SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's common stock, $.01 par value,
held by nonaffiliates of the registrant as of March 1, 1997 was $30,828,990.
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of March 1, 1997 was 8,651,427.
Documents Incorporated by Reference:
Proxy Statement (to be filed) accompanying the notice of the annual meeting of
Stimsonite Corporation's stockholders to be held on May 22, 1997 (Part III).
<PAGE>
STIMSONITE CORPORATION
Form 10-K Annual Report--1996
Table of Contents
<TABLE>
<S> <C>
PART I Page
Item 1. Business.................................................................... 3
Item 2. Properties.................................................................. 11
Item 3. Legal Proceedings........................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......................... 12
Item 4A. Executive Officers of the Registrant........................................ 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....... 14
Item 6. Selected Financial Data..................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 15
Item 8. Financial Statements and Supplementary Data................................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................................. 40
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 41
Item 11. Executive Compensation...................................................... 41
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 41
Item 13. Certain Relationships and Related Transactions.............................. 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 42
Signatures................................................................................ 46
</TABLE>
<PAGE>
PART I
ITEM 1--BUSINESS
The Company
Stimsonite Corporation ("Stimsonite" or the "Company") is one of the
nation's leading manufacturers and marketers of reflective highway safety
products. The Company makes a range of high performance products which are
designed to offer enhanced visual guidance to vehicle operators in a variety of
driving conditions. These products include: highway delineation products, such
as raised reflective pavement markers, thermoplastic pavement marking materials
and related application equipment, construction work zone markers and roadside
and other delineators; optical film products, such as high performance
reflective sheeting used in the construction of highway signs and Protected
Legend(TM) pre-printed sign faces, and precision embossed film, which is used in
internally illuminated airport runway signs, reflective truck markings and a
variety of other products that require optical grade film.
Stimsonite was organized in July 1990 as a Delaware corporation and
acquired substantially all of the assets of the Stimsonite Division of Amerace
Corporation ("Amerace") in August 1990. In May 1995 the Company acquired
substantially all of the assets of Pave-Mark Corporation ("Pave-Mark"), a
manufacturer and marketer of thermoplastic pavement marking materials and
related application equipment used primarily for highway marking.
Products
Highway Delineation Products
The Company is one of the nation's leading manufacturers and suppliers
of reflective highway delineation products. Reflective highway delineation
devices are installed on or near roadways to offer visual guidance in a variety
of driving conditions, such as night, fog and other inclement conditions. These
devices can be mounted horizontally on road surfaces, ramps and bridges to
demarcate traffic lanes and roadway surfaces, vertically on obstructions (such
as construction work zone barriers, bridge abutments and guard rails) within or
near the roadway to alert drivers that such obstructions exist, or mounted to
posts to outline the edge of the roadway and guide motorists through critical
locations and turns. Within this product line, the Company offers different
families of products to its customers designed specifically for use in a variety
of traffic, road and weather conditions.
The Company's highway delineation products are marketed to highway
contractors, and state and local highway departments and traffic engineers, to
address a number of delineation problems presented by different traffic and road
conditions. The Company's sales of highway delineation products totaled $75.5
million, $59.7 million, and $49.0 million in 1996, 1995 and 1994, respectively.
Several of the Company's highway delineation products and its
manufacturing processes are patent protected which, together with its extensive
industry experience, the Company believes provide a competitive advantage to the
Company. The Company was the first to introduce successfully in the U.S.
cube-corner delineation devices, sign legends for interstate signs and raised
reflective pavement markers. The Company has also continuously introduced new
and upgraded markers, including the first commercially successful snowplowable
marker and the first glass-faced marker. Over the past several years, the
Company has introduced new improvements and designs to increase product
<PAGE>
durability, extend the product's effective life on the highway and enhance
reflectivity. Many of these innovations are proprietary and are protected by
patents. These innovations have enabled the Company to enhance and maintain its
position as a recognized market leader in highway delineation products.
The Company's products, including its delineation devices, require
replacement over time. While highway marker life is dependent upon the type and
intensity of highway traffic activity, markers used in temperate climates
require replacement on average every three to four years. Snowplowable markers,
which are set in a protective metal casting designed to last the life of the
road (generally seven years), require that the reflective element be replaced
every two to three years.
Raised Reflective Pavement Markers. The Company's raised reflective
pavement markers are available in several variations and designs for use in a
variety of climatic conditions, forming a complete system for delineating lane
lines, center and edge lines, turns, curb dividers and other roadway structures.
These products incorporate a variety of innovative features that offer
significant performance and cost benefits over other raised reflective pavement
markers. These features sustain the higher reflectivity of the Company's
products resulting in lower maintenance costs and improved cost/benefit ratios
for customers. Markers are available in glass-faced, abrasion resistant models
featuring longer life and superior reflectivity. These models incorporate an
abrasion-resistant glass face on the reflex lens which prevents damage to the
lens caused by the presence of grit, sand and road particles that scar, cloud
and ultimately dim the signal of conventional markers. The Company is currently
the only U.S. manufacturer that produces a glass-faced raised reflective
pavement marker.
The Company also offers a low-profile marker with a reduced overall
height, rounded design and smaller surface area that reduces impact forces from
vehicle tires and allows the marker to function longer on softer pavement. In
conjunction with its introduction of this marker, the Company also introduced
the use of flexible adhesives for pavement marker installation which
significantly increases adhesion to the highway surface.
Historically, snowplow blades were a major source of damage to raised
reflective pavement markers which inhibited their use in certain areas. This led
to the Company's development of a "snowplowable" marker. The Company's
snowplowable marker consists of a replaceable reflector assembly protected by a
specially hardened metal casting. The casting is firmly embedded in the pavement
by an epoxy adhesive. The casting is designed with ramps which effectively
permit a traveling snowplow blade to ride up and over the reflector which is
protected by the casting, without damage to the reflector unit, casting or
snowplow blade. Snowplowable models offer Stimsonite's high brightness,
cube-corner reflectors and patented, abrasion-resistant glass faces, and come in
various versions adaptable to areas where frequent high speed plowing or unusual
traffic conditions are encountered.
Thermoplastic Material for Highway Striping. The Company manufactures
and markets a line of thermoplastic material and related application equipment
primarily for highway striping. These products offer long-life and, unlike most
highway striping, do not result in the emission of volatile organic compounds
(VOCs) upon application. These characteristics are in high demand by the
Company's customers. Environmentally safe upon application and durable,
thermoplastic material meets most federal, state and local specifications for
pavement markings. The material is easy to apply, and over its life-cycle is one
of the most cost-effective marking systems.
The Company makes two types of thermoplastic material, alkyd and
hydrocarbon. Alkyd thermoplastic, a maleic-modified glycerol ester resin, is
<PAGE>
composed of a homogeneous blend of high quality, agriculturally-based resins ( a
renewable, natural resource), pigment, filler and glass reflectorizing spheres
which are resistant to the effects of oil and grease. Hydrocarbon thermoplastic
is primarily petroleum-based resins, pigments, fillers and glass spheres.
The Company also makes and sells a line of heat-fused preformed
thermoplastic pavement markings known as Hot Tape (R). This product is designed
to be applied with the use of a simple propane torch. Hot Tape (R) can be
applied quickly without use of extensive crews and equipment, resulting in a
quicker return to a normal traffic flow.
In conjunction with these products, the Company produces and markets a
broad line of application equipment. This equipment is designed to deliver a
combination of outstanding performance and ease of installation.
Construction Work Zone Delineation Products. The Company manufactures
and markets a Construction Work Zone or "CWZ" system as a coordinated grouping
of a number of work zone products, including raised reflective pavement markers,
delineators and sheeting for use in lane marking and identification of other
work zone hazards. The CWZ system's raised reflective pavement markers provide
positive day and night guidance through construction zones, and incorporate
patented design features which enable this product to perform better and, in
particular, to adhere better to pavement surfaces than competitive products. The
Company has also introduced a temporary overlay pavement marker which provides
excellent day and night visibility and installs easily with pressure-sensitive
adhesive and foot pressure. These overlay markers are also relatively easy to
remove and, after removal, do not leave a misleading indication that could
confuse drivers. The CWZ system also offers regular and fluorescent orange
construction zone sheeting, pre-striped barricade reflective sheeting panels,
and a barricade light lens.
Roadside and Other Delineation Products. The Company manufactures
several other types of permanent reflective devices used for highway delineation
purposes. These products include post, guardrail and barrier delineators.
Post-mounted delineators are reflective devices mounted at the side of the
roadway, in series, to indicate roadway alignment. They are primarily guidance
devices providing night visibility of roadway alignment and are particularly
useful during inclement weather conditions.
Optical Film
Highway Signing Material. The Company manufactures and sells a line of
high performance reflective sheeting for a variety of highway and specialty
uses, principally for use in highway traffic signs and construction work zone
products. The Company's high performance sheeting is a thin, acrylic material
which incorporates microscopic cube-corner prisms to achieve its retroreflective
properties. This patented product provides improved day and night visibility at
greater distances than competitive sheeting products that employ glass bead
technology. Stimsonite also employs a patented production process for
manufacturing its high performance reflective sheeting which involves the
continuous formation of precision optical patterns in thin film.
