-----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, UAnUXoeBJk8F5CnkMxreIVyXWTZlpdXSEV06JHBxzU1qbRpkL/LWe4wzZUUyZ3hF UrjF4y2WsvOaMDG7qfKJ9A== 0000950130-98-000871.txt : 19980226 0000950130-98-000871.hdr.sgml : 19980226 ACCESSION NUMBER: 0000950130-98-000871 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980325 FILED AS OF DATE: 19980225 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNETIC INC CENTRAL INDEX KEY: 0000850436 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 222975182 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-17822 FILM NUMBER: 98548702 BUSINESS ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 BUSINESS PHONE: 2017033400 MAIL ADDRESS: STREET 1: 669 RIVER DRIVE CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 DEF 14A 1 NOTICE OF ANNUAL MEETING 3/25/98 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 Synetic, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: Notes: [SYNETIC LOGO] SYNETIC, INC. 669 RIVER DRIVE ELMWOOD PARK, NEW JERSEY 07407-1361 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 25, 1998 NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting") of Synetic, Inc. (the "Company") will be held at 9:30 A.M., local time, on Wednesday, March 25, 1998, at the St. Regis Hotel, Two East 55th Street, Versailles Room, New York, New York 10022, for the following purposes: 1. To elect four members to the Company's Board of Directors. 2. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate the Company's classified Board of Directors and to provide for annual election of all directors commencing at next year's Annual Meeting of Stockholders of the Company. 3. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate the requirement that provisions of the Certificate of Incorporation relating to the classification of the Board of Directors and the election of one-third of the Board of Directors at each annual meeting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. 4. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate cumulative voting in the election of directors. 5. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate the requirement that provisions of the Certificate of Incorporation relating to cumulative voting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. 6. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to provide that any director may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the outstanding shares entitled to vote. 7. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate the requirement that provisions of the Certificate of Incorporation relating to the power to remove directors or to fill vacancies on the Board of Directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. 8. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to eliminate the requirement that the provision of the Company's By-laws setting the maximum number of directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. 9. To consider and act upon a proposal to adopt an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock from 50 million to 100 million. 10. To consider and act upon a proposal to ratify and approve the Company's Amended and Restated 1989 Class A Stock Option Plan to, among other things, increase the number of shares issuable thereunder by 1,000,000 to 2,200,000, extend the term of the plan through the tenth 2 anniversary of the date on which stockholders approve the plan and comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). 11. To consider and act upon a proposal to ratify and approve the Company's Amended and Restated 1989 Class B Stock Option Plan to, among other things, increase the number of shares issuable thereunder by 2,000,000 to 3,600,000, extend the term of the plan through the tenth anniversary of the date on which stockholders approve the plan and comply with Section 162(m) of the Code. 12. To consider and act upon a proposal to ratify and approve the Company's Amended and Restated 1991 Special Nonqualified Stock Option Plan to, among other things, increase the number of shares issuable thereunder by 500,000 to 2,750,000, extend the term of the plan through the tenth anniversary of the date on which stockholders approve the plan and comply with Section 162(m) of the Code. 13. To consider and act upon a proposal to ratify and approve the grant, on June 23, 1997, of a nonqualified option to acquire 250,000 shares of Common Stock to an officer of the Company. 14. To ratify the appointment of Arthur Andersen LLP as independent auditors of the Company for the fiscal year ending June 30, 1998. 15. To consider and transact such other business as may properly be brought before the Meeting or any adjournment or postponement thereof. Only stockholders of record at the close of business on February 19, 1998 will be entitled to vote at the Meeting. The stock transfer books will not be closed. By Order of the Board of Directors Charles A. Mele Secretary Elmwood Park, New Jersey February 25, 1998 ____________________________ A proxy card and the Annual Report of the Company for the fiscal year ended June 30, 1997 are enclosed. YOUR VOTE IS IMPORTANT To ensure that your interests will be represented at the Meeting, whether or not you plan to attend the Meeting, please complete, date, sign and mail your proxy promptly in the enclosed postage-paid envelope. Stockholders who attend the Meeting in person may revoke their proxies and vote in person if they desire. SYNETIC, INC. 669 RIVER DRIVE ELMWOOD PARK, NEW JERSEY 07407-1361 --------------- PROXY STATEMENT --------------- ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 25, 1998 --------------- This Proxy Statement and the enclosed form of proxy are furnished to stockholders of Synetic, Inc., a Delaware corporation (the "Company"), in connection with the solicitation of proxies by the Board of Directors of the Company from holders of outstanding shares of its common stock, par value $.01 per share ("Common Stock"), for use at the Annual Meeting of Stockholders (the "Meeting") to be held on Wednesday, March 25, 1998 and at any adjournment or postponement thereof. The approximate date on which this Proxy Statement and the related form of proxy are first being sent to stockholders is February 25, 1998. If the enclosed proxy is properly signed and returned, and if the stockholder specifies a choice on the proxy, the shares of Common Stock represented by the proxy will be voted (or withheld from voting) in accordance with the stockholder's choice. If the proxy is signed and returned but no specification is made, the proxy will be voted as follows: . FOR the election of each of the nominees for director listed below ("Proposal One"), allocating that stockholder's votes evenly among the four nominees; . FOR the proposal ("Proposal Two") to amend the Certificate of Incorporation of the Company (the "Charter") to eliminate the Company's classified Board of Directors and to provide for annual election of all directors; . FOR the proposal ("Proposal Three") to amend the Charter to eliminate the requirement that provisions of the Charter relating to the classification of the Board of Directors and the election of one-third of the Board of Directors at each annual meeting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors; . FOR the proposal ("Proposal Four") to amend the Charter to eliminate cumulative voting; . FOR the proposal ("Proposal Five") to amend the Charter to delete the requirement that provisions of the Charter relating to cumulative voting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors; . FOR the proposal ("Proposal Six") to amend the Charter to provide that any director may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the outstanding shares entitled to vote; . FOR the proposal ("Proposal Seven") to amend the Charter to delete the requirement that provisions of the Charter relating to the power to remove directors or to fill vacancies on the Board of Directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors; . FOR the proposal ("Proposal Eight") to amend the Charter to delete the requirement that the provision of the By-laws of the Company (the "By- Laws") setting the maximum number of directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors; . FOR the proposal ("Proposal Nine") to amend the Charter to increase the number of authorized shares of Common Stock from 50 million to 100 million; . FOR the proposal ("Proposal Ten") to approve the Company's Amended and Restated 1989 Class A Stock Option Plan (the "Amended Class A Plan"); . FOR the proposal ("Proposal Eleven") to approve the Company's Amended and Restated 1989 Class B Stock Option Plan (the "Amended Class B Plan"); . FOR the proposal ("Proposal Twelve") to approve the Company's Amended and Restated 1991 Special Nonqualified Stock Option Plan (the "Amended 1991 Plan"; and, collectively with the Amended Class A Plan and the Amended Class B Plan, the "Plans"); . FOR the proposal ("Proposal Thirteen") to approve the grant to Roger C. Holstein, an officer of the Company, of a nonqualified option to purchase 250,000 shares of Common Stock (the "Individual Option"); and . FOR the proposal ("Proposal Fourteen") to ratify the appointment of independent auditors. The Board of Directors of the Company (the "Board") knows of no business that will be presented for consideration at the Meeting other than the matters described in this Proxy Statement. If any other matters are presented at the Meeting, the proxy holders will vote the proxies in accordance with their judgment. Any proxy may be revoked by the stockholder giving it, at any time prior to its being voted, by filing with the Secretary of the Company at its address set forth above, a notice of revocation or a duly executed proxy bearing a later date. Any proxy may also be revoked by the stockholder's attendance at the Meeting and voting in person. A notice of revocation need not be on any specific form. This solicitation is being made on behalf of the Board, and its cost (including preparing and mailing of the notice, this Proxy Statement and the form of proxy) will be paid by the Company. The Company will also make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send the proxy materials to their principals and will reimburse them for their reasonable expenses in so doing. To the extent necessary in order to ensure sufficient representation at the Meeting, officers and regular employees of the Company may solicit the return of proxies by mail, telephone, telegram, telex and personal interview. No compensation in addition to regular salary and benefits will be paid to any officer or regular employee for such solicitation. In addition, the Company has retained Innisfree M&A Incorporated to assist in the solicitation of proxies from beneficial owners of shares held of record by brokerage houses, banks and other custodians, nominees or fiduciaries, at a cost not to exceed $6,500 plus reasonable out-of-pocket expenses. 2 RECORD DATE AND VOTING AT THE MEETING The Board has fixed the close of business on February 19, 1998 as the record date for the determination of the stockholders of the Company entitled to notice of, and to vote at, the Meeting. At that date, there were outstanding 17,685,964 shares of Common Stock, the holders of which will be entitled to one vote per share on each matter submitted to the Meeting, except that the Charter provides for cumulative voting with respect to the election of directors. See "Proposal One: Election of Directors". No other voting securities of the Company are outstanding. The presence at the Meeting, in person or by proxy, of the holders of a majority of the shares entitled to vote at the Meeting constitutes a quorum for the transaction of business at the Meeting. If a quorum should not be present, the Meeting may be adjourned from time to time until a quorum is obtained. Shares of Common Stock present in person or represented by proxy (including shares which abstain or do not vote with respect to one or more matters presented for stockholder approval) will be counted for purposes of determining whether a quorum exists at the meeting. The following considerations apply to the voting of stockholders with respect to each of the respective proposals: . PROPOSAL ONE: ELECTION OF DIRECTORS. Under the By-laws, the four nominees receiving the greatest number of votes cast shall be elected directors of the Company. Only votes cast FOR a nominee will be counted, except that if a stockholder who signs and returns a proxy fails to designate an allocation of votes or to withhold authority to vote, the persons acting under the proxy will allocate that stockholder's votes evenly among the respective director nominees. Abstentions, broker non-votes and instructions on the accompanying proxy card to withhold authority to vote for one or more of the nominees will result in the respective nominees receiving fewer votes. . PROPOSAL TWO: AMENDMENT TO THE CHARTER ELIMINATING THE CLASSIFICATION OF THE BOARD. The affirmative vote of the holders of at least two- thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Two. An abstention or broker non-vote with respect to Proposal Two will have the same effect as a vote against Proposal Two because it is one less vote for approval. . PROPOSAL THREE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION OF THE BOARD. The affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Three. An abstention or broker non-vote with respect to Proposal Three will have the same effect as a vote against Proposal Three because it is one less vote for approval. . PROPOSAL FOUR: AMENDMENT TO THE CHARTER ELIMINATING CUMULATIVE VOTING. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Four. An abstention or broker non-vote with respect to Proposal Four will have the same effect as a vote against Proposal Four because it is one less vote for approval. . PROPOSAL FIVE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO CUMULATIVE VOTING. The affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Five. An abstention or broker non-vote with respect to Proposal 3 Five will have the same effect as a vote against Proposal Five because it will be one less vote for approval. . PROPOSAL SIX: AMENDMENT TO THE CHARTER TO PROVIDE FOR REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Six. An abstention or broker non-vote with respect to Proposal Six will have the same effect as a vote against Proposal Six because it will be one less vote for approval. . PROPOSAL SEVEN: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE REMOVAL OF DIRECTORS. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Seven. An abstention or broker non-vote with respect to Proposal Seven will have the same effect as a vote against Proposal Seven because it will be one less vote for approval. . PROPOSAL EIGHT: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR BY-LAW AMENDMENTS SETTING THE MAXIMUM NUMBER OF DIRECTORS. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Eight. An abstention or broker non-vote with respect to Proposal Eight will have the same effect as a vote against Proposal Eight because it will be one less vote for approval. . PROPOSAL NINE: AMENDMENT TO THE CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES FROM 50 MILLION TO 100 MILLION. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Meeting is required to approve Proposal Nine. An abstention or broker non-vote with respect to Proposal Nine will have the same effect as a vote against Proposal Nine because it is one less vote for approval. . PROPOSALS TEN, ELEVEN, TWELVE AND THIRTEEN: APPROVAL OF PROPOSALS RELATING TO THE PLANS AND THE INDIVIDUAL OPTION. The affirmative vote of the holders of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote is required to approve the proposals to ratify and approve Proposals Ten, Eleven, Twelve and Thirteen. Abstentions with respect to each such proposal will be treated as shares that are present or represented at the Meeting and entitled to vote, but will not be counted as a vote in favor of such proposal. Accordingly, an abstention from voting on any such proposal will have the same legal effect as a vote against any such proposal. Broker non-votes with respect to each such proposal will not be considered as present or represented at the Meeting and entitled to vote with respect to such proposal and, thus, will have no impact on the outcome of the vote with respect to such proposal. . PROPOSAL FOURTEEN: RATIFICATION OF INDEPENDENT AUDITORS. The affirmative vote of the holders of a majority of the votes cast at the Meeting is required to ratify the appointment of Arthur Andersen LLP as the Company's independent auditors. Abstentions and broker non- votes with respect to Proposal Fourteen will not be considered as votes cast and, accordingly, will have no effect on the outcome of the vote with respect to Proposal Fourteen. As more fully described below under "Certain Relationships and Related Transactions--Investment Agreement", pursuant to an Investment Agreement between Mr. Martin J. Wygod, Chairman of the Board of the Company, and the Company, dated as of September 13, 1994 (the "Investment Agreement"), until the earlier of 4 December 14, 1998, the death or adjudication of incompetency of Mr. Wygod or a Change of Control (as defined in the Investment Agreement) of the Company, Mr. Wygod and SN Investors, L.P. ("SN Investors"), a limited partnership the general partner of which is SYNC, Inc. (the "General Partner"), whose sole stockholder is Mr. Wygod, are required to vote the 5,061,857 shares purchased from Merck & Co., Inc. ("Merck") by SN Investors (the "Wygod Shares") or cause the Wygod Shares to be voted (a) with respect to election of directors, for the nominees who would have been elected based on the vote of all shares of Common Stock other than the Wygod Shares in proportion to the votes that such nominees received and (b) on all other matters to come before the stockholders of the Company, in the same manner as a majority of the shares of Common Stock (other than the Wygod Shares) are voted. 5 PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of February 19, 1998 (except as otherwise indicated) concerning the beneficial ownership of the Company's Common Stock by each person known by the Company to own more than 5% of its Common Stock.
AMOUNT NAME AND ADDRESS OF AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS (1) ------------------- -------------------- ------------ Martin J. Wygod................... 5,446,959(2)(3) 30.3% c/o Synetic, Inc. 669 River Drive Center 2 Elmwood Park, New Jersey 07407 SN Investors, L.P................. 5,061,857(2) 28.6% P.O. Box 616 Fair Lawn, New Jersey 07410 The Prudential Insurance Company.. 1,292,447(4) 7.3% of America ("Prudential") Prudential Plaza Newark, New Jersey 07102 FMR Corp.......................... 1,157,582(5) 6.6% 82 Devonshire Street Boston, Massachusetts 02107 James R. Buell.................... 1,010,916(6) 5.7% Star Route Box 129 Orovada, Nevada 89425
- ------------------------ (1) The number of shares of Common Stock deemed outstanding includes: (i) 17,685,964 shares of Common Stock outstanding as of February 19, 1998, (ii) the number of shares, if any, of Common Stock that the respective persons named in the above table have the right to acquire presently or within 60 days of February 19, 1998 upon exercise of stock options and (iii) the number of shares, if any, of Common Stock, that the respective persons named in the above table have the right to acquire upon conversion of the Company's 5% Convertible Subordinated Debentures due 2007 ("Convertible Debentures"). (2) SN Investors, the general partner of which is controlled by Mr. Wygod, is the record and beneficial owner of 5,061,857 shares of Common Stock. Mr. Wygod is an indirect beneficial owner of such shares and they are included in the total of 5,446,959 shares listed as beneficially owned by Mr. Wygod. See "Certain Relationships and Related Transactions--Purchase and Sale Agreement; Divestiture" and "--Investment Agreement" for additional information regarding SN Investors. (3) Includes 306,000 shares of Common Stock that Mr. Wygod has the right to acquire presently or within 60 days of February 19, 1998 upon exercise of stock options or upon conversion of Convertible Debentures. Includes 2,000 shares of Common Stock beneficially owned by Mr. Wygod's spouse, as to which shares Mr. Wygod disclaims beneficial ownership. Does not include 3,500 shares of Common Stock and shares of 6 Common Stock issuable upon conversion of $1,500,000 principal amount of Convertible Debentures owned by Medco Containment Services Foundation, Inc., a charitable foundation of which Mr. Wygod is a trustee and shares voting and dispositive power, nor 129,859 shares of Common Stock and shares of Common Stock issuable upon conversion of $500,000 principal amount of Convertible Debentures owned by the Rose Foundation, a private charitable foundation of which Mr. Wygod is a trustee and shares voting and dispositive power. (4) The information shown is as of December 31, 1997 and is based upon information disclosed by Prudential in its Schedule 13G filed with the Securities and Exchange Commission (the "Commission"). Prudential reported in its Schedule 13G that it has shared voting and dispositive power over such shares. (5) The information shown is as of December 31, 1997 and is based upon information disclosed by FMR Corp., Fidelity Management and Research Company, Fidelity VIP Equity-Income Fund, Abigail P. Johnson and Edward C. Johnson, 3d, the controlling stockholder of FMR Corp., in a Schedule 13G filed with the Commission. Such persons reported that FMR Corp. is the parent holding company of Fidelity Management and Research Company, and that Edward C. Johnson, 3d, FMR Corp., through its control of Fidelity Management and Research Company, and the Funds each have sole power to dispose of such shares. Sole power to vote the shares resides in the Fund's Board of Trustees. (6) Includes 131,667 shares of Common Stock that Mr. Buell has the right to acquire upon conversion of Convertible Debentures. The information shown is as of May 28, 1997 and is based upon information disclosed by Mr. Buell in his Schedule 13D filed with the Commission. Mr. Buell reported in his Schedule 13D that he has sole voting and dispositive power over such shares. 7 SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth certain information, as of February 19, 1998, concerning the ownership of Common Stock by each of the directors, each of the Named Executive Officers, and by all directors and executive officers of the Company as a group.
