<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 February 28, 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 Identification No.)
incorporation or organization)
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 February 28, 1998
- ---------------------------- -----------------------------
Common, par value $1.00 2,963,837
<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
FEBRUARY 28, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Feb 28 Nov 30
1998 1997
------- -------
($000 omitted)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,258 7,220
Receivables, net 64,856 73,638
Inventories 72,424 78,144
Other current assets 7,423 7,070
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Total current assets 147,961 166,072
Other noncurrent assets 6,038 5,661
Property, plant and equipment, at cost 42,302 42,656
Less accumulated depreciation 23,146 22,655
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Net property, plant and equipment 19,156 20,001
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TOTAL ASSETS $ 173,155 191,734
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--------- -------
</TABLE>
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<PAGE>
PART I - FINANCIAL INFORMATION - (Continued)
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Feb 28 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 $ 10,858 8,628
Accounts payable 42,304 58,249
Other current liabilities 19,997 23,295
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Total current liabilities 73,159 90,172
Deferred compensation 7,309 7,313
Deferred income taxes 453 452
Long-term debt, less current maturities 63,842 60,946
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Total liabilities 144,763 158,883
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Stockholders' equity:
Capital stock, $l.00 par value. Authorized
12,000,000 shares; issued 2,963,837 shares 2,964 2,964
Additional paid-in capital 19,629 19,629
Retained earnings 9,674 13,333
Foreign currency translation adjustments (3,875) (3,075)
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Total stockholders' equity 28,392 32,851
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 173,155 191,734
--------- -------
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</TABLE>
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<PAGE>
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1998 AND FEBRUARY 28, 1997
(Unaudited)
<TABLE>
<CAPTION>
For the three
months ended
------------------------
Feb 28 Feb 28
1998 1997
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($000 omitted)
<S> <C> <C>
Net sales $ 59,864 64,591
Cost of goods sold 44,967 45,968
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Gross profit 14,897 18,623
Selling, general and administrative expenses 17,134 17,522
----------- ---------
Operating income (loss) (2,237) 1,101
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Other expense (income):
Interest expense 1,615 1,074
Other expense (income), net (89) (130)
----------- ---------
1,526 944
Earnings (loss) before income taxes (3,763) 157
Income tax expense (benefit) (104) 15
----------- ---------
Net earnings (loss) $ (3,659) 142
----------- ---------
----------- ---------
Basic and diluted earnings (loss) per share $ (1.23) .05
----------- ---------
----------- ---------
Average diluted shares outstanding 2,963,837 3,121,627
----------- ---------
----------- ---------
Cash dividends declared per share $ - -
----------- ---------
----------- ---------
</TABLE>
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<PAGE>
Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended February 28, 1998 and February 28, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- -------
($000 omitted)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (3,659) 142
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 861 1,052
Deferred compensation, net of payments 12 (17)
Deferred income taxes (278) (294)
Other, net 64 56
Cash provided by (used in) changes in:
Receivables 7,061 (2,150)
Inventories 4,950 8,087
Other current assets (456) (1,350)
Accounts payable (15,099) (9,030)
Accrued expenses (2,410) (6,333)
Income taxes 102 54
--------- -------
Net cash provided by (used in) operating activities (8,852) (9,783)
--------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (238) (719)
Proceeds from sale of equipment 8 29
Other investments and assets (166) 67
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Net cash provided by (used in) investing activities (396) (623)
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Cash flows from financing activities:
Proceeds from long-term borrowings 3,024 1,035
Net increase (decrease) in short-term borrowings 2,405 1,971
Principal payments on long-term debt (40) (140)
--------- -------
Net cash provided by (used in) financing activities 5,389 2,866
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Effect of exchange rate changes on cash (103) (217)
--------- -------
Net increase (decrease) in cash and cash equivalents (3,962) (7,757)
Cash and cash equivalents at beginning of period 7,220 16,200
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Cash and cash equivalents at end of period $ 3,258 8,443
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</TABLE>
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<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED) AND NOVEMBER 30, 1997
NOTE 1
The accompanying 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
As a result of successive years of losses in fiscal 1996 and fiscal 1997, and
the related impact on the Company's financial condition, the Board of Directors
has determined to seek a sale of the Company. The Company has retained
financial and other advisors to identify potential purchasers.