The Company manufactures its reflective sheeting products using complex
patented processes and production equipment. In this process, a microscopic
cube-corner pattern is formed in thin film. This material is further processed
<PAGE>
to create different sheeting constructions and impart different reflective or
diffusing properties necessary for the performance of the Company's different
sheeting products.
Stimsonite's high performance reflective sheeting meets federal
government and industry specifications for retroreflective sheeting.
Stimsonite's ability to produce sheeting which meets these specifications has
enabled the Company to market its line of sheeting products for highway
applications and has led to acceptance of this material. As of December 31,
1996, an improved version of the Company's sheeting material had been approved
in several states which are major purchasers of highway sheeting material.
The Company believes that only the Company and one competitor have the
technical capability to manufacture high intensity reflective sheeting in
48-inch widths. Certain customers purchasing reflective sheeting for use in
refurbishing existing highway signs generally prefer 48-inch width sheeting
because of cost factors.
Protected Legend Pre-Printed Sign Faces. The Company designs,
manufactures and sells ready-to-use Protected Legend (R) reflective sign faces
on rolls which can contain from a dozen to several hundred sign faces per roll.
The sign faces are sold with a pressure-sensitive adhesive backing protected
with an easily removable liner. The ready-to-use sign faces thus offer not only
the viewing efficiency and vivid colors of the Company's high performance
reflective sheeting, but also the convenience of a ready-to-use, peel-and-stick
product for easy application.
Non-Highway Applications. The Company also manufactures precision
embossed film that has non-highway applications in areas where optical
properties are important to product performance. Stimsonite's translucent
reflective sheeting is used to diffuse background lighting and also offers
reflective performance in the event of light source or power failure.
Applications include internally illuminated airport taxiway and runway signs,
and internally illuminated highway signs. The Company's diffusing film is used
to diffuse and disperse transmitted light for maximum efficiency and brightness.
Diffusing film is used to enhance the visibility of low voltage signs, including
exit signs and signs using long-life, low power elements such as light-emitting
diodes. Stimsonite is also marketing specialized film products for use as
reflective conspicuity markings for large truck trailers. Federal regulations
require conspicuity markings on large truck trailers manufactured after December
1, 1993.
Product Development and New Products
Working with its customers, the Company focuses its product development
efforts on products that serve a market need and seeks to identify highway
traffic and safety problems that present niche product opportunities. The
Company's product engineers and manufacturing personnel also actively work to
develop new and innovative production methods to increase efficiencies, lower
production costs and improve product quality.
The Company continues to investigate new product applications for its
highway delineation products, reflective sheeting and precision embossed film
material. The Company continues to conduct an aggressive marketing program to
uncover possible new applications for its precision embossed film.
The Company's expenditures on product research and development were
$2.8 million, $3.1 million and $2.3 million in 1996, 1995 and 1994,
respectively.
<PAGE>
Patents and Proprietary Rights
The Company has over 40 issued U.S. patents, of which 27 cover most of
the Company's current products and existing processes, and has six U.S. patent
applications currently pending. The Company also has over 120 foreign patents
relating to many of its U.S. patents and has over 60 foreign patent applications
currently pending. Stimsonite's patents cover various design aspects of its
products as well as the processes used in their manufacture. The Company
believes that its patents and proprietary production methods, coupled with its
extensive industry experience, provide a key competitive advantage.
The Company has three U.S. patents, expiring between November 1997 and
July 1999, covering the use of glass as an abrasion resistant coating, and its
application to the raised reflective pavement marker face. The Company has
obtained patents covering various aspects of its snowplowable markers. Of these,
four patents, which cover certain design, placement and methods, expire between
April 1996 and April 1997. The Company expects that competition for components
of snowplowable markers will increase as a result of the expiration of certain
of these patents. The Company has recently obtained two new patents pertaining
to its new snowplowable markers. The Company also has obtained patent coverage
on two of its new markers. While the Company has applied for and expects to
receive additional patents relating to new or improved product designs, there
can be no assurance that such patents will issue, or if issued, that such
patents will be effective in protecting the Company from competitors.
The Company has obtained ten U.S. patents (with certain corresponding
foreign patents) and has several patent applications pending covering
Stimsonite's reflective sheeting processes, manufacturing equipment and
products. These patents expire between 2001 and 2011. The Company also has
applications pending on other reflective sheeting and precision embossed film
products.
The Company is continuing to develop new, potentially patentable
products, product enhancements and product designs. The Company's ability to
compete effectively with other companies will depend, in part, on its ability to
maintain the proprietary nature of its technology. Although the Company is the
owner of numerous patents in the United States and foreign countries, there can
be no assurance as to the degree of protection offered by these patents, or the
likelihood that pending patent applications will be issued. Furthermore, there
can be no assurance that others will not independently develop the same or
similar technology, develop around the patented aspects of any of the Company's
products or proposed products, or otherwise obtain access to the Company's
proprietary technology.
The Company has registered Stimsonite(R) as trademarks in the U.S. and
in approximately 25 other countries. The Company believes that the highway
safety industry associates the trade name Stimsonite with the industry leader in
reflective highway safety products.
Foreign Operations
The Company has U.K., Hong Kong and Australian subsidiaries (Stimsonite
Europa Limited, doing business in the U.K. as Simsco, Stimsonite Hong Kong
Limited and Stimsonite Australia Pty Limited, respectively) which act
principally as the Company's sales and marketing arm in these and other
countries. There are significant challenges to conducting business in foreign
countries, including, among other factors, regulatory compliance and approvals,
local acceptance of the Company's products, adaptation and design of products to
meet local requirements and criteria, and fluctuations in foreign exchange
rates. For sales and selected financial information by geographical area, see
Note 15 of "Notes to Consolidated Financial Statements".
<PAGE>
Sales and Marketing
The Company sells its products through an extensive sales and
distribution network that markets the Company's full product line.
The Company's marketing strategy is developed by the Company's
management and is implemented in the U.S. by Stimsonite's national sales
managers and regional and district sales managers. The regional managers work
closely with customers and coordinate a distribution network that includes
manufacturers' representatives and approximately 47 distributors employing
collectively over 250 salespersons. The Company believes that this network and
the Company's relationships with key distributors are competitive strengths in
Stimsonite's business.
The Company markets its products to highway contractors and government
agencies for projects in all 50 states. In 1996, the Company had sales in excess
of $1 million in 19 states. The inability of the Company to do business in any
of these states could have a material adverse affect on the Company's business.
Stimsonite sells its products principally to highway contractors, sign
fabricators, state departments of transportation, and county and city road and
highway departments. Such sales may be to any of the established channels of
distribution or by direct sales depending on the size of the purchase,
competitive pressures in a particular market and other factors. Road and highway
pavement marking and signing requirements are established by each government
entity. The Company's sales force works closely with traffic engineers to
demonstrate the quality and effectiveness of Stimsonite's products and the
control and safety advantages of increased signing and highway pavement marking
use. The Company also works directly with state officials to enhance awareness
of the safety benefits and cost effectiveness of the Company's products.
Traffic engineers responsible for maintaining roads and highways are
faced with an array of issues relating to traffic safety and congestion. The
increasing number of visually impaired drivers and the continued pressure on
highway capacity continually force traffic engineers to reassess their
requirements and priorities. These engineers search for products that improve
highway capacity while maintaining appropriate safety levels and minimizing
ongoing maintenance costs. The Company's sales and marketing strategy is
directed towards understanding these market dynamics, working with, and
responding to the needs of, its customers and demonstrating the relative
advantages of Stimsonite products.
The Company's international sales and marketing is implemented by both
local sales office staffs, commissioned regional managers and exclusive sales
agents. Stimsonite's European sales and marketing are conducted through
Stimsonite Europa, which maintains sales offices in Bristol, England.
Commissioned regional sales managers coordinate the Company's sales and
marketing activities in the Middle East and Central and South America.
Stimsonite Australia Pty Ltd. coordinates the Company's sales and marketing
activities in the Southern Pacific Rim. Stimsonite Hong Kong Limited coordinates
sales and marketing activities in China and the Northern Pacific Rim. Stimsonite
also has approximately 40 exclusive agents situated throughout the international
markets that employ collectively over 150 sales persons.
Seasonality
The Company's sales are seasonal, with peak sales activity normally
occurring in the second and third fiscal quarters. For a discussion of quarterly
<PAGE>
results of operations, backlog and the effects of seasonality on inventory
levels, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Competition
The Company believes its principal competitive advantages are its
long-standing reputation for quality and reliability, its proprietary and
patent-protected technology, its understanding of its markets and customer
needs, and its well-established sales and distribution networks. See "Patents
and Proprietary Rights" above.
