<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended August 31, 1998
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From ________ to ____________
Commission file number 1-1416
BINKS SAMES CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9201 WEST BELMONT AVENUE, FRANKLIN PARK, ILLINOIS 60131
-------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including
area code 847-671-3000
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-------- ----------
The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report:
Class Outstanding August 31, 1998
--------------- ---------------------------
Common, par value $1.00 2,964,837
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL STATEMENTS
Company or group of companies
for which report is filed:
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
August 31, 1998 (Unaudited) and November 30, 1997
-------------------------------------------------
<TABLE>
<CAPTION>
Aug 31 Nov 30
1998 1997
------ ------
($000 omitted)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 868 5,610
Receivables, net 43,572 45,589
Inventories 23,346 28,214
Other current assets 5,826 1,931
Net assets of discontinued operations 63,268 62,499
-------- ------
Total current assets 136,880 143,843
Other noncurrent assets 5,004 4,700
Property, plant and equipment, at cost 15,505 15,632
Less accumulated depreciation 9,442 8,826
-------- ------
Net property, plant and equipment 6,063 6,806
-------- ------
TOTAL ASSETS $147,947 155,349
-------- ------
-------- ------
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION - (Continued)
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
August 31, 1998 (Unaudited) and November 30, 1997
<TABLE>
<CAPTION>
Aug 31 Nov 30
1998 1997
--------- ---------
($000 omitted)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 4,865 669
Accounts payable 28,186 36,228
Other current liabilities 20,050 15,904
Debt to be repaid with proceeds
from sale of business 66,469 59,000
--------- -------
Total current liabilities 119,570 111,801
Deferred compensation 7,082 7,244
Deferred income taxes - 453
Long-term debt, less current maturities 1,354 1,306
--------- -------
Total liabilities 128,006 120,804
--------- -------
Stockholders' equity:
Capital stock, $l.00 par value. Authorized
12,000,000 shares; issued 2,964,837 shares at
August 31, 1998 and 2,963,837 at November 30, 1997 2,965 2,964
Additional paid-in capital 19,652 19,629
Retained earnings (deficit) (486) 13,333
Foreign currency translation adjustments (2,190) (1,381)
--------- -------
Total stockholders' equity 19,941 34,545
--------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 147,947 155,349
--------- -------
--------- -------
</TABLE>
<PAGE>
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended August 31, 1998 and August 31, 1997
-----------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
------------- -------------
Aug 31 Aug 31 Aug 31 Aug 31
1998 1997 1998 1997
------ ------- -------
- ------------------------------------------------------------------------------------------------------------------------------
($000 omitted) ($000 omitted)
<S> <C> <C> <C> <C>
Net sales $ 26,561 29,112 87,494 80,386
Cost of goods sold 18,285 21,090 63,942 56,287
--------- ------- -------- --------
Gross profit 8,276 8,022 23,552 24,099
Selling, general and
administrative expenses 7,158 7,487 21,012 22,171
Nonrecurring costs - - 9,754 -
--------- ------- -------- --------
Operating income (loss) 1,118 535 (7,214) 1,928
--------- ------- -------- --------
Other expense (income):
Interest expense 170 185 483 615
Other expense (income), net 543 (128) 933 (257)
--------- ------- -------- --------
713 57 1,416 358
--------- ------- -------- --------
Income (loss) from continuing
operations before
income taxes 405 478 (8,630) 1,570
Income tax expense (benefit) (137) 496 (3,933) 1,088
--------- ------- -------- --------
Income (loss) from continuing
operations, net of tax 542 (18) (4,697) 482
Loss from discontinued operations,
net of tax (1,773) (1,306) (9,122) (3,545)
--------- ------- -------- --------
Net income (loss) $ (1,231) (1,324) (13,819) (3,063)
--------- ------- -------- --------
--------- ------- -------- --------
Income (loss) per share - basic
Continuing operations .18 (.01) (1.58) .16
Discontinued operations (.60) (.42) (3.08) (1.15)
--------- ------- -------- --------
Net income (loss) (.42) (.43) (4.66) (.99)
--------- ------- -------- --------
--------- ------- -------- --------
Income (loss) per share - diluted
Continuing operations .18 (.01) (1.58) .15
Discontinued operations (.59) (.42) (3.08) (1.13)
--------- ------- -------- --------
Net income (loss) (.41) (.43) (4.66) (.98)
--------- ------- -------- --------
--------- ------- -------- --------
Average number of shares:
Common shares outstanding 2,965 3,089 2,964 3,089
Equivalent shares on outstanding
stock options 38 - - 35
--------- ------- -------- --------
--------- ------- -------- --------
Shares applicable to diluted
earnings 3,003 3,089 2,964 3,124
--------- ------- -------- --------
--------- ------- -------- --------
Cash dividends declared per share $ .00 .10 .00 .20
--------- ------- -------- --------
--------- ------- -------- --------
</TABLE>
<PAGE>
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended August 31, 1998 and August 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
($000 omitted)
<S> <C> <C>
Cash flows from operating activities:
Continuing operations:
Net earnings (loss) from continuing operations $ (4,697) $ 482
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 726 1,013
Deferred compensation, net of payments (109) 209
Other, net (293) (39)
Cash provided by (used in) changes in:
Receivables 1,574 828
Inventories 4,766 2,077
Other current assets (1,898) 282
Accounts payable (8,277) (353)
Accrued expenses 4,756 (2,597)
Income taxes (3,751) (2,376)
----------- ---------
Net cash used in operating activities (7,203) (474)
----------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment (340) (972)
Proceeds from sale of real estate and equipment -- 40
Other investments and assets (31) -
----------- ---------
Net cash used in investing activities (371) (932)
----------- ---------
Cash flows from financing activities:
Proceeds from long-term borrowings 7,542 10,000
Net increase in short-term borrowings 4,037 (2,433)
Principal payments on long-term debt (160) (292)
----------- ---------
Net cash provided by financing activities 11,419 7,275
----------- ---------
Net cash used by discontinued operations (8,531) (9,210)
Effect of exchange rate changes on cash (56) (413)
----------- ---------
Net decrease in cash and cash equivalents (4,742) (3,754)
Cash and cash equivalents at beginning of period 5,610 9,084
----------- ---------
Cash and cash equivalents at end of period $ 868 5,330
----------- ---------
----------- ---------
</TABLE>
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
NOTE 1
The accompanying consolidated financial statements are unaudited, but in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position for the periods presented. Results of
operations for any interim period are not necessarily indicative of results for
any other period or for the full year. These interim financial statements
should be read in conjunction with the consolidated financial statements and
related notes contained in the Annual Report on Form 10-K/A for the year ended
November 30, 1997.
NOTE 2
In February 1998, the Board of Directors of the Company announced that it would
pursue a sale of the Company in order to maximize shareholder value. The Board
of Directors determined that in addition to pursuing the sale of the Company as
a whole, the Board would consider other possible strategic alternatives which
could include the sale of only component parts of the Company.
On July 1, 1998 the Company's Board of Directors created a three member Special
Committee of the Board to consider offers and alternatives relating to the sale
of the Company or other possible strategic alternatives involving the Company.
On August 31, 1998 the Company announced it had signed a definitive agreement
with Illinois Tool Works Inc. (ITW) to sell certain of Binks Sames
Corporation's domestic assets, foreign subsidiaries, and standard products
lines. On September 30, 1998 the Company announced the completion of the
sale transaction. The sale price was approximately $80 million in cash plus
the assumption of certain liabilities, currently estimated to be
approximately $26 million. The sale price is subject to adjustment after
delivery of a closing balance sheet as of September 30, 1998.
