. 3.4 Change of Election. (a) A Participant's most recent Deferral Election with respect to his Compensation shall remain in effect for all Plan Years subsequent to the Plan Year for which such Deferral 4 Election was made until the Participant makes a new Deferral Election. A Participant's Deferral Election with respect to his Annual Bonus shall, however, only be effective for the one Plan Year for which such Deferral Election was made. (b) A Participant may increase or decrease the percentage of his Compensation and/or Annual Bonus subject to his Deferral Election for a Plan Year during the Enrollment Period for a subsequent Plan Year, provided, however, such increase or decrease is made with respect to Compensation not yet due and payable to the Participant. (c) A Participant may, during a Plan Year, discontinue his Deferral Election with respect to his Compensation (but not his Annual Bonus) by providing notice to the Committee prior to the commencement of the next payroll period. In such event, Compensation earned subsequent to such notice of discontinuance will be paid directly to the Participant and will not be subject to his prior Deferral Election. A Participant who elects to discontinue his Deferral Election prior to or during a Plan Year may not recommence deferral under the Plan during that same Plan Year, but may again make a Deferral Election during the Enrollment Period for a subsequent Plan Year. ARTICLE IV ACCRUAL OF BENEFITS 4.1 Participants' Accounts. (a) Deferral Account. Each Participant's Deferral Account shall be credited with an amount equal to the Compensation deferred by the Participant as soon as practicable after such amount would otherwise be payable to the Participant. (b) Company Matching Account. The Company Matching Account of each Participant shall be credited with an amount equal to 50% of each such Participant's Compensation and/or Annual Bonus deferred pursuant to his Deferral Election under this Plan. Except, however, the amount of the Company Match shall be limited to the amount described in subparagraph (1) minus the amount described in subparagraph (2): (1) 3% of such Participant's Compensation. (2) The amount actually contributed by the Company to the Participant's Matching Contribution Account under the 401(k) Plan for the Plan Year. 5 (c) The Deferral and Company Matching Accounts of each Participant shall be invested or shall be deemed to be invested, in accordance with the elections of the Participant, in the investment funds made available from time to time by the Committee. The earnings rates of such funds shall be credited to the Participant's Deferral Account and Company Matching Account, as appropriate. 4.2 Vesting of Accounts. A Participant's interest in the value of his Deferral Account shall at all times be 100% nonforfeitable. A Participant's interest in the value of his Company Matching Account shall become nonforfeitable (i.e., vested) in accordance with the following schedule:
Years of Service Percentage Vested ---------------- ----------------- Less than 1 0% 1 20% 2 40% 3 60% 4 80% 5 100%
4.3 Company Matching Account Forfeitures. If a Participant terminates prior to becoming 100% vested in his Company Matching Account, any portion of such account that is not vested shall be forfeited as of the date of the Participant's termination. Any such forfeited amounts, and any earnings thereon, shall be used to reduce the Company's future contribution obligations. 4.4 Death, Disability, or Retirement. Notwithstanding the foregoing Sections 4.2 and 4.3, a Participant's interest in the value of his Company Matching Account shall become 100% vested upon his death, his Total and Permanent Disability as defined in the 401(k) Plan, or his attainment of Normal Retirement Age as defined in the 401(k) Plan. 4.5 Change-in-Control. In the event of a Change-in-Control of the Company, all Participants shall become 100% vested in their Company Matching Accounts upon the date of such Change-in-Control. 6 ARTICLE V DISTRIBUTIONS 5.1 Commencement of Distribution. Prior to commencement of participation in the Plan, a Participant shall elect whether distribution of his Account shall begin (i) in the year of his termination, (ii) as of a specified age, or (iii) as of the later of the year of his termination or a specified age. A Participant may change, at any time, his election regarding the commencement of the distribution of his Account; however, any subsequent election will not become effective for two years or more after the date of such subsequent election. In the event a Participant fails to make an election with respect to the commencement of payment of his Account, distribution to such Participant shall be made in the year of his termination of employment. Notwithstanding the foregoing, if the total balance of the Participant's Account is equal to or less than $10,000 at the time of his termination of employment, such Participant's Account shall be distributed in the year of such termination. 5.2 Manner of Distribution. Prior to commencement of participation in the Plan, a Participant shall elect whether to receive distributions under the Plan as (i) a single-sum payment, or (ii) in a series of substantially equal quarterly, semiannual, or annual installments over a stated period of time not to exceed ten (10) years. A Participant may change, at any time, his election regarding the commencement of the distribution of his Account; however, any subsequent election will not become effective for two years or more after the date of such subsequent election. In the event a Participant fails to make an election with respect to the manner of distribution, payment will be made in the manner determined by the Committee. Notwithstanding the foregoing, if the total balance of the Participant's Account is equal to or less than $10,000 at the time of his distribution is to commence, such Participant's Account shall be distributed in a single-sum payment. 