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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the fiscal year ended DECEMBER 31, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the transition period from ______________ to ______________
Commission file number 0-24690
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CLARION TECHNOLOGIES, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 91-1407411
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 N. ROSELLE ROAD, SUITE 340, SCHAUMBURG, IL 60195
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(Address of principal executive offices) (Zip Code)
(Issuer's telephone number (847) 490-9900
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE N/A
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [___]
State issuer's revenues for its most recent fiscal year $3,400,786
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State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) $37,123,585
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. The number of shares of the
registrant's Common Stock outstanding as of April 13, 1999 was 16,508,592.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-KSB incorporates by reference
information, to the extent specific sections are referred to herein, from the
Registrant's Information Statement for its 1999 Annual Meeting to be held May
24, 1999 (the "1999 Information Statement").
Transitional Small Business Disclosure Format (check one):
Yes No X
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THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS
REPORT THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY,"
"WILL," EXPECT," "BELIEVE," "ANTICIPATE," "ESTIMATE," OR "CONTINUE," THE
NEGATIVE OR OTHER VARIATIONS THEREOF, OR COMPARABLE TERMINOLOGY, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY
DEPENDING ON A VARIETY OF FACTORS, INCLUDING CONTINUED MARKET DEMAND FOR THE
TYPES OF PRODUCTS AND SERVICES PRODUCED AND SOLD BY THE COMPANY, CHANGE IN
WORLDWIDE ECONOMIC AND POLITICAL CONDITIONS AND ASSOCIATED IMPACT ON INTEREST
AND FOREIGN EXCHANGE RATES, THE LEVEL OF SALES BY ORIGINAL EQUIPMENT
MANUFACTURERS OF VEHICLES FOR WHICH THE COMPANY SUPPLIES PARTS, THE SUCCESSFUL
INTEGRATION OF COMPANIES ACQUIRED BY THE COMPANY, AND CHANGES IN CONSUMER DEBT
LEVELS.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Clarion Technologies, Inc., with its wholly-owned subsidiaries, Clarion
Plastics Technologies, Inc. ("Clarion Plastics"), Clarion Specialty Products,
Inc. ("Clarion Specialty"), Clarion Sourcing, Inc. ("Clarion Sourcing") and Rose
& Associates, Inc. ("Rose"), and any predecessor are collectively referred to
herein as the "Company".
Business Development
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The Company was originally incorporated in Nevada as KAR VENTURES on
March 17, 1988. The Company changed its name to Clarion House, Inc. on January
28, 1991.
On April 22, 1996, the Company entered into an Agreement and Plan of
Reorganization and Corporate Separation (the "Reorganization") with exchanging
stockholders of the Company. Pursuant to the Reorganization, which was not
actually consummated until December 1997, the exchanging stockholders exchanged
all of their Company common stock (an aggregate of 800,000 shares) for all of
the issued and outstanding common stock of Insecta Sales & Research, Inc., a
Delaware corporation which was then a wholly-owned subsidiary of the Company.
The Company had no active operations during 1997.
On December 31, 1997, the Company acquired all of the capital stock of
Clarion Plastics Technologies, Inc. (f/k/a Triangle Plastics, Inc.), an Ohio
corporation ("Clarion Plastics"), in order to implement its plan to engage in
the manufacture of injection molded plastic products.
On October 2, 1998, the Company changed its state of incorporation from
Nevada to Delaware and also changed its name to Clarion Technologies, Inc.,
through the merger of Clarion House, Inc., a Nevada corporation, with and into
the Company (the "Reincorporation"). The Registrant was formed as a wholly-owned
subsidiary of Clarion House, Inc. for purposes of the Reincorporation. The
merger exchange ratio was one share of the Company's common stock, $.001 par
value for each one share of Clarion House, Inc.'s common stock, $.01 par value,
outstanding at the effective date of the Reincorporation.
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Business of the Issuer
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GENERAL
The Company, through Clarion Plastics, is engaged in the injection
molding of plastic products for a variety of industries, including medium and
heavy truck, heating and air conditioning, railroad, recreational, office
furniture, water conditioning and Tier II and Tier III automotive. Clarion
Plastics is a full-service supplier providing complete design services and
currently operates twenty-four (24) hours a day with three (3) shifts of
employees.
BUSINESS STRATEGY
The Company intends to diversify its operations beyond injection
molding by initiating contract manufacturing, import and assembly operations for
both plastic and non-plastic products for both consumer and industrial niche
markets. These niche products may or may not incorporate components produced by
Clarion Plastics. The Company implemented its expansion plans through the recent
formation of Clarion Sourcing and Clarion Specialty, as wholly-owned
subsidiaries. In addition, the Company recently acquired Rose, the Company's
former independent and now in-house sales representative organization.
Clarion Sourcing will engage in the sourcing and importation of
products for a variety of industries. Clarion Specialty will engage in the
manufacturing and assembly of products, which include plastic components
manufactured by Clarion Plastics, for a variety of industries.
The Company's expansion strategy is to continue to diversify its
product offerings into high growth niche markets. Although management
anticipates that expansion will primarily focus on those markets which are
strategic to the further integration of the Company's operations, other growth
and acquisition opportunities with significant profit potential will also be
considered.
PRODUCTS AND SERVICES
The Company manufactures and assembles custom injection-molded plastic
components for the office furniture, water conditioning, railroad, recreational,
Tier II/Tier III automotive, heating and air conditioning, and medium and heavy
truck industries. The Company's products currently include, but are not limited
to, interior trim components, HVAC components, exterior trim (skirts/farrings),
storage racks, fenders, chair bases and checkers. The Company believes these
components are typically more difficult for a customer to produce in-house or
for a competitor to replicate due to the substantial investment required in
specialized engineering, design and manufacturing capabilities. Management
further believes such products have strong worldwide growth potential and high
margins.
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The Company offers comprehensive manufacturing capabilities, including
design and engineering, high-precision injection molding, automated
manufacturing and assembly, plastics painting and material and product testing
RAW MATERIALS
The primary raw materials used by Clarion Plastics in the manufacture
of its products are plastics resins, primarily polycarbonate, polyethylene and
polystyrene. Although the Company uses a select group of suppliers, the
materials used in manufacturing injection-molded plastic components are
generally readily available in the open market. Shortages of plastics resins
have been infrequent.
The Company's financial performance is dependent to a substantial
extent on the plastic resin market. The primary plastic resins used by the
Company are produced from petrochemical intermediates derived from products of
the natural gas and crude oil refining processes, respectively. Because plastic
resins are commodity products, price is a significant factor in the selection of
suppliers. Consequently, the Company's sources for plastics resins tend to vary
from year to year.
Natural gas and crude oil markets experience substantial cyclical
fluctuations as well as other market disturbances, including shortages of
supply, the effect of OPEC policy and crises in the oil producing regions of the
world. The capacity, supply and demand for plastic resins and the petrochemical
intermediates from which they are produced are also subject to cyclical and
other market factors. Consequently, plastic resin prices may fluctuate as a
result of changes in natural gas and crude oil prices and the capacity, supply
and demand for resin and petrochemical intermediates from which they are
produced.
The Company is not a significant purchaser of plastic resin in the
United States, and is not able to achieve significant discounts from market
prices for volume purchases.
The Company may not always be able to pass through increases in the
cost of its raw materials to its customers in the form of price increases. To
the extent that increases in the cost of plastic resin cannot be passed on to
its customers, such increases may have an adverse impact on profit margins and
the overall profitability of the Company.
CUSTOMERS
During the year ended December 31, 1998, two (2) of the Company's
customers accounted for more than ten percent (10%) of the Company's revenue.
The Company anticipates that a few customers may continue to account for a
significant portion of its revenue in fiscal 1999. The Company's business is
dependent upon consumer demand for the specific models and product lines that
incorporate the Company's parts.
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MARKET AND POTENTIAL CUSTOMERS
The Company plans to continue focusing a significant amount of its
marketing efforts on the United States medium and heavy truck industry. The
Company, through Rose, has developed relationships with a number of medium and
heavy truck suppliers and manufacturers which can be targeted as potential
customers, including International Navistar, Freightliner, Mack, Paccar and
Volvo.
In addition to the medium and heavy truck industry, the Company's
products are capable of serving other niche markets, including heating and air
conditioning, railroad, recreational, office furniture, water conditioning and
Tier II and Tier III automotive. The Company's product development activity will
respond to the marketplace demand.
SALES AND MARKETING
Rose, which previously operated as an independent sales representative
organization for the Company, currently acts as the Company's in-house sales and
marketing representative. Management believes that the consolidation of Rose
into the Company will provide a more focused sales effort with lower costs.
COMPETITION
The injection-molded plastics industry is highly fragmented and
characterized by intense competition. The Company's competitive market, however,
is regional due to the significant impact of freight costs. As a result, the
Company believes that it has ten (10) principal competitors. The Company
believes that none of its competitors has a dominant position in the market,
although many of the Company's present and potential competitors have, or may
have, substantially greater financial and other resources than the Company to
devote to further technological and new product development and marketing. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements than the Company. The Company believes that
its ability to compete depends primarily upon its technical capabilities,
product quality and durability, competitive pricing and product marketing.
The Company believes that its primary competitive strengths include its
ability to provide technologically advanced design and manufacturing services,
to hire and retain experienced product managers and a skilled manufacturing work
force, maintain superior product quality and deliver finished products on a
just-in-time or scheduled lead time basis.
ENVIRONMENTAL AND SAFETY MATTERS
Certain of the Company's operations are subject to federal, state and
local environmental laws and regulations that impose limitations on the
discharge of pollutants into the air and water and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. While
historically the Company has not had to make significant capital expenditures
for environmental compliance, the Company cannot predict with any certainty its
future capital expenditures for environmental compliance because of continually
changing compliance standards and technology. The Company does not currently
have any insurance coverage for environmental liabilities and does not
anticipate obtaining such coverage in the future.
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The Company routinely monitors environmental compliance at its
manufacturing facilities. The cost of such compliance has not been significant.
The Company is not currently subject to any environmental proceedings. During
1998, the Company did not make any material capital expenditures for
environmental control facilities, nor does it anticipate any such expenditures
in the near future. Actions by federal, state and local governmental agencies
concerning environmental matters could result in laws or regulation that could
increase the cost of producing the products manufactured by the Company or
otherwise adversely affect the demand for its products.
EMPLOYEES
As of February 28, 1999, the Company had approximately 108 full-time
employees, of which 67 were engaged in manufacturing activities and 41 in sales,
office administration and management functions. None of the Company's employees
are represented by a union and the Company believes there is an adequate pool of
labor available to satisfy its foreseeable hiring needs. The Company believes
that its relations with its employees are good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently leases approximately 28,000 square feet of space
in Montpelier, Ohio for its manufacturing facility at a monthly rate of $9,375.
In March 1999 the Company completed construction of an approximately 164,000
square foot building consisting of manufacturing space, warehouse space and
office space to accommodate the anticipated expansion of operations in 1999. The
Company acquired the real property for the new facility in June 1998 for
$150,000 in cash and 5,714 shares of Common Stock at an agreed value of $1.75
per share.
The executive offices of the Company are located in Schaumburg,
Illinois and consist of approximately 5,000 square feet of leased premises. The
Company's lease for these premises expires on June 30, 2000 and provides for
monthly base rent of $2,713.
ITEM 3. LEGAL PROCEEDINGS.
On August 18, 1998, Plastech Exterior Systems, Inc. filed a suit in the
Court of Common Pleas of Williams County, Ohio against Triangle Plastics, Inc.
(the former name of Clarion Plastics) and Clarion Specialty, both wholly-owned
subsidiaries of the Company. The complaint also names Rose Industries, Inc. as a
defendant. The complaint asserts causes of action for misappropriation of trade
secrets, unjust enrichment and tortious interference, and seeks unspecified
damages in excess of $25,000. Plastech Exterior Systems, Inc. previously
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employed certain personnel of Clarion Plastics. The complaint alleges that the
defendants misappropriated trade secrets, apparently by hiring these former
employees of Plastech, as well as by inducing customers and employees to leave
Plastech. This litigation is in a preliminary stage. Management believes that
the claims against the Company's subsidiaries are meritless.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 5, 1998 a proposal was submitted to the majority shareholders
of the Company regarding the approval of the merger of Clarion House, Inc., a
Nevada corporation, with and into Clarion Technologies, Inc., a Delaware
corporation, for purposes of reincorporating the Company in the State of
Delaware. Of the 5,999,500 shares of common stock then outstanding, 4,310,195
shares (or 71.8%) delivered written consents to the Company adopting the
proposal.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
(a) Market Information
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The Company's Common Stock is quoted on the OTC Bulletin Board. Because
of the lack of readily available quotations and the limited trading volume
frequently associated with these securities, there is a greater risk of market
volatility of such securities than for securities traded on national exchanges.
Trading in the Common Stock is now reported under the symbol CTCH. The Company
considers its Common Stock to be thinly traded and that any reported bid or sale
prices may not be a true market-based valuation of the Common Stock.
The following table sets forth the quarterly high and low bid prices of
the Common Stock on the OTC Bulletin Board from January 1, 1997 through December
31, 1998
High Low
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Year ended December 31, 1997
First Quarter 1/2 1/2
Second Quarter 1 1/2
Third Quarter 1/2 1/2
Fourth Quarter 1/2 1/4
Year ended December 31, 1998
First Quarter 3/8 3/8
Second Quarter 2 1/4
Third Quarter 2 7/16
Fourth Quarter 4 7/8 1 5/8
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The foregoing quotations represent inter-dealer prices without retail
mark-up, mark-down or commission and may not represent actual transactions.
(b) Holders
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As of April 13, 1999, there were approximately 309 record holders of
the Company's Common Stock. The Company has not paid any cash dividends since
its inception and does not contemplate paying dividends in the foreseeable
future. It is anticipated that earnings, if any, will be retained for the
operation of the Company's business.
(c) Dividends
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The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to declare or pay any cash dividends in the
foreseeable future. The Company's ability to pay dividends, other than in stock,
is subject to limitations under the terms of its credit facility.
(d) Sales of Unregistered Securities
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During the fiscal year ended December 31, 1998, the Company sold
unregistered shares of its Common Stock in the following transactions:
A. In January 1998, a holder of outstanding options exercised his
rights to purchase 50,000 shares of Common Stock at an exercise price of $1.00
per share. The securities were issued pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Act"). There were no underwriters involved in the
transaction.
B. In January 1998, a holder of outstanding options exercised his
rights to purchase 150,000 shares of Common Stock at an exercise price of $0.25
per share. The securities were issued pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
C. In February 1998, holders of outstanding options exercised their
rights to purchase 100,000 shares of Common Stock at an exercise price of $1.00
per share. The securities were issued pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
D. In March 1998, a holder of outstanding options exercised his rights
to purchase 18,204 shares of Common Stock at an exercise price of $0.824 per
share. The securities were issued pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
E. In March 1998, holders of outstanding options exercised their rights
to purchase 119,500 shares of Common Stock at an exercise price of $1.00 per
share. The securities were issued pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
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F. In April 1998, the Company issued 40,000 shares of Common Stock to
an employee of the Company in connection with an employment agreement. The
securities were issued at an agreed value of $0.25 per share and were issued
pursuant to Section 4(2) of the Act. There were no underwriters involved in the
transaction.
G. In April 1998, the Company sold 105,000 shares of Common Stock at a
price of $1.00 per share. The securities were issued pursuant to Section 4(2) of
the Act. There were no underwriters involved in the transaction.
H. In May 1998, the Company issued 100,000 shares of Common Stock to an
employee of the Company in connection with an employment agreement. The
securities were issued at an agreed value of $0.50 per share and were issued
pursuant to Section 4(2) of the Act. There were no underwriters involved in the
transaction.
I. In May 1998, the Company issued 25,000 shares of Common Stock in
consideration for consulting services rendered to the Company. The securities
were issued at an agreed value of $1.00 per share pursuant to Section 4(2) of
the Act. There were no underwriters involved in the transaction.
J. In June 1998, the Company issued 5,714 shares of Common Stock as
partial consideration for the purchase of real estate. The securities were
issued at an agreed value of $1.75 per share pursuant to Section 4(2) of the
Act. There were no underwriters involved in the transaction.
K. In June 1998, the Company sold 1,820,000 shares of Common Stock at a
price of $1.00 per share. The securities were issued pursuant to Section 4(2) of
the Act. There were no underwriters involved in the transaction.
L. In June 1998, the Company issued 950,000 shares of Common Stock in
consideration for the Company's acquisition of Rose & Associates, Inc. The
securities were issued pursuant to Section 4(2) of the Act.
There were no underwriters involved in the transaction.
M. In June 1998, holders of outstanding warrants exercised their rights
to purchase 100,000 shares of Common Stock at an exercise price of $1.75 per
share. The securities were issued pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
N. In June 1998, the Company issued 10,000 shares of Common Stock as
consideration for services rendered to the Company. The securities were issued
at an agreed value of $1.00 per share pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
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O. In June 1998, the Company issued 38,594 shares of Common Stock as
consideration for equipment and services rendered to the Company. The securities
were issued at an agreed value of $2.00 per share pursuant to Section 4(2) of
the Act. There were no underwriters involved in the transaction.
P. In August 1998, the Company issued 10,000 shares to an employee
pursuant to an employment agreement. The securities were issued at an agreed
value of $0.25 per share pursuant to Section 4(2) of the Act. There were no
underwriters involved in the transaction.
Q. In August 1998, the Company sold 1,000,000 shares of Common Stock at
a price of $1.00 per share. The securities were issued pursuant to Section 4(2)
of the Act. There were no underwriters involved in the transaction.
R. In October 1998, the Company sold 831,470 shares of Common Stock at
$2.00 per share. The offering was conducted pursuant to Section 4(2) of the Act.
There were no underwriters involved in the transaction.
S. In October 1998, the Company issued an aggregate of 70,000 shares of
Common Stock to the outside directors of the Company as consideration for
services rendered. The securities were issued at an agreed value of $1.00 per
share pursuant to Section 4(2) of the Act. There were no underwriters involved
in the transaction.
T. In October 1998, the Company issued 35,000 shares of Common Stock as
consideration for services rendered to the Company. The securities were issued
at an agreed value of $1.00 per share pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
U. In November 1998, the Company issued 45,000 shares of Common Stock
to an employee pursuant to an employment agreement. The securities were issued
at an agreed value of $2.00 per share pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
V. In December 1998, the Company issued 18,911 shares of Common Stock
as consideration for equipment and services rendered to the Company. The
securities were issued at an agreed value of $2.00 per share pursuant to Section
4(2) of the Act. There were no underwriters involved in the transaction.
W. The Company sold 2,647,500 shares of Common Stock at $2.00 per
share. The offering was conducted pursuant to Section 4(2) of the Act. There
were no underwriters involved in the transaction.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION" SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE
HEREIN AND INCLUDES FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES WHICH ARE BASED UPON THE COMPANY'S BELIEFS, AS WELL AS ASSUMPTIONS
MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS PREDICTED BY SUCH FORWARD-LOOKING
STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE RISKS
AND UNCERTAINTIES WHICH ARE DISCUSSED BELOW.
GENERAL
From mid-1995 to December 31, 1997, the Company had no active
operations. On December 31, 1997, the Company consummated the acquisition of
Clarion Plastics. As a result of the acquisition, the Company became a holding
company for one wholly-owned operating subsidiary. Clarion Plastics is a
manufacturer of injection molded thermoplastics.
In March 1999 the Company completed construction of its new 164,000
square foot injection molding and assembly plant in Montpelier, Ohio, which is
scheduled to be fully operational by June 1999. The Company has already
commenced some production in the new facility.
RESULTS OF OPERATIONS
The Company's sales for the 1998 fiscal year were approximately $3.40
million, an increase of approximately $0.14 million, or 4.2%, from $3.26 million
in sales for the 1997 fiscal year.
The Company's gross loss for the 1998 fiscal year was approximately
$0.85 million compared to a gross profit of $0.25 million for the 1997 fiscal
year. This loss was the result of an increase in the cost of sales related to
the Company's increased capital expenditures, fixed labor costs and fixed
overhead expenses during the 1998 fiscal year.
The Company's selling and administrative expenses for the 1998 fiscal
year were approximately $3.40 million, or 100.1% of sales, compared to $1.09
million, or 33.4% of sales for the 1997 fiscal year. This increase is
attributable to the implementation of the Company's expansion plans and the
hiring of executive personnel to assist in the implementation of these plans.
The Company anticipates that the level of selling, general and administrative
expenses to continue to increase in order to support continued growth and
expansion, however, management believes that selling, general and administrative
expenses will decrease as a percentage of net sales in the 1999 fiscal year.
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The Company's interest expense for the 1998 fiscal year was
approximately $126,000, or 3.7% of sales, compared to an interest expense of
approximately $74,000, or 2.3% of net sales, for the 1997 fiscal year. The
Company is anticipating that interest expense for 1999 will exceed the amount
for 1998 as a result of the Company's capital expenditure plans.
No meaningful comparison can be made to the 1996 fiscal year in that
during that period the Company did not have any active operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs and capital equipment requirements
have increased as a result of the growth of the Company and are expected to
continue to increase as a result of anticipated growth. Increases in required
working capital and capital equipment requirements are expected to be met from
cash flow from operations, equipment financing, revolving credit borrowings and
the sale of the Company's equity securities. In March 1999, the Company obtained
a $2.5 million revolving line of credit facility as well as a $6.6 million term
loan to finance capital equipment expenditures. As of December 31, 1998, the
Company had a deficit in working capital of approximately $2.7 million, compared
to a deficit of $0.17 million at the end of the 1997 fiscal year. The decrease
in working capital was attributable to increased accounts payable related to the
purchase of equipment and construction costs for the new Montpelier plant.
The Company used cash in operating activities of $3.85 million for the
fiscal year ended December 31, 1998 compared to $0.43 million for the fiscal
year ended December 31, 1997. Cash used for operating activities in the period
was primarily the result of a net loss, depreciation and amortization, and
changes in working capital due to increases in accounts receivable, inventories
and construction advance receivable.
The Company used cash in investing activities of $3.56 million for the
1998 fiscal year, compared to $0.11 million for the 1997 fiscal year. Cash used
in investing activities was primarily for the purchase of property, plant and
equipment.
The Company generated $11.4 million in cash flow from financing
activities for the fiscal year ended December 31, 1998, compared to net cash
provided of $0.51 million for the 1997 fiscal year. The financing activities in
the period were primarily a result of the sale of Company stock.
On July 1, 1998, the Company commenced a private offering of its common
stock, $.001 par value (the "Offering"). The minimum offering was 500,000 shares
and the maximum offering was 1,000,000 shares. The offering price per share was
$2.00. As of December 31, 1998, the Company had sold 831,470 shares in the
Offering.
On December 1, 1998, the Company commenced a second private offering of
its common stock, $.001 par value (the "Second Offering"). The minimum offering
was 500,000 shares and the maximum offering was 5,000,000 shares. The offering
price was $2.00. As of December 31, 1998, the Company had sold 2,647,500 shares
in the Second Offering.
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The Company received gross proceeds of $11.4 million from the sale of
its equity securities during the fiscal year ended December 31, 1998. The
liquidity provided by the Company's credit facilities, combined with cash flow
from operations and financing activities, is expected to be sufficient to meet
the Company's anticipated working capital and capital expenditure needs for
existing operations for at least twelve months. There can be no assurance,
however, that such funds will not be expended prior thereto due to changes in
economic conditions or other unforeseen circumstances, requiring the Company to
obtain additional financing prior to the end of such twelve month period. There
can be no assurance, however, that additional financing will be available to the
Company, when and if needed, on acceptable terms or at all.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, in less than two years, computer systems
and software used by many companies will need to be upgraded to comply with such
"Year 2000" requirements. The Company believes that its internal systems are
either already Year 2000 compliant or can be upgraded without significant
expenditures.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of Section 21(e) of the Securities Exchange Act of 1934.
These forward-looking statements are based largely on the Company's expectation
and are subject to a number of risks and uncertainties, certain of which are
beyond the Company's control. Actual results could differ materially from these
forward-looking statements as a result of, among other factors, risks related to
the Company's dependence on the automotive industry, fluctuations in operating
results, potential significant indebtedness and leverage, competition,
variability of customer requirements and nature of customer commitments on
orders and other risks. In light of these risks and uncertainties, there can be
no assurance that the forward-looking information contained in this report will
in fact occur.
-12-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Clarion Technologies, Inc. and Subsidiaries Page
------------------------------------------- ----
Independent Auditors' Report...................................F-1
Consolidated Balance Sheets at
December 31, 1998 and 1997................................F-2
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997................................F-4
Consolidated Statements of Changes in Stockholders'
Deficit for the years ended December 31, 1998 and 1997....F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997................................F-7
Notes to Consolidated Financial Statements.....................F-9
-13-
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
-------------
CONSOLIDATED
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
-------------
DECEMBER 31, 1998
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
--------
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
--------
DECEMBER 31, 1998
<PAGE>
CLARION TECHNOLOGIES INC. AND SUBSIDIARIES
- CONTENTS -
PAGE NUMBER
-----------
Independent Auditors' Report F-1
Financial Statements:
Consolidated Balance Sheet F-2
Consolidated Statement of Operations F-4
Consolidated Statement of Changes in Stockholders' Deficit F-5
Consolidated Statement of Cash Flows F-7
Notes to Consolidated Financial Statements F-9
<PAGE>
Independent Auditors' Report
----------------------------
To the Board of Directors
Clarion Technologies, Inc. and Subsidiaries
Schaumburg, Illinois
We have audited the accompanying consolidated balance sheet of CLARION
TECHNOLOGIES, INC. AND SUBSIDIARIES as of December 31, 1998 and 1997, and the
related consolidated statements of operations, changes in stockholders' deficit,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of CLARION
TECHNOLOGIES INC. AND SUBSIDIARIES as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
PERRIN, FORDREE & COMPANY, P.C.
