SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 (NO FEE REQUIRED) For the transition period
from _________ to __________
Commission file number 0-22978
STIMSONITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3718658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification Number)
7542 N. Natchez Avenue
Niles, Illinois 60714
(Address of principal executive offices) (Zip Code)
(847) 647-7717
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of April 30, 1997 was 8,578,927.
<PAGE>
STIMSONITE CORPORATION
Index
Page
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4-5
Condensed Consolidated Statement of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
------------------------- -----------------------------
3/30/97 3/31/96 3/30/97 3/31/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $14,602 $13,425 $83,889 $73,633
Cost of goods sold 10,338 9,030 57,143 45,777
----------- ----------- ----------- -----------
Gross profit 4,264 4,395 26,746 27,856
Operating expenses:
Selling and administrative 3,524 3,845 14,939 14,299
Research and development 645 792 2,653 3,131
Amortization of intangibles 711 709 2,848 2,827
Restructuring charge -- -- 4,000 --
----------- ----------- ----------- -----------
Total operating expenses 4,880 5,346 24,440 20,257
----------- ----------- ----------- -----------
Operating income (loss) (616) (951) 2,306 7,599
Interest expense 578 674 2,584 2,758
Joint venture partnership loss -- -- -- 111
----------- ----------- ----------- -----------
Income (loss) before provision for income
taxes and extraordinary item (1,194) (1,625) (278) 4,730
Provision (benefit) for income taxes (418) (633) 22 2,131
----------- ----------- ----------- -----------
Income (loss) before extraordinary item (776) (992) (300) 2,599
Extraordinary item, net of tax benefit -- -- 332 --
----------- ----------- ----------- -----------
Net income (loss) ($776) ($992) ($632) $2,599
=========== =========== =========== ===========
Net income (loss) per common and common
equivalent share ($0.09) ($0.11) ($0.07) $0.29
=========== =========== =========== ===========
Average number of common and
common equivalent shares outstanding 8,777,372 9,033,201 8,910,866 9,097,701
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
3/30/97 12/31/96
------- --------
(Unaudited) (Audited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $178 $227
Trade accounts receivable, less
allowance for doubtful accounts
of $809 (1997) and $1,206 (1996) 16,289 17,130
Inventories 11,812 11,938
Prepaid expenses and other 4,407 3,157
Deferred tax assets 1,670 1,670
----------- -----------
Total current assets 34,356 34,122
Property, plant and equipment, net 18,522 18,907
Intangible assets, net 13,604 14,373
Deferred financing costs, net 272 287
Long-term deferred tax assets and other 3,990 4,181
----------- -----------
Total Assets $70,744 $71,870
=========== ===========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
3/30/97 12/31/96
------- --------
(Unaudited) (Audited)
LIABILITIES
-----------
<S> <C> <C>
Current liabilities:
Accounts payable $11,161 $11,334
Current maturities of long-term debt 2,500 2,500
Other accrued expenses 4,957 4,435
----------- -----------
Total current liabilities 18,618 18,269
Accrued post-retirement benefits 631 631
Long-term debt 28,225 28,300
----------- -----------
Total liabilities 47,474 47,200
STOCKHOLDERS' EQUITY
--------------------
Total stockholders' equity 23,270 24,670
----------- -----------
Total Liabilities and
Stockholders' Equity $70,744 $71,870
=========== ===========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousand)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
----------------------- ----------------------
3/30/97 3/31/96 3/30/97 3/31/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(776) $(992) $(632) $2,599
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 850 759 3,257 2,830
Amortization of intangibles, deferred financing
costs and discount on long-term debt 984 832 3,276 3,298
Provision for uncollectible accounts - - 311 303
Deferred income taxes - - (1,993) (1,204)
Extraordinary item - - 332 -
Joint venture partnership loss - - - 111
Restructuring charge - - 4,000 -
Changes in assets and liabilities:
Trade account receivables 841 4,362 (2,818) 2,618
Inventories 126 (1,592) 4,628 (3,676)
Prepaid expenses and other (1,243) (184) (3,295) (139)
Accounts payable 214 (1,487) 6,599 (3,451)
Other accrued expenses - 47 - (52)
Accrued employee benefits 127 471 (328) 212
Accrued warranty 32 78 353 188
Accrued income taxes - (689) (838) 522
--------- ------------ ------------ ------------
Net cash provided by (used in) operating activities 1,155 1,605 12,852 4,159
--------- ------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (465) (969) (8,890) (4,186)
Acquisition of Pave-Mark - - - (7,961)
Investment in joint venture partnership - (19) 19 (100)
Other - - - (100)
--------- ------------ ------------ ------------
Net cash used in investing activities (465) (988) (8,871) (12,347)
--------- ------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from the issuance of common stock 5 45 263 160
Payment to reacquire common stock (542) (298) (1,551) (792)
Principal payments under capital lease obligations (40) - (74) -
Payments on notes receivable on common stock - - - 31
Proceeds from long-term debt 1,300 450 38,150 11,250
Payments on long-term debt (1,375) (515) (41,014) (2,833)
Cash overdraft - - - 926
Financing fees paid in connection with debt refinancing - - (332) (151)
--------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities (652) (318) (4,558) 8,591
Effect of exchange rate changes on cash (87) (207) 412 (256)
--------- ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (49) 92 (165) 147
Cash and cash equivalents, beginning of period 227 251 343 196
--------- ------------ ------------ ------------
Cash and cash equivalents, end of period $178 $343 $178 $343
========= ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $527 $571 $2,766 $2,366
========= ============ ============ ============
Cash paid during the period for income taxes $134 $155 $2,859 $2,984
========= ============ ============ ============
Capital lease for property plant & equipment - - 724 -
========= ============ ============ ============
Property plant & equipment purchases
included in accounts payable 1,409 - 1,409 -
========= ============ ============ ============
</TABLE>
See Accompanying Notes
<PAGE>
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
Note 1 - Financial Information
The condensed consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to or as permitted by such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, the financial information presented reflects all adjustments that
are necessary to a fair statement of results for the interim period presented.
Such adjustments are of a normal recurring nature. These financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K").
The Company's business is highly seasonal and accordingly comparative trailing
full year information is provided. The financial information included herein at
March 30, 1997 and for the periods ended March 30, 1997 and March 31, 1996 is
unaudited and, in the opinion of the Company, reflects all adjustments (which
include normal recurring adjustments) necessary for the fair presentation of the
Company's financial position as of that date and results of operations for those
periods. The information in the condensed consolidated balance sheet at December
31, 1996 was derived from the Company's consolidated financial statements
included in the 1996 Form 10-K.
The results for the quarter ended March 30, 1997 are not necessarily indicative
of results that can be expected for the fiscal year ending December 31, 1997.
Note 2 - Inventories
Inventories consist of the following:
3/31/97 12/31/96
------- --------
(Unaudited) (Audited)
Raw materials $3,697 $3,772
Work in process 2,301 1,601
Finished goods 5,814 6,565
------- -------
$11,812 $11,938
======= =======
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion and analysis of the consolidated financial
condition and results of operations of the Company for the quarters and years
ended March 30, 1997 and March 31, 1996. The following should be read in
conjunction with the condensed consolidated financial statements and related
notes appearing elsewhere herein and the consolidated financial statements and
related notes contained in the 1996 Form 10-K.
The Company manufactures and markets reflective highway safety products used in
a variety of applications where motorist guidance is important.
Seasonality and Quarterly Results
The Company's sales are seasonal. The domestic highway maintenance and
construction season tends to reach its peak in the second and third quarters of
the year, and domestic sales of the Company's products are generally highest in
these quarters. While international sales are also seasonal, international
maintenance and construction seasons vary from the domestic season and tend to
offset somewhat the seasonality of domestic sales. International sales
constituted 16.9% and 18.0% of net sales in the first quarters of 1997 and 1996,
respectively, and 12.5% of net sales in the year ended December 31, 1996.
Because the Company operates with little backlog, sales in any given quarter
generally result from orders booked and shipped in that quarter. Accordingly,
net sales and operating income are particularly sensitive to the timing of
domestic market demand and tend to be highest in the second and third quarters,
whereas net sales and operating income tend to be reduced during the first and
fourth quarters, resulting in either operating losses or reduced earnings for
those periods. In addition, the Company's performance in any given quarter is
further affected by weather anomalies.
The Company's sales are dependent on the ability and willingness of the federal
and state governments to fund highway construction projects. Such sales may be
affected by real or perceived uncertainty concerning the level of government
funding for highway construction projects.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
sales of certain items in the Company's condensed consolidated statement of
operations and the percentage change in each item from the prior comparable
period.
<PAGE>
<TABLE>
<CAPTION>
Percentage of Percentage Percentage of Percentage
Net Sales Change from Net Sales Change from
Quarter Ended Prior Year Ended Prior
3/30/97 3/31/96 Period 3/30/97 3/31/96 Period
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 8.8% 100.0% 100.0% 13.9%
Cost of goods sold 70.8 67.3 14.5 68.1 62.2 24.8
Gross profit 29.2 32.7 (3.0) 31.9 37.8 (4.0)
Selling and administrative 24.1 28.6 (8.3) 17.8 19.4 4.5
Research and development 4.4 5.9 (18.6) 3.2 4.3 (15.3)
Amortization of intangibles 4.9 5.3 0.3 3.4 3.8 0.7
Restructuring charge - - NA 4.8 - NA
Operating income (loss) (4.2) (7.1) 35.2 2.7 10.3 (69.7)
Interest expense 4.0 5.0 (14.2) 3.1 3.7 (6.3)
Joint venture partnership loss - - NA - 0.2 NA
Income (loss) before provision (8.2) (12.1) 26.5 (0.3) 6.4 NA
for income taxes and
extraordinary item
Extraordinary item, net of tax - - NA 0.4 - NA
benefit
Net income (loss) (5.3) (7.4) 21.8 (0.8) 3.5 NA
</TABLE>
Quarter Ended March 30, 1997
Compared to
Quarter Ended March 31, 1996
Net sales of $14.6 million for the quarter ended March 30, 1997 increased $1.2
million or 8.8% over the comparable fiscal 1996 quarter. Net sales of domestic
highway delineation products increased 11% compared with the first quarter of
1996. Optical film domestic revenues increased 9% while international sales
increased by 2% compared to the first quarter of 1996.