The Company believes that it has a substantial U.S. market share in its
highway delineation product line due to its patented and proprietary technology
and its experience in its markets. The Company competes with one principal
competitor, Ray-O-Lite, a division of Pac-Tec Inc., in the U.S. market for
raised reflective pavement markers. While Ray-O-Lite competes through a network
of distributors, the Company emphasizes direct sales. The Company has two
significant competitors in the U. S. market for thermoplastic material,
Cataphote Inc., a subsidiary of Sovitec Cataphote Inc., and Swarco America, Inc.
a subsidiary of Swarco Holding AG. In situations where sealed bids are required
by government agencies, the Company competes on price. In other situations, the
Company primarily emphasizes product quality, performance and service in
addition to price. The Company competes with a number of other regional
companies in the international highway delineation market for raised reflective
pavement markers.
Stimsonite has one significant competitor in the market for highway
signing, Minnesota Mining and Manufacturing Company ("3M"), which the Company
believes holds a dominant U.S. and international market share position. The
Company competes in this area on the basis of product quality and performance,
and price. In the precision embossed film material market, the Company competes
with 3M and Reflexite Corporation.
Raw Materials
The principal raw materials used by the Company to manufacture its
products are acrylic, resins, glass beads, sand, calcium carbonate, titanium
dioxide and cast iron. The Company obtains the raw materials it uses to
manufacture its products from commercial sources. Although the Company's
practice is to seek cost savings and enhance quality by purchasing from a
limited number of suppliers, substantially all of the raw materials needed to
manufacture the Company's products are readily available from alternate sources
of supply.
Environmental Matters
The Company is subject to environmental laws and regulations governing
emissions to the air, discharges to waterways, and generation, handling,
storage, transportation, treatment and disposal of waste materials. The Company
is also subject to other federal and state laws and regulations regarding health
and safety matters. The Company believes that it has complied with these laws in
all material respects.
<PAGE>
Customers
Stimsonite sells its products in the U.S. principally to highway
contractors, sign fabricators, distributors, state departments of
transportation, and county and city road and highway departments. A significant
portion of the Company's U.S. sales are effected through fixed price contracts
awarded by competitive bids submitted to state and local agencies. The terms and
conditions of such sales and the contract procurement process are subject to
extensive regulation by various federal, state and local authorities in the U.S.
and by governmental authorities of other countries. Substantially all of these
contracts are not subject to renegotiation of profits or unilateral cancellation
and involve product shipment within one year of receipt of the order. The
Company sells its products outside of the U.S. primarily to independent sales
agents who resell to local governmental authorities and their contractors.
Highway delineation and sign products may not be used on most highways unless
they meet state and local specifications which frequently incorporate relevant
industry and federal standards and testing guidelines. The Company's products,
including its high performance reflective sheeting, meet both these industry and
federal procurement specifications.
Employees
As of March 1, 1997, the Company had approximately 374 full-time
employees, of which approximately 173 were hourly employees and 201 were
salaried employees. None of the Company's employees is represented by a labor
union or is the subject of a collective bargaining agreement.
<PAGE>
ITEM 2--PROPERTIES
The Company maintains its corporate headquarters and manufacturing,
administrative, sales and product development facilities in Niles, Illinois. The
Company also manufactures products in facilities located in Atlanta, Georgia;
Mount Prospect, Illinois; Adelanto, California and Kilsyth, Australia. The
Company's eight principal facilities, all of which are leased, are as follows:
<TABLE>
<CAPTION>
Approximate
Square
Location Footage Function Lease Expiration
- -------- ------- -------- ----------------
<S> <C> <C> <C>
Niles, Illinois 74,291 Administration, manufacture, sales, January 2007 renewable through
product development, engineering 2017
and warehouse
Atlanta, Georgia 100,000 Administration, manufacture, sales, August 2008
product development, engineering
and warehouse
Atlanta, Georgia 42,000 Manufacture and warehouse October 1997 renewable through
October 1998
Atlanta, Georgia 46,000 Manufacture and warehouse April 2004 renewable through
April 2009
Mount Prospect, Illinois 49,853 Manufacture, product development, December 2001 renewable
engineering and warehouse through December 2006
Adelanto, California
15,000 Manufacture and warehouse January 2001
Bristol, England 2,640 Sales and warehouse April 1998
Kilsyth, Australia 16,000 Manufacture, sales and warehouse June 1997
</TABLE>
The Company also leases public warehouse space in other U.S. locations.
The Company owns a 20 acre site in Waukegan IL. Situated on this site
is a 137,000 square foot building. The building is an enclosed shell which could
be occupied upon a build out of the office space. The Company intends to sell
this site and has listed the property with a commercial broker.
The Company's manufacturing facilities are equipped with specialized
equipment and utilize extensive automation for the manufacture of its products.
The Company believes that substantially all of its property and equipment are in
good operating condition.
The Company currently uses the major portion of its manufacturing
capacity but has determined that its capacity is adequate for 1997. The Company
expects to expand capacity in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations---Liquidity and Capital
Resources."
<PAGE>
ITEM 3--LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation that it
considers to be in the normal course of its business. No such litigation has
resulted in any material adverse loss to date and the Company is not engaged in
any legal proceedings, as of the date hereof, which the Company expects
individually or in the aggregate to have a material adverse effect on the
Company's financial condition or results of operations. The Company maintains
product liability insurance in amounts which it believes to be adequate for its
business.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of holders of the Company's common
stock during the fiscal quarter ended December 31, 1996.
ITEM 4A--EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age and current position(s) of each executive officer of the
Company as of March 24, 1997 is as follows:
<TABLE>
<CAPTION>
Present Principal Position
Name Age and Offices with the Company
---- --- ----------------------------
<S> <C> <C>
Robert E. Stutz.......................... 44 President and Chief Executive Officer
Michael A. Cherwin....................... 40 Vice President-Human Resources
Clifford S. Deremo....................... 40 Vice President-Sales and Marketing
Walter B. Finley......................... 49 Vice President-Atlanta Operations
Charles L. Hulsey........................ 53 Vice President-Operations
Robert M. Pricone........................ 52 Vice President-Engineering
Thomas C. Ratchford...................... 48 Vice President-Finance, Chief Financial Officer,
Treasurer and Secretary
</TABLE>
Robert E. Stutz became the President and Chief Executive Officer and a
director of the Company on March 22, 1997. From 1991 to March 21, 1997, Mr.
Stutz was Vice President and General Manager, Automotive Controls Division, of
Cherry Electrical Products, a Division of the Cherry Corporation, a designer,
manufacturer and marketer of customer electrical, electronic and semi conductor
components in automotive, computer and consumer and commercial markets. Prior to
1991, Mr. Stutz was Vice President - Worldwide Sales and Marketing for
Carlingswitch, Inc., a manufacturer of specialty switches and circuit breakers.
Michael A. Cherwin has served as Vice President - Human Resources since
1992. From 1990 to 1992, Mr. Cherwin served as Director of Human Resources of
the Company. Prior to 1990, Mr. Cherwin was the director of human resources at
the Stimsonite Products Division of Amerace Corporation (a manufacturer of
electrical utility, battery separator and traffic safety products), from which
the Company purchased the majority of its assets.
Clifford S. Deremo has served as Vice President - Sales and Marketing
since February 1995. Prior to February 1995, Mr. Deremo served in various
positions with FMC Corporation (a diversified manufacturer of chemicals,
machinery and defense equipment). From 1992 to February 1995, Mr. Deremo was the
<PAGE>
worldwide business manager for FMC's converting equipment division. From 1990 to
1992, he was the business manager for the FMC's palletizer products division.
Prior to 1990, Mr. Deremo was general sales manager of FMC's packaging systems
division.
Walter B. Finley has served as Vice President - Atlanta Operations since
January 1996. From June 1995 to December 1995, Mr. Finley served as the General
Manager of the Company's Atlanta operations. Prior to June 1995, Mr. Finley was
the Executive Vice President - CFO for Pave-Mark Corporation, substantially all
the assets of which were purchased by the Company in the second quarter of 1995.
Charles L. Hulsey has served as Vice President - Operations since 1990.
Prior to 1990, Mr. Hulsey was the vice president of operations at the Stimsonite
Division.
Robert M. Pricone has served as Vice President - Engineering since April
1993. From 1990 to April 1993, Mr. Pricone served as Vice President of Research
and Development of the Company. Prior to 1990, Mr. Pricone was vice president
and project director of reflective sheeting at the Stimsonite Division.
Thomas C. Ratchford has served as Vice President - Finance, Chief
Financial Officer, Treasurer and Secretary since October 1993. From 1992 to
1993, Mr. Ratchford was executive vice president - finance and administration
for American Communications Services, Inc. (a development stage company in the
telecommunications service industry). Prior to 1992, Mr. Ratchford was employed
by The Paxall Group, Inc. (a manufacturer of customized packaging machinery)
where he served as vice president - finance and administration.
Executive officers are elected annually and, subject to the terms of any
applicable employment agreements, serve at the pleasure of the Company's Board
of Directors.