March 15, 1999
Troy, Michigan
F-1
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
------
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 4,009,045 $ 10,265
Accounts receivable - trade 1,050,208 327,768
Inventories 780,699 259,663
Refundable federal tax - 1,048
Prepaid expenses 206,882 -
-------------- --------------
Total current assets 6,046,834 598,744
PROPERTY AND EQUIPMENT - At cost:
Land 187,565 -
Machinery and equipment 3,574,646 1,253,121
Vehicles 25,955 25,955
Furniture and fixtures 311,380 47,359
Leasehold improvements 38,579 17,021
Construction in progress 6,378,609 -
-------------- --------------
10,516,734 1,343,456
Less accumulated depreciation 1,118,873 919,267
-------------- --------------
9,397,861 424,189
OTHER ASSETS:
Deposits 12,085 1,000
Goodwill 1,102,126 230,849
Deferred tax asset - 35,200
-------------- --------------
1,114,211 267,049
-------------- --------------
$ 16,558,906 $ 1,289,982
============== ==============
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
CURRENT LIABILITIES:
Line-of-credit $ - $ 213,728
Current portion of long-term debt 104,063 90,443
Current portion of obligations
under capital leases 19,016 17,379
Accounts payable:
Trade 3,942,945 398,423
Construction cost 4,430,060 -
-------------- --------------
8,373,005 398,423
Accrued expenses:
Payroll and taxes 48,481 23,903
Vacation 75,772 6,120
Interest 96,384 1,503
Workers' compensation - 4,629
Other 11,526 5,670
-------------- --------------
232,163 41,825
Officers' loan - 3,338
-------------- --------------
Total current liabilities 8,728,247 765,136
DEFERRED TAX LIABILITY - 1,300
LONG-TERM DEBT 321,497 419,391
OBLIGATIONS UNDER CAPITAL LEASES 30,761 51,211
-------------- --------------
Total liabilities 9,080,505 1,237,038
STOCKHOLDERS' EQUITY:
Common stock - .01 par value:
Authorized - 20,000,000 shares
Issued and outstanding - 13,468,893
shares and 5,165,000 shares at December
31, 1998 and 1997, respectively 134,689 51,650
Additional paid-in capital 13,251,691 1,512,661
Accumulated deficit (5,907,979) (1,511,367)
-------------- --------------
7,478,401 52,944
-------------- --------------
$ 16,558,906 $ 1,289,982
============== ==============
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
SALES $ 3,400,786 $ 3,264,022
COST OF SALES 4,254,641 3,011,991
-------------- --------------
GROSS PROFIT (LOSS) (853,855) 252,031
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,403,480 1,091,673
-------------- --------------
LOSS FROM OPERATIONS (4,257,335) (839,642)
OTHER OPERATING INCOME (EXPENSE):
Interest expense (125,899) (74,301)
Forgiveness of debt - 6,472
Gain on sale of assets - 247
-------------- --------------
LOSS BEFORE INCOME TAXES (4,383,234) (907,224)
INCOME TAXES:
Federal:
Refundable (21,822) (1,048)
Deferred 35,200 (12,900)
-------------- --------------
13,378 (13,948)
-------------- --------------
CONSOLIDATED NET LOSS (4,396,612) (893,276)
PREACQUISITION SUBSIDIARY LOSS - 97,978
-------------- --------------
NET LOSS $ (4,396,612) $ (795,298)
============== ==============
EARNING (LOSS) PER SHARE
CONSOLIDATED NET LOSS $ (.53) $ (.22)
============== ==============
PREAQUISITION SUBSIDIARY LOSS - .02
-------------- --------------
NET LOSS $ (.53) $ (.20)
============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,152,711 3,913,480
============== ==============
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CLARION HOUSE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE - December 31, 1996 $ 15,229 $ 922,894 $ (657,274) $ 280,849
NET LOSS - 1997 - - (795,298) (795,298)
SPIN-OFF OF INSECTA SALES, INC. (8,000) 75,047 (58,795) 8,252
ISSUANCE OF COMMON STOCK
FOR SERVICES RENDERED 14,642 131,784 - 146,426
ISSUANCE OF COMMON STOCK
RELATING TO EMPLOYMENT
AGREEMENTS 1,000 24,000 - 25,000
ISSUANCE OF COMMON STOCK
VIA CANCELLATION OF NOTES
PAYABLE 9,579 63,136 - 72,715
PURCHASE OF TRIANGLE PLASTICS,
INC. COMMON STOCK 2,500 60,000 - 62,500
ISSUANCE OF COMMON STOCK
TO COMPANY FOUNDERS FOR
SERVICES RENDERED 11,000 99,000 - 110,000
COMMON STOCK SOLD IN
PRIVATE PLACEMENT 5,700 136,800 - 142,500
-------------- -------------- -------------- --------------
BALANCE - December 31, 1997 $ 51,650 $ 1,512,661 $ (1,511,367) $ 52,944
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE - December 31, 1997 $ 51,650 $ 1,512,661 $ (1,511,367) $ 52,944
NET LOSS - 1998 - - (4,396,612) (4,396,612)
ISSUANCE OF COMMON STOCK
FOR SERVICES RENDERED 2,975 427,065 - 430,040
ISSUANCE OF COMMON STOCK
RELATING TO EMPLOYMENT
AGREEMENT 6,467 542,828 - 549,295
ISSUANCE OF COMMON STOCK
TO COMPANY FOUNDERS FOR
SERVICES RENDERED 28,257 2,801,537 - 2,829,794
PURCHASE OF ROSE AND
ASSOCIATES COMMON STOCK 9,500 940,500 - 950,000
ISSUANCE OF COMMON STOCK
FOR CASH 1,050 103,950 - 105,000
COMMON STOCK SOLD IN
PRIVATE PLACEMENT 34,790 6,923,150 - 6,957,940
-------------- -------------- -------------- --------------
$ 134,689 $ 13,251,691 $ (5,907,979) $ 7,478,401
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 2,678,346 $ 3,556,665
Cash paid to suppliers, employees and
contractors (6,496,461) (3,912,152)
Interest paid (31,018) (74,301)
Net miscellaneous - 248
-------------- --------------
Net cash to operating activities (3,849,133) (429,540)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash purchases of equipment (2,685,827) (53,966)
Spin-off of subsidiary - 8,252
Acquisition of subsidiary (871,277) (62,500)
-------------- --------------
Net cash to investing activities (3,557,104) (108,214)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line-of-credit - 14,384
Borrowings from long-term debt 22,695 575,836
Payments on long-term debt (325,469) (620,794)
Payment of obligations under
capital leases (17,379) (16,481)
Common stock issued 11,725,170 559,141
-------------- --------------
Net cash from financing activities 11,405,017 512,086
-------------- --------------
NET INCREASE ( DECREASE) IN CASH AND
CASH EQUIVALENTS 3,998,780 (25,668)
CASH AND CASH EQUIVALENTS:
BALANCE - January 1 10,265 35,933
-------------- --------------
BALANCE - December 31 $ 4,009,045 $ 10,265
============== ==============
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
RECONCILIATION OF NET LOSS TO NET CASH TO OPERATING ACTIVITIES
--------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
------------
1998 1997
-------------- --------------
NET LOSS $ (4,396,612) $ (795,298)
Adjustments:
Depreciation and amortization 278,329 140,074
Gain on sale of fixed assets - (247)
Preacquisition subsidiary net loss - (97,978)
Changes in operating assets and liabilities
which increase (decrease) cash flow:
Accounts receivable (722,440) 292,642
Inventories (521,036) (40,377)
Prepaid expenses (206,882) 223
Federal income tax 34,948 (13,948)
Accounts payable and accrued expenses 1,695,645 98,193
Deposits (11,085) (10,324)
Officers' loan payable - (2,500)
-------------- --------------
547,479 365,758
-------------- --------------
NET CASH TO OPERATING ACTIVITIES $ (3,849,133) $ (429,540)
============== ==============
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This summary of significant accounting policies of Clarion
Technologies, Inc. and Subsidiaries is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of the Company's
management which is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied
in the preparation of the financial statements.
PRINCIPLES OF CONSOLIDATION
---------------------------
At the close of business on December 31, 1997, Clarion
Technologies, Inc. purchased all of the outstanding common stock
of Clarion Plastics Technologies, Inc. Upon consummation of this
transaction, the former sole stockholder of Clarion Plastics
Technologies, Inc. became the holder of a minority share of the
common stock of the Company. Accordingly, the transaction has
been accounted for as a purchase of Clarion Plastics
Technologies, Inc. by Clarion Technologies, Inc. as of December
31, 1997. The accompanying consolidated financial statements
include the results of operations of Clarion Technologies, Inc.
and Subsidiaries for the years ended December 31, 1998 and 1997.
All significant intercompany activities between Clarion
Technologies, Inc. and its wholly-owned subsidiaries have been
eliminated in consolidation.
During 1998, Clarion Technologies, Inc. began operations of
Clarion Specialty Products, Inc.
BUSINESS ACTIVITY
-----------------
As of 1998, Clarion Technologies, Inc. and Clarion Plastics
Technologies, Inc. changed its name from Clarion House, Inc. and
Triangle Plastics, Inc., respectively.
Clarion Technologies, Inc. is a holding company.
Clarion Plastics Technologies, Inc. was incorporated in Ohio
during 1984. Clarion Specialty Products, Inc. and Rose and
Associates, Inc. were incorporated in Ohio and Delaware,
respectively in 1998.
Clarion Plastics Technologies, Inc. and Clarion Specialty
Products, Inc. manufacture a variety of plastic items to various
industries. Rose and Associates, Inc. is a sales and marketing
company.
F-9
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less.
INVENTORIES
-----------
Inventories are valued on the first-in, first-out method based on
the lower of cost or market.
PROPERTY AND EQUIPMENT
----------------------
Improvements and equipment are carried at cost. Major
replacements and refurbishings are charged to the property
accounts while replacements, maintenance and repairs which do not
improve or extend the life of the respective assets are expensed
currently.
DEPRECIATION
------------
Depreciation is calculated by use of the straight-line and
accelerated cost recovery methods over useful lives of 5 to 12
years.
INCOME TAXES
------------
Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the financial statement reported amounts of
assets and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
F-10
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 2 - INVENTORIES:
The various components of inventories are summarized as follows
for the years ended December 31, 1998 and 1997:
1998 1997
-------------- --------------
Work in process $ 57,876 $ 11,423
Packaging material 89,417 2,715
Raw material 344,206 123,762
Finished goods 289,200 90,111
Repair parts - 31,652
-------------- --------------
$ 780,699 $ 259,663
============== ==============
NOTE 3 - LINE OF CREDIT:
At December 31, 1997, the Company had drawn $213,728 under
lines-of-credit agreements with a bank. The agreement allowed
maximum borrowings of $275,000 at December 31, 1997. As of
December 31, 1998 the lines-of-credit were paid in full.
NOTE 4 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Long-term debt consists of the following:
Note payable - bank, in monthly installments
of $8,108, plus interest at 9.75% per annum.
The note is secured by all accounts receivable,
inventory and equipment. Note is due
September 2002. $ 312,809 $ 365,160
Note payable- bank, in monthly installments
of $634, variable interest not to exceed
25% per annum. Interest at December 31,
1998 and 1997 was 9.50% . The note is
secured by equipment. Note is due August 2002. 23,149 28,504
</TABLE>
F-11
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 4 - LONG-TERM DEBT - CONTINUED:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Note payable - bank, in monthly installments of
$2,995, plus interest of 9.00% per annum. The
note is secured by all accounts receivable,
inventory and equipment. Note is due October 2001 89,602 116,170
-------------- --------------
425,560 509,834
Less current portion of long-term debt 104,063 90,443
-------------- --------------
Long-term debt $ 321,497 $ 419,391
============== ==============
Maturities of long-term debt are as follows:
Year ending December 31:
1999 $ 104,063
2000 114,233
2001 119,384
2002 87,880
--------------
$ 425,560
==============
</TABLE>
NOTE 5 - LEASES:
The Clarion Plastics Technologies, Inc. and Clarion Specialty
Products, Inc. lease their buildings on a month to month basis.
Under the leasing arrangements the Company pays $9,375 per month.
Total rental expense under the operating lease was $91,381 during
1998.
Clarion Technologies, Inc. leases an office expiring in April
1999 with payments of $4,960 per month.
The Company also leases equipment under operating leases. Future
minimum lease payments required under the leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 13,179
2000 13,179
2001 11,271
2002 7,655
2003 3,543
--------------
Total minimum lease payments $ 48,827
==============
</TABLE>
The Company also leases property under capital leases expiring in
years through 2001. The assets and liabilities under capital
leases are recorded at the lower of the minimum lease payments or
the fair value of the equipment.
F-12
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 5 - LEASES - CONTINUED:
<TABLE>
<CAPTION>
Minimum lease payments under capital leases are as follows:
<S> <C>
1999 $ 19,016
2000 20,808
2001 9,953
--------------
Total minimum lease payments 49,777
Less current portion 19,016
--------------
$ 30,761
==============
</TABLE>
NOTE 6 - FEDERAL INCOME TAX:
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
ACCOUNTING FOR INCOME TAXES, which requires an asset and
liability approach to financial accounting and reporting for
income taxes. The difference between financial statement and tax
basis of assets and liabilities is determined annually. Deferred
income tax assets and liabilities are computed for those
differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the periods in which
they are expected to effect taxable income. Valuation allowances
are established, if necessary, to reduce the deferred tax asset
to the amount that will more likely than not be realized.
Deferred income taxes have been provided for timing differences
related to depreciation expense.
F-13
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 6 - FEDERAL INCOME TAX - CONTINUED:
The Company and Subsidiaries' total deferred tax assets, deferred
tax liabilities and deferred tax asset valuation allowances at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
CLARION CLARION ROSE
CLARION SPECIALTY PLASTICS AND
TECHNOLOGIES PRODUCTS TECHNOLOGIES ASSOCIATES
INC. INC. INC. INC. TOTAL
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Total deferred
tax assets $ 790,000 $ 119,800 $ 1,005,500 $ 5,300 $ 1,920,600
Total deferred
tax liability - (6,000) (76,000) - (82,000)
-------------- -------------- -------------- -------------- --------------
790,000 113,800 929,500 5,300 1,838,600
Less valuation
allowance (790,000) (113,800) (929,500) (5,300) (1,838,600)
-------------- -------------- -------------- -------------- --------------
Total deferred
tax assets $ - $ - $ - $ - $ -
============== ============== ============== ============== ==============
</TABLE>
The deferred tax assets have been recorded based on accrued
vacation and a net operating loss carryforward.
The deferred tax liability is based on the book-tax depreciation
difference.
The federal income tax benefit was calculated as follows for
December 31:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Deferred tax provision $ 35,200 $ (12,900)
Refundable federal tax (21,822) (1,048)
-------------- --------------
$ 13,378 $ (13,948)
============== ==============
</TABLE>
F-14
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 6 - FEDERAL INCOME TAX - CONTINUED:
The following is a schedule of net operating loss carryforwards
at December 31, 1998:
SEPARATE YEARS
--------------
CLARION EXPIRATION
TECHNOLOGIES, INC. DATE
------------------ ----------
AMOUNT
------
$ 23,200 2006
13,500 2007
84,600 2009
162,200 2010
30,700 2011
795,300 2012
--------------
$ 1,109,500
==============
CLARION PLASTICS
TECHNOLOGIES, INC.
------------------
AMOUNT
------
$ 71,000 2012
==============
CONSOLIDATED
------------
AMOUNT
------
$ 4,550,000 2013
==============
F-15
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 7 - STOCK OPTIONS:
On December 31, 1998, the Company granted the following stock
options to various persons in key management positions:
<TABLE>
<CAPTION>
Number Risk-free
of Exercise Expiration Interest Expected Expected Dividend
Shares Price Date Rate Life Volatility Yield
--------- ------------ --------------------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
25,000 $2.00 August 19, 1999 - 1.625 years 20% 0%
30,000 1.00 April 20, 2001 1.4% 3.29 years 20% 0%
50,000 2.00 October 1, 2001 0.2% 3.75 years 20% 0%
120,000 5.00 December 31, 2001 - 4 years 20% 0%
100,000 3.75 December 31, 2001 - 4 years 20% 0%
45,000 1.00 March 1, 1999 - 1.17 years 20% 0%
31,796 0.824 March 1, 1999 0.1% 1.17 years 20% 0%
75,000 1.000 October 1, 2001 - 3.75 years 20% 0%
</TABLE>
The fair value of each option granted based on the Black-Scholes
Model as of the grant date is negligible. Therefore, no
compensation expense has been recorded.
NOTE 8 - EMPLOYEE BENEFIT PLAN:
The Company maintains a retirement plan for its employees
governed under Section 401(k) of the Internal Revenue Code. The
Plan requires the Company to make certain minimum contributions
and permits additional discretionary contributions. Expense for
1998 and 1997 amounted to $4,005 and $5,173, respectively.
NOTE 9 - MAJOR CUSTOMER:
During 1997, the Company lost a major customer, sales to which
exceeded 20% of the Company's revenues. Revenues from sales to
this customer were approximately $1,861,000 . The Company had an
accounts receivable balance from this customer of approximately
$509,000 . This customer also provided 20% of the Company's
supplies.
The financial impact of the above is undetermined.
F-16
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 10 - SPIN-OFF OF SUBSIDIARY:
Effective December 18, 1997, the Company spun off its subsidiary
Insecta-Sales, Inc. The transaction was accomplished by
delivering the stock of Insecta-Sales, Inc. to the holders of
1,000,000 post-split shares of common stock of Clarion
Technologies, Inc.
NOTE 11 - BUSINESS ACQUISITION:
On December 31, 1997, Clarion Technologies, Inc. acquired the
common stock of Clarion Plastics Technologies, Inc. Clarion
Technologies , Inc. issued 250,000 shares of its $.01 par value
common stock at $.25 per share ($62,500 total purchase price) in
exchange for all of the outstanding common stock of Clarion
Plastics Technologies, Inc. The acquisition was recorded using
the purchase method of accounting and has been reflected in the
accompanying consolidated financial statements accordingly.
Goodwill amounting to $230,849 has been recorded during the
elimination process and will be amortized over 15 years beginning
January 1, 1998.
The following is a summary of operations for Clarion Plastics
Technologies, Inc. for the year ended December 31, 1997:
Sales $ 3,264,022
Cost of sales 3,011,991
--------------
Gross profit 252,031
Selling, general and administrative expenses 289,903
--------------
Loss from operations (37,872)
Other operating income (expense):
Interest expense (74,301)
Gain on sale of assets 247
--------------
(74,054)
--------------
Loss before income taxes (111,926)
Deferred income tax benefit 13,948
--------------
Net loss $ (97,978)
==============
F-17
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 11 - BUSINESS ACQUISITION - CONTINUED:
On June 15, 1998 Clarion Technologies, Inc. acquired the common
stock of Rose and Associates, Inc. Clarion Technologies, Inc.
issued 950,000 shares of its $.01 par value common stock at $2
per share in exchange for all of the outstanding common stock of
Rose and Associates, Inc. The acquisition was recorded using the
purchase method of accounting and has been reflected in the
accompanying consolidated financial statements accordingly.
Goodwill amounting to $950,000 has been recorded during the
elimination process and will be amortized over 15 years beginning
in 1998.
NOTE 12 - CONTINGENCY
Clarion Technologies Inc. is a defendant in a lawsuit. The
Company believes the suit are completely without merit and
intends to vigorously defend its position. As of December 31,
1998, probability of a favorable or unfavorable outcome can not
be determined.
NOTE 13 - SUBSEQUENT EVENTS:
FINANCING
---------
Clarion Technologies, Inc. entered into a long-term financing
arrangement subsequent to February 15, 1999. The funds will be
used to finance the Company's working capital needs, building
construction and machinery purchases.
COMMITMENTS
-----------
As of December 31, 1998 Clarion Plastics Technologies, Inc. is in
the process of constructing a new building. Total cost incurred
during the year amount to the following:
Land $ 187,565
Building and machinery 6,378,609
--------------
$ 6,566,174
==============
F-18
<PAGE>
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 13 - SUBSEQUENT EVENTS - CONTINUED:
At February 15, 1999, Clarion Plastics Technologies, Inc. total
estimated cost of the building is $8,650,000. The estimated cost
of new equipment purchases for 1999 is $8,636,000. The Company
obtained $3.15 million in mortgage financing on the building
subsequent to February 15, 1999.
On January 15, 1999 Clarion Technologies, Inc. terminated a
consulting agreement with Invest L'Inc., a Nevada corporation.
Clarion Technologies, Inc. will pay Invest L'Inc. $42,000 on
March 1, 1999. The cost comprised of $32,000 for the 1998
overhead related to the use by Clarion Technologies, Inc. of
Invest L'Inc. office space and $10,000 of travel and
miscellaneous expenses.
Clarion Technologies, Inc. entered into a consulting agreement on
January 15, 1999 with Invest L'Inc., a Nevada corporation. The
term of the agreement shall commence on January 15, 1999 and
continue for a period of 48 months at $15,000 a month. The total
cost of this consulting agreement is as follows:
Year Ended December 31:
1999 $ 165,000
2000 180,000
2001 180,000
2002 180,000
2003 15,000
--------------
$ 720,000
==============
NOTE 14 - PRESENTATION
Due to comparative financial statements, December 31, 1997 items
have been modified to conform with December 31, 1998.
F-19
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Inapplicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors and Executive Officers
- --------------------------------
Incorporated by reference from the information under the caption "I.
Election of Directors - Information Concerning Nominees" in the 1999 Information
Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Incorporated by reference from the information under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in the 1999
Information Statement.
ITEM 10. EXECUTIVE COMPENSATION.
Incorporated by reference from the information under the caption
"Executive Compensation and Other Information" in the 1999 Information
Statement.
EMPLOYMENT AGREEMENTS
Incorporated by reference from the information under the caption
"Employment Agreements" in the 1999 Information Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from the information under the caption
"Common Stock Ownership of Certain Beneficial Owners and Management" in the 1999
Information Statement.
ITEM 12..CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from the information under the caption
"Certain Relationships and Transactions" in the 1999 Information Statement.
-14-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a)
2.1* Agreement of Merger (Reincorporation in Delaware) dated June 5,
1998, by and between Clarion House, Inc., a Nevada corporation and Clarion
Technologies, Inc., a Delaware corporation.
2.2 Agreement and Plan of Reorganization by and between Clarion
Technologies, Inc., R. Townley Rose, Jr. and Rose & Associates, Inc., dated June
3, 1998.
2.3 Agreement by and between Clarion Technologies, Inc. and R. Townley
Rose, Jr., dated March 31, 1999.
3.1* Certificate of Incorporation of the Company
3.2* Bylaws of the Company
4.1** Specimen of Common Stock Certificate
10.1 1998 Stock Option Plan
10.2 Employment Agreement, dated April 1, 1998, between the Company and
R. Townley Rose, Jr.
10.3 Amendment No. 1 to Employment Agreement, dated March 31, 1999,
between the Company and R. Townley Rose, Jr.
10.4 Employment Agreement, dated October 29, 1998, between the Company
and Robert W. Martin.
10.5 Employment Agreement, dated January 1, 1999, between the Company
and Jack D. Rutherford.
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule.
- ---------------
* Incorporated herein by reference to the Current Report on Form 8-K
filed with the Securities and Exchange Commission October 27, 1998.
** Incorporated herein by reference to the Company's registration
Statement on Form 10-SB filed with the Securities and Exchange Commission on
August 12, 1994 (Reg. No. 0-24690)
(b) REPORTS ON FORM 8-K.
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on October 27, 1998.
-15-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLARION TECHNOLOGIES, INC.
Date: March 31, 1999 By: /S/ JACK D. RUTHERFORD
-------------------------------------------
Jack D. Rutherford, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ JACK D. RUTHERFORD Chairman of the Board, Chief Executive March 31, 1999
- ------------------------------------ Officer and Director
JACK D. RUTHERFORD
/S/ ROBERT W. MARTIN
- ------------------------------------ Chief Financial Officer and Secretary March 25, 1999
ROBERT W. MARTIN
/S/ R. TOWNLEY ROSE, JR
- ------------------------------------ Executive Vice President and Director March 31, 1999
R. TOWNLEY ROSE, JR.
/S/ HARRINGTON BISCHOF
- ------------------------------------ Director March 25, 1999
HARRINGTON BISCHOF
____________________________________ Director March ___, 1999
BRYAN C. CRESSEY
/S/ TERENCE M. GRAUNKE
- ------------------------------------ Director March 31, 1999
TERENCE M. GRAUNKE
/S/ BRIAN C. MANOOGIAN
- ------------------------------------ Director March 24, 1999
BRIAN C. MANOOGIAN
/S/ FRANK T. STECK
- ------------------------------------ Director March 25, 1999
FRANK T. STECK
/S/ CRAIG WIERDA
- ------------------------------------ Director March 24, 1999
CRAIG WIERDA
/S/ TROY D. WISEMAN
- ------------------------------------ Director March 31, 1999
TROY D. WISEMAN
</TABLE>
-16-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
CLARION HOUSE, INC.,
ROSE ACQUISITION CORP.,
ROSE & ASSOCIATES, INC. AND
THE STOCKHOLDER THEREOF
DATED JUNE 3, 1998
<PAGE>
TABLE OF CONTENTS
1. MERGER AND EFFECTIVE TIME; Certificate OF INCORPORATION; BY-LAWS; DIRECTORS
AND OFFICERS; CONVERSION AND EXCHANGE OF SHARES......................2
1.1 THE MERGER......................................................2
1.2 THE EFFECTIVE TIME OF THE MERGER................................2
1.3 CLOSING.........................................................2
1.4 Certificate OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS...2
1.5 CONVERSION AND EXCHANGE OF SHARES...............................3
1.6 EXCHANGE OF CERTIFICATES........................................3
1.7 NO FURTHER OWNERSHIP RIGHTS IN ROSE COMMON STOCK................3
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF STOCKHOLDER AND COMPANY.....4
2.1 DUE ORGANIZATION OF COMPANY.....................................4
2.2 SUBSIDIARIES....................................................4
2.3 PROPERTIES AND ASSETS OF COMPANY................................4
2.4 ABSENCE OF MATERIAL CHANGES.....................................5
2.5 TAXES...........................................................6
2.6 CONTRACTS AND AGREEMENTS........................................6
2.7 LABOR, BENEFIT AND EMPLOYMENT AGREEMENTS........................6
2.8 LITIGATION; DISPUTED ITEMS......................................6
2.9 CAPITAL STRUCTURE...............................................7
2.10 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION....................7
2.11 BROKERAGE COMMISSIONS...........................................7
2.12 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES ON THE CLOSING DATE
...........................................................8
3. REPRESENTATIONS AND WARRANTIES OF PARENT..................................8
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION..................8
3.2 CORPORATE AUTHORITY............................................8
3.3 COMMON STOCK...................................................8
3.4 FINANCIAL STATEMENTS...........................................9
3.5 ABSENCE OF MATERIAL CHANGES SINCE DECEMBER 31,1997.............9
3.6 TAXES..........................................................10
3.7 CONTRACTS AND AGREEMENTS.......................................10
3.8 LABOR, BENEFIT AND EMPLOYMENT AGREEMENTS.......................11
3.9 LITIGATION; DISPUTED ITEMS.....................................11
3.10 CAPITAL STRUCTURE; TITLE TO STOCK...............................11
3.11 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES ON THE CLOSING DATE
...........................................................11
4. STOCKHOLDER'S AND COMPANY'S OBLIGATIONS BEFORE CLOSING DATE ..............12
4.1 PARENT'S ACCESS TO PREMISES AND INFORMATION.....................12
4.2 CONDUCT OF BUSINESS IN THE NORMAL COURSE........................12
4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS......................12
4.4 CORPORATE MATTERS...............................................12
4.5 EMPLOYEES AND COMPENSATION......................................12
4.6 NEW TRANSACTIONS................................................12
4.7 DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF STOCK..............13
4.8 EXISTING AGREEMENTS.............................................13
-i-
<PAGE>
5. COMMON STOCK NOT TO BE REGISTERED; REGISTRATION RIGHTS....................13
5.1 INVESTMENT REPRESENTATIONS......................................13
5.2 LEGEND ON SHARES................................................13
5.3 REGISTRATION RIGHTS.............................................13
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT.............................14
6.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS...........14
6.2 NO MATERIAL ADVERSE CHANGE; STOCKHOLDER'S CERTIFICATE...........14
6.3 ABSENCE OF LITIGATION...........................................14
6.4 APPROVAL OF DOCUMENTATION........................................14
7. CONDITIONS PRECEDENT TO PERFORMANCE BY STOCKHOLDER.........................14
7.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS...........14
7.2 NO MATERIAL ADVERSE CHANGE; PARENT'S CERTIFICATE................16
7.3 ABSENCE OF LITIGATION...........................................16
7.4 APPROVAL OF DOCUMENTATION.......................................16
8. ADDITIONAL AGREEMENTS......................................................17
8.1 RETENTION OF STOCKHOLDER AS COMPANY PRESIDENT....................17
8.2 TERMINATION OF SALES REPRESENTATIVE AGREEMENT....................17
8.3 WAIVERS OF OBLIGATIONS OF STOCKHOLDER AND PARENT.................17
8.4 DILUTION PROTECTION.............................................17
9. STOCKHOLDER'S AND PARENT'S OBLIGATIONS AFTER CLOSING DATE..................18
9.1 STOCKHOLDER'S INDEMNITIES........................................18
9.2 PARENT'S INDEMNITIES.............................................18
10. COSTS.....................................................................18
10.1 ATTORNEYS' FEES.................................................18
10.2 OTHER COSTS.....................................................18
11. MISCELLANEOUS PROVISIONS..................................................18
11.1 NOTICES.........................................................18
11.2 CAPTIONS........................................................19
11.3 EXHIBITS AND SCHEDULES..........................................19
11.4 NUMBER.........................................................19
11.5 SEVERABILITY....................................................19
11.6 AMENDMENT OR MODIFICATION.......................................19
11.7 COUNTERPARTS....................................................19
11.8 SUCCESSORS AND ASSIGNS..........................................20
11.9 GOVERNING LAW...................................................20
11.10 ATTORNEYS' FEES................................................20
11.11 JOINT AND SEVERAL OBLIGATIONS..................................20
-ii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of June 3, 1998 (this
"Agreement"), by and among Clarion House, Inc., a Nevada corporation ("Parent"),
Rose Acquisition Corp., a Delaware corporation ("Sub"), Rose & Associates, Inc.,
a Delaware corporation ("Company"), and R. Townley Rose, Jr. ("Stockholder").