Cost of goods sold for the first quarter of 1997 totaled $10.3 million compared
to $9.0 million for the 1996 period. As a percentage of net sales, costs of
goods sold increased from 67.3% in the first quarter of 1996 to 70.8% in 1997.
The related 3.5% decline in gross profit was largely attributable to a sales mix
which favored lower margin products, including thermoplastic products, and to
under-utilization of the Company's manufacturing capacity resulting from
on-going efforts to reduce inventory levels. The thermoplastic business consists
mostly of commodity products and has historically generated a substantially
lower gross margin than Stimsonite's other products.
Selling and administrative expenses for the first quarter of 1997 were $3.5
million, a decrease of $0.3 million from the first quarter of 1996. As a
percentage of net sales, selling and administrative expenses were 24.1% in the
first quarter of 1997 compared to 28.6% in the first quarter of 1996. The
decrease was attributable to cost-cutting measures put in place at the end of
1996.
Research and development expenses for the first quarter of 1997 were $0.6
million compared to $0.8 million in the first quarter of 1996. The decrease was
attributable to cost-cutting measures put in place at the end of 1996. As a
percentage of net sales, research and development expenses were 4.4% in the 1997
period compared to 5.9% in the 1996 period. Management believes current levels
of R&D expenditures will not have a material adverse effect on the Company.
Interest expense was $0.6 million in the first quarter of 1997 a decrease of
$0.1 million compared to the comparable 1996 period, principally due to lower
interest rates associated with the Company's current credit agreement compared
to its former credit agreement.
Year Ended March 30, 1997
Compared to
Year Ended March 31, 1996
Net sales for the year ended March 30, 1997 were $83.9 million, an increase of
$10.3 million or 13.9% primarily as a result of the acquisition of the Company's
thermoplastic business in May 1995. Excluding the Company's thermoplastic, net
sales increased $0.2 million or 0.3%.
Cost of goods sold for the year ended March 30, 1997 totaled $57.1 million
compared to $45.8 million for the year ended March 31, 1996. The 24.8% increase
was primarily related to a sales mix that favored lower-margin products,
particularly thermoplastic products. Excluding the effect of the thermoplastic
acquisition, cost of goods sold was $29.3 million for the year ended March 30,
1997 compared to $28.6 million for the year ended March 31, 1996.
Selling and administrative expenses for the year ended March 30, 1997 totaled
$14.9 million, an increase of $0.6 million or 4.5% compared to a year earlier.
The increase was principally a result of the acquisition. Excluding the effect
of the acquisition, selling and administrative expenses were $11.4 million for
the year ended March 30, 1997 compared to $11.5 million for the 1996 period.
Research and development expenses for the year ended March 30, 1997 were $2.7
million compared to $3.1 million a year earlier. Expenses were lower for the
year ended March 30, 1997 due to cost-cutting measures put in place at the end
of 1996. As a percentage of net sales, research and development expenses were
3.2% for the year ended March 30, 1997 compared to 4.3% for a year earlier.
Restructuring charge - The Company incurred a $4.0 million restructuring charge
in the fourth quarter of fiscal year 1996 and is described in the 1996 form 10K
under the caption "management discussion and analysis of financial condition and
results of operations - year ended December 31, 1996 compared to year ended
December 31, 1995 - restructuring charge."
Interest expense for the year ended March 30, 1997 was $2.6 million, a decrease
of $0.2 million or 6.3% compared to a year earlier. The decrease was principally
due to lower interest rates associated with the Company's current credit
agreement compared to its former credit agreement.
Liquidity and Capital Resources
- -------------------------------
The Company finances working capital requirements and capital expenditures
through internally generated funds, revolving credit and working capital
requirements and capital borrowings. During the quarter ended March 30, 1997,
the Company repaid $0.1 million more of bank debt than it borrowed, as the
result of minimal changes in working capital requirements.
The Company's sales are highly seasonal, with domestic revenues tending to be
highest in the second and third quarter of the year consistent with the domestic
highway maintenance and construction season. The Company builds working capital,
principally accounts receivable and inventory, during the second and third
quarters to support sales. Positive cash flow from operations is generally
realized in the third quarter as cash collections are higher than production
levels and in the fourth quarter of the year as production and related
expenditures seasonally decline and accounts receivable are collected.
Conversely, the Company generally experiences negative cash flow in the first
quarter, when sales are lower, and in the second quarter, when the Company is
building working capital but has not yet collected revenues from second quarter
sales. The Company has historically borrowed funds available under its revolving
credit facilities to fund working capital during these quarters. As a result of
seasonal fluctuations and lower than expected working capital needs, the Company
realized $1.2 million from operating activities in the first quarter of 1997 and
$1.6 million from operating activities in the first quarter of 1996. The Company
realized $12.9 million from operating activities in the year ended March 30,
1997, compared to $4.2 million from operating activities in the year ended March
31, 1996. The $8.7 million increase in cash flow from operating activities
resulted largely from $3.2 million in lower operating income offset by a $4.0
million non-cash restructuring charge and $8.0 million in net changes in current
assets and liabilities.
At March 30, 1997, the Company's outstanding borrowings under its credit
agreement consisted of $23.8 million of term loans and $7.0 million of revolving
loans. During the balance of 1997, $1.9 million of term loans become due, and an
additional $2.5 million of term loans become due during 1998. At March 30, 1997,
the additional amount available under the revolving portion of the Company's
credit agreement after consideration of all borrowing base limitations and
outstanding loans was $13.0 million.
The Company expects capital expenditure spending for additions and replacements
to approximate $4.0 million in 1997 and $4.0 million in 1998, with funding to be
provided principally from internally generated funds.
Adoption of new accounting standards
- -----------------------------------------
Effective for periods ending after December 15, 1997, the Company is required to
adopt SFAS 128 (Statement of Financial Accounting Standards No. 128 "Earnings
Per Share"). SFAS 128 requires companies is to calculate basic and diluted
earnings per share based upon standards designed to provide consistency and
compatibility with calculations of other countries and with that of the
International Accounting Standards Committee. The Company does not expect
earnings per share as reported to be materially different than basic or diluted
earnings per share to be reported upon adoption of the new accounting standard.
The Company currently uses the major portion of its manufacturing capacity but
has determined that the capacity is adequate for 1997. The Company expects to
expand capacity in 1998. The Company is currently in negotiations to lease or
buy additional space in the Niles, IL area. However, there can be no assurance
that these negotiations will be successful.
In October 1995, the board of directors authorized the repurchase of up to
500,000 shares of the Company's common stock. Through March 30, 1997, the
Company had purchased 326,000 shares of its common stock at an average price of
$7.19 per share. Completion of this stock repurchase program is permitted under
the Company's credit agreement, subject to continued compliance with various
financial covenants.
The Company expects that cash flow from operations and borrowings under the
credit facility will be sufficient to fund working capital needs, capital
expenditures and mandatory principal payments under the credit facility through
1998.
From time to time, the Company considers possible acquisitions of businesses
complimentary to the Company's business. It is likely that any significant
acquisition would be funded with additional long term debt.
This Form 10-Q contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs and future financial performance and
assumptions underlying the foregoing related to product demand, ability to meet
short and long term debt requirements, expected cash flow from operations, and
projected capital spending levels. The actual results or outcomes could differ
materially from those discussed in the particular forward looking statements
based on a number of factors, including; (i) changes in economic conditions;
(ii) pricing and other actions taken by competitors; (iii) government funding
(or perceptions regarding such funding) of highway construction projects; and
(iv) the Company's ability to develop and protect its proprietary technology and
to react to increased competition resulting from expiring patents.
<PAGE>
Part II - Other Information
---------------------------
Item 6 - Exhibits and Reports of Form 8-K
(A) Exhibits
10.1 Employment agreement dated as of March 22, 1997 between
the Company and Robert E. Stutz
10.2 Non-qualified stock option agreement dated as of March 22, 1997
between Robert E. Stutz and the Company
10.3 Stimsonite Corporation Executive Officers
1997 Incentive Compensation Plan
11.1 Statement Regarding Computation of Per Share Earnings.
27.1 Financial Data Schedule
(B) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March 31,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
Dated May 14, 1997 STIMSONITE CORPORATION
/s/THOMAS C. RATCHFORD
----------------------
Thomas C. Ratchford
Vice President-Finance, Treasurer,
Secretary and Chief Financial Officer
(Its Duly Authorized Officer and
Principal Financial and Accounting Officer)
<PAGE>
Exhibit Index
-------------
Exhibit
Number Description
- ------ -----------
10.1 Employment agreement dated as of March 22, 1997 between
the Company and Robert E. Stutz
10.2 Non-qualified stock option agreement dated as of March 22, 1997
between Robert E. Stutz and the Company
10.3 Stimsonite Corporation Executive Officers
1997 Incentive Compensation Plan
11.1 Statement Regarding Computation of Per Share Earnings
27.1 Financial Data Schedule
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of this 22nd day of March, 1997, between Stimsonite Corporation,
a Delaware corporation (the "Company"), and Robert E. Stutz (the "Executive").
WHEREAS, the Company expects that the future growth,
profitability and success of the Company's business will be substantially and
materially advanced by the employment of the Executive by the Company;
WHEREAS, the Company desires to secure for itself and its
subsidiaries the benefit of the Executive's background, experience, ability,
expertise and industry; and
WHEREAS, the Company desires to employ the Executive, and
the Executive has indicated his willingness to provide his services, on the
terms and conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth in this Agreement.
2. Term. Subject to the provisions and conditions of this
Agreement, Executive's employment hereunder shall commence on March 22, 1997
(the "Commencement Date") and, unless otherwise terminated pursuant to the terms
hereof, shall expire two years from such date (the "Expiration Date"); provided,
however, that the term of this Agreement will, on each Expiration Date,
automatically be extended for an additional one-year period unless, no later
than sixty (60) days prior to each Expiration Date, the Company or the Executive
shall have given written notice that it or the Executive, as the case may be,
does not wish to have the term of this Agreement extended (hereinafter referred
to as the "Employment Term").
3. Compensation.
(a) As compensation for the performance of Executive's
services hereunder, the Company shall pay to the Executive (i) a salary (the
"Regular Base Salary") of $225,000 per annum or such greater amount as may be
determined by the Board of Directors of the Company (the "Board of Directors")
and (ii) an annual bonus (the "Bonus"), payable in accordance with the Company's
payroll policy and the Company's annual incentive compensation plan,
respectively, as of the date of this Agreement, as the same may be modified or
replaced by the Company from time to time. The Board of Directors will review
the amount of the Regular Base Salary on an annual basis. Executive's Bonus with
respect to 1997 performance shall not be less than $100,000.