NOTE 3
On February 13, 1998, John J. Schornack, 67, resigned and retired as Chairman of
the Board of Directors of the Company. Dr. Donald G. Meyer, 63, a director of
the Company since 1996, and previously a director of the Company from 1990 to
1995, was elected Chairman of the Board to succeed Mr. Schornack. Doran J.
Unschuld, 74, the Company's President and Chief Executive Officer since 1996,
and an employee of the Company since 1952, has announced that he will retire as
President and Chief Executive Officer at the Company's annual meeting in April
1998. Dr. Meyer will assume the position and responsibilities of President and
Chief Executive Officer upon the retirement of Mr. Unschuld.
NOTE 4
In January 1998, the Company notified the developer and landlord of its planned
future headquarters site in Vernon Hills, Illinois that the Company wanted to
terminate the project. The Company had previously entered into a 20 year lease
agreement for the Vernon Hills site. On March 20, 1998, the landlord filed suit
against the Company claiming that the Company is in default of its obligations
under the lease. While groundbreaking for the new site never occurred, it is
anticipated that the Company will incur lease termination costs. The Company is
unable to make a meaningful estimate of the amount or range of loss that could
result from an unfavorable resolution of this matter.
The Company is the defendant in a lawsuit filed by former financial advisors
seeking approximately $900 thousand under terms of a contract. Management
believes that all required payments have been made and no further amounts have
been provided for.
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.
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<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT DEVELOPMENTS
Beginning in June 1996, the Company's Board of Directors adopted 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. As a result of the successive years of
losses and the related impact on the Company's financial condition, the Board of
Directors has determined to seek a sale of the Company. The Company has
retained financial and other advisors to identify potential purchasers.
On February 13, 1998, John J. Schornack, 67, resigned and retired as Chairman of
the Board of Directors of the Company. Dr. Donald G. Meyer, 63, a director of
the Company since 1996, and previously a director of the Company from 1990 to
1995, was elected Chairman of the Board to succeed Mr. Schornack. Doran J.
Unschuld, 74, the Company's President and Chief Executive Officer since 1996,
and an employee of the Company since 1952, has announced that he will retire as
President and Chief Executive Officer at the Company's annual meeting in April,
1998. Dr. Meyer will assume the position and responsibilities of President and
Chief Executive Officer upon the retirement of Mr. Unschuld.
RESULTS OF OPERATIONS
The Company had net sales of $59.9 million in first quarter fiscal 1998, a
decrease of $4.7 million, or 7%, from the $64.6 million reported for first
quarter fiscal 1997. The majority of the sales decline occurred in the Americas
where sales declined 12% compared to the prior year. This decline was largely
attributable to continuing logistical issues associated with restructuring North
American manufacturing operations during fiscal 1997. However, there has been
significant recent improvement in order delivery and order backlog on a total
Company basis has declined by just under $9 million since November 30, 1997.
Sales in European and Pacific Rim markets increased by 1% compared to first
quarter fiscal 1997 and would have grown by 9% if prevailing first quarter
fiscal 1997 currency exchange rates had remained in effect during first quarter
fiscal 1998.
Gross profit declined $3.7 million in first quarter fiscal 1998 compared to
first quarter fiscal 1997. The gross profit margin was 24.9% in first quarter
fiscal 1998 as compared to 28.8% for the same period last year. This decline
was primarily due to the cost impact of increased lower margin automotive
systems sales in Europe. Gross profit in the Americas increased to 26.7% in
first quarter fiscal 1998 from 22.9% during the same period last year.
Selling, general, and administrative expenses decreased $387 thousand (2%) as
compared to first quarter fiscal 1997 reflecting cost reductions resulting from
the restructuring of worldwide operations.
Interest expense increased by $541 thousand (50%), due to higher average
borrowing levels combined with higher effective interest rates.
