U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of The
Securities Exchange Act of 1934 For The Quarterly
Period Ended September 30, 1998.
[ ] Transition Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Transition Period from ________ to ________
Commission File Number 1-14478
ROOM PLUS, INC.
(Exact name of small business issuer as specified in its charter)
New York 11-2622051
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
91 Michigan Avenue
Paterson, NJ 07503
(Address of principal executive offices)
(973) 523-4600
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No
The number of shares outstanding of the Issuer's Common Stock $.00133 par value,
as of November 11, 1998 was 4,385,000.
The number of the Issuer's Common Stock Purchase Warrants outstanding as of
November 11, 1998 was 2,530,000.
Transitional small business disclosure format:
Yes [ ] No [X]
<PAGE>
ROOM PLUS, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE
- - ------ --------------------- ----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 and December 31, 1997 3
Statements of Operations for the three and nine
months ended September 30, 1998 and 1997 4
Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations 7
Part II OTHER INFORMATION 9
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Number Exhibit Description
4.14 Stock option agreement dated September 21, 1998 with Stephen Giordano
for 100,000 shares 11
10.31 Employment agreement dated September 21, 1998 with Stephen Giordano 17
11 Calculation of Earnings (Loss) Per Common Share 32
27 Financial Data Schedule 33
Signatures 34
</TABLE>
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<PAGE>
ROOM PLUS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------------ ------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................... $ 789,019 $ 185,843
Accounts receivable..................................... 68,483 67,685
Inventories............................................. 2,203,947 1,904,326
Notes receivable, officers.............................. 12,000 12,400
Prepaid expenses........................................ 370,915 492,555
Deferred income taxes................................... 267,000 134,500
----------- -----------
Total Current Assets................................. 3,711,364 2,797,309
----------- -----------
Property and Equipment, net................................ 1,535,750 1,804,303
----------- -----------
Other Assets
Security deposits and deferred charges.................. 157,983 249,474
Deferred income taxes................................... 951,000 1,038,500
Notes receivable, officers.............................. 175,414 177,965
----------- -----------
1,284,397 1,465,939
----------- -----------
$ 6,531,511 $6,067,551
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt....................... $ 163,483 $ 212,791
Notes payable........................................... -- 400,070
Due to related companies................................ 326,701 258,770
Accounts payable and accrued expenses................... 1,339,863 1,604,047
Sales taxes payable..................................... 226,488 108,475
Customer deposits and other advances.................... 453,742 528,517
----------- -----------
Total Current Liabilities............................ 2,510,277 3,112,670
----------- -----------
Long-Term Debt, less current portion....................... 1,835,885 447,857
----------- -----------
Stockholders' Equity
Common stock; authorized, 10,000,000 shares;
$.00133 par value; 4,385,000 shares issued
and outstanding................................. 5,832 5,832
Additional paid-in capital.............................. 6,512,645 6,512,645
Deficit................................................. (4,333,128) (4,011,453)
----------- -----------
2,185,349 2,507,024
----------- -----------
$ 6,531,511 $ 6,067,551
=========== ===========
</TABLE>
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<PAGE>
ROOM PLUS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------------------------ ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues ...................................... $ 14,228,450 $ 12,145,971 $ 5,224,239 $ 4,862,979
Cost of goods sold ............................ 5,954,324 2,009,492 1,990,576 2,009,492
------------ ------------ ----------- -----------
Gross profit .................................. 8,274,126 2,853,487 3,233,663 2,853,487
------------ ------------ ----------- -----------
Expenses
Selling .................................. 7,072,458 7,017,136 2,503,410 2,538,190
General and administrative ............... 1,535,325 2,253,829 519,527 804,481
------------ ------------ ----------- -----------
8,607,783 9,270,965 3,022,937 3,342,671
------------ ------------ ----------- -----------
Earnings (loss) from operations ............... (333,657) (2,154,008) 210,726 (489,184)
------------ ------------ ----------- -----------
Other income (expenses)
Interest income .......................... 17,317 51,372 11,755 11,678
Interest expense ......................... (116,210) (77,067) (54,926) (26,273)
Miscellaneous income ..................... 65,875 16,809 16,033 20,000
------------ ------------ ----------- -----------
(33,018) (8,886) (27,138) 5,405
------------ ------------ ----------- -----------
Earnings (loss) before income
tax benefits ............................... (366,675) (2,162,894) 183,588 (483,779)
Income tax provision (benefits)................ (45,000) (931,405) 60,000 (184,439)
------------ ------------ ----------- -----------
Net earnings (loss)....................... $ (321,675) $ (1,231,489) $ 123,588 $ (299,340)
============ ============ =========== ===========
Weighted average common
shares outstanding ....................... 4,385,000 4,385,000 4,385,000 4,385,000
============ ============ =========== ===========
Net earnings (loss) per share ................. $ (.07) $ (.28) $ .03 $ (.07)
============ ============ =========== ===========
</TABLE>
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<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss ................................................ $ (321,675) $(1,231,489)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation ............................................ 199,262 184,074
Deferred income taxes ................................... (45,000) (934,223)
(Increase) decrease in operating assets
Accounts receivable ................................... (798) (55,989)
Inventories ........................................... (299,621) (417,716)
Prepaid expenses ...................................... 121,640 (196,536)
Deferred charges ...................................... 80,124 112,290
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses ................. (271,028) 97,621
Payroll and sales taxes payable ....................... 118,013 36,488
----------- -----------
Net cash used in operating activities ................. (419,083) (2,405,480)
----------- -----------
Cash Flows from Investing Activities
Purchases of property and equipment ..................... (68,242) (921,540)
Disposal of leasehold improvements ...................... 137,533 --
Net loans from certain shareholders ..................... 2,951 31,086
Increase in investments ................................. -- (100,000)
Decrease (increase) in security deposits and other assets 11,367 (5,634)
----------- -----------
Net cash provided by (used in) investing activities ... 83,609 (996,088)
----------- -----------
Cash Flows from Financing Activities
Net repayment of short-term debt ........................ (400,070) (25,000)
Net proceeds of long-term debt .......................... 1,338,720 398,111
----------- -----------
Net cash provided by financing activities ............. 938,650 373,111
----------- -----------
Net Increase (Decrease) in Cash ............................. 603,176 (3,028,457)
Cash, beginning of period ................................... 185,843 3,178,088
----------- -----------
Cash, end of period ......................................... $ 789,019 $ 149,631
=========== ===========
</TABLE>
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<PAGE>
ROOM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION
The accompanying unaudited financial statements, which are for
interim periods, do not include all disclosures provided in the
annual financial statements. These unaudited financial statements
should be read in conjunction with the financial statements and
footnotes thereto contained in the Annual Report on Form 10-KSB for
the year ended December 31, 1997 of Room Plus, Inc. (the
"Company"), as filed with the Securities and Exchange Commission.