RECITALS
A. The authorized capital stock of Parent consists of 10,000,000 shares
of Common Stock, $.01 par value ("Parent Common Stock"), of which on the close
of business on May 27, 1998, 5,999,500 shares were issued and outstanding, and
no shares were held as treasury stock.
B. The authorized capital stock of Sub consists of 100 shares of Common
Stock, $.01 par value ("Sub Common Stock"), all of which are issued and
outstanding.
C. The authorized capital stock of the Company consists of 1,000 shares
of $.01 par value common stock ("Rose Common Stock"), of which, at the close of
business on the date hereof, 100 shares were issued and outstanding.
D. All of the issued and outstanding shares of Sub Common Stock are
owned by Parent. All of the issued and outstanding shares of Rose Common Stock
(the "Shares") are owned by Stockholder.
E. The respective Boards of Directors of Parent, Sub and the Company
deem it advisable and in the best interests of their respective stockholders
that the Company shall merge into Sub pursuant to the certificate of merger
attached hereto as EXHIBIT A (the "Certificate of Merger") and the applicable
provisions of the laws of the State of Delaware and have, by resolutions duly
adopted, approved the principal terms of such merger which are herein set forth,
and Sub and the Company have directed that the principal terms of such merger be
submitted to their respective stockholders for approval.
F. The parties desire to state the terms and conditions of such merger,
the mode of carrying the same into effect, the consideration which the holders
of Rose Common Stock and Sub Common Stock are to receive in exchange for such
shares upon the merger and such other details and provisions as are deemed
necessary or desirable.
G. The parties intend that such merger be treated as a reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE>
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. MERGER AND EFFECTIVE TIME; CERTIFICATE OF INCORPORATION; BYLAWS;
DIRECTORS AND OFFICERS; CONVERSION AND EXCHANGE OF SHARES.
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2
hereof), the Company shall be merged (the "Merger") into Sub, which shall be
(and is hereinafter sometimes referred to as) the "Surviving Corporation." The
corporate existence of Sub with all its rights, privileges, powers and
franchises shall continue unaffected and unimpaired by the Merger, and as the
Surviving Corporation it shall be governed by the laws of the State of Delaware
and succeed to all rights, privileges, powers, franchises, assets, liabilities
and obligations of the Company in accordance with the Delaware General
Corporation Law (the "DGCL"). The separate existence and corporate organization
of the Company shall cease at the Effective Time and thereupon the Company and
Sub shall be a single corporation, Sub. The Merger shall have the effects
specified in the DGCL.
1.2 THE EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective, following the filing with the Delaware Secretary of State of a
Certificate of Merger in such form as is required by, and executed in accordance
with, the applicable provisions of the DGCL, on June 15, 1998 (the "Effective
Time") or at such later time as may be agreed to by Parent and the Company and
specified in the Certificate of Merger. The parties will cause the Certificate
of Merger to be filed with the Delaware Secretary of State as soon as
practicable after the Closing.
1.3 CLOSING. On the same day as, but immediately prior to the filing
of the Certificate of Merger, a closing (the "Closing") will take place for the
purpose of confirming the satisfaction or waiver of the conditions set forth in
Sections 6 and 7 hereof. The Closing will take place as soon as practicable
after the satisfaction or waiver of the conditions set forth in such Sections
(the date and time of the Closing being hereinafter referred to as the "Closing
Date"), at the offices of Freeborn & Peters, 311 S. Wacker Drive, Chicago,
Illinois 60606, unless another place is agreed to by the parties hereto.
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS.
(a) Certificate of Incorporation. The Certificate of Incorporation of
Sub, as in effect at the Effective Time, shall continue to be the Certificate of
Incorporation of the Surviving Corporation, until amended as provided by law,
except that the name of Sub shall be changed to "Rose & Associates, Inc.".
(b) By-laws. The By-laws of Sub, as in effect at the Effective Time,
shall continue to be the By-laws of the Surviving Corporation, until altered,
amended or repealed in accordance with law, the Certificate of Incorporation of
the Surviving Corporation and such By-laws.
-2-
<PAGE>
(c) Directors and Officers. The directors of the Surviving Corporation
at and immediately following the Effective Time shall be R. Townley Rose, Jr.
and Troy D. Wiseman, to serve in accordance with the By-laws of the Surviving
Corporation. The officers of the Surviving Corporation at and immediately
following the Effective Time shall be R. Townley Rose, Jr., President, and Troy
D. Wiseman, Secretary and Treasurer, to serve in accordance with the By-laws of
the Surviving Corporation.
1.5 CONVERSION AND EXCHANGE OF SHARES. The manner and basis of
converting at the Effective Time Rose Common Stock into Parent Common Stock and
the Note, as hereafter defined, and the exchange of certificates therefor shall
be as set forth herein.
(a) The 100 shares of Rose Common Stock which are issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive (i) 950,000 fully paid and nonassessable shares of
Parent Common Stock and (ii) the promissory note of Parent (the "Note") in the
principal amount of $1,900,000 in the form of EXHIBIT B attached hereto.
(b) Each share of Sub Common Stock issued and outstanding as of the
Effective Time, shall, by virtue of the Merger and without any action on the
part of Parent, the sole stockholder of Sub, be converted into one share of
legally and validly issued, fully paid and nonassessable Common Stock, $.01 par
value, of the Surviving Corporation. Each stock certificate of Sub evidencing
ownership of Sub Common Stock shall by virtue of the Merger evidence ownership
of Common Stock of the Surviving Corporation.
1.6 EXCHANGE OF CERTIFICATES. Parent Common Stock into which Rose
Common Stock shall be converted pursuant to the Merger shall be deemed to have
been issued at the Effective Time. At the Closing, Parent shall deliver to
Stockholder certificates evidencing the shares of Parent Common Stock to which
Stockholder is entitled under Section 1.5, and Stockholder shall deliver to
Parent Stockholder's certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Rose Common Stock, together
with a blank stock power and such other transmittal letters, documents and
instruments as Parent or Parent's transfer agent may reasonably request, each in
form reasonably acceptable to Parent or such transfer agent.
1.7 NO FURTHER OWNERSHIP RIGHTS IN ROSE COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Rose
Common Stock in accordance with the terms hereof and the Note shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Rose Common Stock, and, on and after the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Rose Common Stock which were outstanding
immediately prior to the Effective Time.
-3-
<PAGE>
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF STOCKHOLDER AND
COMPANY. As an inducement to Parent to enter into this Agreement and to
consummate the Merger contemplated herein, Stockholder and Company hereby
severally and not jointly represent and warrant to Parent and agree as follows:
2.1 Due Organization of Company.
2.1.1 Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has full
corporate power and authority to own or lease its properties and conduct the
business in which it is presently engaged.
2.1.2 Without limiting the generality of the foregoing,
Stockholder has full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. This Agreement is the legal,
valid and binding obligation of Stockholder enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the rights of creditors generally. No action, consent or
approval by or filing with any person or entity, including, without limitation,
any federal, territorial, state, municipal, foreign or other court or
governmental or administrative body or agency is required in connection with the
execution, delivery and performance by Stockholder of this Agreement, and
consummation by Stockholder of the transactions contemplated by him herein.
2.1.3 Company does not own any property or conduct any
activities in any state other than Illinois which would require qualification to
do business in any such other state.
2.1.4 Copies of the Certificate of Incorporation of Company,
certified by the Secretary of State of Delaware, and the Bylaws of Company,
certified by the secretary of Company, which are attached hereto as EXHIBITS C
and D respectively, are complete and accurate as of the date hereof. The minute
book of Company contains sufficient and accurate records of all meetings of the
stockholders and directors of Company and of all other corporate action taken by
its shareholders and directors.
2.2 SUBSIDIARIES. Company has no subsidiary corporations and owns
no shares of stock or other securities in any other corporations, nor is Company
a partner, venturer or associate in any other business with any other person or
firm.
-4-
<PAGE>
2.3 PROPERTIES AND ASSETS OF COMPANY. Company was incorporated on
October 2, 1997. The principal assets of Company are its rights under the Sales
Representative Agreement (the "Sales Representative Agreement") and the
Memorandum of Agreement (the "Memorandum of Agreement"), each dated November 18,
1997, by and between Company and Parent. Company has good title to such assets,
subject to no mortgages, liens, claims or encumbrances. Company neither owns nor
leases any real property or tangible personal property and has no accounts
receivable or inventory. The only contracts to which Company is a party are the
Sales Representative Agreement and the Memorandum of Agreement which have not
been assigned or encumbered. Company has no insurance policies or bonds. No
financial statements have been prepared respecting the operations or financial
position of Company for any period. Company owns outright, free and clear of all
liens and encumbrances, all contract rights and intangible personal property
used by it in the operation of its business. To its knowledge, no governmental
permit or license is required by Company for the operation of its business.
2.4 ABSENCE OF MATERIAL CHANGES. Since the date of organization of
Company, there has not been, occurred or arisen any:
2.4.1 Transaction by Company except in the ordinary course of
business, other than the execution of the Sales Representative Agreement and the
Memorandum of Agreement;
2.4.2 Material adverse change to the financial condition,
liabilities, assets, business, properties, earnings or net worth of Company;
2.4.3 Destruction, damage to, or loss of any assets of Company,
whether or not covered by insurance, that materially and adversely affects the
financial condition, business or property of Company;
2.4.4 Declaration, setting aside, or payment of a dividend or
other distribution in respect of the shares of Company or any direct or indirect
redemption, purchase or other acquisition by Company of any of its capital
stock;
2.4.5 Increase in the salary or other compensation payable or
to become payable by Company to any of its officers, directors or employees or
the declaration, payment, or commitment or obligation of any kind for the
payment by Company of a bonus or other additional salary or compensation to any
such person;
2.4.6 Sale or transfer of any asset of Company except in the
ordinary course of business;
2.4.7 Amendment or termination of any contract, agreement or
license to which Company is a party, except in the ordinary course of business;
-5-
<PAGE>
2.4.8 Loan by Company to any person or entity or guaranty by
Company of any loan;
2.4.9 Waiver or release of any right or claim of Company,
except in the ordinary course of business;
2.4.10 Mortgage, pledge or other encumbrance of any asset of
Company;
2.4.11 Issuance or sale by Company of any of its shares; or
2.4.12 Agreement by Company to do any of the things described
in the preceding clauses 2.4.1 through 2.4.11.
2.5 TAXES. Company has filed all Federal, state and local income,
payroll, excise, franchise and property tax returns or other reports, and has
paid in full all federal, state and local taxes to the extent such filings and
payments are required prior to the date of this Agreement, each of said returns
or reports are true and correct, there are no outstanding claimed deficiencies
or assessments for taxes, interest or penalties with respect to any prior tax
period or for the current period. Neither Stockholder nor Company knows of any
basis for any such claim or assessment.
2.6 CONTRACTS AND AGREEMENTS. Other than the Sales Representative
Agreement and the Memorandum of Agreement, there are no contracts or agreements,
written or oral, or other documents to which Company is as of this date a party.
2.7 LABOR, BENEFIT AND EMPLOYMENT AGREEMENTS. Company has no
employees. There are no labor agreements, pension plans or other employment,
profit sharing, deferred compensation, bonus, stock option, stock purchase,
retainer, consultant, retirement, welfare or incentive plans or contracts or
other "fringe benefits" or other compensation plans.
2.8 LITIGATION; DISPUTED ITEMS.
2.8.1 Other than respecting Plastech Engineered Products, Inc.
and its subsidiaries, neither Company nor any of the officers, directors or
partners of Company are now engaged in any pending or threatened litigation or
other proceeding or investigation in connection with the affairs of Company, nor
is Company subject to any existing judgment, order or decree or other
governmental action or any proceeding affecting the operation of its businesses
or assets, or which would prevent, hamper or make illegal the transactions
contemplated by this Agreement.
-6-
<PAGE>
2.8.2 Company has no material liabilities or obligations
(whether accrued, absolute, contingent or otherwise). There are no known or
undisclosed contingent liabilities or obligations of Company which might result
in any material adverse change in the business, prospects or financial condition
of Company nor any claim with respect to any properties or assets owned, held or
used by Company.
2.9 CAPITAL STRUCTURE.
2.9.1 One hundred percent (100%) of the issued and outstanding
shares of Rose Common Stock are owned by Stockholder free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges and
restrictions.
2.9.2 All of the issued and outstanding shares of Rose Common
Stock are validly issued, fully paid and nonassessable. There are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating Company to issue or to transfer from
treasury any additional shares.
2.10 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION.
2.10.1 The Merger will not result in or constitute any of the
following: (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach or violation of the Certificate of Incorporation or
Bylaws of Company or any lease, license, promissory note, conditional sales
contract, commitment, indenture, mortgage, deed of trust or other agreement,
instrument or arrangement to which Stockholder or Company is a party or by which
either of them or the property of either of them is bound; (ii) an event that
would permit any party to terminate any agreement or to accelerate the maturity
of any indebtedness or other obligation of Company; (iii) the creation or
imposition of any lien, charge or encumbrance on any of the properties of
Company; or (iv) the violation of any law, judgment, order or decree affecting
the business of Company.
2.10.2 Company and Stockholder have the right, power, legal
capacity and authority to enter into and perform their respective obligations
under this Agreement, and no approvals or consents of persons other than Company
and Stockholder are necessary in connection with it. The execution and delivery
of this Agreement by Company has been duly authorized by its board of directors.
2.11 BROKERAGE COMMISSIONS. No persons have acted on behalf of
Stockholder or Company as agent, finder or broker in negotiating or bringing
about this transaction and neither Stockholder nor Company have agreed to pay to
any person any fee or commission in the nature of a finder's, broker's or
originator's fee or commission in connection with this Agreement, or the
transactions contemplated hereby. Stockholder and Company shall indemnify and
hold Parent harmless from and against any other claims for finder's, broker's or
originator's fees based upon the acts of Stockholder, Company or its officers,
directors and agents or upon agreements or arrangements made by Stockholder,
Company or its officers, directors and agents.
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2.12 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES ON THE CLOSING
DATE. At the date of this Agreement, Stockholder has, and on the Closing Date
will have, disclosed to Parent all events, conditions and facts known to
Stockholder, materially affecting the business, properties and prospects of
Company. No representation or warranty made by Stockholder in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make such representation or warranty not misleading. All of
the facts recited in any of the Schedules or Exhibits attached hereto shall be
deemed to be representations as to fact and shall be as if recited in this
Agreement, and all the representations and warranties of Stockholder herein
contained shall be true and correct as of such Closing Date, with the same
effect as if made on and as of such Closing Date, and shall survive the Closing
Date and any investigation made by or on behalf of Parent.
3. REPRESENTATIONS AND WARRANTIES OF PARENT. As an inducement to
Stockholder to enter into this Agreement and to consummate the transactions
contemplated herein, Parent represents and warrants to Stockholder and agrees as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Parent and Sub
are corporations duly organized, existing and in good standing under the laws of
Nevada and Delaware, respectively, and each has full corporate power and
authority to own or lease its properties and to carry on its business as now
conducted.
3.2 CORPORATE AUTHORITY. The execution and delivery of this
Agreement and the consummation of this transaction by Parent and Sub have been,
or prior to the Closing Date will have been, duly authorized by Parent's and
Sub's boards of directors and by Parent, as sole stockholder of Sub, and neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, nor compliance with nor fulfillment of the
terms and provisions herein, will: (i) conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under the
Certificate of Incorporation or Bylaws of Parent or Sub, any material agreement,
instrument or judgment to which either of them is a party or by which either of
them is bound or any statute or regulatory provisions affecting Parent or Sub;
(ii) give any party to or with rights under any such agreement, instrument or
judgment the right to terminate, modify or otherwise change the material rights
or obligations of Parent or Sub under such agreement, instrument or judgment; or
(iii) require the approval, consent or authorization of any federal, state or
local court, governmental authority or regulatory body, other than in connection
with or in compliance with the provisions of law. Each of Parent and Sub has,
and will have at the Closing Date, full corporate power and corporate authority
to do and perform all acts and things required to be done by Parent and Sub
under this Agreement, subject to compliance with the provisions of law.
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3.3 COMMON STOCK. The shares of Parent Common Stock, when issued to
Stockholder pursuant to the terms of this Agreement, will be fully paid, validly
issued and nonassessable.
3.4 FINANCIAL STATEMENTS.
3.4.1 Attached hereto as EXHIBIT E are the audited financial
statements of Parent as of and for the year ended December 31, 1997 and the
compiled financial statements of Parent as of and for the year ended December
31, 1996 (collectively, the "Financial Statements").
3.4.2 The Financial Statements as of and for the year ended
December 31, 1997 have been prepared in conformity with generally accepted
accounting principles consistently applied and the Financial Statements as of
and for the year ended December 31, 1996 have been compiled in accordance with
Statement on Standards for Accounting and Review Services. The Financial
Statements present fairly the financial condition of Parent as of their
respective dates, reflect all known claims against, debts and liabilities of
Parent and do not contain any untrue statement of a material fact or any
omission to state a material fact, and are not misleading in any material
respect.
3.5 ABSENCE OF MATERIAL CHANGES SINCE DECEMBER 31, 1997. Since
December 31, 1997, there has not been, occurred or arisen any:
3.5.1 Transaction by Parent except in the ordinary course of
business as conducted on that date, other than: (1) the acquisition of Triangle
Plastics, Inc. ("Triangle"); (2) the hiring by Parent of six employees of
Triangle; and (3) the incurrence by Parent of current operating losses due to
the payment of salaries of employees and other costs incurred in connection with
the projected expansion of the business of Parent;
3.5.2 Material adverse change to the financial condition,
liabilities, assets, business, properties, earnings or net worth of Parent,
other than as provided in subsection 3.5.1 above;
3.5.3 Destruction, damage to, or loss of any assets of Parent,
whether or not covered by insurance, that materially and adversely affects the
financial condition, business or property of Parent;
3.5.4 Change in accounting methods or practices including,
without limitation, any change in depreciation or amortization policies or rates
by Parent;
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3.5.5 Declaration, setting aside, or payment of a dividend or
other distribution in respect of the shares of Parent or any direct or indirect
redemption, purchase or other acquisition by Parent of any of its capital stock;
3.5.6 Other than as referred to in Section 3.5.1 above and
pursuant to the Employment Agreement being entered into with Stockholder and the
Consulting Agreement being entered into with Ralph T. Rose effective as of the
date hereof, increase in the salary or other compensation payable or to become
payable by Parent to any of its officers, directors or employees or the
declaration, payment, or commitment or obligation of any kind for the payment by
Parent of a bonus or other additional salary or compensation to any such person;
3.5.7 Sale or transfer of any asset of Parent except in the
ordinary course of business;
3.5.8 Amendment or termination of any contract, agreement or
license to which Parent is a party, except in the ordinary course of business;
3.5.9 Loan by Parent to any person or entity or guaranty by
Parent of any loan;
3.5.10 Waiver or release of any right or claim of Parent,
except in the ordinary course of business;
3.5.11 Mortgage, pledge or other encumbrance of any asset of
Parent;
3.5.12 Issuance or sale by Parent of any of its shares; or
3.5.13 Agreement by Parent to do any of the things described in
the preceding clauses 3.5.1 through 3.5.12.
3.6 TAXES. Parent has filed all Federal, state and local income,
payroll, excise, franchise and property tax returns or other reports, and has
paid in full all federal, state and local taxes to the extent such filings and
payments are required prior to the date of this Agreement, each of said returns
or reports are true and correct and there are no outstanding claimed
deficiencies or assessments for taxes, interest or penalties with respect to any
prior tax period or for the current period. Neither Stockholder nor Parent knows
of any basis for any such claim or assessment.
3.7 CONTRACTS AND AGREEMENTS.
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3.7.1 Schedule 3.7.1 hereto lists or refers to any and all
material contracts or agreements, written or oral, or other documents, if any,
to which Parent is as of this date a party. Contracts to which subsidiaries of
Parent are a party are not listed.
3.7.2 Copies of any agreements or contracts mentioned in
Section 3.7.1 shall be made available to Stockholder for examination promptly
after execution of this Agreement if requested. All of the agreements and
contracts listed in Section 3.7.1 are valid and binding obligations of the
parties thereto in accordance with their respective terms, and there are no
liabilities arising from any default by Parent heretofore in any of such
agreements and/or contracts.
3.8 LABOR, BENEFIT AND EMPLOYMENT AGREEMENTS. There are no
collective bargaining agreements, employment agreements or other labor
agreements to which Parent is a party, nor are there any pension plans or other
employment, profit sharing, deferred compensation, bonus, stock option, stock
purchase, retainer, consultant, retirement, welfare or incentive plans or
contracts or other "fringe benefits" to employees, other than the hiring of six
(6) employees of Triangle, the terms of which Stockholder is aware.
3.9 LITIGATION; DISPUTED ITEMS.
3.9.1 Except as set forth on Schedule 3.9, neither Parent nor
any of the officers, directors or partners of Parent are now engaged in any
pending or threatened litigation or other proceeding or investigation in
connection with the affairs of Parent, nor is Parent subject to any existing
judgment, order or decree or other governmental action or any proceeding
affecting the operation of its businesses or assets, or which would prevent,
hamper or make illegal the transactions contemplated by this Agreement, nor does
Parent know of any grounds for any such litigation, proceeding or investigation.
3.9.2 Except as set forth in the Financial Statements or on any
Schedule hereto, as of December 31, 1997, Parent has no material liabilities or
obligations (whether accrued, absolute, contingent or otherwise). There are no
known or undisclosed contingent liabilities or obligations of Parent which might
result in any material adverse change in the business, prospects or financial
condition of Parent nor any claim with respect to any properties or assets
owned, held or used by Parent.
3.10 CAPITAL STRUCTURE; TITLE TO STOCK. Parent owns 100% of the
capital stock of its only subsidiary, Clarion Plastics Technologies, Inc. A true
and correct listing of the holders of the Parent Common Stock as of December 31,
1997 is attached hereto as Schedule 3.10 A. A true and correct listing of the
holders of options to acquire Parent Common Stock as of the date of this
Agreement is attached hereto as Schedule 3.10 B.
3.11 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES ON THE CLOSING
DATE.
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At the date of this Agreement, Parent has, and on the Closing Date will have,
disclosed to Stockholder all events, conditions and facts known to Parent,
materially affecting the business, properties and prospects of Parent. No
representation or warranty made by Parent in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
such representation or warranty not misleading. All of the facts recited in any
of the Schedules or Exhibits attached hereto shall be deemed to be
representations as to fact and shall be as if recited in this Agreement, and all
the representations and warranties of Parent herein contained shall be true and
correct as of such Closing Date, with the same effect as if made on and as of
such Closing Date, and shall survive the Closing Date and any investigation made
by or on behalf of Stockholder.
4. STOCKHOLDER'S AND COMPANY'S OBLIGATIONS BEFORE CLOSING DATE.
Stockholder and Company covenant that from the date of this Agreement until the
Closing Date:
4.1 PARENT'S ACCESS TO PREMISES AND INFORMATION. Parent and its
counsel, accountants and other representatives shall have full access during
normal business hours to all properties, books, accounts, records, contracts and
documents of or relating to Company. Stockholder shall furnish or cause to be
furnished to Parent and its representatives all data and information concerning
the business, finances and properties of Company that may reasonably be
requested.
4.2 CONDUCT OF BUSINESS IN THE NORMAL COURSE. Company will carry on
its business and activities diligently and in substantially the same manner as
they previously have been carried out, and shall not make or institute any
unusual or novel methods of purchase, sale, lease, management, accounting or
operation that will vary materially from those methods used by Company as of the
date of this Agreement.
4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Company and
Stockholder will use their best efforts, without making any commitments on
behalf of Parent, to preserve Company's business organizations intact, and to
preserve its present relationships with suppliers, customers and others having
business relationships with Company.
4.4 CORPORATE MATTERS. Company will not do, or agree to do, any of
the following acts: (i) amend its Certificate of Incorporation or Bylaws; (ii)
issue any shares; or (iii) issue or create any warrants, obligations,
subscriptions, options, convertible securities or other commitments under which
any additional shares might be directly or indirectly authorized, issued or
transferred from treasury.
4.5 EMPLOYEES AND COMPENSATION. Company will not do, or agree to do,
any of the following acts: (i) hire any employee or grant any increase in
compensation payable or to become payable to any officer, sales agent or
representative; or (ii) increase benefits payable to any officer, sales agent or
representative under any bonus or pension plan or other contract or commitment.
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4.6 NEW TRANSACTIONS. Company will not, without Parent's written
consent, do or agree to do any of the following acts: (i) enter into any
contract, commitment or transaction not in the usual and ordinary course of its
business; (ii) make any capital expenditures in excess of $5,000 for any single
item or $5,000 in the aggregate, or enter into any leases of capital equipment
or property under which the annual lease charge is in excess of $5,000; (iii)
sell or dispose of any capital assets with a net fair market value in excess of
$5,000, individually, or $5,000 in the aggregate; or (iv) borrow any funds from
any person other than Stockholder.
4.7 DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF STOCK. Company will
not do, or agree to do, any of the following acts: (i) declare, set aside or pay
any dividend or take any distribution in respect of its shares; or (ii) directly
or indirectly purchase, redeem or otherwise acquire any of its shares.
4.8 EXISTING AGREEMENTS. Company will not modify, amend, cancel or
terminate any of its existing contracts or agreements or agree to do any of
those acts.