<PAGE>
PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Stimsonite's common stock is traded on The Nasdaq Stock Market's National
Market System under the symbol STIM. As of March 1, 1997, there were
approximately 77 stockholders of record, including brokerage firms and other
nominees. The following table sets forth, for the fiscal quarters indicated, the
high and low bid prices for the common stock on the National Market System.
1996 High Low
- ---- ---- ---
First Quarter $10.00 $ 7.75
Second Quarter 9.75 7.75
Third Quarter 8.50 6.125
Fourth Quarter 6.75 5.375
1995
First Quarter $14.25 $10.25
Second Quarter 13.00 9.50
Third Quarter 12.50 10.00
Fourth Quarter 13.50 9.75
Stimsonite has never declared or paid any cash dividends on its capital
stock. Stimsonite currently intends to retain its future earnings, if any, to
finance operations, expand its business and repay outstanding debt and does not
anticipate paying cash dividends on its common stock for the foreseeable future.
ITEM 6--SELECTED FINANCIAL DATA.
Selected Financial Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
Income Statement Data 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $82,712 $68,119 $55,941 $45,929 $39,658
Gross Profit 26,877 26,494 28,565 23,816 19,850
Operating Income (Loss) 1,971 7,441 12,168 9,395 7,401
Net Income (Loss) (848) 2,610 6,136 (1,286) 2,110
Net Income (Loss) per Common Share ($0.09) $0.29 $0.68 $0.17 $0.28
Average Shares Outstanding 8,975 9,119 9,075 7,611 7,573
- --------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- --------------------------------------------------------------------------------------------------------------------
Total Assets $71,870 $67,596 $50,936 $48,878 $41,673
Long-Term Debt 28,300 24,703 15,523 24,092 31,324
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ITEM 7--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 as of and for the
years ended December 31, 1996, 1995 and 1994. The following should be read in
conjunction with the consolidated financial statements and related notes
appearing elsewhere herein.
OVERVIEW
The Company manufactures and markets highway safety products used in a
variety of applications where motorist guidance is important. In May 1995, the
Company acquired substantially all of the assets of Pave-Mark Corporation
("Pave-Mark"). Pave-Mark manufactures and markets thermoplastic pavement marking
materials and related application equipment used primarily for highway marking.
These product lines have historically generated lower margins than the Company's
other lines due to a substantially more competitive environment. The results of
operations, assets, liabilities and cash flows attributable to this acquisition
have been included in the Company's consolidated financial statements from the
date of the acquisition.
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 12.5%, 14.2% and 14.8% of net sales in 1996, 1995 and 1994,
respectively. See Note 15 of Notes to Consolidated Financial Statements. 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.
Table 1 below sets forth unaudited financial data for each of the
fiscal quarters of 1996 and 1995. This quarterly information has been prepared
on the same basis as the annual consolidated financial statements and, in
management's opinion, contains all normal recurring adjustments necessary to
state fairly the information set forth therein. The operating results for any
quarter are not necessarily indicative of results for any future period. The
comparison of the first two quarters of 1996 and 1995 is affected by the
purchase of the assets of Pave-Mark in the second quarter of 1995. The operating
results of Pave-Mark have been incorporated since the end of May 1995.
<PAGE>
Table 1
Quarterly Results
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995
---------------------------------------- ----------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $13,425 $24,240 $28,834 $16,213 $7,911 $16,111 $26,298 $17,799
Cost of Goods sold 9,030 15,099 18,113 13,593 4,878 8,744 15,722 12,281
Gross Profit 4,395 9,141 10,721 2,620 3,033 7,367 10,576 5,518
- --------------------------------------------------------------------------------------------------------------------
Operating Expenses
- --------------------------------------------------------------------------------------------------------------------
Selling and Administrative 3,845 3,653 3,958 3,804 2,695 3,182 3,910 3,362
Research and Development 792 618 689 701 750 792 803 744
Amortization of Intangible 709 710 711 716 697 702 704 712
Assets
Restructuring Charge ---- ---- ---- 4,000
Total Operating Expenses 5,346 4,981 5,358 4,000 4,142 4,676 5,417 4,818
Operating Income (Loss) (951) 4,160 5,363 (6,601) (1,109) 2,691 5,159 700
Interest Expense 674 740 660 606 522 610 756 718
Joint Venture Partnership ---- ---- ---- ---- ---- 89 19 3
Loss
Other Income ---- ---- ---- ---- ---- ---- ---- ----
Income (Loss) Before
Provision (Benefit) for Income
Taxes and Extraordinary Item (1,625) 3,420 4,703 (7,207) (1,631) 1,992 4,384 (21)
Provision (Benefit) for Income
Taxes (633) 1,356 1,913 (2,829) (650) 798 1,750 216
Extraordinary Item,
Net of Tax Benefit ---- ---- 332 ---- ---- ---- ---- ----
Net Income (Loss) (992) 2,064 2,458 (4,378) (981) 1,194 2,634 (237)
- --------------------------------------------------------------------------------------------------------------------
Net Income (Loss)Per Common
Share ($0.11) $0.23 $0.27 ($0.49) ($0.11) $0.13 $0.29 ($0.03)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
FORWARD LOOKING STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
This document contains "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995, including (without
limitation) statements as to expectations and beliefs regarding future financial
performance and assumptions underlying the foregoing relating to product demand,
competition, ability to meet short and long term debt requirements, expected
cash flows from operations, and projected capital spending levels. The actual
results of 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>
RESULTS OF OPERATIONS
Table 2 below sets forth, for the periods indicated, the percentage of
sales of certain items in the Company's consolidated statements of operations
and other data and the percentage change in each item from the prior period.
Table 2
<TABLE>
<CAPTION>
Percent of Net Sales Percent Percent of Net Sales Percent
Year Ended Change From Year Ended Change From
1996 1995 Prior Period 1995 1994 Prior Period
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 21.4% 100.0% 100.0% 21.8%
Cost of Goods Sold 67.5 61.1 34.1 61.1 48.9 52.0
Gross Profit 32.5 38.9 1.4 38.9 51.1 (7.3)
Selling and Administrative 18.5 19.3 16.1 19.3 20.3 15.7
Research and Development 3.4 4.6 (9.4) 4.6 4.1 35.9
Amortization of Intangibles 3.4 4.1 1.1 4.1 4.9 2.1
Restructuring Charge 4.8 --- N/A --- --- N/A
Operating Income 2.4 10.9 (73.5) 10.9 21.8 (38.8)
Interest Expense 3.2 3.8 2.8 3.8 3.4 36.3
Joint Venture Partnership Loss --- 0.2 N/A 0.2 0.4 (45.9)
Other Income --- --- N/A --- 0.4 N/A
Income (Loss) before Provision
(Benefit) for Income Taxes and
Extraordinary Item (0.8) 6.9 N/A 6.9 18.3 (53.9)
Extraordinary Item,
Net of Tax Benefit 0.4 --- N/A --- (0.2) N/A
Net Income (Loss) (1.0)% 3.8% N/A 3.8% 11.0% (57.5%)
- ------------------------------------------------------------------------------------------------------
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales in 1996 were $82.7 million, an increase of $14.6
million or 21.4% compared to 1995. Excluding Pave-Mark, which was acquired in
May 1995, revenues increased by 2.9%. Domestic highway delineation product
sales, excluding Pave-Mark's products, increased by 6.4% due to greater market
demand as a result of an uninterrupted flow of federal funds for highway
projects in fiscal year 1996. Revenues for optical film fell by 15.3% due
principally to the loss of certain low bid contracts in 1996. In addition, the
Company believes many customers delayed optical film purchases in the first
three quarters of 1996 in anticipation of the Company's release in the fourth
quarter of an improved product. Sales to customers outside of the U. S.
increased by 6.7% due principally to sales of thermoplastic products
manufactured by Pave-Mark. Excluding Pave-Mark products, sales increased by
3.9%.
COST OF GOODS SOLD. Cost of goods sold increased 34% to $55.8 million
(67.5% of sales) in 1996 from $41.6 million (61.1% of sales) in 1995, primarily
due to the inclusion of twelve months sales of Pave-Mark products that provide a
lower gross margin than Stimsonite's other product lines. Fiscal 1995 included
only 7 months of sales of Pave-Mark products. Excluding Pave-Mark, the cost of
goods sold totaled $29.8 million (56.9% of sales) compared to $27.0 million
(53.0% of sales) in 1995 or an increase of 10.4%. This increase in the cost of
goods sold was the result of higher manufacturing costs and an increase in the
provision for inventory obsolescence, particularly for optical film. The
provision for the optical film product was due to the Company's introduction of
an improved product in the fourth quarter of 1996.