In the opinion of management of the Company, the accompanying
unaudited financial statements contain all adjustments (which
include only normal recurring adjustments) necessary in order to
make the balance sheets, statements of operations and deficit and
statements of cash flow not misleading.
The results of operations for the nine-month period ended September
30, 1998, are not necessarily indicative of the operating results
to be expected for the full year.
Note 2: INVENTORIES
Inventories are stated at the lower of cost determined by the
first-in, first-out method or market and consist of the following:
September 30 December 31
1998 1997
Finished goods $1,629,192 $1,451,814
Work in process 90,100 25,258
Raw materials 484,655 427,254
------------ ----------
$ 2,203,947 $1,904,326
============ ==========
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998 and 1997
Revenues for the nine months ended September 30, 1998 totaled
$14,228,450 as compared to $12,145,971 for the nine months ended
September 30, 1997, an increase of $2,082,479, or 17.1%. Existing store
revenue increased $1,440,158, or 11.9%, as compared to September 30,
1997, while four new showrooms realized $642,321 in revenues during the
same period.
Cost of goods sold totaled $5,954,324 for the first nine months of
1998 as compared to $5,029,014 for the first nine months of 1997. This
increase of $925,310, or 18.4%, was primarily the result of the
increase in revenues. However, cost of goods sold increased slightly as
a percentage of revenues from 41.4% to 41.8% due to increased sales
of lower margin products.
Selling, general and administrative expenses totaled $8,607,783 for the
first nine months of 1998 as compared to $9,270,965 for the first nine
months of 1997. The decrease of $663,182, or 7.2%, was primarily the
result of reduced advertising expenses, professional fees and certain
store operating costs.
Loss from operations for the period ended September 30, 1998 was
$333,657, or 2.3% of revenues, as compared to a loss from operations
of $2,154,008, or 17.7% of revenues, during the period ended September
30, 1997.
Other expenses for the period ended September 30, 1998 were $33,018 as
compared to $8,886 for September 30, 1997. The increase in other
expenses of $24,132 is primarily due to an increase in net interest
expense of approximately $73,000, which was offset by a recovery of
certain store closing costs of approximately $49,000.
For the first nine months of 1998, the Company recorded a net deferred
income tax benefit of $45,000 compared to net deferred income tax
benefits of $931,405 in 1997.
Due to the combination of the preceding factors and a restatement of
the prior two quarters of 1988, the Company realized a net loss of
$321,675, or 2.3% of revenues, during the nine months ended
September 30, 1998 as compared to a net loss of $1,231,489, or 10.1% of
revenues, during the nine months ended September 30, 1997.
Three Months Ended September 30, 1998 and 1997
Revenues for the three months ended September 30, 1998, totaled
$5,224,239 as compared to $4,862,979 for the three months ended
September 30 1997, an increase of $361,260, or 7.4%. There were no new
showrooms opened during the three-month period ended September 30, 1998.
Cost of goods sold for the three months ended September 30, 1998, were
$1,990,576, or 38.1% of revenues, as compared to $2,009,492, or 41.3% of
revenues, for the same period in 1997. This increase of $18,916, or
0.9%, is primarily due to the increase in volume and production
efficiencies.
Selling, general and administrative expenses amounted to $3,022,337, or
57.9% of revenues, for the three months ended September 30, 1998,
compared to $3,342,671, or 68.7% of revenues, for the three months ended
September 30, 1997. The decrease of $320,334, or 9.6%, was primarily the
result of reduced advertising expenses, professional fees and certain
store operating costs.
Earnings from operations for the period ended September 30, 1998 was
$210,726 , or 4.0% of revenues, as compared to a loss from operations of
$[489,184], or [10.1]% of revenues, during the period ended September
30, 1997.
- 7 -
<PAGE>
Item 2. (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Other expenses for the three months ended September 30, 1998 were
$27,138 as compared to income of $5,405 in the three months ended
September 30, 1997. The primary reasons for the $32,543 net increase in
other expenses was an increase in interest costs associated with the
Company's borrowings.
In the three months ending September 30, 1998, the Company recorded a
net deferred income tax provision of $60,000 compared to net deferred
income tax benefits of $184,439 in 1997.
As a result of the preceding factors, the Company realized net earnings
of $123,588, or 2.4% of revenues, during the three months ended
September 30, 1998 as compared to a net loss of ($299,340), or (13.7%)
of revenues, during the three months ended September 30, 1997.
Liquidity and Capital Resources
The Company had working capital of $1,201,087 at September 30, 1998,
which represented a net change of $1,516,448 from the working capital
deficit of $315,361 at December 31, 1997.
The Company's operating activities used cash of $419,083 and $2,405,480
for the nine months ended September 30, 1998 and 1997, respectively. For
the nine months ended September 30, 1998, cash was used primarily to
finance inventory. For the nine months ended September 30, 1997, cash
was used to primarily finance inventory and the initial costs for six
new retail showrooms.
The Company's investing activities provided (used) cash of $83,609 and
($996,088), for the nine months ended September 30, 1998 and 1997,
respectively. The cash provided by the Company's investing activities
for the nine months ended September 30, 1998, results primarily from
funds received in connection with the closing of one of the Company's
retail showrooms. The cash used by the Company's investing activities
for the nine months ended September 30, 1997, was primarily the result
of the acquisition of computerized machinery and equipment, which
improved operating efficiency and lowered costs of manufacturing, and
leasehold improvements for four new showrooms.