Other income, which decreased $41 thousand, includes interest income, exchange
gains and losses, gains on sales of fixed assets, and miscellaneous income. The
majority of this decrease was in European and Pacific Rim markets.
Income tax benefit was $104 thousand on a pretax loss of $3.7 million in first
quarter fiscal 1998, compared to income tax expense of $15 thousand on a pretax
profit of $157 thousand in first quarter fiscal 1997.
As a result of all of the factors above, the Company recorded a net loss of $3.7
million ($1.23 per share) in first quarter fiscal 1998 as compared to a net
profit of $142 thousand ($.05 per share) in first quarter fiscal 1997.
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<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Revenue generated 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 $21.8 million
at February 28, 1998.
The Company's cash balances decreased $3.9 million during the quarter ended
February 28, 1998, largely due to cash outflows of $8.8 million used in
operating activities. In addition to the net loss from operations, operational
cash outlays for reductions of accounts payable and other current liabilities
were $17.5 million, which were partially offset by reductions of receivables and
inventories of $12 million. The Company used $396 thousand in investing
activities in first quarter 1998, primarily for the purchase of capital
equipment. Financing activities provided $5.4 million to the Company during
first quarter fiscal 1998 which was primarily used to lower accounts payable and
accrued liabilities.
On September 23, 1997, the Company entered into a $50 million unsecured
five-year credit facility with a syndicate of Chicago area banks. As of
November 30, 1997, the Company was not in compliance with several of the
financial covenants contained in the credit facility. On March 16, 1998, the
Company agreed with the bank group to collateralize the credit facility, pay
amendment fees, increase the interest rate to prime plus 1/2% on existing
borrowings and prime plus 1% on new borrowings, and shorten the duration of
the agreement to two years, in exchange for waiving all existing defaults,
amending certain terms, and increasing the total line of credit to $52.5
million to accommodate the projected cash flow needs of the Company. On
March 16, 1998, the Company also agreed with the holder of its 7.14% senior
notes to pay amendment fees, increase the interest rate to 7.64%, and shorten
the maturity to September 30, 1999 in exchange for waiving all existing
defaults and amending certain terms of the agreement.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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<PAGE>
BINKS SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 See Note 4 to Consolidated Financial Statements for the
period ended February 28, 1998
(Unaudited) contained herein.
Items 2 through 5 Not applicable
Item 6 (a) Exhibit 10.9 Form of bonus agreements with certain
executive officers and key employees
(b) On February 17, 1998, the Company filed a Current
Report on Form 8-K reporting that the Company had issued a
press release regarding the Company's intention to pursue a
sale of the Company and certain management changes.
On March 23, 1998, the Company filed a Current Report on
Form 8-K reporting the Company's fiscal 1997 year end
results and arrangements made with the Company's bank
group.
On March 26, 1998, the Company filed a Current Report on
Form 8-K reporting certain management changes.
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/ Doran J. Unschuld
- --------------------------------
Doran J. Unschuld, President/
Chief Executive Officer
Date April 14, 1998
--------------
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<PAGE>
BONUS AGREEMENT
THIS BONUS AGREEMENT is effective as of the ______ day of _______________,
1998, by and between Binks Sames Corporation, a Delaware corporation (the
"Company"), and _______________ (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee is now employed by the Company;
WHEREAS, Company is exploring certain strategic alternatives for the
Company and/or its affiliates that may result in a transaction involving a
Change in Control (as is hereinafter defined), and Employee acknowledges that
prior to and after such a transaction Employee may become aware of confidential
information which could cause irreparable harm to the Company and/or its
stockholders if disclosed;
WHEREAS, Company and Employee acknowledge that in order to facilitate such
a transaction, it is desired that the Employee continue to be employed by the
Company through the date of such transaction;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, it is agreed as follows:
1. EXISTING EMPLOYMENT AGREEMENT. Nothing in this Agreement shall be
construed to supersede the rights and obligations of the Employee or Company
contained in any employment agreement.