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expenses
in 1996 were $15.3 million, compared to $13.1 million in 1995. The $2.2 million
increase was principally attributable to the inclusion of a full year of
expenses for Pave-Mark in 1996, and to $0.5 million of additional sales
commissions paid to outside sales representatives.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was
$2.8 million in 1996 compared with $3.1 million in 1995. The decrease was
largely due to realization in 1996 of additional revenue from sales of insert
tools which offsets research and development expenses. As a percentage of net
sales, research and development expense totaled 3.4% in 1996 and 4.5% in 1995.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
totaled $2.8 million in both 1996 and 1995. These intangible assets relate
primarily to the acquisition of principally all of the Company's assets in 1990
and Pave-Mark in 1995. Intangible assets are being amortized over varying useful
lives, the longest of which is 20 years. Accordingly, the Company has incurred
and will continue to incur significant non-cash expenses relating to the
amortization of these assets. A further result of these amortization expenses
also reduce cash payments for taxes.
See Notes 6 and 10 of Notes to Consolidated Financial Statements.
RESTRUCTURING CHARGE. The Company incurred a $4.0 million restructuring
charge in the fourth quarter of 1996. Substantially all of the charge related to
anticipated losses in conjunction with the proposed sale of land and a building
under construction in Waukegan, IL. In April 1996, the Company purchased 20
acres of undeveloped land in Waukegan, IL for the purpose of constructing a new
manufacturing and office complex. The Company intended to relocate its principal
manufacturing and office functions from Niles, IL to the Waukegan site during
1997. The Company initiated the construction of a 137,000 square foot building
on the land in May 1996. In December 1996, when the facility was partially
completed, the Company decided to remain in its Niles, IL facilities and not
relocate any operations to Waukegan. The building is an enclosed shell which
could be occupied upon a build-out of the office facilities. The site is
currently listed for sale with a commercial broker. The building was constructed
to meet the specific manufacturing requirements of the Company, including
special electrical power requirements and environmental safety features. The
Company believes that the cost of certain unique features of the building may
not be recoverable. In addition, the 20 acre land site is approximately twice as
large as is necessary for the existing building and the cost of the additional
land may not be recoverable. The restructuring charge included amounts relating
to unrecoverable costs and the marketing expenses associated with prospective
sale of the building.
The restructuring charge also includes certain other costs associated
with a series of actions to reduce expenses. Among these actions were a 10%
reduction in the salaried workforce and consolidation into the Niles, IL
facility of several administrative functions that were previously performed in
Atlanta.
OPERATING INCOME. Operating income was $2.0 million in 1996 compared to
$7.4 million in 1995, a decrease of $5.4 million. Operating income as a
percentage of sales was 2.4% in 1996, compared to 10.9% in 1995. The decrease as
a percent of sales was principally due to the inclusion of Pave-Mark (with its
historically lower margin products) for a full year. Excluding the 1996
restructuring charges operating income would have been $6.0 million in 1996, a
decrease of $1.4 million from 1995.
INTEREST EXPENSE. Interest expense for 1996 was $2.7 million, which was
$0.1 million higher than in 1995. In July of 1996, the Company refinanced its
long term debt under a new unsecured credit agreement (see discussion under
Liquidity and Capital Resources). Total borrowings (including current
<PAGE>
maturities) increased from $27.9 million at December 31, 1995 to $30.8 million
at December 31, 1996. The increase in borrowings resulted from $6.4 million of
debt incurred to purchase the land and fund construction costs at the Waukegan,
IL facility and $1.3 million of debt incurred to fund the purchase in 1996 of
188,500 shares of the Company's common stock, offset by favorable cash flow from
operations.
INCOME TAXES. The Company incurred a loss in 1996. Accordingly, the
provision for income taxes in 1996 was a benefit of $0.2 million, representing
an effective tax benefit rate of 27.2% compared to a tax of $ 2.1 million,
representing an effective tax rate of 44.8% in 1995. The current year decrease
in the effective tax rate was the result of an inability to realize tax benefits
on certain foreign net operating loss carry forwards.
EXTRAORDINARY ITEM. As a result of the Company refinancing its long
term debt, the Company recorded a $0.3 million after-tax extraordinary charge
attributable to the accelerated write-off of deferred financing fees related to
the Company's prior credit facility.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales in 1995 were $68.1 million, an increase of $12.2
million or 21.8% compared to 1994. Excluding Pave-Mark, revenues declined by
8.8%. Highway delineation product sales, excluding Pave-Mark's products,
declined by 14.9% due to soft market demand which the Company believes was
principally caused by uncertainty over the continued flow of federal funds for
highway projects beyond fiscal year 1995. Revenues for optical film rose by
14.9% due principally to expansion into new markets. Sales to customers outside
of the U. S. increased by 17.0% due principally to Pave-Mark. Excluding
Pave-mark, international revenue increased 3.2%.
COST OF GOODS SOLD. Cost of goods sold was $41.6 million (61.1% of
sales) in 1995 compared to $27.4 million (48.9% of sales) in 1994. These
increases were primarily due to the inclusion of Pave-Mark products that provide
a lower gross margin than Stimsonite's other product lines. Excluding Pave-Mark,
the cost of goods sold totaled $27.0 million (53.0% of sales) compared to $27.4
million (48.9% of sales) in 1994. The corresponding percentage increase was due
primarily to a change in the sales mix which favored lower margin products.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses in 1995 were $13.1 million, compared to $11.4 million in 1994.
Substantially all of the $1.7 million increase was attributable to the acquired
operations of Pave-Mark.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expense was
$3.1 million in 1995 and $2.3 million in 1994. The $0.8 million increase was due
to increased spending for new product development and existing product
improvements. As a percentage of net sales, such expense totaled 4.5% in 1995
and 4.1% in 1994.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
totaled $2.8 million in both 1995 and 1994.
OPERATING INCOME. Operating income was $7.4 million in 1995 and $12.2
million in 1994, a decrease of $4.8 million. Operating income as a percentage of
sales was 10.9% in 1995, compared to 21.8% in 1994. The decrease was due to the
inclusion of Pave-Mark (with its historically lower margin products) and lower
sales of other products without a corresponding decrease in expenses. Excluding
Pave-Mark, operating income was $6.7 million or 13.1% of net sales.
<PAGE>
INTEREST EXPENSE. Interest expense for 1995 was $2.6 million, an
increase of $0.7 million or 36.3% compared to 1994. The increase was primarily
due to increased borrowings under the revolving portion of the Company's former
credit agreement, which were used primarily to purchase the assets of Pave-Mark
and to support higher levels of working capital. Total borrowings (including
current maturities) increased from $18.2 million at December 31, 1994 to $27.9
million at December 31, 1995.
INCOME TAXES. The provision for income taxes in 1995 was $2.1 million,
representing an effective tax rate of 44.8% compared to $ 4.0 million,
representing an effective tax rate of 39.2% in 1994. The lower effective tax
rate in 1994 resulted from certain tax benefits arising from the dissolution of
the Company's German subsidiary. The 1995 increase in the effective tax rate was
partially offset by a reduction of the valuation allowance related to foreign
net operating loss carryforwards.
EXTRAORDINARY ITEM. The extraordinary expense in 1994 related to the
elimination of a portion of previously deferred financing fees attributable to
the prepayment of amounts outstanding under the Company's credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
During the two years ended December 31, 1996, the Company has relied on
internally generated funds and revolving credit borrowings to finance working
capital requirements and capital expenditures. In July 1996, the Company
refinanced its long term debt under a new unsecured credit agreement. The terms
of the new credit agreement provide a credit facility totaling $45.0 million, of
which $20.0 million is revolving credit that is due on June 30, 2000, bearing
interest (at the Company's option) at prime or LIBOR plus a margin of 75 to 150
basis points based on the Company's debt to cash flow ratio for the preceding
four quarters. Amounts available under the revolving loan are subject to certain
borrowing base limitations. As of December 31, 1996, the maximum amount
available, taking into account these borrowing limitations, was $20.0 million of
which $6.425 million were outstanding borrowings. The balance of the credit
facility is a $25.0 million term loan due in quarterly installments of $0.625
million with a final payment of $8.75 million due on June 30, 2003 and bearing
interest (at the Company's option) at prime plus 25 basis points or LIBOR plus
180 basis points. As of December 31, 1996, borrowings under the term facility
bore interest at 7.4875%. The new credit facility establishes certain financial
covenants, including covenants relating to the Company's funded debt to EBITDA
ratio, cash flow coverage ratio and leverage ratio. The Company's performance
with respect to these covenants will affect, among other things, the amounts
available under the revolving portion of the facility. In connection with the
debt refinancing, the Company recorded a $0.3 million after tax extraordinary
charge in the third quarter of 1996 attributable to the write-off of deferred
financing fees related to the Company's prior credit facility. The Company has
entered into interest rate protection agreements which effectively provide
ceiling rates of interest on $11.9 million of its obligations under the credit
agreement. The Company is required to make scheduled principal payments of $2.5
million in 1997 and 1998. The Company intends to meet this obligation with
internally generated funds.
The Company's net cash flow from operating activities was $13.3 million
and $1.7 million for the years ended December 31, 1996 and 1995, respectively.
