U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
Commission file number 0-24690
CLARION TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)
Delaware 91-1407411
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(State of incorporation) (I.R.S. Employer Identification No.)
235 Central Avenue, Holland, Michigan 49423
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (616) 494-8885
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.
[X] Yes [ ] No
The number of shares outstanding of registrant's common stock was
20,542,254 as of April 29, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
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-1-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
---------------------------
APRIL 1, MARCH 31,
2000 1999
------------ ------------
Net sales $ 25,085,000 $ 3,059,000
Cost of sales 21,371,000 3,017,000
------------ ------------
Gross profit 3,714,000 42,000
Selling, general and administrative expenses 2,334,000 1,527,000
------------ ------------
Operating income(loss) 1,380,000 (1,485,000)
Interest expense (1,230,000) (51,000)
Other income - net 48,000 10,000
------------ ------------
Income(loss) before income taxes 198,000 (1,526,000)
Provision for income taxes 118,000 6,000
------------ ------------
Net income(loss) $ 80,000 $ (1,532,000)
============ ============
Net income(loss) $ 80,000 $ (1,532,000)
Preferred stock dividends declared (548,000) -
------------ ------------
Loss designated to common shareholders $ (468,000) $ (1,532,000)
============ ============
Loss per share:
Basic $ (.02) $ (.10)
============ ============
Diluted $ (.02) $ (.10)
============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 1, DECEMBER 31,
2000 1999
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,149,000 $ 6,560,000
Accounts receivable, net 16,380,000 9,543,000
Inventories 6,389,000 3,752,000
Prepaid expenses and other current assets 1,056,000 706,000
------------ ------------
Total current assets 25,974,000 20,561,000
Property, plant and equipment, net 50,835,000 33,594,000
Costs in excess of net assets acquired, net 31,461,000 5,567,000
Other assets 1,222,000 592,000
------------ ------------
$109,492,000 $ 60,314,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 87,000 $ 87,000
Current portion of long-term debt 3,482,000 463,000
Accounts payable 15,907,000 8,395,000
Accrued liabilities and dividends payable 7,171,000 5,885,000
------------ ------------
Total current liabilities 26,647,000 14,830,000
Long-term debt, net of current portion 53,116,000 23,204,000
Deferred taxes and other liabilities 646,000 737,000
------------ ------------
Total liabilities 80,409,000 38,771,000
Value of common shares subject to redemption 2,550,000 2,550,000
Shareholders' equity:
Preferred stock 15,702,000 15,670,000
Common stock 21,000 19,000
Additional paid-in capital 31,794,000 23,820,000
Accumulated deficit (20,984,000) (20,516,000)
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Total shareholders' equity 26,533,000 18,993,000
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$109,492,000 $ 60,314,000
============ ============
See accompanying notes to condensed consolidated financial statements.
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CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
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APRIL 1, MARCH 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ 80,000 $ (1,532,000)
Depreciation and amortization 1,480,000 218,000
Changes in operating assets and liabilities (2,923,000) (1,804,000)
Other, net (207,000) 4,000
------------ ------------
Cash used in operating activities (1,570,000) (3,114,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (443,000) (8,938,000)
Proceeds from sale of equipment 3,000 -
Acquisitions, net of cash acquired (27,255,000) -
------------ ------------
Cash used in investing activities (27,695,000) (8,938,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt (3,500,000) 30,000
Proceeds from borrowings 49,800,000 6,439,000
Repayments of long-term debt (20,972,000) (441,000)
Capital lease payments (81,000) (4,000)
Net preferred stock issued 32,000 -
Net common stock issued - 5,710,000
Preferred stock dividends paid (425,000) -
------------ ------------
Cash provided by financing activities 24,854,000 11,734,000
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,411,000) (318,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,560,000 3,973,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,149,000 $ 3,655,000
============ ============
See accompanying notes to condensed consolidated financial statements.
-4-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Clarion
Technologies, Inc. and Subsidiaries (collectively referred to as "Clarion"
or the "Company") have been prepared, without audit, in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals and adjustments, considered
necessary for a fair presentation of the condensed consolidated financial
statements have been made. Certain amounts for prior periods have been
reclassified to conform with the current period financial statement
presentation. Results for interim periods should not be considered
indicative of results to be expected for a full year. Reference should be
made to the consolidated financial statements and notes thereto contained
in the Company's Annual Report on Form 10-KSB for the year ended December
31, 1999.
Effective January 1, 2000, the Company adopted 4-4-5 quarterly accounting
cycles. The first quarter of 2000 ended on April 1, whereas the first
quarter of 1999 ended on March 31. The Company's 2000 first quarter
results from operations would have been approximately the same if the
current year quarter had ended on March 31 rather than on April 1.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market. Components of inventories are summarized as
follows:
APRIL 1, DECEMBER 31,
2000 1999
------------ ------------
Raw materials $ 1,848,000 $ 1,626,000
Work in process 2,517,000 1,331,000
Finished goods 2,024,000 795,000
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$ 6,389,000 $ 3,752,000
============ ============
-5-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3. EARNINGS PER SHARE
The following table reconciles the numerators and denominators used in the
calculation of basic and diluted EPS.
THREE MONTHS ENDED
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APRIL 1, MARCH 31,
2000 1999
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Numerators:
Net income(loss) $ 80,000 $ (1,532,000)
Preferred stock dividends declared (548,000) -
------------ ------------
Loss designated to common shareholders
for basic and diluted earnings per share $ (468,000) $ (1,532,000)
============ ============
Denominators:
Weighted-average shares outstanding
for basic and diluted EPS 19,875,587 14,818,459
============ ============
Diluted EPS was the same as basic EPS for each of the periods presented.