5. COMMON STOCK NOT TO BE REGISTERED; REGISTRATION RIGHTS.
5.1 INVESTMENT REPRESENTATIONS. Stockholder acknowledges that the
shares of Parent Common Stock to be acquired by him pursuant to this Agreement
are being issued by Parent without registration under the Securities Act of
1933, as amended (the "Act"), in reliance upon an exemption available under the
Act for non-public offerings. Stockholder represents and warrants to Parent that
he is acquiring Parent Common Stock for investment and not with a view to the
public resale or distribution thereof, that he has no contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge to such
person or anyone else such shares or any portion thereof or interest therein,
and that he has no present plans to enter into such contract, undertaking,
agreement or arrangement.
5.2 LEGEND ON SHARES. Stockholder acknowledges that the certificate
evidencing the shares of Parent Common Stock acquired by him pursuant to this
Agreement, and any and all replacements thereof, shall bear and be subject to a
legend in substantially the following form affecting the transferability of such
shares, and that Parent will place appropriate stop transfer orders with its
transfer agent and registrar:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REQUIREMENTS FOR SUCH
REGISTRATION FOR NON-PUBLIC OFFERINGS. ACCORDINGLY, THE SALE,
TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES
EVIDENCED HEREBY OR ANY PORTION THEREOF OR INTEREST THEREIN MAY NOT BE
ACCOMPLISHED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THAT ACT, OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
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5.3 REGISTRATION RIGHTS. Stockholder shall have the right to require
Parent to register the shares of Parent Common Stock already owned by
Stockholder and the shares of Parent Common Stock acquired by Stockholder under
Section 1 of this Agreement in any public offering of Parent Common Stock,
whether such offering is by Parent, by shareholders of Parent or both. However,
if in the written opinion of the underwriter for the offering the inclusion of
all the shares which Stockholder desires to sell in the offering creates a
substantial risk that the price per share in the offering will be reduced, or
will have any other material detrimental effect on the offering or the market
for the Parent Common Stock, which reason shall be specified by the underwriter,
then a portion specified by the underwriter as necessary to avoid such
detrimental effect of the shares which Stockholder desires to sell in the
offering shall be excluded. If shares of any other shareholder are to be
registered in such offering and if in the written opinion of the underwriter the
inclusion of all shares which Stockholder and the other shareholder or
shareholders desire to sell in the offering creates a substantial risk that the
price per share in the offering will be reduced, or will have any other material
detrimental effect on the offering or the market for the Parent Common Stock,
which reason shall be specified by the underwriter, then shares of Stockholder
and such other shareholder or shareholders shall be excluded from the offering
pro rata based upon the number of shares which Stockholder and such other
shareholder or shareholders desired to register in the offering. Parent shall
bear all expenses (other than underwriting discounts and commissions related to
Stockholder's shares) of the offering unless the offering is by shareholders
only, in which case each shareholder shall pay a pro rata portion of such
expenses based upon the number of shares which such shareholder is selling in
the offering. Parent shall indemnify Stockholder for any liability arising out
of any untrue or alleged untrue statement of a material fact, or omission or
alleged omission to state a material fact, in the registration statement or
prospectus for the offering. While Parent is a public company, Parent shall also
file all necessary reports in compliance with the securities laws required to
permit Stockholder to sell Parent Common Stock under Rule 144.
6. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT. The obligations of
Parent hereunder are subject to the satisfaction at or prior to the Closing Date
of all of the following conditions, compliance with which or the occurrence of
which may be waived in whole or in part by Parent in writing provided, however,
that no such waiver of a condition shall constitute a waiver by Parent of any of
its other rights or remedies at law or in equity, if Stockholder or Company
shall be in default of any of the representations, warranties or covenants under
this Agreement.
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6.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, covenants and warranties of Stockholder and Company contained
in this Agreement shall be true and correct on and as of the Closing Date, with
the same effect as though the same had been made on and as of the Closing Date.
The Schedules and Exhibits attached hereto shall likewise be true and correct as
of the Closing Date, and if there are any changes therein and such changes are
approved by Parent, the same shall be amended or supplemented as appropriate, so
that they shall be true as of the Closing Date.
6.1.1 Stockholder and Company shall have performed and satisfied
all covenants and conditions required by this Agreement to be performed or
satisfied by it or them on or prior to the Closing Date.
6.1.2 Parent shall not have discovered any material error,
misstatement or omission in any of the Schedules, Exhibits, representations or
warranties contained herein or material failure on the part of Stockholder or
Company to perform or satisfy any such covenants or conditions.
6.1.3 There shall have been delivered to Parent on the Closing
Date a certificate of Stockholder dated the Closing Date certifying compliance
with this Section 6.1 and such other certificates and other documents with
respect to the foregoing as Parent, consistent with the terms of this Agreement,
may request. The delivery of such certificate shall in no way diminish the
warranties and representations of Stockholder and Company made in this
Agreement.
6.2 NO MATERIAL ADVERSE CHANGE; STOCKHOLDER'S CERTIFICATE. During
the period from the date of organization of Company to the Closing Date, there
shall not have been any material adverse change in the financial condition or
results of operations or business prospects of Company, and Company shall not
have sustained any material destruction, loss or damage to its properties,
whether or not insured, which affects its ability to conduct its businesses.
Parent shall have received a certificate dated the Closing Date, signed by
Stockholder certifying to the foregoing effect and to the further effect that
any liabilities of Company as of the Closing Date are only liabilities incurred
in the ordinary course of business or as otherwise contemplated by this
Agreement or the Schedules or Exhibits hereto. The delivery of such certificate
shall in no way diminish the warranties and representations of Stockholder and
Company made in this Agreement.
6.3 ABSENCE OF LITIGATION. No action or proceedings shall have been
instituted or threatened prior to or on the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated by
this Agreement, or the result of which could prevent or make illegal the
consummation of such transactions or which could be materially adverse to the
business of Company.
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6.4 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered to Parent under this
Agreement shall be satisfactory to Parent.
7. CONDITIONS PRECEDENT TO PERFORMANCE BY STOCKHOLDER. The obligations
of Stockholder and Company to consummate the transactions contemplated by this
Agreement are subject to the following conditions, compliance with which or the
occurrence of which may be waived in whole or in part by Stockholder in writing.
7.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1.1 All representations, covenants and warranties of Parent
contained in this Agreement shall be true and correct on and as of the Closing
Date, with the same effect as though the same had been made on and as of the
Closing Date.
7.1.2 Parent shall have performed and complied with all
covenants and agreements, and satisfied all conditions that it is required by
this Agreement to perform, comply with or satisfy, before or on the Closing
Date.
7.1.3 Company shall not have discovered any material error,
misstatement or omission in any of the Schedules, Exhibits, representations or
warranties contained herein or material failure on the part of Parent to perform
or satisfy any such covenants or conditions.
7.1.4 There shall have been delivered to Company on the Closing
Date a certificate of Stockholder dated the Closing Date certifying compliance
with this Section 7.1 and such other certificates and other documents with
respect to the foregoing as Company and Stockholder, consistent with the terms
of this Agreement, may request. The delivery of such certificate shall in no way
diminish the warranties and representations of Parent made in this Agreement.
7.2 NO MATERIAL ADVERSE CHANGE; PARENT'S CERTIFICATE. Except as
specified in Section 3.5.1, during the period from December 31, 1997 to the
Closing Date, there shall not have been any material adverse change in the
financial condition or results of operations or business prospects of Parent,
and Parent shall not have sustained any material destruction, loss or damage to
its properties, whether or not insured, which affects its ability to conduct its
businesses. Stockholder shall have received a certificate dated the Closing
Date, signed by Parent certifying to the foregoing effect and to the further
effect that any liabilities of Parent as of the Closing Date which were not
reflected on the Financial Statements are only liabilities incurred in the
ordinary course of business subsequent to the date of the Financial Statements
or as otherwise contemplated by this Agreement or the Schedules or Exhibits
hereto. The delivery of such certificate shall in no way diminish the warranties
and representations of Parent made in this Agreement.
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7.3 ABSENCE OF LITIGATION. No action or proceedings shall have been
instituted or threatened prior to or on the Closing Date before any court or
governmental body or authority pertaining to the transactions contemplated by
this Agreement, or the result of which could prevent or make illegal the
consummation of such transactions or which could be materially adverse to the
business of Parent.
7.4 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments and other documents delivered to Parent under this
Agreement shall be satisfactory to Company.
8. ADDITIONAL AGREEMENTS.
8.1 RETENTION OF STOCKHOLDER AS COMPANY PRESIDENT. Parent shall
cause Stockholder to be retained in the position of President of Company
following the Closing Date pursuant to an employment agreement in the form
attached hereto as EXHIBIT F. In addition, Stockholder shall serve as Executive
Vice President and a member of the Board of Directors of Parent.
8.2 TERMINATION OF SALES REPRESENTATIVE AGREEMENT. Stockholder,
Company and Parent acknowledge and agree that the consummation of the
transaction contemplated by this Agreement shall constitute an exercise of the
"Merger Option" as defined in the Sales Representative Agreement. As a result,
on the Closing Date, the Sales Representative Agreement shall terminate.
Stockholder and Company further acknowledge and agree that the Memorandum of
Understanding shall be canceled concurrently with the consummation of the
transaction contemplated by this Agreement.
8.3 WAIVERS OF OBLIGATIONS OF STOCKHOLDER AND PARENT. Stockholder
and Parent acknowledge that under the Sales Representative Agreement certain
commissions were due from Parent to Stockholder and that certain reimbursement
obligations were owed from Stockholder to Parent. As part of this Agreement, it
is understood and agreed that Stockholder and Parent are waiving any and all
monies required to be paid from November 18, 1997 under the Sales Representative
Agreement and amendment thereto.
8.4 DILUTION PROTECTION. The intent of the parties hereto is that no
transfer of assets to a related or affiliated corporation or other entity or
similar transaction shall dilute the equity interest that Stockholder will
attain pursuant to Section 1 hereof. Therefore, in the event of any transfer of
assets to a related or affiliated entity or other similar transaction, if the
related or affiliated entity is not wholly owned by Parent, Stockholder shall be
awarded the same percentage equity interest in such entity that Stockholder has
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in Parent, without the payment of further consideration. Alternatively,
Stockholder shall have the right, at his election, to receive additional shares
of Parent to compensate him for the diminution in value of the assets of Parent
resulting from such transfer of assets or similar transaction. This section does
not apply to any offering of shares by Parent at fair market value, such as
stock offerings on the open market, the use of Parent stock as consideration in
acquisitions or transfers of assets for fair market value.
In any issuance of Parent Common Stock in a public offering, secondary
offering or any form of private placement, including offerings to affiliates, if
Parent authorizes the issuance and sale of any shares of Parent Common Stock or
securities containing options or rights to acquire any shares of Parent Common
Stock ("New Stock"), Parent will first offer Stockholder a portion of the New
Stock equal to the number of shares of New Stock multiplied by a fraction, the
numerator of which is the number of shares of Parent Common Stock held by
Stockholder and the denominator of which is the number of shares of Parent
Common Stock outstanding. Stockholder will be entitled to purchase up to such
portion of New Stock at the same price, terms and conditions as the New Stock is
to be offered to any other persons. Stockholder must exercise such option to
purchase, if Stockholder desires to do so, within 15 business days of receipt of
the offer from Parent. If Stockholder elects to exercise his option under this
paragraph, he shall be given 30 additional days to close with Parent.
9. STOCKHOLDER'S AND PARENT'S OBLIGATIONS AFTER CLOSING DATE.
9.1 STOCKHOLDER'S INDEMNITIES. Stockholder shall indemnify, defend
and hold harmless Parent against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
it shall incur or suffer, which arise, result from or relate to any breach of or
failure by Stockholder or Company to perform any of their representations,
warranties, covenants or agreements in this Agreement or in any Schedule,
certificate, Exhibit or other instrument furnished or to be furnished by
Stockholder.
9.2 PARENT'S INDEMNITIES. Parent shall indemnify, defend and hold
harmless Stockholder against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees, that
he shall incur or suffer, which arise, result from or relate to any breach of or
failure by Parent to perform any of its representations, warranties, covenants
or agreements in this Agreement or in any Schedule, certificate, Exhibit or
other instrument furnished or to be furnished by Parent.
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10. COSTS.
10.1 ATTORNEYS' FEES. The attorneys' fees of Company and
Stockholder incurred in negotiating and preparing this Agreement and in
connection with the transaction contemplated by this Agreement, shall be paid by
Parent.
10.2 OTHER COSTS. Except as provided in Section 11.1, each of the
parties hereto shall pay all costs and expenses incurred by it in negotiating
and preparing this Agreement and in closing and carrying out the transactions
contemplated hereby.
11. MISCELLANEOUS PROVISIONS.
11.1 NOTICES. Any notice or demand required or permitted to be
given hereunder shall be in writing and shall be deemed effective forty-eight
(48) hours after having been deposited in the United States mail, postage
prepaid, registered or certified, return receipt requested, addressed to each
party in the following manner:
TO PARENT: CLARION HOUSE, INC.
1901 North Roselle Road
Suite 1030
Schaumburg, IL 60195
TO COMPANY: ROSE & ASSOCIATES, INC.
334 Sutton Road
Barrington Hills, Illinois 60010
TO STOCKHOLDER: R. TOWNLEY ROSE, JR.
334 Sutton Road
Barrington Hills, Illinois 60010
Any party may change the address to which such notices are to be
addressed by giving the other parties notice in the manner set forth herein.
11.2 CAPTIONS. The title or headings of the various sections,
articles and paragraphs hereof are intended solely for convenience of reference
and are not intended and shall not be deemed for any purpose whatsoever to
modify or explain or place any construction upon any of the provisions of this
Agreement.
11.3 EXHIBITS AND SCHEDULES. All statements contained in any
Exhibit, Schedule, certificate or other instrument delivered by or on behalf of
the parties hereto, or in connection with the transactions contemplated hereby,
are an integral part of this Agreement and shall be deemed representations and
warranties hereunder. All representations, warranties and agreements made by the
-19-
<PAGE>
parties to this Agreement or pursuant hereto, shall survive the Closing Date and
any investigations made by or on behalf of the parties. All of the Schedules and
Exhibits hereto shall be attached on or before the Closing Date and at such time
shall become a part of this Agreement and shall be incorporated herein as if
attached on the execution date.
11.4 NUMBER. Throughout this Agreement, wherever the context so
requires, the singular shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and vice versa.
11.5 SEVERABILITY. In the event that any provision in this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
11.6 AMENDMENT OR MODIFICATION. The parties hereto may amend or
modify this Agreement in such manner as may be agreed upon only by a written
instrument executed by such parties.
11.7 COUNTERPARTS. This Agreement is being executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute but one and the same instrument.
11.8 SUCCESSORS AND ASSIGNS. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and assigns.
11.9 GOVERNING LAW. The parties hereby agree that this Agreement
shall be construed, enforced and governed by the laws of the State of Nevada.
11.10 ATTORNEYS' FEES. In the event any party hereto shall
institute an action to enforce any rights hereunder, the prevailing party in
such action shall be entitled, in addition to any other relief awarded by the
court, to such reasonable attorneys' fees as the court may award.
11.11 JOINT AND SEVERAL OBLIGATIONS. Each obligation imposed by
this Agreement on Company or the Stockholder, shall be the joint and several
obligation of Company and the Stockholder.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year above written.
"PARENT"
CLARION HOUSE, INC.,
a Nevada corporation
By:__________________________________
Brian C. Manoogian, President
"SUB"
ROSE ACQUISITION CORP.,
a Delaware corporation
By:__________________________________
Troy D. Wiseman, President
"STOCKHOLDER"
_____________________________________
R. Townley Rose, Jr.
"COMPANY"
ROSE & ASSOCIATES, INC.,
a Delaware corporation
By:__________________________________
R. Townley Rose, Jr., President
-21-
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF MERGER
OF
ROSE & ASSOCIATES, INC.
INTO
ROSE ACQUISITION CORP.
*********
The undersigned corporation organized and existing under and by virtue
of the General Corporation Law of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
NAME: STATE OF INCORPORATION
Rose Acquisition Corp. Delaware
Rose & Associates, Inc. Delaware
SECOND: That an agreement of merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 251 of
the General Corporation Law of Delaware.
THIRD: The name of the surviving corporation of the merger is Rose
Acquisition Corp., which shall hereinwith be changed to Rose & Associates, Inc.
FOURTH: That the amendments or changes in the Certificate of
Incorporation of Rose Acquisition Corp., the surviving corporation, as are to be
effected by the merger are as follows:
Article 1 shall be amended to read as follows:
1. The name of the Corporation is Rose & Associates, Inc.
FIFTH: That the executed Agreement of Merger is on file at the
principal place of business of the surviving corporation, the address of which
is 1901 North Roselle Road, Suite 1030, Schaumburg, IL 60195.
SIXTH: That a copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: That this Certificate of Merger shall be effective on June 15,
1998.
Dated: June 3, 1998
ROSE ACQUISITION CORP.
By:___________________________
Name: Troy D. Wiseman
Title: President
A-1
<PAGE>
EXHIBIT B
---------
PROMISSORY NOTE
---------------
$1,900,000 June 15, 1998
FOR VALUE RECEIVED, CLARION HOUSE, INC., a Nevada corporation
("Borrower"), hereby promises to pay to R. Townley Rose, Jr. ("Holder"), an
individual having an address at c/o Rose & Associates, Inc., 334 Sutton Road,
Barrington, Hills, Illinois 60010, the sum of One Million Nine Hundred Thousand
Dollars ($1,900,000) in immediately available funds and in lawful money of the
United States of America, together with unpaid interest accrued thereon. This
Note shall be non-transferable by Holder except upon the death of Holder to his
estate (or to the heirs or devisees of Holder) or by operation of law.
Interest on this Note shall accrue from the date hereof at the rate
specified below until April 15, 1999, on which date all such accrued interest
shall be due and payable. Thereafter, principal on this Note shall be payable in
installments on the fifteenth day of each month, commencing May 15, 1999 and
ending on December 15, 2007, as specified in Schedule A to this Note, together
with accrued interest payable on each installment payment date; provided,
however, that if during the Measuring Period, as hereafter defined, Borrower
shall have aggregate revenues for such entire period of less than $45,000,000,
then Borrower shall be released from its obligation to pay all installments of
principal payable on this Note on the first day of the month following the end
of the Measuring Period and thereafter. The "Measuring Period" shall mean the
period from July 1, 1999 through June 30, 2002 if Borrower's new manufacturing
facility is fully operational, with occupancy permit and all other necessary
permits and all required equipment in place, on or before April 1, 1999. If such
conditions are not met by April 1, 1999, the beginning and ending dates of the
Measuring Period shall be deferred for the period of time after April 1, 1999
(rounded up to the next full month) which elapses before such conditions are
satisfied. This Note shall be prepayable at any time without penalty.
Borrower shall pay interest on the unpaid principal balance of this
Note from the date hereof until fully paid computed on the basis of the actual
number of days elapsed over a 360-day year, at a rate per annum equal to 10% per
annum. Borrower shall pay interest on overdue principal at the rate of 12% per
annum; it shall pay interest, to the extent permitted by applicable law, on
overdue installments of interest at the rate of 12% per annum.
Payments of principal and interest shall be made in lawful money of the
United States of America to the Holder at the address shown above in immediately
available funds. Any payments due hereunder which fall due on a day which is not
a Business Day shall be payable on the first succeeding Business Day and such
extension of time shall be included in the computation of interest due
hereunder.
B-1
<PAGE>
Borrower shall pay all costs and expenses (including reasonable
attorneys' fees) incurred by the Holder in collecting upon or enforcing this
Note.
Holder at his option may extend the time for payment of this Note,
postpone the enforcement hereof, or grant any other indulgences without
affecting or diminishing Holder's right of recourse against Borrower, which
right is expressly reserved.
Borrower waives presentment for payment, demand, protest, notice of
protest and notice of dishonor hereof, and all other notices to which it may be
entitled.
This Note shall be governed by the laws of the State of Illinois.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of this 15th day of June, 1998.
CLARION HOUSE, INC.
By:___________________________
Name: Brian C. Manoogian
Title: President
B-2
<PAGE>
SCHEDULE A
----------
AMORTIZATION SCHEDULE
<PAGE>
I, Troy D. Wiseman, Secretary of Rose Acquisition Corp., a corporation
organized and existing under the laws of the State of Delaware, hereby certify,
as such Secretary, that the Agreement of Merger to which this Certificate is
attached, after having been first duly signed on behalf of the said corporation
and having been signed on behalf of Rose & Associate, Inc., a corporation of the
State of Delaware, was duly adopted pursuant to section 228 of the General
Corporation of Delaware by the unanimous written consent of the stockholders
holding 100 shares of the capital stock of the corporation, same being all of
the shares issued and outstanding having voting power, which Agreement of Merger
was thereby adopted as the act of the stockholders of said Rose Acquisition
Corp. as the duly adopted agreement and act of the said corporation.
WITNESS my hand on this 3rd day of June, 1998.
_________________________
Name: Troy D. Wiseman
Title: Secretary
<PAGE>
I, R. Townley Rose, Jr., Secretary of Rose & Associates, Inc.., a
corporation organized and existing under the laws of the State of Delaware,
hereby certify, as such Secretary, that the Agreement of Merger to which this
Certificate is attached, after having been first duly signed on behalf of the
said corporation and having been signed on behalf of Rose Acquisition Corp., a
corporation of the State of Delaware, was duly adopted pursuant to section 228
of the General Corporation of Delaware by the unanimous written consent of the
stockholders holding 100 shares of the capital stock of the corporation, same
being all of the shares issued and outstanding having voting power, which
Agreement of Merger was thereby adopted as the act of the stockholders of said
Rose & Associates, Inc. as the duly adopted agreement and act of the said
corporation.
WITNESS my hand on this 3rd day of June, 1998.
__________________________
Name: R. Townley Rose, Jr.
Title: Secretary
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into this 31st day of March,
1999 by and among CLARION TECHNOLOGIES, INC., a Delaware corporation ("Parent"),
and R. TOWNLEY ROSE, JR., an individual resident of Illinois ("Stockholder"),
with respect to an Agreement and Plan of Merger dated June 3, 1998 (the "Merger
Agreement") between Clarion House, Inc., a Nevada corporation which was the
predecessor of Parent (hereinafter included in the term "Parent"), and
Stockholder pertaining to the acquisition by Parent from Stockholder of all of
the outstanding shares of capital stock of ROSE & ASSOCIATES, INC., a Delaware
corporation ("Rose").
R E C I T A L S
- - - - - - - -
A. The Merger Agreement provided for the receipt by Stockholder of
950,000 shares of Parent's common stock (the "Shares") and a promissory note in
the original principal amount of One Million Nine Hundred Thousand Dollars
($1,900,000) (the "Note") in exchange for all of the outstanding capital stock
of Rose.
B. The parties hereto desire to modify the consideration delivered
pursuant to the Merger Agreement by means of a purchase money debt reduction.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE MONEY DEBT REDUCTION. Parent and Stockholder hereby agree,
subject to satisfaction of the conditions precedent specified in the following
section of this Agreement, that the consideration payable to Stockholder in
connection with the Merger Agreement shall be modified by means of a purchase
money debt reduction to consist solely of the Shares. The principal amount of
and all accrued interest on the Note after December 31, 1998 shall be reduced to
Zero Dollars and No Cents ($0.00) effective as of December 31, 1998, the parties
agreeing that Parent owes Stockholder only interest on the Note accrued to and
including December 31, 1998, which amount shall be paid to Stockholder within
180 days of the date hereof.
2. CONDITIONS PRECEDENT. Stockholder's agreement in the preceding
section shall be conditioned upon receipt of (a) Amendment No. 1 to Employment
Agreement in form acceptable to Stockholder on the date hereof and (b) interest
on the Note to and including December 31, 1998 within 180 days of the date
hereof. Upon satisfaction of the two conditions precedent just specified,
Stockholder shall deliver to Parent the Note and the assignment document in the
form attached hereto as Exhibit A. Parent agrees to indemnify Stockholder for
any taxes or costs, including legal and/or accounting fees incurred by him as a
result of the modification of the terms of the sale of his shares of Rose
pursuant to the Merger Agreement reflected by this Agreement. Parent shall pay
Stockholder's legal and/or accounting costs as such costs are incurred so that
Stockholder shall not be required to advance his own funds to pay such fees or
costs. Parent agrees that Stockholder shall retain the right to contest any
demand from or determination by the Internal Revenue Service or other
governmental authority, or not, as he shall determine. Parent shall make any
indemnification payment required hereunder within ten (10) days after request
therefor from Stockholder.
<PAGE>
3. STOCKHOLDER'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS. As an
inducement to Parent to enter into this Agreement and to consummate the
transactions contemplated herein, Stockholder hereby represents and warrants to
Parent and agrees as follows:
3.1 AUTHORITY AND CAPACITY OF STOCKHOLDER. Stockholder has full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement is the legal, valid and binding
obligation of Stockholder enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally. No action, consent or approval by
or filing with any person or entity, including, without limitation, any federal,
territorial, state, municipal, foreign or other court or governmental or
administrative body or agency is required in connection with the execution,
delivery and performance by Stockholder of this Agreement, and consummation by
Stockholder of the transactions contemplated by him herein. Stockholder has the
right, power, legal capacity and authority to enter into and perform his
obligations under this Agreement, and no approvals or consents of any other
persons are necessary in connection with it.
3.2 TITLE TO NOTE. Stockholder is the current holder of the Note and
no other party has any interest thereon or claim thereon.
4. PARENT'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS. As an
inducement to Stockholder to enter into this Agreement and to consummate the
transactions contemplated herein, Parent represents and warrants to Stockholder
and agrees as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Parent is a
corporation duly organized, existing and in good standing under the laws of
Delaware and has full corporate power and authority to own or lease its
properties and to carry on its business as now conducted.
4.2 CORPORATE AUTHORITY. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein by Parent
have been, or prior to the Closing Date will have been, duly authorized by
Parent's board of directors, and neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, nor
compliance with nor fulfillment of the terms and provisions herein, will: (i)
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under the Certificate of Incorporation or Bylaws of Parent,
any material agreement, instrument or judgment to which it is a party or by
which it is bound or any statute or regulatory provisions affecting Parent; (ii)
give any party to or with rights under any such agreement, instrument or
judgment the right to terminate, modify or otherwise change the material rights
or obligations of Parent under such agreement, instrument or judgment; or (iii)
require the approval, consent or authorization of any federal, state or local
court, governmental authority or regulatory body, other than in connection with
or in compliance with the provisions of law. Parent has, and will have at the
Closing Date, full corporate power and corporate authority to do and perform all
acts and things required to be done by Parent and this Agreement, subject to
compliance with the provisions of law.
2
<PAGE>
5. CLOSING.
5.1 TIME AND PLACE. The parties shall exchange executed counterparts
of this Agreement and Amendment No. 1 to Employment Agreement on March 31, 1999.
Employee shall deliver the items referred to in Section 5.2 hereof to Parent
promptly after the satisfaction of the conditions precedent referred to in
Section 2 on a date (the "Closing Date") and at such time as may be mutually
agreed by the parties.
5.2 STOCKHOLDER'S OBLIGATIONS ON CLOSING DATE. On the Closing Date,
Stockholder shall deliver or cause to be delivered to Parent the following:
5.2.1 The original Note.
5.2.2 A document of assignment in the form attached hereto as
Exhibit A.