2. STAY BONUSES/CLOSING BONUS.
(a) FIRST STAY BONUS. The Company shall pay Employee an amount (the
"First Stay Bonus") equal to the product obtained by multiplying (x) the amount
of the Employee's Base Salary (as hereinafter defined) earned during the month
of August 1998, by (y) six (6), less withholding taxes, other normal payroll
taxes and any other amounts required by law to be withheld from the First Stay
Bonus, no later than September 30, 1998, provided that (i) the Employee remains
continuously employed with the Company for the period beginning March 1, 1998
through and including August 31, 1998 (the "First Six Month Period") and
(ii) the Employee complies fully with the terms of this Agreement and any other
current or future agreement between the Employee and the Company. "Base Salary"
shall mean the gross amount of the Employee's base salary prior to withholding
taxes, other normal payroll deductions and any other amounts required by law to
be withheld for the specified one (1) month period, excluding any bonuses,
benefits, profit sharing, pension, fringe benefits, or any other forms of
compensation beyond the Employee's base salary.
(b) SECOND STAY BONUS. The Company shall pay Employee an amount (the
"Second Stay Bonus") equal to the product obtained by multiplying (x) the amount
of the Employee's Base Salary earned during the month of February 1999, by (ii)
six (6), less withholding taxes, other
<PAGE>
normal payroll taxes and any other amounts required by law to be withheld from
the Second Stay Bonus, no later than March 31, 1999, provided that (i) the
Employee remains continuously employed with the Company for the First Six Month
Period and the period beginning February 28, 1998, through and including
February 28, 1999 (the "Second Six Month Period") and (ii) the Employee complies
fully with the terms of this Agreement and any other current or future agreement
between the Employee and the Company. Except as otherwise provided in this
Agreement, the First Stay Bonus and the Second Stay Bonus (collectively the
"Stay Bonuses") are in addition to and not in lieu of the compensation, benefits
and/or other bonuses that the Employee earns or is entitled to receive. The
Stay Bonuses, Closing Bonus and death/Disability Payment (as hereinafter
defined) are collectively referred to hereinafter as the "Bonuses".
(c) CLOSING BONUS. If the Employee's employment with the Company is
terminated (the "Change in Control Termination") as a direct result of a Change
in Control during the First Six Month Period or Second Six Month Period, the
Company shall pay the Employee an amount (the "Closing Bonus"), equal to the
product obtained by multiplying (x) the amount of the Employee's Base Salary
earned during the calendar month immediately preceding the month in which the
Change in Control Termination occurred, by (y) twelve (12) if the Change in
Control Termination occurs during the First Six Month Period, or by six (6) if
the Change in Control Termination occurs during the Second Six Month Period,
less withholding taxes, other normal payroll taxes and any other amounts
required by law to be withheld from the Closing Bonus, within thirty (30) days
after the date of the Change in Control Termination, provided that (i) the
Employee remains continuously employed with the Company until the date of the
Change in Control Termination, and (ii) the Employee complies fully with the
terms of this Agreement and any other current or future agreement between the
Employee and the Company. The Closing Bonus shall be paid to Employee in lieu
of and not in addition to (A) the Stay Bonuses if the Change in Control
Termination occurs during the First Six Month Period, (B) the Second Stay Bonus
if the Change in Control Termination occurs during the Second Six Month Period
and (C) any of the other Bonuses or payments provided for in this Agreement.