The increase in cash flow from operating activities is the result of an increase
in working capital of $11.1 million in 1996 compared to a $5.9 million increase
in working capital for 1995. Working capital cash flow increased primarily
because of increased collections of accounts receivable and lower inventory due
to tighter controls. This was partially offset by lower net income after
adjustment for non-cash items. Capital expenditures in 1996 included $9.4
million used to purchase land and fund construction at the Waukegan, IL facility
and for other projects. Capital expenditures in 1995 were $3.8 million. In
addition to the land and construction spending cited above, capital expenditures
in 1996 reflected the addition, replacement and improvement of manufacturing
equipment, some of which was initiated in 1995. The Company expects capital
expenditure spending for additions and replacements to approximate $4.5 million
in each of 1997 and 1998, with funding to be principally provided from
internally generated funds. As of December 31, 1996, the Company had committed
$0.3 million for the purchase of fixed assets and $0.5 million in continued
construction costs for the Waukegan facility in 1997. The $0.5 million of
commitments for the Waukegan facility reflected reimbursement of the general
contractor for construction costs incurred in 1996.
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 common stock. Through December 31, 1996, the Company had
purchased 248,500 shares at an average price of $7.37. Completion of this stock
repurchase program is permitted under the Company's credit agreement, subject to
continued compliance with various financial covenants.
The Company repaid term debt under its credit agreement totaling $2.0
million in 1996 and $3.1 million in 1995 from internally generated funds. At
December 31, 1996, the Company's capitalization consisted of $28.3 million in
long-term debt (excluding $2.5 million of current maturities) and $24.7 million
in total stockholders' equity. At December 31, 1995, long-term debt was $24.7
million (excluding $3.2 million of current maturities) and total stockholders'
equity was $26.2 million. The decrease in stockholders' equity is due to the
repurchase of common stock mentioned above.
The Company expects that cash flow from operations and borrowings under
the credit agreement will be sufficient to fund working capital needs and
capital expenditures and make mandatory principal payments under the credit
agreement through 1998. From time to time, the Company considers possible
acquisitions of businesses complementary to the Company's business. It is likely
that any significant acquisition would be funded with additional long-term debt.
INFLATION
Inflation has not had a significant effect on the Company's business
during the periods discussed.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Reference is made to Note 2 of the Notes to Consolidated Financial
Statements.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and schedules are listed under item 14.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Stimsonite Corporation
We have audited the accompanying consolidated balance sheets of Stimsonite
Corporation and Subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Stimsonite
Corporation and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
February 18, 1997
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales $ 82,712 $ 68,119 $ 55,941
Cost of goods sold 55,835 41,625 27,376
------ ------ ------
Gross profit 26,877 26,494 28,565
Operating expenses:
Selling and administrative 15,260 13,149 11,367
Research and development 2,800 3,089 2,273
Amortization of intangible assets 2,846 2,815 2,757
Restructuring charge 4,000 -- --
------ ------ ------
Total operating expenses 24,906 19,053 16,397
------ ------ ------
Operating income 1,971 7,441 12,168
----- ----- ------
Other (income) expense:
Interest expense 2,680 2,606 1,912
Joint venture partnership loss -- 111 205
Other income -- -- (206)
------ ------- ------
Income (loss) before provision
for income taxes and extraordinary item (709) 4,724 10,257
Provision (benefit) for income taxes (193) 2,114 4,017
------ ------ ------
Income before extraordinary item (516) 2,610 6,240
Extraordinary item, net of tax benefit 332 -- (104)
------ ------ ------
Net income (loss) $(848) $2,610 $6,136
====== ====== ======
Earnings (loss) per common and common equivalent
share:
Income before extraordinary item $(0.06) $0.29 $0.69
Extraordinary item, net of tax benefit (0.04) -- (0.01)
------ ------- ------
Net income (loss) $ (0.09) $ 0.29 $ 0.68
========== ========= =========
Weighted average number of common and common
equivalent shares outstanding 8,974,823 9,118,912 9,074,529
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
ASSETS December 31,
------------
Current assets: 1996 1995
- --------------- ---- ----
Cash and cash equivalents $ 227 $ 251
Trade accounts receivable, less
allowance for doubtful accounts
of $1,206 (1996) and $895 (1995) 17,130 18,144
Inventories 11,938 14,848
Prepaid expenses and other 3,157 921
Deferred tax assets 1,670 1,345
----- -----
Total current assets 34,122 35,509
Property, plant and equipment, net 18,907 11,890
Intangible assets, net 14,373 16,884
Deferred financing costs, net of
accumulated amortization
of $24 (1996) and $2,152 (1995) 287 892
Deferred tax assets 3,990 2,322
Other 191 99
------- -------
Total assets $71,870 $67,596
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: 1996 1995
- -------------------- ---- ----
Accounts payable $ 11,334 $ 7,242
Current maturities of long-term debt 2,500 3,243
Accrued employee benefits 3,526 3,510
Accrued warranty costs 909 510
Accrued income taxes 0 1,527
------ ------
Total current liabilities 18,269 16,032
Accrued post retirement benefits 631 631
Long-term debt 28,300 24,703
------ ------
Total liabilities 47,200 41,366
------ ------
Commitments and Contingencies
Stockholders' equity:
Common Stock, $.01 par value--
15,000,000 shares authorized,
8,706,150 shares (1996) and
8,861,400 shares (1995)
issued and outstanding 90 89
Treasury stock, at cost (1,801) (494)
Additional paid-in capital 23,818 23,516
Retained earnings 2,314 3,162
Foreign currency translation adjustment 249 (43)
------- -------
Total stockholders' equity 24,670 26,230
------- -------
Total liabilities and stockholders' $71,870 $67,596
equity ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
Cash flows from operating activities: 1996 1995 1994
------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ (848) $ 2,610 $ 6,136
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 3,166 2,566 1,905
Amortization of intangibles, deferred financing
costs and discount on long-term debt 3,124 3,212 3,243
Provision for uncollectible accounts 311 303 259
Deferred income taxes (1,993) (1,204) (145)
Extraordinary item 332 -- 143
Restructuring charge 4,000 -- --
Joint venture partnership loss -- 111 205
Changes in assets and liabilities, (net of effects of acquisitions)::
Trade accounts receivables 703 1,319 (6,163)
Inventories 2,910 (4,369) (1,077)
Prepaid expense and other (2,236) (81) 46
Accounts payable 4,945 (1,777) 760
Accrued employee benefits 16 (875) 579
Accrued warranty 399 210 (228)
Accrued income taxes (1,527) (342) 112
------- ----- -----
Net cash provided by operating activities 13,302 1,683 5,775
------- ----- -----
Cash flows from investing activities:
Purchase of property, plant and equipment (9,394) (3,752) (2,593)
Acquisition of Pave-Mark -- (7,961) --
Investment in joint venture partnership -- (111) (205)
Other (103) (307)
--------- -------- -------
Net cash used in investing activities (9,394) (11,927) (3,105)
--------- -------- -------
Cash flows from financing activities:
Net proceeds from the issuance of common stock 303 115 2,811
Payment to reacquire Common Stock (1,307) (494) --
Payments on notes receivable on common stock -- 61 36
Principal payments under capital lease obligation (34) -- --
Proceeds from long term-debt 37,300 12,800 500
Payments on long term-debt (40,154) (3,095) (8,632)
Cash over draft -- 926 --
Financing fees paid in connection with debt refinancing (332) (151) (35)
------- ------ -------
Net cash provided by (used in) financing activities (4,224) 10,162 (5,320)
------- ------ -------
Effect of exchange rate changes on cash 292 (30) (16)
------- ------ -------
Net increase (decrease) in cash and cash equivalents (24) (112) (2,666)
Cash and cash equivalents, beginning of year 251 363 3,029
------- ------- -------
Cash and cash equivalents, end of year $ 227 $ 251 $ 363
======= ======= =======
Supplemental disclosures:
Cash paid during the year for interest $2,810 $2,228 $1,719
Cash paid during the year for income taxes $2,880 $3,732 $4,011
Capital Lease for Property, Plant & Equipment $ 724
Property, Plant & Equipment purchases included in Accounts
Payable $3,915
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands except share data)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK Balance at January 1 8,861,400 $89 8,903,900 $89 8,556,400 $86
---------------------------------------------------------------------------------------
Repurchase of common stock (188,500) (60,000)
------------------------------------------------------------
Issuance of common stock 33,250 1 17,500 347,500 3
---------------------------------------------------------------------------------------
Balance at December 31 8,706,150 $90 8,861,400 $89 8,903,900 $89
- -------------------------------------------------------------------------------------------------------------------
TREASURY STOCK Balance at January 1 (60,000) ($494)
---------------------------------------------------------------------------------------
Repurchase of common stock (188,500) (1,307) (60,000) ($494)
---------------------------------------------------------------------------------------
Balance at December 31 (248,500) ($1,801) (60,000) ($494)
- -------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID IN Balance at January 1 $23,516 $23,401 $20,593
---------------------------------------------------------------------------------------
CAPITAL Issuance of common stock 302 115 2,808
---------------------------------------------------------------------------------------
Balance at December 31 $23,818 $23,516 $23,401
- -------------------------------------------------------------------------------------------------------------------
NOTES RECEIVABLE Balance at January 1 ($61) ($97)
---------------------------------------------------------------------------------------
FROM STOCK SALE Payments on notes 61 36
receivable
---------------------------------------------------------------------------------------
Balance at December 31 ($61)
- -------------------------------------------------------------------------------------------------------------------
ACCUMULATED Balance at January 1 $3,162 $552 ($5,584)
---------------------------------------------------------------------------------------
EARNINGS (DEFICIT) Net income (loss) (848) 2,610 6,136
---------------------------------------------------------------------------------------
Balance at December 31 $2,314 $3,162 $552
- -------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY Balance at January 1 ($43) ($13) $3
---------------------------------------------------------------------------------------
TRANSLATION Aggregate adjustment from
translation of foreign
ADJUSTMENT currency statements 292 (30) (16)
---------------------------------------------------------------------------------------
Balance at December 31 $249 ($43) ($13)
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' Balance at January 1 $26,230 $23,968 $15,001
---------------------------------------------------------------------------------------
EQUITY Repurchase of common stock (1,307) (494)
---------------------------------------------------------------------------------------
Payments on notes 61 36
receivable
---------------------------------------------------------------------------------------
Issuance of common stock 303 115 2,811
---------------------------------------------------------------------------------------
Foreign currency 292 (30) (16)
translation adjustment
---------------------------------------------------------------------------------------
Net income (Loss) (848) 2,610 6,136
---------------------------------------------------------------------------------------
Balance at December 31 $24,670 $26,230 $23,968
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
1. Nature of Business:
Stimsonite Corporation and subsidiaries (the "Company") is a manufacturer and
marketer of highway safety products. These products include (i) highway
delineation products, such as raised reflective pavement markers, thermoplastic
pavement marking materials and related application equipment, construction work
zone markers, and roadside and other delineators; and (ii) optical film
materials, such as high performance reflective sheeting used in the construction
of highway signs, pre-printed sign faces, and other applications.