6. COSTS. Parent shall pay all costs and expenses incurred by
Stockholder in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated hereby.
7. MISCELLANEOUS PROVISIONS.
7.1 NOTICES. Any notice or demand required or permitted to be given
hereunder shall be in writing and shall be deemed effective forty-eight (48)
hours after having been deposited in the United States mail, postage prepaid,
registered or certified, return receipt requested, addressed to each party in
the following manner:
TO PARENT: CLARION TECHNOLOGIES, INC.
1901 North Roselle Road.
Suite 340
Schaumburg, IL 60195
TO STOCKHOLDER: R. TOWNLEY ROSE, JR.
334 Sutton Road
Barrington Hills, Illinois 60010
Any party may change the address to which such notices are to be sent
by giving the other parties notice in the manner set forth herein.
3
<PAGE>
7.2 CAPTIONS. The title or headings of the various sections,
articles and paragraphs hereof are intended solely for convenience of reference
and are not intended and shall not be deemed for any purpose whatsoever to
modify or explain or place any construction upon any of the provisions of this
Agreement.
7.3 EXHIBITS AND SCHEDULES. All statements contained in any Exhibit,
Schedule, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the transactions contemplated hereby, are
an integral part of this Agreement and shall be deemed representations and
warranties hereunder. All representations, warranties and agreements made by the
parties to this Agreement or pursuant hereto, shall survive the Closing Date and
any investigations made by or on behalf of the parties. All of the Schedules and
Exhibits hereto shall be attached on or before the Closing Date and at such time
shall become a part of this Agreement and shall be incorporated herein as if
attached on the execution date.
7.4 NUMBER. Throughout this Agreement, wherever the context so
requires, the singular shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and vice versa.
7.5 SEVERABILITY. In the event that any provision in this Agreement
shall be held invalid or unenforceable, such provision shall be severable from,
and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Agreement.
7.6 AMENDMENT OR MODIFICATION. The parties hereto may amend or
modify this Agreement in such manner as may be agreed upon only by a written
instrument executed by such parties.
7.7 COUNTERPARTS. This Agreement is being executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
7.8 SUCCESSORS AND ASSIGNS. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns.
7.9 GOVERNING LAW. The parties hereby agree that this Agreement
shall be construed, enforced and governed by the laws of the State of Illinois.
7.10 ATTORNEYS' FEES. In the event any party hereto shall institute
an action to enforce any rights hereunder, the prevailing party in such action
shall be entitled, in addition to any other relief awarded by the court, to such
reasonable attorneys' fees as the court may award.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
"PARENT"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By:___________________________________________
Jack D. Rutherford, Chief Executive Officer
"STOCKHOLDER"
_______________________________________________
R. TOWNLEY ROSE, JR.
<PAGE>
CLARION HOUSE, INC.
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Clarion House, Inc. 1998 Stock Option
Plan (the "Plan") is to strengthen Clarion House, Inc., a Nevada corporation
("Corporation"), by providing to employees, officers, directors, consultants and
independent contractors of the Corporation or any of its subsidiaries (including
dealers, distributors, and other business entities or persons providing services
on behalf of the Corporation or any of its subsidiaries) added incentive for
high levels of performance and unusual efforts to increase the earnings of the
Corporation. The Plan seeks to accomplish this purpose by enabling specified
persons to purchase shares of the Corporation's common stock, $.01 par value,
thereby increasing their proprietary interest in the Corporation's success and
encouraging them to remain in the employ or service of the Corporation.
2. CERTAIN DEFINITIONS. As used in this Plan, the following words and
phrases shall have the respective meanings set forth below, unless the context
clearly indicates a contrary meaning:
2.1 "BOARD OF DIRECTORS": The Board of Directors of the Corporation.
2.2 "CODE": The Internal Revenue Code of 1986, as amended.
2.3 "COMMITTEE": The Committee which shall administer the Plan shall
consist of a committee of all members of the Board of Directors.
2.4 "FAIR MARKET VALUE PER SHARE": The fair market value per share
of the Shares as determined by the Committee in good faith. The Committee is
authorized to make its determination as to the fair market value per share of
the Shares on the following basis: (i) if the Shares are traded only otherwise
than on a securities exchange and are not quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ"), but are quoted on the
bulletin board or in the "pink sheets" published by the National Daily Quotation
Bureau, the greater of (a) the average of the mean between the average daily bid
and average daily asked prices of the Shares during the thirty (30) day period
preceding the date of grant of an Option, as quoted on the bulletin board or in
the "pink sheets" published by the National Daily Quotation Bureau, or (b) the
mean between the average daily bid and average daily asked prices of the Shares
on the date of grant, as published on the bulletin board or in such "pink
sheets;" (ii) if the Shares are traded on a securities exchange or on the
NASDAQ, the greater of (a) the average of the daily closing prices of the Shares
during the ten (10) trading days preceding the date of grant of an Option, as
quoted in the Wall Street Journal, or (b) the daily closing price of the Shares
on the date of grant of an Option, as quoted in the Wall Street Journal; or
(iii) if the Shares are traded only otherwise than as described in (i) or (ii)
above, or if the Shares are not publicly traded, the value determined by the
Committee in good faith based upon the fair market value as determined by
completely independent and well qualified experts.
<PAGE>
2.5 "INCENTIVE STOCK OPTION": An Option intended to qualify for
treatment as an incentive stock option under Code Sections 421 and 422, and
designated as an Incentive Stock Option.
2.6 "NONQUALIFIED OPTION": An Option not qualifying as an Incentive
Stock Option.
2.7 "OPTION": A stock option granted under the Plan.
2.8 "OPTIONEE": The holder of an Option.
2.9 "OPTION AGREEMENT": The document setting forth the terms and
conditions of each Option.
2.10 "SHARES": The shares of common stock, $.01 par value, of the
Corporation.
2.11 "SUBSIDIARY": Any corporation of which fifty percent (50%) or
more of the total combined voting power of all classes of stock of such
corporation is owned by the Corporation or another Subsidiary (as so defined).
3. ADMINISTRATION OF PLAN.
3.1 IN GENERAL. This Plan shall be administered by the Committee.
Any action of the Committee with respect to administration of the Plan shall be
taken pursuant to (i) a majority vote at a meeting of the Committee (to be
documented by minutes), or (ii) the unanimous written consent of its members.
3.2 AUTHORITY. Subject to the express provisions of this Plan, the
Committee shall have the authority to: (i) construe and interpret the Plan,
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan and to define the terms used therein; (ii)
prescribe, amend and rescind rules and regulations relating to administration of
the Plan; (iii) determine the purchase price of the Shares covered by each
Option and the method of payment of such price, individuals to whom, and the
time or times at which, Options shall be granted and exercisable and the number
of Shares covered by each Option; (iv) determine the terms and provisions of the
respective Option Agreements (which need not be identical); (v) determine the
duration and purposes of leaves of absence which may be granted to participants
without constituting a termination of their employment for purposes of the Plan;
and (vi) make all other determinations necessary or advisable to the
administration of the Plan. Determinations of the Committee on matters referred
to in this Section 3 shall be conclusive and binding on all parties howsoever
concerned. With respect to Incentive Stock Options, the Committee shall
administer the Plan in compliance with the provisions of Code Section 422 as the
same may hereafter be amended from time to time. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option.
2
<PAGE>
4. ELIGIBILITY AND PARTICIPATION.
4.1 IN GENERAL. Only officers, employees and directors who are also
employees of the Corporation or any Subsidiary shall be eligible to receive
grants of Incentive Stock Options. Officers, employees and directors (whether or
not they are also employees) of the Corporation or any Subsidiary, as well as
consultants, independent contractors or other service providers of the
Corporation or any Subsidiary shall be eligible to receive grants of
Nonqualified Options. Within the foregoing limits, the Committee, from time to
time, shall determine and designate persons to whom Options may be granted. All
such designations shall be made in the absolute discretion of the Committee and
shall not require the approval of the stockholders. In determining (i) the
number of Shares to be covered by each Option, (ii) the purchase price for such
Shares and the method of payment of such price (subject to the other sections
hereof), (iii) the individuals of the eligible class to whom Options shall be
granted, (iv) the terms and provisions of the respective Option Agreements, and
(v) the times at which such Options shall be granted, the Committee shall take
into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Section 1. An individual
who has been granted an Option may be granted an additional Option or Options if
the Committee shall so determine. No Option shall be granted under the Plan
after June 5, 2008 but Options granted before such date may be exercisable after
such date.
4.2 CERTAIN LIMITATIONS. In no event shall Incentive Stock Options
be granted to an Optionee such that the sum of (i) aggregate fair market value
(determined at the time the Incentive Stock Options are granted) of the Shares
subject to all Options granted under the Plan which are exercisable for the
first time during the same calendar year, plus (ii) the aggregate fair market
value (determined at the time the options are granted) of all stock subject to
all other incentive stock options granted to such Optionee by the Corporation,
its parent and Subsidiaries which are exercisable for the first time during such
calendar year, exceeds One Hundred Thousand Dollars ($100,000). For purposes of
the immediately preceding sentence, fair market value shall be determined as of
the date of grant based on the Fair Market Value Per Share as determined
pursuant to Section 2.3.
5. AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
5.1 SHARES. Subject to adjustment as provided in Section 5.2 below,
the total number of Shares to be subject to Options granted pursuant to this
Plan shall not exceed Seven Hundred Fifty Thousand (750,000) Shares. Shares
subject to the Plan may be either authorized but unissued shares or shares that
were once issued and subsequently reacquired by the Corporation; the Committee
shall be empowered to take any appropriate action required to make Shares
available for Options granted under this Plan. If any Option is surrendered
before exercise or lapses without exercise in full or for any other reason
ceases to be exercisable, the Shares reserved therefore shall continue to be
available under the Plan.
3
<PAGE>
5.2 ADJUSTMENTS. As used herein, the term "Adjustment Event" means
an event pursuant to which the outstanding Shares of the Corporation are
increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, stock consolidation or
otherwise. Upon the occurrence of an Adjustment Event, (i) appropriate and
proportionate adjustments shall be made to the number and kind of Shares and
exercise price for the Shares subject to the Options which may thereafter be
granted under this Plan, (ii) appropriate and proportionate adjustments shall be
made to the number and kind of and exercise price for the Shares subject to the
then outstanding Options granted under this Plan, and (iii) appropriate
amendments to the Option Agreements shall be executed by the Corporation and the
Optionees if the Committee determines that such an amendment is necessary or
desirable to reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the substitution
of securities of a corporation other than the Corporation, the Committee shall
make arrangements for the assumptions by such other corporation of any Options
then or thereafter outstanding under the Plan. Notwithstanding the foregoing,
such adjustment in an outstanding Option shall be made without change in the
total exercise price applicable to the unexercised portion of the Option, but
with an appropriate adjustment to the number of Shares, kind of shares and
exercise price for each Share subject to the Option. The determination by the
Committee as to what adjustments, amendments or arrangements shall be made
pursuant to this Section 5.2, and the extent thereof, shall be final and
conclusive. No fractional Shares shall be issued under the Plan on account of
any such adjustment or arrangement.
6. TERMS AND CONDITIONS OF OPTIONS.
6.1 INTENDED TREATMENT AS INCENTIVE STOCK OPTIONS. Incentive Stock
Options granted pursuant to this Plan are intended to be "incentive stock
options" to which Code Sections 421 and 422 apply, and the Plan shall be
construed and administered to implement that intent. If all or any part of an
Incentive Stock Option shall not be an "incentive stock option" subject to
Sections 421 or 422 of the Code, such Option shall nevertheless be valid and
carried into effect. All Options granted under this Plan shall be subject to the
terms and conditions set forth in this Section 6 (except as provided in Section
5.2) and to such other terms and conditions as the Committee shall determine to
be appropriate to accomplish the purpose of the Plan as set forth in Section 1.
6.2 AMOUNT AND PAYMENT OF EXERCISE PRICE.
6.2.1 EXERCISE PRICE. The exercise price per Share for each
Share which the Optionee is entitled to purchase under a Nonqualified Option
shall be determined by the Committee but shall not be less than eighty-five
percent (85%) of the Fair Market Value Per Share on the date of the grant of the
Nonqualified Option. The exercise price per Share for each Share which the
Optionee is entitled to purchase under an Incentive Stock Option shall be
determined by the Committee but shall not be less than the Fair Market Value Per
Share on the date of the grant of the Incentive Stock Option; provided, however,
that the exercise price shall not be less than one hundred and ten percent
(110%) of the Fair Market Value Per Share on the date of the grant of the
Incentive Stock Option in the case of an individual then owning (within the
meaning of Code Section 425(d)) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or Subsidiaries.
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6.2.2 PAYMENT OF EXERCISE PRICE. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee and may consist of promissory
notes, shares of the common stock of the Corporation or such other consideration
and method of payment for the Shares as may be permitted under applicable state
and federal laws.
6.3 EXERCISE OF OPTIONS.
6.3.1 Each Option granted under this Plan shall be exercisable
at such times and under such conditions as may be determined by the Committee at
the time of the grant of the Option and as shall be permissible under the terms
of the Plan; provided, however, in no event shall an Option be exercisable after
the expiration of ten (10) years from the date it is granted, and in the case of
an Optionee owning (within the meaning of Code Section 425(d)), at the time an
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or Subsidiaries, such Incentive Stock Option shall not be exercisable
later than five (5) years after the date of grant.
6.3.2 An Optionee may purchase less than the total number of
Shares for which the Option is exercisable, provided that a partial exercise of
an Option may not be for less than One Hundred(100) Shares and shall not include
any fractional Shares.
6.4 NONTRANSFERABILITY OF OPTIONS. All Options granted under this
Plan shall be nontransferable, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by such Optionee.
6.5 EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Except as otherwise determined by the Committee in connection with the grant of
Nonqualified Options, the effect of termination of an Optionee's employment or
other relationship with the Corporation on such Optionee's rights to acquire
Shares pursuant to the Plan shall be as follows:
6.5.1 TERMINATION FOR OTHER THAN DISABILITY OR CAUSE. If an
Optionee ceases to be employed by, or ceases to have a relationship with, the
Corporation for any reason other than for disability or cause, such Optionee's
Options shall expire not later than three (3) months thereafter. During such
three (3) month period and prior to the expiration of the Option by its terms,
the Optionee may exercise any Option granted to him, but only to the extent such
Options were exercisable on the date of termination of his employment or
relationship and except as so exercised, such Options shall expire at the end of
such three (3) month period unless such Options by their terms expire before
such date. The decision as to whether a termination for a reason other than
disability, cause or death has occurred shall be made by the Committee, whose
decision shall be final and conclusive, except that employment shall not be
considered terminated in the case of sick leave or other bona fide leave of
absence approved by the Corporation.
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6.5.2 Disability. If an Optionee ceases to be employed by, or
ceases to have a relationship with, the Corporation by reason of disability
(within the meaning of Code Section 22(e)(3)), such Optionee's Options shall
expire not later than one (1) year thereafter. During such one (1) year period
and prior to the expiration of the Option by its terms, the Optionee may
exercise any Option granted to him, but only to the extent such Options were
exercisable on the date the Optionee ceased to be employed by, or ceased to have
a relationship with, the Corporation by reason of disability and except as so
exercised, such Options shall expire at the end of such one (1) year period
unless such Options by their terms expire before such date. The decision as to
whether a termination by reason of disability has occurred shall be made by the
Committee, whose decision shall be final and conclusive.
6.5.3 TERMINATION FOR CAUSE. If an Optionee's employment by, or
relationship with, the Corporation is terminated for cause, such Optionee's
Option shall expire immediately; provided, however, the Committee may, in its
sole discretion, within thirty (30) days of such termination, waive the
expiration of the Option by giving written notice of such waiver to the Optionee
at such Optionee's last known address. In the event of such waiver, the Optionee
may exercise the Option only to such extent, for such time, and upon such terms
and conditions as if such Optionee had ceased to be employed by, or ceased to
have a relationship with, the Corporation upon the date of such termination for
a reason other than disability, cause, or death. Termination for cause shall
include termination for malfeasance or gross misfeasance in the performance of
duties or conviction of illegal activity in connection therewith or any conduct
detrimental to the interests of the Corporation. The determination of the
Committee with respect to whether a termination for cause has occurred shall be
final and conclusive.
6.6 WITHHOLDING OF TAXES. As a condition to the exercise, in whole
or in part, of any Options the Board of Directors may in its sole discretion
require the Optionee to pay, in addition to the purchase price of the Shares
covered by the Option an amount equal to any Federal, state or local taxes that
may be required to be withheld in connection with the exercise of such Option.
6.7 NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Plan or in any Option Agreement shall obligate the Corporation
to employ or have another relationship with any Optionee for any period or
interfere in any way with the right of the Corporation to reduce such Optionee's
compensation or to terminate the employment of or relationship with any Optionee
at any time.
6.8 TIME OF GRANTING OPTIONS. The time an Option is granted,
sometimes referred to herein as the date of grant, shall be the day the
Corporation executes the Option Agreement; provided, however, that if
appropriate resolutions of the Committee indicate that an Option is to be
granted as of and on some prior or future date, the time such Option is granted
shall be such prior or future date.
6.9 PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to such Optionee. No Shares shall be purchased upon the exercise of
any Option unless and until, in the opinion of the Corporation's counsel, any
then applicable requirements of any laws or governmental or regulatory agencies
having jurisdiction and of any exchanges upon which the stock of the Corporation
may be listed shall have been fully complied with.
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6.10 SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any Options are
granted under the Plan and before any Shares are issued pursuant to Options.
Without limiting the generality of the foregoing, the Corporation may require
from the Optionee such investment representation or such agreement, if any, as
counsel for the Corporation may consider necessary or advisable in order to
comply with the Securities Act of 1933 as then in effect, and may require that
the Optionee agree that any sale of the Shares will be made only in such manner
as is permitted by the Committee. The Committee in its discretion may cause the
Shares underlying the Options to be registered under the Securities Act of 1933,
as amended, by the filing of a Form S-8 Registration Statement covering the
Options and Shares underlying such Options. Optionee shall take any action
reasonably requested by the Corporation in connection with registration or
qualification of the Shares under federal or state securities laws.
6.11 OPTION AGREEMENT. Each Incentive Stock Option and Nonqualified
Option granted under this Plan shall be evidenced by the appropriate written
Stock Option Agreement ("Option Agreement") executed by the Corporation and the
Optionee in a form substantially the same as the appropriate form of Option
Agreement attached as Exhibit I or II hereto (and made a part hereof by this
reference) and shall contain each of the provisions and agreements specifically
required to be contained therein pursuant to this Section 6, and such other
terms and conditions as are deemed desirable by the Committee and are not
inconsistent with the purpose of the Plan as set forth in Section 1.
7. PLAN AMENDMENT AND TERMINATION.
7.1 AUTHORITY OF COMMITTEE. The Committee may at any time
discontinue granting Options under the Plan or otherwise suspend, amend or
terminate the Plan and may, with the consent of an Optionee, make such
modification of the terms and conditions of such Optionee's Option as it shall
deem advisable; provided that, except as permitted under the provisions of
Section 5.2, the Committee shall have no authority to make any amendment or
modification to this Plan or any outstanding Option thereunder which would: (i)
increase the maximum number of Shares which may be purchased pursuant to Options
granted under the Plan, either in the aggregate or by an Optionee (except
pursuant to Section 5.2); (ii) change the designation of the class of the
employees eligible to receive Incentive Stock Options; (iii) extend the term of
the Plan or the maximum Option period thereunder; (iv) decrease the minimum
Incentive Stock Option price or permit reductions of the price at which Shares
may be purchased for Incentive Stock Options granted under the Plan; or (v)
cause Incentive Stock Options issued under the Plan to fail to meet the
requirements of incentive stock options under Code Section 422. An amendment or
modification made pursuant to the provisions of this Section 7 shall be deemed
adopted as of the date of the action of the Committee effecting such amendment
or modification and shall be effective immediately, unless otherwise provided
therein, subject to approval thereof (1) within twelve (12) months before or
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after the effective date by stockholders of the Corporation holding not less
than a majority vote of the voting power of the Corporation voting in person or
by proxy at a duly held stockholders meeting when required to maintain or
satisfy the requirements of Code Section 422 with respect to Incentive Stock
Options, and (2) by any appropriate governmental agency. No Option may be
granted during any suspension or after termination of the Plan.
7.2 TEN (10) YEAR MAXIMUM TERM. Unless previously terminated by the
Committee, this Plan shall terminate on June 5, 2008 and no Options shall be
granted under the Plan thereafter.
7.3 EFFECT ON OUTSTANDING OPTIONS. Amendment, suspension or
termination of this Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option theretofore granted.
8. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of June 5,
1998, the date the Plan was adopted by the Board of Directors, subject to the
approval of the Plan by the affirmative vote of a majority of the issued and
outstanding Shares of common stock of the Corporation represented and voting at
a duly held meeting at which a quorum is present within twelve (12) months
thereafter. The Committee shall be authorized and empowered to make grants of
Options pursuant to this Plan prior to such approval of this Plan by the
stockholders; provided, however, in such event the Option grants shall be made
subject to the approval of both this Plan and such Option grants by the
stockholders in accordance with the provisions of this Section 8.
9. MISCELLANEOUS PROVISIONS.
9.1 EXCULPATION AND INDEMNIFICATION. The Corporation shall indemnify
and hold harmless the Committee from and against any and all liabilities, costs
and expenses incurred by such persons as a result of any act, or omission to
act, in connection with the performance of such persons' duties,
responsibilities and obligations under the Plan, other than such liabilities,
costs and expenses as may result from the gross negligence, bad faith, willful
conduct and/or criminal acts of such persons.
9.2 GOVERNING LAW. The Plan shall be governed and construed in
accordance with the laws of the State of Nevada and the Code.
9.3 COMPLIANCE WITH APPLICABLE LAWS. The inability of the
Corporation to obtain from any regulatory body having jurisdiction authority
deemed by the Corporation's counsel to be necessary to the lawful issuance and
sale of any Shares upon the exercise of an Option shall relieve the Corporation
of any liability in respect of the non-issuance or sale of such Shares as to
which such requisite authority shall not have been obtained.
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<PAGE>
EXHIBIT I
FORM OF
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is entered into as
of __________ , by and between CLARION HOUSE, INC. a Nevada corporation
("Corporation"), and __________ ("Optionee").
R E C I T A L S
---------------
A. On __________ , 1998 the Board of Directors of the Corporation adopted,
subject to the approval of the Corporation's shareholders, the Clarion House,
Inc. 1998 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on ________________, the members of the Board of
Directors of the Corporation serving on the Committee authorized granting to
Optionee options to purchase shares of the Corporation's common stock, $.01 par
value ("Shares") for the term and subject to the terms and conditions
hereinafter set forth.
A G R E E M E N T
-----------------
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context
otherwise clearly requires, terms with initial capital letters used herein shall
have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee, Options
to purchase all or any part of ___________ Shares, upon and subject to the terms
and conditions of the Plan, which is incorporated in full herein by this
reference, and upon the other terms and conditions set forth herein.
3. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 18) and expiring on the date __________ (__) years from the date of
grant, unless earlier terminated pursuant to Section 7:
[Terms of option vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of Shares Optionee elects to purchase, such notice to be accompanied by
such other executed instruments or documents as may be required by the Committee
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pursuant to this Agreement, and unless otherwise directed by the Committee,
Optionee shall at the time of such exercise tender the purchase price of the
Shares he has elected to purchase. An Optionee may purchase less than the total
number of Shares for which the Option is exercisable, provided that a partial
exercise of an Option may not be for less than ______________ (___________)
Shares. If Optionee shall not purchase all of the Shares which he is entitled to
purchase under the Options, his right to purchase the remaining unpurchased
Shares shall continue until expiration of the Options. The Options shall be
exercisable with respect of whole Shares only, and fractional Share interests
shall be disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be
$_________ per Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased. Provided, however, the Board of Directors may, in its sole
discretion, permit payment by the Corporation of the purchase price in whole or
in part with Shares. If the Optionee is so permitted, and the Optionee elects to
make payment with Shares, the Optionee shall deliver to the Corporation
certificates representing the number of Shares in payment for new Shares, duly
endorsed for transfer to the Corporation, together with any written
representations relating to title, liens and encumbrances, securities laws,
rules and regulatory compliance, or other matters, reasonably requested by the
Board of Directors. The value of Shares so tendered shall be their Fair Market
Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF EMPLOYMENT. If an Optionee's employment or
other relationship with the Corporation (or a Subsidiary) terminates, the effect
of the termination on the Optionee's rights to acquire Shares shall be as
follows:
7.1 TERMINATION FOR OTHER THAN DISABILITY OR CAUSE. If an Optionee
ceases to be employed by, or ceases to have a relationship with, the Corporation
or a Subsidiary for any reason other than for disability or cause, such
Optionee's Options shall expire not later than three (3) months thereafter.
During such three (3) month period and prior to the expiration of the Option by
its terms, the Optionee may exercise any Option granted to him, but only to the
extent such Options were exercisable on the date of termination of his
employment or relationship and except as so exercised, such Options shall expire
at the end of such three (3) month period unless such Options by their terms
expire before such date. The decision as to whether a termination for a reason
other than disability, cause or death has occurred shall be made by the
Committee, whose decision shall be final and conclusive, except that employment
shall not be considered terminated in the case of sick leave or other bona fide
leave of absence approved by the Corporation.
7.2 DISABILITY. If an Optionee ceases to be employed by, or ceases
to have a relationship with, the Corporation or a Subsidiary by reason of
disability (within the meaning of Code Section 22(e)(3)), such Optionee's
Options shall expire not later than one (1) year thereafter. During such one (1)
year period and prior to the expiration of the Option by its terms, the Optionee
may exercise any Option granted to him, but only to the extent such Options were
exercisable on the date the Optionee ceased to be employed by, or ceased to have
a relationship with, the Corporation or Subsidiary by reason of disability. The
decision as to whether a termination by reason of disability has occurred shall
be made by the Committee, whose decision shall be final and conclusive.
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7.3 TERMINATION FOR CAUSE. If an Optionee's employment by, or
relationship with, the Corporation or a Subsidiary is terminated for cause, such
Optionee's Option shall expire immediately; provided, however, the Committee
may, in its sole discretion, within thirty (30) days of such termination, waive
the expiration of the Option by giving written notice of such waiver to the
Optionee at such Optionee's last known address. In the event of such waiver, the
Optionee may exercise the Option only to such extent, for such time, and upon
such terms and conditions as if such Optionee had ceased to be employed by, or
ceased to have a relationship with, the Corporation or a Subsidiary upon the
date of such termination for a reason other than disability, cause or death.
Termination for cause shall include termination for malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith or any conduct detrimental to the interests of the
Corporation or a Subsidiary. The determination of the Committee with respect to
whether a termination for cause has occurred shall be final and conclusive.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by Optionee.
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The Shares
acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated herein as
if fully set forth.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding Shares
of the Corporation are increased, decreased or changed into, or exchanged for a
different number or kind of shares or securities, without receipt of
consideration by the Corporation, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend, stock consolidation or otherwise. Upon the occurrence of an Adjustment
Event, (i) appropriate and proportionate adjustments shall be made to the number
and kind and exercise price for the Shares subject to the Options, and (ii)
appropriate amendments to this Agreement shall be executed by the Corporation
and Optionee if the Committee determines that such an amendment is necessary or
desirable to reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the substitution
of securities of a corporation other than the Corporation, the Committee shall
make arrangements for the assumptions by such other corporation of the Options.