The Company's financing activities provided cash of $938,650 and
$373,111, for the nine months ended September 30, 1998 and 1997,
respectively. The cash provided by the financing activities for the nine
months ended September 30, 1998 was the result of a $1,500,000 two-year
term loan from the Company's new Chairman of the Board of Directors, net
of the repayment of the Company's bank line of credit and certain
equipment financing arrangements. The cash provided by financing
activities for the nine months ended September 30, 1997, was the result
of capital leases which the company used toward the purchase of
machinery and equipment.
The Company's current cash position coupled with significant
improvements in operations should, in management's opinion, provide
sufficient capital to enable the Company to fund its operations for at
least the next twelve months. Historically, demand for the Company's
products has been seasonal, with demand increasing in the third and
fourth quarters, corresponding to the beginning of the school year and
the holiday season. The Company generally realizes 60% of its annual
revenues during those quarters. The Company's operations have not been
materially affected by the impact of inflation.
"Safe Harbor" Statement
Forward-looking statements made herein are based on current expectations of the
Company that involve a number of risks and uncertainties and such
forward-looking statements should not be considered guarantees of future
performance. These statements are made under the "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995. The factors that could cause
actual results to differ materially from the forward-looking statements include
the impact of competitive products and pricing, product demand and market
acceptance risks, the presence of competitors with greater financial resources
than the Company and an inability to arrange additional debt or equity
financing.
- 8 -
<PAGE>
Part II.
OTHER INFORMATION
Item 1. - Legal Proceedings
Not applicable
Item 2. - Changes in Securities
Page 10
Item 3. - Defaults upon Senior Securities
Not applicable
Item 4. - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. - Other Information
Not applicable
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibits description
4.14 Stock option agreement dated September 21, 1998
with Stephen Giordano for 100,000 shares
10.31 Employment agreement dated September 21, 1998
with Stephen Giordano
11 Calculation of net earnings per common share
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on August 7, 1998,
disclosing a Change in Control.
- 9 -
<PAGE>
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
Pursuant to a Stock Purchase Agreement dated as of September 21, 1998,
the Company issued to Stephen Giordano ("Giordano") an option to
purchase 100,000 shares of common stock of the Company, par value
$.00133 per share (the "Option"). The exercise price of the Option is
$2.00 per share and the Option shall expire on September 20, 2003. The
Option was issued as incentive compensation for services to be rendered
by Giordano as the Chief Operating Officer of the Company. The Option
was issued in reliance on the exemptions from registration provided by
Section 4(2) of the Securities Act of 1933 and applicable regulations
promulgated thereunder.
- 10 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: November 16, 1998 ROOM PLUS, INC.
By: /s/ Jay H. Goldberg
-------------------
Name: Jay H. Goldberg
Title: Chief Financial Officer
(Principal Accounting and
Financial Officer)
- 11 -
EXECUTION COPY
STOCK OPTION AGREEMENT
Room Plus, Inc. (the "Company"), desiring to afford an opportunity to
the Grantee named below to purchase certain shares of the Company's Common
Stock, par value $.00133 per share, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee hereby accepts, an option to purchase
the number of such shares optioned as specified below, during the term ending at
midnight (prevailing local time at the Company's principal offices) on the
expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following respective meanings:
(a) Grantee: Stephen Giordano
(b) Date of grant: September 21, 1998
(c) Number of shares optioned: 100,000
(d) Option exercise price per share: $2.00
(e) Expiration date: September 20, 2003
(f) Employment Agreement: the Employment Agreement dated as of September
21, 1998 between the Company and the Grantee, together with any amended
or successor employment agreement (References herein to any "Section"
of the Employment Agreement shall refer to the corresponding sections
of the Employment Agreement dated September 21, 1998 and any comparable
provision of any amended or successor employment agreement.)
This Option is not intended to be and shall not be treated as an incentive
stock option under Section 422 of the Internal Revenue Code.
2. Exercise Schedule: Subject to Section 3 hereof, this Option shall vest
and become exercisable as follows: This Option shall become exercisable in
respect of 2800 shares on October 21, 1998, in respect of an additional 2800
shares on the 21st day of each month thereafter to and including August 21, 2001
and in respect of 2000 shares on September 21, 2001 (each such date a "Vesting
Date") and shall be exercisable in whole or in part, from time to time, on or
prior to the expiration date.
3. Additional Exercise Provisions: Notwithstanding the provisions of
Section 2, the exercise of this Option shall be subject to the following
additional provisions:
(a) If the Grantee's employment shall be terminated for Cause pursuant to
Section 6.1 of the Employment Agreement by reason of a criminal
conviction covered by Section 6.3(c) thereof, this Option, including
all rights of exercise, shall expire and terminate forthwith upon the
effective date of such termination for
<PAGE>
Cause; in addition, if the Company gives notice to the Grantee pursuant
to Section 6.3 of the Employment Agreement of its intention to
terminate Grantee's employment for Cause based on subsection (c)
thereof, Grantee's right to exercise this Option shall be suspended
during such period of notice;
(b) If the Grantee's employment is terminated by the Company pursuant to
(i) Section 2.2 of the Employment Agreement effective at the end of the
Initial Term (as therein defined) or (ii) Section 6.1(a) (death) or
Section 6.1(b) (disability) of the Employment Agreement , this Option
shall thereupon become exercisable in respect of such additional number
of shares in respect of which it would have become exercisable in the
12-month period immediately following such termination of employment;
(c) If the Grantee's employment by the Company is terminated by the Grantee
pursuant to Section 6.1(d) ("Good Reason") or Section 6.1(e) ("Change
of Control") of the Employment Agreement or by the Company under any of
the circumstances covered by Section 6.6(E) ("Termination by the
Employer Without Cause") thereof, this Option shall thereupon become
exercisable in respect of all shares for which the Vesting Date had not
occurred prior to such termination of employment ; provided, however,
that, in the event of a termination of Grantee's employment by the
Company under circumstances covered by Section 6.6(E) prior to the end
of the Initial Term, this Option shall become exercisable only in
respect of the number of shares for which the Vesting Date would have
occurred on or prior to the second anniversary of the Effective Date
(as therein defined); and
(d) Except as set forth in (b) and (c) of this Section 3, if Grantee ceases
to be employed by the Company for any reason, this Option shall not at
any time become exercisable in respect of any shares for which the
Vesting Date had not occurred prior to such termination of employment.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5.Adjustments and Corporate Reorganizations: If the outstanding shares of
the class then subject to this Option are increased or decreased, or are changed
into or exchanged for a different number or kind of shares or securities, as a
result of one or more reorganizations, recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, appropriate adjustments shall be made
in the number and/or kind of shares or securities for which the unexercised
portions of this Option may thereafter be exercised, all without any change in