Under the terms of the sale, ITW purchased all assets related to the manufacture
and distribution of Binks Sames standard products in the U.S., including a
leased manufacturing facility in Longmont, Colorado; the Poly-Craft Systems
division in Cottage Grove, Oregon; the Research and Development facility in
Boulder, Colorado and Binks Sames domestic branches and warehouses. All Binks
Sames employees related to the businesses being acquired became employees of ITW
upon closing the transaction. International operations included in the sale are
Binks Sames businesses in the U.K., Belgium, Germany, Australia and a portion of
the Canadian operations. As part of the agreement, ITW will assume all trade
liabilities of the acquired portion of the business.
Subject to the final sale price adjustment, management anticipates a net gain on
the sale of approximately $7 million and a net gain in currency translation
adjustment of $2 million. On September 30, 1998 the Company used approximately
$66.5 million of the sale proceeds to reduce debt, and intends to use the
remaining proceeds to pay a settlement of patent infringement litigation and
related licensing arrangements, further reduce debt and provide working capital
to support the Company's operations and growth in the North American automotive
and general industry markets.
The operations sold to ITW have been classified as discontinued operations. The
fiscal 1998 and fiscal 1997 operating results of these discontinued operations
for the three months and nine months ended August 31 are as follows:
<TABLE>
<CAPTION>
IN US $000'S EXCEPT PER SHARE AMOUNTS
THREE MONTHS ENDED AUGUST 31 NINE MONTHS ENDED AUGUST 31
---------------------------------- ------------------------------------
1998 1997 1998 1997
----- ---- ----- -----
<S> <C> <C> <C> <C>
Sales $ 28,562 $ 42,895 $ 85,470 $ 114,260
Costs and expenses 30,065 45,103 95,772 120,116
-------------- --------------- ---------------- ----------------
Loss before tax provision $ (1,503) $ (2,208) $ (10,302) $ (5,856)
Income tax expense (benefit)
270 (902) (1,180) (2,311)
-------------- --------------- ---------------- ----------------
Loss from discontinued operations $ (1,773) $ (1,306) $ (9,122) $ (3,545)
-------------- --------------- ---------------- ----------------
-------------- --------------- ---------------- ----------------
Loss per share - diluted $ (0.59) $ (0.42) $ (3.08) $ (1.13)
-------------- --------------- ---------------- ----------------
-------------- --------------- ---------------- ----------------
</TABLE>
-5-
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
AUGUST 31, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
The net assets of discontinued operations are summarized as follows:
<TABLE>
<CAPTION>
In US $000's
AUG 31 NOV 30
1998 1997
<S> <C> <C>
Cash $ 1,144 $ 1,610
Receivables, net 28,123 36,959
Inventories 50,746 49,929
Other current assets 2,504 5,140
Property, plant and equipment - net 10,213 13,194
Other noncurrent assets 962 963
Notes payable, bank overdrafts
and current maturities of long-term debt (4,975) (7,960)
Accounts payable (19,240) (30,931)
Other current liabilities (8,045) (7,391)
Long-term debt (53) (640)
Other long-term liabilities (340) (68)
Currency translation adjustment 2,229 1,694
--------- ---------
Net assets of discontinued operations $ 63,268 $ 62,499
--------- ---------
--------- ---------
</TABLE>
Not included in the sale to ITW, and representing the continuing operations of
the Company, are: the Sames business based in Grenoble, France; Sames
Electrostatic Inc., headquartered in Livonia, Michigan; the North American
powder systems group; subsidiaries in Japan and Sweden; and the spray booth
business in North America. Sames is noted for its global leadership position in
electrostatic finishing equipment for the automotive finishing market and for
the general industrial finishing market.
The Board of Directors will continue to work with its investment banking firm,
William Blair & Company, in exploring strategic options for the Company, in
order to maximize shareholder value. The Company has begun discussions with
several companies, which might lead to regional or global strategic alliances.
Discussions have been held with prospective buyers of the North American spray
booth business.
NOTE 3
At a regularly scheduled meeting of the Company's Board of Directors on
August 19, 1998, Dr. Wayne F. Edwards, 63, was named Chairman of the Board
and interim Chief Executive Officer of the Company. Dr. Edwards has been a
director of the Company since 1996 and is the retired Vice President and
Chief Financial Officer of Crown Zellerbach International. Dr. Edwards
succeeds Dr. Donald G. Meyer, who passed away on August 18, 1998.
On October 1, 1998, Arnold H. Dratt, 54, became President and Chief Executive
Officer and a director of the Company, as well as President and a director of
its largest subsidiary, Sames, S.A., based in Grenoble, France. Mr. Dratt has
been president for seven years of the Dratt-Campbell Company, a Chicago-area
consulting firm, and has served as an advisor to the Binks Sames Board of
Directors since January 1998.
Dr. Wayne F. Edwards will continue in his role as Chairman of the Board of
Directors of the Company.
On September 30, 1998 the Company announced that Terrence P. Roche, 40,
Executive Vice President, whose responsibilities transferred to ITW effective
with the completion of the sale, has resigned as a director. William W. Roche,
73, a director of the Company since 1958, also resigned from the Board effective
with the completion of the sale.
-6-
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
AUGUST 31, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
NOTE 4
On March 20, 1998, a suit was filed against the Company concerning a lease
related to a headquarters facility that had been planned for Vernon Hills,
Illinois. The suit was brought by the developer alleging default by the Company
under the lease. The Company has asserted in a counterclaim that the developer
had previously repudiated the lease and has filed a third party claim against
the real estate advisor that arranged the lease. The advisor has recently filed
a counterclaim against the Company. The Company is unable to make a meaningful
estimate of the amount or range of loss that might result from an unfavorable
resolution of these matters.
On July 10, 1998, the Company settled patent infringement actions brought in the
United States by Behr Systems, Inc. and in Germany by Durr Systems GmbH, the
parent of Behr Systems, Inc. The Company decided to settle the patent
infringement actions because of recent technical tests, which conflicted with
previous evidence and caused uncertainty regarding the issue of infringement In
the settlement, the Company agreed to a paid-up royalty of $9 million for a
world-wide license for the life of all patents at issue in the actions, to be
paid on the earlier of (1) five business days following the closing of the sale
of the Company or any separate sale of the Company's subsidiaries Sames, S.A.
and Sames Electrostatic, Inc. or (2) December 31, 1998. The Company obtained
waivers from its lenders permitting the Company to enter into the settlement
agreement. On October 7, 1998, the Company reached agreement with Behr Systems,
Inc. on the following settlement payment schedule; $4 million on October 9,
1998, $2 million on October 30, 1998, $2 million on November 30, 1998, and $1
million on December 31, 1998. The entire cost of the settlement is included in
second quarter fiscal 1998 results as nonrecurring costs.