Amount and Nature of Beneficial Percent of Name of Beneficial Owner Ownership (1)(2) Class (3) - ------------------------ ------------------------ ----------- Thomas R. Ferguson.................... 108,117 * Mervyn L. Goldstein................... 110,717(4) * Ray E. Hannah......................... 137,628 * Roger H. Licht........................ 81,333 * James V. Manning...................... 299,740(5) 1.67% Bernard A. Marden..................... 400,001(10) 2.25% Victor L. Marrero..................... 72,758 * Charles A. Mele....................... 73,188(6) * Herman Sarkowsky...................... 239,725(7) 1.35% Paul C. Suthern....................... 238,500(5) 1.33% Anthony Vuolo......................... 113,658 * Albert M. Weis........................ 157,169(8) * Martin J. Wygod....................... 5,446,959(5)(6)(9) 30.27% All directors and executive officers as a group (15 persons)............. 7,540,351 38.77%
- ---------------------- * Less than one percent. (1) The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, unless otherwise indicated in the following footnotes. (2) Includes the following number of shares of Common Stock that the following persons have the right to acquire presently or within 60 days of February 19, 1998 upon exercise of stock options and the number of shares of Common Stock that the following persons have the right to acquire upon conversion of Convertible Debentures: Mr. Ferguson, 103,667; Dr. Goldstein, 98,667; Mr. Hannah, 64,167; Mr. Licht, 79,333; Mr. Manning, 263,333; Mr. Marden, 83,333; Mr. Marrero, 70,833; Mr. Mele, 70,833; Mr. Sarkowsky, 127,000; Mr. Suthern, 236,500; Mr. Vuolo, 111,833; Mr. Weis, 106,167; Mr. Wygod, 306,000; and all directors and executive officers as a group, 1,709,666. Includes 1,461 shares of Common Stock allocated to the account of Mr. Hannah, 100 shares of Common Stock allocated to the account of Mr. Marrero, 105 shares of Common Stock allocated to the account of Mr. Mele and 100 shares of Common Stock allocated to the account of Mr. Vuolo under the Porex Technologies Corp. 401(k) Savings Plan as of June 30, 1997. (3) The number of shares of Common Stock deemed outstanding includes: (i) 17,685,964 shares of Common Stock outstanding as of February 19, 1998, (ii) the number of shares of Common Stock that the respective persons named in the above table have the right to acquire presently or within 60 days of February 19, 1998 upon exercise of stock options and (iii) the number of shares of Common Stock that the respective persons named in the above table have the right to acquire upon conversion of Convertible Debentures. 8 (4) Includes 200 shares of Common Stock owned by Dr. Goldstein's spouse, as to which Dr. Goldstein disclaims beneficial ownership. (5) Does not include 3,500 shares of Common Stock and shares of Common Stock issuable upon conversion of $1,500,000 principal amount of Convertible Debentures owned by Medco Containment Services Foundation, Inc., a charitable foundation of which Messrs. Manning, Suthern and Wygod are trustees and share voting and dispositive power. (6) Does not include 129,859 shares of Common Stock and shares of Common Stock issuable upon conversion of $500,000 principal amount of Convertible Debentures owned by the Rose Foundation, a private charitable foundation of which Messrs. Wygod and Mele are trustees and share voting and dispositive power. (7) Includes 23,706 shares of Common Stock owned by a charitable foundation of which Mr. Sarkowsky is a director. (8) Includes 3,050 shares of Common Stock owned by a corporation of which Mr. Weis is the sole stockholder, sole director and president and 3,200 shares of Common Stock held in trust for Mr. Weis's children. (9) Includes 2,000 shares of Common Stock beneficially owned by Mr. Wygod's spouse, as to which shares Mr. Wygod disclaims beneficial ownership. See also "Footnote 2 to Principal Stockholders Table". (10) Includes 316,668 shares of Common Stock held in an irrevocable trust, with respect to which Mr. Marden is trustee and holds voting and dispositive power. 9 PROPOSAL ONE: ELECTION OF DIRECTORS The proxy will be voted in accordance with the directions thereon with respect to Proposal One, or, if no directions are given, FOR the election of the nominees for director, allocating that stockholder's votes evenly among the four nominees. The holders of Common Stock are being asked to elect four members to the Board. The four members who are so elected and the remaining seven directors whose terms continue after the Meeting will be directors of the Company. During the fiscal year ended June 30, 1997, the Board had four standing committees: an Audit Committee, a Stock Option Committee, a Compensation Committee and an Executive Committee. The Audit Committee is responsible for reviewing the internal accounting controls and procedures of the Company with management and the independent auditors, accounting principles, related party transactions and the scope of the annual audit of the Company. The Stock Option Committee administers the Company's stock option plans. The Board has delegated to the Executive Committee the power to exercise, to the fullest extent permitted by law, the powers of the entire Board. The Compensation Committee is responsible for reviewing and approving compensation levels for the Company's executive officers and reviewing and making recommendations to the Board with respect to other matters relating to the compensation practices of the Company. The Board has no nominating committee. The entire Board performs those functions often performed by a nominating committee. During the fiscal year ended June 30, 1997, the Board of the Company held four meetings and also took certain actions by written consent. The Stock Option Committee held no formal meetings during such period, but took certain actions by written consent. The Audit Committee held two meetings. The Executive Committee held no formal meetings during such period, but took certain actions by written consent. Except for Per Lofberg, who resigned as a director on June 27, 1997, each director attended more than 75% of the Board meetings and the meetings of Board committees on which he served. Pursuant to the terms of the Charter, the Board is divided into three classes with staggered three-year terms, and not more than one class of directors is elected at any annual meeting of stockholders. Under the Company's By-laws, the nominees receiving the greatest number of votes cast shall be elected directors of the Company. Messrs. Marden, Hannah, Licht and Sarkowsky are the nominees, selected by the Board, for election to serve three-year terms expiring at the Annual Meeting of Stockholders of the Company in the year 2000. Cumulative voting will be applicable to the election of these nominees pursuant to the Charter. Cumulative voting means that each stockholder entitled to vote may cast votes equal to the number of shares of Common Stock eligible to be voted by that stockholder multiplied by the number of directors to be elected; a stockholder may cast all of his, her or its votes for a single nominee or may allocate them among nominees. For example, a holder of 100 shares may cast 400 votes for a single nominee, allocate 100 votes to each of the four nominees or allocate 400 votes in any other manner. If a stockholder who signs and returns a proxy fails to designate an allocation of votes or to withhold authority to vote, the persons acting under the proxy will allocate that stockholder's votes evenly among the four nominees. In the event that Proposal Two is approved, the term of all directors will expire at next year's annual meeting of stockholders (the "1998 Annual Meeting") and, commencing with the 1998 Annual Meeting, stockholders will vote upon the election of directors for one-year terms. In the event that Proposal Four is approved, stockholders will no longer be able to cumulate their votes in the election of directors commencing at the 1998 Annual Meeting. See "Proposal Two: Amendment to the Charter Eliminating the Classification of the Board of Directors" and "Proposal Four: Amendment to the Charter Eliminating Cumulative Voting". 10 If for any reason any nominee for director should become unavailable for election, the proxies may be voted for the election of a substitute designated by management, unless a contrary instruction is given on the proxy. Management has no reason to believe that any of the nominees will be unable or unwilling to serve if elected, and all nominees have expressed an intention to serve the entire term for which election is sought. Certain information as of February 19, 1998 concerning the directors and nominees and concerning the officers of the Company is set forth below: NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING*
Name Age Director Since ---- --- -------------- Ray E. Hannah 62 1989 Roger H. Licht 44 1989 Bernard A. Marden 78 1997 Herman Sarkowsky(A)(B)(C) 72 1989 DIRECTORS WHOSE TERM EXPIRES AT THE 1999 ANNUAL MEETING* Name Age Director Since ---- --- -------------- Thomas R. Ferguson(A)(B)(C)(D) 71 1989 Mervyn L. Goldstein, M.D. 60 1989 Paul C. Suthern 46 1993 Martin J. Wygod 58 1989 DIRECTORS WHOSE TERM EXPIRES AT THE 1998 ANNUAL MEETING Name Age Director Since ---- --- -------------- James V. Manning(D) 51 1989 Charles A. Mele 41 1989 Albert M. Weis(A)(B)(C)(D) 71 1989
- -------------------------- * Terms expire at the 1998 Annual Meeting if Proposal Two is approved. 11 (A) Member of the Audit Committee. (B) Member of the Stock Option Committee. (C) Member of the Compensation Committee. (D) Member of the Executive Committee. -------------------- Mr. Ferguson has been a member of the law firm of Ferguson, Case, Orr, Paterson & Cunningham for more than five years. Dr. Goldstein has been a physician in private practice, Associate Clinical Professor of Medicine at the Albert Einstein College of Medicine in New York City and Attending Physician in Medicine and Oncology at Montefiore Medical Center in New York City for more than five years. Mr. Hannah has been Co-Chairman of the Board of Porex Corporation (together with its subsidiaries, unless the context otherwise requires, "Porex") since January 1998. Prior to such time, he was President and Chief Executive Officer of Porex since its inception in November 1997. He has been President of Porex Technologies Corp. ("PTC") since September 1987 and its Chief Executive Officer since November 1992. Prior to becoming Chief Executive Officer of PTC, he was Chief Operating Officer of PTC from November 1984 to November 1992. He has been a director of the Company since May 1989, an executive officer of the Company since June 1989 and a director of PTC since November 1984. Mr. Licht has been a member of the law firm of Licht & Licht for more than five years. Mr. Manning has been Chief Executive Officer of the Company since January 1995, President of the Company since July 1996 and has been an executive officer of the Company for more than the last five years, and was, until December 1994, an executive officer of Medco Containment Services, Inc. ("Medco") for more than five years. He is also Chairman of the Board of COMNET Corporation ("Comnet"), a computer software company. Mr. Marden has been a private investor for more than five years. Mr. Mele has been Vice President--General Counsel of the Company since July 1995, and was an executive officer of the Company from May 1989 until December 1994 and was an executive officer of Medco for more than five years, until March 1995. Mr. Mele is also a director of Comnet and Group 1 Software, Inc., computer software companies. Mr. Sarkowsky has been Chairman of the Board and Chief Executive Officer of Sarkowsky Investment Corporation, a diversified investment company, for more than five years. Since May 1992, he has been a director of Seafirst Bank. Mr. Sarkowsky is also a director of Eagle Hardware & Garden Inc. and Hollywood Park, Inc. Mr. Suthern has been Vice Chairman of the Company since July 1996, and was the President and Chief Operating Officer of the Company from February 1993 until July 1996 and was also the Chief Executive Officer from October 1993 until January 1995. Mr. Suthern was also President and Chief Operating Officer of Medco from November 1992 through December 1994 and Assistant to Medco's Chairman from December 1991 to November 1992. Prior thereto, he was Executive Vice President--Operations of Medco for more than five years. Mr. Weis has been President of A.M. Weis & Co., Inc., a commodities trading corporation, for more than five years. Since August 1997, Mr. Weis has been the Chairman of the Board of the New York Cotton Exchange. Mr. Weis is also a member of the Board of the Commodities Clearing Corporation. 12 Mr. Wygod has been Chairman of the Board of the Company since May 1989. From May 1989 to February 1993, Mr. Wygod also served as the Company's President and Chief Executive Officer and until May 1994 was an executive officer of the Company. Until May 1994, Mr. Wygod was Chairman of the Board of Medco for more than five years, and until January 1993 he also served as Chief Executive Officer of Medco. He is also engaged in the business of racing, boarding and breeding thoroughbred horses, and is President of River Edge Farm, Inc., which is engaged in the business of breeding and boarding thoroughbred horses. No family relationship exists among any of the directors or executive officers except that Martin J. Wygod, Chairman of the Board of the Company, and Paul C. Suthern, Vice Chairman of the Company, are brothers-in-law. No arrangement or understanding exists between any director or executive officer and any other person pursuant to which any director or executive officer was selected as a director or executive officer of the Company. All executive officers are elected annually by the Board and serve at the discretion of the Board. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under the securities laws of the United States, the Company's directors, its executive officers and any persons holding more than ten percent of the Common Stock are required to report their respective holdings of the Common Stock and any changes in such holdings to the Commission. Specific due dates for these reports have been established and the Company is required to report in this Proxy Statement any failure to file by such due dates during the fiscal year ended June 30, 1997. To the best knowledge of the Company, these filing requirements were timely satisfied by its directors, officers and ten percent holders during the fiscal year ended June 30, 1997. In making these statements, the Company has relied upon written representations of its directors, officers and ten percent holders, and copies of the reports that have been filed with the Commission. DIRECTOR COMPENSATION Those directors who are not officers or employees of the Company received no cash compensation for serving as directors for the fiscal year ended June 30, 1997. The Company's 1991 Non-Employee Director Stock Option Plan (the "Director Plan") provides that on the first business day of each fiscal year of the Company, each director who is not an officer or employee of the Company then in office will automatically be granted an option to purchase 10,000 shares of Common Stock. In addition, each director who is not an officer or employee of the Company automatically receives an option to purchase 10,000 shares of Common Stock at the time such director is first elected to the Board. The Director Plan is administered by the Board or any executive officer or officers designated by the Board. Non-employee directors have also in the past received options to purchase Common Stock under the Class A Plan, and the Company from time to time has granted options to purchase Common Stock to certain of such directors outside the Company's stock option plans on terms similar to those contained in the Class A Plan. EXECUTIVE COMPENSATION Prior to the consummation of the purchase of shares of Common Stock from Merck by the Company and SN Investors (the "Purchase") on December 14, 1994 (for additional information regarding the Purchase, see below "Certain Relationship and Related Transactions"), the Company bore a proportionate share of the cost or expense in respect of Medco compensation, benefits and travel and entertainment expenses of certain officers of the Company who were also employees of Medco or its subsidiaries other than the Company. During the period from July 1, 1994 through December 14, 1994, the executive officers of the Company, other than Ray E. Hannah, did not receive any cash compensation for services to the Company or its subsidiaries. In the case of Mr. Hannah, all amounts shown below were paid by the Company. Following the consummation of the Purchase, the other 13 executive officers of the Company became salaried employees of the Company and began to participate in the employee benefit plans and arrangements of the Company and its subsidiaries. The following table presents information concerning compensation paid for services to the Company during the last three fiscal years to Mr. Manning, Mr. Hannah, Mr. Mele, Mr. Vuolo and Mr. Marrero, the only other executive officers whose combined salary and bonus during the fiscal year ended June 30, 1997 exceeded $100,000 (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ OTHER SECURITIES ANNUAL UNDERLYING ALL OTHER COMPEN- OPTIONS/ COMPEN- NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) SATION ($) SARS (#) SATION ($) - --------------------------- ---- --------- -------- ----------- -------- ----------- James V. Manning............. 1997 100,000 - - - - President and Chief 1996 100,000 - - - - Executive Officer 1995 50,000(1) - - 150,000 - Ray E. Hannah................ 1997 163,461 100,000 4,505 40,000 5,901(2) Vice President 1996 160,000 74,140 - - 3,239(2) --Porex Technologies Group 1995 160,000 - - - 4,146(2) Charles A. Mele.............. 1997 150,000 - 12,000 195,000 2,019(3) Vice President -- General 1996 150,000 12,460 12,000 - 1,540(3) Counsel 1995 - - - - - Anthony Vuolo................ 1997 150,000 - 12,000 81,000 2,019(3) Vice President -- Chief 1996 150,000 - 12,000 - 1,419(3) Financial Officer (since 1995 43,269(4) - 3,461 125,000 - May 1997) Victor L. Marrero............ 1997 150,000 - 12,000 31,000 2,019(3) Vice President and Chief 1996 150,000 - 12,000 - 1,419(3) Financial Officer (through 1995 75,000(5) - 6,000 125,000 - May 1997)
- ---------------------- (1) During the period beginning on July 1, 1994 and ending on December 14, 1994, the date of consummation of the Purchase, Mr. Manning was paid a salary of $186,923 by Medco, none of which was attributed to services rendered to the Company. During the period beginning on December 15, 1994 and ending on June 30, 1995, Mr. Manning was paid a salary of $50,000 by the Company. Effective August 1, 1996, Mr. Manning assumed the responsibilities of acting President of the Company. (2) Includes Company matching contributions to the Porex 401(k) Plan and life insurance premiums paid on behalf of Mr. Hannah of $2,043 and $2,103, respectively, in the fiscal year ended June 30, 1995, $1,878 and $1,361, respectively, in the fiscal year ended June 30, 1996 and $3,795 and $2,106, respectively, in the fiscal year ended June 30, 1997. (3) Comprised of Company matching contributions to the Porex 401(k) Plan. 14 (4) During the period beginning on July 1, 1994 and ending on December 14, 1994, the date of consummation of the Purchase, Mr. Vuolo was paid a salary of approximately $115,000 by Medco, none of which was attributed to services rendered to the Company. During the period beginning on December 15, 1994 and ending on June 30, 1995, Mr. Vuolo was paid a salary of $43,269 by the Company. (5) During the period beginning on July 1, 1994 and ending on December 14, 1994, the date of consummation of the Purchase, Mr. Marrero was paid a salary of approximately $115,000 by Medco, none of which was attributed to services rendered to the Company. During the period beginning on December 15, 1994 and ending on June 30, 1995, Mr. Marrero was paid a salary of $75,000 by the Company. Mr. Marrero was the Chief Financial Officer from December 1994 until May 1997, at which time Mr. Vuolo became the Chief Financial Officer. -------------------- The following table presents information concerning the options granted to the Named Executive Officers during the last fiscal year. OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ----------------- NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS/SARS EXERCISE OPTIONS/ GRANTED TO OR BASE GRANT DATE SARS EMPLOYEES PRICE EXPIRATION PRESENT VALUE NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE ($)(2) - ---- ----------- -------------- -------- ---- ------ Ray E. Hannah...... 40,000(1) 1.1% 35.50 4/16/07 459,998 Victor L. Marrero.. 31,000(1) .8% 32.25 10/02/06 309,874 Charles A. Mele.... 195,000(1) 5.3% 32.25 10/02/06 1,949,204 Anthony Vuolo...... 31,000(1) .8% 32.25 10/02/06 309,874 50,000(1) 1.4% 34.88 6/23/07 575,981
- ------------ (1) These options vest and become exercisable at the rate of 20% per year, commencing on the first anniversary of the date of grant, and were granted on the following dates: Mr. Hannah, all on April 16, 1997; Messrs. Marrero and Mele, all on October 2, 1996; and Mr. Vuolo, 31,000 on October 2, 1996 and 50,000 on June 23, 1997. Such options are subject to stockholder approval of the Amended Class A Plan or Amended Class B Plan, as the case may be. (2) The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) the respective option exercise price, specified above, equal to the fair market value of the underlying stock on the date of grant; (ii) the exercise of options within one year of the date that they become exercisable; (iii) a risk-free interest rate of 6.5% per annum; and (iv) volatility of 0.2722 calculated using daily stock prices of the Company during the period from the date of the Purchase to June 30, 1997. The ultimate values of the options will depend on the future market price of the Company's stock, which cannot be forecasted with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the 15 excess of the market value of the Company's Common Stock over the exercise price on the date the option is exercised. There is no assurance that the value realized by an optionee will be at or near the value estimated by the Black-Scholes model or any other model applied to value the options. -------------------- No options to purchase Common Stock were exercised by the Named Executive Officers during the fiscal year ended June 30, 1997. Messrs. Marrero and Vuolo realized income of $2,522,534 and $2,006,240, respectively, from the exercise of options to purchase common stock of Merck granted prior to the closing of the Purchase, but which continued to vest and remained exercisable thereafter as a result of their employment by the Company. See "Certain Relationships and Related Transactions--Purchase and Sale Agreement; Divestiture." The following table presents information concerning the fiscal year-end value of options to purchase Common Stock held by the Named Executive Officers. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/ OPTIONS/SARS AT FY-END (#) SARS AT FY-END ($)(1) --------------------------- --------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - -------- ----------- ------------- ----------- ------------- James V. Manning... 225,000 90,000 6,488,750 2,430,000 Ray E. Hannah...... 64,000 40,000 1,754,500 60,000 Victor L. Marrero.. 60,000 106,000 1,667,500 2,172,250 Charles A. Mele.... 70,000 195,000 1,945,000 926,250 Anthony Vuolo...... 86,000 164,000 2,293,000 2,482,500 - ----------------- (1) Based upon the fiscal year-end closing price of the Common Stock of $37.00. 16 PLANS AND ARRANGEMENTS OF THE COMPANY PENSION PLAN Employees of the Company and certain of its subsidiaries who satisfy certain age and service requirements are eligible to participate in the Pension Plan for Employees of Porex Technologies Corp. (the "Pension Plan"), a defined benefit plan. The Company bears the entire cost of the Pension Plan. The Company's contributions to the Pension Plan are computed on an actuarial basis in order to fund the defined retirement benefits. Normal retirement benefits are payable monthly for life to a participant upon retirement at his or her retirement date (i.e., age 65), and are equal to 1/12 of the sum of (a) 0.6% of the participant's average annual compensation for the five consecutive calendar years that the participant's compensation was the highest during the ten consecutive years of service immediately preceding retirement ("Final Average Compensation"), multiplied by the participant's credited years of service up to a maximum of 35 years, and (b) 0.6% of the participant's Final Average Compensation in excess of the average annual Social Security taxable wage base for the 35-year period ending with the year the participant would reach normal retirement age, multiplied by the participant's credited years of service up to a maximum of 35 years. A participant becomes 100% vested in his or her accrued retirement benefit after completion of five years of service or upon attainment of normal retirement at age 65. Retirement benefits are not subject to any deduction for Social Security or other offset amounts. Under a defined benefit plan such as the Pension Plan, contributions allocable to individual participants cannot be readily and accurately calculated. The table below shows estimated annual retirement benefits for executives at specified levels of remuneration and years of service. The estimates assume that benefits commence at age 65 under a straight life annuity form. The table discloses the benefits that an individual would receive at age 65 if he participated in the Pension Plan for 15, 20, 25, 30 and 35 years. PENSION PLAN TABLE Years of Service -------------------------------------- Remuneration 15 20 25 30 35 ------------ -- -- -- -- -- 100,000 15,363 20,484 25,604 30,725 35,864 115,000 18,063 24,084 30,104 36,125 42,146 125,000 19,863 26,484 33,104 39,725 46,346 150,000 24,363 32,484 40,604 48,725 56,846 152,000 or more 24,723 32,964 41,204 49,445 57,686 Ray E. Hannah, the only Named Executive Officer participating in the Pension Plan, had accrued 29 credited years of service under the Pension Plan and had annual remuneration covered by the Pension Plan of $160,000 as of January 1, 1997. Sections 401(a)(17) and 415 of the Internal Revenue Code limit the amount of compensation that may be considered in computing benefits under a qualified retirement plan. For 1995 and 1996, the maximum amount of compensation allowed for use in calculating an individual's pension benefits under the Retirement Plan was $150,000. For 1997, the maximum amount increased to $160,000. 17 COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG SYNETIC, INC., NASDAQ U.S. COMPOSITE INDEX AND COMPOSITE INDEXES The following graphs compare the cumulative total shareholder return on the Company's Common Stock for the period beginning June 30, 1992 and ending June 30, 1997 with: (a) in the case of Graph A, the cumulative total shareholder return of the NASDAQ US Composite stock index and the Dow Jones Containers & Packaging index and (b) in the case of Graph B, the cumulative total shareholder return of the NASDAQ US Composite stock index and a composite index consisting of the Dow Jones Containers & Packaging index and the Dow Jones Retailers and Wholesalers Drug-Based index, weighted according to the distribution of the Company's revenues in each time period between its plastics business and its institutional pharmacy business (the "Dow Composite Index"). The comparison assumes the investment of $100 on June 30, 1992 in Company Common Stock and in each index and that dividends were reinvested on the ex-dividend date. The Company is not included in the composite indexes. [GRAPH A APPEARS HERE] CUMULATIVE TOTAL RETURN Based on reinvestment of $100 beginning June 30, 1992 Measurement period Dow Jones Containers (Fiscal year Covered) Synetic Inc. NASDAQ US Composite & Packaging Index - --------------------- ------------ ------------------- -------------------- Measurement PT - $ 100 $ 100 $ 100 06/30/92 FYE 06/30/93 $ 71 $ 126 $ 96 FYE 06/30/94 $ 76 $ 127 $ 98 FYE 06/30/95 $ 136 $ 169 $ 123 FYE 06/30/96 $ 206 $ 218 $ 122 FYE 06/30/97 $ 206 $ 265 $ 154 [GRAPH B APPEARS HERE] CUMULATIVE TOTAL RETURN Based on reinvestment of $100 beginning June 30, 1992 Measurement period Dow (Fiscal year Covered) Synetic Inc. NASDAQ US Composite Composite Index - --------------------- ------------ ------------------- --------------- Measurement PT - $ 100 $ 100 $ 100 06/30/92 FYE 06/30/93 $ 71 $ 126 $ 108 FYE 06/30/94 $ 76 $ 127 $ 124 FYE 06/30/95 $ 136 $ 169 $ 168 FYE 06/30/96 $ 206 $ 218 $ 167 FYE 06/30/97 $ 206 $ 265 $ 211 18 REPORT ON EXECUTIVE COMPENSATION The Compensation Committee and the Stock Option Committee are composed of three outside directors, Messrs. Ferguson, Sarkowsky and Weis. The Compensation Committee is responsible for reviewing and approving compensation levels for the Company's executive officers and reviewing and making recommendations to the Board of Directors with respect to other matters relating to the compensation practices of the Company. The Stock Option Committee is responsible for approving the grants of options to purchase shares of Common Stock and general administration of the Company's stock option plans. The Company's compensation policies are intended to provide compensation opportunities that will help attract, motivate and retain highly qualified managers and executives and link their total compensation to increases in shareholder value. The compensation of the Chief Executive Officer and the other executive officers of the Company (other than Mr. Hannah) consists of base salary and stock option grants. Stock options are generally exercisable in annual installments over five years, reflecting the objective of the Board to retain executives and to insure the linkage of executive compensation to increases in shareholder value through stock appreciation. The Compensation Committee intends to continue to use stock options as the key component of executive compensation in order to provide long-term incentives that are aligned to the interests of the stockholders of the Company. No specific formula is used to determine stock option grants to any particular person (including the Chief Executive Officer and the executive officers), but grants are generally based upon factors such as the optionee's contribution toward Company performance and expected contribution toward meeting long-term strategic goals of the Company. Mr. Hannah's compensation consists of base salary, annual incentive compensation and stock option grants. Mr. Hannah's incentive compensation is based primarily upon the operating results of Porex and the achievement of certain financial criteria established and communicated at the beginning of the fiscal year. For tax years beginning on or after January 1, 1994, Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), limits the ability of a publicly held corporation to deduct compensation in excess of $1 million paid to certain executive officers. In light of Section 162(m) of the Code, it is the policy of the Stock Option Committee and the Compensation Committee to modify where practicable the executive incentive plans so as to maximize the tax deductibility of compensation paid to its top executive officers. Accordingly, the proposed Amended Class A Plan, Amended Class B Plan, Amended 1991 Plan and the Individual Option were designed to ensure that compensation attributable to options granted thereunder will be tax deductible by the Company. It is possible, however, that options previously granted under the Company's option plans to certain individuals who may subsequently become subject to Section 162(m) may not be fully deductible by the Company. The Board does not anticipate that the compensation from the Company to any executive officer during fiscal year ending June 30, 1998 will exceed the limits on deductibility for such period. Thomas R. Ferguson Herman Sarkowsky Albert M. Weis 19 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS PURCHASE AND SALE AGREEMENT; DIVESTITURE. On December 14, 1994, pursuant to the Purchase and Sale Agreement dated as of May 24, 1994 between the Company and Merck (the "Purchase and Sale Agreement"), the Company purchased 5,268,463 shares of the Company's Common Stock from Merck for an aggregate purchase price of $37,764,019. At the time of the purchase by the Company, SN Investors purchased 5,061,857 shares of the Company's Common Stock (the "Wygod Shares" and, collectively with the shares purchased by the Company, the "Shares") from Merck for an aggregate purchase price of $36,283,079. The purchase prices for the Shares stated above reflect a final purchase price adjustment, pursuant to the terms of the Purchase and Sale Agreement, in the amount of $2,331,256 that was paid by the Company to Merck on July 31, 1996, $1,142,315 of which was reimbursed to the Company by SN Investors. The purchase by SN Investors was made pursuant to an assignment by the Company to Mr. Wygod of the right to purchase the Wygod Shares pursuant to the Investment Agreement between Mr. Wygod and the Company, dated as of September 13, 1994 (the "Investment Agreement"). Mr. Wygod, as permitted under the Investment Agreement, further assigned to SN Investors his right to purchase the Wygod Shares. The Investment Agreement governs the terms and conditions under which the Wygod Shares will be held by Mr. Wygod and his permitted assignees and transferees. See "--Investment Agreement". Also on December 14, 1994, the Company consummated the sale (the "Divestiture") of the subsidiaries conducting the Company's institutional pharmacies business (the "Institutional Pharmacies Business") to Pharmacy Corporation of America, an indirect, wholly owned subsidiary of Beverly Enterprises, Inc. ("Beverly"), for approximately $107,300,000. In the Purchase and Sale Agreement, the Company agreed, until May 24, 1999, to be bound by the restrictions contained in the Consulting Agreement described below under "--Consulting Agreement", provided that such restrictions shall be of no further force and effect in the event of the death of Mr. Wygod, or if Mr. Wygod ceases to be a director of the Company or any subsidiary of the Company, ceases to have any ownership interest in the Company (provided that if the Company is a public company he may have up to a 1% equity interest in the Company), and is not a principal, agent or employee of or consultant to the Company or any subsidiary of the Company, or is not otherwise rendering any services to the Company or any subsidiary of the Company. Pursuant to the terms of the Purchase and Sale Agreement, options to purchase common stock of Merck and its subsidiaries (other than the Company and its subsidiaries) previously granted to certain employees and consultants were modified so that employment by or consulting services to the Company or its subsidiaries (in the case of employees and consultants continuing with the Company after the closing of the Purchase) or Beverly or its subsidiaries (in the case of employees and consultants continuing with the Institutional Pharmacies Business after the closing of the Divestiture) will be considered employment by or consulting services to Merck and its subsidiaries for purposes of vesting and continued exercisability of such options; provided that no further vesting of such options occurred after June 1, 1996. INVESTMENT AGREEMENT. In the Investment Agreement, the Company assigned the rights and obligations to purchase the Wygod Shares to Mr. Wygod. The Investment Agreement governs the terms and conditions under which the Wygod Shares will be held by Mr. Wygod and his permitted assignees and transferees. Mr. Wygod, as permitted under the Investment Agreement, assigned such rights and obligations to SN Investors. Pursuant to the Investment Agreement, SN Investors was (1) required to be a limited partnership in which Mr. Wygod or an entity controlled by Mr. Wygod is the general partner and one or more of his family trusts and/or partnerships (collectively, the "Wygod Entities") and/or independent third parties are limited partners and (2) required to agree to be bound by all of the restrictions and obligations applicable to Mr. Wygod under the Investment Agreement. The Investment Agreement required the initial investment of the Wygod Entities in SN Investors to be at least $20,000,000 (on a cost basis) (the "Wygod Investment"). 