(b) During the Employment Term, the Executive shall be
entitled to receive (i) a car allowance not to exceed $900 per month payable in
accordance with the Company's payroll policy, as the same may be modified or
replaced by the Company from time to time, and (ii) such other benefits and
conditions of employment, including, without limitation, participation in such
group health, life, retirement, disability and dental benefit plans provided by
the Company (such benefits collectively, the "Welfare Benefits"), and such paid
vacation, as are afforded from time to time hereafter to the other executive
officers of the Company. Executive shall be entitled during the Employment Term
to four weeks annual paid vacation until the fifth anniversary of the
Commencement Date and to five weeks annual paid vacation thereafter.
(c) Executive will be entitled to receive the stock
options described in Section 10.
4. Position and Duties. Subject to the terms and conditions
contained herein, the Executive shall serve as the President and Chief Executive
Officer of the Company and, in such capacity, shall provide such services and
perform such functions, consistent with the nature of such position, as shall be
determined from time to time by, or pursuant to authority of, the Board of
Directors. If elected or appointed, the Executive shall also serve as a director
or officer of any of the Company, its subsidiaries or affiliated companies,
without further compensation. The Board of Directors will, effective as of the
Commencement Date or as soon as practicable thereafter, appoint the Executive to
fill the vacancy on the Board of Directors existing as of the date of this
Agreement to serve the remainder of the term of such directorship, which
terminates at the next annual meeting of the Company's stockholders. The Board
of Directors will nominate the Executive for election as a director at each
annual meeting of the Company's stockholders held during the Employment Term.
Notwithstanding the preceding two sentences, nothing contained herein shall be
construed as limiting any rights of the Company's stockholders to elect and
remove members of the Board of Directors. The Executive understands and agrees
that he may be required to undertake normal business travel from time to time.
5. Exclusivity. During the Employment Term, the Executive
shall devote his working hours to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Board of
Directors which are not otherwise prohibited by this Agreement, shall use his
best efforts to promote and serve the interests of the Company and shall not
engage in any other business or commercial activity for compensation; provided,
however, that nothing in this Agreement shall be deemed to prevent the Executive
from investing his personal assets, or the assets of his immediate family or any
trust for the benefit of Executive or his immediate family; provided, further,
that with respect to businesses that compete with the Company's business, (i)
his participation, or that of his immediate family or such trust, is solely that
of a passive investor owning no more than 1% of any class of such company's
publicly traded outstanding debt or equity securities and (ii) such activities
do not contravene the provisions of Section 8 hereof.
6. Reimbursement for Expenses. Upon the presentation of
itemized vouchers, the Company shall reimburse the Executive for travel, meals,
entertainment and other expenses reasonably incurred by the Executive in the
performance of his duties under this Agreement in accordance with the Company's
expense reimbursement policy as the same may be modified by the Company from
time to time.
7. Termination.
(a) After an occurrence of an event within the
definition of Cause (as defined in this Section 7(a)), the Company shall be
entitled to terminate this Agreement (other than Sections 8 and 9 hereof unless
otherwise specified by the Company) and the employment relationship established
hereby immediately upon the giving of written notice to the Executive of such
termination specifying the grounds therefor. After the effective date of
termination under this Section 7(a), the Company shall not be obligated to make
any further payments under this Agreement, except for amounts due the Executive
hereunder as of such effective date. "Cause" means any of the following events
which the Board of Directors has determined, in good faith, has occurred and
which has not been remedied (to the fullest extent possible) by the Executive
within ten (10) days after notice thereof by the Company: (i) Executive's
continual or deliberate neglect of the performance of his material duties; (ii)
Executive's failure to devote substantially all of his working time to the
business of the Company and its subsidiaries; (iii) Executive's engaging
willfully in misconduct in connection with the performance of any of his duties,
including, without limitation, the misappropriation of funds or securing or
attempting to secure personally any profit in connection with any transaction
entered into on behalf of the Company or its subsidiaries; (iv) Executive's
willful breach of any confidentiality or nondisclosure agreements with the
Company (including this Agreement) or Executive's violation, in any material
respect, of any code or standard of behavior generally applicable to employees
or executive employees of the Company; (v) Executive's active disloyalty to the
Company, including, without limitation, willfully aiding a competitor or
improperly disclosing confidential information; or (vi) Executive's engaging in
conduct which may reasonably result in material injury to the reputation of the
Company, including commission of a felony, embezzlement, bankruptcy, insolvency,
or general assignment for the benefit of creditors.
(b) In the event that the Executive resigns, or the
Executive gives notice pursuant to Section 2 that he does not wish to have the
term of this Agreement extended as provided therein (other than for reasons that
would entitle the Executive to terminate his employment pursuant to Section
7(d)), this Agreement, other than Sections 8 and 9 hereof, and the employment
relationship established hereby shall terminate immediately upon the receipt by
the Company of notice of the Executive's resignation. After the effective date
of termination under this subsection (b), the Company shall not be obligated to
make any further payments under this Agreement, except for amounts due the
Executive hereunder as of such effective date.
(c) In the event that the Executive dies, Retires (as
hereinafter defined) or becomes Disabled (as hereinafter defined) during the
term of this Agreement, this Agreement, other than Sections 8 and 9, and the
employment relationship established hereby shall terminate immediately upon the
date on which the Executive dies, Retires or becomes Disabled, as the case may
be. After the effective date of termination under this Section 7(c), the Company
shall not be obligated to make any further payments under this Agreement to the
Executive or the Executive's heirs, executors, administrators or legal
representatives, as the case may be, except for amounts due the Executive
hereunder as of such effective date, including any amounts or benefits to which
the Executive may be entitled under the terms of any employee benefit plan of
the Company, as in effect on the effective date of such termination. For
purposes of this Section 7(c) "Retires" shall mean the voluntary termination of
employment by the Executive after the Executive attains age 65 and "Disabled"
shall mean, as of any date, the permanent disability of the Executive in
accordance with the then applicable provisions of the disability benefit program
of the Company generally available to executive employees of the Company.
(d) In the event that the Company elects to terminate
the full time employment of the Executive during the Employment Term (other than
as a result of circumstances described in subsections (a), (b) and (c) of this
Section 7), or if the Executive resigns from his employment hereunder following
a Substantial Breach, as defined in this Section 7(d) (such Substantial Breach
having not been corrected by the Company within 30 days of receipt of written
notice from the Executive of the occurrence of such Substantial Breach, which
notice shall specifically set forth the nature of the Substantial Breach which
is the reason for such resignation), the Company shall continue to pay the
Executive as provided in Section 11 hereof. "Substantial Breach" shall mean any
material breach by the Company of its obligation under this Agreement including
without limitation, (A) the assignment of the Executive to any position or
duties materially inconsistent with the provisions of Section 4 hereof; (B) a
reduction by the Company in the Regular Base Salary other than a reduction that
is consistent with reductions in compensation among senior executive officers of
the Company generally; or (C) the failure by the Company to allow the Executive
to participate in the Company's employee benefit plans generally available from
time to time to executive employees of the Company; provided, however, that the
term "Substantial Breach" shall not include (x) an immaterial breach by the
Company of any provisions of this Agreement including those referred to in
clauses (A) through (C) above or (y) a termination for Cause under Section 7(a)
hereof. The date of termination of employment by the Company under this Section
7(d) (the "Section 7(d) Termination Date") shall be the later of the date, if
any, specified in a written notice of termination to the Executive or the date
on which such notice is given to the Executive. The date of resignation under
this Section 7(d) shall be 30 days after receipt by the Company of written
notice of resignation, provided that the Substantial Breach specified in such
notice shall not have been corrected by the Company during such 30-day period.
(e) Notwithstanding anything in this Section 7 to the
contrary, the Executive's rights in any employee benefit plans offered by the
Company shall be governed by the rules of such plans as well as by applicable
law.
8. Secrecy and Non-Competition.
(a) No Competing Employment. The Executive acknowledges
that (i) the agreements and covenants contained in this Section 8 are essential
to protect the value of the Company's business and assets and (ii) by virtue of
his employment with the Company, the Executive will obtain such knowledge,
know-how, training and experience of such a character that there is a
substantial probability that such knowledge, know-how, training and experience
could be used to the substantial advantage of a competitor of the Company and to
the Company's substantial detriment. Therefore, the Executive agrees that, for
the period (the "Restricted Period") commencing on the date of this Agreement
and ending on the date which is two years after the termination of the
Executive's employment hereunder for any reason, the Executive shall not
participate or engage, directly or indirectly, for himself or on behalf of or in
conjunction with any person, partnership, corporation or other entity, whether
as an employee, agent, investor or otherwise, in any business activities (a
"Competitive Activity") if such activity constitutes the manufacturing,
production, sale or provision of products or services that are similar to, or
competitive with, products or services then being manufactured, produced, sold
or provided by the Company or any of its subsidiaries or which the Company (at
any time during the Employment Term) planned to manufacture, produce, sell or
provide; provided, however, that the Executive may maintain and/or undertake
purely passive investments on behalf of himself, his immediate family or any
trust on behalf of himself or his immediate family in companies engaged in a
Competitive Activity so long as the aggregate interest represented by such
investments does not exceed 1% of any class of the outstanding publicly traded
debt or equity securities of any company engaged in a Competitive Activity. The
Executive, however, shall not be bound by the restrictions contained in this
Section 8(a) if the Company shall have failed to comply with its obligations
under Section 11 of this Agreement after the Executive's employment with the
Company is terminated pursuant to Section 7(d) hereof.