The Company has certain other contingent liabilities resulting from litigation
and claims incident to the ordinary course of business. Management believes
that the probable resolution of such contingencies will not materially
affect the financial position or results of operations of the Company. For
information relating to other legal matters involving the Company, reference is
made to Item 3 "Legal Proceedings" in the Company's Form 10-K/A for the year
ended November 30, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT DEVELOPMENTS
Beginning in June 1996, the Company's Board of Directors adopted various
measures as part of a comprehensive reorganization and restructuring of the
Company. These measures included: (i) closing of the Company's manufacturing
facility in Franklin Park, Illinois and shifting production to the Company's new
Longmont, Colorado manufacturing facility; (ii) reduction of manufacturing
capacity with increased outsourcing; (iii) rationalization of the Company's
product line to eliminate non-profitable products; (iv) headcount reductions
related primarily to manufacturing; and (v) reorganization of the Company's
sales and marketing, product management, research and development, manufacturing
and distribution functions along geographic and operational lines.
In fiscal 1997, the Company recorded a net loss of $40.1 million, which followed
a net loss of $11.1 million in fiscal 1996. The Company's net losses included
special charges of $21.1 million in 1997 and $18.9 million in 1996 due to
impairment and restructuring charges, inventory writedowns and warranty and
dispute resolution costs. The fiscal 1997 net loss also included a charge of
$10 million to reduce the balance sheet carrying amounts of deferred tax assets
initially recorded in prior years.
In February 1998, the Board of Directors of the Company announced that it would
pursue a sale of the Company in order to maximize shareholder value. The Board
of Directors determined that in addition to pursuing the sale of the Company as
a whole, the Board would consider other possible strategic alternatives which
could include the sale of only component parts of the Company.
-7-
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
On July 1, 1998 the Company's Board of Directors created a three member Special
Committee of the Board to consider offers and alternatives relating to the sale
of the Company or other possible strategic alternatives involving the Company.
On August 31, 1998 the Company announced it had signed a definitive agreement
with Illinois Tool Works Inc. (ITW) to sell certain of Binks Sames
Corporation's domestic assets, foreign subsidiaries, and standard products
lines. On September 30, 1998 the Company announced the completion of the
sale transaction. The sale price was approximately $80 million in cash plus
the assumption of certain liabilities, currently estimated to be
approximately $26 million. The sale price is subject to adjustment after
delivery of a closing balance sheet as of September 30, 1998.
Under the terms of the sale, ITW purchased all assets related to the manufacture
and distribution of Binks Sames standard products in the U.S., including a
leased manufacturing facility in Longmont, Colorado; the Poly-Craft Systems
division in Cottage Grove, Oregon; the Research and Development facility in
Boulder, Colorado and Binks Sames domestic branches and warehouses. All Binks
Sames employees related to the businesses being acquired became employees of ITW
upon closing the transaction. International operations included in the sale are
Binks Sames businesses in the U.K., Belgium, Germany, Australia and a portion of
the Canadian operations. As part of the agreement, ITW assumed all trade
liabilities of the acquired portion of the business.
Not included in the sale to ITW, and representing the continuing operations of
the Company, are: the Sames business based in Grenoble, France; Sames
Electrostatic Inc., headquartered in Livonia, Michigan; the North American
powder systems group; subsidiaries in Japan and Sweden; and the spray booth
business in North America. Sames is noted for its global leadership position in
electrostatic finishing equipment for the automotive finishing market and for
the general industrial finishing market.
RESULTS OF OPERATIONS
The Company had net sales of $87.5 million for nine months fiscal 1998, an
increase of $7.1 million, or 9%, from the $80.4 million reported for nine months
fiscal 1997. Sales growth would have been $10.7 million, or 11% if prevailing
nine months fiscal 1997 currency exchange rates had remained in effect during
nine months fiscal 1998. Contributing to the growth in sales was a significant
increase in the sale of large automotive installations during the first six
months of fiscal 1998. In third quarter fiscal 1998, sales declined 9% to $26.6
million as compared to third quarter fiscal 1997 sales of $29.1 million. The
sales decline was primarily attributable to lower sales of large automotive
installations relative to third quarter fiscal 1997.
Gross profit declined $547 thousand (2%) in nine months fiscal 1998 compared to
nine months fiscal 1997. This was primarily due to unfavorable currency
translation rates which reduced gross profit by approximately $1 million, and
the increased contribution of higher volume, lower margin automotive
installation sales to the product mix for the nine months. The gross profit
margin was 27% for nine months fiscal 1998 as compared to 30% for the same
period last year. In third quarter fiscal 1998 gross profit margin improved to
31% as compared to the 28% attained in third quarter fiscal 1997. This was
reflective of the increased contribution of lower volume, higher margin standard
product sales to the product sales mix in third quarter fiscal 1998 as compared
to third quarter fiscal 1997.
For nine months fiscal 1998, selling, general, and administrative expenses were
$21 million (down 5%) as compared to $22.2 million for nine months fiscal 1997.
In third quarter fiscal 1998, selling, general, and administrative expenses were
$7.2 million (down 4% ) as compared to $7.5 million for third quarter fiscal
1997.
Nonrecurring costs of $9.8 million were incurred during nine months fiscal
1998. These costs are related to the settlement of patent infringement
litigation and related licensing arrangements during second quarter fiscal
1998.
Interest expense decreased by $132 thousand (21%) for the nine month period
primarily due to lower interest rates. In third quarter fiscal 1998, interest
expense was $170 thousand compared to $185 thousand in third quarter fiscal
1997.
-8-
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Other income and expenses includes interest income, currency exchange gains and
losses, gains on sales of fixed assets, and miscellaneous income. Other expense
was $933 thousand for the nine month period, compared to other income during the
nine months of fiscal 1997 of $257 thousand. In third quarter fiscal 1998,
other expense was $543 thousand compared to other income in third quarter fiscal
1997 of $128 thousand.
Income tax benefit was $3.9 million on a pretax loss of $8.6 million in nine
months fiscal 1998, compared to income tax expense of $1.1 million on pretax
earnings of $1.6 million in nine months fiscal 1997. In third quarter fiscal
1998, income tax benefit amounted to $137 thousand on pretax earnings of $405
thousand compared to income tax expense of $496 thousand on pretax earnings of
$478 thousand in third quarter fiscal 1997.
As a result of all of the factors above, the Company's continuing operations
recorded a net loss of $4.7 million ($1.58 per share) in nine months fiscal
1998, and net income of $542 thousand ($.18 per share) in third quarter fiscal
1998 as compared to net income of $482 thousand ($.15 per share) for nine months
fiscal 1997, and a net loss of $18 thousand ($.01 per share) in third quarter
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations is the primary source of the Company's liquidity.
Short-term funds are also provided for current operations through bank loans.
The Company maintains substantial lines of credit for general corporate
purposes. The unused lines of credit were approximately $14.8 million at
August 31, 1998.
The Company's cash balances decreased $4.7 million during the nine months ended
August 31, 1998, largely due to cash outflows of $7.2 million used in operating
activities and $8.5 million used in discontinued operations. The Company used
$371 thousand in investing activities in nine months fiscal 1998, primarily
related to the purchase of capital equipment. Financing activities provided
$11.4 million to the Company during nine months fiscal 1998 which was primarily
used to fund both continuing and discontinued operations.