The diluted share base excluded all common stock equivalents because of the
anti-dilutive effect caused by the Company's operating losses designated to
the common shareholders during each of those periods.
NOTE 4. BUSINESS COMBINATIONS
Purchase Transactions:
On February 1, 2000, the Company acquired substantially all the assets of
Drake Products Corporation ("Drake"), a full-service plastic injection
molding firm based in Greenville, Michigan. Consideration for the
acquisition included 2 million shares of Clarion common stock,
approximately $25 million in cash and the issuance of two subordinated
promissory notes totaling approximately $5.1 million. The Company also
assumed approximately $6.7 million of liabilities. The transaction was
accounted for under the purchase method of accounting, therefore, assets
and liabilities were recorded based upon their fair values at the date of
acquisition. Operating results have been included in the Company's
condensed consolidated statements of income from the date of acquisition.
The Company recorded $26.1 million of costs in excess of the fair value of
the net assets acquired, which is being amortized over 40 years.
-6-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. BUSINESS COMBINATIONS (continued)
In a related transaction, the Company acquired the real property used by
Drake for $2.2 million in cash and the issuance of a $1.0 million
promissory note.
On September 30, 1999, the Company acquired Double "J" Molding, Inc.
("Double J"), a tier-two automotive supplier of plastic injection molded
parts. The transaction was accounted for under the purchase method of
accounting. As such, operating results have been included in the Company's
condensed consolidated statements of income from the date of acquisition.
On August 31, 1999, the Company acquired Wamar Products, Inc. ("Wamar
Products"), a plastic injection molder and assembler of plastic component
and finished products. The transaction was accounted for under the
purchase method of accounting. As such, operating results have been
included in the Company's condensed consolidated statements of income from
the date of acquisition.
The following unaudited pro forma consolidated results of operations are
presented as if the acquisitions of Drake, Double J and Wamar Products had
been made at the beginning of the periods presented.
THREE MONTHS ENDED
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APRIL 1, MARCH 31,
2000 1999
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Net sales $ 29,032,000 $ 26,218,000
Net income(loss) 8,000 (1,457,000)
Loss per share:
Basic (0.03) (0.08)
Diluted (0.03) (0.08)
The unaudited pro forma information is not necessarily indicative of the
results of operations that would have occurred had the purchases been made
at the beginning of the periods presented or of the future results of the
combined operations.
-7-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4. BUSINESS COMBINATIONS (continued)
Pooling Transactions:
On April 29, 1999 the Company acquired Mito Plastics, Inc. ("Mito"), a full-
service product development company providing program management,
industrial design, engineering, prototyping and tooling from concept
through delivery of complete assemblies all under one roof. The
acquisition has been accounted for as a pooling of interests and
accordingly all prior period condensed consolidated financial statements
have been restated to include the combined results of operations, financial
position and cash flows of Mito.
On August 31, 1999 the Company acquired Wamar Tool & Machine Co. ("Wamar
Tool"), a fully equipped mold making and mold repair firm that serves the
plastic injection molding industry. The acquisition has been accounted for
as a pooling of interests and accordingly all prior period condensed
consolidated financial statements have been restated to include the
combined results of operations, financial position and cash flows of Wamar
Tool.
Net sales and net income of the separate companies for the period preceding
the acquisitions and the combined amounts presented in the accompanying
condensed consolidated financial statements are presented below:
MARCH 31,
1999
------------
Net sales:
Clarion Technologies, Inc. $ 1,321,000
Mito 1,526,000
Wamar Tool 212,000
------------
Combined $ 3,059,000
============
Net loss:
Clarion Technologies, Inc. $ (1,493,000)
Mito (20,000)
Wamar Tool (19,000)
------------
Combined $ (1,532,000)
============
-8-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following:
APRIL 1, DECEMBER 31,
2000 1999
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Line of credit refinanced $ - $ 3,500,000
Revolving credit agreements 11,800,000 5,575,000
Term loan (balloon payment terms) 12,000,000 -
Term loans (amortizing) 25,811,000 13,752,000
Promissory notes 6,135,000 -
Capital lease obligations 852,000 840,000
------------ ------------
56,598,000 23,667,000
Less current portion 3,482,000 463,000
------------ ------------
$ 53,116,000 $ 23,204,000
============ ============
On February 29, 2000, the Company entered into a new revolving credit
agreement that provides for up to $15.0 million in borrowings through
February 2003. The Company borrowed $11.8 million under the new credit
facility and used the proceeds to pay existing bank debt. At the option of
the Company, interest is payable monthly based on LIBOR plus 3.50% or the
bank's prime rate plus 1.00%. In February 2001, interest will be variable
based on the Company's leverage ratio and will range between LIBOR plus
1.75% to 3.00% or prime rate, to prime rate plus 1.00%, at the option of
the Company. In addition, a commitment fee is payable on the unused
portion of the credit line. At April 1, 2000, the Company had
approximately $1.1 million of unused borrowing capacity under the credit
agreement's most restrictive debt covenant. Borrowings are collateralized
by all tangible and intangible assets.
Concurrent with the revolving credit agreement, the Company entered into a
$12.0 million term loan agreement that requires periodic interest payments
and a lump sum payment of principal in February 2003. Proceeds were used
to pay existing bank debt. At the option of the Company, interest is
payable based on LIBOR plus 1.00% or the bank's prime rate. Borrowings are
collateralized by all tangible and intangible assets, in addition to
certain personal guarantees. Two members of Clarion's Board of Directors
and a Clarion executive officer have guaranteed $3 million of the term debt
by each providing $1 million in standby letters of credit. Two other
individuals not related to the Company have guaranteed the remaining $9
million; one by providing a standby letter of credit for $3 million, the
other by making a $6 million cash deposit with one of the lending banks.