(b) Nondisclosure of Confidential Information. The
Executive, except in connection with his employment hereunder, shall not
disclose to any person or entity or use, either during the Employment Term or at
any time thereafter, any information not in the public domain, in any form,
acquired by the Executive while employed by the Company or, if acquired
following the Employment Term, such information which, to the Executive's
knowledge, has been acquired, directly or indirectly, from any person or entity
owing a duty of confidentiality to the Company or any of its affiliates,
relating to the Company, its subsidiaries and affiliates, including but not
limited to trade secrets, technical information, designs, drawings, processes,
systems, procedures, formulae, test data, know-how, improvements, price lists,
financial or other data (including the revenues, costs or profits associated
with any of the Company's products), business and product plans, code books,
invoices and other financial statements, computer programs, discs and printouts,
sketches, plans (engineering, architectural or otherwise), customer and supplier
lists or names, personnel files, equipment maintenance records, equipment
warranty information, sales and advertising material, telephone numbers, names,
addresses or any other compilation of information, written or unwritten, which
is or was used in the business of the Company, any predecessor of the Company or
any subsidiary thereof. The Executive agrees and acknowledges that all of such
information, in any form, and copies and extracts thereof are and shall remain
the sole and exclusive property of the Company, and upon termination of his
employment with the Company, the Executive shall return to the Company the
originals and all copies (and shall delete all such items in electronic format)
of any such information provided to or acquired by the Executive in connection
with the performance of his duties for the Company, and shall return to the
Company all files, correspondence and/or other communications (including any
such materials in electronic format) received, maintained and/or originated by
the Executive during the course of his employment.
(c) No Interference. During the Restricted Period, the
Executive shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), solicit, endeavor to entice away from the Company or any of
its subsidiaries, or otherwise interfere with the relationship of the Company or
any of its subsidiaries with, any person who, to the knowledge of the Executive,
is employed by or otherwise engaged to perform services for the Company or any
of its subsidiaries (including, but not limited to, any independent sales
representatives or organizations) or any entity who is, or was within the then
most recent twelve-month period, a customer or client of the Company, any
predecessor or any of its subsidiaries (a "Customer"); provided, however, that
this Section 8(c) shall not prohibit the Executive from employing, for his own
account, following a termination of the employment of the Executive, any person
employed by a Customer or supplier, if such employment is not in connection with
a Competitive Activity.
(d) Inventions. The Executive hereby sells, transfers
and assigns to the Company or to any person or entity designated by the Company
all of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made, authored or conceived by the Executive, solely
or jointly, or in whole or in part, during his employment by the Company and
which (i) relate to methods, apparatus, designs, products, processes or devices
sold, leased, used or under construction or development by the Company or any
subsidiary of the Company and (ii) arise (wholly or partly) from the efforts of
the Executive during his employment with the Company (an "Invention"). The
Executive shall communicate promptly and disclose to the Company, in such form
as the Company requests, all information, details and data pertaining to any
such Inventions; and, whether during the Restricted Period or thereafter, the
Executive shall execute and deliver to the Company such form of transfers and
assignments and such other papers and documents as reasonably may be required of
the Executive to permit the Company or any person or entity designated by the
Company to file, prosecute, obtain or otherwise protect or transfer any
intellectual property, including any patent, patent application or copyright.
The Company shall pay all costs incident to the execution and delivery of such
transfers, assignments and other documents. Any invention by the Executive
within six months following the termination of his employment hereunder shall be
deemed to fall within the provisions of this Section 8(d) unless the Executive
bears the burden of proof of showing that the Invention was first conceived and
made following such termination.
9. Deductions from Compensation. The Executive agrees that
the Company shall be entitled to deduct and withhold from any compensation
payable to the Executive hereunder (i) any taxes in respect of the Executive
that the Company is required to deduct and withhold under federal, state or
local law whether arising from compensation hereunder or otherwise and (ii)
offsets for any other amounts lawfully due from the Executive as determined in
good faith by the Company and/or the Board of Directors. In the event that the
Executive is no longer employed by the Company at a time when the Company
otherwise would be entitled to deduct and withhold any amount pursuant to the
preceding sentence, the Executive shall remit such amount to the Company within
five (5) days after the receipt of notice from the Company specifying such
amount or otherwise in accordance with the Executive's obligations with respect
thereto.
10. Stock Options. Executive shall receive the following
options:
(a) On the Commencement Date, Executive will receive a
stock option to purchase 100,000 shares of the Company's Common Stock, $.01 par
value (the "Common Stock") at an exercise price per share equal to the lesser of
(i) the fair market value of the Common Stock on the Commencement Date (which
shall be deemed to be the closing price reported on the Nasdaq NMS system on the
Commencement Date or, if no trades occur on such date, on the most recent date
preceding the Commencement Date on which trades occurred) or (ii) $6.50 and with
such additional terms as are set forth in the form of non-qualified stock option
agreement attached to this Agreement as Exhibit A.
(b) On the first date (before the date Executive's
employment with the Company is terminated for whatever reason (the "Termination
Date")) on which the Common Stock has a closing price equal to or greater than
$7.50 per share for a 30th consecutive trading day, Executive will receive a
stock option to purchase 100,000 shares of Common Stock at an exercise price per
share equal to $7.50 and with such additional terms as are set forth in the form
of non-qualified stock option agreement attached to this Agreement as Exhibit B.
(c) On the first date (before the Termination Date) on
which the Common Stock has a closing price equal to or greater than $9.00 per
share for a 30th consecutive trading day, Executive will receive a stock option
to purchase 100,000 shares of Common Stock at an exercise price per share equal
to $9.00 and with such additional terms as are set forth in the form of
non-qualified stock option agreement attached to this Agreement as Exhibit C.
(d) On the first date (before the Termination Date) on
which the Common Stock has a closing price equal to or greater than $11.00 per
share for a 30th consecutive trading day, Executive will receive a stock option
to purchase 100,000 shares of Common Stock at an exercise price per share of
$11.00 and with such additional terms as are set forth in the form of
non-qualified stock option agreement attached to this Agreement as Exhibit D.
The Executive will not receive any stock options after the
Termination Date.
11. Termination Benefits. Subject to Section 9 hereof, if
the Executive's full time employment with the Company is terminated pursuant to
Section 7(d) hereof, the Executive shall be entitled to receive the termination
benefits provided under this Section 11 for a period ("Minimum Period")
commencing on the Section 7(d) Termination Date and ending on the later to occur
of (i) the last day of the Employment Term or (ii) the first anniversary of the
Section 7(d) Termination Date. In the event that the Executive obtains other
employment, whether full or part time, after the Section 7(d) Termination Date
and prior to the end of the Minimum Period, the Executive shall forthwith notify
the Company. The Company shall not be entitled to set off from amounts due the
Executive under subsections (a) and (b) below amounts paid to the Executive in
respect of other employment.
(a) Compensation-Regular Base Salary. After the Section
7(d) Termination Date and until the expiration of the Minimum Period, the
Executive shall be paid his Regular Base Salary periodically, according to the
Company's wage practices, at the rate in effect on the Section 7(d) Termination
Date.
(b) Compensation-Bonus. After the Section 7(d)
Termination Date and until the earlier to occur of (i) the last day of the
Employment Term or (ii) the first anniversary of the Section 7(d) Termination
Date, the Executive shall be paid in periodic ratable installments, at the same
time as payments of the Regular Base Salary are made to the Executive pursuant
to Section 11(a), an amount equal to the annual Bonus, if any, actually paid on
account of the most recently concluded fiscal year to the Executive under the
Company's annual incentive compensation plan or any predecessor plan, if
applicable.
(c) Vacation Pay. Any accrued vacation pay due but not
yet taken at the Section 7(d) Termination Date shall be paid to the Executive on
the date upon which the Executive receives his first payment under Section
11(a).
(d) Welfare Benefits, etc. The Executive's
participation (including dependent coverage) in any life, disability, group
health and dental benefit plans provided by the Company, in effect immediately
prior to the Section 7(d) Termination Date, shall be continued after the Section
7(d) Termination Date, in accordance with Company policy relating to such plans
as of the Section 7(d) Termination Date, or substantially equivalent benefits
shall be provided by the Company until the earlier of (i) the end of the Minimum
Period or (ii) the date upon which the Executive accepts other employment,
whether full or part time. Following the Section 7(d) Termination Date, the
Company shall not be obligated to (i) provide business accident insurance
covering the Executive or (ii) make contributions in respect of the Executive to
any qualified retirement and pension plans or profit sharing plans.
(e) Executive Outplacement Counseling. Upon the request
of the Executive, within thirty (30) days following the Section 7(d) Termination
Date, the Company shall engage an outplacement counseling service of national
reputation, at its own expense provided that such expense shall not exceed in
the aggregate Twenty Thousand Dollars ($20,000), to assist the Executive in
obtaining employment, until the earlier of two years from the Section 7(d)
Termination Date or such date as the Executive has obtained employment.
12. Limitation on Termination Benefits Payments.
(a) Definitions. For purposes of this Section, (1) a
"Payment" shall mean any payment or distribution in the nature of compensation
to or for the benefit of the Executive, whether paid or payable pursuant to this
Agreement or otherwise; (2) "Agreement Payment" shall mean a Payment paid or
payable pursuant to this Agreement (disregarding this Section); (3) "Net After
Tax Receipt" shall mean the Present Value of a Payment net of all taxes imposed
on the Executive with respect thereto under Sections 1 and 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), determined by applying the
highest marginal rate under Section 1 of the Code which applied to the
Executive's taxable income for the immediately preceding taxable year; and (4)
"Present Value" shall mean such value determined in accordance with section
280G(d)(4) of the Code.
(b) Reduction of Payments. Notwithstanding anything in
this Agreement to the contrary, if receipt of all Payments would subject the
Executive to tax under Section 4999 of the Code, the aggregate Agreement
Payments shall be reduced to an amount (but not below zero) which would result
in the maximum possible Net After Tax Receipts for the Executive from all
Payments (the "Reduced Amount"). The Reduced Amount and the applicability of
Section 4999 of the Code shall be determined within 10 days after termination of
the employment of the Executive at the Company's expense by a nationally
recognized accounting firm, whose decision shall be final and binding upon both
parties.
(c) Manner of Reduction. If it is determined that the
Executive should receive a Reduced Amount, the Company shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof.
Within ten (10) days after receiving such notice and calculations, the Executive
shall advise the Company in writing of the manner in which the Agreement
Payments shall be reduced. If no such election is made by the Executive within
such ten (10) day period, the Company shall make the Agreement Payments in the
manner prescribed in Section 11 above until the Reduced Amount has been paid to
the Executive, after which the Agreement Payments shall cease.
13. Confidentiality of Employment Terms. The Executive shall
not disclose to any person other than the Executive's lawyer, financial advisor,
accountant and members of his immediate family any of the terms and conditions
of his employment with the Company, whether contained herein or in any other
agreement, unless such disclosure (i) shall be required by law, government
regulation, or the order of any court, administrative authority or other
government agency or (ii) shall have been publicly disclosed by the Company.