On July 10, 1998, the Company settled patent infringement actions brought in the
United States by Behr Systems, Inc. and in Germany by Durr Systems GmbH, the
parent of Behr Systems, Inc. The Company decided to settle the patent
infringement actions because of recent technical tests, which conflicted with
previous evidence and caused uncertainty regarding the issue of infringement In
the settlement, the Company agreed to a paid-up royalty of $9 million for a
world-wide license for the life of all patents at issue in the actions, to be
paid on the earlier of (1) five business days following the closing of the sale
of the Company or any separate sale of the Company's subsidiaries Sames, S.A.
and Sames Electrostatic, Inc. or (2) December 31, 1998. The Company obtained
waivers from its lenders permitting the Company to enter into the settlement
agreement. On October 7, 1998, the Company reached agreement with Behr Systems,
Inc. on the following settlement payment schedule; $4 million on October 9,
1998, $2 million on October 30, 1998, $2 million on November 30, 1998, and $1
million on December 31, 1998. The entire cost of the settlement is included in
second quarter fiscal 1998 results as nonrecurring costs.
The Company is in the process of negotiating a $10 million, prime rate,
multi-year credit agreement with The CIT Group, in order to support the
Company's operations and growth in the North American automotive and general
industry markets.
YEAR 2000 COMPLIANCE
The Company has upgraded or replaced its computer software applications and
systems which the Company believes accommodates the "Year 2000" dating
changes necessary to permit correct recording of year dates for 2000 and
later years. The Company does not expect that additional costs with regards
to year 2000 compliance will be material to its financial condition or
results of operations. The Company does not anticipate any material
disruption in its operations as the result of any failure by the Company to
be in compliance. The Company does not currently have any information
concerning the compliance status of its suppliers and customers.
-9-
<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Statements regarding the Company's negotiations with The CIT Group and the
Company's Year 2000 compliance constitute "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, and are
subject to the safe harbor created thereby. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward-looking
statements will prove to be correct. Important factors that could cause actual
results to differ materially from the Company's expectations include, without
limitation, the ability of the Company to reach a definitive agreement with The
CIT Group, and the effectiveness of the Company's Year 2000 compliance. No
assurance can be given that the forward-looking statements will prove to be
correct.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
PART II - OTHER INFORMATION
Item 1 See Note 4 to Consolidated Financial Statements for the
period ended August 31, 1998 (Unaudited) contained herein.
Items 2, 3 and 5 Not applicable
Item 4 Submission of Matters to a Vote of Security-Holders
The annual meeting of stockholders of the Company was held
on April 28, 1998. Two proposals were submitted to
stockholders as described in the Company's proxy statement
dated March 27, 1998. The following is a brief description
of the matters voted upon, the number of votes cast for and
against each proposal, and the number of abstentions.
1. The election of one director of the Company.
Nominee: Donald G. Meyer
Votes for Nominee: 2,508,087
Votes Withheld From Nominee: 6,897
2. The ratification of KPMG Peat Marwick LLP as the
Company's independent accountants for the fiscal year
ended November 30, 1998.
Votes for: 2,508,999
Votes Against: 2,432
Abstain: 3,553
Item 6 (a) Exhibits.
- Exhibit 10.1 - Consulting Agreement dated as of
October 1, 1998 by and between the Company and The
Dratt-Campbell Company.
- Exhibit 10.2 - Employment Agreement dated as of
September 30, 1998 by and between the Company and
Jeffrey W. Lemajeur.
- Exhibit 10.3 - Amendment to Employment Security
Agreement dated as of September 30, 1998 by and
between the Company and Jeffrey W. Lemajeur.
- Exhibit 27 - Financial Data Schedule
-10-
<PAGE>
PART II - OTHER INFORMATION - CONTINUED
(b) Reports on Form 8-K
1. On August 20, 1998, the Company filed a Current
Report on Form 8-K reporting that the Company had
issued a press release on August 19, 1998
regarding the death of its chairman and chief
executive officer.
2. On September 4, 1998, the Company filed a Current
Report on Form 8-K reporting that the Company had
issued a press release on August 31, 1998
regarding the proposed sale by the Company of
certain of its assets to Illinois Tool Works Inc.
3. On October 2, 1998, the Company filed a Current
Report on Form 8-K reporting that the Company had
issued a press release on September 18, 1998
regarding unaudited financial information for the
Company's continuing operations.
4. On October 13, 1998, the Company filed a Current
Report on Form 8-K reporting that the Company had
issued a press release on September 30, 1998
regarding the completion of the sale of certain of
the Company's assets to Illinois Tool Works Inc.
5. On October 15, 1998, the Company filed a Current
Report on Form 8-K regarding the disposition of
certain of the Company's assets and related pro
forma financial information.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Binks Sames Corporation
-----------------------------
/s/ Jeffrey W. Lemajeur
--------------------------------
Jeffrey W. Lemajeur, Treasurer/
Chief Financial Officer
/s/ Arnold H. Dratt
---------------------------------
Arnold H. Dratt, President and
Chief Executive Officer
Date OCTOBER 15, 1998
-------------------
-11-
<PAGE>
EXHIBIT 10.1
CONSULTING AGREEMENT
This Agreement is made as of October 1, 1998, between BINKS SAMES
CORPORATION, a Delaware corporation ("BSC") and The Dratt-Campbell Company
("Consultant").
WHEREAS, BSC desires to retain Consultant to provide services in
accordance with the following terms and conditions;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, BSC and Consultant hereby agree as follows:
1. SERVICES. Consultant will make available Arnold H. Dratt to serve
as the President and Chief Executive Officer of BSC to provide such
management services consistent with such position as reasonably requested by
the Board of Directors of BSC from time to time. Arnold H. Dratt will be
expected to devote an average of four days per week to the business and
affairs of BSC. In furtherance of the foregoing, the Board of Directors
shall elect Arnold H. Dratt as the President and Chief Executive Officer, and
as a director, of BSC and of its principal subsidiary, Sames S.A.
2. TERM. The term (the "Term") of this Agreement shall commence
immediately following the closing of the sale of certain assets by BSC to
Illinois Tool Works Inc. ("ITW") (the "Commencement Date") and shall end on
the second anniversary of the Commencement Date, subject to earlier
termination as provided in Paragraph 5, below. The Term may be extended by
further written agreement between BSC and Consultant.
3. MONTHLY FEE. BSC shall pay Consultant a monthly fee of $25,000,
which amount shall be payable on the Commencement Date and on the same day of
each month thereafter during the Term hereof.
4. TRAVEL AND OTHER EXPENSES. BSC will reimburse Consultant for (a)
reasonable travel and other direct, out-of-pocket expenses (which shall not
include overhead or similar expenses) actually incurred in the performance of
services hereunder, (b) medical insurance premiums paid by Consultant during
the Term hereof, with respect to Arnold H. Dratt and his dependents, (c) the
$600 per month car allowance paid by Consultant with respect to Arnold H.
Dratt, and (d) reasonable attorney's fees (not to exceed $5,000) incurred in
connection with the drafting and negotiation of this Agreement. Such
reimbursements shall be made within a reasonable time following Consultant's
submission of receipts for such expenses.
5. TERMINATION. Either BSC or Consultant may terminate the Term and
this Agreement upon seven (7) days' advance written notice to the other;
provided, however that this Agreement may be terminated immediately by BSC
for "cause" (as defined below). Upon termination of this Agreement,
Consultant shall be entitled to compensation pursuant to Paragraph 3 for
services
<PAGE>
EXHIBIT 10.1
actually rendered to BSC through the date of termination, and Consultant
shall be relieved of any obligation hereunder to render further services to
BSC. Except as set forth below, no further payments shall be made or owed by
BSC to Consultant under this Agreement, other than properly incurred,
unreimbursed expenses; provided, however, that Consultant's rights with
respect to indemnification protection shall be determined pursuant to
Paragraph 6 below. In the event such termination occurs (a) prior to a
Change of Control (as defined in Paragraph 12 below) and (b) is by BSC for
reasons other than "cause" (as defined below) or by Consultant for "good
reason" (as defined below), then BSC shall pay to Consultant on the
termination date a lump sum payment in an amount equal to six (6) times the
sum of (i) the monthly fee set forth in Paragraph 3 above, (ii) the most
recent monthly medical premium reimbursed by BSC pursuant to Paragraph 4(b)
above, and (iii) the $600 monthly car allowance described in Paragraph 4(c)
above.