20 The Investment Agreement provides that, until the earliest to occur of (a) December 14, 1998, (b) the death or adjudication of incompetency of Mr. Wygod or (c) a Change of Control (as defined in the Investment Agreement) (the "Restriction Period"), in respect of the Wygod Investment, except to the extent of proceeds from sales of the Wygod Shares pursuant to a tender or exchange offer for shares of Common Stock that is not opposed by the Board, the Wygod Entities will at all times maintain (directly and/or through SN Investors) at least $20,000,000 (on a cost basis) in the Wygod Investment and will not cause or allow the amount of the Wygod Investment (on a cost basis) to be less than $20,000,000 (net of any disposition, transfer, pledge, distribution by SN Investors or any other arrangement involving the transfer of ownership or interests in Wygod Shares (or proceeds therefrom), but not taking into account any reduction in the Wygod Investment by virtue of a decline in the value of Wygod Shares). A "Change of Control" under the Investment Agreement means: (a) the acquisition by any person, entity or group of at least 50% of the voting power of the voting securities of the Company other than the Wygod Shares; (b) individuals who, as of the date of the Investment Agreement, constitute the Board (the "Incumbent Board") ceasing for any reason to constitute at least a majority of the Board (provided that directors whose nomination or election was approved by the Incumbent Board are also generally deemed to be part of the Incumbent Board); (c) a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), excluding, however, such a Business Combination pursuant to which (i) all or substantially all of the individuals and entities who were the beneficial owners of the Company's voting securities immediately prior to such Business Combination beneficially own more than 60% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination, in substantially the same proportions as their ownership immediately prior to such Business Combination of the Company's voting securities, and (ii) at least a majority of the board of directors of the resulting corporation were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; (d) a complete liquidation or dissolution of the Company; or (e) the issuance by the Company following the closing of the Purchase of shares of Common Stock constituting in the aggregate more than 50% of the shares of Common Stock outstanding as of immediately following the closing of the Purchase. As of February 19, 1998, the Company had issued 5,176,255 shares of Common Stock since the closing of the Purchase. Accordingly, the issuance of an aggregate of 1,078,600 additional shares of Common Stock would be a "Change of Control" as defined in clause (e) above. Pursuant to the Investment Agreement, during the Restriction Period: (a) Mr. Wygod and SN Investors are required to vote (or cause to be voted) the Wygod Shares (i) with respect to election of directors, for the nominees who would have been elected based on the vote of all shares of Common Stock, other than the Wygod Shares, in proportion to the votes that such nominees received, and (ii) on all other matters to come before the stockholders of the Company, in the same manner as a majority of the outstanding shares of Common Stock (other than the Wygod Shares) are voted; and (b) except for sales pursuant to a tender or exchange offer for the shares of Common Stock that is not opposed by the Board, neither Mr. Wygod nor SN Investors may transfer interests in the Wygod Shares (except that Mr. Wygod may transfer interests in SN Investors to the extent otherwise permitted by the Investment Agreement). Upon the expiration of the obligations of Mr. Wygod and SN Investors described in this paragraph, Mr. Wygod and SN Investors may be in a position to influence the election of the Board as well as the direction and future operations of the Company. Under the Investment Agreement, following the earlier to occur of (a) December 14, 1998 or (b) the death or adjudication of incompetency of Mr. Wygod: (i) to the extent the Wygod Entities and/or SN Investors retain the power to vote Wygod Shares that have, in the aggregate, in excess of 20% of the voting power of the Company's voting securities outstanding at the time of any vote by stockholders of the Company, Mr. Wygod and SN Investors will vote (or cause to be voted) the portion of such Wygod Shares representing the excess above 20% of such voting power, (A) with respect to the election of directors, for the nominees who would have been elected based on the vote of all shares of Common Stock, other than the Wygod Shares, in proportion to the votes that such nominees received, and (B) on all other matters to come before the stockholders of the Company, in the same 21 manner as a majority of the outstanding shares of Common Stock, other than the Wygod Shares, are voted; and (ii) to the extent that Wygod Entities and/or SN Investors retain beneficial ownership of Wygod Shares that have, in the aggregate, in excess of 20% of the voting power of the outstanding voting securities of the Company, the portion of such Wygod Shares representing the excess above 20% of such voting power at the time of any proposed sale or transfer thereof shall not be sold or transferred except (A) to transferees reasonably acceptable to the Company (provided that, without the Company's consent, no such transfer or series of transfers to a single person, entity or group will involve the transfer of more than 9.9% of the voting power of the Company's outstanding voting securities and no such transfer or series of transfers will be made to a single person, entity or group that will own, following such transfers, more than 50% of the voting power of the Company's outstanding voting securities), (B) to the partners of SN Investors in proportion to their respective interests in SN Investors (provided that, without the Company's consent, no such transfer or series of transfers to a single person, entity or group (other than Mr. Wygod or the Wygod Entities) will involve the transfer of more than 9.9% of the voting power of the Company's outstanding voting securities), (C) in ordinary open market transactions, or (D) pursuant to an underwritten public offering. The Investment Agreement provides that the restrictions described in the foregoing paragraph will not apply (a) in the event there has been, or from and after the occurrence of, a Change of Control (as defined in the Investment Agreement) of the Company, (b) at any time after December 14, 2004 or (c) to any person or entity, other than Mr. Wygod, the Wygod Entities or SN Investors, to whom Wygod Shares are transferred (including by means of distributions from SN Investors) in accordance with the provisions of the foregoing paragraph. The Investment Agreement also provides certain demand registration rights to Mr. Wygod at Mr. Wygod's expense that are assignable to any permitted transferee of the Wygod Shares; provided that in no event is the Company required to file in the aggregate more than two registration statements in connection therewith. Mr. Wygod has not assigned such registration rights to SN Investors. While Mr. Wygod currently intends to assign such registration rights to SN Investors in the event the General Partner determines to sell or otherwise transfer the Wygod Shares under circumstances in which registration would be required, Mr. Wygod is under no obligation to do so. Certain provisions of the Investment Agreement may have the effect of deterring a change of control of the Company that is not supported by the Board or Mr. Wygod. During the Restriction Period, Mr. Wygod and SN Investors are prohibited from transferring the Wygod Shares, except pursuant to a tender or exchange offer that is not opposed by the Board or to specified permitted transferees. In addition, under the Investment Agreement, in the event that a Change of Control (as defined in the Investment Agreement) were to occur during the Restriction Period, Mr. Wygod and SN Investors would no longer be obligated under the Investment Agreement to vote the Wygod Shares with respect to nominees for election as directors based on the vote of shares other than the Wygod Shares and with respect to other matters in the same manner as the majority of the other outstanding shares of Common Stock (other than the Wygod Shares) are voted, with the result that Mr. Wygod and SN Investors would have unrestricted voting power with respect to the Wygod Shares. The effect of these provisions of the Investment Agreement may be to discourage the commencement of a tender or exchange offer opposed by the Board during the Restriction Period and to discourage a proxy solicitation to change a majority of the Board absent the support of Mr. Wygod. CONSULTING AGREEMENT. In the Consulting Agreement, dated as of May 24, 1994 (the "Consulting Agreement"), by and among Mr. Wygod, Merck and Medco, Mr. Wygod has agreed that, until May 24, 1999, absent Merck's prior written approval, he will not (as principal, agent, employee, consultant or otherwise) directly or indirectly engage in activities with, nor render services to, any business engaged or about to become engaged in a Competitive Business (as defined in the Consulting Agreement). A "Competitive Business" is defined in the Consulting Agreement as: (a) the pharmaceutical business of Merck and its affiliates (unless such business is subsequently disposed of and Mr. Wygod did not have material involvement in such business during the two-year period preceding May 24, 1994), (b) the business, as of either November 18, 1993 or May 24, 1994, of Medco 22 and its subsidiaries (unless such business is subsequently disposed of and Mr. Wygod did not have material involvement in such business during the two-year period preceding May 24, 1994), other than the business of Porex and the other plastic businesses of the Company as conducted as of May 24, 1994, or (c) any other then-current business of Merck and its affiliates as to which Mr. Wygod became materially involved following November 18, 1993; provided, however, that the Consulting Agreement permits Mr. Wygod to have a 1% or less equity interest in a Competitive Business that is a public corporation. In addition, the Consulting Agreement provides that, until May 24, 1999, Mr. Wygod will not, directly or indirectly: (i) solicit or contact any customer or prospective customer of Medco and/or any of its affiliates as to matters that relate to a Competitive Business in which Medco or its affiliates is then engaged or which is in any way inconsistent or interferes therewith; (ii) induce, or attempt to induce, any employees or agents or consultants of Medco and/or its affiliates to do anything from which Mr. Wygod is restricted by reason of the Consulting Agreement; or (iii) offer or aid others to offer employment to any employees of Medco or its affiliates. OTHER. The Company was reimbursed approximately $121,600 and $49,500 by a corporation controlled by Mr. Wygod for the partial use of two of the Company's office facilities and for services rendered by one Company employee during the fiscal years ended June 30, 1997 and 1996, respectively. 23 PROPOSAL TWO: AMENDMENT TO THE CHARTER ELIMINATING THE CLASSIFICATION OF THE BOARD OF DIRECTORS The proxy will be voted in accordance with the directions thereon with respect to Proposal Two, or, if no directions are indicated, FOR adoption of Proposal Two. The Board has determined that the Charter should be amended to eliminate the classification of the Board and to provide for the annual election of all directors, and has unanimously voted to recommend such amendment to the stockholders. If the proposed amendment is approved, the classified Board will be eliminated, the current term of office of each director will end at the 1998 Annual Meeting, which will be held after the end of the Company's fiscal year ending June 30, 1998, and all directors will thereafter be elected for one-year terms at each annual meeting of stockholders. RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT ELIMINATING THE CLASSIFICATION OF THE BOARD OF DIRECTORS The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of the amendment to the Charter to eliminate the classification of the Board and provide for the annual election of all directors. The Board recommends that the stockholders vote FOR the proposal to amend the Charter to provide for the annual election of directors. ELIMINATION OF CLASSIFIED BOARD Pursuant to the Charter, the Board is divided into three classes with staggered three-year terms and not more than one class of directors is elected at any annual meeting of stockholders. Under the By-laws, the nominees receiving the greatest number of votes cast shall be elected directors of the Company. The proposed amendment to the Charter would eliminate the three classes and staggered three-year terms, as described above, and provide for the annual election of all directors. Proponents of classified boards of directors believe that a classified board helps the board of directors maintain a greater continuity of experience because the majority of directors at any given time will have experience with the business affairs and operations of the company. This continuity may assist the company in long-term strategic planning. Additionally, proponents argue that a classified board reduces the possibility of a sudden change in majority control of the board of directors; in the event of a hostile takeover attempt, a classified board may encourage a person seeking control of the company to initiate arm's-length discussions with management and the board, who are in a position to negotiate a more favorable transaction for stockholders. The Board believes that a classified board of directors, however, limits the ability of stockholders to elect directors and exercise influence over the Company. The election of directors is the primary avenue for stockholders to influence corporate governance policies and to hold management accountable for its implementation of those policies. The Board is of the opinion that many potential investors are opposed to the concept of a classified board and, in keeping with its goal of ensuring that the Company's corporate governance policies maximize management accountability to stockholders, has determined that eliminating the classified Board, and instead having all of the Company's directors elected annually, would best serve the interests of the Company and its stockholders. If Proposal Two is adopted by the stockholders, Article Six of the Charter will be deleted and replaced with the following: 24 ARTICLE SIX The number of directors which shall constitute the whole Board of Directors of the Corporation shall be determined in the By-laws as provided therein. The directors of the Corporation shall be elected by the stockholders entitled to vote thereon at each annual meeting of stockholders and shall hold office until the next annual meeting of stockholders and until their respective successors shall have been elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office. The term of office of each director in office at the time this amendment to Article Six of the Certificate of Incorporation of the Corporation becomes effective shall expire at the time of the opening of the polls for the election of directors at the next annual meeting of stockholders of the Corporation held after the time this amendment to Article Six becomes effective. Section 141(d) of the Delaware General Corporation Law (the "DGCL") requires that a corporation desiring to classify its board of directors must expressly provide for such classification in either its certificate of incorporation or by-laws. The deletion of the provisions of Article Six relating to the classification of the Board is intended to remove any express provision for the classification of the Board, thereby removing the classification of the Board. If Proposal Two is approved, the Company intends to file an amendment to the Charter immediately after adjournment of the 1997 Annual Meeting with the Secretary of State of the State of Delaware, upon which filing it will be effective. In addition, the Board of Directors has approved certain corresponding amendments to the By-laws that will be effective immediately upon the filing of the amendment to the Charter. In order to facilitate the power of stockholders to elect directors, the Board believes that the classification of the Board should be eliminated. The Board believes that all directors should be equally accountable at all times for the Company's performance. 25 PROPOSAL THREE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION OF THE BOARD The proxy will be voted in accordance with the directions thereon with respect to Proposal Three, or, if no directions are indicated, FOR adoption of Proposal Three. The Board has determined that, if Proposal Two is approved, the Charter should be amended to eliminate the requirement that provisions of the Charter relating to the classification of the Board may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The Board has unanimously voted to recommend the amendment described in this Proposal Two to the stockholders. The effectiveness of Proposal Three is expressly conditioned upon the adoption of Proposal Two by stockholders, and will not be effective absent such adoption. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION OF THE BOARD The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of Proposal Three. The Board recommends that the stockholders vote FOR Proposal Three. ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION OF THE BOARD The Charter provides that any amendment to the provisions thereof relating to the classification of the Board must be approved by the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. This supermajority vote requirement was included in the Charter to protect the purposes and effect of having a classified board of directors. If stockholders approve Proposal Two, the Board will no longer be classified, all directors will be elected annually, and the provisions that were protected by the supermajority voting requirement relating to the classification of the Board and the election of one-third of the Board at each annual meeting will be deleted from the Charter. Accordingly, the supermajority vote requirement protecting such provisions would no longer be necessary. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". Consistent with the Board's view that it is in the best interest of the stockholders that holders of a majority of the voting power be able to have more control over the affairs of the Company, the Board unanimously recommends that stockholders vote to eliminate the supermajority vote requirement for Charter amendments relating to the classification of the Board. The text of the amendment described in this Proposal Three is set forth below in "Proposal Eight: Amendment to the Charter Eliminating the Supermajority Vote Requirement for Charter Amendments Relating to the Removal of Directors -- Text of the Charter Amendment to Eliminate Certain Supermajority Voting Requirements". 26 PROPOSAL FOUR: AMENDMENT TO THE CHARTER ELIMINATING CUMULATIVE VOTING The proxy will be voted in accordance with the directions thereon with respect to Proposal Four, or, if no directions are indicated, FOR adoption of Proposal Four. The Board has determined that the Charter should be amended to eliminate cumulative voting for the election of directors. If the proposed amendment is approved, cumulative voting will be eliminated and each share would be entitled to a single vote "for" or to "withhold" such vote in such respect of the election of each nominee for director. RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDMENT TO THE CHARTER ELIMINATING CUMULATIVE VOTING The affirmative vote of the holders of at least two-thirds of the outstanding shares of the Common Stock entitled to vote at the Meeting is required for approval of the amendment to the Charter to eliminate cumulative voting. The Board recommends that the stockholders vote FOR the proposal to amend the Charter to eliminate cumulative voting. ELIMINATION OF CUMULATIVE VOTING The Charter provides that each stockholder may cumulate his or her votes in the election of directors. Cumulative voting entitles a stockholder to cast a number of votes equal to the number of directors to be elected multiplied by the number of shares of Common Stock held by such stockholder, and to cast all such votes for one nominee or to distribute such votes among up to as many candidates as there are positions to be filled. Nominees receiving the highest number of votes on the foregoing basis up to the total number of directors to be elected are elected as directors. Cumulative voting enables a minority stockholder or group of stockholders to elect a representative to the Board without respect to the votes of a majority of the stockholders. For example, if eleven directors are to be elected at an annual meeting, stockholders holding approximately 8.3% of the voting shares could nominate and elect one director by cumulating and casting their eleven votes per share only for their single candidate. The other shareholders holding approximately 91.7% could not prevent the election of that candidate under such conditions. In the absence of cumulative voting, each share is entitled to a single vote "for" or to "withhold" such vote in respect of the election of each nominee for director, and, accordingly, a stockholder or group of stockholders must hold a majority of the outstanding shares of Common Stock to be able to cause the election of one or more directors. Furthermore, Section 141(k)(2) of the DGCL provides that, if cumulative voting is in effect, a director may not be removed by the stockholders if votes cast against such removal (or, if done by written consent, the votes eligible to be cast by non-consenting stockholders) would be sufficient to elect such director under cumulative voting under the same voting conditions. For example, if the Board consists of eleven directors, the affirmative vote of the holders of 91.7% of the outstanding shares entitled to vote would be required to remove a director. Under the Charter and absent cumulative voting, a director may be removed by the affirmative vote of the holders of at least two-thirds of the outstanding shares of stock entitled to vote; provided, however, if Proposal Six is approved, the Charter will be amended to provide that a director could be removed by the affirmative vote of the holders of a majority of the outstanding shares of stock entitled to vote. The elimination of cumulative voting will make it more difficult for a minority stockholder or a group of stockholders to obtain representation on the Board without the concurrence of holders of a majority of the outstanding shares of Common Stock, and may restrict the ability of holders of a significant number of shares, but 27 less than a majority, from influencing the management or policies of the Company. While this proposal is not intended as a takeover-resistive device, the elimination of cumulative voting, under certain circumstances, may have certain takeover-resistive effects by discouraging unsolicited acquisitions of minority interests in the Company. The amendment to eliminate cumulative voting is not being proposed in response to any particular effort by a minority stockholder or group of stockholders to obtain representation on the Board of Directors, nor is the Board aware of any such effort. As of February 19, 1998, the Wygod Shares constituted approximately 30% of the outstanding shares; these shares would be the only minority interest in the Company sufficient to elect a director to a classified Board by cumulating votes. Pursuant to the provisions of the Investment Agreement, Mr. Wygod and SN Investors have agreed to vote the Wygod Shares in favor of the nominees who would have been elected based on the vote of all shares of Common Stock other than themselves, in proportion to the votes that such nominees received, and, accordingly, are contractually prevented from otherwise cumulating their votes. This agreement with respect to voting terminates on the earlier of December 14, 1998 or the occurrence of a Change of Control (as defined below in "Certain Relationships and Related Transactions -- Investment Agreement"). Upon termination of these voting restrictions, and in the event that cumulative voting is eliminated, Mr. Wygod and SN Investors would no longer have the right to elect directors to the Board of Directors unilaterally, but require the concurrence of an additional 20% of the outstanding shares of Common Stock to ensure the election of any particular director. On the other hand, Mr. Wygod and SN Investors will hold a significant percentage of the Company's stock and, accordingly, may have significant influence over any votes for the election of directors. The Board believes that it is in the best interests of the Company and its stockholders to eliminate cumulative voting so that each director represents the interests of all stockholders. Cumulative voting permits the presence on the Board of one or more directors representing the interests of a minority of stockholders, even if such stockholders' interests conflict or are inconsistent with the interests of the majority of stockholders. The elimination of cumulative voting will help ensure that each director represents the best interests of all stockholders, rather than the interests of any special constituency. Moreover, the elimination of cumulative voting prevents a minority shareholder or group of shareholders from disrupting the management of the Company and preventing it from operating in the most effective manner. In addition, the elimination of cumulative voting will reduce the percentage of shares required to remove a director to 66% (or, if Proposal Six is adopted by stockholders, to a majority), thereby increasing the accountability of each director to stockholders. If Proposal Four is adopted by the stockholders, paragraph (c) of Article Four of the Charter will be amended to read as follows: (c) At each election for directors, each holder of Common Stock entitled to vote at such election shall be entitled to one vote in person or by proxy for each share of stock held by such holder. If Proposal Four is approved, the Company intends to file an amendment to the Charter immediately after adjournment of the 1997 Annual Meeting with the Secretary of State of the State of Delaware, upon which filing it will be effective. If Proposal Four is approved, the election of directors at the 1998 Annual Meeting will occur after the effectiveness of such amendment and, accordingly, there will be no cumulative voting in the election of directors at the 1998 Annual Meeting. By providing for majority-rule voting in the election of directors, the Board believes that approval of the proposed amendment will ensure that the Board represents the majority of the stockholders rather than any special constituency. 28 PROPOSAL FIVE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO CUMULATIVE VOTING The proxy will be voted in accordance with the directions thereon with respect to Proposal Five, or, if no directions are indicated, FOR adoption of Proposal Five. The Board has determined that, if Proposal Four is approved, the Charter should also be amended to eliminate the related requirement that provisions of the Charter relating to cumulative voting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The Board has unanimously voted to recommend the amendment described in this Proposal Five to the stockholders. The effectiveness of Proposal Five is expressly conditioned upon the adoption of Proposal Four by stockholders, and will not be effective absent such adoption. See "Proposal Four -- Amendment to the Charter Eliminating Cumulative Voting". RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO CUMULATIVE VOTING The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of Proposal Five. The Board recommends that the stockholders vote FOR Proposal Five. ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO CUMULATIVE VOTING The Charter provides that any amendment to the provisions thereof relating to cumulative voting must be approved by the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. This supermajority vote requirement was included in the Charter to protect the purposes and effect of having cumulative voting. If stockholders approve Proposal Four, stockholders will no longer be able to cumulate their votes in the election of directors, each share would be entitled to a single vote "for" or to "withhold" such vote in respect of the election of each nominee for director, and the provisions that were protected by the supermajority voting requirement relating to cumulative voting will be deleted from the Charter. Accordingly, the supermajority vote requirement protecting such provisions would no longer be necessary. See "Proposal Four -- Amendment to the Charter Eliminating Cumulative Voting". Consistent with the Board's view that it is in the best interest of the stockholders that holders of a majority of the voting power be able to have more control over the affairs of the Company, the Board unanimously recommends that stockholders vote to eliminate the supermajority vote requirement for Charter amendments relating to cumulative voting. The text of the amendment described in this Proposal Five is set forth below in "Proposal Eight: Amendment to the Charter Eliminating the Supermajority Vote Requirement for Charter Amendments Relating to the Removal of Directors -- Text of the Charter Amendment to Eliminate Certain Supermajority Voting Requirements". 