(d) DEATH/DISABILITY. If the Employee dies or suffers a Disability
(as defined below) during the First Six Month Period or Second Six Month Period,
the Company shall pay Employee an amount (the "death/Disability Payment") equal
to the product obtained by multiplying (x) the amount of the Employee's Base
Salary earned during the calendar month immediately preceding the month in which
the Employee dies or suffers a Disability, by (y) twelve (12) if the
death/Disability occurs during the First Six Month Period, or by six (6) if the
death/Disability occurs during the Second Six Month Period, less withholding
taxes, other normal payroll taxes and any other amounts required by law to be
withheld from the death/Disability Payment, within thirty (30) days after the
date of death of the Employee or the date it is determined that the Employee has
suffered a Disability (as provided for below), provided that (i) the Employee
remains continuously employed with the Company until the date of the Employee's
death/Disability, and (ii) the Employee complies fully with the terms of this
Agreement and any other current or future agreement between the Employee and the
Company. The death/Disability Payment shall be paid to Employee in lieu of and
not in addition to (A) the Stay Bonuses if the date of the Employee's
death/Disability occurs during the First Six Month Period, (B) the Second Stay
Bonus if the date of the Employee's death/Disability occurs during the Second
Six Month Period and (C) any of the other Bonuses or payments provided for in
this Agreement. For purposes of this Agreement, the Employee shall be deemed to
have
2
<PAGE>
suffered a "Disability" if the Employee shall be: (i) deemed to be mentally or
physically disabled by the insurance carrier which provides disability insurance
coverage for employees of the Company and such mental or physical disability
continues for six (6) months; (ii) in the absence of such disability insurance,
when in the judgment of the Board of Directors of the Company, the Employee is
unable to continue to perform the Employee's then current duties and such mental
or physical disability continues for a period of six (6) months; or (iii) deemed
to be mentally or physically disabled by a licensed practicing physician of the
Company's choice. Notwithstanding Subsection (ii) or (iii) above, in the event
of a dispute between the parties as to the Employee's Disability, the parties
shall select a licensed practicing physician to determine the Employee's
condition. In the event the parties cannot agree on the selection of a
physician, the issue shall be submitted to arbitration for immediate resolution
in accordance with Section 9. The determination of such physician shall be
binding on the Company and the Employee and/or the Employee's personal
representative. Termination of this Agreement or the Employee's employment
hereunder due to the Employee's Disability shall not relieve the Employee of the
Employee's obligations under Section 4.
3. CHANGE IN CONTROL. The term "Change in Control" means any transaction
or a series of related transactions, whether involving the Company or the
holders of any class or series of its stock, (a) in which the current
shareholders of the Company cease to be the beneficial owners, directly or
indirectly, of a majority of stock of Company or of any successor by merger,
consolidation or similar transaction or (b) in which all or substantially all of
the Company's assets shall be sold, leased, conveyed or otherwise disposed of as
an entirety or substantially as an entirety to any person or entity. If a
Change in Control is accomplished pursuant to (b) above, the person or entity
purchasing substantially all of the assets of the Company shall become a party
to this Agreement and shall assume all of Company's rights and obligations under
this Agreement. If the person or entity purchasing substantially all of the
assets of the Company does not become a party to this Agreement and assume the
Company's rights and obligations hereunder, the Company shall not be released of
its obligations hereunder.
4. EMPLOYEE'S DUTIES.
(a) During the term of this Agreement the Employee agrees that
Employee will not use for Employee's own account and, except pursuant to a court
order, statute or government regulation, as is necessary to the performance of
the Employee's duties to the Company or as requested by the Company's Chief
Executive Officer, communicate or disclose to any person, or advise, discuss
with, or in any way assist any other person or firm in obtaining or learning
about, information concerning: (i) the potential or actual sale of the
Company's assets or stock; (ii) the name(s) of any potential or actual
purchaser; (iii) the terms of any offers (whether or not accepted); and (iv) the
terms of this Agreement, including but not limited to the amount of the Bonuses
provided for in Section 2. The Employee further covenants and agrees that
Employee shall retain all such knowledge and information concerning the
foregoing in trust for the sole benefit of the Company and its successor or
assign. The Employee agrees to provide Company with prompt notice of any
requests for information, court orders, subpoena, civil investigative demands or
similar processes, seeking information or documents relating to the information
enumerated in subparts (i)-(iv) of this paragraph, so that Company may seek an
appropriate protective order, and, Employee further agrees to use the
3
<PAGE>
Employee's best efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such confidential information.