For purposes of this Paragraph 5, "cause" shall mean (A) the death or
disability of Arnold H. Dratt, (B) the resignation of Arnold H. Dratt from
the position of President and Chief Executive Officer of BSC (other than in
conjunction with the termination of this Agreement by Consultant for "good
reason"), (C) the willful misconduct of any Consultant Personnel, including
Arnold H. Dratt, or the willful or continued failure by any Consultant
Personnel, including Arnold H. Dratt (other than by reason of disability), to
substantially perform the duties and services contemplated by this Agreement,
which in either case has a material adverse effect on BSC, or (D) the willful
fraud or material dishonesty of any Consultant Personnel, including Arnold H.
Dratt, in connection with the performance of duties and services for BSC.
This Agreement shall not be deemed terminated for "cause" unless and until
Consultant receives a copy of a resolution adopted by the Board finding, in
the good faith opinion of the Board, Consultant Personnel is guilty of acts
or omissions constituting cause, which resolutions has been duly adopted by
an affirmative vote of the majority of the Board (excluding Arnold H. Dratt)
and any such vote shall be taken at a meeting of the Board called and held
for such purpose, after reasonable written notice is provided to Consultant
setting forth in reasonable detail the facts and circumstances claimed to
provide a basis of termination for cause and Consultant is given an
opportunity, together with counsel, to be heard before the Board. To the
extent possible, Consultant shall have the opportunity to cure any such acts
or omissions within fifteen (15) days of receipt of such resolution.
For purposes of this Paragraph 5, "disability" shall mean the inability
of Arnold H. Dratt to perform his duties for BSC on account of physical or
mental illness or incapacity for a period of six (6) consecutive months, or
for a period of one hundred eighty (180) calendar days, whether or not
consecutive, during any three hundred sixty-five (365) day period.
For purposes of this Paragraph 5 "good reason" shall mean (x) any
failure by BSC to comply with the compensation provisions hereof or any other
material breach by BSC of its obligations hereunder, which failure or breach
is not remedied by BSC within fifteen (15) days of receipt of written notice
thereof from Consultant (y) the removal of Arnold H. Dratt from the position
of President and Chief Executive Officer of BSC or as a director thereof
(other than in conjunction with
2
<PAGE>
EXHIBIT 10.1
the termination of this Agreement for cause), or (z) the relocation of BSC's
headquarters outside the metropolitan Chicago area, such that Consultant
Personnel will be required to relocate in order to perform services hereunder.
6. INDEMNIFICATION. During the Term and continuing for a period of
three (3) years thereafter, BSC shall maintain in force Director and Officer
Liability Insurance in the aggregate amount of not less than $30 million,
including Arnold H. Dratt as a director and officer covered under that
policy. In addition, Arnold H. Dratt shall be entitled to the benefits of
the indemnification provisions of BSC's charter and by-laws, and shall become
a party to any indemnification or similar agreements whiion. During the Term
and continuing for a period of three (3) years thereafter, BSC shall maintain
in force Director and Officer Liability Insurance in the aggregate amount of
not less than $30 million, including Arnold H. Dratt as a director and
officer covered under that policy. In addition, Arnold H. Dratt shall be
entitled to the benefits of the indemnification provisions of BSC's charter
and by-laws, and shall become a party to any indemnification or similar
agreements which BSC may from time to time enter into with its directors or
officers. The provisions of this Section 6 shall survive termination of this
Agreement.
7. ASSIGNMENT. Neither Consultant nor BSC may assign this Agreement
without the prior written consent of the other. Any assignment prohibited
hereby shall be null and void.
8. EMPLOYMENT STATUS. BSC and Consultant acknowledge that Arnold H.
Dratt and any other individuals (Arnold H. Dratt and such individuals
hereinafter referred to as "Consultant Personnel") who perform services for
Consultant hereunder will not be employees of BSC. Consultant Personnel will
at all times remain either employees of Consultant or self-employed
independent contractors. Consultant Personnel will at all times remain under
the supervision and control of Consultant and not under the supervision or
control of BSC, except that BSC, through its Board of Directors, shall have
the authority to specify the services to be provided by Consultant and to
monitor the performance of such services. Consultant and/or Consultant
Personnel, if applicable, will be solely responsible for the payment of its
and/or their own benefits, workers' compensation or contributions to any
similar program, and for fulfilling any tax and other obligations associated
with employment or self-employment. Consultant Personnel are not eligible
to, nor will they, participate in or earn service under any BSC benefits plan
or program now existing or hereafter created for employees of BSC or any of
its subsidiaries or affiliates.
9. REPRESENTATIONS AND WARRANTIES. Consultant represents and warrants
to BSC, for the term of this Agreement, that it is not subject to any
restrictive covenants arising from any consulting or other agreement which
would prohibit or materially affect the services to be rendered pursuant to
this Agreement.
10. NON-COMPETITION. During the term of this Agreement, neither
Consultant nor any Consultant Personnel will perform services that are
similar to the services provided under this Agreement for, or in support of
the activities of, any company that is in direct and substantial competition
with the finishing equipment business of BSC.
11. CONFIDENTIALITY. Consultant agrees that any and all Confidential
Information is and shall remain the property of BSC and shall be held in
strict confidence by Consultant and Consultant
3
<PAGE>
EXHIBIT 10.1
Personnel solely for the benefit of BSC, and shall not be used or otherwise
disclosed to any other parties at any time, without obtaining the prior
written consent of BSC, except as may be required by laws. "Confidential
Information" includes all nonpublic technical, business and personnel
information, or other nonpublic information which relates to past, present or
future research, development and business activities of BSC and its
subsidiaries and affiliates (including but not by way of limitation
information about employees, customers and suppliers), however communicated
or disclosed to Consultant or Consultant Personnel in connection with the
performance of any services for BSC. Confidential Information shall not
include information which is or becomes generally available to the public
(other than by prohibited acts or omissions of Consultant or Consultant
Personnel). Consultant's obligations under this Paragraph 11 shall survive
termination of this Agreement.