14. Injunctive Relief. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in Section 8 hereof may result in material
irreparable injury to the Company or its affiliates for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
the Company shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining the Executive from engaging in
activities prohibited by Section 8 hereof or such other relief as may be
required to specifically enforce any of the covenants in Section 8 hereof. The
Executive hereby agrees and consents that such injunctive relief may be sought
in any state or federal court of record in the County of Cook, State of
Illinois, or in the state and county in which such violation may occur, or in
any other court, at the election of the Company.
15. Extension of Restricted Period. In addition to the
remedies the Company may seek and obtain pursuant to Section 14 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 8 hereof.
16. Successors; Binding Agreement.
(a) In the event of any sale of all or substantially
all of the assets of the Company, or the merger, consolidation or other
corporate reorganization involving the Company, any successor to the Company by
reason of any such transaction shall succeed to all of the Company's
obligations, rights and benefits hereunder.
(b) Except as provided in subsection (a) above, neither
this Agreement, nor any rights or benefits hereunder, may be assigned,
delegated, transferred, pledged or hypothecated without the written consent of
both parties hereto, and any such assignment, delegation, transfer, pledge or
hypothecation shall be null and void and shall be disregarded by the Company.
(c) The Company will require any transferee of all or
substantially all of its assets (whether or not by merger or consolidation) to
assume, whether by operation of law or otherwise, the Company's obligations
under Section 11 of this Agreement in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall constitute a Substantial Breach by
the Company and shall entitle the Executive to benefits described in Section 11
hereof upon his resignation from the Company within three business days of the
date such succession becomes effective. For purposes of implementing the
foregoing, the later of (i) the date on which any such succession becomes
effective or (ii) the date upon which the Company receives written notice of the
Executive's resignation shall be deemed the Section 7(d) Termination Date.
17. Waiver and Modification. Any waiver, alteration or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however, that any such
waiver, alteration or modification is consented to on the Company's behalf by a
majority of the Board of Directors of the Company (not counting the Executive
should he then be a director of the Company). No waiver by either of the parties
hereto of their rights hereunder shall be deemed to constitute a waiver with
respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
18. Severability and Governing Law. The Executive
acknowledges and agrees that the covenants set forth in Section 8 hereof are
reasonable and valid in geographical and temporal scope and in all other
respects. If any of such covenants or such other provisions of this Agreement
are found to be invalid or unenforceable by a final determination of a court of
competent jurisdiction (a) the remaining terms and provisions hereof shall be
unimpaired and (b) the invalid or unenforceable term or provision shall be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision. This Agreement shall be governed by and interpreted in accordance
with the internal laws of the State of Illinois without regard to the contract
provision thereof.
19. Blue-Pencilling. In the event that, notwithstanding the
first sentence of Section 18 hereof, any of the provisions of Section 8 relating
to the covenants contained therein shall be declared by a court of competent
jurisdiction to exceed the maximum restrictiveness such court deems enforceable,
such provision shall be deemed to be replaced herein by the maximum restriction
deemed enforceable by such court.
20. Arbitration. The parties agree to submit any dispute
arising under this Agreement to arbitration to be held in Chicago, Illinois.
Arbitration shall be by a single arbitrator experienced in the matters at issue
selected by the Company and the Executive in accordance with the commercial
arbitration rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding as to any matter submitted to him under
this Agreement. All costs and expenses incurred in connection with such
arbitration proceeding shall be borne by the party against whom the decision is
rendered.
21. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed effective and given upon
actual delivery if presented personally, one business day after the date sent if
sent by prepaid telegram, overnight courier service, telex, or by facsimile
transmission or five business days after the date sent if sent by certified or
registered mail, postage prepaid, return receipt requested, which shall be
addressed, in the case of the Company, to Stimsonite Corporation, 7524 N.
Natchez Avenue, Niles, Illinois 60714, Attention: Chairman, Fax (847) 647-1205,
with a copy to Timothy J. Melton, Esq., Jones, Day Reavis & Pogue, 77 West
Wacker Drive, Chicago, Illinois, 60610, FAX: (312) 782-8585 and, in the case of
the Executive, to Robert E. Stutz, 1030 Old Barn Lane, Lake Forest, Illinois
60045 or, in each case, to such other address as may be designated in writing by
any such party.
22. Captions and Paragraph Headings. Captions and section
headings herein are for convenience only, are not a part hereof and shall not be
used in construing this Agreement.
23. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive and supersedes any prior agreements or understandings with respect
thereto.
24. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
STIMSONITE CORPORATION
By:/s/Terrence D. Daniels
Terrence D. Daniels, Chairman
EXECUTIVE
By:/s/Robert E. Stutz
Robert E. Stutz
<PAGE>
EXHIBIT 10-1A
FORM OF STOCK OPTION
UNDER SECTION 10(a)
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of March 22,
1997 (this "Agreement"), between Robert E. Stutz (the "Optionee") and Stimsonite
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Optionee has agreed to become President and
Chief Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of March 22, 1997 between Optionee and the Company (the
"Employment Agreement"); and
WHEREAS, Section 10 of the Employment Agreement provides
that the Optionee will receive certain options from the Company; and
WHEREAS, the execution of a Nonqualified Stock Option
Agreement in the form hereof was approved by a resolution of the Board of
Directors of the Company (the "Board") duly adopted on March 12, 1997 and is
incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to Section 10(a) of the Employment Agreement,
the Company hereby grants to the Optionee an option (the "Option") to purchase
100,000 shares of Common Stock, $.01 par value of the Company (the "Option
Shares") at a purchase price per share of $_____ (the "Option Price"), and
agrees to cause certificates for any shares purchased hereunder to be delivered
to the Optionee upon payment of the Option Price in full, all subject, however,
to the terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
33% of the shares covered hereby after the Optionee shall have been in the
continuous employ of the Company or any Subsidiary through the first anniversary
of March 22, 1997 (the "Date of Grant") to the extent of an additional 33% of
the shares covered hereby after the Optionee shall have been in the continuous
employ of the Company or any Subsidiary through the second anniversary of the
Date of Grant and to the extent of an additional 34% of the shares covered
hereby after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary through the third anniversary of the Date of Grant.
For purposes of this Agreement, the employment of the Optionee with the Company
or a Subsidiary shall not be deemed interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company or any Subsidiary by
reason of the transfer of his employment among or between the Company and its
Subsidiaries. For the purpose of this paragraph, leaves of absence approved by
the Board of Directors of the Company, or any committee thereof, for illness,
military or government service, or other cause, shall be considered as
employment.
(c) To the extent exercisable, the Option may be exercised
in whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the
following dates:
(i) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary unless he ceases to be such an employee
in a manner described in (ii) or (iii) below.
(ii) On the later to occur of (A) the second
anniversary of the Commencement Date (as defined in the Employment Agreement) or
(B) 60 days after the Optionee ceases to be an employee of the Company or any
Subsidiary if (I) Optionee retires from employment with the Company or any
Subsidiary after reaching the age of 65 years, or (II) Optionee's employment is
terminated pursuant to Section 7(d) of the Employment Agreement.
(iii) On the later to occur of (A) the second
anniversary of the Commencement Date (as defined in the Employment Agreement) or
(B) 90 days after the date on which Optionee's employment is terminated as a
result of Optionee's death or Disability (as defined in the Employment
Agreement).
(iv) Ten years from the Date of Grant.
In the event the Optionee shall intentionally commit an
act materially inimical to the interests of the Company or a Subsidiary, and the
Board shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to
modify or enlarge the rights of the Optionee and the conditions of exercising
this Option as set forth in Section 1(b) hereof, and at no time shall any right
to exercise this Option accrue to the Optionee unless and to the extent that the
conditions set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery
to the Company of (i) an Exercise Notice in the form attached to this Agreement
as Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by
check (certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing.
(c) If the Company shall be required to withhold any
Federal, state, local or foreign tax in connection with exercise of the Option,
it shall be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control; Adjustments.
(a) Upon the earlier to occur of (i) Optionee's death or
Disability, (ii) Optionee's termination of employment pursuant to Section 7(d)
of the Employment Agreement or (iii) a Change in Control (as hereinafter
defined), the Option shall, notwithstanding Section 1(b), become immediately
exercisable in full. If any event or series of events constituting a Change in
Control shall be abandoned, the effect thereof shall be null and of no further
force and effect and the provisions of Section 1(b) shall be reinstated but
without prejudice to any exercise of the Option that may have occurred prior to
such nullification.
(b) (i) The Board may make or provide for such adjustments
in the number and kind of shares of the Company's Common Stock covered by the
Option and in the Option Price, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to the foregoing.
(ii) In the event of any such transaction or event, the
Board may provide in substitution for the Option such alternative consideration
as it may in good faith determine to be equitable under the circumstances and
may require in connection therewith the surrender of this Option.
4. No Transfer of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Modification of Option.
The Option may be amended by the Board; provided that no such
amendment that adversely affects the Optionee shall be effective without the
consent of the Optionee.
6. Limitations on Exercise of Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
7. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
8. Fractional Shares.
The Company shall not be required to issue any fractional shares
of Common Stock pursuant to the Option.
9. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the
sale or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Terrence D. Daniels or any of
his affiliates has or intends to become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing a
majority or more of the combined voting power of the then-outstanding Voting
Stock, including, without limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (iv) each director who
is first elected, or first nominated for election by the Company's stockholders,
by a vote of at least two-thirds of the directors of the Company (or a committee
thereof) then still in office who were directors of the Company at the beginning
of any such period shall be deemed to have been a director of the Company at the
beginning of such period; or
(v) Except pursuant to a transaction described in the
proviso to subsection (i) of this definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation has
a direct or indirect ownership or other equity interest.
EXECUTED at Niles, Illinois as of the 22nd day of March, 1997.
STIMSONITE CORPORATION
By _________________________________
Name:
Title:
ACCEPTED AND AGREED
By
Robert E. Stutz
<PAGE>
ANNEX A
to
Nonqualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Non-Qualified Stock Option Agreement dated as of
March __, 1997 between the undersigned and Stimsonite Corporation (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:
(b) Total purchase price ((a) x Option Exercise Price): $
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
The undersigned's social security number is: .