-9-
CLARION TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5. LONG-TERM DEBT (continued)
The Company has agreed to pay, on behalf of the guarantors providing
standby letters of credit, the 1% annual fees due under the letters of
credit plus 1% per month on the guaranteed amount. The Company is paying
the guarantor providing the cash deposit a 2% fee per month.
On February 29, 2000, in connection with the acquisition of Drake, as
described further in Note 4, the Company entered into a $26.0 million term
loan agreement with a variable interest rate of LIBOR plus 3.50% or prime
rate plus 1.00%, at the option of the Company. The term loan requires
periodic payments of principal and interest through February 2003. The
Company also has a term loan, unrelated to the acquisition of Drake, with a
fixed interest rate of 9.0%, which requires periodic payments of principal
and interest through October 2001. Borrowings are collateralized by all
tangible and intangible assets.
On February 1, 2000, in connection with the acquisition of Drake, as
described further in Note 4, the Company issued two promissory notes
totaling $6.0 million with a fixed interest rate of 12.0% that requires
periodic payments of interest through January 2005 with a balloon payment
in February 2005. The Company also issued a $135,000 non-interest-bearing
promissory note that requires periodic payments through January 2002.
Maturities of long-term debt for the next five years subsequent to April 1,
2000 are as follows:
At April 1, 2000:
2000 $ 3,482,000
2001 4,363,000
2002 42,556,000
2003 181,000
2004 6,016,000
-----------
$56,598,000
===========
NOTE 6. GEOGRAPHIC AND SEGMENT DATA
The Company operates in a single geographic location, North America, and in
a single reportable business segment, plastic injection molding.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1999.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
The following information should be read in conjunction with the
accompanying Condensed Consolidated Financial Statements of the Company and
the Management's Discussion and Analysis or Plan of Operation set forth in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1999.
The Company is a full-service custom injection molder, providing rapid
prototyping and design models, mold design and engineering services, mold
manufacturing, injection molding and post-molding assembly to a diverse
base of customers in the automotive, heavy truck, office furniture and
consumer goods industries.
Clarion's business strategy is to create, through acquisitions and internal
growth, one of the largest full-service custom injection molding business
in the highly fragmented plastic injection-molding industry to serve
customers in the Company's target markets.
As described in Note 4 of the Notes to Condensed Consolidated Financial
Statements, the Company entered into two business combinations during 1999
that were accounted for as poolings of interests. In April, the Company
acquired Mito Plastics, Inc. a full-service product development company
providing program management, industrial design, engineering, prototyping
and tooling from concept through delivery of complete assemblies all under
one roof. In August, the Company acquired Wamar Tool & Machine Co., a
fully equipped mold making and mold repair firm that serves the plastic
injection molding industry. Accordingly, all financial data in the
Management's Discussion and Analysis or Plan of Operation is reported as
though these companies have always been one entity.
The Company also entered into two business combinations during 1999 and one
during 2000 that were accounted for under the purchase method of
accounting, as described in Note 4 of the Notes to Condensed Consolidated
Financial Statements, that impact the comparability of results between the
periods presented. On August 31, 1999, the Company acquired Wamar
Products, Inc. a plastic injection molder and assembler of plastic
component and finished products. On October 1, 1999, the Company acquired
Double "J" Molding, Inc., a tier two automotive supplier of plastic
injection molded parts. On February 1, 2000, the Company acquired the
assets of Drake Products Corporation, a full-service plastic injection
molding firm. Accordingly, financial data in the Management's Discussion
and Analysis or Plan of Operations only include operating results for these
companies subsequent to their effective acquisition dates.
-11-
RESULTS OF OPERATIONS
The table below outlines the components of the Company's Statement of
Income as a percentage of net sales:
THREE MONTHS ENDED
---------------------------
APRIL 1, MARCH 31,
2000 1999
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Net sales 100.0% 100.0%
Cost of sales 85.2% 98.6%
-------- --------
Gross profit 14.8% 1.4%
Selling, general and
administrative expenses 9.3% 49.9%
-------- --------
Operating income(loss) 5.5% (48.5%)
Other income(expense) (4.7%) (1.4%)
-------- --------
Income(loss) before income taxes 0.8% (49.9%)
Provision for income taxes .5% .2%
-------- --------
Net income(loss) 0.3% (50.1%)
======== ========
Net sales
Net sales for the first three months of 2000 was $25.1 million, an increase
of $22.0 million over net sales of $3.1 million for the corresponding
period of 1999. Of this increase, $19.8 million was due to the
acquisitions of Wamar Products in August 1999, Double J in September 1999
and Drake in February 2000. The remaining sales increase was primarily
attributable to higher sales volume at the Company's new Montpelier, Ohio
large-tonnage facility, which was in its start-up phase during the first
quarter of 1999.
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Gross profit
Gross profit, as a percentage of net sales, for the first quarter of 2000
was 14.8% compared to 1.4% for the corresponding period of 1999. The
improvement in gross margin for the first quarter of 2000 was primarily
attributable to the gross profit recorded by the Company's small and medium
tonnage injection molding facilities, which were acquired subsequent to the
first quarter of 1999. Adversely impacting the gross margin for the first
quarter of 2000 was the under absorption of overhead costs at the Company's
new Montpelier, Ohio large tonnage injection molding facility that is
operating below practical capacity. Management believes that business
booked or anticipated to be booked later in 2000 and beyond should bring
this facility closer to normal operating levels. Manufacturing overhead at
this facility is being minimized where possible. Gross margin for the
first quarter of 1999 was also adversely impacted by the under absorption
of fixed costs associated with the start-up operations at the Montpelier
facility; the Company's sole injection molding facility at the time.