(b) Employee shall not, during the term of this Agreement and for one
(1) year thereafter, directly or indirectly provide services in the capacity as
an owner, independent contractor, principal, agent, officer, director, partner,
stockholder, employee or consultant to any person or entity that contacts or is
contacted by the Company or one of its agents in connection with the anticipated
disposition of the Company's assets or stock; PROVIDED, HOWEVER, that the
restriction on Employee set forth in this Subsection 4 (b) shall not apply in
the event the Company terminates the Employee's employment with the Company
without Cause by Company (as defined below), including a Change in Control
Termination, or the Employee terminates the Employee's employment with the
Company with Cause by Employee (as defined below).
5. TERM. This Agreement shall terminate thirty-two (32) days after the
end of the Second Six Month Period, unless terminated earlier pursuant to the
provisions hereof.
6. TERMINATION BY COMPANY.
(a) The Company may terminate this Agreement and Employee's
employment with the Company at any time, with or without Cause by Company (as
defined below), by written notice to Employee. Such written notice shall
specify whether the termination is with or without Cause by Company and if such
termination is with Cause by Company the notice shall specify in reasonable
detail the underlying failure or misconduct giving rise to such termination with
Cause by Company. If the Company terminates Employee's employment with Cause by
Company, the Employee shall not be entitled to receive any of the Bonuses
provided for in Section 2 of this Agreement. If, however, the Company
terminates Employee's employment without Cause by Company (other than a Change
in Control Termination) during the First Six Month Period or Second Six Month
Period, the Company shall immediately pay the Employee an amount equal to the
product obtained by multiplying (x) the amount of the Employee's Base Salary
earned during the calendar month immediately preceding the month in which the
Employee was terminated without Cause by Company, by (y) twelve (12) if such
termination occurs during the First Six Month Period, or by six (6) if such
termination occurs during the Second Six Month Period, less withholding taxes,
other normal payroll taxes and any other amounts required by law to be withheld
from such payment, within thirty (30) days after the date of such termination,
provided that (i) the Employee remains continuously employed with the Company
until the date of the Employee is terminated without Cause by Company, and (ii)
the Employee complies fully with the terms of this Agreement and any other
current or future agreement between the Employee and the Company. The payment
provided for in the immediately preceding sentence shall be in lieu of and not
in addition to (A) the Stay Bonuses if the date the Employee is terminated
without Cause by the Company occurs during the First Six Month Period, (B) the
Second Stay Bonus if such date occurs during the Second Six Month Period and (C)
any of the other Bonuses or payments provided for in this Agreement.
(b) The term "Cause by Company" shall mean:
4
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(i) except in the event of the Employee's Disability, an act of
misconduct or material failure by the Employee to perform the
Employee's material duties or reasonable obligations to the Company
which the Employee fails to remedy within thirty (30) days after
written notice is received by the Employee specifying the alleged act
of misconduct or failure in reasonable detail;
(ii) conviction by the Employee of a felony;
(iii) a material act of dishonesty or breach of trust on the part
of the Employee resulting, or intending to result, directly or
indirectly in personal gain or enrichment at the expense of the
Company or its shareholders or other detriment to the Company or its
shareholders; and
(iv) disclosure of any proprietary information of the Company to
the detriment of the Company or its shareholders (except pursuant to a
court order or as otherwise permitted by this Agreement).
(c) Termination of this Agreement and the Employee's employment by
the Company with or without Cause by Company shall not relieve the Employee
of the Employee's obligations under Section 4 of this Agreement,
notwithstanding that Employee's compensation and benefits shall otherwise
terminate.
7. TERMINATION BY EMPLOYEE.
(a) The Employee may terminate this Agreement and the Employee's
employment with the Company at any time with or without Cause by Employee (as
such term is defined below), by written notice to the Company. Such written
notice shall specify whether the termination is with or without Cause by
Employee and if such termination is with Cause by Employee the notice shall
specify in reasonable detail the underlying failure or breach giving rise to
such termination with Cause by Employee. If the Employee terminates this
Agreement and the Employee's employment with the Company without Cause by
Employee, the Employee shall not be entitled to receive any of the Bonuses
provided for in Section 2. If, however, the Employee terminates the Employee's
employment with the Company with Cause by Employee (other than a Change in
Control Termination) during the First Six Month Period or Second Six Month
Period, the Company shall immediately pay the Employee an amount equal to the
product obtained by multiplying (x) the amount of the Employee's Base Salary
earned during the calendar month immediately preceding the month in which the
Employee's employment is terminated with Cause by Employee, by (y) twelve (12)
if such termination occurs during the First Six Month Period, or by six (6) if
such termination occurs during the Second Six Month Period, less withholding
taxes, other normal payroll taxes and any other amounts required by law to be
withheld from such payment, within thirty (30) days after the date of such
termination, provided that (i) the Employee remains continuously employed with
the Company until the date the Employee's employment is terminated with Cause by
Employee, and (ii) the Employee complies fully with the terms of this Agreement
and any other current or future agreement between the Employee and the Company.