29 PROPOSAL SIX: AMENDMENT TO THE CHARTER TO PROVIDE FOR REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS The proxy will be voted in accordance with the directions thereon with respect to Proposal Six, or, if no directions are indicated, FOR the adoption of Proposal Six. The Board has determined that, if Proposal Two is approved, the Charter should be amended to provide for removal of directors, either with or without cause, at any time, by the affirmative vote of the majority of outstanding shares entitled to vote in the election of directors. The Board has unanimously voted to recommend the amendment described in this Proposal Six to the stockholders. The effectiveness of Proposal Six is expressly conditioned upon the adoption of Proposal Two by stockholders, and will not be effective absent such adoption. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT TO PROVIDE FOR REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS The affirmative vote of the holders of at least two-thirds of outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of Proposal Six. The Board recommends that the stockholders vote FOR Proposal Six. REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS The Charter provides that directors may be removed, either for or without cause, at any time, by the affirmative vote of the holders of record of at least two-thirds of the outstanding shares of stock entitled to vote. This provision was included in the Charter to protect the purposes and effect of having a classified board of directors. If stockholders approve Proposal Two, the Board will no longer be classified and all directors will be elected annually. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". The Board believes that enabling a majority of stockholders to remove any director increases the ability of stockholders to exercise influence over the Company, ensuring that the Board is directly accountable to the majority of stockholders. If Proposal Six is approved by the stockholders, Article Ten of the Charter will be deleted in its entirety and replaced with the following: ARTICLE TEN The election of directors need not be by written ballot unless required by the By-laws of the Corporation. Any directors may be removed, either for or without cause, at any time, by the affirmative vote of holders of record of a majority of the outstanding shares of stock entitled to vote, and the vacancy in the Board of Directors caused by any such removal shall be filled as provided herein; provided, that where the holders of any class or series of Preferred Stock are entitled to elect one or more directors, the provisions of the Certificate of Designation of such class or series of Preferred Stock shall apply, in respect of removal, with or without cause, of a director or directors so elected. 30 In the event that Proposal Six is approved (assuming Proposal Two is also approved), the holders of a majority of the outstanding shares of stock entitled to vote will be able to remove a director. The Board believes that empowering a majority of stockholders to remove directors increases the accountability of the Board to stockholders, and, accordingly recommends amending the Charter to provide for the removal of directors by a majority of stockholders. 31 PROPOSAL SEVEN: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE REMOVAL OF DIRECTORS The proxy will be voted in accordance with the directions thereon with respect to Proposal Seven, or, if no directions are indicated, FOR adoption of Proposal Seven. The Board has determined that, if Proposal Two and Proposal Six are approved, the Charter should be amended to eliminate the requirement that provisions of the Charter relating to the power to remove directors or to fill vacancies on the Board may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The Board has unanimously voted to recommend the amendment described in this Proposal Seven to the stockholders. The effectiveness of Proposal Seven is expressly conditioned upon the adoption of Proposal Two and Proposal Six by stockholders, and will not be effective absent such adoption. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors" and "Proposal Six -- Amendment to the Charter to Provide for Removal of Directors by a Majority of Stockholders". RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE REMOVAL OF DIRECTORS The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of Proposal Seven. The Board recommends that the stockholders vote FOR Proposal Seven. ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE REMOVAL OF DIRECTORS The Charter provides that any amendment to the provisions thereof relating to the removal of directors must be approved by the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. This supermajority vote requirement was included in the Charter to protect the purposes and effect of having a classified board of directors. If stockholders approve Proposal Two, the Board will no longer be classified, all directors will be elected annually, and the provisions that were protected by the supermajority voting requirement relating to the classification of the Board and the election of one-third of the Board at each annual meeting will be deleted from the Charter. Accordingly, the supermajority vote requirement protecting provisions designed to protect the classified board of directors would no longer be necessary. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". Consistent with the Board's view that it is in the best interest of the stockholders that holders of a majority of the voting power be able to have more control over the affairs of the Company, the Board unanimously recommends that stockholders vote to eliminate the supermajority vote requirement for Charter amendments relating to the removal of directors. The text of the amendment described in this Proposal Seven is set forth below in "Proposal Eight: Amendment to the Charter Eliminating the Supermajority Vote Requirement for Charter Amendments Relating to the Removal of Directors -- Text of the Charter Amendment to Eliminate Certain Supermajority Voting Requirements". 32 PROPOSAL EIGHT: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR BY-LAW AMENDMENTS SETTING THE MAXIMUM NUMBER OF DIRECTORS The proxy will be voted in accordance with the directions thereon with respect to Proposal Eight, or, if no directions are indicated, FOR adoption of Proposal Eight. The Board has determined that the Charter should be amended to eliminate the requirement that provisions of the By-laws setting the maximum number of directors may only be amended with the affirmative vote of the holders of two- thirds of the shares entitled to vote in the election of directors, and has unanimously voted to recommend such amendment to the stockholders. The effectiveness of Proposal Eight is expressly conditioned upon the adoption of Proposal Two by stockholders, and will not be effective absent such adoption. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION OF THE BOARD The affirmative vote of the holders of at least two-thirds of the outstanding shares of Common Stock entitled to vote at the Meeting is required for approval of Proposal Eight. The Board recommends that the stockholders vote FOR Proposal Eight. ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR BY-LAW AMENDMENTS SETTING THE MAXIMUM NUMBER OF DIRECTORS The Charter provides that any amendment to the provisions of the By-laws that set the maximum number of directors on the Board at 12 must be approved by the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. This supermajority vote requirement was included in the Charter to protect the purposes and effect of having a classified board of directors. If stockholders approve Proposal Two, the Board will no longer be classified, all directors will be elected annually, and the provisions that were protected by the supermajority voting requirement relating to the classification of the Board and the election of one-third of the Board at each annual meeting will be deleted from the Charter. Accordingly, the supermajority vote requirement protecting provisions designed to protect the classified board of directors would no longer be necessary. See "Proposal Two -- Amendment to the Charter Eliminating the Classification of the Board of Directors". If Proposal Eight is approved (assuming Proposal Two is also approved), the holders of a majority of the outstanding shares of Common Stock will be able to amend provisions of the By-laws that set the maximum number of directors at 12. Consistent with the Board's view that it is in the best interest of the stockholders that holders of a majority of the voting power be able to have more control over the affairs of the Company, the Board unanimously recommends that stockholders vote to eliminate the supermajority vote requirement for By-law amendments setting the maximum number of directors. 33 TEXT OF THE CHARTER AMENDMENT TO ELIMINATE CERTAIN SUPERMAJORITY VOTING REQUIREMENTS If Proposals Three, Five, Seven and Eight are approved by the stockholders, Article Twelve of the Charter will be deleted in its entirety and replaced with the following: ARTICLE TWELVE The Corporation reserves the right to amend, alter, change or repeal any provision in this Certificate of Incorporation or in the By-laws, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. In the event that any of Proposals Three, Five, Seven or Eight are not approved by the stockholders, additional language will be added to the above text of Article Twelve to provide that the applicable provision referred to in such proposal may not be amended without the affirmative vote of the holders of two-thirds of the outstanding shares entitled to vote in the election of directors. 34 PROPOSAL NINE: AMENDMENT TO THE CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES The proposed amendment to the Charter would increase the number of shares of authorized shares of the Company's Common Stock from 50 million to 100 million. The proxy will be voted in accordance with the directions thereon with respect to Proposal Nine, or if no directions are indicated, FOR adoption of Proposal Nine. RECOMMENDATION OF THE BOARD AND VOTE The approval of the amendment to the Charter increasing the number of authorized shares of Common Stock requires the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock entitled to vote at the Meeting. The Board unanimously recommends a vote FOR approval of the proposed amendment to the Charter. INCREASE IN AUTHORIZED SHARES The Board believes the increase in the number of authorized shares of Common Stock will provide flexibility in connection with future stock dividends or splits, financings, investment opportunities, acquisitions of other companies and for other corporate purposes that the Board deems advisable. The Company has announced its intention to issue shares from time to time for corporate acquisitions, but there can be no assurance that any such issuance or issuances for other purposes will be made or, if made, as to the timing, type, or size of any issuance. The authorized but unissued Common Stock of the Company, including the increased number of shares of Common Stock if this proposed amendment is approved by the stockholders and made effective, may be issued from time to time as determined by the Board without further stockholder action (subject to any applicable stock exchange rules) unless issued in transactions, such as certain mergers, which require stockholder approval. The Company does not intend to seek stockholder approval for any such corporate acquisitions or share issuances unless required by applicable law, stock exchange rule or other regulation. The issuance of additional shares of Common Stock may cause a dilution in the equity and earnings of the present stockholders. No preemptive rights exist with respect to any outstanding shares of Common Stock. Of the 50 million shares currently authorized, as of February 19, 1998, 22,954,427 were issued, of which 5,268,463 are held in treasury and 17,685,964 are outstanding. As of the same date, there were 27,045,573 authorized but unissued shares, 8,951,388 shares of which were reserved for issuance upon the exercise of options under the Company's stock option plans, 2,750,000 shares of which were reserved for issuance upon the conversion of Convertible Debentures and 250,000 shares of which were reserved for issuance upon the exercise of the Company's outstanding warrants. If the amendment is adopted by the stockholders, the first sentence of Article Four of the Charter will be amended to read as follows: The Corporation shall have authority, to be exercised by the Board of Directors, to issue a total of 110,000,000 shares consisting of 100,000,000 shares of common voting stock of par value of $0.01 per share (the "Common Stock") and 10,000,000 shares of preferred stock of the par value of $0.01 per share (the "Preferred Stock"). 35 PROPOSAL TEN: AMENDED AND RESTATED 1989 CLASS A STOCK OPTION PLAN The proxy will be voted in accordance with the directions thereon with respect to Proposal Ten, or if no directions are indicated, FOR adoption of Proposal Ten. The Board has unanimously adopted, subject to stockholder approval, the amendment and restatement of the Company's 1989 Class A Stock Option Plan (the "Amended Class A Plan"). Stockholder approval of the Amended Class A Plan is recommended by the Board to increase the number of shares of Common Stock that are issuable thereunder by 1,000,000, to extend the term of the plan through the tenth anniversary of the date on which stockholders approve the plan and to ensure the tax deductible status of the compensation income generated upon the exercise of options under the Amended Class A Plan by the Chief Executive Officer and any other participating key officers who are among the other four most highly compensated executive officers. The Amended Class A Plan contains certain other amendments that reflect recent changes in Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other amendments that are described below. Since adoption of the Amended Class A Plan may benefit the directors and executive officers of the Company, they may be deemed to have an interest in its approval. As of February 19, 1998, the market value of the Common Stock (based upon the last sale price as reported on the Nasdaq National Market ("NASDAQ")) was $46.5625 per share. RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDED CLASS A PLAN The affirmative vote of the holders of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote is required for approval of the Amended Class A Plan. The Board recommends that the stockholders vote FOR the adoption of the proposed Amended Class A Plan so that, among other things, the Company may continue to use options as a method of compensating eligible individuals and the Company may fully deduct compensation realized from the exercise of the options granted thereunder. DESCRIPTION OF THE AMENDED CLASS A PLAN The following description of the Amended Class A Plan is qualified by the full text of the Plan, which is set forth as Exhibit A to this proxy statement. Subject to adjustment in accordance with its terms, the Amended Class A Plan provides for 2,200,000 shares to be subject to purchase pursuant to options granted thereunder, which represents an increase of 1,000,000 over the Plan prior to its amendment and restatement. As of February 19, 1998, 1,309,000 options have been granted under the Amended Class A Plan. In order to comply with Section 162(m) of the Code, the Amended Class A Plan limits the number of options that may be granted thereunder to an eligible employee in any one-year period to no more than 250,000 (subject to adjustment in accordance with the Amended Class A Plan). The Amended Class A Plan is administered by the Board or a stock option committee of the Board comprised of at least two members of the Board, and having the authority, within limitations as set forth in the Amended Class A Plan, to determine the persons to whom options may be granted, the number of shares of Common Stock to be covered by each option, the time or times at which the options may be granted or exercised and the terms and provisions of the options to be granted. The Amended Class A Plan is currently administered by the Stock Option Committee, all of the members of which are "non-employee directors" and "outside directors" within the meaning of Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, respectively. 36 Directors, other than Thomas R. Ferguson, Herman Sarkowsky and Albert A. Weis, the present members of the Stock Option Committee, are eligible to receive options under the Amended Class A Plan (eight persons). Although eligible, the Stock Option Committee has no present intention to grant options under the Amended Class A Plan to directors who are not also employees of the Company. Nonemployee directors receive options under the Director Plan. Only nonqualified stock options may be granted under the Amended Class A Plan. An option under the Amended Class A Plan may be exercised at the times specified by the Stock Option Committee at the time of grant and specified in the Option Agreement. Options granted under the Amended Class A Plan generally vest in installments of 20% over a five-year period, subject to continued employment (or consulting arrangement) with the Company and its subsidiaries. No options may be granted under the Amended Class A Plan after the tenth anniversary of the date on which stockholders approve the plan, and all options expire within ten years from the date of grant. Options granted under the Amended Class A Plan are not assignable except by will or the laws of descent and distribution or, if the Stock Option Committee so permits, and subject to such terms and conditions as the Stock Option Committee may specify, options may be transferred to family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. Nonqualified stock options granted under the Amended Class A Plan must have an exercise price of at least 85% (100% in the case of an optionee designated by the Stock Option Committee whose compensation may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code (a "Section 162(m) Optionee")) of the fair market value of the Common Stock on the date of grant. An optionee may pay the exercise price in cash, by certified check or bank draft or in shares of Common Stock that the optionee has owned for at least six months, or, if the Stock Option Committee so determines, pursuant to a cashless exercise procedure through a broker or by the Company withholding shares of Common Stock subject to the option which have a fair market value equal to the exercise price. The Amended Class A Plan has standard anti-dilution provisions. Under the Amended Class A Plan, an option becomes exercisable in full, whether or not it is then exercisable, upon a Change in Control (as defined below). In addition, the Stock Option Committee may determine at the time of grant or thereafter that an option will become exercisable in full or in part upon the occurrence of such circumstances or events as the Stock Option Committee determines special merit consideration. A Change in Control is generally defined as the occurrence of (i) any person (excluding Martin J. Wygod or his affiliates, the Company and Company employee benefit plans) becoming the beneficial owner of 50% or more of the combined voting power of the Company's securities, (ii) during a 24-month period the individuals who, at the beginning of such period, constituted the Company's Board (the "Incumbent Directors") ceasing to be a majority of the Board unless such new directors were elected or recommended by the Incumbent Directors, (iii) the approval of a merger or consolidation of the Company or a reclassification of its voting stock without the consent of a majority of the directors, (iv) stockholder approval of a sale of all or substantially all of the Company's assets and (v) stockholder approval of a plan of liquidation, dissolution or winding up. Under the Amended Class A Plan, if the Company is merged or consolidated with another corporation or in the event of a reorganization, separation or liquidation of the Company, the options will be replaced by options to purchase stock in the successor corporation. If an optionee terminates his service as a member of the Board or as a consultant (if retained as a consultant), he will have 30 days following his termination (or, if earlier, until expiration of the option period) to exercise his option to the extent it was exercisable as of his termination; provided, however, that if the optionee retires with the consent of the Company (defined in the Amended Class A Plan as the optionee's termination after age 65) or he dies, the optionee (or the heirs of a deceased optionee) will have 90 days in the case of the optionee's retirement, or one year in the case of his death, to exercise the option, to the extent it was exercisable as of the date 37 of the optionee's retirement or death. If an optionee is terminated because of a violation of his duties, as determined by the Board or the Stock Option Committee, his option will terminate immediately. If at any time an optionee is indebted to the Company or any subsidiary, the Company may in the discretion of the Stock Option Committee withhold from the optionee (i) shares issuable upon exercise of an option, the value of which is equal to the amount of such indebtedness, or (ii) following the sale by an optionee of shares of Common Stock received pursuant to the exercise of an option, amounts due to an optionee in connection with the sale up to the amount of such indebtedness, or the Company may take any other substantially similar action to collect such debt. The Amended Class A Plan may be terminated and may be modified or amended by the Board at any time; provided, however, that (i) no modification or amendment will be effective without stockholder approval if such approval is required by law or under the rules of NASDAQ or the stock exchange on which the Company's Common Stock is listed, (ii) with respect to any person who was granted an option prior to the date on which stockholder approval of the Amended Class A Plan is obtained (the "Effective Date"), no such termination, modification or amendment may alter or affect the terms of any of the then outstanding options without the consent of the affected optionee and (iii) with respect to any person who is granted an option on or after the Effective Date, no such termination, modification or amendment of the Amended Class A Plan may adversely alter or affect the terms of any of the then outstanding options previously granted, without the consent of the affected optionee. Awards under the Amended Class A Plan are determined by the Stock Option Committee in its discretion. For this reason, it is not possible to determine the benefits and amounts that will be received by any individual participant or group of participants in the future. During the period from July 1, 1996 to June 30, 1997, the grants of options shown on the table below were made subject to stockholder approval of the Amended Class A Plan. During the period from July 1, 1997 through February 19, 1998, options to purchase an aggregate of 269,000 shares have been granted under the Amended Class A Plan, subject to stockholder approval of the Amended Class A Plan. NEW PLAN BENEFITS SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS A STOCK OPTION PLAN ----------------------------------------------------------------- NAME AND POSITION NUMBER OF OPTIONS ----------------- ----------------- James V. Manning 0 President and Chief Executive Officer Ray E. Hannah 40,000 Vice President - Porex Technologies Group Charles A. Mele 100,000 Vice President - General Counsel Anthony Vuolo 0 Vice President - Chief Financial Officer Victor L. Marrero 0 Former Vice President and Chief Financial Officer Executive Group 140,000 Non-Executive Director Group 0 Non-Executive Officer Employee Group 0 38 CERTAIN TAX MATTERS Options granted under the Amended Class A Plan are nonqualified options. An optionee will not recognize taxable income, and the Company will not be entitled to a deduction, upon the grant of a nonqualified stock option. Upon exercise, an optionee will recognize ordinary income in an amount equal to the amount by which the fair market value of each share on the date of exercise exceeds the option price, and may be required to make a withholding tax payment to the Company at the time of exercise in an amount equal to the minimum income tax on such income. Any delay by the optionee in making such tax payment may result in the imputation of additional taxable income to the optionee. The amount so recognized as income will be deductible by the Company, subject to Section 162(m) of the Code. Upon any subsequent sale of shares by an optionee, the optionee's basis in the shares purchased for determining gain or loss will be their fair market value on the date of exercise, if such shares were acquired for cash. If the exercise of the nonqualified stock option is made by delivery of shares of Common Stock in payment of the option price, the shares delivered are deemed to be exchanged in a tax-free transaction for the equivalent number of new shares of Common Stock. Such equivalent number of new shares has the same basis and holding period as the shares exchanged. The number of shares received in excess of the number of shares delivered is included in the optionee's income at the fair market value thereof at the time of exercise. If the shares are capital assets in the hands of an optionee, any gain or loss recognized upon the sale or other disposition of these shares will be capital gain or loss, either long-term or short-term depending upon the holding period of the shares (which begins on the date the optionee recognizes income with respect to such shares, except for the shares deemed to be received in a tax-free transaction as described above). The foregoing is not to be considered as tax advice to any person who may be an optionee, and any such persons are advised to consult their own tax counsel. 39 PROPOSAL ELEVEN: AMENDED AND RESTATED 1989 CLASS B STOCK OPTION PLAN The proxy will be voted in accordance with the directions thereon with respect to Proposal Eleven, or if no directions are indicated, FOR adoption of Proposal Eleven. The Board has unanimously adopted, subject to stockholder approval, the amendment and restatement of the Company's 1989 Class B Stock Option Plan (the "Amended Class B Plan"). Stockholder approval of the Amended Class B Plan is recommended by the Board to increase the number of shares of Common Stock that are issuable thereunder by 2,000,000, to extend the term of the plan through the tenth anniversary of the date on which stockholders approve the plan and to ensure the tax deductible status of the compensation income generated upon the exercise of options under the Amended Class B Plan by the Chief Executive Officer and any other participating key officers who are among the other four most highly compensated executive officers. The Amended Class B Plan contains certain other amendments that reflect recent changes in Section 16 of the Securities Exchange Act of 1934, as amended, and other amendments that are described below. Since adoption of the Amended Class B Plan may benefit the directors and executive officers of the Company, they may be deemed to have an interest in its approval. RECOMMENDATION OF THE BOARD CONCERNING THE AMENDED AND RESTATED CLASS B STOCK OPTION PLAN The affirmative vote of the holders of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote is required for approval of the Amended Class B Plan. The Board recommends that the stockholders vote FOR the approval of the Amended Class B Plan so that, among other things, the Company may continue to use options as a method of compensating eligible individuals and the Company may fully deduct compensation realized from the exercise of nonqualified options granted thereunder. DESCRIPTION OF THE AMENDED CLASS B PLAN The following description of the Amended Class B Plan is qualified by the full text of the Plan, which is set forth as Exhibit B to this proxy statement. Subject to adjustment in accordance with its terms, the Amended Class B Plan provides for 3,600,000 shares to be subject to purchase pursuant to options granted thereunder, which represents an increase of 2,000,000 over the Plan prior to its amendment and restatement. As of February 19, 1998, 2,208,400 options have been granted under the Amended Class B Plan. In order to comply with Section 162(m) of the Code, the Amended Class B Plan limits the number of options that may be granted thereunder to an eligible employee in any one-year period to no more than 250,000 (subject to adjustment in accordance with the Amended Class B Plan). The Amended Class B Plan is currently administered by the Stock Option Committee and contains the identical provisions regarding administration as described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan". Eligibility for the grant of options under the Amended Class B Plan is limited to employees, officers and directors (who are also employees) of the Company and its subsidiaries and certain key consultants and agents of the Company and its subsidiaries (approximately 725 persons, although historically the Company has granted options under the plan only to directors, executive officers and officers (approximately 50 persons)). Options granted under the Amended Class B Plan may be either incentive stock options within the meaning of Section 422 of the Code, or nonqualified stock options, as determined by the Stock Option Committee. 