5.3 Form of Payment of Account. Distributions from the Plan shall be made in cash. 5.4 Distributions on Account of Death. In the event of the death of a Participant prior to distribution of the total balance of his Account, distribution of the balance of such Account shall be made to the Participant's Beneficiary, as determined in accordance with Section 2.4, in a single-sum payment as soon as practicable following the death of such Participant. 5.5 Distributions on Account of Financial Hardship. In the event a Participant has a financial hardship (as determined by the Committee), the Committee, in its sole discretion, may 7 distribute all or any portion of the Participant's Deferral Account and/or all or any vested portion of the Company Matching Account. Financial hardships shall be limited to unforeseeable emergencies beyond the Participant's control which result in a severe financial hardship. Amounts shall be limited to those needed to satisfy the hardship need. 5.6 Distributions on Demand. Notwithstanding the foregoing, a Participant shall have the right to demand, upon thirty (30) days written notice to the Committee, the distribution of the total amount of the Participant's Deferral Account plus the vested portion of his Company Matching Account at any time not provided in the preceding sections of this Article. The demanding Participant shall receive a distribution of the total amount of the Participant's Deferral Account plus the vested portion of his Company Matching Account, less 10% of that total amount, which shall be forfeited. A Distribution on Demand shall operate to discontinue the Participant's current Deferral Election and such Participant shall be precluded from deferring under the Plan until the second Plan Year following the Plan Year in which the distribution is made. ARTICLE VI ADMINISTRATION 6.1 Plan Administration. The Plan shall be administered by the Supplemental Savings Plan Committee, which shall consist of at least three members appointed by the Company. 6.2 Committee Action. Action of the Committee may be taken with or without a meeting of its members; provided, however, that any action shall be taken only upon the vote or other affirmative expression of a majority of committee members qualified to vote with respect to such action. If a member of the Committee is a Participant in the Plan, he shall not participate in any decision which solely affects his own Account under the Plan. 6.3 Rights and Duties. The Committee shall administer the Plan and shall have all powers necessary to accomplish that purpose, including, but not limited to, the following: (a) to construe, interpret, and administer the Plan with its decisions to be final and binding on all parties; (b) to make allocations and determinations required by the Plan, and to maintain all necessary records of the Plan, including Participants' Accounts; (c) to compute and certify to the Company the amount of benefits payable to Participants or their Beneficiaries, and to determine the time and manner in which such benefits are to be paid. 8 6.4 Compensation, Indemnity, and Liability. The Committee shall serve as such without bond and without Compensation for services hereunder. All expenses of the Plan and the Committee shall be paid by the Company. No member of the Committee shall be liable for any act or omission of any other member, nor any act or omission on his own part, except his own willful misconduct. The Company shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities, including reasonable legal fees and expenses arising out of his membership on the Administrative Committee, except for expenses or liabilities arising out of his own willful misconduct. 6.5 Taxes. If all or any portion of a Participant's Account shall become liable for the payment of any estate, inheritance, or other tax which the Company shall be required to pay or withhold, the Company shall have the full power and authority to withhold and pay such tax out of any monies or other property credited to the Account of such Participant at the time the Account is distributable to the Participant under the terms of the Plan or any other such monies as may be owed by the Company to the Participant. ARTICLE VII CLAIMS PROCEDURE 7.1 Claims for Benefits. If a Participant or Beneficiary does not receive payment of any benefits which he believes are due and payable under the Plan, he may make a claim for benefits to the Committee. The claim for benefits must be in writing and addressed to the Committee or to the Company. If the claim for benefits is denied, the Committee shall notify the Participant or Beneficiary in writing within ninety (90) days after receipt of the claim. However, if special circumstances require an extension of time for processing the claim, the Committee shall provide notice of the extension to the Participant or Beneficiary prior to the termination of the initial ninety (90) day period, and such extension shall not exceed one additional, consecutive ninety (90) day period. Any notice of a denial of benefit shall inform the Participant or Beneficiary of the basis for the denial, any additional material or information necessary to perfect such claim, and the steps which must be taken to have such claim reviewed. 