12. CHANGE OF CONTROL. In the event of a Change of Control (as
hereinafter defined) after the Commencement Date hereof, BSC shall,
simultaneously with the Change of Control, pay to Consultant all amounts due
to and including the date of that Change of Control, shall remain obligated
to provide the Director and Officer Liability Insurance provided by Paragraph
6 and, in addition, shall, within five (5) business days after the date of
the Change of Control, pay Consultant a lump sum payment in an amount equal
to twelve (12) times the sum of (i) the monthly fee set forth in Paragraph 3
above, (ii) the most recent monthly medical premiums reimbursed by BSC
pursuant to Paragraph 4(b), and (iii) the $600 monthly car allowance
described in Paragraph 4(c). In the event of a Change of Control at any time
within the six (6) month period following termination of this Agreement (i)
by BSC for reasons other than "cause", or (ii) by Consultant for "good
reason," BSC shall, within five (5) business days after the date of the
Change of Control, pay Consultant a lump sum payment in an amount equal to
six (6) times the sum of (i) the monthly fee set forth in Paragraph 3, above,
(ii) the most recent monthly medical premiums reimbursed by BSC pursuant to
Paragraph 4(b), above, and (iii) the $600 monthly car allowance described in
Paragraph 4(c). "Change of Control" of BSC shall mean: (a) BSC is merged
or consolidated or reorganized into or with another corporation or other
legal person (an "Acquiror") and as a result of such merger, consolidation or
reorganization less than 50% of the outstanding voting securities or other
capital interests of the surviving, resulting or acquiring corporation or
other legal person are owned in the aggregate by the stockholders of BSC,
directly or indirectly, immediately prior to such merger, consolidation or
reorganization, other than by the Acquiror or any corporation or other legal
person controlling, controlled by or under common control with the Acquiror;
(b) BSC sells, transfers or conveys all of its business and/or assets to an
Acquiror, of which less than 50% of the outstanding voting securities or
other capital interests are owned in the aggregate by the stockholders of
BSC, directly or indirectly, immediately prior to such sale, other than by
any corporation or other legal person controlling, controlled by or under
common control with the Acquiror; (c) there is a report filed on Schedule
13D or Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, or other public announcement
disclosing that any person or group (as the terms "person" and "group" are
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the
rules and regulations promulgated thereunder) has become the beneficial
4
<PAGE>
EXHIBIT 10.1
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of more than
50% of the issued and outstanding shares of voting securities of BSC, other
than (i) a trustee or other fiduciary holding securities under any employee
benefit plan of BSC or any subsidiary, (ii) a corporation owned directly or
indirectly by the stockholders of BSC in substantially the same proportion as
their ownership of stock in BSC, (iii) Burke B. Roche, his spouse or any of
their descendants or any spouse of their descendants, William B. Roche, his
spouse or any of their descendants or any spouse of their descendants, any
trust or other arrangement for the benefit of Burke B. Roche, William B.
Roche, the spouse of either of them, or any of their descendants or the
spouse of any such descendants (Burke B. Roche, William B. Roche and such
other individuals, trusts or other arrangements, collectively, the "Roche
Family"), or (iv) any group which includes the Roche Family if a majority of
the voting securities of BSC beneficially owned by such group are
beneficially owned by the Roche Family; or (d) individuals who are members
of the Incumbent Board cease to constitute a majority of the Board of
Directors of BSC; or (e) the dissolution or liquidation of BSC is approved by
its stockholders. For this purpose, "Incumbent Board" means (i) the members
of the Board of Directors of the BSC after the Commencement Date and (ii) any
individual who becomes a member of the Board of Directors of the Corporation
after the Commencement Date, if such individual's election or nomination for
election as a Director was approved by the affirmative vote of the then
Incumbent Board.
13. EQUAL EMPLOYMENT OPPORTUNITY. Consultant expressly agrees not to
discriminate against any of its employees or applicants for employment
because of age, race, color, religion, sex, national origin, ancestry,
disability, handicap or veteran status or any other basis prohibited by
applicable federal, state or local law and further agrees to comply with all
applicable rules and regulations relating to such equal employment
opportunity. Consultant further agrees to comply with BSC's policy of
maintaining a business environment free of all forms of discrimination,
including sexual harassment.
14. WAIVER. Any delay or failure of either party hereto at any time to
require performance by the other party of any provision of this Agreement
shall in no way affect the right of such party to require performance of that
or any other provision of this Agreement and shall not be construed as a
waiver of any subsequent breach of that provision, a waiver of the provision
itself, or a waiver of any other right under this Agreement.
15. PUBLICITY. Consultant shall not refer, either directly or
indirectly, to BSC or any of their subsidiaries or affiliates in any
advertising or other published material without the prior written consent of
BSC, which consent may be withheld in BSC's sole discretion.
16. AMENDMENT. No provision of this Agreement shall be deemed amended
by either party unless such amendment shall be in writing and signed by the
party against which the amendment is to be enforced. However, if the scope
of any restriction or requirement contained in this Agreement is too broad to
permit enforcement of such restriction or requirement to its full extent,
then such
5
<PAGE>
EXHIBIT 10.1
restriction or requirement shall be enforced to the maximum extent permitted
by law, and Consultant consents and agrees that any court of competent
jurisdiction may so modify such scope in any proceeding brought to enforce
such restriction or requirement.
17. ENTIRE AGREEMENT. This Agreement, including all exhibits attached
hereto, constitutes the entire agreement between the parties with respect to
the subject matter hereof; all prior agreements, representations, statements,
negotiations and undertakings on the subject matter hereof are superseded
hereby.
18. INVALIDITY OF ANY PROVISION. If any one or more of the provisions
of this Agreement should be invalid, illegal or unenforceable in any respect
under any applicable statute or rule of law, they are, to that extent, deemed
to be omitted from this Agreement.
19. GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws, and not the choice of law principles, of the
State of Illinois applicable to contracts to be performed wholly within the
State of Illinois.
20. NOTICE. Any notice or other communication permitted or required
hereunder shall be in writing and provided to the respective party as set
forth below:
(a) If to Consultant, to:
The Dratt-Campbell Company
5430 West 70th Place
Bedford Park, IL 60638
Attention: Mr. Arnold H. Dratt
(b) If to BSC, to:
Binks Sames Corporation
9201 Belmont Avenue
Franklin Park, IL 60131-2887
Attention: Chairman of the Board
or, to such other address as either party shall have theretofore
designated by notice in writing.
All written notices are to be delivered by hand, by reputable commercial
delivery service, or by certified mail, return receipt requested. All notices
provided in accordance with this paragraph shall be deemed to have been given
upon the date of delivery as indicated on the written receipt for
6
<PAGE>
EXHIBIT 10.1
delivery by commercial service or by certified mail, or in the case of hand
delivery, upon the date actually received.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first set forth above.
THE DRATT-CAMPBELL COMPANY BINKS SAMES CORPORATION
By: /s/ Arnold H. Dratt By: /s/ Wayne F. Edwards
------------------------------- -------------------------------
Title: President Title: Chairman of the Board
---------------------------- ----------------------------
Date: October 5, 1998 Date: October 2, 1998
7
<PAGE>
EXHIBIT 10.2
September 30, 1998
Mr. Jeffrey W. Lemajeur
Binks Sames Corporation
9201 Belmont Avenue
Franklin Park, Illinois 60131
Dear Jeff:
Following up on our recent discussions, this will confirm our
understanding and agreement relative to your employment with Binks Sames
Corporation (the "Company"), under the following terms and conditions:
1. NATURE OF EMPLOYMENT. You will remain employed by The Company to
act in the capacities and with the titles of Vice President of Finance, Chief
Financial Officer and Treasurer of the Company.
2. TERM OF AGREEMENT. The initial term of this agreement will begin
on the date of the closing of the transactions contemplated under that
certain Agreement of Purchase and Sale of Assets and Stock, dated August 31,
1998, between the Company and Illinois Tool Works Inc. (the "ITW
Transaction"), and will, subject to prior termination in accordance with
paragraph 5 below, continue through and including March 31, 1999. Commencing
December 31,1998, if on or before the date that is 90 days prior to the last
day of the term of this agreement, the Company has not delivered to you a
written notice that the term of this agreement will not be extended, the term
of this agreement will be automatically extended each day thereafter by one
day, until a date which is 90 days after the Company delivers such a notice
to you. Upon termination of your employment, the Company will pay to you all
salary, benefits and other compensation described below accrued through the
effective date of termination, in addition to the items described in
paragraph 5 below.