40 An option under the Amended Class B Plan may be exercised at the times specified by the Stock Option Committee at the time of grant and specified in the Option Agreement. Options granted under the Amended Class B Plan generally vest in installments of 20% over a five-year period, subject to continued employment (or consulting arrangement) with the Company and its subsidiaries. No options may be granted under the Amended Class B Plan after the tenth anniversary of the date on which stockholders approve the plan and all options expire within ten years from the date of grant (except that incentive stock options granted to an optionee who owns or is deemed to own more than 10% of the combined voting power of all classes of stock of the Company or a subsidiary expire within five years from the date of grant). Options granted under the Amended Class B Plan are not assignable except by will or the laws of descent and distribution or, if the Stock Option Committee so permits, and subject to such terms and conditions as the Stock Option Committee may specify, options may be transferred to family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. Incentive stock options granted under the Amended Class B Plan are not assignable. Under the Amended Class B Plan, the exercise price for an incentive stock option may not be less than 100% (or 110% if the optionee owns or is deemed to own more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary) of the fair market value of the Company's Common Stock on the date of grant, as determined by the Board or the Stock Option Committee, and nonqualified stock options must have an exercise price of at least 85% (100% in the case of a Section 162(m) Optionee) of the fair market value of the Common Stock on the date of grant. An optionee may pay the exercise price in cash, by certified check or bank draft or in shares of Common Stock which the optionee has owned for at least six months, or, if the Stock Option Committee so determines, pursuant to a cashless exercise procedure through a broker or by the Company withholding shares of Common Stock subject to the option which have a fair market value equal to the exercise price. The Amended Class B Plan has standard anti-dilution provisions. Under the Amended Class B Plan, if there is a Change in Control (as defined in the Amended Class A Plan), the Board of Directors may provide that options granted under the Amended Class B Plan will become exercisable in full or in part, whether or not the options are otherwise exercisable. The Stock Option Committee may, in its discretion, also include provisions in an option agreement relating to a change in control of a subsidiary. In addition, the Stock Option Committee may determine at the time of grant or thereafter that an option will become exercisable in full or in part upon the occurrence of such circumstances or events as the Stock Option Committee determines merit special consideration. Under the Amended Class B Plan, if the Company is merged or consolidated with another corporation or in the event of a reorganization, separation or liquidation of the Company, either (i) the options will be replaced by options to purchase stock in the successor corporation or (ii) the optionee will be given 60 days to exercise his option before it will terminate. If an optionee terminates his services as an employee or as a consultant (if retained as a consultant) with the Company and its subsidiaries, he will have 30 days following his termination (or, if earlier, until expiration of the option period) to exercise his option to the extent it was exercisable as of his termination; provided, however, that if the optionee retires with the consent of the Company or he dies, the optionee (or the heirs of a deceased optionee) will have 90 days in the case of the optionee's retirement, or one year in the case of his death, to exercise the option, to the extent it was exercisable as of the date of the optionee's retirement or death. If an optionee is terminated for cause because of a violation of a duty to the Company or its subsidiaries, as determined by the Board or the Stock Option Committee, his option will terminate immediately. If at any time an optionee is indebted to the Company or any subsidiary, the Company may in the discretion of the Stock Option Committee withhold from the optionee (i) shares issuable upon exercise of an option, the value of which is equal to the amount of such indebtedness or (ii) following the sale by an optionee of shares of Common 41 Stock received pursuant to the exercise of an option, amounts due to an optionee in connection with the sale up to the amount of such indebtedness or the Company may take any other substantially similar action to collect such debt. The Amended Class B Plan contains the identical amendment provisions as described under the heading "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan". Awards under the Amended Class B Plan are determined by the Stock Option Committee in its discretion. For this reason, it is not possible to determine the benefits and amounts that will be received by any individual participant or group of participants in the future. During the period from July 1, 1996 to June 30, 1997, the grants of options shown on the table below were made, subject to stockholder approval of the Amended Class B Plan. During the period from July 1, 1997 through February 19, 1998, options to purchase an aggregate of 610,000 shares have been granted under the Amended Class B Plan, subject to stockholder approval of the Amended Class B Plan. NEW PLAN BENEFITS SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS B STOCK OPTION PLAN ----------------------------------------------------------------- NAME AND POSITION NUMBER OF OPTIONS ----------------- ----------------- James V. Manning 0 President and Chief Executive Officer Ray E. Hannah 0 Vice President - Porex Technologies Group Charles A. Mele 95,000 Vice President - General Counsel Anthony Vuolo 81,000 Vice President - Chief Financial Officer Victor L. Marrero 31,000 Former Vice President and Chief Financial Officer Executive Group 207,000 Non-Executive Director Group 0 Non-Executive Officer Employee Group 212,000 CERTAIN TAX MATTERS Nonqualified Stock Options. Nonqualified options granted under the Amended Class B Plan have the identical tax consequences to those described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan--Certain Tax Matters". Incentive Stock Options. Options granted under the Amended Class B Plan and designated by the Stock Option Committee as incentive stock options are intended to meet the requirements of the Code. In such event, an optionee will not recognize taxable income, and the Company will not be entitled to a deduction, upon the grant or exercise of an incentive stock option. The excess of the fair market value of each share over the option price at the date of exercise is an item of tax preference and may be subject to the alternative minimum tax. The alternative minimum tax paid with respect to the exercise of an incentive stock option in one year will be a credit against 42 regular tax in subsequent years; and if, in the year the optionee sells the stock acquired under an incentive stock option, the optionee is subject to the alternative minimum tax, his basis in the stock is increased by the amount treated as an item of a tax preference in the year the option was exercised. If the holding period requirements of Section 422 are met by the optionee (i.e., no disposition of the shares is made by the optionee within two years of the grant of the option and within one year after the transfer of the shares to the optionee), then any gain or loss recognized by the optionee upon disposition of the shares will be treated as long-term capital gain or loss (assuming the shares are capital assets in the hands of the optionee). If the shares acquired on exercise of an incentive stock option are disposed of prior to the expiration of either of the required holding periods, the optionee will recognize ordinary income in the disposition year. The amount of ordinary income will be the lesser of (a) the excess of the fair market value of the shares on the date of exercise of the option over the option price, or (b) the amount realized on the disposition of the shares over the amount paid for such shares, so long as the disposition is by sale or exchange with respect to which a loss, if sustained, would be recognized. The Company will receive a deduction at the time of the disqualifying disposition in the amount equal to the ordinary income recognized by the optionee, subject to general rules pertaining to the reasonableness of compensation and Section 162(m) of the Code. In addition, long-term or short-term capital gain may be recognized by the optionee in an amount equal to the excess of the amount realized on the disqualifying disposition over the sum of the option price and the ordinary income recognized by the optionee. If the exercise of an incentive stock option is made by delivery of shares of Common Stock in payment of the option price, and such delivered shares were not acquired upon the exercise of an incentive stock option or if so acquired are so delivered after expiration of the holding period requirements, the shares delivered are deemed to be exchanged in a tax-free transaction for the equivalent number of new shares of Common Stock. Such equivalent number of new shares has the same basis and holding period as the shares exchanged. The number of shares received in excess of the number of shares delivered has a zero basis. If shares so acquired are sold more than two years after the incentive stock option was granted and more than one year after the transfer of the shares to the optionee, the gain or loss arising from the sale based upon the amount realized upon such sale will constitute long-term capital gain or loss (assuming the shares are capital assets in the hands of the optionee). Proposed Treasury regulations provide that, if an incentive stock option is exercised with previously acquired shares, and any of the shares received on exercise are disposed of before the holding period requirements are satisfied, such disposition will be deemed to be a disposition of the shares with the lowest basis acquired upon exercise of the incentive stock option. The exercise of an incentive stock option by delivery of shares acquired upon the exercise of an incentive stock option prior to the expiration of the holding period requirements will be deemed to be a taxable exchange and a disqualifying disposition of the incentive stock option so delivered; but the shares so purchased should still be entitled to incentive stock option treatment as described above if the applicable holding period requirements are met. If an option is exercised by the estate of an optionee, the above-described holding period requirements do not apply, and, when the estate disposes of the stock acquired by exercise of the option, it will not recognize any ordinary income. The estate, however, may recognize long-term or short-term capital gain and any long-term capital gain may be subject to the alternative minimum tax. The Company will receive no deduction. The foregoing is not to be considered as tax advice to any person who may be an optionee, and any such persons are advised to consult their own tax counsel. 43 PROPOSAL TWELVE: AMENDED AND RESTATED 1991 SPECIAL NONQUALIFIED STOCK OPTION PLAN The proxy will be voted in accordance with the directions thereon with respect to Proposal Twelve, or if no directions are indicated, FOR adoption of Proposal Twelve. The Board has unanimously adopted, subject to stockholder approval, the amendment and restatement of the Company's 1991 Special Nonqualified Stock Option Plan (the "Amended 1991 Plan"). Stockholder approval is recommended by the Board to increase the number of shares of Common Stock that are issuable thereunder by 500,000, to extend the term of the plan through the tenth anniversary of the date on which stockholders approve the plan and to ensure the tax deductible status of the compensation generated upon the exercise of options granted thereunder. The Amended 1991 Plan contains certain other amendments that are described below. RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDED 1991 PLAN The affirmative vote of the holders of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote is required for approval of the Amended 1991 Plan. The Board recommends that the stockholders vote FOR the approval of the Amended 1991 Plan so that, among other things, the Company may continue to use options as a method of compensating eligible individuals and the Company may fully deduct compensation realized from the exercise of options granted thereunder. DESCRIPTION OF THE AMENDED 1991 PLAN The following description of the Amended 1991 Plan is qualified by reference to the full text of the plan, which is set forth as Exhibit C to this proxy statement. Subject to adjustment in accordance with its terms, the Amended 1991 Plan provides for 2,750,000 shares to be subject to purchase pursuant to options granted thereunder, which represents an increase of 500,000 over the Plan prior to its amendment and restatement. As of February 19, 1998, 2,080,380 options have been granted under the Amended 1991 Plan. The Amended 1991 Plan is currently administered by the Stock Option Committee and contains the identical provisions regarding administration as described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan", except that under certain circumstances the Stock Option Committee may delegate authority to grant options under the Amended 1991 Plan to certain designated directors who are also officers of the Company. Awards under the Amended 1991 Plan may be granted to key employees and consultants of the Company (approximately 700 individuals); provided that no option may be granted to an employee who at the time of such grant is an officer or director of the Company. Although officers may not receive grants of options under the Amended 1991 Plan, the Amended 1991 Plan is designed to comply with Section 162(m) of the Code due to the fact that an optionee may become subject to Section 162(m) in the future by becoming the Chief Executive Officer or one of the four most highly compensated executive officers of the Company (e.g., at the time the optionee exercises the option). It is, therefore, possible that grants previously made under the Amended 1991 Plan may become subject to the limitation on deductible compensation contained in Section 162(m) of the Code. Only nonqualified stock options may be granted under the Amended 1991 Plan and, in order to comply with the requirements of Section 162(m) of the Code, optionees may be granted options under the Amended 1991 Plan for a maximum of 250,000 shares of Common Stock per calendar year. Each option granted under the Amended 1991 Plan must be evidenced by a stock option agreement. Each stock option agreement will specify the number of shares of Common Stock for which options have been granted, the exercise price, the applicable vesting schedule, the manner and time and medium of payment upon exercise and the effective term of the option. In addition, stock option agreements may contain such other 44 terms as the Stock Option Committee may prescribe. Such additional terms may vary among the stock option agreements. No option may be granted under the Amended 1991 Plan after the tenth anniversary of the date on which stockholders approve the plan and all options expire within 15 years and one day from the date of grant. Options granted under the Amended 1991 Plan are not assignable except by will or the laws of descent and distribution or, if the Stock Option Committee so permits, and subject to such terms and conditions as the Stock Option Committee may specify, options may be transferred to family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. Nonqualified stock options granted under the Amended 1991 Plan must have an exercise price of at least 100% of the fair market value of the Common Stock on the date of grant (as determined by the Board or the Stock Option Committee). The Amended 1991 Plan contains standard antidilution provisions. Under the Amended 1991 Plan, an option is exercisable at the times specified by the Stock Option Committee in the applicable stock option agreement; provided that, unless otherwise specified by the Stock Option Committee and set forth in the stock option agreement, the option will become exercisable during the first five years in which the option is outstanding at the rate per year of 20% of the total number of shares of Common Stock issuable under the option. The Stock Option Committee may also determine at the time of grant or thereafter that an option will become exercisable in full or in part, whether or not it is then exercisable under the stock option agreement, in other circumstances that merit special consideration. If at any time an optionee is indebted to the Company or any subsidiary, the Company may in the discretion of the Stock Option Committee withhold from the optionee (i) shares issuable upon exercise of an option, the value of which is equal to the amount of such indebtedness or (ii) following the sale by an optionee of shares of Common Stock received pursuant to the exercise of an option, amounts due to an optionee in connection with the sale up to the amount of such indebtedness or the Company may take any other substantially similar action to collect such debt. If the Company is merged or consolidated with another corporation or in the event of a reorganization, separation or liquidation of the Company, the Board or the board of directors of any corporation assuming the obligations of the Company under the Amended 1991 Plan may either (i) make appropriate provisions for the protection of any outstanding options by the substitution on an equitable basis of appropriate securities of the Company, or appropriate securities of the merged, consolidated, or otherwise reorganized corporation, or the appropriate adjustment in the option price, or both, or (ii) give written notice to the optionees that their options must be exercised, to the extent then exercisable, within 60 days of the date of such notice or the options will terminate. In the event that the employment of an optionee who is a key employee of the Company is terminated, all unexercised options (both vested and unvested) held by such optionee will expire 30 days after he is terminated unless the optionee is retained by the Company as a consultant immediately after such termination of employment or the Stock Option Committee grants the optionee, in writing, an extended term. Upon the retirement of an optionee from employment with the Company, the unvested portion of any options held by the optionee will expire on the retirement date and the portion of the options that is exercisable on such date will remain exercisable for 90 days thereafter. If an optionee dies while working for the Company as a key employee or contractor or within 30 days following the date of termination of the optionee's status as a key employee or contractor (or within the 90-day period after the date of the optionee's retirement) any unexercised portion of the options which was otherwise exercisable on the date of death will be exercisable by the estate or heirs of the optionee for a period of one year after the date of death. The Amended 1991 Plan contains the identical amendment provisions as described under the heading "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan". During the period from July 1, 1996 to June 30, 1997, the grants of options shown on the table below were made. Such grants were not made subject 45 to stockholder approval of the Amended 1991 Plan and, accordingly, may be subject to Section 162(m) of the Code. During the period from July 1, 1997 through February 19, 1998, options to purchase an aggregate of 250,000 shares have been granted under the Amended 1991 Plan, 175,000 of which were made subject to stockholder approval of the Amended 1991 Plan. NEW PLAN BENEFITS SYNETIC, INC. 1991 SPECIAL NONQUALIFIED STOCK OPTION PLAN --------------------------------------------------------- NAME AND POSITION NUMBER OF OPTIONS ----------------- ----------------- James V. Manning 0 President and Chief Executive Officer Ray E. Hannah 0 Vice President - Porex Technologies Group Charles A. Mele 0 Vice President - and General Counsel Anthony Vuolo 0 Vice President - Chief Financial Officer Victor L. Marrero 0 Former Vice President and Chief Financial Officer Executive Group 0 Non-Executive Director Group 0 Non-Executive Officer Employee Group 862,750 CERTAIN TAX MATTERS The tax consequences applicable to the Amended 1991 Plan are identical to the tax consequences described in "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan--Certain Tax Matters". 46 PROPOSAL THIRTEEN: APPROVAL OF THE INDIVIDUAL OPTION The proxy will be voted in accordance with the directions thereon with respect to Proposal Thirteen, or if no directions are indicated, FOR adoption of Proposal Thirteen. On June 23, 1997 (the "Grant Date") and subject to approval by the stockholders of the Company, the Stock Option Committee granted a nonqualified option to purchase 250,000 shares of Common Stock (the "Individual Option") to Mr. Holstein, an officer of the Company, in order to reward Mr. Holstein for his service to the Company and to provide him with an additional long-term incentive in the form of an equity interest in the Company. RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE INDIVIDUAL OPTION The affirmative vote of the holders of a majority of the shares of Common Stock present or represented at the Meeting and entitled to vote is required for approval of the Individual Option. The Board recommends that the stockholders vote FOR the adoption of the proposed Individual Option so that, among other things, the Company may fully deduct compensation realized from the exercise of the Individual Option. DESCRIPTION OF THE INDIVIDUAL OPTION The Individual Option has an exercise price of $34.875 per share. The Individual Option was granted outside of the Company's stock option plans and is evidenced by an individual stock option agreement (the "Individual Agreement") between the Company and Mr. Holstein. A copy of the Individual Agreement is attached hereto as Exhibit D to the proxy statement and this summary is qualified in its entirety by reference thereto. The Company also granted a nonqualified option to purchase 250,000 shares of Common Stock to Mr. Holstein on October 2, 1996 (the "Grant Date") under the 1991 Special Nonqualified Stock Option Plan. In the event Mr. Holstein becomes Chief Executive Officer or is one of the four most highly compensated executive officers (as determined under Section 162(m) of the Code) at the time of exercise of the grant made on October 2, 1996, the compensation attributable to such option may be subject to the limitation on deductible compensation contained in Section 162(m). The Individual Option will vest and become exercisable at the rate of 20% per year, commencing on the first anniversary of the Grant Date and ending on the fifth anniversary of the Grant Date at which time the Individual Option will be fully vested. The vested portion of the Individual Option will remain exercisable until the earlier of (i) the fifteenth anniversary of the Grant Date, on which date the unexercised portion of the Individual Option will expire or (ii) Mr. Holstein's termination of employment, in which case the expiration of the unexercised portion of the Individual Option will be determined in accordance with the reasons for such termination, as described in the following paragraph. If Mr. Holstein's employment is terminated by the Company for Cause (as defined in the Individual Agreement) or Mr. Holstein resigns from his employment with the Company without Cause, the vested and unvested portions of the Individual Option will expire on the date of such termination. If Mr. Holstein's employment is terminated by the Company without Cause or by Mr. Holstein for Cause, Mr. Holstein will retain the vested portion of the Individual Option and any portion of the Individual Option that has not vested will continue to vest as if Mr. Holstein had remained employed by the Company until the earlier of (i) the second anniversary of the date of termination and (ii) the occurrence of any event that would constitute Cause for purposes of Mr. Holstein's termination by the Company. If Mr. Holstein's employment with the Company is terminated either (i) by Mr. Holstein upon 30 days' written notice to the Company at any time after the first anniversary of a Change in Control, as defined below (or a shorter period to the extent that the acquiring company does not request Mr. Holstein's services), (ii) by the Company due to Mr. Holstein's mental or physical incapacity to regularly perform his duties to the Company for more than ninety consecutive days or an aggregate of one hundred and twenty days during a 47 twelve-month period, or (iii) due to Mr. Holstein's death, any portion of the Individual Option that is not vested as of the date of such termination will remain outstanding and continue to vest as if Mr. Holstein had remained employed by the Company until the earlier of (i) November 6, 2002 and (ii) the occurrence of any event that would constitute Cause for purposes of Mr. Holstein's termination by the Company. For purposes of the Individual Option, a Change in Control is generally the occurrence of (i) the acquisition of 50% or more of the voting power of the Company (excluding an acquisition thereof by Martin J. Wygod and his affiliates) or a reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company and, in each case, where immediately following such event the Chairman of the Board ceases to hold one or more of the following positions: Chairman of the Board, Chief Executive Officer or a senior executive officer of the acquirer with duties and responsibilities which are greater than or substantially equivalent to those prior to such acquisition or business combination, or (ii) a complete liquidation or dissolution of the Company. In the event that Mr. Holstein is retained by the Company as a consultant within thirty days after a termination of Mr. Holstein's employment with the Company, he will be deemed to continue his employment with the Company for purposes of the Individual Agreement. Accordingly, if Mr. Holstein becomes a consultant to the Company during such thirty-day period, he will retain the Individual Option and the Individual Option will continue to vest as if he were an employee of the Company during the period that Mr. Holstein is retained by the Company as a consultant and until thirty days after Mr. Holstein ceases to be so retained. The exercise price for the Individual Option is payable in cash or, if shares of the Company's Common Stock are then publicly traded, in shares of Common Stock (valued for this purpose at their then fair market value) or a combination of the two. The Individual Option is not transferable by Mr. Holstein other than by will or the laws of descent and distribution, except that the Stock Option Committee may, in its sole discretion, permit the transfer of the Individual Option to Mr. Holstein's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. In the event of any stock split or reverse split of the issued Common Stock of the Company, or any other recapitalization of the Company, or any business combination or other transaction involving the Company, the Board or the Stock Option Committee will make such appropriate adjustments to the terms of the Individual Option as deemed appropriate. However, the Board or the Stock Option Committee will be required to make equitable adjustments if, as a result of such event, the Common Stock is no longer publicly traded and in certain other circumstances. If the Company is merged or consolidated with another corporation, or in the event of a reorganization of the Company, the Board or the board of directors of any corporation assuming the obligations of the Company hereunder must either (i) make appropriate provisions for the protection of any outstanding portion of the Individual Option by the substitution on an equitable basis of appropriate securities of the Company, or appropriate securities of the merged, consolidated or otherwise reorganized corporation, or the appropriate adjustment in the Individual Option price, or both, or (ii) give written notice to Mr. Holstein that the Individual Option must be exercised, to the extent then exercisable, within sixty days of the date of such notice or the Individual Option will terminate, and to the extent that the Individual Option is not exercised within such sixty-day period, it will terminate and be of no further effect. CERTAIN TAX MATTERS The tax consequences applicable to the Individual Option are identical to the tax consequences described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan--Certain Tax Matters". 48 PROPOSAL FOURTEEN: RATIFICATION OF INDEPENDENT AUDITORS Upon recommendation of the Audit Committee, the Board has appointed Arthur Andersen LLP as its independent auditors for the fiscal year ending June 30, 1998. A resolution will be submitted to stockholders at the Meeting to ratify their appointment. The affirmative vote of the holders of a majority of the shares of Common Stock cast at the Meeting with respect to Proposal Fourteen will be required to approve this resolution. The Board recommends a vote FOR this resolution. The proxy will be voted in accordance with the directions thereon with respect to Proposal Fourteen or, if no directions are indicated, FOR ratification of the appointment of Arthur Andersen LLP. Although stockholder approval of the Board's appointment of Arthur Andersen LLP is not required by law, the Board believes that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved at the Annual Meeting, the Board of Directors will reconsider its selection of Arthur Andersen LLP. A representative of Arthur Andersen LLP is expected to be present at the Meeting. The representative will be afforded an opportunity to make a statement and will be available to respond to questions by stockholders. If the resolution ratifying the appointment of Arthur Andersen LLP as independent auditors is approved by the stockholders, the Board of Directors nevertheless retains the discretion to select different auditors in the future, should the Board then deem such selection to be in the Company's best interest. Any such selection need not be submitted to a vote of stockholders. STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with regulations of the Commission. Should a stockholder intend to present a proposal at the Company's 1998 Annual Meeting, which will be held after the end of the Company's fiscal year ending June 30, 1998, it must be received by the Secretary of the Company, 669 River Drive, Elmwood Park, New Jersey 07407-1361, not later than June 30, 1998 in order to be included in the Company's proxy statement and form of proxy relating to that meeting. WHERE YOU CAN FIND MORE INFORMATION The Company files annual, quarterly and special reports, proxy statements and other information with the Commission. A copy of the Company's Annual Report to Stockholders for the fiscal year ended June 30, 1997 accompanies this Proxy Statement. You may read and copy reports, statements or other information filed by the Company at the Commission's public reference rooms in Washington, D.C., New York City, and Chicago. Please call the Commission at 1-800-SEC-0330 for further information on these public reference rooms. The Company's filings are also available to the public at the web site maintained by the Commission at "http://www.sec.gov" and from commercial document retrieval services. This Proxy Statement incorporates by reference the portions of the documents set forth below that the Company has previously filed with the Commission. These documents contain important information about the Company and its finances. . The financial statements contained in Item 14 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997. . The financial statements contained in Part I of the Company's Quarterly Reports on Form 10-Q for the quarters ended September 30, 1997 and December 31, 1997. 49 The Company also incorporates by reference the equivalent sections of any quarterly reports or special reports the Company files with the Commission between the date of this Proxy Statement and the date of the Annual Meeting. If you are a stockholder, the Company may have sent you some of the documents incorporated by reference, but you may obtain any of them through the Company or the Commission. Documents incorporated by reference are available from the Company without charge, excluding all exhibits unless such exhibits have been specifically incorporated by reference in this Proxy Statement. Stockholders may obtain documents incorporated by reference in this Proxy Statement by requesting them in writing or by telephone at the following address: Administrator of Shareholder Relations Synetic, Inc. River Drive Center 2 669 River Drive Elmwood Park, New Jersey 07407-1361 (201) 703-3400 MISCELLANEOUS Where information contained in this Proxy Statement rests particularly within the knowledge of a person other than the Company, the Company has relied upon information furnished by such person or contained in filings made by such person with the Commission. By Order of the Board of Directors Charles A. Mele Secretary 50 [X] PLEASE MARK VOTES AS IN THIS EXAMPLE REVOCABLE PROXY SYNETIC, INC. ANNUAL MEETING OF STOCKHOLDERS MARCH 25, 1998 The undersigned hereby appoints James V. Manning, Charles A. Mele and David J. Schlanger, and each of them, as the true and lawful agents and proxies of the undersigned, with full power of substitution, to represent the undersigned and to vote all shares of stock that the undersigned is entitled in any capacity to vote at the Annual Meeting of Stockholders of SYNETIC, INC. (the "Company") to be held at the St. Regis Hotel, Two East 55th Street, New York, New York 10022 at 9:30 A.M., local time, on March 25, 1998 and at any and all adjournments or postponements thereof, on the matters set forth below, and, in their discretion, upon all matters incident to the conduct of the Annual Meeting and upon such other matters as may properly be brought before the meeting. This proxy revokes all prior proxies given by the undersigned. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR LISTED HEREON, ALLOCATING VOTES EVENLY AMONG THE FOUR NOMINEES, AND FOR EACH OF PROPOSALS 2 THROUGH 14. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE DIRECTORS RECOMMEND A VOTE FOR ELECTION OF ALL NOMINEES AND FOR PROPOSALS 2 THROUGH 14.
1. The election as directors of all nominees listed below For Withhold For All (except as marked to the contrary below) to serve a term Except of three years: [ ] [ ] [ ]
RAY E. HANNAH, ROGER H. LICHT, BERNARD A. MARDEN AND HERMAN SARKOWSKY. INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW. TO ALLOCATE VOTES AMONG NOMINEES UNDER THE PROVISIONS FOR CUMULATIVE VOTING DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT, SPECIFY VOTING INSTRUCTIONS IN THE SPACE PROVIDED BELOW. _____________________________________ 2 2. Amendment to the Certificate of Incorporation to For Against Abstain eliminate the classified Board of Directors and to provide for the annual election of all directors [ ] [ ] [ ] commencing at next year's Annual Meeting of Stockholders of the Company. 3. Amendment to the Certificate of Incorporation to For Against Abstain eliminate the requirement that provisions of the Certificate of Incorporation relating to the classification [ ] [ ] [ ] of the Board of Directors and the election of one-third of the Board of Directors at each annual meeting may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The effectiveness of Proposal 3 is expressly conditioned upon the adoption of Proposal 2 by stockholders, and will not be effective absent such adoption. 4. Amendment to the Certificate of Incorporation to For Against Abstain eliminate cumulative voting in the election of directors. [ ] [ ] [ ] 5. Amendment to the Certificate of Incorporation to For Against Abstain eliminate the requirement that provisions of the Certificate of Incorporation relating to cumulative voting [ ] [ ] [ ] may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The effectiveness of Proposal 5 is expressly conditioned upon the adoption of Proposal 4 by stockholders, and will not be effective absent such adoption. 6. Amendment to the Certificate of Incorporation to For Against Abstain provide that any director may be removed, either with or without cause, at any time, by the affirmative vote of [ ] [ ] [ ] a majority of the outstanding shares entitled to vote. The effectiveness of Proposal 6 is expressly conditioned upon the adoption of Proposal 2 by stockholders, and will not be effective absent such adoption.