7.2 Appeals. Each Participant or Beneficiary whose claim for benefits has been denied may file a written request for review of his claim with the Committee. The request for review must be filed within sixty (60) days after the Participant or Beneficiary received the written notice denying his claim. The final decision of the Committee will be made within sixty (60) days after receipt of the request for review and shall be communicated in writing, setting forth the basis for the Committee's decision. If there are special circumstances which require an extension of time for completing the review, the Committee's decision shall be rendered not later than one-hundred twenty (120) days after the receipt of the request for review. 9 ARTICLE VIII AMENDMENT AND TERMINATION 8.1 Amendment. The Company or Committee shall have the right to amend the Plan in whole or in part at any time; provided, however, that no amendment shall reduce the amounts credited to any Participant's Account as of the effective date of such amendment. Any amendment shall be in writing and executed by a duly authorized officer of the Company or a majority of members of the Committee. 8.2 Termination of the Plan. The Company reserves the right to discontinue and terminate the Plan at any time, in whole or in part, for any reason. In the event of termination of the Plan, the amounts credited to any Participant's Account shall become fully vested, and such amounts, as of the effective date of such termination, shall not be reduced and shall be distributed at a time and in the manner determined by the Committee. ARTICLE IV MISCELLANEOUS 9.1 Limitation on Participant's Rights. Participation in this Plan shall not give any Participant the right to be retained in the Company's employ or any rights or interest in this Plan or any assets of the Company other than as herein provided. The Company reserves the right to terminate the employment of any Participant without any liability for any claim against the Company under this Plan, except to the extent provided herein. 9.2 Benefits Unfunded. The benefits provided by this Plan shall be unfunded. All amounts payable under the Plan to Participants shall be paid from the general assets of the Company, and nothing contained herein shall require the Company to set aside or hold in trust any amounts or assets for the purpose of paying benefits. Participants shall have the status of general unsecured creditors of the Company with respect to amounts of Compensation they defer under the Plan or any other obligation of the Company to pay benefits pursuant hereto. Any funds of the Company available to pay benefits under the Plan shall be subject to the claims of general creditors of the Company and may be used for any purpose by the Company. Notwithstanding the preceding paragraph, the Company may at any time transfer assets to a trust for purposes of paying all or any part of its obligations under this Plan. However, to the extent provided in the trust agreement only, such transferred amounts shall remain subject to the claims of general creditors of the Company. To the extent that assets are held in a trust when a Participant's benefits under the Plan become payable, the Committee shall direct the trustee to pay such benefits to the Participant from the assets of the trust. 10 9.3 Other Plans. This Plan shall not affect the right of any Eligible Employee or Participant to participate in and receive benefits under any employee benefit plans which are now or hereafter maintained by the Company, unless the terms of such other employee benefit plan or plans specifically provide otherwise. 9.4 Governing Law. This Plan shall be construed, administered, and governed in all respects in accordance with applicable federal law and, to the extent not preempted by federal law, in accordance with the laws of the State of Georgia. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 9.5 Gender, Number, and Headings. In this Plan, whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other. Headings and subheadings in this Plan are inserted for convenience of reference only and are not considered in the construction of the provisions hereof. 9.6 Successors and Assigns; Nonalienation of Benefits. This Plan shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns; provided, however, that the amounts credited to the Account of a Participant shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to any benefits payable hereunder shall be void, including, without limitation, any assignment or alienation in connection with a separation, divorce, child support or similar arrangement. IN WITNESS WHEREOF, the Company has caused this amendment and restatement of the Plan to be executed by its duly authorized officer this _____ day of_______________, 1998. SYNTHETIC INDUSTRIES, INC. By: /s/ Illegible ----------------------------------- Title: Dir Human Resources -------------------------------- Attest:/s/ Illegible --------------------------- Title: Corproate Tax Manager ---------------------------- 11 EX-27 13 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET OF SYNTHETIC INDUSTRIES, INC. AS OF SEPTEMBER 30, 1998, AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND CASH FLOWS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 0000809803 SYNTHETIC INDUSTRIES, INC. 1,000 USD YEAR SEP-30-1998 OCT-01-1997 SEP-30-1998 1 285 0 66,965 2,714 52,450 134,295 326,645 108,196 440,514 48,030 170,000 0 0 8,669 113,976 440,514 368,996 368,996 246,677 246,677 73,731 0 18,515 30,073 11,855 18,218 0 0 0 18,218 2.11 2.03
-----END PRIVACY-ENHANCED MESSAGE-----