Date: _____________________________ _________________________________
Optionee
<PAGE>
EXHIBIT 10.1B
FORM OF STOCK OPTION
UNDER SECTION 10(b)
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of ____________,
____ (this "Agreement"), between Robert E. Stutz (the "Optionee") and Stimsonite
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Optionee has agreed to become President and Chief
Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of March 22, 1997 between Optionee and the Company (the
"Employment Agreement"); and
WHEREAS, Section 10 of the Employment Agreement provides that
the Optionee will receive certain options from the Company; and
WHEREAS, the execution of a Nonqualified Stock Option
Agreement in the form hereof was approved by a resolution of the Board of
Directors of the Company (the "Board") duly adopted on March 12, 1997 and is
incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to Section 10(b) of the Employment Agreement, the
Company hereby grants to the Optionee an option (the "Option") to purchase
100,000 shares of Common Stock, $.01 par value of the Company (the "Option
Shares") at a purchase price per share of $7.50 (the "Option Price"), and agrees
to cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Option Price in full, all subject, however, to the
terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
33% of the shares covered hereby after the Optionee shall have been in the
continuous employ of the Company or any Subsidiary through the second
anniversary of __________, ____ (the "Date of Grant") to the extent of an
additional 33% of the shares covered hereby after the Optionee shall have been
in the continuous employ of the Company or any Subsidiary through the third
anniversary of the Date of Grant and to the extent of an additional 34% of the
shares covered hereby after the Optionee shall have been in the continuous
employ of the Company or any Subsidiary through the fourth anniversary of the
Date of Grant. For purposes of this Agreement, the employment of the Optionee
with the Company or a Subsidiary shall not be deemed interrupted, and the
Optionee shall not be deemed to have ceased to be an employee of the Company or
any Subsidiary by reason of the transfer of his employment among or between the
Company and its Subsidiaries. For the purpose of this paragraph, leaves of
absence approved by the Board of Directors of the Company, or any committee
thereof, for illness, military or government service, or other cause, shall be
considered as employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the
following dates:
(i) On the date on which the Optionee ceases to be an employee
of the Company or a Subsidiary unless he ceases to be such an employee in a
manner described in (ii) or (iii) below.
(ii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 60 days
after the Optionee ceases to be an employee of the Company or any Subsidiary if
(I) Optionee retires from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (II) Optionee's employment is terminated
pursuant to Section 7(d) of the Employment Agreement.
(iii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 90 days
after the date on which Optionee's employment is terminated as a result of the
Optionee's death or Disability (as defined in the Employment Agreement).
(iv) Ten years from the Date of Grant.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Board shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing.
(c) If the Company shall be required to withhold any Federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control; Adjustments.
(a) Upon the earlier to occur of (i) Optionee's death or
Disability or (ii) a Change in Control (as hereinafter defined), the Option
shall, notwithstanding Section 1(b), become immediately exercisable in full. If
any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
(b) (i) The Board may make or provide for such adjustments in
the number and kind of shares of the Company's Common Stock covered by the
Option and in the Option Price, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to the foregoing.
(ii) In the event of any such transaction or event, the Board
may provide in substitution for the Option such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require in connection therewith the surrender of this Option.
4. No Transfer of Option.
The Option may not be transferred by the Optionee except by
will or the laws of descent and distribution. The Option may not be exercised
during the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Modification of Option.
The Option may be amended by the Board; provided that no such
amendment that adversely affects the Optionee shall be effective without the
consent of the Optionee.
6. Limitations on Exercise of Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
7. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
8. Fractional Shares.
The Company shall not be required to issue any fractional
shares of Common Stock pursuant to the Option.
9. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the sale
or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Terrence D. Daniels or any of
his affiliates has or intends to become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing a
majority or more of the combined voting power of the then-outstanding Voting
Stock, including, without limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (iv) each director who
is first elected, or first nominated for election by the Company's stockholders,
by a vote of at least two-thirds of the directors of the Company (or a committee
thereof) then still in office who were directors of the Company at the beginning
of any such period shall be deemed to have been a director of the Company at the
beginning of such period; or
(v) Except pursuant to a transaction described in the proviso
to subsection (i) of this definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation has
a direct or indirect ownership or other equity interest.
EXECUTED at Niles, Illinois as of the _____ day of ___________, ____.
STIMSONITE CORPORATION
By ____________________________________
Name:
Title:
ACCEPTED AND AGREED
By ________________________________
Robert E. Stutz
<PAGE>
ANNEX A
to
Nonqualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Non-Qualified Stock Option Agreement dated as
of ____________, ____ between the undersigned and Stimsonite Corporation (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:
(b) Total purchase price ((a) x Option Exercise Price): $
Please issue a single certificate for the shares being
purchased in the name of the undersigned. The registered address on such
certificate should be:
The undersigned's social security number is: .
Date: ___________________ ___________________________________
Optionee
<PAGE>
EXHIBIT 10.1C
FORM OF STOCK OPTION
UNDER SECTION 10(c)
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of ____________,
____ (this "Agreement"), between Robert E. Stutz (the "Optionee") and Stimsonite
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Optionee has agreed to become President and Chief
Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of March 22, 1997 between Optionee and the Company (the
"Employment Agreement"); and
WHEREAS, Section 10 of the Employment Agreement provides that
the Optionee will receive certain options from the Company; and
WHEREAS, the execution of a Nonqualified Stock Option
Agreement in the form hereof was approved by a resolution of the Board of
Directors of the Company (the "Board") duly adopted on March 12, 1997 and is
incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to Section 10(c) of the Employment Agreement, the
Company hereby grants to the Optionee an option (the "Option") to purchase
100,000 shares of Common Stock, $.01 par value of the Company (the "Option
Shares") at a purchase price per share of $9.00 (the "Option Price"), and agrees
to cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Option Price in full, all subject, however, to the
terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
33% of the shares covered hereby after the Optionee shall have been in the
continuous employ of the Company or any Subsidiary through the third anniversary
of __________, ____ (the "Date of Grant") to the extent of an additional 33% of
the shares covered hereby after the Optionee shall have been in the continuous
employ of the Company or any Subsidiary through the fourth anniversary of the
Date of Grant and to the extent of an additional 34% of the shares covered
hereby after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary through the fifth anniversary of the Date of Grant.
For purposes of this Agreement, the employment of the Optionee with the Company
or a Subsidiary shall not be deemed interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company or any Subsidiary by
reason of the transfer of his employment among or between the Company and its
Subsidiaries. For the purpose of this paragraph, leaves of absence approved by
the Board of Directors of the Company, or any committee thereof, for illness,
military or government service, or other cause, shall be considered as
employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the
following dates:
(i) On the date on which the Optionee ceases to be an employee
of the Company or a Subsidiary unless he ceases to be such an employee in a
manner described in (ii) or (iii) below.
(ii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 60 days
after the Optionee ceases to be an employee of the Company or any Subsidiary if
(I) Optionee retires from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (II) Optionee's employment is terminated under
Section 7(d) of the Employment Agreement.
(iii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 90 days
after the date on which Optionee's employment is terminated as a result of the
Optionee's death or Disability (as defined in the Employment Agreement).
(iv) Ten years from the Date of Grant.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Board shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing.
(c) If the Company shall be required to withhold any Federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control; Adjustments.
(a) Upon the earlier to occur of (i) Optionee's death or
Disability or (ii) a Change in Control (as hereinafter defined), the Option
shall, notwithstanding Section 1(b), become immediately exercisable in full. If
any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
(b) (i) The Board may make or provide for such adjustments in
the number and kind of shares of the Company's Common Stock covered by the
Option and in the Option Price, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to the foregoing.
(ii) In the event of any such transaction or event, the Board
may provide in substitution for the Option such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require in connection therewith the surrender of this Option.
4. No Transfer of Option.
The Option may not be transferred by the Optionee except by
will or the laws of descent and distribution. The Option may not be exercised
during the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Modification of Option.
The Option may be amended by the Board; provided that no such
amendment that adversely affects the Optionee shall be effective without the
consent of the Optionee.
6. Limitations on Exercise of Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
7. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
8. Fractional Shares.
The Company shall not be required to issue any fractional
shares of Common Stock pursuant to the Option.
9. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the sale
or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Terrence D. Daniels or any of
his affiliates has or intends to become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing a
majority or more of the combined voting power of the then-outstanding Voting
Stock, including, without limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (iv) each director who
is first elected, or first nominated for election by the Company's stockholders,
by a vote of at least two-thirds of the directors of the Company (or a committee
thereof) then still in office who were directors of the Company at the beginning
of any such period shall be deemed to have been a director of the Company at the
beginning of such period; or
(v) Except pursuant to a transaction described in the proviso
to subsection (i) of this definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation has
a direct or indirect ownership or other equity interest.
EXECUTED at Niles, Illinois as of the _____ day of ___________, ____.
STIMSONITE CORPORATION
By __________________________________
Name:
Title:
ACCEPTED AND AGREED
By ______________________________________
Robert E. Stutz
<PAGE>
ANNEX A
to
Nonqualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Non-Qualified Stock Option Agreement dated as
of ____________, ____ between the undersigned and Stimsonite Corporation (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:
(b) Total purchase price ((a) x Option Exercise Price): $
Please issue a single certificate for the shares being
purchased in the name of the undersigned. The registered address on such
certificate should be:
The undersigned's social security number is: .
Date: ________________ ______________________________________
Optionee
<PAGE>
EXHIBIT 10.1D
FORM OF STOCK OPTION
UNDER SECTION 10(d)
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of ____________,
____ (this "Agreement"), between Robert E. Stutz (the "Optionee") and Stimsonite
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Optionee has agreed to become President and Chief
Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of March 22, 1997 between Optionee and the Company (the
"Employment Agreement"); and
WHEREAS, Section 10 of the Employment Agreement provides that
the Optionee will receive certain options from the Company; and
WHEREAS, the execution of a Nonqualified Stock Option
Agreement in the form hereof was approved by a resolution of the Board of
Directors of the Company (the "Board") duly adopted on March 12, 1997 and is
incorporated herein by reference; and
WHEREAS, the option granted hereby is intended as a
nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to Section 10(d) of the Employment Agreement, the
Company hereby grants to the Optionee an option (the "Option") to purchase
100,000 shares of Common Stock, $.01 par value of the Company (the "Option
Shares") at a purchase price per share of $11.00 (the "Option Price"), and
agrees to cause certificates for any shares purchased hereunder to be delivered
to the Optionee upon payment of the Option Price in full, all subject, however,
to the terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
33% of the shares covered hereby after the Optionee shall have been in the
continuous employ of the Company or any Subsidiary through the third anniversary
of __________, ____ (the "Date of Grant") to the extent of an additional 33% of
the shares covered hereby after the Optionee shall have been in the continuous
employ of the Company or any Subsidiary through the fourth anniversary of the
Date of Grant and to the extent of an additional 34% of the shares covered
hereby after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary through the fifth anniversary of the Date of Grant.