Excluding the acquisitions of Wamar Products, Double J, and Drake, gross
profit, as a percentage of net sales, for the first quarter of 2000 would
have been approximately 5.4%, as compared to 1.4% for the corresponding
period of 1999. The improvement in gross margin on a comparative basis was
primarily attributable to increased absorption of overhead costs, as a
result of higher sales volume at the Montpelier large tonnage facility,
which was in its start-up phase during the first quarter of 1999.
Selling, general and administrative expenses
Selling, general and administrative expenses for the first quarter of 2000
increased $0.8 million to $2.3 million from $1.5 million for the comparable
quarter in 1999. This increase was primarily the result of the acquisition
of Drake during the first quarter of 2000. As a percentage of net sales,
selling, general and administrative expenses decreased from 49.9% to 9.3%.
This decrease, as a percentage of net sales, was indicative of higher net
sales in the first quarter of 2000, as compared to the first quarter of
1999 when significant costs were incurred, in relation to the sales volume,
to support the Company's long-term strategy of growth through acquisitions.
The Company anticipates that the level of selling, general and
administrative expenses will continue to increase in order to support
continued growth and expansion, however, management believes that selling,
general and administrative expenses will continue to decrease as a
percentage of net sales.
Interest expense
Interest expense for the first quarter of 2000 increased $1.1 million to
$1.2 million from $0.1 million for the comparable quarter in 1999. The
increase was the result of additional interest expense being recognized due
to higher debt levels for financing the new Montpelier facility, certain
acquisition funding and general working capital needs.
-13-
Income taxes
The Company's effective income tax rate for the first quarter of 2000 and
1999 differed from the applicable statutory rate primarily due to
nondeductible goodwill amortization, the effect of Michigan Single Business
tax, and fully reserving future federal income tax benefits, which are
comprised primarily of net operating loss carryforwards.
Net income (loss)
Net income for the first quarter of 2000 was $80,000 compared to a net loss
of $1.5 million for the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a total cash balance of $2.1 million at April 1, 2000. The
Company's primary cash requirements are for working capital needs, capital
expenditures, business acquisitions, debt service obligations and preferred
stock dividends. These cash requirements have increased due to the growth
of the Company and are expected to continue to increase as a result of
future anticipated growth. Historically, the Company's main sources of
cash have been from the sale of equity securities and bank borrowings. The
Company believes that cash generated from operations, together with amounts
available under its revolving credit facility and any other available
financing source, will be adequate to permit the Company to meet its cash
requirements, although no assurance can be given in this regard. Changes
in the Company's economic condition or other unforeseen circumstances could
cause these funds to not be available to meet its cash requirements. In
addition, the Company intends to pursue, as part of its business strategy,
future growth through acquisitions that may involve the expenditure of
significant funds. Depending upon the nature, size and timing of future
acquisitions, the Company may be required to obtain additional debt or
equity financing in connection with such transactions. 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.
Net cash used by operating activities decreased to $1.6 million for the
first quarter of 2000 from $3.1 million for the first quarter of 1999. The
decrease in cash used by operating activities was primarily attributable to
improved profitability. Working capital at April 1, 2000 was a negative
$0.7 million, compared with a positive $5.7 million at December 31, 1999.
The decrease reflected the cash paid and current portion of long-term debt
incurred in connection with the Drake acquisition.
During the first quarter of 2000, the Company used cash of $0.4 million for
capital expenditures, $27.3 million, net of cash acquired, for acquisitions
and $425,000 to pay dividends to preferred shareholders.
-14-
On February 1, 2000, the Company acquired substantially all the assets of
Drake Products Corporation, a full-service plastic injection molding firm
based in Greenville, Michigan. Consideration for the acquisition included
2 million shares of Clarion common stock, approximately $25 million in cash
and the issuance of two subordinated promissory notes totaling
approximately $5.1 million. The Company also assumed approximately $6.7
million of liabilities.
In a related transaction, the Company also acquired the real property used
by Drake for $2.2 million in cash and the issuance of a $1.0 million
promissory note.
At April 1, 2000, the Company's total debt was $56.7 million, of which
$49.7 million represented bank debt. This is in comparison to the $23.8
million in total debt at December 31, 1999, of which $22.8 million
represented bank debt. The increase in total debt resulted principally
from new long-term bank borrowings of $49.8 million and the issuance of
$6.1 million in promissory notes associated with the Drake acquisition,
offset by repayments totaling $24.6 million. The bank debt outstanding at
December 31, 1999 was replaced by a new revolving credit facility and term
loan in February 2000.
On February 29, 2000, the Company entered into a new revolving credit
agreement that provides for up to $15.0 million in borrowings through
February 2003. The Company borrowed $11.8 million under the new credit
facility and used the proceeds to pay existing bank debt. At the option of
the Company, interest is payable based on LIBOR plus 3.50% or the bank's
prime rate plus 1.00%. In February 2001, interest will be variable based
on the Company's leverage ratio and will range between LIBOR plus 1.75% to
3.00% or prime rate to prime rate plus 1.00%, at the option of the Company.
In addition, a commitment fee is payable on the unused portion of the
credit line. At April 1, 2000, the Company had approximately $1.1 million
of unused borrowing capacity under the credit agreement's most restrictive
debt covenant. Borrowings are collateralized by all tangible and
intangible assets.
Concurrent with the revolving credit agreement, the Company entered into a
$12.0 million term loan agreement that requires periodic interest payments
and a lump sum payment of principal in February 2003. Proceeds were used
to pay existing bank debt. At the option of the Company, interest is
payable based on LIBOR plus 1.00% or the bank's prime rate. Borrowings are
collateralized by all tangible and intangible assets, in addition to
certain personal guarantees. Two members of Clarion's Board of Directors
and a Clarion executive officer have guaranteed $3 million of the term debt
by each providing $1 million in standby letters of credit. Two other
individuals not related to the Company have guaranteed the remaining $9
million; one by providing a standby letter of credit for $3 million, the
-15-
other by making a $6 million cash deposit with one of the lending banks.