Notwithstanding the foregoing, any such adjustment to the Options shall be made
without change in the total exercise price applicable to the unexercised portion
of the Options, but with an appropriate adjustment to the number of Shares, kind
of Shares and exercise price for each Share subject to the Options. The
determination by the Committee as to what adjustments, amendments or
arrangements shall be made pursuant to this Section 10, and the extent thereof,
shall be final and conclusive. No fractional Shares shall be issued on account
of any such adjustment or arrangement.
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11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or have
another relationship with Optionee for any period or interfere in any way with
the right of the Corporation to reduce Optionee's compensation or to terminate
the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be
______________________.
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws, or governmental or regulatory agencies
having jurisdiction, and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any Shares are
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the Shares will
be made only in such manner as is permitted by the Committee. The Committee may
in its discretion cause the Shares underlying the Options to be registered under
the Securities Act of 1933, as amended, by filing a Form S-8 Registration
Statement covering the Options and the Shares underlying the Options. Optionee
shall take any action reasonably requested by the Corporation in connection with
registration or qualification of the Shares under federal or state securities
laws.
15. INTENDED TREATMENT AS INCENTIVE STOCK OPTIONS. The Options granted
herein are intended to be "incentive stock options" to which Sections 421 and
422 of the Internal Revenue Code of 1986, as amended from time to time ("Code")
apply, and shall be construed to implement that intent. If all or any part of
the Options shall not be subject to Sections 421 and 422 of the Code, the
Options shall nevertheless be valid and carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by the
provisions of the Plan. All determinations and interpretations of the Plan made
by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
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18. CONDITIONS TO OPTIONS.
18.1 COMPLIANCE WITH APPLICABLE LAWS. The Corporation's obligation
to issue Shares of its common stock upon exercise of the Options is expressly
conditioned upon the completion by the Corporation of any registration or other
qualification of such Shares under any state and/or Federal law or rulings or
regulations of any governmental regulatory body, or the making of such
investment representations or other representations and undertakings by the
Optionee or any person entitled to exercise the Option in order to comply with
the requirements of any exemption from any such registration or other
qualification of such Shares which the Committee shall, in its sole discretion,
deem necessary or advisable. Such required representations and undertakings may
include representations and agreements that the Optionee or any person entitled
to exercise the Option (i) is not purchasing such Shares for distribution and
(ii) agrees to have placed upon the face and reverse of any certificates a
legend setting forth any representations and undertakings which have been given
to the Committee or a reference thereto.
18.2 SHAREHOLDER APPROVAL OF PLAN. If the Options granted hereby
are granted prior to approval of the Plan by the shareholders of the Corporation
pursuant to Section 8 of the Plan, the grant of the Options made hereby is
expressly conditioned upon and such Options shall not be exercisable until the
approval of the Plan by the shareholders of the Corporation in accordance with
the provisions of Section 8 of the Plan.
18.3 MAXIMUM EXERCISE PERIOD. Notwithstanding any provision of this
Agreement to the contrary, the Options shall expire no later than ten (10) years
from the date hereof or five (5) years if, as of the date hereof, the Optionee
owns or is considered to own by reason of Code Section 425(d) more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary or parent corporation of the Corporation.
19. MISCELLANEOUS.
19.1 BINDING EFFECt. This Agreement shall bind and inure to the
benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
19.2 FURTHER ACTS. Each party agrees to perform any further acts
and execute and deliver any documents which may be necessary to carry out the
provisions of this Agreement.
19.3 AMENDMENT. This Agreement may be amended at any time by the
written agreement of the Corporation and the Optionee.
19.4 SYNTAX. Throughout this Agreement, whenever the context so
requires, the singular shall include the plural, and the masculine gender shall
include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this Agreement.
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19.5 CHOICE OF LAW. The parties hereby agree that this Agreement
has been executed and delivered in the State of__________ and shall be
construed, enforced and governed by the laws thereof. This Agreement is in all
respects intended by each party hereto to be deemed and construed to have been
jointly prepared by the parties and the parties hereby expressly agree that any
uncertainty or ambiguity existing herein shall not be interpreted against either
of them.
19.6 SEVERABILITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
19.7 NOTICES. All notices and demands between the parties hereto
shall be in writing and shall be served either by registered or certified mail,
and such notices or demands shall be deemed given and made forty-eight (48)
hours after the deposit thereof in the United States mail, postage prepaid,
addressed to the party to whom such notice or demand is to be given or made, and
the issuance of the registered receipt therefor. If served by telegraph, such
notice or demand shall be deemed given and made at the time the telegraph agency
shall confirm to the sender, delivery thereof to the addressee. All notices and
demands to Optionee or the Corporation may be given to them at the following
addresses: If to Optionee:
-----------------------
-----------------------
-----------------------
If to Corporation: Clarion House, Inc.
25800 Northwestern Highway, Suite 1000
Southfield, Michigan 48075
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement supersedes all prior and contemporaneous agreements and
understandings of the parties, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof except as set forth or referred to herein. No supplement, modification or
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall constitute a waiver of any other provision hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
19.9 ATTORNEYS' FEES. In the event that any party to this Agreement
institutes any action or proceeding, including, but not limited to, litigation
or arbitration, to preserve, to protect or to enforce any right or benefit
created by or granted under this Agreement, the prevailing party in each
respective such action or proceeding shall be entitled, in addition to any and
all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money which
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represents the attorneys' fees reasonably incurred by the prevailing party
therein in filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and, additionally, the
attorneys' fees reasonably incurred by such prevailing party in negotiating any
and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first set forth above.
"CORPORATION"
CLARION HOUSE, INC.,
a Nevada corporation
By:_____________________
"OPTIONEE"
________________________
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EXHIBIT II
[FORM OF]
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is entered into
as of ________, , by and between CLARION HOUSE, INC., a Nevada corporation
("Corporation"), and _______________ ("Optionee").
R E C I T A L S
---------------
A. On __________, 1998, the Board of Directors of the Corporation
adopted, subject to the approval of the Corporation's shareholders, the Clarion
House, Inc. 1998 Stock Option Plan (the "Plan").
B. Pursuant to the Plan, on ___________, the members of the Board of
Directors of the Corporation serving on the Committee authorized granting to
Optionee options to purchase shares of the common stock, $.01 par value, of the
Corporation ("Shares") for the term and subject to the terms and conditions
hereinafter set forth.
A G R E E M E N T
-----------------
It is hereby agreed as follows:
1. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context
otherwise clearly requires, terms with initial capital letters used herein shall
have the meanings assigned to such terms in the Plan.
2. GRANT OF OPTIONS. The Corporation hereby grants to Optionee, Options
to purchase all or any part of ____________ Shares, upon and subject to the
terms and conditions of the Plan, which is incorporated in full herein by this
reference, and upon the other terms and conditions set forth herein.
3. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 18) and expiring on the date ________ (__) years from the date of grant,
unless earlier terminated pursuant to Section 7:
Number of Options Date First Exercisable
----------------- ----------------------
[Terms of option vesting to be set forth here]
4. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of Shares Optionee elects to purchase, such notice to be accompanied by
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such other executed instruments or documents as may be required by the Committee
pursuant to this Agreement, and unless otherwise directed by the Committee,
Optionee shall at the time of such exercise tender the purchase price of the
Shares he has elected to purchase. An Optionee may purchase less than the total
number of Shares for which the Option is exercisable, provided that a partial
exercise of an Option may not be for less than__________ (__) Shares. If
Optionee shall not purchase all of the Shares which he is entitled to purchase
under the Options, his right to purchase the remaining unpurchased Shares shall
continue until expiration of the Options. The Options shall be exercisable with
respect of whole Shares only, and fractional Share interests shall be
disregarded.
5. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be $ per
Share.
6. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased. Provided, however, the Board of Directors may, in its sole
discretion, permit payment by the Corporation of the purchase price in whole or
in part with Shares. If the Optionee is so permitted, and the Optionee elects to
make payment with Shares, the Optionee shall deliver to the Corporation
certificates representing the number of Shares in payment for new Shares, duly
endorsed for transfer to the Corporation, together with any written
representations relating to title, liens and encumbrances, securities laws,
rules and regulatory compliance, or other matters, reasonably requested by the
Board of Directors. The value of Shares so tendered shall be their Fair Market
Value Per Share on the date of the Optionee's notice of exercise.
7. EFFECT OF TERMINATION OF RELATIONSHIP OR DEATH. If Optionee's
relationship with the Corporation as an employee terminates (whether voluntarily
or involuntarily because he is not re-elected by the shareholders), or if
Optionee dies, all Options which have previously vested shall expire six (6)
months thereafter. All unvested Options shall lapse and automatically expire.
During such six (6) month period (or such shorter period prior to the expiration
of the Option by its own terms), such Options may be exercised by the Optionee,
his executor or administrator or the person or persons to whom the Option is
transferred by will or the applicable laws of descent and distribution, as the
case may be, but only to the extent such Options were exercisable on the date
Optionee ceased to have a relationship with the Corporation as a director or
died.
8. NONTRANSFERABILITY OF OPTIONS. The Options shall not be
transferable, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by Optionee.
9. ADDITIONAL RESTRICTIONS REGARDING DISPOSITIONS OF SHARES. The Shares
acquired pursuant to the exercise of Options shall be subject to the
restrictions set forth in Exhibit "A" attached hereto and incorporated herein as
if fully set forth.
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10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
term "Adjustment Event" means an event pursuant to which the outstanding Shares
of the Corporation are increased, decreased or changed into, or exchanged for a
different number or kind of shares or securities, without receipt of
consideration by the Corporation, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, stock
dividend, stock consolidation or otherwise. Upon the occurrence of an Adjustment
Event, (i) appropriate and proportionate adjustments shall be made to the number
and kind and exercise price for the Shares subject to the Options, and (ii)
appropriate amendments to this Agreement shall be executed by the Corporation
and Optionee if the Committee determines that such an amendment is necessary or
desirable to reflect such adjustments. If determined by the Committee to be
appropriate, in the event of an Adjustment Event which involves the substitution
of securities of a corporation other than the Corporation, the Committee shall
make arrangements for the assumptions by such other corporation of the Options.
Notwithstanding the foregoing, any such adjustment to the Options shall be made
without change in the total exercise price applicable to the unexercised portion
of the Options, but with an appropriate adjustment to the number of Shares, kind
of Shares and exercise price for each Share subject to the Options. The
determination by the Committee as to what adjustments, amendments or
arrangements shall be made pursuant to this Section 10, and the extent thereof,
shall be final and conclusive. No fractional Shares shall be issued on account
of any such adjustment or arrangement.
11. NO RIGHTS TO CONTINUED EMPLOYMENT OR RELATIONSHIP. Nothing
contained in this Agreement shall obligate the Corporation to employ or have
another relationship with Optionee for any period or interfere in any way with
the right of the Corporation to reduce Optionee's compensation or to terminate
the employment of or relationship with Optionee at any time.
12. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be
______________.
13. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to
the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws, or governmental or regulatory agencies
having jurisdiction, and of any exchanges upon which the stock of the
Corporation may be listed shall have been fully complied with.
14. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the Shares will
be made only in such manner as is permitted by the Committee. The Committee may
in its discretion cause the Shares underlying the Options to be registered under
the Securities Act of 1933, as amended, by filing a Form S-8 Registration
Statement covering the Options and the Shares underlying the Options. Optionee
shall take any action reasonably requested by the Corporation in connection with
registration or qualification of the Shares under federal or state securities
laws.
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15. INTENDED TREATMENT AS NON-QUALIFIED STOCK OPTIONS. The Options
granted herein are intended to be non-qualified stock options described in U.S.
Treasury Regulation ("Treas. Reg.") ss.1.83-7 to which Sections 421 and 422 of
the Internal Revenue Code of 1986, as amended from time to time ("Code") do not
apply, and shall be construed to implement that intent. If all or any part of
the Options shall not be described in Treas. Reg. ss.1.83-7 or be subject to
Sections 421 and 422 of the Code, the Options shall nevertheless be valid and
carried into effect.
16. PLAN CONTROLS. The Options shall be subject to and governed by the
provisions of the Plan. All determinations and interpretations of the Plan made
by the Committee shall be final and conclusive.
17. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
18. CONDITIONS TO OPTIONS.
18.1 COMPLIANCE WITH APPLICABLE LAWS. The Corporation's obligation
to issue Shares upon exercise of the Options is expressly conditioned upon the
completion by the Corporation of any registration or other qualification of such
Shares under any state and/or Federal law or rulings or regulations of any
governmental regulatory body, or the making of such investment representations
or other representations and undertakings by the Optionee or any person entitled
to exercise the Option in order to comply with the requirements of any exemption
from any such registration or other qualification of such Shares which the
Committee shall, in its sole discretion, deem necessary or advisable. Such
required representations and undertakings may include representations and
agreements that the Optionee or any person entitled to exercise the Option (i)
is not purchasing such Shares for distribution and (ii) agrees to have placed
upon the face and reverse of any certificates a legend setting forth any
representations and undertakings which have been given to the Committee or a
reference thereto.
18.2 SHAREHOLDER APPROVAL OF PLAN. If the Options granted hereby
are granted prior to approval of the Plan by the shareholders of the Corporation
pursuant to Section 8 of the Plan, the grant of the Options made hereby is
expressly conditioned upon and such Options shall not be exercisable until the
approval of the Plan by the shareholders of the Corporation in accordance with
the provisions of Section 8 of the Plan.
19. MISCELLANEOUS.
19.1 BINDING EFFECT. This Agreement shall bind and inure to the
benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
19.2 FURTHER ACTS. Each party agrees to perform any further acts
and execute and deliver any documents which may be necessary to carry out the
provisions of this Agreement.
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19.3 AMENDMENT. This Agreement may be amended at any time by the
written agreement of the Corporation and the Optionee.
19.4 SYNTAX. Throughout this Agreement, whenever the context so
requires, the singular shall include the plural, and the masculine gender shall
include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this Agreement.
19.5 CHOICE OF LAW. The parties hereby agree that this Agreement
has been executed and delivered in the State of__________ and shall be
construed, enforced and governed by the laws thereof. This Agreement is in all
respects intended by each party hereto to be deemed and construed to have been
jointly prepared by the parties and the parties hereby expressly agree that any
uncertainty or ambiguity existing herein shall not be interpreted against either
of them.
19.6 SEVERABILITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
19.7 NOTICES. All notices and demands between the parties hereto
shall be in writing and shall be served either by registered or certified mail,
and such notices or demands shall be deemed given and made forty-eight (48)
hours after the deposit thereof in the United States mail, postage prepaid,
addressed to the party to whom such notice or demand is to be given or made, and
the issuance of the registered receipt therefor. If served by telegraph, such
notice or demand shall be deemed given and made at the time the telegraph agency
shall confirm to the sender, delivery thereof to the addressee. All notices and
demands to Optionee or the Corporation may be given to them at the following
addresses:
If to Optionee:
-----------------------
-----------------------
-----------------------
If to Corporation: Clarion House, Inc.
25800 Northwestern Highway, Suite 1000
Southfield, Michigan 48075
Such parties may designate in writing from time to time such other place or
places that such notices and demands may be given.
19.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement supersedes all prior and contemporaneous agreements and
understandings of the parties, and there are no warranties, representations or
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other agreements between the parties in connection with the subject matter
hereof except as set forth or referred to herein. No supplement, modification or
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall constitute a waiver of any other provision hereof (whether
or not similar) nor shall such waiver constitute a continuing waiver.
19.9 ATTORNEYS' FEES. In the event that any party to this Agreement
institutes any action or proceeding, including, but not limited to, litigation
or arbitration, to preserve, to protect or to enforce any right or benefit
created by or granted under this Agreement, the prevailing party in each
respective such action or proceeding shall be entitled, in addition to any and
all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money which
represents the attorneys' fees reasonably incurred by the prevailing party
therein in filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and, additionally, the
attorneys' fees reasonably incurred by such prevailing party in negotiating any
and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
CLARION HOUSE, INC.,
a Nevada corporation
By:_____________________
"OPTIONEE"
________________________
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 1st day of April, 1998, by and between CLARION HOUSE, INC., a Nevada
corporation ("Company"), and R. TOWNLEY ROSE, JR. ("Employee"). In consideration
of the mutual covenants herein contained and other good and valuable
consideration, the parties hereby agree as follows:
R E C I T A L S
- - - - - - - -
A. The Company is engaged in the manufacturing business (the
"Business").
B. Effective June 15, 1998, the Company intends to cause a Delaware
corporation to be named Rose & Associates, Inc. ("Rose") to become a
wholly-owned subsidiary of the Company and to operate as the in-house sales
representative of the Company.
C. The Company wishes to employ Employee, and Employee agrees to serve,
as the Executive Vice President of the Company subject to the terms and
conditions set forth below.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. RECITALS. The recitals set forth above shall constitute and shall be
deemed to be an integral part of this Agreement.
2. DUTIES.
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2.1 EXECUTIVE VICE PRESIDENT OF THE COMPANY. Employee shall serve in
the capacity of Executive Vice President of the Company. Employee's principal
duties and responsibilities shall consist of primary responsibility for the
general and active supervision and management of all of the sales and marketing
activities and functions of the Company and its officers, agents and employees
engaged in that function. Employee shall perform such other services and duties
as may from time to time be assigned to Employee by the Company's Board of
Directors provided that such other services and duties are not inconsistent with
any other term of this Agreement. Except during vacation periods or in
accordance with the Company's personnel policies covering executive leaves and
reasonable periods of illness or other incapacitation, Employee shall devote his
services to the Company's Business and interests in a manner consistent with
Employee's title and office and the Company's needs for his services. Employee
agrees to perform his duties pursuant to this Agreement in good faith and in a
manner which he honestly believes to be in the best interests of the Company,
and with such care, including reasonable inquiry, as an ordinary prudent person
in a like position would use under similar circumstances. Employee agrees to
observe a duty of loyalty to the Company placing the interests of the Company
ahead of his own. Such duties shall be rendered at such place or places as the
Company shall require in accordance with the best interests, needs, business and
opportunities of the Company. However, in no event, shall the Company require
Employee to move his principal residence. Employee shall at all times be subject
to and shall observe and carry out such reasonable rules, regulations, policies,
directions and restrictions as may be established from time to time by the
Company not inconsistent with this Agreement.
2.2 PRESIDENT OF ROSE AND DIRECTOR OF ROSE AND THE COMPANY. Employee
shall also serve as President of Rose and shall have the right to serve as a
member of the Board of Directors of both Rose and the Company. Employee shall
not receive any additional compensation for his service in such capacities and
the termination or resignation of Employee as a director of the Company or as an
officer or director of Rose shall not constitute a termination of this
Agreement. The Company agrees, at Employee's request, to vote the outstanding
capital stock of Rose in favor of Employee's election as a director of Rose as
aforesaid. Attached hereto as EXHIBIT A are consents of certain principal
stockholders of the Company under which such stockholders agree, at the request
of Employee, to vote their shares to elect Employee to the Board of Directors of
the Company at all times during the Term (as defined below) of this Agreement.
3. LIMITATIONS ON OTHER EMPLOYMENT. Throughout the Term of Employee's
employment under this Agreement, Employee shall not enter into the services of
or be employed in any capacity or for any purposes whatsoever, whether directly
or indirectly, by any person, firm, corporation or entity other than the Company
or Rose, and will not, during said period of time, be engaged in any business,
enterprise or undertaking other than employment by the Company or Rose except
for such other activities that do not detract from the full discharge of
Employee's duties hereunder or as otherwise consented to in writing by the
Company.
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4. COMPENSATION AND BENEFITS.
4.1 SALARY. In consideration of Employee's performance of his duties
and responsibilities hereunder and his observance of the covenants, conditions
and restrictions contained herein, Employee shall be entitled to receive a
salary of One Hundred Fifty Thousand Dollars ($150,000) per annum during the
period from April 1, 1998 to December 31, 1998 and thereafter increasing to Two
Hundred Ten Thousand Dollars ($210,000) during the Term hereof, payable in
weekly or other periodic installments in accordance with the Company's payroll
procedures in effect from time to time. This salary has been expressed in terms
of a gross amount, and the Company is or may be required to withhold from such
gross amount deductions in respect of federal, state or local income taxes, FICA
and the like.
4.2 INCENTIVE COMPENSATION. The Company shall pay to Employee, as
additional incentive compensation, a cash bonus of Five Thousand Dollars ($5,000
) per month (the "Bonus") for each fiscal year ending during the term hereof in
which Clarion's consolidated net sales ("Net Sales") exceed Fifteen Million
Dollars ($15,000,000). For 1999, Employee shall be entitled to $5,000 for each
month beginning with the first month in which monthly Net Sales, from such month
through December 31, 1999, average One Million Two Hundred Fifty Thousand
Dollars ($1,250,000). The Bonus shall be computed on the Net Sales reflected on
Clarion's audited financial statements as filed with the Securities and Exchange
Commission. If such financial statements are not prepared in sufficient time to
permit the timely payment of the Bonus as provided in the following sentence,
the Bonus will be paid on the basis of interim statements or Company-prepared
statements, reconciled with the audited statements as soon as the audited
statements are prepared. The Bonus shall be payable annually within ninety (90)
days after the end of each fiscal year, provided, however, that so long as
Clarion's monthly Net Sales, on an unaudited basis, are in excess of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000), Employee shall have the option
to receive the additional Five Thousand Dollars ($5,000) per month, payable no
later than the 20th day of the month following the month in which said Bonus is
earned. In the event that Employee receives such additional amounts and
Clarion's Net Sales for the year do not attain $15,000,000 (or, for 1999, do not
average at least One Million Two Hundred Fifty Thousand Dollars ($1,250,000) per
month starting with the month in which Employee elects to receive the additional
amount), the additional amounts which Employee has received shall be deducted
from Employee's base salary during the succeeding fiscal year.
4.3 MEDICAL AND DENTAL INSURANCE. Throughout the term of Employee's
employment under this Agreement, Employee shall be entitled to receive Company
paid medical insurance and dental insurance on the same basis as the other
executive employees of the Company.
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<PAGE>
4.4 EXPENSES. Employee may incur reasonable expenses in performing
his services hereunder sufficient to support his positions with the Company and
Rose which shall be reimbursed by the Company upon presentation by Employee of
supporting documentation (e.g., receipts and vouchers) for such expenditures
which meet IRS guidelines.
4.5 LIFE AND DISABILITY INSURANCE AND 401(K) PLAN. Employee shall
also be entitled to Short Term Disability, Long Term Disability and Life
Insurance. The Short Term Disability and the Long Term Disability policies shall
provide Employee, in the event of his disability during the term hereof,
benefits equal to 70% of the salary provided for in Section 4.1 hereof. The Life
Insurance policy shall be a ten-year term policy which provides death benefits
payable to Employee's beneficiaries in the amount of $1,000,000 and to the
Company in the amount of $1,000,000. Employee shall also be entitled to a 401(k)
plan on the same basis as the other executive employees of the Company.
4.6 OTHER FRINGE BENEFITS. Employee shall also be entitled to all
other employee benefits provided by the Company to the President, CEO or
Chairman of the Company (whichever receives the highest fringe benefits).
5. TERM OF EMPLOYMENT. The Company hereby employs Employee, and
Employee hereby accepts employment with the Company, for a period of ten (10)
years from the date hereof (such period, together with any renewal terms,
referred to herein as the "Term"); provided that this Agreement shall be
automatically renewed for successive one (1) year terms unless either party
elects not to renew this Agreement by delivering written notice of its election
to the other party no later than one hundred eighty (180) days prior to the end
of the current term. Notwithstanding anything in this Section 5 to the contrary,
this Agreement may be terminated at any time in accordance with Section 6.
6. TERMINATION.
6.1 BY THE COMPANY FOR CAUSE. Employee's employment under this
Agreement may be terminated immediately by the Company upon the occurrence of
one or more of the following causes, and not otherwise:
6.1.1 Employee's conviction of a felony pertaining to the
Company's Business;
6.1.2 The commission by Employee of any act of willful, material
dishonesty in connection with the performance of any of Employee's duties
hereunder (including, but not limited to falsification of Company records,
wilfully making false statements of material facts to third parties regarding
the Company's Business, and misappropriation or embezzlement of funds against
the Company or any of its customers or suppliers);
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<PAGE>
6.1.3 Any willful material breach by Employee of any of the
covenants, conditions or restrictions set forth in Sections 7, 8 or 9 of this
Agreement; and
6.1.4 Employee dies or becomes disabled (Employee shall be
deemed "disabled" for purposes of this Agreement if he is unable, by reason of
illness, accident, or other physical or mental incapacity, to perform
substantially all of his regular duties for a continuous period of one hundred
twenty (120) days).
6.2 BY EMPLOYEE WITHOUT CAUSE. Employee may voluntarily terminate
his employment hereunder on sixty (60) days written notice to the Company.
6.3 EFFECT OF TERMINATION. Upon termination of Employee's employment
by the Company under Section 6.1, except for a termination resulting from the
death or disability of Employee, Employee shall be entitled to all compensation
accrued but unpaid to the date of termination, but Employee shall have no
further rights to any base salary, benefits or other compensation of any kind or
nature.
Upon termination of Employee's employment by the Company under
Section 6.1 as a result of the disability of Employee or by Employee under
Section 6.2, Employee shall be entitled to receive (in the case of termination
due to disability, in addition to the benefits payable under the disability
policies provided for in Section 4.5) an amount each month equal to the amount
which the Company is then paying for health insurance for Employee.
Upon any termination of Employee's employment pursuant to
Section 6.1 or 6.2, Employee shall be entitled to compensation for any accrued
and unused vacation hours as provided by applicable law and to any rights under
COBRA or other comparable rights as provided by law.
6.4 NON-COMPETITION. Provided that the Company is not in default
under its Promissory Note to be dated as of June 15, 1998 (the "Note") payable
to Employee and has paid Employee the salary specified in Section 4 hereof in
full during Employee's employment hereunder, Employee agrees that he will not at
any time within the three-year period immediately following the termination of
Employee's employment hereunder, directly or indirectly engage in, or have any
interest in, any person, firm, corporation or business (whether as an employee,
officer, director, agent, secretary, holder, creditor, consultant or otherwise)
that engages in any activity which is directly competitive with any activity now
engaged in by the Company (or any successor or successors of the Company) so
long as the Company (or any successor) shall engage in this activity. In the
event of any default in payment under the Note or failure of the Company to pay
Employee's salary during the term hereof, Employee shall not be bound by the
non-compete covenant specified in the first sentence of this Section until such
default is cured. This Section shall not apply to limit in any way Employee's
damages in the event of any breach of this Agreement by the Company. Neither
party shall have any obligation under this Section 6.4 in the event of
termination pursuant to Section 6.1.
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7. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
7.1 CONFIDENTIALITY AND APPROPRIATION OF CONFIDENTIAL INFORMATION.
During the term of Employee's employment under this Agreement and thereafter,
Employee will keep confidential and will not directly or indirectly reveal,
divulge or make known in any manner to any person or entity (except as required
by applicable law or in connection with the performance of his duties and
responsibilities as an employee hereunder) nor use or otherwise appropriate for
Employee's own benefit, or on behalf of any other person or entity by whom
Employee might subsequently be employed or with whom Employee might be otherwise
associated or affiliated, any Confidential Information (as hereinafter defined).