the aggregate exercise price applicable to the unexercised portions of this
Option, but with a corresponding adjustment in the exercise price per share or
other unit. No fractional share of stock shall be issued under this Option or in
connection with any such adjustment. Such adjustments shall be made by or under
authority of the Company's board of directors whose
2
<PAGE>
determinations as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
In case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merger with or into another corporation (where the Company
is not the surviving corporation or where there is a change in or distribution
with respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all of its property, assets or business to
another corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other Property"), are
to be received by or distributed to the holders of Common Stock of the Company,
then Grantee shall have the right thereafter to receive, upon exercise of this
Option, the number of shares of common stock of the successor or acquiring
corporation or of the company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Option is exercisable
immediately prior to such event (including after giving effect to the
accelerated vesting referred to in Section 3). In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor and acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Option to be performed and observed by
the Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of the
Board of Directors of the Company) in order to provide for adjustments of shares
of the Common Stock for which this Option is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this Section
5. For purposes of this Section 5, "common stock of the successor or acquiring
corporation" shall include stock of such corporation of any class which is not
preferred as to dividends or assets over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscriber for or purchase any such stock. The
foregoing provisions of this Section 5 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
6. Exercise, Payment For and Delivery of Stock: This Option may be
exercised by the Grantee or other person then entitled to exercise it by giving
five (5) business days' written notice of exercise to the Company specifying the
number of shares to be purchased and the total purchase price, accompanied by a
check to the order of the Company in payment of such price. If the Company is
required to withhold an account of any present or future tax imposed as a result
of such exercise, the notice of exercise shall be accompanied by a check to the
order of the Company in payment of the amount of such withholding.
7. Alternative Payment with Stock: Notwithstanding the foregoing provisions
requiring payment by check, payment of such purchase price or any portion
thereof may be made with shares of stock of the same class as the shares then
subject to this Option, if shares of that
3
<PAGE>
class are then publicly traded (as defined below), such shares to be credited
toward such purchase price at the Market Price thereof as defined in Section 8,
in which event the stock certificates evidencing the shares so to be used shall
accompany the notice of exercise and shall be duly endorsed or accompanied by
duly executed stock powers to transfer the same to the Company; provided,
however, that such payment in stock instead of cash shall not be effective and
shall be rejected by the Company if (i) the Company is then prohibited from
purchasing or acquiring shares of the class of its stock thus tendered to it, or
(ii) the right or power of the person exercising the Option to deliver such
shares in payment of said purchase price is subject to the prior interests of
any other person (excepting the Company), as indicated by legends upon the
certificate(s) or as known to the Company. For purposes of this Section,
"publicly traded" shares are those which are listed or admitted to unlisted
trading privileges on a national securities exchange or as to which sales or bid
and offer quotations are reported in the automated quotation system ("NASDAQ")
operated by the National Association of Securities Dealers, Inc. ("NASD"). If
the Company rejects the payment in stock, the tendered notice of exercise shall
not be effective hereunder unless promptly after being notified of such
rejection the person exercising the Option pays the purchase price in acceptable
form. If and while payment of the purchase price with stock is permitted in
accordance with the foregoing provisions, the person then entitled to exercise
this Option may, in lieu of using previously outstanding shares therefor, use
some of the shares as to which this Option is then being exercised, in which
case the notice of exercise need not be accompanied by any stock certificates
but shall include a statement directing the Company to withhold so many of the
shares that would otherwise have been delivered upon that exercise of this
Option as equals the number of shares that would have been transferred to the
Company if the purchase price had been with previously issued stock.
8. Definition of Market Price: The Market Price of a share of stock or
other securities on any day shall mean the average closing price of a share of
Common Stock or other security for the 5 consecutive trading days preceding such
day on the principal national securities exchange or NASDAQ system on which the
shares of Common Stock or securities are listed or admitted to trading or, if
not listed or admitted to trading on any national securities exchange or NASDAQ
system, the average of the reported bid and asked prices during such 5 trading
day period in the over-the-counter market as furnished by the National Quotation
Bureau, Inc., or, if such firm is not then engaged in such business selected by
the Company, or, if there is no such firm, as furnished by any member of the
National Association of Securities Dealers, Inc. selected by the Company, or if
the shares of Common Stock or securities are not publicly traded, the Market
Price for such day shall be the fair market value thereof as determined in good
faith by the Board of Directors of the Company.
9. Rights in Shares Before Issuance and Delivery: No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.
10. Requirements of Law of Stock Exchanges: By accepting this Option, the
Grantee represents and agrees for himself and his transferees by will or the
laws of descent and distribution that, unless a registration statement under the
Securities Act of 1933 is in effect as to shares purchased upon any exercise of
this Option, (i) any and all shares so purchased shall be acquired for his
personal account and not with a view to or for sale in connection with any
distribution, and (ii) each notice of the exercise of any portion of this Option
shall be
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accompanied by a representation and warranty in writing, signed by the person
entitled to exercise the same, that the shares are being so acquired in good
faith for his personal account and not with view to or for sale in connection
with any distribution.
No certificate or certificates for shares of stock purchased upon exercise
of this Option shall be issued and delivered prior to the admission of such
shares to listing on notice of issuance on any stock exchange on which shares of
that class are then listed, nor unless and until, in the opinion of counsel for
the Company, such securities may be issued and delivered without causing the
Company to be in violation of or incur any liability under any federal, state or
other securities law, any requirement of any securities exchange listing
agreement to which the Company may be a party, or any other requirement of law
or of any regulatory body having jurisdiction over the Company.
Notwithstanding the foregoing , the company agrees to use its best efforts
to cause a registration statement on Form S-8 (or comparable form) to be filed
with the Securities and Exchange Commission in respect of the shares underlying
this Option and to become effective and to take all steps as may be necessary to
cause such shares to be eligible for trading on any stock exchange on which the
Company's Common Stock is traded.
11. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary as its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address given beneath
his signature hereto or at such other address as the Grantee may hereafter
designate in writing to the Company. Any such notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
registered or certified, and deposited, postage and registry or certification
fee prepaid, in a post office or branch post office regularly maintained by the
United States Postal Service.
12. Applicable Law: This Agreement shall be construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed therein.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
ROOM PLUS, INC.
By: /s/ MARK ZUCKER
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Title: CHIEF EXECUTIVE OFFICER
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ACCEPTED
/s/ STEPHEN GIORDANO
- - ---------------------------------
Grantee
Stephen Giordano
427 Portside Drive
Edgewater, New Jersey 07024
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of September 21,
1998, by ROOM PLUS, INC., a New York corporation (the "Employer"), and STEPHEN
GIORDANO, an individual residing at 427 Portside Drive, Edgewater, New Jersey
07024 (the "Executive").
RECITAL
The Employer desires to employ the Executive and the Executive wishes to
accept employment, upon the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.
"Agreement"-- this Employment Agreement, as amended from time to time.
"Basic Compensation"-- Salary and Benefits.
"Benefits"-- as defined in Section 3.1(b).
"Board of Directors"-- the board of directors of the Employer.
"Change of Control" -- as defined in Section 6.5.
"Confidential Information"-- any and all:
(a) trade secrets concerning the business and affairs of the Employer,
product specifications, data, know-how, formulae, compositions, processes,
designs, sketches, photographs, graphs, drawings, samples, inventions and ideas,
past, current, and planned research and development, current and planned
manufacturing or distribution methods and processes, customer or supplier lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information) and any other information, however documented, that is a trade
secret under applicable law; and
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(b) information concerning the business and affairs of the Employer,
including, without limitation, historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, information
concerning product manufacturing, costs and sales, and personnel training
materials, however documented; and
(c) notes, analysis, compilations, studies, summaries, and other material
prepared by or for the Employer containing or based, in whole or in part, on any
information included in the foregoing.
"disability"-- as defined in Section 6.2.
"Effective Date"-- the date stated in the first paragraph of the Agreement.
"Employee Invention"-- any idea, invention, technique, modification,
process, or improvement (whether patentable or not), any industrial design
(whether registerable or not), any mask work, however fixed or encoded, that is
suitable to be fixed, embedded or programmed in a semiconductor product (whether
recordable or not), and any work of authorship (whether or not copyright
protection may be obtained for it) created, conceived, or developed by the
Executive, either solely or in conjunction with others, during the Employment
Period, or a period that includes a portion of the Employment Period, that
relates in any way to, or is useful in any manner in, the business then being
conducted or proposed to be conducted by the Employer, and any such item created
by the Executive, either solely or in conjunction with others, following
termination of the Executive's employment with the Employer, that is based upon
or uses Confidential Information.
"Employment Period"-- the term of the Executive's employment under this
Agreement.
"Fiscal Year"-- the Employer's fiscal year, as it exists on the Effective
Date or as changed from time to time.
"for Cause"-- as defined in Section 6.3.
"for Good Reason" -- as defined in Section 6.4.
"Incentive Compensation"-- as defined in Section 3.
"Initial Term" -- as defined in Section 2.2.
"person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.
"Post-Employment Period" -- as defined in Section 8.2.
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"Proprietary Items" -- as defined in Section 7.2(a)(iv).
"Salary" -- as defined in Section 3.1(a).
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Executive, and the Executive hereby
accepts employment by the Employer, upon the terms and conditions set forth in
this Agreement.
2.2 TERM
Subject to the provisions of Section 6, the term of the
Executive's employment under this Agreement will be one year, beginning on the
Effective Date and ending on the first anniversary of the Effective Date (the
"Initial Term"), which term shall be automatically extended for an additional
period of two years beginning on the first anniversary of the Effective Date and
ending on the third anniversary of the Effective Date unless either party gives
written notice to the other party of its intention not to so extend the term of
employment at least sixty (60) days prior to the end of the Initial Term.
2.3 DUTIES
The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors or Chief Executive Officer, and will
initially serve as Chief Operating Officer of the Employer and report directly
to the Chief Executive Officer. The Executive will devote his entire business
time, attention, skill, and energy exclusively to the business of the Employer,
will use his best efforts to promote the success of the Employer's business, and
will cooperate fully with the Board of Directors in the advancement of the best
interests of the Employer. Nothing in this Section 2.3, however, will prevent
the Executive from engaging in additional activities in connection with personal
investments, community affairs or serving as a director of other corporations to
the extent that such activities are not inconsistent with the Executive's duties
under this Agreement. If the Executive is elected as a director of the Employer
or as a director or officer of any of its affiliates, the Executive will fulfill
his duties as such director or officer without additional compensation.
3. COMPENSATION
3.1 BASIC COMPENSATION
(A) Salary. The Executive will be paid an annual salary of $160,000,
subject to adjustment as provided below (the "Salary"), which will be payable in
equal periodic installments according to the Employer's customary payroll
practices, but no less frequently than monthly. The Salary will be increased on
each anniversary date of this Agreement by a percentage equal to the greater of
(i) the percentage increase in the New York Northeastern New Jersey Consumer
Price Index published by the Bureau of Labor Statistics for the most
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recently completed twelve month period (or other comparable index if such index
is not published) or (ii) five percent (5%).
(B) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life insurance,
hospitalization, major medical, disability and other employee benefit plans of
the Employer that may be in effect from time to time, to the extent the
Executive is eligible under the terms of those plans (collectively, the
"Benefits").
3.2 STOCK OPTIONS
The Executive is hereby granted an option to purchase up to 100,000 shares
of the Employer's Common Stock at an exercise price of $2.00 per share on the
terms subject to the conditions set forth in a separate Stock Option Agreement
between the Employer and the Executive dated the date hereof.
3.3 INCENTIVE COMPENSATION
The Executive shall be entitled to such incentive compensation or
performance bonuses, if any, during the Employment Period as the Board of
Directors, or duly authorized committee thereof, may award from time to time
based upon criteria to be established by the Board of Directors or such
committee from time to time.
4.FACILITIES AND EXPENSES
4.1 GENERAL
The Employer will furnish the Executive office space, equipment, supplies,
and such other facilities and personnel as the Employer deems necessary or
appropriate for the performance of the Executive's duties under this Agreement.