3 7. Amendment to the Certificate of Incorporation to For Against Abstain eliminate the requirement that provisions of the Certificate of Incorporation relating to the power to [ ] [ ] [ ] remove directors or to fill vacancies on the Board of Directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The effectiveness of Proposal 7 is expressly conditioned upon the adoption of Proposal 2 and Proposal 6 by stockholders, and will not be effective absent such adoption. 8. Amendment to the Certificate of Incorporation to For Against Abstain eliminate the requirement that the provision of the Company's By-laws setting the maximum number of [ ] [ ] [ ] directors may only be amended with the affirmative vote of the holders of two-thirds of the shares entitled to vote in the election of directors. The effectiveness of Proposal 8 is expressly conditioned upon the adoption of Proposal 2 by stockholders, and will not be effective absent such adoption. 9. Amendment to the Certificate of Incorporation to For Against Abstain increase the number of authorized shares of Common Stock from 50 million to 100 million. [ ] [ ] [ ] 10. Ratification and Approval of the Amended and Restated For Against Abstain 1989 Class A Stock Option Plan. [ ] [ ] [ ] 11. Ratification and Approval of the Amended and Restated For Against Abstain 1989 Class B Stock Option Plan. [ ] [ ] [ ] 12. Ratification of the Amended and Restated 1991 Special For Against Abstain Nonqualified Stock Option Plan. [ ] [ ] [ ] 13. Ratification of the grant on June 23, 1997 of a For Against Abstain nonqualified option to acquire 250,000 shares of Common Stock to an officer of the Company. [ ] [ ] [ ] 14. Ratification of the appointment of Arthur Andersen LLP For Against Abstain as independent public auditors of the Company for the fiscal year ending June 30, 1998. [ ] [ ] [ ]
RECEIPT OF NOTICE OF SAID MEETING AND OF THE PROXY STATEMENT AND ANNUAL REPORT OF SYNETIC, INC. IS HEREBY ACKNOWLEDGED. 4 Please sign this proxy exactly as your name appears hereon. Joint owners should each sign. Trustees, executors, administrators and others signing in a representative capacity should indicate in which capacity they are signing. An authorized officer may sign on behalf of a corporation and should indicate the name of the corporation and his capacity. Please be sure to sign and date this proxy in the box below. Date [ ], 1998 ________________________________________________________ Stockholder sign above Co-holder (if any) sign above SIGN, DATE AND MAIL ENTIRE CARD IN POSTAGE PAID ENVELOPE PROVIDED. SYNETIC, INC. PLEASE ACT PROMPTLY SIGN, DATE & MAIL YOUR PROXY CARD TODAY EX-99.(A) 2 AMEND. AND RESTATED 1989 CLASS A STOCK OPTION PLAN EXHIBIT 99(a) SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS A STOCK OPTION PLAN 1. Definitions. The terms below shall be defined as indicated. ----------- 1.1 Board means the Board of Directors of the Company, as ----- constituted at any time. 1.2 Code means the Internal Revenue Code of 1986, as amended ---- from time to time. 1.3 Committee means the Committee of the Board described in --------- Section 3.1. 1.4 Common Stock means the Company's Common Stock, par value ------------ $.0l per share. 1.5 Company means Synetic, Inc., a Delaware corporation, and any ------- successor corporation which adopts the Plan. 1.6 Exchange Act means the Securities Exchange Act of 1934, as ------------ amended from time to time. 1.7 Fair Market Value means, on a specified date, the last sales ----------------- price of a Share traded on the over-the-counter market as reported on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") or the closing price for a Share on the stock exchange, if any, on which Shares are primarily traded; provided, however, that if no Shares were traded on such date, then on the last previous date on which a Share was so traded or, if none of the above is applicable, the value of a Share as established by the Committee for such date. 1.8 Option means an option granted by the Company pursuant to ------ the Plan to purchase Shares. 1.9 Option Agreement means a written agreement as described in ---------------- Section 7 hereof between the Company and Optionee evidencing an Option. 1.10 Option Period means the period from the date of the ------------- granting of an Option to the date on which that Option can no longer be exercised, as determined by the Committee pursuant to Section 7.4 hereof. A-1 1.11 Option Price means the price to be paid for the Shares ------------ purchased pursuant to an Option. 1.12 Optionee means any person who is granted an Option under -------- the Plan. 1.13 Plan means the Company's Amended and Restated 1989 Class ---- A Stock Option Plan, as embodied herein and as amended from time to time. 1.14 Section 162(m) Optionee means, for a given fiscal year of ----------------------- the Company, any Optionee designated by the Committee by not later than 90 days following the start of such year as a Optionee (or such other time as may be required or permitted by Section 162(m) of the Code) whose compensation for such fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 1.15 Shares means shares of Common Stock. ------ 1.16 Subsidiary means a subsidiary of the Company as defined ---------- under Section 424(f) of the Code. 2. Purpose. The Plan is intended to encourage ownership of Common ------- Stock by directors of the Company in order to increase their interest in the Company's success and to encourage them to remain directors of the Company. 3. Administration. -------------- 3.1 Board or Committee. The Plan shall be administered by the ------------------ or, if the Board so elects, by a Committee of at least two members of the Board to be appointed by the Board. In the event that the Board does not elect to appoint a Committee then, for purposes of administering the Plan, the term "Board" shall be substituted for the term "Committee" whenever it appears in the Plan. 3.2 Determination of Option Terms. The Committee shall have ----------------------------- authority, subject to the terms of the Plan, to determine the persons to whom Options shall be granted, the number of Shares to be covered by each Option, the time or times at which Options shall be granted, and the terms and provisions of the Options, and to make all other determinations necessary or advisable for the administration of the Plan. 3.3 Interpretation and Construction. The Committee shall have ------------------------------- the authority to interpret and construe the provisions of the Plan or of any Option Agreement and such interpretation or construction shall be final and conclusive unless otherwise determined by A-2 the Board and, in any such event, the determination by the Board shall be final and conclusive. 4. Eligible Persons. The Committee may grant Options to members of ---------------- the Board; provided, however, that members of the Committee shall not be eligible to receive Options under the Plan. 5. Grant of Options. ---------------- 5.1 Procedure. Subject to the provisions of Sections 8.1 and --------- 8.2 hereof, the Committee may grant Options (which shall not be considered "incentive stock options", within the meaning of Section 422 of the Code) provided that the person to whom the Option is to be granted subsequently becomes a party to an Option Agreement. 5.2 Additional Grants. Subject to Section 8.2 hereof, nothing ----------------- contained in the Plan shall be construed to preclude either the granting of an Option to an Optionee to whom one or more Options have already been granted or the simultaneous granting of more than one Option to the same Optionee. 5.3 Subject to Market or Exchange Rules. Any and all grants of ----------------------------------- Options shall be subject to all applicable rules and regulations of Nasdaq or any stock exchange on which the Common Stock may then be listed. 6. Expiration Date of Plan. The Plan shall be effective as of the ----------------------- date on which stockholder approval of the Plan is obtained (the "Effective Date"). No Option shall be granted under the Plan after the tenth anniversary of the Effective Date. 7. Option Agreements. Option Agreements shall be in such form as ----------------- the Committee, in its sole discretion, shall approve or determine; provided, however, that all Option Agreements shall comply with and be subject to the following terms and conditions: 7.1 Manner, Time, and Medium of Payment. An Option shall be ----------------------------------- exercised in the manner set forth in the Option Agreement relating thereto, and payment in full of the Option Price for all Shares shall be made at the time of exercise. Payment shall be in United States dollars in the form of cash, certified check or bank draft, by delivery to the Company of Shares which the Optionee has owned for at least six months, or, if the Committee so determines, by withholding Shares with respect to which the Optionee has exercised such Option having a Fair Market Value on the date of exercise equal to the sum of the Option Price for the withheld Shares and the remaining Shares with respect to which the Optionee has exercised such Option, or pursuant to a "cashless" exercise through a broker or any combination of such methods of payment. Shares shall be valued at their Fair Market Value on the date of exercise. A-3 7.2 Number of Shares. Subject to Section 9 hereof, the Option ---------------- Agreement shall state the number of Shares to which it pertains. 7.3 Option Price. The Option Price shall be determined by the ------------ Committee, in its sole discretion; provided, however, that the Option Price shall not be less than 85% of the Fair Market Value of a Share on the date the Option is granted; and provided further, that, in the case of an Option that is granted to a Section 162(m) Optionee, such Option Price shall not be less than 100% of the Fair Market Value of a Share as of the date the Option is granted. 7.4 Option Period. Each Option granted under the Plan shall ------------- expire no later than ten years from the date the Option is granted. Option Agreements shall contain provisions for the earlier expiration of the Option in the event the Optionee's status as a director of the Company terminates, as provided by Section 7.8 hereof. 7.5 Date of Exercise. An Option shall be exercisable at the ---------------- times specified by the Committee at the time the Option is granted; notwithstanding the foregoing, in the event of a "Change in Control", any Option granted under the Plan shall become exercisable in full, whether or not it is then exercisable. For purposes of the Plan, a "Change in Control" shall be deemed to have occurred: (i) when any "person", as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) and 14(d) thereof (but excluding Martin J. Wygod and his affiliates, the Company (and any successor to the Company in the transaction which did not result in a Change in Control), any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee) directly or indirectly becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time) of securities of the Company representing 50 percent or more of the combined power of its then outstanding securities with respect to the election of directors; (ii) when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors"), cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors of the Company who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24- month period) or by prior operation of this Section A-4 7.5(ii); (iii) when the stockholders of the Company approve a merger or consolidation of the Company without the consent or approval of a majority of its Incumbent Directors; (iv) when there is a sale or disposition of all or substantially all of the Company's assets; or (v) when the Company adopts a plan of liquidation. In addition, the Committee may, in its sole discretion, include provisions in an Option Agreement relating to a change in control of a Subsidiary. The Committee may also determine at the time of grant or thereafter that an Option shall become exercisable in full or in part, whether or not it is then exercisable, upon such circumstances or events as the Committee determines, in its sole discretion, merits special consideration. 7.6 Reorganization. In case the Company is merged or -------------- consolidated with another corporation, or in case of a reorganization, separation or liquidation of the Company, the Board or the board of directors of any corporation assuming the obligations of the Company hereunder shall make appropriate provisions for the protection of any outstanding Options by the substitution on an equitable basis of appropriate securities of the Company, or appropriate securities of the merged consolidated, or otherwise reorganized corporation, or the appropriate adjustment in the Option Price, or both. 7.7 Transferability; Assignability. No Option shall be ------------------------------ assignable or transferable except by will or by the laws of descent and distribution and no Option may be exercised other than by an Optionee or, after the death of an Optionee, by that Optionee's personal representative, heirs or legatees; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of an Option to an Optionee's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. 7.8 Continuation with Company. ------------------------- 7.8.1 No Option shall be exercisable by an Optionee later than the expiration of the Option Period or 30 days after termination of such Optionee's service as a member of the Board and as a consultant to the Company, if retained by the Company as such a consultant, whichever occurs first, unless such termination occurs after the Optionee attains age 65 or because of his death. The Committee may provide in an Option Agreement that employment with a Subsidiary shall not constitute employment with the Company for purposes of such Option Agreement. If the Optionee's service as a member of the Board and as a A-5 consultant to the Company is terminated because of his death or after he attains age 65, (or if the Optionee dies within 30 days of such termination or 90 days of his termination after age 65) the Optionee (or the representative of the estate of the heirs or legatees of a deceased Optionee) shall have the right to exercise the unexercised portion of the Option which the Optionee could have exercised as of the date of his death or termination after age 65, provided that notice of such exercise is given in writing before the expiration of the Option Period and within 90 days of the Optionee's termination after age 65 or one year of the Optionee's death, as the case may be. If the Optionee's service as a member of the Board or as a consultant to the Company is terminated because of the Optionee's violation of his duties, the existence of which violation shall be determined by the Committee, in its sole discretion (which determination shall be conclusive) all of the Optionee's Options shall terminate immediately and the Optionee shall have no right after such termination to exercise any Option he might have been able to exercise prior to his termination as a member of the Board and as a consultant to the Company. 7.8.2 Nothing in the Plan or in any Option granted under it shall confer (or be deemed to confer) upon an Optionee any right to continue as a member of the Board or to be retained, or continue, as a consultant to the Company. 7.9 Rights as a Stockholder. An Optionee shall have no rights ----------------------- as a stockholder with respect to Shares covered by any Option until the date the Company has issued and delivered such Shares to the Optionee, and the Optionee's name shall have been entered as the stockholder of record on the books of the Company and then only as to such Shares as are actually issued and delivered to the Optionee. 7.10 Securities Laws. The Company may require each Optionee to --------------- represent to the Company, in writing, when an Option is exercised, that such Optionee is exercising such Option for his own account for investment only and not with a view to distribution and that the Optionee will not make any sale, transfer or other disposition of any Shares so purchased except (i) pursuant to a registration statement filed under the Securities Act of 1933, as amended, which the Securities and Exchange Commission has declared effective, (ii) pursuant to an opinion of counsel satisfactory in form and substance to the Company that the sale, transfer or other disposition may be made without registration, or (iii) pursuant to a "no action" letter issued to the Optionee by the Securities and Exchange Commission. The Company may require each share certificate representing Shares purchased upon the exercise of an Option to bear a legend stating that the Shares evidenced thereby may not be sold or transferred except in compliance with the Securities Act of 1933, as amended, and the provisions of the Plan. No Option may be granted or exercised at a time when such Option, or the granting or exercise thereof, may result in the violation of any law or governmental order or regulation. 7.11 Other Provisions. Option Agreements shall contain such ---------------- other terms and conditions not inconsistent with the Plan as the Committee shall deem advisable. A-6 8. Shares Available for Option. --------------------------- 8.1 Maximum. Subject to Sections 7.6 and 9 hereof, no more than ------- 2,200,000 Shares shall be subject to purchase pursuant to Options granted under the Plan. At all times during the term of the Plan, the Company shall have reserved that number of Shares less an amount equal to the number of Shares which have been issued pursuant to the exercise of Options. At all times after termination of the Plan, the Company shall have reserved for issuance a number of Shares equal to the aggregate number of Shares subject to outstanding Options. 8.2 Employee Maximum. Subject to Section 7.6 and 9 hereof, no ---------------- Optionee shall receive Options with respect to an aggregate of more than 250,000 Shares in any Plan year. 8.3 Expiration or Termination. If any outstanding Option under ------------------------- the Plan expires for any reason or is terminated prior to the expiration date of the Plan as set forth in Section 6 hereof, the Shares allocable to any unexercised portion of such Option may again be subject to Options under the Plan. 9. Recapitalization or Change in Par Value of Common Stock. The ------------------------------------------------------- aggregate number of Shares purchasable under Options pursuant to the Plan and the number of Shares and the Option Price for Shares covered by each outstanding Option shall all be proportionately adjusted, as deemed appropriate by the Committee, if the Shares are split-up, converted, exchanged, reclassified, or in any way substituted for. The Committee shall also provide for appropriate adjustments of the number of Shares purchasable under the Plan and of outstanding Options in the event of stock dividends or distributions of assets or securities of other companies owned by the Company to stockholders relating to Common Stock for which the record date is prior to the date the shares purchased by exercise of an Option are issued, except that no such adjustment shall be made for cash dividends or stock dividends of 10% or less (in the aggregate). Any such adjustment to an outstanding Option may include an adjustment of the Option Price or the number of Shares for which an Option may be exercised, or may provide for an escrow of assets or securities so distributed to be available upon future exercise, or any combination thereof, as the Committee deems appropriate. In the event of a change in the Company's presently authorized Common Stock which is limited to a change of all of its presently authorized Shares with par value into the same number of shares without par value, or any change of the then authorized Shares with par value into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be Shares as defined in Section 1 hereof, and no change in the number of Shares covered by each Option or in the Option Price shall take place. A-7 10. Indemnification and Reliance. ---------------------------- 10.1 Indemnification. Each person who is or shall have been a --------------- member of the Board or of the Committee shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof (with the Company's written approval) or paid by such person in satisfaction of a judgment in any such action, suit or proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject, however, to the condition that upon the institution of any such claim, action, suit or proceeding, such person shall in writing give the Company an opportunity to intervene at its own expense on his or her behalf. The foregoing right of indemnification shall not be exclusive of any other right to which such person may be entitled as a matter of law or otherwise, or any power that the Company may have to indemnify such person or hold him harmless. 10.2 Reliance. Each member of the Board or of the Committee and -------- each officer and employee of the Company in performing duties under the Plan shall be entitled to rely upon information and reports furnished in connection with the administration of this Plan by any duly authorized officer or agent of the Company. 11. Income Tax Withholding. If the Company or a Subsidiary shall be ---------------------- required to withhold any amounts by reason of any federal, state or local tax rules or regulations in respect of the payment of cash or the issuance or Shares pursuant to the exercise of an Option, the Company or such Subsidiary shall be entitled to deduct and withhold such amounts from any cash payments to be made to the Optionee. In any event, the Optionee shall either (i) make available to the Company or such Subsidiary, promptly when requested by the Company or such Subsidiary, sufficient funds to meet the requirements of such withholding, or (ii) to the extent permitted by the Committee, irrevocably authorize the Company to withhold from the Shares otherwise issuable to the Optionee as a result of such exercise a number of Shares having a Fair Market Value, as of the date the withholding tax obligation arises (the "Tax Date") which alone, or when added to funds paid to the Company or the Subsidiary by the Optionee, equal the amount of the minimum withholding tax obligation (the "Withholding Election") and the Company or such Subsidiary shall be entitled to take and authorize such steps as it may deem advisable in order to have such funds made available to the Company or such Subsidiary out of any funds or property due or to become due to the Optionee. An Optionee's Withholding Election may only be made prior to the Tax Date and may be disapproved by the Committee. 12. Amendment or Termination of Plan. The Board may modify, amend or -------------------------------- terminate the Plan in whole or in part at any time; provided, however, that (i) no modification or A-8 amendment shall be effective without stockholder approval if such approval is required by law or under the rules of Nasdaq or the stock exchange on which the Shares are listed, (ii) with respect to any person who is granted an Option prior to the Effective Date, no such termination, modification or amendment of the Plan shall alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee and (iii) with respect to any person who is granted an Option on or after the Effective Date, no such termination, modification, or amendment of the Plan shall adversely alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee. 13. Set-off. If at any time an Optionee is indebted to the Company ------- or any Subsidiary, the Company may in the discretion of the Board or the Committee (a) withhold from the Optionee (i) following the exercise by the Optionee of an Option, Shares issuable to the Optionee having a Fair Market Value on the date of exercise up to the amount of indebtedness to the Company or (ii) following the sale by an Optionee of Shares received pursuant to the exercise of an Option, amounts due to such Optionee in connection with the sale of such Shares up to the amount of indebtedness to the Company, or (b) take any substantially similar action. The Board or the Committee may establish such rules and procedures as it may deem necessary or advisable in connection with the taking of any action contemplated by this Section 13. 14. Captions. Other than the definitions in Section 1 hereof, the -------- captions are not part of this Plan and shall not be taken into account for purposes of interpreting the Plan. 15. Governing Law. The Plan shall be construed in accordance with ------------- the laws of the State of New Jersey without regard to the principles of conflicts of law. A-9 EX-99.(B) 3 AMEND. AND RESTATED 1989 CLASS B STOCK OPTION PLAN EXHIBIT 99(b) SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS B STOCK OPTION PLAN 1. Definitions. The terms below shall be defined as indicated. ----------- 1.1 Board means the Board of Directors of the Company, as constituted at any time. 1.2 Code means the Internal Revenue Code of 1986, as amended from time to time. 1.3 Committee means the Committee of the Board described in Section 3.1. 1.4 Common Stock means the Company's Common Stock, par value $.0l. 1.5 Company means Synetic, Inc., a Delaware corporation, and any successor corporation which adopts the Plan. 1.6 Employee means a person (including an Employee who is also an officer or a director of the Company) employed by the Company or a Subsidiary on a full or part time basis, who is compensated by a regular salary. 1.7 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time. 1.8 Fair Market Value means, on a specified date, the last sales price of a Share traded on the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") or the closing price for a Share on the stock exchange, if any, on which Shares are primarily traded; provided, however, that if no Shares were traded on such date, then on the last previous date on which a Share was so traded, or, if none of the above is applicable, the value of a Share as established by the Committee for such date, using any reasonable method of valuation. 1.9 Incentive Stock Option means an Option which is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. 1.10 Key Consultant means an individual (other than an Employee) who is an officer or director of the Company or a Subsidiary or a consultant, agent, or other person engaged by the Company or a Subsidiary to render services to, or on behalf of, the B-1 Company or such Subsidiary; provided, however, that members of the Committee shall not be eligible to receive Options under the Plan. 1.11 Non-qualified Stock Option means any Option which in not an Incentive Stock Option. 1.12 Option means an option granted by the Company pursuant to the Plan to purchase Shares. 1.13 Option Agreement means a written agreement, as described in Section 7 hereof, between the Company and an Optionee evidencing an Option. 1.14 Option Period means the period from the date of the granting of an Option to the date on which that Option can no longer be exercised, as determined by the Committee pursuant to Section 7.4 hereof. 1.15 Option Price means the price to be paid for the Shares purchased pursuant to an Option. 1.16 Optionee means any person who is granted an Option under the Plan. 1.17 Plan means the Company's Amended and Restated 1989 Class B Stock Option Plan, as embodied herein and as amended from time to time. 1.18 Section 162(m) Optionee means, for a given fiscal year of the Company, any Optionee designated by the Committee by not later than 90 days following the start of such year as an Optionee (or such other time as may be required or permitted by Section 162(m) of the Code) whose compensation for such fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 1.19 Shares means shares of Common Stock. 1.20 Subsidiary means a subsidiary of the Company as defined under Section 424(f) of the Code. 2. Purpose. The Plan is intended to encourage ownership of Common ------- Stock by certain Employees and Key Consultants in order to increase their interest in the Company's success and to encourage them to remain in the employ of, or in a consultancy relationship with, the Company and its Subsidiaries. B-2 3. Administration. -------------- 3.1 Board or Committee. The Plan shall be administered by the ------------------ Board or, if the Board so elects, by a Committee of at least two members of the Board to be appointed by the Board. In the event that the Board does not elect to appoint a Committee, then, for purposes of administering the Plan, the term "Board" shall be substituted for the term "Committee" whenever it appears in the Plan. 3.2 Interpretation and Construction. The Committee shall have ------------------------------- the authority to interpret and construe the provisions of the Plan or of any Option Agreement and such interpretation or construction shall be final and conclusive unless otherwise determined by the Board, and in any such event the determination by the Board shall be final and conclusive. 3.3 Determination of Option Terms. The Committee shall have ----------------------------- authority, subject to the terms of the Plan, to determine the persons to whom Options shall be granted, the number of Shares to be covered by each Option, the time or times at which Options shall be granted, and the terms and provisions of the Options, and to make all other determinations necessary or advisable for the administration of the Plan. 4. Eligible Persons. The Committee may grant Options to any ---------------- Employee or Key Consultant; provided, however, that an Incentive Stock Option shall not be granted to any individual who is not an Employee as of the date of grant, and, provided further, that no Incentive Stock Option shall be granted to any individual who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary, unless, at the time the Incentive Stock Option is granted, the Option Price is at least 110% of the Fair Market Value of a Share and the Incentive Stock Option, by its terms, is not exercisable after the expiration of five years from the date such Option is granted. 5. Grant of Option. --------------- 5.1 Procedure. Subject to the provisions of Sections 8.1 and --------- 8.2 hereof, the Committee may grant Options, which may be either Incentive Stock Options or Non-qualified Stock Options (as determined by the Committee, in its sole discretion) provided that the person to whom the Option is granted subsequently becomes a party to an Option Agreement. An Option granted pursuant to the Plan shall be presumed to be a Non-qualified Stock Option, unless the Committee specifies otherwise at the time the Option is granted. 5.2 Additional Grants. Subject to Section 8.2 hereof, nothing ----------------- contained in the Plan shall be construed to preclude either the granting of an Option to an B-3 Optionee to whom one or more Options have already been granted or the simultaneous granting of more then one Option to the same Optionee. 5.3 Subject to Market or Exchange Rules. Any and all grants of ----------------------------------- Options shall be subject to all applicable rules and regulations of Nasdaq or any stock exchange on which the Company's Common Stock may then be listed. 6. Effective Date and Expiration Date of Plan. The Plan shall be ------------------------------------------ effective as of the date on which stockholder approval of the Plan is obtained (the "Effective Date"). No Option shall be granted under the Plan after the tenth anniversary of the Effective Date. 7. Option Agreements. Option Agreements shall be in such form as ----------------- the Committee, in its sole discretion, shall approve or determine; provided, however, that all Option Agreements shall comply with and be subject to the following terms and conditions: 7.1 Manner, Time, and Medium of Payment. An Option shall be ----------------------------------- exercised in the manner set forth in the Option Agreement relating thereto and payment in full of the Option Price for all Shares shall be made at the time of exercise. Payment shall be in United States dollars in the form of cash, certified check, bank draft, by delivery to the Company, Shares which the Optionee has owned for at least six months, or, if the Committee so determines, by withholding Shares with respect to which the Optionee has exercised such Option or pursuant to a "cashless" exercise through a broker, or any combination of such methods of payment. Shares shall be valued at their Fair Market Value on the date of exercise. 