Confidential Information shall include information (not readily compiled from
publicly available sources) which is made available to Employee or obtained by
Employee during the course of his employment relating or pertaining to the
Company's business operations, including trade secrets, business and financial
information, operations information, projects, products, customers, supplier
names, addresses and pricing policies, company pricing policies, computer
programs and software or unpublished know-how, whether patented or unpatented.
Employee agrees to cooperate with the Company to maintain the secrecy of and
limit the use of such Confidential Information. Employee further agrees that he
is under no obligation to any former employer which is in any way inconsistent
with this Agreement or which imposes any restriction on the Company. The Company
shall maintain similar confidentiality with respect to all non-public business
information possessed by Employee on the date of execution of this Agreement
which is disclosed by Employee to the Company during the term hereof.
7.2 PREVENTION OF UNAUTHORIZED RELEASE OF COMPANY INFORMATION.
Employee agrees to promptly advise the Company of any knowledge which he may
have of any unauthorized release or use of any Confidential Information, and
shall take reasonable measures to prevent unauthorized persons or entities from
having access to, obtaining or being furnished with any Confidential
Information.
8. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda, reports,
notebooks, correspondence, files, lists and other records, and the like,
designs, drawings, specifications, computer software and computer equipment,
computer printouts, computer disks, and all photocopies or other reproductions
thereof, affecting or relating to the business of the Company, which Employee
shall prepare, use, construct, observe, possess or control during the term
hereof ("Company Materials"), shall be and remain the sole
property of the Company. Upon termination of this Agreement, Employee shall
deliver promptly to the Company all such Company Materials.
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9. INVENTIONS AND DISCOVERIES. Employee hereby assigns to the Company
all of Employee's rights, title and interest in and to all inventions,
discoveries, processes, standards, procedures, designs and other intellectual
property (hereinafter collectively referred to as the "Inventions"), and all
improvements on existing Inventions, which, in either case, are made or
discovered by Employee during the Term of Employee's employment hereunder.
Promptly upon the making of any such Invention or improvement thereon, Employee
shall disclose the same to Company and shall execute and deliver to Company such
reasonable documents as Company may request to confirm the assignment of
Employee's rights therein and, if requested by Company, shall assist Company in
applying for and prosecuting any patents which may be available in respect
thereof.
10. REMEDIES.
10.1 INJUNCTIVE RELIEF. The Company and Employee recognize and
acknowledge that Employee is employed under this Agreement as an employee in a
position where Employee will be rendering personal services of a special,
unique, unusual and extraordinary character requiring extraordinary ingenuity
and effort by Employee. Employee hereby acknowledges that compliance with the
provisions of Sections 7, 8 and 9 of this Agreement (which shall survive the
termination of this Agreement in all respects) is necessary to protect the
goodwill and other proprietary interests of the Company and that the Company
would suffer continuing and irreparable injury which injury is not adequately
compensable in monetary damages or at law. Accordingly Employee agrees that the
Company, its successors and assigns may obtain injunctive relief against the
breach or threatened breach of the foregoing provisions, in addition to any
other legal remedies which may be available to it under this Agreement
(including money damages), and that any such breach or threatened breach may be
preliminarily enjoined by the Company without bond.
10.2 OTHER REMEDIES. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by the Company
or Employee shall not constitute a waiver of the right to pursue other available
remedies.
10.3 ACCOUNTING FOR PROFITS. Employee covenants and agrees that if
he violates the provisions of Sections 7, 8 or 9, the Company shall be entitled
to an accounting and payment of all damages sustained by the Company as a result
of any such violation. These remedies shall be in addition and not in limitation
of any injunctive relief or other rights or remedies to which the Company is or
may be entitled at law, in equity or under this Agreement.
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10.4 ATTORNEYS' FEES. If litigation arises under this Agreement
between Company and Employee, the prevailing party in such litigation shall be
entitled to recover its reasonable attorneys' and paralegal's fees, court costs
and out-of-pocket litigation expenses from the non-prevailing party.
10.5 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, except Sections 7, 8 and 9, shall be resolved by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association then in effect. The decision of the arbitrator shall be final and
binding upon the parties hereto, and judgment upon the award rendered by the
arbitrator may be entered in any court of competent jurisdiction. There shall be
a single arbitrator, the situs of the arbitration shall be in the County of
Cook, State of Illinois, and the prevailing party (or parties) shall also
recover from the losing party (or parties) reasonable attorneys' fees and the
costs of arbitration as part of the judgment rendered.
10.6 CUMULATIVE REMEDIES. The remedies described in this Section 11
are in addition to and not in substitution for any other remedies available
under the law.
11. INDEMNIFICATION. The Company agrees to indemnify and hold Employee,
and his executors, heirs and assigns, harmless against all Litigation Charges in
respect of Covered Claims, each as hereafter defined. "Litigation Charges" shall
include, without limitation, damages, judgments, settlements and costs, costs of
investigation and attorney's fees and costs; provided, however, that the Company
shall not be obligated to pay fines or other obligations or fees imposed by law
or otherwise make any payments hereunder which it is prohibited by applicable
law from paying as indemnity or for any other reason. "Covered Claims" shall
mean all claims or actions which may be advanced, either originally or as a
counterclaim, (i) against Employee on account of any action taken by Employee on
behalf of or for the benefit of the Company, Rose or Rose & Associates, Inc., a
Delaware corporation ("Rose & Associates"), directly or indirectly, either under
the Sales Representation Agreement or in the course of his employment under this
Agreement or otherwise or (ii) by Employee against another person to recover
moneys owed to Employee or an affiliate of Employee by such other person which
such other person is refusing to pay due to any action taken or allegedly taken
by Employee on behalf of or for the benefit of the Company, Rose or Rose &
Associates, directly or indirectly, either under the Sales Representation
Agreement or in the course of his employment under this Agreement or otherwise.
"Covered Claims" shall not include any litigation in which Employee is convicted
of committing an illegal act based upon taking the action for which
indemnification is sought. The Company shall have no obligation to indemnify
Employee in any litigation, however, unless, prior to receiving any
indemnification respecting such litigation, Employee shall agree to remit to the
Company one-half (1/2) of any recovery received by Employee in such litigation.
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The Company shall indemnify Employee against any liability, loss, cost, expense
or damages sustained by him resulting from any claim by any person based on
injury to, death or other harm to any person or entity allegedly caused by any
defect in or breach of warranty relating to products and services offered,
distributed or sold by Company or any of its agents, employees, joint venturers,
affiliates, subsidiaries or other representatives prior to, during or after the
term of this Agreement. The Company's covenants hereunder shall survive the
termination of this Agreement. During the term of this Agreement, the Company
shall maintain such insurance coverages and capitalization as are reasonably
sufficient in accordance with industry standards to cover the risks and
liabilities which may be reasonably anticipated or inherent in the Company's
business or which may arise from the foreseeable use or misuse of its products
in the stream of commerce (and shall upon request furnish Employee with copies
of the certificates of insurance evidencing such coverage).
The Company shall pay indemnification provided for under this Section
11, including expenses and attorneys' fees and costs incurred by Employee in any
litigation, in advance of the final disposition of the proceeding if Employee
furnishes the Company a written affirmation of Employee's good faith belief that
he is entitled to be indemnified under this Agreement and undertakes in writing
to repay the advance to the extent that it is ultimately determined Employee is
not entitled to be indemnified by the Company. Such undertaking shall be an
unlimited general obligation of Employee but need not be secured. Advances
pursuant to this Section 11 shall be made no later than ten days after receipt
by the Company of the affirmation and undertaking described above, and shall be
made without regard to Employee's ability to repay the amount advanced and
without regard to Employee's ultimate entitlement to indemnification under this
Agreement. The Company may establish a trust, escrow account or other secured
funding source for the payment of advances made and to be made pursuant to this
Section 11.
12. SEVERABILITY. It is the desire of the parties that the provisions
and restrictions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies in each jurisdiction in which enforcement
might be sought. Thus, whenever possible, each provision or restriction of this
Agreement shall be interpreted in such manner as to be effective under
applicable law. If any section or portion of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or invalid under
applicable law, the invalidity or unenforceability of that section or portion of
this Agreement shall not invalidate any other section or portion, nor shall it
affect the application of such section or portion to other parties or other
circumstances. If in any judicial proceeding, a court shall refuse to enforce
this Agreement, whether because the time limit is too long or because the
restrictions contained herein are more extensive (whether as to geographic area,
scope of business or otherwise) than is necessary to protect the business and
goodwill of the Company, it is expressly understood and agreed between the
parties hereto that this Agreement is deemed modified to the extent necessary to
permit this Agreement to be enforced in any such proceedings.
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13. CONTINUING OBLIGATIONS. Employee's obligations pursuant to Sections
7 and 8 of this Agreement and the rights and remedies of the Company hereunder
shall continue in effect beyond the term of this Agreement.
14. WAIVER OR MODIFICATION. No waiver or modification of this Agreement
or of any covenant, condition, or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith.
Furthermore, no evidence of any modification or waiver shall be offered or
received as evidence in any litigation between the parties arising out of or
affecting this Agreement or the rights or obligations of any party hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The provisions of this section may not be waived except as herein set forth.
15. ENTIRE AGREEMENT. This written Agreement contains the sole and
entire agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties acknowledge
and agree that neither of them has made any representation with respect to such
matters of this Agreement or any representations except as are specifically set
forth herein, and each party acknowledges that he or it has relied on his or its
own judgment in entering into this Agreement. The parties further acknowledge
that statements or representations that may have been heretofore made by either
of them to the other are void and of no effect and that neither of them has
relied thereon in connection with his or its dealing with the other.
16. CHOICE OF LAW. This Agreement and the performance hereunder and all
suits and special proceedings hereunder shall be construed in accordance with
the laws of the State of Illinois.
17. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, successors, assigns and legal representatives. This Agreement
shall be construed as a contract for personal services by Employee to the
Company and shall not be assignable by Employee PROVIDED, HOWEVER, that any or
all of the rights of Employee hereunder may be assigned, in whole or in such
part as Employee may elect, to any entity with which Employee is affiliated or
associated as a significant shareholder, partner, officer or joint venturer
(either individually or through a related or controlled or controlling entity).
Upon written notification from Employee, the Company will pay to any of such
entities any moneys to which Employee is entitled hereunder. In the event of the
sale, merger or con solidation of the Company, Employee agrees that the Company
may assign its rights and obligations hereunder to its successor or purchaser,
but this Agreement shall not otherwise be assignable by the Company without the
prior written consent of Employee.
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18. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or when mailed by certified registered
mail, return receipt requested, with postage prepaid to the current address of
the person to whom such notice is directed or to such other address as such
person may request in writing.
[The balance of this page is intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
"COMPANY"
CLARION HOUSE, INC.
a Nevada corporation
By:______________________________________
Brian C. Manoogian, President
By:______________________________________
Troy D. Wiseman, CEO
"EMPLOYEE"
R. TOWNLEY ROSE, JR.
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EXHIBIT A
---------
Each of the undersigned shareholders of Clarion House, Inc., a Nevada
corporation ("Clarion"), agree, upon the request of R. Townley Rose, Jr.
("Rose") to vote all of the shares of common stock, $.01 par value per share
("Stock") of Clarion owned by them, both now and in the future, to elect Rose to
the Board of Directors of Clarion at all times during the term of the Employment
Agreement between Clarion and Rose attached hereto. Each of the undersigned
further agrees, upon any transfer of their shares in a private transaction
(i.e., any transaction other than a public offering, sale under Rule 144 or
other transaction over-the-counter, through a dealer or on a securities
exchange) to require the transferee to execute a consent containing such
agreements.
INVEST L'INC. INVEST L'INC. BRIDGE FUND,
LLC
By:________________________ By:__________________________
Title:_____________________ Title:_______________________
Name:______________________ Name:________________________
APPORTUM CONSULTING CORP. ILP
By:________________________ By:__________________________
Title:_____________________ Title:_______________________
Name:______________________ Name:________________________
___________________________ _____________________________
Troy D. Wiseman Brian C. Manoogian
___________________________ OPPENHEIMER, WOLFF &
DONNEL-
Robert J. Skandaleris LY, LLP
By:__________________________
Title:_______________________
Name:________________________
A-1
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AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the "Amendment"), is
entered into as of March 31, 1999, by and between CLARION TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), and R. TOWNLEY ROSE, JR. ("Employee"), to
amend that certain Employment Agreement, dated April 1, 1998 (the "Employment
Agreement"), by and between CLARION HOUSE, INC., a Nevada corporation (and
predecessor of the Company) and Employee.
R E C I T A L S
- - - - - - - -
A. Pursuant to Section 6.4 of the Employment Agreement, Employee agreed
that he would not, at any time within the three-year period immediately
following the termination of his employment with the Company, directly or
indirectly engage in any activity which is directly competitive with any
activity now engaged in by the Company.
B. The Company and Employee desire to amend Sections 6.1 and 6.4 of the
Employment Agreement as specified herein.
C. The Company and Employee further desire to amend Section 4.1 of the
Employment Agreement regarding the time at which Employee's salary shall
increase to Two Hundred Ten Thousand Dollars ($210,000) per year, with the
balance of the compensation, including incentive compensation, provisions to
remain in full force and effect.
A G R E E M E N T
- - - - - - - - -
1. Section 4.1 of the Employment Agreement is hereby amended to read as
follows:
4.1 SALARY. In consideration of Employee's performance of his duties
and responsibilities hereunder and his observance of the covenants, conditions
and restrictions contained herein, Employee shall be entitled to receive a
salary of One Hundred Fifty Thousand Dollars ($150,000) per annum during the
period from April 1, 1998 to March 31, 1999 and thereafter increasing to Two
Hundred Ten Thousand Dollars ($210,000) during the Term hereof, payable in
weekly or other periodic installments in accordance with the Company's payroll
procedures in effect from time to time. This salary has been expressed in terms
of a gross amount, and the Company is or may be required to withhold from such
gross amount deductions in respect of federal, state or local income taxes, FICA
and the like.
2. Section 6.1 of the Employment Agreement is hereby amended to read as
follows:
6.1 BY THE COMPANY FOR CAUSE. Employee's employment under this
Agreement may be terminated immediately by the Company upon the occurrence of
one or more of the following causes, and not otherwise:
6.1.1 Employee's conviction of a felony pertaining to the
Company's Business;
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6.1.2 The commission by Employee of any act of willful, material
dishonesty in connection with the performance of any of Employee's duties
hereunder (including, but not limited to falsification of Company records,
willfully making false statements of material facts to third parties regarding
the Company's Business, and misappropriation or embezzlement of funds against
the Company or any of its customers or suppliers);
6.1.3 any willful material breach by Employee of any of its
covenants, conditions or restrictions set forth in Sections 7, 8 or 9 or this
Agreement; and
6.1.4 Employee dies or becomes disabled (Employee shall be
deemed "disabled" for purposes of this Agreement if he is unable, by reason of
illness, accident, or other physical or mental incapacity, to perform
substantially all of his regular duties for a continuous period of one hundred
twenty (120) days).
Employee shall have the right to notify the Company in writing within 60 days
after termination on any of the above grounds that Employee intends to contest
such termination. In such case, the Company agrees to continue to pay to
Employee, retroactive to the date of termination, the salary specified in
Section 4.1 at the level Employee was receiving on the date of termination until
the earlier of (a) twelve (12) months after the date of termination or (b) the
date upon which the validity of the termination is finally determined by a court
of law or by an arbitrator as provided in Section 10.5 hereof. Such payments
shall be made promptly following the date upon which Employee gives the notice
referred to above and shall continue to be made in the manner and with the
frequency in which Employee received such amounts prior to termination. Employee
agrees, if it delivers the notice referred to above, to contest such termination
with due diligence until final resolution and further agrees, if it is
determined that the termination was valid, to repay the Company for all amounts
received after termination.
3. Section 6.4 of the Employment Agreement is hereby amended to read as
follows:
6.4 COVENANT NOT TO COMPETE. Provided that the Company has paid
Employee the salary and Bonus (if earned) specified in Section 4 hereof in full
during Employee's employment hereunder, and has complied with such Section in
all other material respects, Employee agrees that he will not at any time within
the one-year period immediately following the termination of Employee's
employment hereunder (the "Non-Compete Term"), directly or indirectly engage in,
or have any interest in, any person, firm, corporation or business (whether as
an employee, officer, director, agent, secretary, holder, creditor, consultant
or otherwise) that engages in any activity which is directly competitive with
any activity now engaged in by the Company (or any successor or successors of
the Company) so long as the Company (or any successor) shall engage in this
activity. Stock interest of under ten percent (10%) in a public corporation
shall not be deemed to violate this Agreement. In the event of any failure of
the Company to pay Employee's salary and Bonus (if earned) and otherwise comply
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with Section 4 in all material respects during the term hereof, Employee shall
not be bound by the non-compete covenant specified in the first sentence of this
Section until such default is cured. This Section shall not apply to limit in
any way Employee's damages in the event of any breach of this Agreement by the
Company. As consideration for Employee's covenants under this Section 6.4, the
Company agrees to pay Employee, during the Non-Compete Term, (a) the salary
specified in Section 4.1 hereof, and (b) if Employee was receiving the Bonus at
the time of the termination of Employee's employment hereunder, the Bonus
specified in Section 4.2 hereof. These amounts (the "Non-Compete Payment") shall
be paid to Employee during the Non-Compete Term in the same manner and frequency
as Employee's salary and bonus was paid during Employee's employment. The
parties agree that the Non-Compete Payment provided for hereby is in
consideration for Employee's agreement to refrain from competing with Employer
as provided above, and therefore Employer's obligation to make such Non-Compete
Payment during the Non-Compete Term shall be absolute and unconditional, and
such amounts must be paid regardless of any claim or dispute which may arise
between Employer and Employee under the Employment Agreement or otherwise, so
long as Employee complies with the non-compete covenant set forth above. The
Non-Compete Payment shall be paid if Employee terminates his employment
hereunder at any time during the term of his employment hereunder, the parties
agreeing that the Company may not terminate Employee's employment hereunder for
any reason whatsoever, other than as specified in Section 6.1 hereof. Neither
party shall have any obligation under this Section 6.4 in the event of
termination pursuant to Section 6.1.
6.4.1 CERTAIN CORPORATE TRANSACTIONS. As a condition to any
merger, consolidation or sale of all or substantially all of the Company's
assets, the Company will require the surviving, resulting or transferee entity
to assume the obligations of the Company under this Employment Agreement.
4. Section 10.5 of the Employment Agreement is hereby amended to read
as follows:
10.5 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, except Sections 8 and 9, shall be resolved by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association then in effect. The decision of the arbitrator shall be final and
binding upon the parties hereto, and judgment upon the award rendered by the
arbitrator may be entered in any court of competent jurisdiction. There shall be
a single arbitrator, the situs of the arbitration shall be in the County of
Cook, State of Illinois, and the prevailing party (or parties) shall also
recover from the losing party (or parties) reasonable attorneys' fees and the
costs of arbitration as part of the judgment rendered.
5. Other than as specifically provided in this Amendment, all other
provisions of the Employment Agreement shall remain in full force and effect,
the Employment Agreement as amended by this Amendment No. 1 constituting the
sole and entire agreement between the parties as to the matters contained
herein, and superseding any and all conversations, letters and other
communications which may have been disseminated by the parties relating to the
subject matter hereof, all of which are void and of no effect.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
"COMPANY"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By:___________________________________________
Jack D. Rutherford, Chief Executive Officer
"EMPLOYEE"
______________________________________________
R. TOWNLEY ROSE, JR.
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 29th day of October, 1998, by and between CLARION TECHNOLOGIES, INC., a
Delaware corporation ("Company") and ROBERT W. MARTIN ("Employee").
R E C I T A L S
- - - - - - - -
A. The Company is engaged in the business of custom injection molding,
assembly, tooling, product design, advanced engineering and program management
(the "Business").
B. The Company wishes to employ Employee, and Employee agrees to serve,
as Chief Financial Officer of the Company subject to the terms and conditions
set forth below.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. RECITALS. The recitals set forth above shall constitute and shall be
deemed to be an integral part of this Agreement.
2. DUTIES. Employee shall serve in the capacity of Chief Financial
Officer of the Company. Employee's principal duties and responsibilities shall
include supervising, having custody of, and being responsible for all funds and
securities of the Company. Employee shall deposit all such funds in the name of
the Company in such banks, trust companies or other depositories as shall be
selected by the Board of Directors or in accordance with authority delegated by
the Board of Directors. Employee shall receive, and give receipts for, moneys
due and payable to the Company from any source whatsoever. Employee shall
exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Company and the preparation of such
records and reports in connection therewith as may be necessary or desirable.
Employee shall, in general, perform all other duties incident to the office of
Chief Financial Officer and such other duties as from time to time may be
assigned to Employee by the Board of Directors provided that such other services
and duties are not inconsistent with any other term of this Agreement. Except
during vacation periods or in accordance with the Company's personnel policies
covering executive leaves and reasonable periods of illness or other
incapacitation, Employee shall devote his services to the Company's Business and
interests in a manner consistent with Employee's title and office and the
Company's needs for his services. Employee agrees to perform his duties pursuant
to this Agreement in good faith and in a manner which he honestly believes to be
in the best interests of the Company, and with such care, including reasonable
inquiry, as an ordinary prudent person in a like position would use under
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similar circumstances. Employee agrees to observe a duty of loyalty to the
Company placing the interests of the Company ahead of his own. Such duties shall
be rendered at such place or places as the Company shall require in accordance
with the best interests, needs, business and opportunities of the Company.
However, in no event, shall the Company require Employee to move his principal
residence. Employee shall at all times be subject to and shall observe and carry
out such reasonable rules, regulations, policies, directions and restrictions as
may be established from time to time by the Company.
3. LIMITATIONS ON OTHER EMPLOYMENT. Throughout the Term (as defined
below) of Employee's employment under this Agreement, Employee shall not enter
into the services of or be employed in any capacity or for any purposes
whatsoever, whether directly or indirectly, by any person, firm, corporation or
entity other than the Company, and will not, during said period of time, be
engaged in any business, enterprise or undertaking other than employment by the
Company except for such other activities that do not detract from the full
discharge of Employee's duties hereunder or as otherwise consented to in writing
by the Company.
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. In consideration of Employee's performance of all of
his duties and responsibilities hereunder and his observance of all of the
covenants, conditions and restrictions contained herein, Employee shall be
entitled to receive from the date of this Agreement through October 31, 1999, a
base salary of One Hundred Thousand Dollars ($100,000) per year, payable in
weekly or other periodic installments in accordance with the Company's payroll
procedures in effect from time to time. The base salary has been expressed in
terms of a gross amount, and the Company is or may be required to withhold from
such gross amount deductions in respect of federal, state or local income taxes,
FICA and the like. Employee's base salary for any renewal term hereof shall be
determined by the Compensation Committee of the Company's Board of Directors.
4.2 INCENTIVE BONUS. Employee shall be entitled to an incentive bonus
in the amount of Twenty-Five Thousand (25,000) shares of Common Stock for
performance during the period commencing on the Effective Date (as defined
below) of this Agreement. The shares shall be issued to Employee effective
November 1, 1998 and shall be held in an escrow account until such time as the
Company achieves certain mutually agreed upon targets (the "Targets"). The
Targets shall be identified by the Company and Employee within ninety (90) days
of the Effective Date of this Agreement. Employee acknowledges that the Company
will issue an Internal Revenue Service ("IRS") Form 1099 for 1998 for $50,000.
Upon achieving the Targets, the Company shall cause the shares of Common Stock
to be released to Employee from the escrow account. Employee shall forfeit all
rights to the shares of Common Stock granted hereunder in the event that
Employee or the Company terminates his employment with the Company prior to the
Company's achievement of the Targets; provided, however, that Employee's rights
to the shares shall continue in the event his employment is terminated as the
result of death or disability.
4.3 SIGNING BONUS. As a one-time bonus for agreeing to enter into this
Agreement, the Company shall issue to Employee Twenty Thousand (20,000) shares
of Common Stock, at an agreed value of $2.00 per share. Employee acknowledges
that the Company will issue an IRS Form 1099 for 1998 for $40,000.
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4.4 MEDICAL AND DENTAL INSURANCE, VACATION. Throughout the term of
Employee's employment under this Agreement, Employee shall be entitled to
receive Company paid medical insurance and dental insurance. Employee shall be
entitled to three weeks of paid vacation (to be taken at such time or times as
is reasonably convenient to the Company).
4.5 EXPENSES. Employee may incur reasonable expenses in performing his
services hereunder which shall be reimbursed by the Company, in accordance with
the Company's standard expense reimbursement policies for approved expenses,
upon presentation by Employee of supporting documentation (e.g., receipts and
vouchers) for such expenditures which meet IRS guidelines.
4.6 LIFE AND DISABILITY INSURANCE AND 401(K) PLAN. Employee shall also
be entitled to Short Term Disability, Long Term Disability and Life Insurance
and a 401(k) plan, subject to the review and approval of the Board of Directors.
4.7 OTHER FRINGE BENEFITS. Employee shall also be entitled to all other
employee benefits generally provided by the Company.
4.8 RELOCATION AND LIVING EXPENSE REIMBURSEMENT. Employee shall be
entitled to reimbursement for Employee's actual living expenses in Schaumburg
and/or the reasonable cost of moving the personal belongings and household goods
of Employee and Employee's family, not to exceed Fifteen Thousand Dollars
($15,000) per annum.
5. TERM OF EMPLOYMENT. The Company hereby employs Employee, and
Employee hereby accepts employment with the Company, for a period of one (1)
year commencing on November 1, 1998 (the "Effective Date") and terminating on
October 31, 1999 (the "Term"); provided that this Agreement shall be
automatically renewed for successive one (1) year terms unless either party
elects not to renew this Agreement by delivering written notice of its election
to the other party no later than ninety (90) days prior to the end of the
current term. Notwithstanding anything in this Section 5 to the contrary, this
Agreement may be terminated at any time in accordance with Section 6.
6. TERMINATION.
6.1 BY THE COMPANY FOR CAUSE. Employee's employment under this
Agreement may be terminated immediately by the Company upon the occurrence of
one or more of the following causes:
A. Employee's conviction of any criminal act involving moral
turpitude or which otherwise tends to bring disrepute upon the Company;
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B. The commission by Employee of any act of dishonesty in
connection with the performance of any of Employee's duties hereunder
(including, but not limited to falsification of Company records, making false
statements of material facts to third parties regarding the Company's Business,
fraud, and misappropriation or embezzlement against the Company or any of its
customers or suppliers);
C. Any willful material breach by Employee of any of the covenants,
conditions or restrictions set forth in this Agreement, including, but not
limited to, the restrictions set forth in Sections 7, 8 or 9 of this Agreement;
D. The material failure to perform Employee's duties, and/or to
observe the written rules, regulations, policies, directions or restrictions
adopted by the Company from time to time to the extent such rules, regulations,
policies, directions or restrictions are not inconsistent with the terms of this
Agreement, provided that such failure shall not have been cured within ten (10)
days after Employee is given specific notice and an opportunity to cure such
failure;
E. If Employee dies or becomes disabled (Employee shall be deemed
"disabled" for purposes of this Agreement if he is unable, by reason of illness,
accident, or other physical or mental incapacity, to perform substantially all
of his regular duties for a continuous period of one hundred twenty (120) days);
and
F. Repeated abuse of alcohol or illegal narcotics which results in
the failure of Employee to perform his duties hereunder.