The Company has agreed to pay, on behalf of the guarantors providing
standby letters of credit, the 1% annual fees due under the letters of
credit plus 1% per month on the guaranteed amount. The Company is paying
the guarantor providing the cash deposit a 2% fee per month.
On February 29, 2000, in connection with the acquisition of Drake, the
Company entered into a $26.0 million term loan agreement with a variable
interest rate of LIBOR plus 3.50% or prime rate plus 1.00%, at the option
of the Company. The loan requires monthly principal payments of $250,000
through February 2001, $333,333 through February 2002, and $416,667 through
January 2003, plus interest. A final principal payment of $14.4 million
plus interest is due in February 2003. Borrowings are collateralized by
all tangible and intangible assets.
Debt covenants covering the new credit facilities require the Company to
maintain certain fixed charge coverage and leverage ratios. Other
provisions establish minimum tangible net worth and EBITDA targets, and
limit capital expenditures and Company indebtedness. There are also
restrictions on the payment of dividends.
On February 1, 2000, in connection with the acquisition of Drake, the
Company issued two promissory notes totaling $6.0 million with a fixed
interest rate of 12% that requires periodic payments of interest through
January 2005 with a balloon payment in February 2005. The Company also
issued a $135,000 non-interest-bearing promissory note that requires
periodic payments through 2002.
TAX CONSIDERATIONS
The Company has net operating loss ("NOL") carryforwards for tax purposes
that are available to offset future taxable income. However, there are
federal tax laws that restrict or eliminate NOL carryforwards when certain
changes of control occur. A 50% change of control, which is calculated
over a rolling three-year period, may cause the Company to lose some or all
of its NOL carryforward benefits. Due to the significant number of equity
transactions that have occurred in recent years the Company believes there
have been changes in control, however, the Company also believes there are
currently no restrictions that would eliminate the future cash benefits
from utilizing its NOL carryforwards. As the Company executes it strategy
of growth through acquisitions, there are likely to be more transactions in
the future involving private or public sales of equity securities. The
Company cannot make any assurances that such transactions will not result
in the loss of NOL carryforward benefits in the future due to changes in
control.
-16-
INFLATION
The Company does not believe that sales of its products are affected
materially by inflation, although there can be no assurance that inflation
will not affect sales in the future. The Company does believe that its
financial performance could be adversely affected by inflation in the
plastic resin market. The primary plastic resins used by the Company are
produced from petrochemical feedstock mostly derived from natural gas
liquids. Supply and demand cycles in the petrochemical industry, which are
often impacted by OPEC policies, can cause substantial price fluctuations.
Consequently, plastic resin prices may increase as a result of changes in
natural gas liquid prices and the capacity, supply and demand for resin and
petrochemical feedstock from which they are produced.
In many instances the Company has been able to pass through changes in the
cost of its raw materials to customers in the form of price increases.
However, there is no assurance that the Company will be able to continue
such pass throughs, or that the timing of such pass throughs will coincide
with the Company's increased costs. To the extent that increases in the
cost of plastic resin cannot be passed on to customers, or that the
duration of time lags associated with a pass through becomes significant,
such increases may have an adverse impact on gross profit margins and the
overall profitability of the Company.
YEAR 2000 READINESS DISCLOSURE
Many computer systems and software products were designed to accept only
two digits in date code fields which could result in recognizing the entry
?00? as the year 1900 rather than the year 2000. Consequently, such
computer systems and software products need to be upgraded to comply with
Year 2000 ("Y2K") requirements. Clarion had actively taken steps prior to
December 31, 1999 to insure that information technology systems, embedded
technology and material third parties were all prepared to process date-
related information in the Year 2000 without disruption.
As of the date of this filing, the Company has not experienced any Y2K-
related problems and is unaware of any future potential interruptions that
could result from Y2K readiness issues. The Company continues to monitor
its operations and transactions with customers and vendors for possible Y2K
issues.
-17-
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION
The statements contained in this document or incorporated by reference that
are not historical facts are forward-looking statements within the meaning
of the ?safe harbor? provisions of the Private Securities Litigation Reform
Act of 1995. The forward-looking statements are based on management's
current expectations or beliefs and are subject to a number of risks and
uncertainties. In particular, any statement contained herein regarding the
consummation and benefits of future acquisitions, as well as expectations
with respect to future sales, operating efficiencies, and product expansion
are subject to known and unknown risks, uncertainties and contingencies,
many of which are beyond the control of the Company, which may cause actual
results, performance or achievements to differ materially from those
described in the forward looking statements. Factors which may cause
actual results to differ materially from those contemplated by the forward-
looking statements, include, among other things: overall economic and
business conditions; the demand for the Company's goods and services;
competitive factors in the industries in which the Company competes;
increases in production or material costs that cannot be recouped in
product pricing; changes in government regulations; changes in tax
requirements (including tax rate changes, new tax laws and revised tax law
interpretations); interest rate fluctuations and other capital market
conditions; the ability to achieve anticipated synergies and other cost
savings in connection with acquisitions; and the timing, impact and other
uncertainties of future acquisitions. The Company undertakes no obligation
to update publicly any forward-looking statements, whether as a result of
new information, future events or otherwise.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not currently involved in any material lawsuits. The
Company is subject to claims and litigation in the ordinary course of its
business, but does not believe that any such claim or litigation will have
a material adverse effect on its consolidated financial position, results
of operations or cash flow.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended April 1, 2000, the Company sold options to
acquire 4,000 shares of convertible preferred stock for cash at an
aggregate price (inclusive of exercise price of $32,000). The private
offering to accredited investors only was conducted pursuant to Rule 506
promulgated under Regulation D of the Securities Act of 1933, as amended.