The Employer will reimburse the Executive for reasonable expenses incurred by
the Executive at the request of, or on behalf of, the Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with the Employer's employment policies. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.
4.2 AUTOMOBILE
The Executive will receive an automobile allowance of $500 per month
during the Employment Period. The Executive will own his own automobile, and
maintain and insure it at his own expense, for his business use in connection
with his employment under this Agreement, except that the Employer shall pay for
gasoline utilized by the Employee in connection with his employment under this
Agreement and shall supply the Employee with a gasoline credit card for charging
such expenses.
4.3 MOVING EXPENSES
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In the event that Employer relocates its principal offices to a location
outside the greater New York-New Jersey metropolitan area, as a result of which
it becomes necessary for the Executive to move his residence, the Employer shall
reimburse the Executive for his reasonable moving expenses related thereto.
5. VACATIONS AND HOLIDAYS
The Executive will be entitled to four weeks' paid vacation each Fiscal
Year in accordance with the vacation policies of the Employer in effect for its
executive officers from time to time (which entitlement to vacation shall be
pro-rated for any partial Fiscal Year). Vacation must be taken by the Executive
at such time or times as approved by the Chief Executive Officer. The Executive
will also be entitled to the paid holidays set forth in the Employer's policies.
Vacation days and holidays during any Fiscal Year that are not used by the
Executive during such Fiscal Year may not be used in any subsequent Fiscal Year.
6. TERMINATION
6.1 EVENTS OF TERMINATION
The Employment Period, the Executive's Basic Compensation and Incentive
Compensation, and any and all other rights of the Executive under this Agreement
or otherwise as an employee of the Employer will terminate (except as otherwise
provided in this Section 6):
(a) upon the death of the Executive;
(b) upon the disability of the Executive (as defined in Section 6.2)
immediately upon notice from either party to the other;
(c) for Cause (as defined in Section 6.3), upon such notice from the
Employer to the Executive,as is specified in Section 6.3;
(d) for Good Reason (as defined in Section 6.4) upon such notice from
Executive to Employer as is specified in Section 6.4; or
(e) following a Change of Control (as defined in Section 6.5), upon such
notice from Executive to Employer as is specified in Section 6.5.
6.2 DEFINITION OF DISABILITY
For purposes of Section 6.1, the Executive will be deemed to have a
"disability" if, for physical or mental reasons, the Executive is unable to
perform the essential functions of the Executive's duties under this Agreement
for 120 consecutive days, or 180 days during any twelve month period, as
determined in accordance with this Section 6.2. The disability of the Executive
will be determined by a medical doctor selected by written agreement of the
Employer and the Executive upon the request of either party by notice to the
other. If the Employer and the Executive cannot agree on the selection of a
medical doctor, each of them will select a medical
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doctor and the two medical doctors will select a third medical doctor who will
determine whether the Executive has a disability. The determination of the
medical doctor selected under this Section 6.2 will be binding on both parties.
The Executive must submit to a reasonable number of examinations by the medical
doctor making the determination of disability under this Section 6.2, and the
Executive hereby authorizes the disclosure and release to the Employer of such
determination and all supporting medical records. If the Executive is not
legally competent, the Executive's legal guardian or duly authorized
attorney-in-fact will act in the Executive's stead, under this Section 6.2, for
the purposes of submitting the Executive to the examinations, and providing the
authorization of disclosure, required under this Section 6.2.
6.3 TERMINATION FOR CAUSE
The Employer may terminate the employment of the Executive at any time for
Cause (as hereinafter defined) by giving the Executive prior notice of such
termination, with reasonable specificity of the details thereof. As used herein,
the term "Cause" shall be limited to and mean (a) an action or actions by the
Executive involving willful malfeasance having a material adverse effect on the
Employer, (b) one or more failures to act by Executive involving material
nonfeasance having a material adverse effect on the Employer, or (c) the
Executive being convicted of a felony, or of any economic or business crime
involving moral turiptude; provided, however, that any action or failure to act
by Executive shall not be constitute "Cause" if, in good faith, the Executive
reasonably believed such action or failure to act to be in or not opposed to the
best interests of the Employer or was pursuant to the instructions, directions
or with the consent of either the Chief Executive Officer or the Board of
Directors, or the Executive believed in good faith that the action or failure to
act would be inconsistent with law, professional ethics, accepted or accredited
standards or business behavior. A termination pursuant to Clause (a), or (b),
(other than as a result of a conviction), shall take effect 15 days after the
giving of the notice contemplated hereby unless the Executive shall, during such
15 day period, remedy to the reasonable satisfaction of the Chief Executive
Officer and/or the Board of Directors of the Employer the breach specified in
such notice; provided, however, that such termination shall take effect
immediately upon the giving of such prior notice if the Chief Executive Officer
and/or Board of Directors of the Employer shall, in its reasonable discretion,
have determined that such breach is not remediable (which determination shall be
stated in such notice). A termination pursuant to (c) (as a result of a
conviction of a crime) shall take effect immediately upon the giving of the
notice contemplated hereby. For purposes of this Agreement, a "Notice of
Termination" shall mean delivery of notice specifying particulars thereof in
reasonable detail. For purposes of this Agreement, no such purported termination
of Executive's employment shall be effective without such Notice of Termination.
6.4 TERMINATION FOR GOOD REASON
The Executive may terminate his employment hereunder for Good Reason at
any time during the Employment Term, in which event the Executive shall resign
from all of his positions with the Employer. For purposes of this Agreement,
"Good Reason" shall mean any of the following (without the Executive's express
prior consent):
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(a) The assignment to the Executive by the Employer of duties inconsistent
with the Executive's position as Chief Operating Officer of the Employer, or any
significant reduction or change in either the position, stature or job function,
except in connection with the termination of the Executive's employment for
Cause;
(b) A reduction by the Employer in the Basic Compensation and/or benefits
as defined in Section 3;
(c) A failure by the Employer to discharge its obligations under any
incentive arrangement described in Section 3.3 hereof; or
(d) A fundamental change in the nature of the business conducted by the
Employer.