For purposes of this Agreement, the employment of the Optionee with the Company
or a Subsidiary shall not be deemed interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company or any Subsidiary by
reason of the transfer of his employment among or between the Company and its
Subsidiaries. For the purpose of this paragraph, leaves of absence approved by
the Board of Directors of the Company, or any committee thereof, for illness,
military or government service, or other cause, shall be considered as
employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the
following dates:
(i) On the date on which the Optionee ceases to be an employee
of the Company or a Subsidiary unless he ceases to be such an employee in a
manner described in (ii) or (iii) below.
(ii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 60 days
after the Optionee ceases to be an employee of the Company or any Subsidiary if
(I) Optionee retires from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (II) Optionee's employment is terminated
pursuant to Section 7(d) of the Employment Agreement.
(iii) On the later to occur of (A) the second anniversary of
the Commencement Date (as defined in the Employment Agreement) or (B) 90 days
after the date on which Optionee's employment is terminated as a result of the
Optionee's death or Disability (as defined in the Employment Agreement).
(iv) Ten years from the Date of Grant.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Board shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing.
(c) If the Company shall be required to withhold any Federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control; Adjustments.
(a) Upon the earlier to occur of (i) Optionee's death or
Disability or (ii) a Change in Control (as hereinafter defined), the Option
shall, notwithstanding Section 1(b), become immediately exercisable in full. If
any event or series of events constituting a Change in Control shall be
abandoned, the effect thereof shall be null and of no further force and effect
and the provisions of Section 1(b) shall be reinstated but without prejudice to
any exercise of the Option that may have occurred prior to such nullification.
(b) (i) The Board may make or provide for such adjustments in
the number and kind of shares of the Company's Common Stock covered by the
Option and in the Option Price, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to the foregoing.
(ii) In the event of any such transaction or event, the Board
may provide in substitution for the Option such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require in connection therewith the surrender of this Option.
4. No Transfer of Option.
The Option may not be transferred by the Optionee except by
will or the laws of descent and distribution. The Option may not be exercised
during the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Modification of Option.
The Option may be amended by the Board; provided that no such
amendment that adversely affects the Optionee shall be effective without the
consent of the Optionee.
6. Limitations on Exercise of Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
7. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
8. Fractional Shares.
The Company shall not be required to issue any fractional
shares of Common Stock pursuant to the Option.
9. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for the
merger, consolidation or reorganization into or with another corporation or
other legal person; provided, however, that no such merger, consolidation or
reorganization shall constitute a Change in Control if as a result of such
merger, consolidation or reorganization not less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the sale
or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) other than Terrence D. Daniels or any of
his affiliates has or intends to become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing a
majority or more of the combined voting power of the then-outstanding Voting
Stock, including, without limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this subsection (iv) each director who
is first elected, or first nominated for election by the Company's stockholders,
by a vote of at least two-thirds of the directors of the Company (or a committee
thereof) then still in office who were directors of the Company at the beginning
of any such period shall be deemed to have been a director of the Company at the
beginning of such period; or
(v) Except pursuant to a transaction described in the proviso
to subsection (i) of this definition, the Company adopts a plan for the
liquidation or dissolution of the Company.
(b) "Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation has
a direct or indirect ownership or other equity interest.
EXECUTED at Niles, Illinois as of the _____ day of ___________, ____.
STIMSONITE CORPORATION
By _______________________________
Name:
Title:
ACCEPTED AND AGREED
By _____________________________________
Robert E. Stutz
<PAGE>
ANNEX A
to
Nonqualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Non-Qualified Stock Option Agreement dated as
of ____________, ____ between the undersigned and Stimsonite Corporation (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:
(b) Total purchase price ((a) x Option Exercise Price): $
Please issue a single certificate for the shares being
purchased in the name of the undersigned. The registered address on such
certificate should be:
The undersigned's social security number is: .
Date: _________________________ ________________________________
Optionee
EXHIBIT 10.2
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of March 22, 1997
(this "Agreement"), between Robert E. Stutz (the "Optionee") and Stimsonite
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
--------------------
WHEREAS, the Optionee has agreed to become President and Chief
Executive Officer of the Company pursuant to the terms of an Employment
Agreement dated as of March 22, 1997 between Optionee and the Company (the
"Employment Agreement"); and
WHEREAS, Section 10 of the Employment Agreement provides that
the Optionee will receive certain options from the Company; and
WHEREAS, the execution of a Nonqualified Stock Option Agreement
in the form hereof was approved by a resolution of the Board of Directors of the
Company (the "Board") duly adopted on March 12, 1997 and is incorporated herein
by reference; and
WHEREAS, the option granted hereby is intended as a nonqualified
stock option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. Option.
(a) Pursuant to Section 10(a) of the Employment Agreement, the
Company hereby grants to the Optionee an option (the "Option") to purchase
100,000 shares of Common Stock, $.01 par value of the Company (the "Option
Shares") at a purchase price per share of $6.00 (the "Option Price"), and agrees
to cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the Option Price in full, all subject, however, to the
terms and conditions hereinafter set forth.
(b) Subject to Section 3(a) hereof, this Option (until
terminated as hereinafter provided) shall be exercisable only to the extent of
33% of the shares covered hereby after the Optionee shall have been in the
continuous employ of the Company or any Subsidiary through the first anniversary
of March 22, 1997 (the "Date of Grant") to the extent of an additional 33% of
the shares covered hereby after the Optionee shall have been in the continuous
employ of the Company or any Subsidiary through the second anniversary of the
Date of Grant and to the extent of an additional 34% of the shares covered
hereby after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary through the third anniversary of the Date of Grant.
For purposes of this Agreement, the employment of the Optionee with the Company
or a Subsidiary shall not be deemed interrupted, and the Optionee shall not be
deemed to have ceased to be an employee of the Company or any Subsidiary by
reason of the transfer of his employment among or between the Company and its
Subsidiaries. For the purpose of this paragraph, leaves of absence approved by
the Board of Directors of the Company, or any committee thereof, for illness,
military or government service, or other cause, shall be considered as
employment.
(c) To the extent exercisable, the Option may be exercised in
whole, or in part from time to time, until expiration as provided in Section
1(d).
(d) This Option shall terminate on the earliest of the following
dates:
(i) On the date on which the Optionee ceases to be an employee
of the Company or a Subsidiary unless he ceases to be such an employee in a
manner described in (ii) or (iii) below.
(ii) On the later to occur of (A) the second anniversary of the
Commencement Date (as defined in the Employment Agreement) or (B) 60 days after
the Optionee ceases to be an employee of the Company or any Subsidiary if (I)
Optionee retires from employment with the Company or any Subsidiary after
reaching the age of 65 years, or (II) Optionee's employment is terminated
pursuant to Section 7(d) of the Employment Agreement.
(iii) On the later to occur of (A) the second anniversary of the
Commencement Date (as defined in the Employment Agreement) or (B) 90 days after
the date on which Optionee's employment is terminated as a result of Optionee's
death or Disability (as defined in the Employment Agreement).
(iv) Ten years from the Date of Grant.
In the event the Optionee shall intentionally commit an act
materially inimical to the interests of the Company or a Subsidiary, and the
Board shall so find, the Option shall terminate at the time of such act,
notwithstanding any other provision of this Agreement.
Nothing in this Section 1(d) shall be construed to modify or
enlarge the rights of the Optionee and the conditions of exercising this Option
as set forth in Section 1(b) hereof, and at no time shall any right to exercise
this Option accrue to the Optionee unless and to the extent that the conditions
set forth in Section 1(b) shall have been satisfied.
(e) Nothing contained in this Agreement shall limit whatever
right the Company or any Subsidiary might otherwise have to terminate the
employment of the Optionee.
2. Exercise; Payment for Shares.
(a) This Option shall be exercised by Optionee by delivery to
the Company of (i) an Exercise Notice in the form attached to this Agreement as
Annex A, appropriately completed and duly executed and dated by the Optionee,
(ii) payment in full of the Option Price for the number of shares which the
Optionee is purchasing hereunder as required by Section 2(b), and (iii) payment
in full to the Company of any amounts required to be paid pursuant to Section
2(c).
(b) The Option Price shall be payable (i) in cash or by check
(certified, personal or bank check) acceptable to the Company, (ii)
nonforfeitable unrestricted shares of Common Stock which are already owned by
the Optionee and have a value at the time of exercise that is equal to the
Option Price, or (iii) a combination of the foregoing.
(c) If the Company shall be required to withhold any Federal,
state, local or foreign tax in connection with exercise of the Option, it shall
be a condition to such exercise that the Optionee pay or make provision
satisfactory to the Company for payment of all such taxes.
3. Change in Control; Adjustments.
(a) Upon the earlier to occur of (i) Optionee's death or
Disability, (ii) Optionee's termination of employment pursuant to Section 7(d)
of the Employment Agreement or (iii) a Change in Control (as hereinafter
defined), the Option shall, notwithstanding Section 1(b), become immediately
exercisable in full. If any event or series of events constituting a Change in
Control shall be abandoned, the effect thereof shall be null and of no further
force and effect and the provisions of Section 1(b) shall be reinstated but
without prejudice to any exercise of the Option that may have occurred prior to
such nullification.
(b) (i) The Board may make or provide for such adjustments in
the number and kind of shares of the Company's Common Stock covered by the
Option and in the Option Price, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, spin-out,
split-off, split-up, reorganization, partial or complete liquidation or other
distribution of assets, issuance of warrants or other rights to purchase
securities or any other corporate transaction or event having an effect similar
to the foregoing.
(ii) In the event of any such transaction or event, the Board
may provide in substitution for the Option such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require in connection therewith the surrender of this Option.