7.2 Number of Shares. Subject to Section 9 hereof, the Option ---------------- Agreement shall state the number of Shares to which it pertains. 7.3 Option Price. The Option Price shall be determined by the ------------ Committee, in its sole discretion; provided, however, that in the case of a Non- qualified Stock Option, the Option Price shall not be less than 85% of the Fair Market Value of a Share as of the date the Option is granted, and, in the case of an Incentive Stock Option or a Non-qualified Stock Option granted to a Section 162(m) Optionee, shall not be less than 100% of the Fair Market Value of a Share as of the date the Option is granted. 7.4 Option Period. Each Option granted under the Plan shall ------------- expire no later than ten years (or five years as provided in Section 4 hereof) from the date the Option is granted. Option Agreements shall contain provisions for the earlier expiration of the Options in the event of the Optionee's termination of employment as provided by Section 7.8 hereof. B-4 7.5 Date of Exercise. An Option shall be exercisable at the ---------------- times specified by the Committee at the time the Option is granted; notwithstanding the foregoing, in the event of a "Change in Control", the Board may in its sole discretion, determine that any Option granted under the Plan shall become exercisable in full or in part, whether or not it is then exercisable. For purposes of the Plan, a "Change in Control" shall be deemed to have occurred: (i) when any "person", as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) and 14(d) thereof (but excluding Martin J. Wygod and his affiliates, the Company (and any successor to the Company in the transaction which did not result in a Change in Control), any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee) directly or indirectly becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time) of securities of the Company representing 50 percent or more of the combined power of its then outstanding securities with respect to the election of directors; (ii) when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors"), cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors of the Company who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24- month period) or by prior operation of this Section 7.5(ii); (iii) when the stockholders of the Company approve a merger or consolidation of the Company without the consent or approval of a majority of its Incumbent Directors; (iv) when there in a sale or disposition of all or substantially all of the Company's assets; or (v) when the Company adopts a plan of liquidation. B-5 In addition, the Committee may, in its sole discretion, include provisions in an Option Agreement relating to a change in control of a Subsidiary. The Committee may also determine at the time of grant or thereafter that an Option shall become exercisable in full or in part, whether or not it is then exercisable, upon such circumstances or events as the Committee determines, in its sole discretion, merits special consideration. 7.6 Reorganization. In case the Company is merged or -------------- consolidated with another corporation, or in case of a reorganization, separation, or liquidation of the Company, the Board or the board of directors of any corporation assuming the obligations of the Company hereunder shall either (i) make appropriate provisions for the protection of any outstanding Options by the substitution on an equitable basis of appropriate securities of the Company, or appropriate securities of the merged, consolidated, or otherwise reorganized corporation, or the appropriate adjustment in the Option Price, or both, or (ii) give written notice to the Optionees that their Options must be exercised, to the extent then exercisable after giving due effect to Section 7.5 hereof, within 60 days of the date of such notice or the Options will terminate. 7.7 Transferability; Assignability. No Option shall be ------------------------------ assignable or transferable except by will or by the laws of descent and distribution and no Option may be exercised other than by an Optionee or, after the death of an Optionee, by that Optionee's personal representative, heirs or legatees; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of an Option that is not an Incentive Stock Option to an Optionee's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. 7.8 Continuation with Company. ------------------------- 7.8.1 No Option shall be exercisable by an Optionee later than the expiration of the Option Period or 30 days after termination of such Optionee's service as an Employee or a Key Consultant, whichever occurs first, unless such termination of service occurs by reason of the Optionee's retirement with the consent of the Company or the Subsidiary, as the case may be, or his death. The Committee may provide in an Option Agreement that employment with a Subsidiary shall not constitute employment with the Company for purposes of such Option Agreement. If the Optionee's services are terminated because of his retirement with such consent or death (or if the Optionee dies within 30 days of such termination or 90 days of such retirement) the Optionee (or the representative of the estate or the heirs or legatees of a deceased Optionee) shall have the right to exercise the unexercised portion of the Option which the Optionee could have exercised as of the date of his retirement or death provided that notice of such exercise is given to the Company in writing before the expiration of the Option Period and within 90 days of the Optionee's retirement or one year of the Optionee's death, an the case may be. If the Optionee's services with the Company or the B-6 Subsidiary are terminated because of the Optionee's violation of his duties to the Company or the Subsidiary as he may from time to time have, the existence of which violation shall be determined by the Committee, in its sole discretion (which determination shall be conclusive) all of the Optionee's Options shall terminate immediately and the Optionee shall have no right after such termination to exercise any Option he might have been able to exercise prior to his termination of service. 7.8.2 Nothing in the Plan or in any Option granted under it shall confer (or be deemed to confer) upon an Optionee any right to continue in the employ or continue to be retained by the Company or any Subsidiary or interfere in any way with the right of the Company or any Subsidiary to terminate his employment or retention at any time. 7.9 Rights of Stockholder. An Optionee shall have no rights as --------------------- a stockholder with respect to such Shares covered by any Option until the date the Company has issued and delivered such Shares to the Optionee, and the Optionee's name shall have been entered as the stockholder of record on the books of the Company and then only as to such Shares as are actually issued and delivered to the Optionee. 7.10 Securities Laws. The Company may require each Optionee to --------------- represent to the Company, in writing, when an Option is exercised, that such Optionee is exercising such Option for his own account for investment only and not with a view to distribution and that the Optionee will not make any sale, transfer, or other disposition of any Shares so purchased except (i) pursuant to a registration statement filed under the Securities Act of 1933, as amended, which the Securities and Exchange Commission has declared effective, (ii) pursuant to an opinion of counsel satisfactory in form and substance to the Company that said sale, transfer, or other disposition may be made without registration, or (iii) pursuant to a "no action" letter issued to the Optionee by the Securities and Exchange Commission. The Company may require each certificate representing Shares purchased upon the exercise of an Option to bear a legend stating that the Shares evidenced thereby may not be sold or transferred except in compliance with the Securities Act of 1933, as amended, and the provisions of the Plan. No Option may be granted or exercised at a time when such Option, or the granting or exercise thereof, may result in the violation of any law or governmental order or regulation. 7.11 Other Provisions. Option Agreements shall contain such ---------------- other term and conditions not inconsistent with the Plan as the Committee shall deem advisable or as shall be required by Section 422 of the Code. B-7 8. Shares Available for Option. --------------------------- 8.1 Maximum. Subject to Sections 7.6 and 9 hereof, no more than ------- 3,600,000 Shares shall be subject to purchase pursuant to Options granted under the Plan. At all times during the term of the Plan, the Company shall have reserved said number of Shares less an amount equal to the number of Shares which have been issued pursuant to the exercise of Options. At all times after termination of the Plan, the Company shall have reserved for issuance a number of Shares equal to the aggregate number of Shares subject to outstanding Options. 8.2 Employee Maximum. Subject to Sections 7.6 and 9 hereof, no ---------------- Optionee shall receive Options under this Plan with respect to an aggregate of more than 250,000 Shares in any Plan year. 8.3 Expiration or Termination. If any outstanding Option under ------------------------- the Plan expires for any reason or is terminated prior to the expiration date of the Plan as set forth in Section 6 hereof, the Shares allocable to any unexercised portion of such Option may again be subject to Options under the Plan. 8.4 $l00,000 Limitation. Notwithstanding any other provision of ------------------- this Plan to the contrary, the aggregate Fair Market Value (determined as of the time of grant) of the sum of (a) the Shares for which any Optionee is granted Incentive Stock Options and (b) the securities of the Company or any Subsidiary for which such Optionee is granted other incentive stock options (within the meaning of Section 422 of the Code), which are exercisable for the first time by such Optionee during any calendar year shall not exceed $100,000. 9. Recapitalization or Change in Par Value of Common Stock. The -------------------------------------------------------- aggregate number of Shares purchasable under Options pursuant to the Plan and the number of Shares and the Option Price for Shares covered by each outstanding Option shall all be proportionately adjusted, as deemed appropriate by the Committee, if the Shares are split-up, converted, exchanged, reclassified, or in any way substituted for. The Committee shall also provide for appropriate adjustments of the number of Shares purchasable under the Plan and of outstanding Options in the event of stock dividends or distributions of assets or securities of other companies owned by the Company to stockholders relating to Common Stock for which the record date is prior to the date the shares purchased by exercise of an Option are issued, except that no such adjustment shall be made for cash dividends or stock dividends of 10% or less (in the aggregate). Any such adjustment to an outstanding Option my include an adjustment of the Option Price or the number of Shares for which an Option may be exercised, or may provide for an escrow of assets or securities so distributed to be available upon future exercise, or any combination thereof, as the Committee deems appropriate. In the event of a change in the Company's presently authorized Common Stock which is limited to a change of B-8 all of its presently authorized Shares with par value into the same number of shares without par value, or any change of the then authorized Shares with par value into the same number of shares with a different par value, the shares resulting from any such change shall be deemed to be Shares as defined in Section 1 hereof, and no change in the number of Shares covered by each Option or in the Option Price shall take place. 10. Indemnification and Reliance. ---------------------------- 10.1 Indemnification. Each person who is or shall have been a --------------- member of the Board or of the Committee shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or, resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from may and all amounts paid by such person in settlement thereof (with the Company's written approval) or paid by such person in satisfaction of a judgment in any such action, suit, or proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject, however, to the condition that upon the institution of any such claim, action, suit, or proceeding, such person shall in writing give the Company an opportunity to intervene at its own expense on his behalf. The foregoing right of indemnification shall not be exclusive of any other right to which such person may be entitled as a matter of law or otherwise, or any power that the Company may have to indemnify such person or hold him harmless. 10.2 Reliance. Each member of the Board or of the Committee and -------- each officer and employee of the Company in performing duties under the Plan shall be entitled to rely upon information and reports furnished in connection with the administration of this Plan by any duly authorized officer or agent of the Company. 11. Income Tax Withholding. If the Company or a Subsidiary shall be ---------------------- required to withhold any amounts by reason of any federal, state or local tax rules or regulations in respect of the payment of cash or the issuance of Shares pursuant to the exercise of an Option, the Company or such Subsidiary shall be entitled to deduct and withhold such amounts from any cash payments to be made to the Optionee. In any event, the Optionee shall either (i) make available to the Company or such Subsidiary, promptly when requested by the Company or such Subsidiary, sufficient funds to meet the requirements of such withholding, or (ii) to the extent permitted by the Committee, irrevocably authorize the Company to withhold from the Shares otherwise issuable to the Optionee as a result of such exercise a number of Shares having a Fair Market Value, as of the date the withholding tax obligation arises (the "Tax Date") which alone, or when added to funds paid to the Company or the Subsidiary by the Optionee, equal the amount of the minimum withholding tax obligation (the "Withholding Election") and the Company or such Subsidiary shall be entitled to take and authorize such B-9 steps as it may deem advisable in order to have such funds made available to the Company or such Subsidiary out of any funds or property due or to become due to the Optionee. An Optionee's Withholding Election may only be made prior to the Tax Date and may be disapproved by the Committee. 12. Amendment or Termination of Plan. The Board may modify, amend or -------------------------------- terminate the Plan in whole or in part at any time; provided, however, that (i) no modification or amendment shall be effective without stockholder approval if such approval is required by law or under the rules of Nasdaq or of the stock exchange on which the Shares are listed, (ii) with respect to any person who is granted an Option prior to the Effective Date, no such termination, modification, or amendment of the Plan shall alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee and (iii) with respect to any person who is granted an Option on or after the Effective Date, no such termination, modification, or amendment of the Plan shall adversely alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee. 13. Set-off. If at any time an Optionee is indebted to the Company ------- or any Subsidiary, the Company may in the discretion of the Board or the Committee (a) withhold from the Optionee (i) following the exercise by the Optionee of an Option, Shares issuable to the Optionee having a Fair Market Value on the date of exercise up to the amount of indebtedness to the Company or (ii) following the sale by an Optionee of Shares received pursuant to the exercise of an Option, amounts due to such Optionee in connection with the sale of such Shares up to the amount of indebtedness to the Company, or (b) take any substantially similar action. The Board or the Committee may establish such rules and procedures as it may deem necessary or advisable in connection with the taking of any action contemplated by this Section 13. 14. Captions. Other then the definitions in Section 1 hereof, the -------- captions are not part of this Plan and shall not be taken into account for purposes of interpreting the Plan. 15. Governing Law. The Plan shall be construed in accordance with ------------- the laws of the State of New Jersey without regard to the principles of conflicts of law. B-10 EX-99.(C) 4 AMEND. AND RESTATED 1991 SPEC. NON-QUAL SOP EXHIBIT 99(c) SYNETIC, INC. AMENDED AND RESTATED 1991 SPECIAL NON-QUALIFIED STOCK OPTION PLAN 1. Definitions. The terms below shall be defined as indicated. ----------- 1.1 Board means the Board of Directors of the Company, as ----- constituted from time to time. 1.2 Code means the Internal Revenue Code of 1986, as amended ---- from time to time, or any successor statute thereto. 1.3 Committee means the Committee of the Board described in --------- Section 3. 1.4 Common Stock means the Company's common stock, par value ------------ $.01. 1.5 Company means Synetic, Inc., a Delaware corporation, and ------- any successor corporation which adopts the Plan. 1.6 Designated Officer means any director of the Company (who is ------------------ also an officer of the Company) that the Board or the Committee may designate pursuant to Section 3 to act on their behalf with respect to the Plan. 1.7 Exchange Act means the Securities Exchange Act of 1934, as ------------ amended from time to time, or any successor statute thereto. 1.8 Fair Market Value means, on a specified date, the last sales ----------------- price of a Share traded on the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotation System ("Nasdaq"), or the last closing price for a Share on the stock exchange, if any, ------ on which Shares are primarily traded (or if no Shares were traded on such date, then on the last previous date on which any Shares were so traded), or if none of the above is applicable, the value of a Share for such date as established by the Committee, using any reasonable method of valuation. 1.9 Key Consultant means an individual (other than a Key -------------- Employee) who is a consultant, agent, or other person engaged by the Company or a Subsidiary to render services to, or on behalf of, the Company or such Subsidiary. 1.10 Key Employee means a person employed by the Company or a ------------ Subsidiary on a full or part time basis, who is compensated by a regular salary. C-1 1.11 Option means an option to purchase Shares granted by the ------ Company pursuant to the Plan. The Options are not intended to qualify as "incentive stock options" within the meaning of Section 422 of the Code. 1.12 Option Agreement means a written agreement as described ---------------- in Section 7 between the Company and the Optionee evidencing an option. 1.13 Option Period means the period from the date of the ------------- granting of an Option to the date on which that Option can no longer be exercised. 1.14 Option Price means the price to be paid for the Shares ------------ purchased pursuant to an Option. 1.15 Optionee means any person who is granted an Option under -------- the Plan. 1.16 Plan means the Company's Amended and Restated 1991 Special ---- Non-Qualified Stock Option Plan, as adopted by the Board in substantially the form set forth herein and as the same may be amended or otherwise modified from time to time. 1.17 Shares means shares of Common Stock. ------ 1.18 Subsidiary means a subsidiary of the Company as defined ---------- under Section 424(f) of the Code. 2. Purpose. The Plan is intended to encourage ownership of Common ------- Stock by Key Employees and Key Consultants, upon whose judgment and interest the Company is dependent for its successful operation and growth, in order to increase their proprietary interest in the Company's success and to encourage them to remain in the employ of the Company. 3. Administration. -------------- 3.1 Board, Committee or Designated Officer. The Plan shall be -------------------------------------- administered by the Board or, if the Board so determines, by a Committee appointed by the Board from among its members. The Board or the Committee may designate one or more Designated Officers, each of whom shall be authorized and empowered to exercise such functions and make such determinations with respect to the Plan and the administration thereof as the Board or the Committee shall specify in the resolution designating such officer. Any provision of the Plan to the contrary notwithstanding, (a) in the event of any inconsistency between any action taken by a Designated Officer and any action taken by the Committee concerning the Plan or any Options hereunder, the action taken by the Committee shall govern, C-2 (b) in the event of any inconsistency between any action taken by a Designated Officer or the Committee and any action taken by the Board concerning the Plan or any Options hereunder, the action taken by the Board shall govern and (c) no Designated Officer may take any action except to the extent authorized to do so by a resolution of the Board or the Committee. 3.2 Determination of Option Terms. Subject to the provisions ----------------------------- of Section 8 and Section 12, the Board, the Committee or any Designated Officer shall have authority to determine the vesting and exercise schedule with respect to Options, the persons to whom Options shall be granted, the number of Shares to be covered by each Option, the time or times at which Options shall be granted and the terms and provisions of the Options, and to make all other determinations necessary or advisable for the administration of the Plan. Unless otherwise determined and specified in the Option Agreement, Options shall become exercisable during the first five years in which the option is outstanding at the rate of 20% per year. 3.3 Interpretation and Construction. The Board, the Committee ------------------------------- or the Designated Officer(s), as applicable, shall have the authority to interpret and construe the provisions of the Plan or of any Option Agreement and, subject to Section 3.1, such interpretation and construction by the Board, the Committee or any Designated Officer shall be final and conclusive. 4. Eligible Persons. The Board, the Committee or any Designated ---------------- Officer, as the case may be, may grant Options only to Key Employees or Key Consultants; provided, however, that no Option shall be granted to any individual who, at the time of grant, is subject to Section 16 of the Exchange Act. 5. Grant of Options. ---------------- 5.1 Procedure. Subject to the provisions of Sections 8.1 and --------- 8.2, the Board, the Committee or any Designated Officer may (but shall not be required to) grant Options, provided that the person to whom the Option is to be granted subsequently becomes a party to an Option Agreement. 5.2 Additional Grants. Subject to Section 8.2 hereof, nothing ----------------- contained in the Plan shall be construed to preclude either the granting of an Option to an Optionee to whom one or more Options have already been granted or the simultaneous granting of more than one Option to the same Optionee. 5.3 Subject to Exchange Rules. Any and all grants of Options ------------------------- shall be subject to all applicable rules and regulations of Nasdaq or any stock exchange on which the Common Stock may then be listed. C-3 6. Effective Date and Expiration Date of Plan. The Plan shall be ------------------------------------------ effective as of the date on which stockholder approval of the Plan is obtained (the "Effective Date"). No Option shall be granted under the Plan after the -------------- tenth anniversary of the Effective Date. 7. Option Agreements. Option Agreements shall be in such form as ----------------- the Board, the Committee or any Designated Officer shall approve or determine; provided, however, that all Option Agreements shall comply with and be subject to the following terms and conditions: 7.1 Manner, Time, and Medium of Payment. An Option shall be ----------------------------------- exercised in the manner set forth in the Option Agreement relating thereto and payment in full of the Option Price for all Shares shall be made at the time of exercise. Payment shall be in United States dollars in the form of cash, certified check or bank draft, or by delivery of fully paid Shares held for a period of at least six months valued at their Fair Market Value on the date of exercise, or, if the Board, the Committee or any Designated Officer so determines, by withholding Shares with respect to which the Optionee has exercised such Option having a Fair Market Value on the date of exercise equal to the sum of the Option Price for the withheld Shares and the remaining Shares with respect to which the Optionee has exercised such option, or any combination of such methods of payment. 7.2 Number of Shares. Subject to Section 9, the Option ---------------- Agreement shall state the number of Shares to which it pertains. 7.3 Option Price. The Option Price shall be determined by the ------------ Board, the Committee or any Designated Officer. Notwithstanding the foregoing, subject to Section 9, except for options which are given in substitution for options of any parent, subsidiary, predecessor to or party to a merger or reorganization with or into the Company, the Option Price shall not be less than the Fair Market Value of a Share on the date the Option is granted. 7.4 Option Period. Each Option granted under the Plan shall ------------- expire no later than fifteen years from the date the Option is granted. Any Option Agreement may contain provisions for the earlier expiration of the Option in the event of the Optionee's termination of employment, retirement or death or in the event of a violation by an Optionee of any of such Optionee's duties to the Company or any Subsidiary. 7.5 Date of Exercise. An Option shall be exercisable at the ---------------- times specified by the Board, the Committee or any Designated Officer, as applicable, at the time the Option is granted; notwithstanding the foregoing, in the event of a "Change in Control", the Board, may in its sole discretion determine that any Option granted under the Plan shall become exercisable in full or in part, whether or not it is then exercisable. For purposes of the Plan, a "Change in Control" shall be deemed to have occurred: ----------------- C-4 (i) when any "person", as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a "group", as defined in Section 13(d) and 14(d) thereof (but excluding Martin J. Wygod and his affiliates), the Company (and any successor to the Company in the transaction which did not result in a change in control), any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of such plan acting as trustee) directly or indirectly becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time) of securities of the Company representing 50 percent or more of the combined power of its then outstanding securities with respect to the election of directors; (ii) when, during any period of 24 consecutive months during the existence of the Plan, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors"), cease for any ------------------- reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of at least two-thirds of the directors of the Company who then qualified as Incumbent Directors, either actually (because they were directors at the beginning of such 24- month period) or by prior operation of this Section 7.5(ii); (iii) when the stockholders of the Company approve a merger or consolidation of the Company without the consent or approval of a majority of its Incumbent Directors; (iv) when there in a sale or disposition of all or substantially all of the Company's assets; or (v) when the Company adopts a plan of liquidation. In addition, the Board or the Committee, as applicable, may, in its sole discretion, include provisions in an Option Agreement relating to a change in control of a Subsidiary. The Board or the Committee may also determine at the time of grant or thereafter that an Option shall become exercisable in full or in part, whether or not it is then exercisable, upon such circumstances or events as the Board or the Committee, in its sole discretion, merits special consideration. 7.6 Reorganization. In case the Company is merged or -------------- consolidated with another corporation, or in case of a reorganization, separation or liquidation of the C-5 Company, the Board or the board of directors of any corporation assuming the obligations of the Company hereunder shall either (i) make appropriate provisions for the protection of any outstanding options by the substitution on an equitable basis of appropriate securities of the Company, or appropriate shares or other securities of the merged, consolidated, or otherwise reorganized corporation, or the appropriate adjustment in the Option Price, or both, or (ii) give written notice to Optionees that their Options must be exercised, to the extent then exercisable after giving due effect to Section 7.5, within 60 days of the date of such notice or they will terminate, and to the extent that such Options are not exercised within such 60-day period they shall terminate and be of no further effect. 7.7 Transferability; Assignability. No Option shall be ------------------------------ assignable or transferable except by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order (as such term is defined in the Code), and no Option may be exercised other than by an Optionee or, after the death of an Optionee, by that Optionee's personal representatives, heirs, or legatees; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of an Option to an Optionee's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. 7.8 Continuation with Company. No Option shall be exercisable ------------------------- by an Optionee after the expiration of the Option Period, or 30 days after termination of such Optionee's service as a Key Employee or a Key Consultant, whichever occurs first, unless such termination of service occurs by reason of the Optionee's retirement with the consent of the Company or the Subsidiary, as the case may be, or his death. The Board, the Committee or any Designated Officer may provide in an Option Agreement that employment with a Subsidiary shall not constitute employment with the Company for purposes of such Option Agreement. If the Optionee's services are terminated because of his retirement with such consent or death (or if the Optionee dies within 30 days of such termination or 90 days of such retirement) the Optionee (or the representative of the estate or the heirs or legatees of a deceased Optionee) shall have the right to exercise the unexercised portion of the Option which the Optionee could have exercised as of the date of his retirement or death, provided that notice of such exercise is given to the Company in writing before the expiration of the Option Period and within 90 days of the Optionee's retirement or one year of the Optionee's death, an the case may be. If the Optionee's services with the Company or the Subsidiary are terminated because of the Optionee's violation of his duties to the Company or the Subsidiary as he may from time to time have, the existence of which violation shall be determined by the Board, the Committee or any Designated Officer, as applicable, in his, her or its sole discretion (which determination shall be conclusive), all of the Optionee's Options shall terminate immediately and the Optionee shall have no right after such termination to exercise any Option he might have been able to exercise prior to his termination of service. In addition, the Board, the Committee or any Designated Officer, in his, her or its sole discretion may require that any Option Agreement include provisions that in the C-6 event of a violation by the Optionee of his or her duties to the Company or any Subsidiary (whether before or after termination of the Optionee's services), the existence of which violation shall be determined by the Board, the Committee or any Designated Officer in his, her or its sole discretion (which determination shall be conclusive), the Optionee shall remit to the Company all income that he or she has realized during the twenty-four month period prior to such violation. 