3. COMPENSATION.
(a) As compensation for your services hereunder, the Company will
pay you a base salary of $10,833 per month during the term of this agreement,
payable in accordance with the standard payroll practices of the Company in
effect from time to time. The amount of your base salary may be increased
from time to time by the Company in accordance with its policies and
practices applicable to your peer executives.
1
<PAGE>
Mr. Jeffrey W. Lemajeur
Binks Sames Corporation
September 30, 1998
Page 2
(b) In addition to the foregoing base salary, the Company will pay
you certain stay bonuses at such times and in the amounts set forth in the
Payment Schedule attached hereto as EXHIBIT A.
4. BENEFIT PROGRAMS. Throughout the period of your employment hereunder,
in addition to the compensation and other benefits specified above, you will
continue to be eligible to participate in any employee benefit plan, pension
plan, incentive plan, group life, health or accident insurance, or other such
plan or policy which may presently be in effect or which may hereafter be
adopted by the Company for the benefit of all of its employees or your peer
executives, except stock option plans. With respect to any partial year of
employment hereunder, your benefits will be appropriately prorated to the
extent permitted under each subject plan or policy. Notwithstanding the
foregoing, you will be eligible to participate in the Company's current group
health plan through June 30, 1999 at the current employee contribution rates,
or, if later, until the end of the third calendar month that commences after
your termination of employment at the employee contribution rates in effect
on the date of your termination of employment. Such group health plan
coverage will continue for a period of six months following the end of the
third calendar month that commences following your termination of employment,
unless you obtain group coverage from a new employer, and the COBRA
continuation period will begin no earlier than the tenth month following the
month in which you have a termination of employment.
5. TERMINATION OF EMPLOYMENT.
(a) Anything contained in paragraph 2 above to the contrary
notwithstanding, the Company will at all times have the right to terminate
your employment for good cause, effective upon written notice to you. For
purposes of this paragraph 5(a), good cause for termination shall be deemed
to exist in the event (i) of your willful failure to perform your duties,
(ii) your conviction of a criminal violation excluding traffic offenses and
misdemeanors not involving dishonesty, fraud or breach of trust, or (iii)
your willful engagement in gross misconduct in the performance of your duties
that materially injures the Company. In the event the Company terminates
your employment pursuant to this paragraph 5(a), the Company will be
obligated to make payment to you of the base salary and stay bonus described
in paragraph 3 above, and the benefits described in paragraph 4 above through
the effective date of termination, as well as provide the benefits required
by applicable law.
(b) Anything contained in paragraph 2 above to the contrary
notwithstanding, you will at all times have the right to terminate your
employment for good reason, effective upon written notice to the Company.
For purposes of this paragraph 5(b), good reason for termination shall be
deemed to exist if, without your written consent (i) you are assigned to new
duties involving a
2
<PAGE>
Mr. Jeffrey W. Lemajeur
Binks Sames Corporation
September 30, 1998
Page 3
material amount of your time that are not of an executive or supervisory
nature or do not involve the level of responsibility generally comparable to
responsibilities of your duties prior to the Closing Date, (ii) your duties
and responsibilities are substantially reduced from those of your present
position, excluding reductions that are a normal consequence of the Company
ceasing to be publicly owned, (iii) there occurs any material reduction in
your aggregate compensation, incentive and benefit package in effect on the
Closing Date, excluding (in the case of an incentive or benefit package
whose benefits are proportionate to the performance of you or the Company)
reductions in benefits resulting from diminished performance of the Company
or you; or (iv) you are an officer of the Company as of the Closing Date and
thereafter the Company shall require you to perform services outside of a
fifty-mile radius of the Company's offices at which your are currently based
except for travel on the Company's business that the Company reasonably
requires. In the event you terminate your employment pursuant to this
paragraph 5(b), or the Company terminates your employment other than for
cause, the Company will be obligated to make immediate payment to you of the
base salary and stay bonus described in paragraph 3 above through the
remaining term of the Agreement in a single lump sum, and the benefits
described in paragraph 4 above, as well as provide the benefits required by
applicable law.
(c) Anything contained in paragraph 2 above to the contrary
notwithstanding, you will have the right at all times to terminate your
employment, by resignation at any time, effective upon fourteen (14) days'
written notice to the Company. In the event you terminate your employment
pursuant to this paragraph 5(c), the Company will be obligated to make
payment to you of the second and fourth stay bonuses described on Exhibit A
(if not earlier paid), the base salary and remaining stay bonuses described
in paragraph 3(a) above and the benefits described in paragraph 4 above
through the effective date of termination, as well as provide the benefits
required by applicable law.
(d) In the event your employment is terminated on account of your
death or disability, the Company will be obligated to make payment to you (or
your beneficiary) of the second and fourth stay bonuses described in Exhibit
A (if not earlier paid), the base salary described in paragraph 3 above
through the effective date of termination, the remaining stay bonuses
described in paragraph 3 above through the remaining term of this agreement
(or until all stay bonuses have been paid), and the benefits described in
paragraph 4 above through the effective date of termination, as well as
provide the benefits required by applicable law.
(e) Should you terminate your employment with the Company prior to
March 31, 1999, pursuant to paragraph 5(c) above, you agree to provide
consulting services to the Company on mutually agreeable terms.
3
<PAGE>
Mr. Jeffrey W. Lemajeur
Binks Sames Corporation
September 30, 1998
Page 4
6. AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT. That certain
Employment Security Agreement (the "Employment Security Agreement"), dated
July 2, 1996, between you and the Company will be amended, effective as of
the date hereof, in accordance with the Amendment to Employment Security
Agreement attached hereto as EXHIBIT B. Upon the occurrence of a Corporate
Transaction as defined in the Employment Security Agreement (other than the
ITW Transaction) the Company will be obligated to make immediate payment to
you of all stay bonuses described in Exhibit A which were not paid prior to
the occurrence of the Corporate Transaction.
7. NON-ASSIGNABILITY. You will not transfer or assign this agreement
or any of your rights or obligations hereunder and any such purported or
attempted assignment or transfer shall be void.
8. NOTICES. Any and all notices, requests, demands or other
communications under this agreement shall be in writing and shall be deemed
to have been given when delivered personally, when sent by telecopier to the
designated fax number of the party being notified, or when mailed by
certified mail, return receipt requested, addressed to the party being
notified at the address of such party first set forth above, or at such other
address as such party may hereafter have designated by written notice;
PROVIDED, HOWEVER, that any notice of change of address shall not be
effective until its receipt by the party to be charged therewith.
9. WAIVERS AND AMENDMENTS. None of the terms or conditions of this
agreement may be waived, amended or modified except by means of a written
instrument signed by the party to be charged therewith.
10. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and
shall inure to the benefit of us and our respective heirs, executors,
administrators, representatives, successors and permitted assigns.
If the foregoing accurately reflects our entire agreement and
understanding as to the subject matter hereof, kindly acknowledge same by
countersigning and returning to the Company a duplicate copy of this letter.