During the three months ended April 1, 2000, the Company issued
unregistered shares of its Common Stock in the following transactions:
-18-
In February, the Company issued 2,000,000 shares of Common Stock as
consideration for the Company's acquisition of substantially all of the
assets of Drake Products Corporation. The securities were issued pursuant
to Section 4(2) of the Act. There were no underwriters involved in the
transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the first quarter of the fiscal year covered by this report.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ------------------------------------------------- ------
10(a) Employment Agreement, dated March 23, 1999 21
between the Company and Timothy R. Kline
10(b) Employment Agreement, dated February 1, 2000 30
between the Company and Michael C. Miller
10(c) Employment Agreement, dated February 1, 2000 39
between the Company and Jeffrey W. Anonick
27 Financial Data Schedule n/a
(b) The Company filed the following report on Form 8-K during
the three months ended April 1, 2000:
March 15, 2000; pursuant to Item 2, the Company reported the
acquisition of substantially all the assets of Drake Products
Corporation. No financial statements were filed as part of this
report.
-19-
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CLARION TECHNOLOGIES, INC.
Date: May 15, 2000 /s/ David W. Selvius
-----------------------------------------
David W. Selvius, Chief Financial Officer
-20-
<EX-10>
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is dated March 23, 1999
and is effective as of the 1st day of September, 1998, by and between
CLARION PLASTICS TECHNOLOGIES, INC., an Ohio corporation ("Company") and
TIMOTHY R. KLINE ("Employee"). CLARION TECHNOLOGIES, INC., a Delaware
corporation ("Clarion"), the parent company of the Company, joins as an
additional party to this Agreement for purposes of the stock compensation
provided in Section 4 hereof.
RECITALS
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 President and Chief Operating Officer of the Company subject to
the terms and conditions set forth below.
C. The Company is a wholly-owned subsidiary of Clarion.
AGREEMENT
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 President and Chief
Operating Officer of the Company. Employee's principal duties and
responsibilities shall consist of prin1ary 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 or Chief Executive Officer 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
-21-
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 August 31,
1999, a base salary of One Hundred Eighty Thousand Dollars ($180,000) 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 Options. Effective January 1, 1999, Employee shall be granted
options to purchase an aggregate of fifty Thousand (50,000) shares of
Clarion's $.01 par value common stock ("Common Stock"), at an exercise
price of Two Dollars ($2.00) per share (the "Options"). The options shall
be issued as incentive stock options or non-qualified stock options
pursuant to the Company's 1998 Stock Option Plan.
4.3 Incentive Bonus. Employee shall be entitled to an incentive
bonus in the amount of Fifty Thousand (50,000) shares of Common Stock for
performance during the period commencing on the date of this Agreement.
The shares shall be issued to Employee effective January 1, 1999 and shall
be held in an escrow account until such time as the Company achieves net
earnings (based on four (4) consecutive fiscal quarters) of Four Million
Dollars ($4,000,000) (the "Target"). Employee acknowledges that the
Company will issue an Internal Revenue Service ("IRS") Form 1099 for 1999
for One Hundred Thousand Dollars ($100,000). Upon achieving the Target,
Clarion shall cause the shares of Common Stock to be released to Employee
for the escrow account. Employee shall forfeit all rights to the shares of
Common Stock granted hereunder in the event that Employee of the Company
-22-
terminates his employment with the Company prior to the Company's
achievement of the Target; 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.
4.4 Signing Bonus. As a one-time bonus for agreeing to enter into
this Agreement, Clarion shall issue to Employee, effective January 1, 1999,
Twenty-Five Thousand (25,000) 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 1999 for Fifty Thousand Dollars ($50,000).
4.5 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).
4.6 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.
4.7 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.
4.8 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 one (1) year
terminating on August 31, 1999 ("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;
-23-
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.
-24-
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.
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 1aw 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.
-25-
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, posses 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 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.
-26-
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 Williams, State of Ohio, 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 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 sha11 it affect the
application of such section or portion to other parties or other
circumstances. If in any judicial proceeding, a court sha11 refuse to
enforce this Agreement, whether because the time limit is too long or
-27-
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 sha11 be construed in accordance
with the laws of the State of Ohio.
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.
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.
-28-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first written above.
"Company"
CLARION PLASTICS TECHNOLOGIES, INC.,
an Ohio corporation
By: /s/ Robert W. Martin
-------------------------------------------
Robert W. Martin, Chief Financial Officer
"Employee"
/s/ Timothy R. Kline
----------------------------------------------
TIMOTHY R. KLINE
"Clarion"
CLARION TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Jack Rutherford
-------------------------------------------
Jack D. Rutherford, Chief Executive Officer
-29-
<EX-10>
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
effective this 1st day of February, 2000, by and between CLARION
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and MICHAEL C.
MILLER ("Employee").
RECITALS
A. The Company, through it operating subsidiaries, 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 a member of the executive leadership team of the Company subject
to the terms and conditions set forth below.
AGREEMENT
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 have the title of Vice Present and shall
serve as an active member of the Company's executive leadership team.
Employee's principal duties and responsibilities shall be assigned to
Employee from time to time by the Company's Board of Directors, Chief
Executive Officer or President. 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 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.
-30-
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 the
fifth anniversary hereof, a base salary of Two Hundred Thousand Dollars
($200,000) per annum. The base salary shall be 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 Bonus. Employee shall also be entitled to receive from the
date of this Agreement through the fifth anniversary hereof, a guaranteed
minimum bonus of Eighty Seven Thousand Five Hundred Dollars ($87,500) per
annum. The guaranteed minimum bonus shall be paid in four (4) quarterly
installments of Twenty One Thousand Eight Hundred Seventy Five Dollars
($21,875). The guaranteed minimum bonus 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.