7.9 No Right to Continue with Company. Nothing in the Plan or --------------------------------- in any Option granted under the Plan shall confer (or be deemed to confer) any right on any Optionee to continue as an Officer or as an employee of the Company or any Subsidiary or shall interfere in any way with the right of the Company or any Subsidiary to terminate such status at any time, with or without cause and with or without notice. 7.10 Rights as a Stockholder. An Optionee shall have no rights ----------------------- as a stockholder with respect to Shares covered by any Option until the date the Company has issued or delivered such Shares to the Optionee, and the Optionee's name shall have been entered as the stockholder of record on the books of the Company and then only as to such Shares as are actually issued and delivered to the Optionee. 7.11 Other Provisions. Option Agreements shall contain such ---------------- other terms and conditions not inconsistent with the Plan as the Board, the Committee or any Designated Officer shall deem advisable. 7.12 Compliance with Law. Notwithstanding any provision of the ------------------- Plan or any Option Agreement to the contrary, no Option may be granted or exercised at any time when such Option or the granting or exercise thereof or payment therefor may result in the violation of any law or governmental order or regulation. 7.13 Securities Laws. The Company may require each Optionee to --------------- represent to the Company, in writing, when an Option is exercised that such Optionee is exercising such Option for his own account for investment only, and not with a view to distribution, and that the Optionee will not make any sale, transfer, or other disposition of any Shares so purchased except (i) pursuant to a registration statement filed under the Securities Act of 1933, as amended, which the Securities and Exchange Commission has declared effective, (ii) pursuant to an opinion of counsel satisfactory in form and substance to the Company that said sale, transfer, or other disposition may be made without registration, or (iii) pursuant to a "no action" letter issued to the Optionee by the Securities and Exchange Commission. The Company may require each certificate representing Shares purchased upon the exercise of an Option to bear a legend stating that the Shares evidenced thereby may not be sold or transferred except in compliance with the Securities Act of 1933, as amended, and the provisions of the C-7 Plan. No Option may be granted or exercised at a time when such Option, or the granting or exercise thereof, may result in the violation of any law or governmental order or regulation. 8. Share Available for Option. -------------------------- 8.1 Maximum. Subject to Sections 7.6 and 9, no more than ------- 2,750,000 Shares shall be subject to purchase pursuant to Options granted under the Plan. At all times during the term of the Plan, the Company shall have reserved that number of Shares less an amount equal to the number of Shares which have been issued pursuant to the exercise of Options. At all times after termination of the Plan, the Company shall have reserved for issuance a number of Shares equal to the aggregate number of Shares subject to outstanding Options. 8.2 Employee Maximum. Subject to Sections 7.6 and 9 hereof, no ---------------- Optionee shall receive Options under this Plan with respect to an aggregate of more than 250,000 Shares in any Plan year. 8.3 Expiration or Termination. If any outstanding Option under ------------------------- the plan expires for any reason or is terminated prior to the expiration date of the Plan as set forth in Section 6, the Shares allocable to any unexercised portion of such Option may again be subject to an Option. 9. Recapitalization or Change in Par Value of Common Stock. The ------------------------------------------------------- aggregate number of Shares purchasable under Options granted and which may be granted pursuant to the Plan and the Option Price for Shares covered by each outstanding Option shall all be proportionately adjusted, as deemed appropriate by the Board, the Committee or any Designated Officer if the Shares are split up, converted, exchanged, reclassified or in any way substituted for. The Board, the Committee or such Designated Officer shall provide for appropriate adjustments of the numbers of shares purchasable under the Plan and of outstanding Options in the event of stock dividends or distributions of assets or securities of other companies owned by the Company to stockholders relating to Common Stock for which the record date is prior to the date the Shares purchased by exercise of an Option are issued or transferred, except that no such adjustment shall be made for cumulative stock dividends of 10% or less (in the aggregate) or cash dividends. Any such adjustment may include an adjustment of the Option Price or the number of Shares for which an Option may be exercised, or may provide for an escrow of assets or securities so distributed to be available upon future exercise. In the event of a change in the Company's presently authorized Common Stock which is limited to a change of all of its presently authorized Shares of Common Stock with par value into the same number of shares without par value, or any change of the then authorized Shares of Common Stock with par value into the same number of shares of Common Stock with a different par value, the shares resulting from any such change shall be deemed to be Shares as defined in Section 1, and C-8 no change in the number of Shares covered by each Option or in the Option Price shall take place. 10. Indemnification; Reliance; Exculpation. -------------------------------------- 10.1 Indemnification. Each person who is or shall have been a --------------- member of the Board or of the Committee and each Designated Officer shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof (with the Company's written approval) or paid by such person in satisfaction of a judgment in any such action, suit, or proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject, however, to the condition that upon the institution of any such claim, action, suit, or proceeding, such person shall in writing give the Company an opportunity to intervene at the Company's expense on his or her behalf. The foregoing right of indemnification shall not be exclusive of any other right to which such person may be entitled as a matter of law or otherwise, or any power that the Company may have to indemnify such person or hold him or her harmless. 10.2 Reliance. Each member of the Board or of the Committee, -------- each Designated Officer and each other officer and employee of the Company in performing duties under the Plan shall be entitled to rely upon information and reports furnished in connection with the administration of this Plan by any duly authorized officer or agent of the Company. 10.3 Exculpation. No member of the Board or of the Committee ----------- and no Designated Officer shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under the Plan. 11. Income Tax Withholding. If the Board, the Committee, or any ---------------------- Designated Officer shall be required to withhold any amounts by reason of any federal, state or local tax rules or regulations in respect of the payment of cash or the issuance of Shares pursuant to the exercise of an Option, the Company or such Subsidiary shall be entitled to deduct and withhold such amounts from any cash payments to be made to the Optionee. In any event, the Optionee shall either (i) make available to the Company or Subsidiary, promptly when requested by the Company or such Subsidiary, sufficient funds or, if the Option Agreement so provides, Shares (valued at Fair Market Value as of the date the withholding tax obligation arises (the "Tax Date")), to meet the requirements of --- ---- such withholding, or (ii) to the extent permitted by the Board, the Committee or any Designated Officer, irrevocably authorize the Company to withhold from the Shares otherwise issuable to the Optionee as a result of such exercise a number of Shares having a Fair Market Value as of the Tax Date which alone, or when added to C-9 funds paid or Shares delivered to the Company or the Subsidiary by the Optionee, equal the amount of the minimum withholding tax obligation (the "Withholding ----------- Election") and the Company or such Subsidiary shall be entitled to take and - -------- authorize such steps as it may deem advisable in order to have such funds or Shares made available to the Company or such Subsidiary out of any funds or property due or to become due to the Optionee. An Optionee's Withholding Election may only be made prior to the Tax Date and may be disapproved by the Board, the Committee or any Designated Officer. The Board, the Committee or any Designated Officer may establish such rules and procedures as he, she or it may deem necessary or advisable in connection with the withholding of taxes relating to the exercise of any Option. 12. Amendment or Termination of Plan. The Board may modify, amend or -------------------------------- terminate the Plan in whole or in part at any time; provided, however, that (i) no modification or amendment shall be effective without stockholder approval if such approval is required by law or under the rules of Nasdaq or of the stock exchange on which the Shares are listed, (ii) with respect to any person who is granted an Option prior to the Effective Date, no such termination, modification, or amendment of the Plan shall alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee and (iii) with respect to any person who is granted an Option on or after the Effective Date, no such termination, modification, or amendment of the Plan shall adversely alter or affect the terms of any then outstanding Options previously granted hereunder without the consent of the Optionee. 13. Set-Off. If at any time an Optionee is indebted to the Company ------- or any Subsidiary, the Company may in the discretion of the Board, the Committee or any Designated Officer (a) withhold from the Optionee (i) following the exercise by the Optionee of an Option, Shares issuable to the Optionee having a Fair Market Value on the date of exercise up to the amount of indebtedness to the Company or (ii) following the sale by an Optionee of Shares received pursuant to the exercise of an Option, amounts due to an Optionee in connection with the sale of such Shares up to the amount of indebtedness to the Company, or (b) take any substantially similar action. The Board, the Committee or any Designated Officer may establish such rules and procedures as he, she or it may deem necessary or advisable in connection with the taking of any action contemplated by this Section 13. 14. Headings. The section headings contained herein have no -------- substantive meaning or content and are not part of this Plan. 15. Governing Law. The Plan shall be construed in accordance with ------------- the laws of the State of New Jersey without regard to the principles of conflicts of law. C-10 EX-99.(D) 5 STOCK OPTION AGREEMENT EXHIBIT 99(d) EXECUTION COPY -------------- STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT (this "Agreement") made as of June 23, 1997, between --------- SYNETIC, INC., a Delaware corporation (the "Company"), and ROGER C. HOLSTEIN ------- ("Optionee"). - ---------- RECITAL ------- The Company desires to provide Optionee with an opportunity to acquire shares of Common Stock (as defined below) of the Company, subject to stockholder approval. As a result, the Company has elected to issue to Optionee an option to acquire 250,000 shares of its Common Stock and intends that such option comply with the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Section 162(m) of the Internal ------------ Revenue Code of 1986, as amended. AGREEMENTS ---------- In consideration of the Recital (which is incorporated by reference) and the mutual covenants of this Agreement, the Company and Optionee agree as follows: 1. Confirmation of Grant of Option. Pursuant to a determination by ------------------------------- the Stock Option Committee of the Board of Directors of the Company (the "Board")effective as of the date first set forth above (the "Date of Grant"), ----- ------------- the Company hereby confirms that Optionee has been granted, subject to the terms of this Agreement and approval by the Company's stockholders at the next annual meeting of stockholders, the right (the "Option") to purchase 250,000 shares of ------ Common Stock of the Company ("Common Stock"). All of the shares hereunder are ------------ hereinafter referred to as "Shares". Said number of Shares subject to the ------ Option may be adjusted as provided in Section 9. As used herein, "Committee" shall mean the Stock Option Committee of the Board (and any successor committee appointed by the Board). 2. Exercisability of Option. ------------------------ 2.1. Subject to the terms and conditions of this Agreement (including Sections 2.3, 2.4 and 2.5), the Option shall become exercisable: 2.1.1. with respect to 20% of the Shares, on and after the first anniversary of the Date of Grant; 2.1.2. with respect to an additional 20% of the Shares, on and after the second anniversary of the Date of Grant; D-1 2.1.3. with respect to an additional 20% of the Shares, on and after the third anniversary of the Date of Grant; 2.1.4. with respect to an additional 20% of the Shares, on and after the fourth anniversary of the Date of Grant; and 2.1.5. with respect to the remainder of the Shares, on and after the fifth anniversary of the Date of Grant. 2.2. The unexercised portion of the Option shall automatically and without notice terminate and become null and void at the time of the earliest to occur of the following: 2.2.1. The fifteenth anniversary of the Date of Grant; or 2.2.2. Subject to the provisions of Sections 2.3, 2.4, 2.5, 2.6 and 2.7 below, 30 days following the date of termination of Optionee's status as an employee of the Company for any reason in the case of the vested portion of the Option (or the date on which a portion of the Option vests pursuant to Sections 2.5 and 2.6) and immediately following such date of termination in the case of the unvested portion of the Option. 2.3. If Optionee's employment is terminated by the Company for Cause (as defined in this Section 2.3), the Option (both vested and non-vested) shall expire on the date of termination. For purposes of this section of this Agreement, the term "Cause" shall mean any of the following: ----- (a) A willful failure of Optionee to perform his duties in any material respect which failure is not cured by Optionee within 30 days following written notice from the Company detailing such failure; (b) Any willful misconduct by Optionee relating, directly or indirectly, to the Company or any of its affiliates, which breach, if susceptible to cure, is not cured by Optionee within 30 days following written notice from the Company detailing such breach; (c) Any breach by Optionee of any material provision contained in this Agreement or any employment or consulting agreement between the Company and Optionee, which breach, if susceptible to cure, is not cured by Optionee within 30 days following written notice from the Company detailing such breach; or (d) Optionee's conviction of a felony or crime involving moral turpitude. D-2 2.4. If Optionee terminates his employment for any reason other than for Cause (as defined in this Section 2.4), the Option (both vested and non- vested) shall expire on the date of termination. For purposes of this section of this Agreement, the term "Cause" shall mean any of the following: ----- (a) Any material breach by the Company of its obligations to Optionee under this Agreement or any employment or consulting agreement between the Company and Optionee, which, if susceptible to cure, remains uncured; (b) A material demotion of Optionee's position with the Company; or (c) If Optionee is required by the Company to relocate from his present residence or is required to commute, on a regular basis, to the Company's headquarters and such headquarters is outside of the New York City metropolitan area. 2.5. In the event that Optionee's employment with the Company is terminated (I) by the Company without Cause (as defined in Section 2.3) or (II) by Optionee for Cause (as defined in Section 2.4), the Option shall remain outstanding and continue to vest, and shall otherwise be treated for purposes of this Agreement, as if Optionee remained in the employ of the Company through the earlier of (a) the second anniversary of the date of termination or (b) the occurrence of any circumstance or event that would constitute Cause under Section 2.3 of this Agreement. 2.6. In the event that Optionee's employment with the Company is terminated (I) by Optionee upon 30 days' written notice to the Company at any time after a 12 month period following the occurrence of the Change of Control (as defined below) (or such shorter period to the extent the acquiring company does not request the services of the Optionee for such 12 month period), (II) by the Company because Optionee shall become ill, mentally or physically disabled, or otherwise incapacitated so as to be unable regularly to perform the duties of his position for a period in excess of 90 consecutive days or more than 120 days in any consecutive 12 month period, or (III) due to his death, the Option shall remain outstanding and continue to vest, and shall otherwise be treated for the purposes of the terms and conditions thereof, as if Optionee remained in the employment of the Company through the earlier of (a) November 6, 2002 and (b) the occurrence of any circumstances or events that would constitute Cause under such Section 2.3. For purposes of this Section 2.6, a "Change of Control" shall ----------------- be deemed to have occurred if: (a) both (i) any person, entity or group shall have acquired at least 50% of the voting power of the outstanding voting securities of the company ("Voting Power"), excluding Martin J. Wygod and his affiliates, and (ii) ------------ following such acquisition of 50% Voting Power, Martin J. Wygod shall cease to hold one or more of the following positions: Chairman of the Board or Chief Executive Officer of the Company or a D-3 senior executive office of the acquirer of 50% Voting Power, in each case with duties and responsibilities greater than or substantially equivalent to those prior to such acquisition of 50% Voting Power; or (b) both (i) a reorganization, merger or consolidation or sale of other disposition of all or substantially all of the assets of the Company ("Business Combination") shall have occurred and (ii) following such -------------------- Business Combination, Martin J. Wygod shall cease to be Chairman of the Board or Chief Executive Officer of, or to hold a senior executive position in, the corporation resulting from such Business Combination, with duties and responsibilities greater than or substantially equivalent to those prior to such Business Combination; or (c) a complete liquidation or dissolution of the Company shall have occurred. 2.7. Notwithstanding any other provision of this Agreement, the Committee may determine that the Option shall become exercisable in full or in part, whether or not it is then exercisable, upon such circumstances or events as the Committee determines, in its sole discretion, merits special consideration. 2.8 Notwithstanding anything to the contrary contained herein, in no event shall the Option be exercisable after the expiration of fifteen years from the date of this Agreement. 3. Method of Exercise of Option. The Option may be exercised by ---------------------------- Optionee (or by Optionee's personal representatives or heirs at law, as provided in Section 2, but by no other person) as to all or (at Optionee's election) part of the Shares as to which the Option is then exercisable (that is, vested) under Section 2 by giving written notice of exercise to the Company at its principal business office, specifying the number of Shares for which the Option is exercised, accompanied by payment in full for such Shares (as determined pursuant to Section 4) together with any amount required for payroll withholding tax under all applicable federal, state or local laws or regulations. The failure to exercise the Option, in whole or in part, as to any vested exercise rights shall not constitute a waiver of these rights. The Company shall cause certificates for the Shares so purchased to be delivered to Optionee or Optionee's personal representatives or heirs at law, at its principal business office, against payment in full of the Option price for such Shares (as determined pursuant to Section 4), as soon as practicable following receipt of the notice of exercise and the applicable purchase price. The Option price shall be paid in United States dollars in the form of cash, certified check or bank draft, or (if the Shares of Common Stock of the Company are then publicly traded) in fully paid Shares of Common Stock of the Company, that have been held by the Optionee for a period of at least six months (valued for this purpose at their then fair market D-4 value determined by the Committee), consistent with practices permitted by the Committee or a combination of the two. 4. Option Price. Subject to adjustment as provided in Section 9, ------------ the purchase price of the Shares covered by this Agreement shall be $34.875 per Share. 5. Non-Transferability of Option. The Option is not assignable or ----------------------------- transferable except by will or by the laws of descent and distribution and the Option may not be exercised other than by the Optionee or, after the death of the Optionee, by the Optionee's personal representative, heirs or legatees; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of the Option to the Optionee's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members. Without limiting the generality of the foregoing, the Option may not be assigned, transferred (except as permitted in the preceding sentence), pledged or hypothecated in any way (whether by operation of law or otherwise), and shall not be subject to levy, attachment or similar process. Any attempt to assign, transfer, pledge or hypothecate the Option contrary to the provisions of this Agreement, and any levy, attachment or similar process upon the Option shall be null and void and without effect, and the Board or the Committee may, in its discretion, upon the happening of any such event, terminate the Option as of the date of such event. 6. No Rights Prior to Issuance of Shares. The holder of the Option ------------------------------------- shall not have any rights to dividends nor any other rights of a shareholder with respect to the Shares covered by the Option until the Shares have been issued (as evidenced by the appropriate entry on the books of the transfer agent of the Company) following exercise of the Option prior to its termination. 7. Restrictions on Exercise and on Common Stock. -------------------------------------------- 7.1. The Shares issued upon exercise of the Option shall be issued only to Optionee or a person permitted to exercise the Option pursuant to Section 2.3. 7.2. The Company may require the Optionee to represent to the Company, in writing, when the Option is exercised, that the Optionee is exercising the Option for the Optionee's own account for investment only and not with a view to distribution and that the Optionee will not make any sale, transfer or other disposition of any Shares purchased except (i) pursuant to a registration statement filed under the Securities Act of 1933 as amended, which the Securities and Exchange Commission has declared effective, (ii) pursuant to an opinion of counsel satisfactory in form and substance to the Company that the sale, transfer or other disposition may be made without registration, or (iii) pursuant to a "no action" letter issued to the Optionee by the Securities and Exchange Commission. The Company may require each share certificate representing Shares to bear a legend stating that the Shares D-5 evidenced thereby may not be sold or transferred except in compliance with the Securities Act of 1933, as amended, and the provisions of this Agreement. Notwithstanding anything contained herein to the contrary, the Option shall not be exercisable at a time when the exercise thereof may result in the violation of any law or governmental order or regulation. 8. Right to Terminate Employment. This Agreement does not ----------------------------- constitute a contract of, or an implied promise to continue, Optionee's employment or status with the Company or any subsidiary of the Company; and nothing contained in this Agreement shall confer upon Optionee the right to continue such employment or status; nor does this Agreement affect the right of the Company to terminate Optionee's employment at any time. Optionee shall have no rights in the benefits conferred by the Option or in any Shares except to the extent the Option is exercised while vested and prior to termination. Termination of the Option by reason of rightful termination of employment shall give no rise for any claim for damages by Optionee under this Agreement and shall be without prejudice to any rights or remedies which the Company or any subsidiary of the Company may have against Optionee. 9. Adjustment. ---------- 9.1. In the event of any subdivision (stock split) or consolidation (reverse split) of the issued Common Stock of the Company, or any other recapitalization of the Company, or any business combination or other transaction involving the Company, which shall substantially affect the rights of holders of Common Stock, the Board or the Committee shall make such appropriate adjustments to the number of Shares and price per Share covered by the Option, and any other rights under the Option, as deemed appropriate by the Board or the Committee, as the case may be (whose good faith determination shall be absolute and binding upon Optionee), to provide Optionee with a benefit equivalent to that to which Optionee would have been entitled if such event had not occurred; provided, however, that if, as a result of such event, the Common Stock is no longer publicly traded, the Board or the Committee shall make such appropriate adjustments to the unvested portion of the Option, as deemed appropriate by the Board or the Committee, as the case may be (whose good faith determination shall be absolute and binding upon Optionee), to provide Optionee with a benefit equivalent to that to which Optionee would have been entitled if Optionee would have had the right to exercise any unvested portion of the Option immediately prior to such event. The Committee or the Board, as the case may be, shall provide for appropriate adjustment of the Option in the event of stock dividends or distributions of assets or securities of other companies owned by the Company to stockholders relating to Common Stock for which the record date is prior to the date the Shares purchased by exercise of the Option are issued or transferred, except that no such adjustment shall be made for cash dividends or stock dividends of 10% or less (cumulatively, in the aggregate). 9.2. In case the Company is merged or consolidated with another corporation, or in case of a reorganization of the Company, the Board or the board of directors of any D-6 corporation assuming the obligations of the Company hereunder shall either (i) make appropriate provisions for the protection of any outstanding portion of the Option by the substitution on an equitable basis of appropriate securities of the Company, or appropriate securities of the merged, consolidated, or otherwise reorganized corporation, or the appropriate adjustment in the option price, or both, or (ii) give written notice to the Optionee that his Option must be exercised, to the extent then exercisable, within 60 days of the date of such notice or the Option will terminate, and to the extent that the Option is not exercised within such 60-day period it shall terminate and be of no further effect. 10. Taxes. If the Company shall be required to withhold any amounts ----- by reason of any federal, state or local tax rules or regulations in respect of the payment of cash or the issuance of Shares pursuant to the exercise of an Option, the Company shall be entitled to deduct and withhold such amounts from any cash payments to be made to the Optionee. In any event, the Optionee shall either (i) make available to the Company, promptly when requested by the Company, sufficient funds to meet the requirements of such withholding, or (ii) to the extent permitted by the Committee, irrevocably authorize the Company to withhold from the Shares otherwise issuable to the Optionee as a result of such exercise a number of Shares having a fair market value, as of the date the withholding tax obligation arises (the "Tax Date") which alone, or when added to -------- funds paid to the Company by the Optionee, equal the amount of the minimum withholding tax obligation (the "Withholding Election") and the Company shall be -------------------- entitled to take and authorize such steps as it may deem advisable in order to have such funds made available to the Company out of any funds or property due or to become due to the Optionee. An Optionee's Withholding Election may only be made prior to the Tax Date and may be disapproved by the Committee. The Committee may establish such rules and procedures as it may deem necessary or advisable in connection with the withholding of taxes relating to the exercise of the Option. 11. Notices. Each notice relating to this Agreement shall be in ------- writing and delivered in person or by certified mail to the proper address. Each notice to the Company shall be addressed to it at its principal office, attention of the Chief Financial Officer, with a copy to the Company's General Counsel. Each notice to Optionee (or other person or persons then entitled to exercise the Option) shall be addressed to Optionee (or such other person or persons) at Optionee's most recent address on the books of the Company. Anyone to whom a notice may be given under this Agreement may designate a new address by notice to that effect. Each notice shall be deemed to have been given on the day it is received. 12. Benefits of Agreement. This Agreement shall inure to the benefit --------------------- of and be binding upon each successor of the Company. Rights granted to the Company under this Agreement shall be binding upon Optionee's personal representatives and heirs at law. D-7 13. Source of Rights. This Agreement shall be the sole and exclusive ---------------- source of any and all rights which Optionee, and Optionee's personal representatives or heirs at law, may have in respect of the Option as granted hereunder. 14. Captions. The captions contained in this Agreement are for -------- reference purposes only and shall not affect the meaning or interpretation of this Agreement. 15. Interpretation and Construction. The Option shall be ------------------------------- administered by the Committee. The Committee shall have authority to interpret and construe the terms of the Option, to make all determinations necessary or advisable for the administration of the Option (including determinations relating to the delivery of Shares of Common Stock in payment of the purchase price of the Shares covered by the Option and any tax withholding obligations, subject to compliance with any applicable rules promulgated under Section 16 of the Exchange Act). The good faith interpretation and construction by the Board or by the Committee of any provision of this Agreement shall be final and conclusive and binding on the parties hereto. 16. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 17. Governing Law. This Agreement shall be construed in accordance ------------- with and governed by the laws of the State of New Jersey without regard to any principles of conflict of laws. EXECUTION --------- The parties signed this Agreement as of the day and year first above written, whereupon it became binding in accordance with its terms. SYNETIC, INC. By: /s/ Anthony Vuolo ----------------------------- Name: Anthony Vuolo Title: Vice President and Chief Financial Officer /s/ Roger C. Holstein --------------------------------- Roger C. Holstein D-8 -----END PRIVACY-ENHANCED MESSAGE-----