2. Summary of Significant Accounting Policies:
A summary of the significant accounting policies used in the preparation of the
accompanying consolidated financial statements follows:
Principles of Consolidation
The consolidated financial statements include the financial statements of
Stimsonite Corporation and its subsidiaries. Significant intercompany
transactions have been eliminated in consolidation.
Foreign Currency Translation
The financial statements of foreign operations are translated into U.S. dollars
in accordance with Statement of Financial Accounting Standards (SFAS) No. 52.
Accordingly, all assets and liabilities are translated at current and historical
rates of exchange and operating transactions are translated at weighted average
rates during the year. The translation gains and losses are accumulated as a
component of stockholders' equity.
Revenue Recognition
The Company recognizes revenue upon shipment of the product.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt instruments with an
initial maturity date of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on the
first-in, first-out (FIFO) basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed by
use of the straight-line method over the estimated useful lives of the assets.
Expenditures for maintenance and repairs are charged to operations as incurred;
major improvements are capitalized. Upon retirement or sale, the cost of assets
and related accumulated depreciation are removed from the accounts and any
resulting gains or losses upon disposition are reflected in operations. The
following is a summary of the estimated useful lives utilized by the Company:
<PAGE>
Equipment................................... 7 years
Furniture and fixtures...................... 7 years
Automobiles................................. 5 years
Molds, dies and tools....................... 3 years
Leasehold improvements...................... Lesser of lease life
or useful life
Intangible Assets
Intangible assets have been recorded at cost and are being amortized on the
straight-line basis over their respective amortization periods (see Note 5). In
the current year, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Impairment is evaluated by comparing future cash flows
(undiscounted and without interest charges) expected to result from the use of
the asset and its eventual disposition to the carrying amount of the asset.
Deferred Financing Costs
Deferred financing costs represent commitment fees and other costs incurred in
connection with the issuance of long-term debt. These costs are amortized as
interest expense over the life of the related debt using the interest method.
Warranty Costs
Estimated costs related to warranty of certain highway signing products are
charged to operations at the time of the sale.
Income Taxes
The Company accounts for income taxes under the principles of SFAS No. 109
"Accounting for Income Taxes."
In accordance with SFAS No. 109, deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the basis of assets
and liabilities for income tax and for financial reporting purposes. In
addition, the amount of any future tax benefits are reduced by a valuation
allowance to the extent such benefits are not expected to be fully realized.
Financial Instruments
The fair value of cash and cash equivalents is assumed to approximate the
carrying value of these assets due to the short duration of these instruments.
The fair value of the Company's debt, current and long-term is estimated to
approximate the carrying value of these liabilities based upon borrowing rates
currently available to the Company for borrowings with similar terms.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates made by the Company include warranty accruals which are estimated
based upon product performance experience, and it is reasonably possible that
this estimate could change in the near term.
<PAGE>
Earnings Per Share Calculation
The computation of income (loss) per common share is based on the weighted
average number of common and common equivalent shares outstanding during each
period. The dilutive effect of all other stock options has been calculated using
the treasury stock method. Income (loss) per common and common equivalent share
computed on an historical basis pursuant to Accounting Principles Board Opinion
No. 15 approximates the SAB 83 presentation.
Recently Issued Accounting Pronouncements
Earnings per share
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
revises the disclosure requirements and increases the comparability of EPS data
on an international basis by simplifying the existing computational guidelines
in APB Opinion No. 15. The pronouncement will require dual presentation of basic
and diluted EPS on the Company's Statement of Operations and is effective the
Company's fiscal year ending December 31, 1997. The Company believes that
adoption will not have a material impact on its financial statements.
Disclosure of Information About Capital Structure Statement of Financial
Accounting Standards No. 129. "Disclosures of Information About Capital
Structure," establishes standards for disclosing information about an entity's
capital structure. The new accounting principle is effective for the Company's
fiscal year ending December 31, 1997. The Company believes that adoption will
not have a material impact on its current disclosures.
3. Inventories:
Inventories are comprised of the following:
December 31,
1996 1995
---- ----
Raw materials............................. $ 3,772 $ 4,735
Work-in-process........................... 1,601 4,062
Finished goods............................ 6,565 6,051
--------- ---------
$11,938 $14,848
4. Property, Plant and Equipment:
Property, plant and equipment are comprised of the following:
December 31,
1996 1995
---- ----
Equipment................................. $17,016 $14,382
Molds, dies and tools..................... 3,822 3,761
Leasehold improvements.................... 2,817 2,133
Furniture and fixtures.................... 786 566
Automobiles............................... 595 480
Waukegan facility costs................... 6,411 ---
Construction in progress.................. 1,948 1,891
------- -------
33,395 23,213
Less accumulated depreciation and amortization (14,488) (11,323)
------ -------
$18,907 $11,890
====== ======
<PAGE>
5. Intangible Assets:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
Amortization December 31,
Period 1996 1995
------ ---- ----
<S> <C> <C> <C>
Patents 6-17 years $15,467 $15,246
Covenants not to compete 3-10 years 7,089 7,089
Sales representative and distribution organization acquired 7 years 2,298 2,298
Government product approvals acquired 15 years 2,148 2,148
Goodwill associated with Simsco acquisition 20 years 1,279 1,279
Goodwill associated with Pave-Mark acquisition 20 years 901 901
Trademarks and other 15 years 2,777 2,663
------ --------
31,959 31,624
Less accumulated amortization. (17,586) (14,740)
------ --------
$14,373 $16,884
======= ========
</TABLE>
6. Long Term Debt:
At December 31, 1996, the Company had outstanding borrowings under the new
credit agreement as follows:
December 31, 1996
-----------------
Term Loan principal payable quarterly
from March 31, 1997 through March 31,
2003 and final payment of $8.75 million
due June 30, 2003. Interest payable
in one, two, three or six
month periods at the Company's option. $ 24,375
Revolver loan principal due June 30,
2000. Interest payable in one, two,
three or six month periods at the
Company's option. 6,425
-----
30,800
Less current maturities (2,500)
Total long-term debt $28,300
On July 23, 1996, the Company refinanced its long term debt under a new
unsecured credit agreement. The terms of the new credit agreement provide a
credit facility totaling $45.0 million of which $20.0 million is revolving
credit due on June 30, 2000 and $25.0 million is a term loan due June 30, 2003.
In connection with the debt refinancing, the Company recorded a $0.3 million
($0.04 per share) extraordinary charge in the third quarter of 1996 attributable
to the write-off of deferred financing fees related to the Company's prior
credit facility.
<PAGE>
Quarterly installment repayments of $0.625 million and a final repayment of
$8.75 million is due on June 30, 2003 on the term loan. Borrowings under the new
credit agreement may be repaid in whole or in part without penalty.
The outstanding borrowings under the revolver loan bear interest at prime (8.25%
at December 31, 1996) or LIBOR (at the Company's option) plus a LIBOR margin
ranging from 0.75% to 1.5% based on the ratio of debt to cash flow determined on
the immediately preceding rolling four quarter performance at December 31, 1996.