The payment provided for in the immediately preceding sentence shall be in lieu
of and not in addition to (A) the Stay Bonuses if the date the Employee's
5
<PAGE>
employment is terminated with Cause by Employee occurs during the First Six
Month Period, (B) the Second Stay Bonus if such date occurs during the Second
Six Month Period and (C) any of the other Bonuses or payments provided for in
this Agreement.
(b) The term "Cause by Employee" shall mean:
(i) a material breach by the Company of any material covenant or
agreement hereunder where the Company has failed to remedy such
alleged breach within sixty (60) days after written notice is received
by the Company from the Employee specifying the alleged breach in
reasonable detail;
(ii) a reduction of the Employee's compensation and/or benefits
without Cause by Company from the current amounts which the Employee
is currently earning or entitled;
(iii) a reduction of the Employee's duties and/or title without
Cause by Company as they currently exist; and
(iv) requiring the Employee to work in a location other than the
location where the Employee is currently employed.
(c) Termination by the Employee with or without Cause by Employee of
this Agreement or the Employee's employment hereunder shall not relieve the
Employee of the Employee's obligations under Section 4 of this Agreement,
notwithstanding that Employee's compensation and benefits shall otherwise
terminate.
8. REMEDIES. Notwithstanding Section 9 of this Agreement, in the event
of a breach or threatened breach by the Employee of Section 4, the Company shall
be entitled to a temporary restraining order and an injunction restraining the
Employee from the commission of such breach. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of money
damages. In any dispute arising from this Agreement, the prevailing party shall
be entitled to reimbursement from the other party of reasonable attorney's fees
and costs incurred in connection with such dispute.
9. ARBITRATION. Except as otherwise provided for in this Agreement, the
Company and Employee agree to settle any controversy or claim arising out of or
relating to this Agreement or the breach thereof by arbitration in the City of
Chicago, Illinois, in accordance with the rules then obtaining of the American
Arbitration Association, and judgment upon the award rendered may be entered in
any court having jurisdiction thereof.
10. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate nor be
construed as a waiver of any subsequent breach by the other party.
11. BINDING EFFECT. 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
6
<PAGE>
the person or entity purchasing the assets or stock of the Company which causes
a Change in Control. Insofar as the Employee is concerned, this Agreement,
being personal, cannot be assigned.
12. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the construction or interpretation of this
Agreement.
13. SEVERABILITY. Whenever possible each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to be an original,
but all of which together shall constitute one and the same instrument.
15. GOVERNING LAW. This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of the
State of Illinois, without reference to the conflict of law provisions of such
state.
16. NOTICE. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or three (3) days after being mailed by registered or
certified first class mail, postage prepaid, return receipt requested, if to the
Employee, at the address listed under his name, or if to the Company, at the
address listed under its name or to such other address as such party shall have
specified by notice to the other party hereto as provided in this Section.
17. ENTIRE AGREEMENT. Except as specifically provided for in this
Agreement, this Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, understandings and arrangements,
oral or written, between the parties hereto with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
EMPLOYEE: COMPANY:
BINKS SAMES CORPORATION
By:
- -------------------------------------- --------------------------------
Name: Name:
------------------------------
Its:
-------------------------------
Address: Address:
- -------------------------------------- 9201 Belmont Avenue
Franklin Park, Illinois 60131
- --------------------------------------
7
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<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
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0
0
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