4.3 Stock Options. Employee shall be granted as of the effective
date hereof, options to purchase 150,000 shares of the Company's common
stock, $.001 par value ("Common Stock"), pursuant to a stock option
agreement in the form attached hereto as Exhibit "A." The options shall be
granted under the Company's 1998 Stock Option Plan.
4.4 Medical and Dental Insurance, Vacation. Throughout the term
of Employee's employment under this Agreement, Employee, Employee's spouse
and Employee's children shall be entitled to receive Company paid medical
insurance and dental insurance. Employee shall be entitled to four 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 participation in the 401(k) plan maintained by the Company.
4.7 Automobile Allowance. Employee shall also be entitled to One
Thousand Dollars ($1,000) per month as an automobile allowance.
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4.8 Cellular Telephone. Employee shall also be entitled to
reasonable expenses associated with Employees use of one (1) cellular
telephone in performing his services hereunder which shall be reimbursed by
the Company.
4.9 Other Fringe Benefits. Employee shall also be entitled to all
other employee benefits generally provided by the Company.
5. Term and Terms of Employment.
5.1 Term and Terms of Employment. The Company hereby employs
Employee, and Employee hereby accepts employment with the Company, for a
period of five (5) years terminating on February __, 2005 ("Term").
Notwithstanding anything in this Section 5.1 to the contrary, this
Agreement may be terminated at any time in accordance with Section 6.
5.2 Covenants of the Company. During the period of Employee's
employment with the Company, the Company will not do any of the following:
A. Relocate Employee's principal place of employment to any
location more than seventy-five (75) miles from the Employee's principal
place of employment on the date on which this Agreement becomes effective;
or
B. Detrimentally alter Employee's position, reporting,
responsibilities and duties, once the same are established pursuant to
Section 2 hereof, without the consent of Employee, which consent shall not
be unreasonably withheld.
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 a felony;
B. The commission by Employee of any act of fraud or
willful or reckless 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, other
than the restrictions set forth in Sections 7, 8 or 9 of this Agreement, or
the willful 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 however, that such
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failure or breach shall not have been cured within ten (10) days after
Employee is given specific notice and an opportunity to cure such failure
or breach;
D. Any material breach by Employee of any of the
restrictions set forth in Sections 7, 8 or 9 of this Agreement; and
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).
Reasons 6.1(A) through 6.1(D) are for "Cause." Reason 6.1(E) is for
"Disability."
6.2 By the Company Without Cause. After the third anniversary of
this Agreement, 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
(i) continue to receive all base salary (as set forth in Section 43.1) and
bonuses (as set forth in Section 4.2) (less any sums which Employee
receives from disability insurance maintained by the Company and less any
sums which Employee receives from life insurance maintained by the Company)
for a period which is the greater of (a) six (6) months following
termination, and (b) the period (if any) commencing on the date of
termination and ending on the third anniversary hereof. 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 shall constitute an "Event of Default" under Section
7(ii) of that Subordinated Promissory Note (the "Promissory Note") made on
even date herewith by Clarion-Drake Acquisition, Inc., a wholly-owned
subsidiary of the Company, in favor of Drake Products Corporation.
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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 shall terminate that certain Registration and
Lock-Up Agreement between the Company and Drake Products Corporation of
even date herewith, pursuant to Section 5.11 of such Registration and Lock-
Up Agreement. Notwithstanding the foregoing, if neither Clarion-Drake
Acquisition, Inc. nor the Company are able to pay the amount due under the
Promissory Note following an Event of Default under the Promissory Note
which results from a termination of this Agreement, then Employee shall be
entitled to receive all base salary and bonuses for the Term of this
Agreement.
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; Non-Competition.
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.
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7.3 Non-Competition. Employee agrees that he will not render
services for any organization or engage directly or indirectly in any
business (including, but not limited to, plastics injection molding) that
is or, during the period of Employee's employment, becomes competitive with
the Company or any parent corporation of the Company, any subsidiary
corporation of the Company or any entity controlling, controlled by, or
under common control with the Company (an "Affiliated Entity"), or which
organization or business, or the rendering of services to such organization
or business, is or becomes otherwise prejudicial to or in conflict with the
business or interests of the Company or any Affiliated Entity, either (a)
during the Term of this Agreement, regardless of whether Employee remains
employed with the Company or any Affiliated Entity, or (b) for a period of
three (3) years after termination of Employee's employment with the Company
or any Affiliated Entity, whichever is longer. Ownership, for personal
investment purposes only, of less than one percent (1%) of the voting stock
of any publicly traded corporation shall not constitute a violation hereof.
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 provisions of Sections 7, 8 and 9 of
this Agreement (which shall survive the termination of this Agreement in
-35-
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 Kent, State of Michigan, 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
-36-
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.
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 Michigan.
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
-37-
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. In the event of the sale, merger or consolidation
of the Company, the Company will require any successor to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such sale,
merger or consolidation had occurred.
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: /s/ David Selvius
-----------------------------------------
David W. Selvius, Chief Financial Officer
"Employee"
/s/ Michael C. Miller
-----------------------------------------
Michael Miller
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<EX-10>
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
effective this 1st day of February, 2000, by and between CLARION
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and JEFFREY W.
ANONICK ("Employee").
RECITALS
A. The Company, through it operating subsidiaries, 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 a member of the executive leadership team of the Company subject
to the terms and conditions set forth below.
AGREEMENT
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 have the title of Vice Present and shall
serve as an active member of the Company's executive leadership team.
Employee's principal duties and responsibilities shall be assigned to
Employee from time to time by the Company's Board of Directors, Chief
Executive Officer or President. 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 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.