4. No Transfer of Option.
The Option may not be transferred by the Optionee except by will
or the laws of descent and distribution. The Option may not be exercised during
the Optionee's lifetime except by the Optionee or, in the event of the
Optionee's legal incapacity, by his guardian or legal representative acting in a
fiduciary capacity on behalf of the Optionee under state law and court
supervision.
5. Modification of Option.
The Option may be amended by the Board; provided that no such
amendment that adversely affects the Optionee shall be effective without the
consent of the Optionee.
6. Limitations on Exercise of Option.
The Option shall not be exercisable if such exercise would
involve a violation of any applicable Federal or state securities law and unless
under such laws at the time of exercise the shares purchasable upon exercise are
exempt, are the subject matter of an exempt transaction, are registered by
description or by qualification, or at such time are the subject matter of a
transaction which has been registered by description.
7. Rights as Stockholder.
The holder of this Option shall not be, nor have any of the
rights or privileges of, a holder of the Company's Common Stock in respect of
any shares purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
8. Fractional Shares.
The Company shall not be required to issue any fractional shares
of Common Stock pursuant to the Option.
9. Defined Terms. As used in this Agreement,
(a) "Change in Control" means the occurrence of any of the
following events:
(i) The execution by the Company of an agreement for the merger,
consolidation or reorganization into or with another corporation or other legal
person; provided, however, that no such merger, consolidation or reorganization
shall constitute a Change in Control if as a result of such merger,
consolidation or reorganization not less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the sale
or other transfer of all or substantially all of its assets to another
corporation or other legal person; provided, however, that no such sale or other
transfer shall constitute a Change in Control if as a result of such sale or
transfer not less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") disclosing that
any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2)
of the Exchange Act) other than Terrence D. Daniels or any of his affiliates has
or intends to become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing a majority or more of the combined
voting power of the then-outstanding Voting Stock, including, without
limitation, pursuant to a tender offer or exchange offer;
(iv) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof; provided,
however, that for purposes of this subsection (iv) each director who is first
elected, or first nominated for election by the Company's stockholders, by a
vote of at least two-thirds of the directors of the Company (or a committee
thereof) then still in office who were directors of the Company at the beginning
of any such period shall be deemed to have been a director of the Company at the
beginning of such period; or
(v) Except pursuant to a transaction described in the proviso to
subsection (i) of this definition, the Company adopts a plan for the liquidation
or dissolution of the Company.
(b) "Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in which the Corporation has
a direct or indirect ownership or other equity interest.
EXECUTED at Niles, Illinois as of the 22nd day of March, 1997.
STIMSONITE CORPORATION
By /s/Terrence D. Daniels
-------------------------
Terrence D. Daniels
Chairman of the Board
ACCEPTED AND AGREED
By /s/Robert E. Stutz
- ---------------------
Robert E. Stutz
<PAGE>
ANNEX A
to
Nonqualified Stock Option Agreement
Form of Exercise Notice
Pursuant to the Non-Qualified Stock Option Agreement dated as of
March __, 1997 between the undersigned and Stimsonite Corporation (the
"Company"), the undersigned hereby elects to exercise his option as follows:
(a) Number of shares purchased:
(b) Total purchase price ((a) x Option Exercise Price): $
Please issue a single certificate for the shares being purchased
in the name of the undersigned. The registered address on such certificate
should be:
The undersigned's social security number is: .
Date: ________________ ____________________________________
Optionee
EXHIBIT 10.3
STIMSONITE CORPORATION
EXECUTIVE OFFICERS
1997 INCENTIVE COMPENSATION PLAN
SUBJECT:
Incentive Compensation Plan for the Executive Officers of the Company for the
time period of January 1, 1997 through December 31, 1997.
PURPOSE:
To institute a compensation package providing a monetary incentive to meet and
exceed predetermined financial goals and personal objectives. Nothing herein is
meant to guarantee or should be construed as guaranteeing employment for a
specific term or the payment of any bonus (hereunder or otherwise).
INCENTIVE COMPENSATION:
Each Executive Officer will be eligible for an annual incentive bonus ("Target
Bonus") equal to a set percentage of the Executive Officer's 1997 year ending
base salary ("Base Salary"). The Target Bonus has two components: (i) Financial
Objective Target Bonus; plus (ii) Personal Objective Target Bonus. The criteria
for earning the Financial Objective Target Bonus and the Personal Objective
Target Bonus are customized for each Executive Officer and approved by the
Compensation Committee of the Company's Board of Directors. Refer to Schedule A
for details of the Target Bonus components for each Executive Officer and the
calculation thereof.
Financial Objectives - A Financial Objective Target Bonus is based on the
financial performance of the Company and/or certain product lines. It will
comprise 60% to 90% of the Target Bonus, depending on the individual.
Calculation of the actual payout requires a comparison of actual income against
pre-established Income targets for the Company on a consolidated basis and/or
income targets for various product lines (so called "Earnings Targets").
Depending on the level of actual income of the Company and/or certain product
lines, certain "points" will be earned by the Executive Officer. The points will
be used in a formula, defined below, to compute the bonus payout. If the actual
income is equal to the related Earnings Target, then the Executive Officer would
earn 100 points. If the actual income is less than or more than the Earnings
Target, then the Executive Officer would earn less than or more than 100 points,
as the case may be. No points will be earned unless the actual level of income
is equal to or more than 85% of the relevant Earnings Target. The maximum award
is 200 points.
The award under the financial objective portion of the program can exceed the
Financial Objective Target Bonus In the event that the Company or a product line
achieves earnings in excess of the Earnings Target. The maximum points are
awarded if relevant earnings are at the defined maximum achievement level. The
maximum achievement level can be earned if the Company or a product line
achieves a level of earnings from 110% to 200% of the related Earnings Target.
Upon reaching the maximum achievement level, the Executive Officer receives 200
points.
Personal Performance Objectives - Personal Objectives should be measurable goals
jointly developed by the participant and his or her immediate supervisor and
then approved by the Compensation Committee of the Company's Board of Directors.
A Personal Objective Target Bonus will equal 10% to 40% of the Target Bonus,
depending upon the individual. The Personal Objective Target Bonus is calculated
based on the percentage of completion of each assigned objective. Up to 100
points can be earned for full achievement of all personal objectives.
No Personal Objective Target Bonus will be paid to any Executive Officer unless
the Company's consolidated earnings are at least 85% of the defined Earnings
Target. Additionally, no Personal Objective Target Bonus will be made to any
Executive Officer if the expense level within the functional areas over which
the Executive Officer has defined responsibilities exceeds the budgeted expense
level.
EFFECTIVE DATES:
This plan will be in effect during the 1997 fiscal year subject to the Company's
right to terminate or amend the plan upon thirty (30) days' written notice.
Participants who resign from or are terminated from the Company during the plan
year or prior to the payout date will not receive an award. The payout date will
occur when audited year end statements are available, usually within 60 days of
the end of the fiscal year.
BENEFITS:
Life insurance, long-term disability, the savings and investment plan, and the
capital accumulation plan benefits will be based on the participant's Base
Salary only.
RESOLUTION OF DISPUTES:
In the event of any dispute as to the interpretation or application of the
provisions of this agreement, the decision of the Compensation Committee of the
Company's Board of Directors shall be final and binding on all parties.
COMPLETE AGREEMENT:
This agreement amends, supersedes and entirely replaces all previous agreements
and understandings, oral or written, with respect to incentive compensation
payments and shall constitute the exclusive basis upon which such payments shall
be made during the period in which this agreement remains in effect.
<PAGE>
<TABLE>
Schedule A
TARGET BONUS INFORMATION
- ------------------------
<CAPTION>
Target Composition of Target Bonus
Executive Officer Title Bonus* Financial Personal Objectives
- ----------------- ----- ------ --------- -------------------
<S> <C> <C> <C> <C>
Robert E. Stutz President 50% 90% 10%
Robert M. Pricone VP - Engineering 50% 70% 30%
Michael A. Cherwin VP-Human Resources 35% 60% 40%
Clifford S. Deremo VP-Sales and Marketing 35% 60% 40%
Walter B. Finley VP- Atlanta Operations 35% 60% 40%
Charles L. Hulsey VP-Operations 35% 60% 40%
Thomas C. Ratchford VP-Finance 35% 60% 40%
</TABLE>
* expressed as a percentage of base salary
Payment Formula
Total Incentive Compensation Payment equals A + B where:
A = Financial Objective Target Bonus, under which payment is calculated as:
(Points achieved / 100) x [60% to 90%, depending on the individual]
x (Target Bonus)
AND
B = Personal Objective Target Bonus, under which payment is calculated as:
(Points achieved / 100) x [10% to 40%, depending on the individual]
x (Target Bonus)
Exhibit 11.1
STIMSONITE CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
---------------------------- -----------------------------
Description 3/30/97 3/31/96 3/30/97 3/31/96
- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Average shares outstanding 8,648,501 8,856,400 8,767,592 8,899,129
Net additional shares
assuming dilutive stock
options exercised and proceeds
used to purchase treasury
shares at fair market value 128,871 160,542 138,743 176,259
Options issued within one
year prior to the initial
filing date of the registration
statement for an initial public
offering in accordance with Staff
Accounting Bulletin No. 83 -- 16,259 4,531 22,313
------------- ------------- ------------- -------------
Average number of common
shares and common equivalent
shares outstanding 8,777,372 9,033,201 8,910,866 9,097,701
============= ============= ============= =============
Net income (loss) ($776,000) ($992,000) ($632,000) $2,599,000
============= ============= ============= =============
Per share data:
Net income (loss) ($0.09) ($0.11) ($0.07) $0.29
============= ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000876400
<NAME> STIMSONITE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 178
<SECURITIES> 0
<RECEIVABLES> 17,098
<ALLOWANCES> 809
<INVENTORY> 11,812
<CURRENT-ASSETS> 34,356
<PP&E> 33,860
<DEPRECIATION> 15,338
<TOTAL-ASSETS> 70,744
<CURRENT-LIABILITIES> 18,618
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 23,180
<TOTAL-LIABILITY-AND-EQUITY> 70,744
<SALES> 14,602
<TOTAL-REVENUES> 14,602
<CGS> 10,338
<TOTAL-COSTS> 10,338
<OTHER-EXPENSES> 4,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 578
<INCOME-PRETAX> (1,194)
<INCOME-TAX> (418)
<INCOME-CONTINUING> (776)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (776)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