A termination pursuant to this Section 6.4 shall take effect 15 days after
the giving of the notice contemplated hereby unless the Employer shall, during
such 15 day period, remedy to the reasonable satisfaction of the Executive the
breach specified in such notice; provided, however, that such termination shall
take effect immediately upon the giving of such notice if the Executive, in his
reasonable discretion, shall have determined that such breach is not remediable
(which determination shall be stated in such notice).
6.5 CHANGE OF CONTROL
If a Change of Control (as hereinafter defined) occurs, the Executive
shall have the right to terminate this Agreement upon 60 days prior notice to
the Employer; provided, however, the Employer shall have the option to shorten
such period. At least ten (10) days prior to any such proposed Change of Control
(or if the Change of Control is not proposed by the Employer, promptly following
such Change of Control), the Employer shall notify the Executive of its
intention to effect such Change of Control (or that a Change of Control has
occurred), and the Executive shall thereupon have thirty (30) days from the
actual receipt of such notice to give notice of his intention to terminate this
Agreement. As used herein, the term "Change of Control: shall mean: when any
"person" as defined in Section 3(a)(9) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of the Exchange Act
(but excluding (a) the Employer or any subsidiary; (b) any affiliate of the
Employer; (c) any employee benefit plan sponsored or maintained by the Employer
or any subsidiary of the Employer; or (d) David Belford or any entity with which
he is affiliated (a "Belford Entity")), becomes "beneficial owner" (as defined
in Rule 13(d)(3) under the Exchange Act) of securities of the Employer
representing 30% or more of the combined voting power of the Employer's then
outstanding securities; or the occurrence of a transaction requiring stockholder
approval for the acquisition of the Employer by an entity (other than (a) the
Employer or a subsidiary, (b) an affiliate (as defined in Rule 12b-2 under the
Exchange Act of the Employer or (c) a Belford Entity) through the purchase of
assets, or by merger, or otherwise.
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6.6 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer will be
obligated to pay the Executive (or, in the event of his death, his designated
beneficiary as defined below) only such compensation as is provided in this
Section 6.6. For purposes of this Section 6.6, the Executive's designated
beneficiary will be such individual beneficiary or trust, located at such
address, as the Executive may designate by notice to the Employer from time to
time or, if the Executive fails to give notice to the Employer of such a
beneficiary, the Executive's estate. Notwithstanding the preceding sentence, the
Employer will have no duty, in any circumstances, to attempt to open an estate
on behalf of the Executive, to determine whether any beneficiary designated by
the Executive is alive or to ascertain the address of any such beneficiary, to
determine the existence of any trust, to determine whether any person or entity
purporting to act as the Executive's personal representative (or the trustee of
a trust established by the Executive) is duly authorized to act in that
capacity, or to locate or attempt to locate any beneficiary, personal
representative, or trustee.
(A) Termination by the Employer for Cause. If the Employer terminates this
Agreement for Cause, the Executive will be entitled to receive his Salary only
through the date such termination is effective, but will not be entitled to any
Incentive Compensation for the Fiscal Year during which such termination occurs
or any subsequent Fiscal Year.
(B) Termination upon Disability or Death. If this Agreement is terminated
(i) by either party as a result of the Executive's disability, as determined
under Section 6.2, or (ii) by reason of the Executive's Death, the Executive
will be entitled to receive his Salary through the later of the end of the
Initial Term or the end of the calendar month during which such termination is
effective and that part of the Executive's Incentive Compensation, if any, for
the Fiscal Year during which such termination occurs, prorated through the
effective date of such termination.
(C) Termination by the Executive for Good Reason or Following a Change of
Control. If the Executive terminates this Agreement for Good Reason or following
a Change of Control, the Executive shall be entitled to receive his Salary only
through the date such termination is effective and that part of the Executive's
Incentive Compensation, if any, for the Fiscal Year in which such termination
occurs, prorated through the date of termination.
(D) Benefits. The Executive's accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this Section 6, any payment
or other compensation for any vacation, holiday, sick leave, or other leave
unused on the date the notice of termination is given under this Agreement.
(E) Termination by the Employer Without Cause. Without limiting any other
remedy available to Executive, if the Employer terminates the Executive's
employment for any reason other than Cause, Disability or Death (or upon
expiration of the then-current term), the Executive shall be entitled to receive
his salary for the remaining portion of the then current term
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and that part of the Executive's Incentive Compensation, if any, for the Fiscal
Year in which such termination occurs, prorated through the date of termination.
In addition, the Executive shall be entitled to all Benefits through the
remaining portion of the then current term.
7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment Period and as a
part of his employment, the Executive will be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; (c) because the Executive
possesses substantial expertise and skill with respect to the Employer's
business, the Employer desires to obtain exclusive ownership of any Employee
Invention; and (d) the provisions of this Section 7 are reasonable and necessary
to prevent the improper use or disclosure of Confidential Information and to
provide the Employer with exclusive ownership of all Employee Inventions.
7.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid or provided
to the Executive by the Employer under this Agreement, the Executive covenants
as follows:
(A) Confidentiality.
(i) During and following the Employment Period, the Executive will hold in
confidence the Confidential Information and will not disclose it to any person
except with the specific prior written consent of the Employer or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Employer will be entitled to all of the
protections and benefits under applicable state trade secret laws and any other
applicable law. If any information that the Employer deems to be a trade secret
is found by a court of competent jurisdiction not to be a trade secret for
purposes of this Agreement, such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement. The Executive hereby
waives any requirement that the Employer submit proof of the economic value of
any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to any
part of the Confidential Information that the Executive demonstrates was or
became generally available to the public other than as a result of a disclosure
by the Executive.
(iv) The Executive will not remove from the Employer's premises (except to
the extent such removal is for purposes of the performance of the Executive's
duties at home or while traveling, or except as otherwise specifically
authorized by the Employer) any document, record, notebook, plan, model,
component, device, or computer software or code, whether embodied in a disk or
in any other form (collectively, the "Proprietary Items"). The Executive
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recognizes that, as between the Employer and the Executive, all of the
Proprietary Items, whether or not developed by the Executive, are the exclusive
property of the Employer. Upon termination of this Agreement by either party, or
upon the request of the Employer during the Employment Period, the Executive
will return to the Employer all of the Proprietary Items in the Executive's
possession or subject to the Executive's control, and the Executive shall not
retain any copies, abstracts, sketches, or other physical embodiment of any of
the Proprietary Items.