-39-
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 the
fifth anniversary hereof, a base salary of Two Hundred Thousand Dollars
($200,000) per annum. The base salary shall be 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 Bonus. Employee shall also be entitled to receive from the
date of this Agreement through the fifth anniversary hereof, a guaranteed
minimum bonus of Eighty Seven Thousand Five Hundred Dollars ($87,500) per
annum. The guaranteed minimum bonus shall be paid in four (4) quarterly
installments of Twenty One Thousand Eight Hundred Seventy Five Dollars
($21,875). The guaranteed minimum bonus 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.
4.3 Stock Options. Employee shall be granted as of the effective
date hereof, options to purchase 150,000 shares of the Company's common
stock, $.001 par value ("Common Stock"), pursuant to a stock option
agreement in the form attached hereto as Exhibit "A." The options shall be
granted under the Company's 1998 Stock Option Plan.
4.4 Medical and Dental Insurance, Vacation. Throughout the term
of Employee's employment under this Agreement, Employee, Employee's spouse
and Employee's children shall be entitled to receive Company paid medical
insurance and dental insurance. Employee shall be entitled to four 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 participation in the 401(k) plan maintained by the Company.
4.7 Automobile Allowance. Employee shall also be entitled to One
Thousand Dollars ($1,000) per month as an automobile allowance.
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4.8 Cellular Telephone. Employee shall also be entitled to
reasonable expenses associated with Employees use of one (1) cellular
telephone in performing his services hereunder which shall be reimbursed by
the Company.
4.9 Other Fringe Benefits. Employee shall also be entitled to all
other employee benefits generally provided by the Company.
5. Term and Terms of Employment.
5.1 Term and Terms of Employment. The Company hereby employs
Employee, and Employee hereby accepts employment with the Company, for a
period of five (5) years terminating on February __, 2005 ("Term").
Notwithstanding anything in this Section 5.1 to the contrary, this
Agreement may be terminated at any time in accordance with Section 6.
5.2 Covenants of the Company. During the period of Employee's
employment with the Company, the Company will not do any of the following:
A. Relocate Employee's principal place of employment to any
location more than seventy-five (75) miles from the Employee's principal
place of employment on the date on which this Agreement becomes effective;
or
B. Detrimentally alter Employee's position, reporting,
responsibilities and duties, once the same are established pursuant to
Section 2 hereof, without the consent of Employee, which consent shall not
be unreasonably withheld.
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 a felony;
B. The commission by Employee of any act of fraud or
willful or reckless 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, other
than the restrictions set forth in Sections 7, 8 or 9 of this Agreement, or
the willful 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 however, that such
-41-
failure or breach shall not have been cured within ten (10) days after
Employee is given specific notice and an opportunity to cure such failure
or breach;
D. Any material breach by Employee of any of the
restrictions set forth in Sections 7, 8 or 9 of this Agreement; and
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).
Reasons 6.1(A) through 6.1(D) are for "Cause." Reason 6.1(E) is for
"Disability."
6.2 By the Company Without Cause. After the third anniversary of
this Agreement, 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
(i) continue to receive all base salary (as set forth in Section 43.1) and
bonuses (as set forth in Section 4.2) (less any sums which Employee
receives from disability insurance maintained by the Company and less any
sums which Employee receives from life insurance maintained by the Company)
for a period which is the greater of (a) six (6) months following
termination, and (b) the period (if any) commencing on the date of
termination and ending on the third anniversary hereof. 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 shall constitute an "Event of Default" under Section
7(ii) of that Subordinated Promissory Note (the "Promissory Note") made on
even date herewith by Clarion-Drake Acquisition, Inc., a wholly-owned
subsidiary of the Company, in favor of Drake Products Corporation.
-42-
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 shall terminate that certain Registration and
Lock-Up Agreement between the Company and Drake Products Corporation of
even date herewith, pursuant to Section 5.11 of such Registration and Lock-
Up Agreement. Notwithstanding the foregoing, if neither Clarion-Drake
Acquisition, Inc. nor the Company are able to pay the amount due under the
Promissory Note following an Event of Default under the Promissory Note
which results from a termination of this Agreement, then Employee shall be
entitled to receive all base salary and bonuses for the Term of this
Agreement.
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; Non-Competition.
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.
-43-
7.3 Non-Competition. Employee agrees that he will not render
services for any organization or engage directly or indirectly in any
business (including, but not limited to, plastics injection molding) that
is or, during the period of Employee's employment, becomes competitive with
the Company or any parent corporation of the Company, any subsidiary
corporation of the Company or any entity controlling, controlled by, or
under common control with the Company (an "Affiliated Entity"), or which
organization or business, or the rendering of services to such organization
or business, is or becomes otherwise prejudicial to or in conflict with the
business or interests of the Company or any Affiliated Entity, either (a)
during the Term of this Agreement, regardless of whether Employee remains
employed with the Company or any Affiliated Entity, or (b) for a period of
three (3) years after termination of Employee's employment with the Company
or any Affiliated Entity, whichever is longer. Ownership, for personal
investment purposes only, of less than one percent (1%) of the voting stock
of any publicly traded corporation shall not constitute a violation hereof.
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 provisions of Sections 7, 8 and 9 of
this Agreement (which shall survive the termination of this Agreement in
-44-
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 Kent, State of Michigan, 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
-45-
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.
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 Michigan.
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
-46-
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. In the event of the sale, merger or consolidation
of the Company, the Company will require any successor to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such sale,
merger or consolidation had occurred.
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: /s/ David Selvius
-----------------------------------------
David W. Selvius, Chief Financial Officer
"Employee"
/s/ Jeffrey Anonick
-----------------------------------------
Jeffrey W. Anonick
-47-
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