Very truly yours,
BINKS SAMES CORPORATION
By: /s/ Wayne F. Edwards
--------------------
Wayne F. Edwards
Its: Chairman and Chief Executive Officer
Acknowledged, Accepted
and Agreed to:
/s/ Jeffrey W. Lemajeur
- -----------------------
Name: Jeffrey W. Lemajeur
4
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
PAYMENT SCHEDULE
SEPTEMBER OCTOBER NOVEMBER DECEMBER JANUARY FEBRUARY MARCH
ITEM 1998 1998 1998 1998 1999 1999 1999 TOTAL
---- --------- ------- -------- -------- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALARY 10,833 10,833 10,833 10,833 10,833 10,833 10,833 75,831
1ST STAY 65,000 65,000
BONUS
2ND STAY 65,000 65,000
BONUS
3RD STAY 5,417 5,417 5,417 5,417 5,417 5,417 32,502
BONUS
4TH STAY 32,502 32,502
BONUS
--------------------------------------------------------------------------------------------------- -------
75,833 81,250 16,250 16,250 16,250 16,250 48,750 270,833
- ------------------------------------------------------------------------------------------------------------------ -------
- ------------------------------------------------------------------------------------------------------------------ -------
</TABLE>
OTHER TERMS AND CONDITIONS
(1) ALL PAYMENTS DESCRIBED ON THE ABOVE PAYMENT SCHEDULE WILL BE PAID IN
THE MONTH INDICATED EXCEPT AS DESCRIBED IN TERMS (3), (4) AND (5)
BELOW.
(2) PAYMENT OF THE 4TH STAY BONUS AND ANY DISCRETIONARY BONUS WILL BE
OFFSET AGAINST PAYMENT UNDER THE EMPLOYMENT SECURITY AGREEMENT DATED
07/02/96, AS AMENDED.
(3) PAYMENT OF THE 4TH STAY BONUS WILL BE MADE ON THE EARLIER OF A)
03/31/99 OR B) JEFFERY W. LEMAJEUR'S LAST DAY OF EMPLOYMENT WITH THE
COMPANY.
(4) PAYMENT OF THE 2ND STAY BONUS WILL BE MADE WITHIN 30 DAYS AFTER THE
CLOSING DATE OF THE SALE TRANSACTIONS CONTEMPLATED UNDER THE PURCHASE
AGREEMENT BETWEEN THE COMPANY AND ITW, BUT IN NO EVENT LATER THAN
12/31/98.
(5) THE 3RD STAY BONUS WILL BEGIN BEING EARNED THE DAY AFTER THE CLOSING
DATE OF THE SALE TRANSACTIONS CONTEMPLATED UNDER THE PURCHASE
AGREEMENT BETWEEN THE COMPANY AND ITW AND WILL BE PAID RATABLY EACH
PAY PERIOD THEREAFTER IN THE MONTHLY AMOUNTS SHOWN ABOVE.
<PAGE>
AMENDMENT
This Amendment to Employment Security Agreement (this "Amendment") dated
as of September 30, 1998 is by and between BINKS SAMES CORPORATION (the
"Company") and Jeffrey W. Lemajeur (the "Employee").
WHEREAS, the Company and the Employee entered into that certain
Employment Security Agreement dated July 2, 1996 (the "Employment Security
Agreement") providing for certain payments and benefits to the Employee by
the Company in the event of a Change of Control (as defined in the Employment
Security Agreement); and
WHEREAS, the Company and the Employee desire to amend the Employment
Security Agreement as more specifically set forth hereinafter;
NOW, THEREFORE, in consideration of the agreement hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Section 3 of the Employment Security Agreement is hereby amended by
adding the following:
(d) All amounts and benefits provided in Sections 3(a) and 3(b)
hereof will be paid or provided automatically by the Company in the event of
a "Corporate Transaction" as defined below. In such event, references to
your termination of employment in Section 3(a) and 3(b) hereof shall be
deemed to refer to such Corporate Transaction, and the amount payable
pursuant to Section 3(a) shall be paid upon the occurrence of the Corporate
Transaction. For purposes hereof, "Corporate Transaction" means (i) a change
of control occurring after September 1, 1998, (ii) individuals who, as of
August 1, 1998, constituted the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board of Directors of the Company, provided that an individual whose
election or nomination for election by the Company's stockholders was
approved by at least a majority of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company) shall be deemed to be a member of
the Incumbent Board, or (iii) approval by the stockholders of the Company (or
the occurrence without the approval of the stockholders of the Company) of
any one or more of the following (X) a merger, reorganization or
consolidation of or by the Company, (Y) a liquidation or dissolution of the
Company or (Z) the sale or other disposition of 50% or more of the assets of
Binks Sames France SA in one transaction or a series of related transactions.
2. This Amendment shall be effective as of the day hereof.
3. Except as expressly amended hereby, the Employment Security
Agreement shall continue in full force and effect.
BINKS SAMES CORPORATION
By: ___________________________ _________________________
Wayne F. Edwards Jeffrey W. Lemajeur
Its Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 10.3
AMENDMENT
This Amendment to Employment Security Agreement (this "Amendment") dated
as of September 30, 1998 is by and between BINKS SAMES CORPORATION (the
"Company") and Jeffrey W. Lemajeur (the "Employee").
WHEREAS, the Company and the Employee entered into that certain
Employment Security Agreement dated July 2, 1996 (the "Employment Security
Agreement") providing for certain payments and benefits to the Employee by
the Company in the event of a Change of Control (as defined in the Employment
Security Agreement); and
WHEREAS, the Company and the Employee desire to amend the Employment
Security Agreement as more specifically set forth hereinafter;
NOW, THEREFORE, in consideration of the agreement hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Section 3 of the Employment Security Agreement is hereby amended
by adding the following:
(d) All amounts and benefits provided in Sections 3(a) and 3(b)
hereof will be paid or provided automatically by the Company in the event of a
"Corporate Transaction" as defined below. In such event, references to your
termination of employment in Section 3(a) and 3(b) hereof shall be deemed to
refer to such Corporate Transaction, and the amount payable pursuant to Section
3(a) shall be paid upon the occurrence of the Corporate Transaction. For
purposes hereof, "Corporate Transaction" means (i) a change of control occurring
after September 1, 1998, (ii) individuals who, as of August 1, 1998, constituted
the Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Company, provided that an individual whose election or nomination for election
by the Company's stockholders was approved by at least a majority of the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company) shall
be deemed to be a member of the Incumbent Board, or (iii) approval by the
stockholders of the Company (or the occurrence without the approval of the
stockholders of the Company) of any one or more of the following (X) a merger,
reorganization or consolidation of or by the Company, (Y) a liquidation or
dissolution of the Company or (Z) the sale or other disposition of 50% or more
of the assets of Binks Sames France SA in one transaction or a series of related
transactions.
2. This Amendment shall be effective as of the day hereof.
3. Except as expressly amended hereby, the Employment Security
Agreement shall continue in full force and effect.
BINKS SAMES CORPORATION
By: /s/ Wayne F. Edwards /s/ Jeffrey W. Lemajeur
--------------------------------- ---------------------------------
Wayne F. Edwards Jeffrey W. Lemajeur
<PAGE>
Its Chairman and Chief Executive Officer
2
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 868
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<RECEIVABLES> 43,572
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<INVENTORY> 23,346
<CURRENT-ASSETS> 136,880
<PP&E> 15,505
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0
0
<COMMON> 2,965
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<TOTAL-LIABILITY-AND-EQUITY> 147,947
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