(B) Employee Inventions. Each Employee Invention will belong exclusively
to the Employer. The Executive covenants that he will promptly:
(i) disclose to the Employer in writing any Employee Invention;
(ii) assign to the Employer or to a party designated by the Employer, at
the Employer's request and without additional compensation, all of the
Executive's right to the Employee Invention for the United States and all
foreign jurisdictions;
(iii) execute and deliver to the Employer such applications, assignments,
and other documents as the Employer may request in order to apply for and obtain
patents or other registrations with respect to any Employee Invention in the
United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above obligations;
and
(v) give testimony and render any other assistance but without expense to
the Executive in support of the Employer's rights to any Employee Invention.
7.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy arising from
or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be performed by him
under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character; and the provisions of this Section 8 are reasonable and
necessary to protect the Employer's business.
8.2 COVENANTS OF THE EXECUTIVE
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In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer, the Executive covenants that he will not, directly or
indirectly:
(a) during the Employment Period, except in the course of his employment
hereunder, engage or invest in, own, manage, operate, finance, control, or
participate in the ownership, management, operation, financing, or control of,
be employed by, associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's credit to or render
services or advice to, any business whose products or activities are similar to,
or compete in whole or in part with, the products or activities of the Employer;
provided, however, that the Executive may purchase or otherwise acquire up to
(but not more than) one percent of any class of securities of any enterprise
(but without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of 1934;
(b) whether for the Executive's own account or the account of any other
person at any time during the Employment Period and the Post-Employment Period,
(i) solicit, employ, or otherwise engage as an employee, independent contractor,
or otherwise, any person who is or was an employee of the Employer at any time
during the Employment Period or in any manner induce or attempt to induce any
employee of the Employer to terminate his employment with the Employer; or (ii)
interfere with the Employer's relationship with any person, including any person
who at any time during the Employment Period was an employee, contractor,
supplier, or customer of the Employer; or
(d) at any time during or after the Employment Period, disparage the
Employer or any of its shareholders, directors, officers, employees, or agents.
For purposes of this Section 8.2, the term "Post-Employment Period" means
the 18-month period beginning on the date of termination of the Executive's
employment with the Employer.
If any covenant in this Section 8.2 is held to be unreasonable, arbitrary,
or against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time, or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
The period of time applicable to any covenant in this Section 8.2 will be
extended by the duration of any violation by the Executive of such covenant.
The Executive will, while the covenant under this Section 8.2 is in
effect, give notice to the Employer, within ten days after accepting any other
employment, of the identity of the Executive's employer. The Buyer or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of the
relevant portions of this Agreement.
11
<PAGE>
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be suffered by the
Employer as a result of a breach of the provisions of this Agreement (including
any provision of Sections 7 and 8) would be irreparable and that an award of
monetary damages to the Employer for such a breach would be an inadequate
remedy. Consequently, the Employer will have the right, in addition to any other
rights it may have, to obtain injunctive relief to restrain any breach or
threatened breach or otherwise to specifically enforce any provision of this
Agreement, and the Employer will not be obligated to post bond or other security
in seeking such relief.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The covenants by the Executive in Sections 7 and 8 are essential elements
of this Agreement, and without the Executive's agreement to comply with such
covenants, the Employer would not have entered into this Agreement or employed
or continued the employment of the Executive. The Employer and the Executive
have independently consulted their respective counsel and have been advised in
all respects concerning the reasonableness and propriety of such covenants, with
specific regard to the nature of the business conducted by the Employer.
If the Executive's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Sections 7 and 8.
9.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
The Executive represents and warrants to the Employer that the execution
and delivery by the Executive of this Agreement do not, and the performance by
the Executive of the Executive's obligations hereunder will not, with or without
the giving of notice or the passage of time, or both: (a) violate any judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Executive; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is or may
be bound.
9.4 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this
12
<PAGE>
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.
9.5 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
9.6 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nation-ally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer:
Room Plus, Inc.
91 Michigan Avenue
Paterson, NJ 07503
Attention: Marc Zucker
Facsimile No.: (973) 523-9288
- - -
If to the Executive:
Stephen Giordano
427 Portside Drive
Edgewater, NJ 07024
9.7 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, contains the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written,
13
<PAGE>
between the parties hereto with respect to the subject matter hereof. This
Agreement may not be amended orally, but only by an agreement in writing signed
by the parties hereto.
9.8 GOVERNING LAW
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
9.9 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
9.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
9.11 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
14
<PAGE>
9.12 WAIVER OF JURY TRIAL
THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date above first written above.
ROOM PLUS, INC.
By: /S/MARK ZUCKER
----------------------------
Marc Zucker
Chief Executive Officer
/S/ STEPHEN GIORDANO
--------------------------------
Stephen Giordano
15
Exhibit No. 11
ROOM PLUS, INC.
Computation of Earnings (Loss) per Common Share
(See Note 1 of Notes to Financial Statements)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1998 1997
----------- -----------
<S> <C> <C>
Basic and Diluted
Net (loss) applicable to common stock $ (321,675) $(1,231,489)
=========== ===========
Shares
Weighted average number of common shares outstanding 4,385,000 4,385,000
Basic and diluted earnings (loss) per common share $ (.07) $ (0.28)
=========== ===========
</TABLE>
Assumed exercise of options and warrants which could have been purchased with
the proceeds from the exercise of such options and warrants would have an
anti-dilutive effect on earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 789,019
<SECURITIES> 0
<RECEIVABLES> 68,483
<ALLOWANCES> 0
<INVENTORY> 2,203,947
<CURRENT-ASSETS> 3,711,364
<PP&E> 3,630,900
<DEPRECIATION> 2,095,150
<TOTAL-ASSETS> 6,531,511
<CURRENT-LIABILITIES> 2,510,277
<BONDS> 0
0
0
<COMMON> 5,832
<OTHER-SE> 6,512,645
<TOTAL-LIABILITY-AND-EQUITY> 6,531,511
<SALES> 14,228,450
<TOTAL-REVENUES> 14,228,450
<CGS> 5,954,324
<TOTAL-COSTS> 8,607,783
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,210
<INCOME-PRETAX> (366,675)
<INCOME-TAX> (45,000)
<INCOME-CONTINUING> (321,675)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (321,675)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>