6.2 BY THE COMPANY WITHOUT CAUSE. The Company may terminate Employee's
employment hereunder on sixty (60) days written notice to Employee.
6.3 BY EMPLOYEE UPON BREACH BY THE COMPANY. Upon a breach by the
Company of the terms of this Agreement, Employee shall have the right to
terminate his employment hereunder, provided that the Company has first been
afforded thirty (30) days written notice and an opportunity to cure such breach.
6.4 BY EMPLOYEE WITHOUT CAUSE. Employee may voluntarily terminate his
employment hereunder on sixty (60) days written notice to the Company.
6.5 EFFECT OF TERMINATION. Upon termination of Employee's employment by
the Company under Section 6.1, except for a termination resulting from the
disability of Employee, Employee shall be entitled to all compensation accrued
but unpaid to the date of termination, but Employee shall have no further rights
to any base salary, benefits or other compensation of any kind or nature.
Upon termination of Employee's employment by the Company under
Section 6.2, by the Company under Section 6.1 as a result of the disability of
Employee or by Employee under Section 6.3, Employee shall be entitled to
continue to receive all base salary for a period of six months following
termination and an amount each month equal to the amount which the Company is
then paying for health insurance for Employee on the same dates that he would
have received such base salary had such termination of employment not occurred,
less any sums which Employee receives from disability insurance maintained by
the Company.
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Upon termination of Employee's employment pursuant to Section 6.4,
Employee shall be entitled to continue to receive one-half (1/2) of the base
salary for a period of six months following termination on the same dates that
he would have received such base salary had such termination of employment not
occurred.
Upon any termination of Employee's employment pursuant to Section
6.1, 6.2, 6.3 or 6.4, Employee shall be entitled to compensation for any accrued
and unused vacation hours as provided by applicable law and to any rights under
COBRA or other comparable rights as provided by law.
7. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
7.1 CONFIDENTIALITY AND APPROPRIATION OF CONFIDENTIAL INFORMATION.
During the term of Employee's employment under this Agreement and thereafter,
Employee will keep confidential and will not directly or indirectly reveal,
divulge or make known in any manner to any person or entity (except as required
by applicable law or in connection with the performance of his duties and
responsibilities as an employee hereunder) nor use or otherwise appropriate for
Employee's own benefit, or on behalf of any other person or entity by whom
Employee might subsequently be employed or otherwise associated or affiliated
with, any Confidential Information (as hereinafter defined). Confidential
Information shall include information (not readily compiled from publicly
available sources) which is made available to Employee or obtained by Employee
during the course of his employment relating or pertaining to the Company's
business and franchise operations, including trade secrets, business and
financial information, operations information, projects, products, customers,
supplier names, addresses and pricing policies, company pricing policies,
computer programs and software or unpublished know-how, whether patented or
unpatented. Employee agrees to cooperate with the Company to maintain the
secrecy of and limit the use of such Confidential Information. Employee further
agrees that he is under no obligation to any former employer which is in any way
inconsistent with this Agreement or which imposes any restriction on the
Company.
7.2 PREVENTION OF UNAUTHORIZED RELEASE OF COMPANY INFORMATION. Employee
agrees to promptly advise the Company of any knowledge which he may have of any
unauthorized release or use of any Confidential Information, and shall take
reasonable measures to prevent unauthorized persons or entities from having
access to, obtaining or being furnished with any Confidential Information.
8. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda, reports,
notebooks, correspondence, files, lists and other records, and the like,
designs, drawings, specifications, computer software and computer equipment,
computer printouts, computer disks, and all photocopies or other reproductions
thereof, affecting or relating to the business of the Company, which Employee
shall prepare, use, construct, observe, possess or control ("Company
Materials"), shall be and remain the sole property of the Company. Upon
termination of this Agreement, Employee shall deliver promptly to the Company
all such Company Materials.
5
<PAGE>
9. INVENTIONS AND DISCOVERIES. Employee hereby assigns to the Company
all of Employee's rights, title and interest in and to all inventions,
discoveries, processes, standards, procedures, designs and other intellectual
property (hereinafter collectively referred to as the "Inventions"), and all
improvements on existing Inventions made or discovered by Employee during the
Term of Employee's employment hereunder. Promptly upon the making of any such
Invention or improvement thereon, Employee shall disclose the same to Company
and shall execute and deliver to Company such reasonable documents as Company
may request to confirm the assignment of Employee's rights therein and, if
requested by Company, shall assist Company in applying for and prosecuting any
patents which may be available in respect thereof. Inventions originated by
Employee shall be considered by the Board of Director's Compensation Committee
in determining salary and incentive compensation.
10. REMEDIES.
10.1 INJUNCTIVE RELIEF. The Company and Employee recognize and
acknowledge that Employee is employed under this Agreement as an employee in a
position where Employee will be rendering personal services of a special,
unique, unusual and extraordinary character requiring extraordinary ingenuity
and effort by Employee. Employee hereby acknowledges that compliance with the
provisions of Sections 7, 8 and 9 of this Agreement (which shall survive the
termination of this Agreement in all respects) is necessary to protect the
goodwill and other proprietary interests of the Company and that the Company
would suffer continuing and irreparable injury which injury is not adequately
compensable in monetary damages or at law. Accordingly Employee agrees that the
Company, its successors and assigns may obtain injunctive relief against the
breach or threatened breach of the foregoing provisions, in addition to any
other legal remedies which may be available to it under this Agreement
(including money damages), and that any such breach or threatened breach may be
preliminarily enjoined by the Company without bond.
10.2 OTHER REMEDIES. However, no remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies by
the Company shall not constitute a waiver of the right to pursue other available
remedies.
10.3 ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he
violates the provisions of Sections 7, 8 or 9, the Company shall be entitled to
an accounting and repayment of all profits, compensation, commissions,
remuneration or other benefits that Employee has realized and may realize as a
result of or in connection with any such violation. These remedies shall be in
addition and not in limitation of any injunctive relief or other rights or
remedies to which the Company is or may be entitled at law, in equity or under
this Agreement.
6
<PAGE>
10.4 ATTORNEYS' FEES. If litigation arises under this Agreement between
Company and Employee, the prevailing party in such litigation shall be entitled
to recover its reasonable attorneys' and paralegal's fees, court costs and
out-of-pocket litigation expenses from the non-prevailing party.
10.5 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, except Sections 7, 8 and 9, shall be resolved by arbitration
in accordance with the Commercial Rules of the American Arbitration Association
then in effect. The decision of the arbitrator shall be final and binding upon
the parties hereto, and judgment upon the award rendered by the arbitrator may
be entered in any court of competent jurisdiction. There shall be a single
arbitrator, the situs of the arbitration shall be in the County of Cook, State
of Illinois, and the prevailing party (or parties) shall also recover from the
losing party (or parties) reasonable attorneys' fees and the costs of
arbitration as part of the judgment rendered.
10.6 CUMULATIVE REMEDIES. The remedies described in this Section 10 are
in addition to and not in substitution for any other remedies available under
the law.
11. BOARD APPROVAL. This Agreement shall be effective subject to the
approval of the Company's Board of Directors.
12. INDEMNIFICATION. The Company agrees to indemnify Employee, and his
executors, heirs and assigns, against all claims or actions which may be
advanced against Employee on account of Employee's resignation from his previous
employment; provided, however, that the Company shall not be obligated to
indemnify Employee if Employee has committed an illegal act. The payments which
the Company will be obligated to make hereunder shall include, without
limitation, damages, judgments, settlements and costs, cost of investigation and
costs of defense of legal actions, claims or proceedings; provided, however,
that the Company shall not be obligated to pay fines or other obligations or
fees imposed by law or otherwise make any payments hereunder which it is
prohibited by applicable law from paying as indemnity or for any other reason.
13. SEVERABILITY. It is the desire of the parties that the provisions
and restrictions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies in each jurisdiction in which enforcement
might be sought. Thus, whenever possible, each provision or restriction of this
Agreement shall be interpreted in such manner as to be effective under
applicable law. If any section or portion of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or invalid under
applicable law, the invalidity or unenforceability of that section or portion of
this Agreement shall not invalidate any other section or portion, nor shall it
affect the application of such section or portion to other parties or other
circumstances. If in any judicial proceeding, a court shall refuse to enforce
this Agreement, whether because the time limit is too long or because the
restrictions contained herein are more extensive (whether as to geographic area,
scope of business or otherwise) than is necessary to protect the business and
goodwill of the Company, it is expressly understood and agreed between the
parties hereto that this Agreement is deemed modified to the extent necessary to
permit this Agreement to be enforced in any such proceedings. 14. CONTINUING
OBLIGATIONS. Employee's obligations pursuant to Sections 7 and 8 of this
Agreement and the rights and remedies of the Company hereunder shall continue in
effect beyond the term of this Agreement.
7
<PAGE>
15. WAIVER OR MODIFICATION. No waiver or modification of this Agreement
or of any covenant, condition, or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith.
Furthermore, no evidence of any modification or waiver shall be offered or
received as evidence in any litigation between the parties arising out of or
affecting this Agreement or the rights or obligations of any party hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The provisions of this Section may not be waived except as herein set forth.
16. ENTIRE AGREEMENT. This written Agreement contains the sole and
entire agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties acknowledge
and agree that neither of them has made any representation with respect to such
matters of this Agreement or any representations except as are specifically set
forth herein, and each party acknowledges that he or it has relied on his or its
own judgment in entering into this Agreement. The parties further acknowledge
that statements or representations that may have been heretofore made by either
of them to the other are void and of no effect and that neither of them has
relied thereon in connection with his or its dealing with the other.
17. CHOICE OF LAW. This Agreement and the performance hereunder and all
suits and special proceedings hereunder shall be construed in accordance with
the laws of the State of Illinois.
18. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, successors, assigns and legal representatives. This Agreement
shall be construed as a contract for personal services by Employee to the
Company and shall not be assignable by Employee. In the event of the sale,
merger or consolidation of the Company, Employee agrees that the Company may
assign its rights and obligations hereunder to its successor or purchaser.
19. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or when mailed by certified registered
mail, return receipt requested, with postage prepaid to their current address or
to such other address as they request in writing.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
"Company"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By:_________________________________________
Troy D. Wiseman, Chief Executive Officer
"Employee"
_________________________________________
ROBERT W. MARTIN
9
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 1st day of January, 1999, by and between CLARION TECHNOLOGIES, INC., a
Delaware corporation ("Company") and JACK D. RUTHERFORD ("Employee").
R E C I T A L S
- - - - - - - -
A. The Company is engaged in the business of custom injection molding,
assembly, tooling, product design, advanced engineering and program management
(the "Business").
B. The Company wishes to employ Employee, and Employee agrees to serve,
as Chairman of the Board and Chief Executive Officer of the Company subject to
the terms and conditions set forth below.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. RECITALS. The recitals set forth above shall constitute and shall be
deemed to be an integral part of this Agreement.
2. DUTIES. Employee shall serve in the capacity of Chairman of the
Board and Chief Executive Officer of the Company. Employee's principal duties
and responsibilities shall consist of primary responsibility for the general and
active supervision and management of the business activities and functions of
the Company and its subordinate officers, agents and employees. Employee shall
perform such other services and duties as may from time to time be assigned to
Employee by the Company's Board of Directors provided that such other services
and duties are not inconsistent with any other term of this Agreement. Except
during vacation periods or in accordance with the Company's personnel policies
covering executive leaves and reasonable periods of illness or other
incapacitation, Employee shall devote his services to the Company's Business and
interests in a manner consistent with Employee's title and office and the
Company's needs for his services. Employee agrees to perform his duties pursuant
to this Agreement in good faith and in a manner which he honestly believes to be
in the best interests of the Company, and with such care, including reasonable
inquiry, as an ordinary prudent person in a like position would use under
similar circumstances. Employee agrees to observe a duty of loyalty to the
1
<PAGE>
Company placing the interests of the Company ahead of his own. Such duties shall
be rendered at such place or places as the Company shall require in accordance
with the best interests, needs, business and opportunities of the Company.
However, in no event, shall the Company require Employee to move his principal
residence. Employee shall at all times be subject to and shall observe and carry
out such reasonable rules, regulations, policies, directions and restrictions as
may be established from time to time by the Company.
3. LIMITATIONS ON OTHER EMPLOYMENT. Throughout the Term (as defined
below) of Employee's employment under this Agreement, Employee shall not enter
into the services of or be employed in any capacity or for any purposes
whatsoever, whether directly or indirectly, by any person, firm, corporation or
entity other than the Company, and will not, during said period of time, be
engaged in any business, enterprise or undertaking other than employment by the
Company except for such other activities that do not detract from the full
discharge of Employee's duties hereunder or as otherwise consented to in writing
by the Company.
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. In consideration of Employee's performance of all of
his duties and responsibilities hereunder and his observance of all of the
covenants, conditions and restrictions contained herein, Employee shall be
entitled to receive a base salary of Ten Thousand Dollars ($10,000) per month
("Base Salary"), payable in weekly or other periodic installments in accordance
with the Company's payroll procedures in effect from time to time. The Base
Salary shall be paid to Employee retroactive to the date that Employee was
appointed as Chairman of the Company's Board of Directors (i.e., November 11,
1998). The Base Salary has been expressed in terms of a gross amount, and the
Company is or may be required to withhold from such gross amount deductions in
respect of federal, state or local income taxes, FICA and the like. Employee's
Base Salary for any renewal term hereof shall be determined by the Compensation
Committee of the Company's Board of Directors and shall be based on the
performance of the Company.
4.2 OPTIONS. Upon the commencement of Employee's employment term,
Employee shall be granted options to purchase an aggregate of Five Hundred
Thousand (500,000) shares of the Company's $.001 par value common stock ("Common
Stock"), at an exercise price of One Dollar ($1.00) per share (the "Options").
4.3 MEDICAL AND DENTAL INSURANCE, VACATION. Throughout the term of
Employee's employment under this Agreement, Employee shall be entitled to
receive Company paid medical insurance and dental insurance. Employee shall be
entitled to three weeks of paid vacation (to be taken at such time or times as
is reasonably convenient to the Company).
4.4 EXPENSES. Employee may incur reasonable expenses in performing his
services hereunder which shall be reimbursed by the Company, in accordance with
the Company's standard expense reimbursement policies for approved expenses,
upon presentation by Employee of supporting documentation (e.g., receipts and
vouchers) for such expenditures which meet IRS guidelines.
2
<PAGE>
4.5 LIFE AND DISABILITY INSURANCE AND 401(K) PLAN. Employee shall also
be entitled to Short Term Disability, Long Term Disability and Life Insurance
and a 401(k) plan, subject to the review and approval of the Board of Directors.
4.6 OTHER FRINGE BENEFITS. Employee shall also be entitled to all other
employee benefits generally provided by the Company.
5. TERM OF EMPLOYMENT. The Company hereby employs Employee, and
Employee hereby accepts employment with the Company, for a period of two (2)
years terminating on December 31, 2000 (the "Term"); provided that this
Agreement shall be automatically renewed for successive one (1) year terms
unless either party elects not to renew this Agreement by delivering written
notice of its election to the other party no later than sixty (60) days prior to
the end of the current term. Notwithstanding anything in this Section 5 to the
contrary, this Agreement may be terminated at any time in accordance with
Section 6.
6. TERMINATION.
6.1 BY THE COMPANY FOR CAUSE. Employee's employment under this
Agreement may be terminated immediately by the Company upon the occurrence of
one or more of the following causes:
A. Employee's conviction of any criminal act involving moral
turpitude or which otherwise tends to bring disrepute upon the Company;
B. The commission by Employee of any act of dishonesty in
connection with the performance of any of Employee's duties hereunder
(including, but not limited to falsification of Company records, making false
statements of material facts to third parties regarding the Company's Business,
fraud, and misappropriation or embezzlement against the Company or any of its
customers or suppliers);
C. Any willful material breach by Employee of any of the covenants,
conditions or restrictions set forth in this Agreement, including, but not
limited to, the restrictions set forth in Sections 7, 8 or 9 of this Agreement;
D. The material failure to perform Employee's duties, and/or to
observe the written rules, regulations, policies, directions or restrictions
adopted by the Company from time to time to the extent such rules, regulations,
policies, directions or restrictions are not inconsistent with the terms of this
Agreement, provided that such failure shall not have been cured within ten (10)
days after Employee is given specific notice and an opportunity to cure such
failure;
E. If Employee dies or becomes disabled (Employee shall be deemed
"disabled" for purposes of this Agreement if he is unable, by reason of illness,
accident, or other physical or mental incapacity, to perform substantially all
of his regular duties for a continuous period of one hundred twenty (120) days);
and F. Repeated abuse of alcohol or illegal narcotics which results in the
failure of Employee to perform his duties hereunder.
3
<PAGE>
6.2 BY THE COMPANY WITHOUT CAUSE. The Company may terminate Employee's
employment hereunder on sixty (60) days written notice to Employee.
6.3 BY EMPLOYEE UPON BREACH BY THE COMPANY. Upon a breach by the
Company of the terms of this Agreement, Employee shall have the right to
terminate his employment hereunder, provided that the Company has first been
afforded thirty (30) days written notice and an opportunity to cure such breach.
6.4 BY EMPLOYEE WITHOUT CAUSE. Employee may voluntarily terminate his
employment hereunder on sixty (60) days written notice to the Company.
6.5 EFFECT OF TERMINATION. Upon termination of Employee's employment by
the Company under Section 6.1, except for a termination resulting from the
disability of Employee, Employee shall be entitled to all compensation accrued
but unpaid to the date of termination, but Employee shall have no further rights
to any Base Salary, benefits or other compensation of any kind or nature.
Upon termination of Employee's employment by the Company under
Section 6.2, by the Company under Section 6.1 as a result of the disability of
Employee or by Employee under Section 6.3, Employee shall be entitled to
continue to receive all base salary for a period of six (6) months following
termination and an amount each month equal to the amount which the Company is
then paying for health insurance for Employee on the same dates that he would
have received such Base Salary had such termination of employment not occurred,
less any sums which Employee receives from disability insurance maintained by
the Company.
Upon termination of Employee's employment pursuant to Section 6.4,
Employee shall be entitled to continue to receive one-half (1/2) of the Base
Salary for a period of six (6) months following termination on the same dates
that he would have received such Base Salary had such termination of employment
not occurred.
Upon any termination of Employee's employment pursuant to Section
6.1, 6.2, 6.3 or 6.4, Employee shall be entitled to compensation for any accrued
and unused vacation hours as provided by applicable law and to any rights under
COBRA or other comparable rights as provided by law.
7. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
7.1 CONFIDENTIALITY AND APPROPRIATION OF CONFIDENTIAL INFORMATION.
During the term of Employee's employment under this Agreement and thereafter,
Employee will keep confidential and will not directly or indirectly reveal,
divulge or make known in any manner to any person or entity (except as required
by applicable law or in connection with the performance of his duties and
responsibilities as an employee hereunder) nor use or otherwise appropriate for
4
<PAGE>
Employee's own benefit, or on behalf of any other person or entity by whom
Employee might subsequently be employed or otherwise associated or affiliated
with, any Confidential Information (as hereinafter defined). Confidential
Information shall include information (not readily compiled from publicly
available sources) which is made available to Employee or obtained by Employee
during the course of his employment relating or pertaining to the Company's
business and franchise operations, including trade secrets, business and
financial information, operations information, projects, products, customers,
supplier names, addresses and pricing policies, company pricing policies,
computer programs and software or unpublished know-how, whether patented or
unpatented. Employee agrees to cooperate with the Company to maintain the
secrecy of and limit the use of such Confidential Information. Employee further
agrees that he is under no obligation to any former employer which is in any way
inconsistent with this Agreement or which imposes any restriction on the
Company.
7.2 PREVENTION OF UNAUTHORIZED RELEASE OF COMPANY INFORMATION. Employee
agrees to promptly advise the Company of any knowledge which he may have of any
unauthorized release or use of any Confidential Information, and shall take
reasonable measures to prevent unauthorized persons or entities from having
access to, obtaining or being furnished with any Confidential Information.
8. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda, reports,
notebooks, correspondence, files, lists and other records, and the like,
designs, drawings, specifications, computer software and computer equipment,
computer printouts, computer disks, and all photocopies or other reproductions
thereof, affecting or relating to the business of the Company, which Employee
shall prepare, use, construct, observe, possess or control ("Company
Materials"), shall be and remain the sole property of the Company. Upon
termination of this Agreement, Employee shall deliver promptly to the Company
all such Company Materials.
9. INVENTIONS AND DISCOVERIES. Employee hereby assigns to the Company
all of Employee's rights, title and interest in and to all inventions,
discoveries, processes, standards, procedures, designs and other intellectual
property (hereinafter collectively referred to as the "Inventions"), and all
improvements on existing Inventions made or discovered by Employee during the
Term of Employee's employment hereunder. Promptly upon the making of any such
Invention or improvement thereon, Employee shall disclose the same to Company
and shall execute and deliver to Company such reasonable documents as Company
may request to confirm the assignment of Employee's rights therein and, if
requested by Company, shall assist Company in applying for and prosecuting any
patents which may be available in respect thereof. Inventions originated by
Employee shall be considered by the Board of Director's Compensation Committee
in determining salary and incentive compensation.
10. REMEDIES.
10.1 INJUNCTIVE RELIEF. The Company and Employee recognize and
acknowledge that Employee is employed under this Agreement as an employee in a
position where Employee will be rendering personal services of a special,
unique, unusual and extraordinary character requiring extraordinary ingenuity
and effort by Employee. Employee hereby acknowledges that compliance with the
5
<PAGE>
provisions of Sections 7, 8 and 9 of this Agreement (which shall survive the
termination of this Agreement in all respects) is necessary to protect the
goodwill and other proprietary interests of the Company and that the Company
would suffer continuing and irreparable injury which injury is not adequately
compensable in monetary damages or at law. Accordingly Employee agrees that the
Company, its successors and assigns may obtain injunctive relief against the
breach or threatened breach of the foregoing provisions, in addition to any
other legal remedies which may be available to it under this Agreement
(including money damages), and that any such breach or threatened breach may be
preliminarily enjoined by the Company without bond.
10.2 OTHER REMEDIES. However, no remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies by
the Company shall not constitute a waiver of the right to pursue other available
remedies.
10.3 ACCOUNTING FOR PROFITS. Employee covenants and agrees that if he
violates the provisions of Sections 7, 8 or 9, the Company shall be entitled to
an accounting and repayment of all profits, compensation, commissions,
remuneration or other benefits that Employee has realized and may realize as a
result of or in connection with any such violation. These remedies shall be in
addition and not in limitation of any injunctive relief or other rights or
remedies to which the Company is or may be entitled at law, in equity or under
this Agreement.
10.4 ATTORNEYS' FEES. If litigation arises under this Agreement between
Company and Employee, the prevailing party in such litigation shall be entitled
to recover its reasonable attorneys' and paralegal's fees, court costs and
out-of-pocket litigation expenses from the non-prevailing party.
10.5 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, except Sections 7, 8 and 9, shall be resolved by arbitration
in accordance with the Commercial Rules of the American Arbitration Association
then in effect. The decision of the arbitrator shall be final and binding upon
the parties hereto, and judgment upon the award rendered by the arbitrator may
be entered in any court of competent jurisdiction. There shall be a single
arbitrator, the situs of the arbitration shall be in the County of Cook, State
of Illinois, and the prevailing party (or parties) shall also recover from the
losing party (or parties) reasonable attorneys' fees and the costs of
arbitration as part of the judgment rendered.
10.6 CUMULATIVE REMEDIES. The remedies described in this Section 10 are
in addition to and not in substitution for any other remedies available under
the law.
11. SEVERABILITY. It is the desire of the parties that the provisions
and restrictions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies in each jurisdiction in which enforcement
might be sought. Thus, whenever possible, each provision or restriction of this
Agreement shall be interpreted in such manner as to be effective under
6
<PAGE>
applicable law. If any section or portion of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or invalid under
applicable law, the invalidity or unenforceability of that section or portion of
this Agreement shall not invalidate any other section or portion, nor shall it
affect the application of such section or portion to other parties or other
circumstances. If in any judicial proceeding, a court shall refuse to enforce
this Agreement, whether because the time limit is too long or because the
restrictions contained herein are more extensive (whether as to geographic area,
scope of business or otherwise) than is necessary to protect the business and
goodwill of the Company, it is expressly understood and agreed between the
parties hereto that this Agreement is deemed modified to the extent necessary to
permit this Agreement to be enforced in any such proceedings.
12. CONTINUING OBLIGATIONS. Employee's obligations pursuant to Sections
7 and 8 of this Agreement and the rights and remedies of the Company hereunder
shall continue in effect beyond the term of this Agreement.
13. WAIVER OR MODIFICATION. No waiver or modification of this Agreement
or of any covenant, condition, or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith.
Furthermore, no evidence of any modification or waiver shall be offered or
received as evidence in any litigation between the parties arising out of or
affecting this Agreement or the rights or obligations of any party hereunder,
unless such waiver or modification is in writing, duly executed as aforesaid.
The provisions of this Section may not be waived except as herein set forth.
14. ENTIRE AGREEMENT. This written Agreement contains the sole and
entire agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties acknowledge
and agree that neither of them has made any representation with respect to such
matters of this Agreement or any representations except as are specifically set
forth herein, and each party acknowledges that he or it has relied on his or its
own judgment in entering into this Agreement. The parties further acknowledge
that statements or representations that may have been heretofore made by either
of them to the other are void and of no effect and that neither of them has
relied thereon in connection with his or its dealing with the other.
15. CHOICE OF LAW. This Agreement and the performance hereunder and all
suits and special proceedings hereunder shall be construed in accordance with
the laws of the State of Illinois.
16. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, successors, assigns and legal representatives. This Agreement
shall be construed as a contract for personal services by Employee to the
Company and shall not be assignable by Employee. In the event of the sale,
merger or consolidation of the Company, Employee agrees that the Company may
assign its rights and obligations hereunder to its successor or purchaser.
7
<PAGE>
17. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or when mailed by certified registered
mail, return receipt requested, with postage prepaid to their current address or
to such other address as they request in writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first written above.
"Company"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By:_________________________________________
Robert W. Martin, Chief Financial Officer
"Employee"
____________________________________________
JACK D. RUTHERFORD
8
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
NAME STATE OF INCORPORATION
- ------------------------------------------ ------------------------------------
Clarion Plastics Technologies, Inc. Ohio
Clarion Specialty Products, Inc. Ohio
Clarion Sourcing, Inc. Illinois
Rose & Associates, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4009045
<SECURITIES> 0
<RECEIVABLES> 1050208
<ALLOWANCES> 0
<INVENTORY> 780699
<CURRENT-ASSETS> 6046834
<PP&E> 10516734
<DEPRECIATION> 1118873
<TOTAL-ASSETS> 16558906
<CURRENT-LIABILITIES> 8373005
<BONDS> 0
0
0
<COMMON> 134689
<OTHER-SE> 7343712
<TOTAL-LIABILITY-AND-EQUITY> 16558906
<SALES> 3400786
<TOTAL-REVENUES> 3400786
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<CHANGES> 0
<NET-INCOME> (4396612)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
</TABLE>