At December 31, 1996, the LIBOR margin in effect was 1.25% and the all inclusive
LIBOR interest rate on the revolving loan was 6.935%. At December 31, 1996,
under the revolving loan, $5.0 million was borrowed under LIBOR contracts and
$1.425 million was borrowed at prime. The outstanding borrowings under the term
loan bear interest at either prime plus .25%. (8.5% at December 31, 1996) or
LIBOR plus 1.8% (7.4875% at December 31, 1996)(at the company's option). At
December 31, 1996 all outstanding borrowings under the term loan were under
LIBOR contract.
Under the revolving loan, subject to compliance with certain borrowing base
requirements, the Company may borrow up to $20.0 million. At December 31, 1996,
$6,425 was outstanding under the revolving loan and $13,575 was available for
further borrowing after considering borrowing base requirements. Unused amounts
under the revolving loan are subject to an annual commitment fee of 0.375%.
The new credit facility establishes certain financial covenants, including
covenants relating to the Company's funded debt to EBITDA ratio, cash flow
coverage ratio and leverage ratio. In addition the new credit agreement imposes
limitations on the Company with respect to among other things, (i) capital
expenditures; (ii) mergers, acquisitions and purchases and sales of assets;
(iii) additional indebtedness and liens; (iv) transactions with affiliates and
(v) the payment of cash dividends and the repurchase of common stock. The
Company's performance with respect to these covenants will affect, among other
things, the level of additional borrowing available under the agreement.
Future minimum principal payments of long term debt are as follows:
Year Total
---- -----
1997 $ 2,500
1998 2,500
1999 2,500
2000 8,925
2001 2,500
2002 2,500
2003 9,375
-------
$30,800
<PAGE>
At December 31, 1995, the Company had term loans payable to its principal lender
under the old credit agreement as follows:
December 31, 1995
-----------------
Term Loan A bearing interest
at base rate plus 1.25% (9.75%
at December 31, 1995) or LIBOR
plus 2.5% (8.1875% at December
31, 1995), at the Company's
option, payable in quarterly
installments from March 31, 1996
through 1998. Interest payable
quarterly. $8,567
Term Loan B bearing interest
at base rate plus 1.75% (10.25%
at December 31, 1995) or LIBOR
plus 3.0% (8.685% at December 31,
1995) at the Company's option
payable in quarterly installments
from March 31, 1996 through 2000.
Interest payable quarterly. 6,579
Revolver loan bearing interest
at base rate plus 1.25% (9.75%
at December 31, 1995) or LIBOR
plus 2.5% (8.1875% at December
31, 1995) at the Company's
option, 1998. Interest
payable quarterly. 12,600
Swing line loan, principal due
September 28, 1998. Interest
payable quarterly 200
-------
27,946
Less current maturities (3,243)
-------
Total long-term debt $24,703
=======
7. Common Stock:
On January 11, 1994 in connection with the underwriters' option to purchase
additional shares to cover over-allotments in the Company's December 1993
initial public offering, the Company issued 333,500 shares of Common Stock to
the public at $9.00 per share. The underwriting discounts and commissions
against the sale were $210 with net proceeds to the Company amounting to $2,791.
The proceeds were used to repay term loans under the credit agreement in effect
at that time.
During 1994, 14,000 shares of Common Stock were issued in connection with the
exercise of stock options. The average exercise price per share was $1.61.
During 1995, 17,500 shares of Common Stock were issued in connection with the
exercise of stock options. The average exercise price was $1.94.
<PAGE>
During 1995, the Board of Directors authorized the repurchase of up to 500,000
outstanding shares of Common Stock. As of December 31, 1996, a total of 248,500
shares had been repurchased as treasury stock at an average purchase price of
$7.25. Completion of this stock repurchase program will be dependent upon the
approval of the Company's lenders under the credit agreement and the market
price of the stock.
During 1996, 33,250 shares of common stock were issued in connection with the
exercise of stock options. The average exercise price was $1.70.
8. Stock Options:
Under the Stimsonite Corporation 1991 Stock Option Plan, up to 210,000 options
to purchase shares of Common Stock were authorized for grant. Under the
Stimsonite Corporation Executive Stock Option Plan (the "1992 Plan"), 197,050
options to purchase shares of Common Stock were authorized for grant. Under the
Stimsonite Corporation 1993 Incentive Equity Plan (the "1993 Plan"), up to
428,000 shares of Common Stock may be issued pursuant to awards granted
thereunder. Awards under the 1993 Plan may be awards of restricted stock, stock
options, stock appreciation rights, deferred shares, performance shares and
performance units. Through December 31, 1996, stock options were the only types
of awards granted under the 1993 Plan. In 1994, the Company adopted the
Stimsonite Corporation 1994 Stock Option Plan for Non-Employee Directors (the
"Director Plan"). Under the Director Plan, certain non-employee directors
receive an option to purchase 2,000 shares of Common Stock. The options vest
over 5 years. Additionally each non-employee director may make an election to
receive director's compensation in the form of stock options. In 1995 and 1994,
15,889 and 51,785 options were respectively granted under the Director Plan. The
Director Plan also provides that each non-employee director elected at each
annual meeting of stockholders receives an option to purchase 1,500 shares of
common stock. No options were exercised under the Director Plan during the years
1996, 1995 and 1994.
The following is a summary of the activity in the Company's stock option plans
and other options issued for the years ended December 31, 1996, 1995 and 1994.
Year Ended December 31,
1996 1995 1994
-------- --------- --------
Outstanding, beginning of the period 305,724 297,335 249,550
Granted 161,847 67,856 61,785
Exercised (33,250) (17,500) (14,000)
Canceled (91,347) (41,967) --
-------- --------- --------
Outstanding at end of period 342,974 305,724 297,335
======== ======== ========
Average price per share $ 4.88 $ 3.54 $ 3.18
======== ======== ========
Exercisable at end of period 161,108 172,252 172,550
======== ======== ========
Available for grant at end of period 477,226 547,726 573,615
======== ======== ========
The average exercise price per share of stock options exercised was $1.70 per
share in 1996, $1.94 per share in 1995 and $1.61 per share in 1994.
The Company applies the provision of APB 25 in accounting for its stock based
employee compensation arrangements. During 1996, the Company was required to
adopt Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS No. 123") which encourages entities to adopt a
fair value based method of accounting for stock-based compensation plans in
place of the provisions of Accounting Principles Board Opinion No. 25 Accounting
for Stock Issued to Employees ("APB No. 25") for all arrangements under which
employees receive shares of stock or other equity instruments of the employer or
the employer incurs liabilities to employees in amounts based on the price of
its stock.
The Company recognizes compensation cost for stock-based compensation awards
equal to the difference between the quoted market price of the stock at the date
<PAGE>
of grant or award and the price to be paid by the employee upon exercise in
accordance with the provisions of APB No. 25. Based upon the terms of Company's
current stock option plans, the stock price on the date of grant and price paid
upon exercise are the same, thus no compensation charge is required to be
recognized.
As allowed by SFAS No. 123, the Company will continue to apply the provisions of
APB No. 25 in accounting for its stock-based employee compensation arrangements
and will disclose pro forma net income and earnings per share information in its
footnotes as if the fair value method suggested in SFAS No. 123 had been
applied.
If compensation cost based on fair value method of the options had been used,
the Company's net income and earnings per common share (EPS) would have been as
follows:
1996 1995
---- ----
Net Income (Loss) As reported $(848) $2,610
Pro Forma (900) 2,603
EPS As Reported $(0.09) $0.29
Pro Forma (0.10) 0.29
The fair value of each option was estimated as of the date of the grant using
the Black-Scholes option pricing model based on the following assumptions for
1996 and 1995, respectively: volatility of 33.0% and 33.4%; expected life of 7
and 6 years; risk-free interest rate of 5.4% and 7.7%; and no payment of
dividends expected during the life of the options. The weighted average fair
value of options granted during 1996 is $4.19 per share.
9. Income Taxes:
The components of income (loss) before provision (benefit) for income taxes and
extraordinary item are as follows:
Year Ended December 31,
---------------------------------------
1996 1995 1994
---- ---- ----
Domestic $(175) $5,902 $ 9,806
Foreign (534) (1,178) 451
------ ------ -------
$(1,709) $4,724 $10,257
====== ====== =======
The income tax provision (benefit) on income before provision for income taxes
and extraordinary item for the years ended December 31, 1996, 1995 and 1994 is
comprised of the following:
Year Ended December 31,
--------------------------------
Current income tax expense: 1996 1995 1994
---- ---- ----
Federal $1,485 $3,164 $3,379
State 315 672 783
------- ------- ------
Total current $1,800 $3,836 $4,162
======= ====== ======
Deferred income tax (benefit) expense:
Federal $(1,638) $(1,455) $ (118)
State (355) (267) (27)
-------- ------ -------
Total deferred (1,993) (1,722) (145)
-------- ------ -------
Total (benefit) provision $ (193) $2,114 $4,017
======= ====== =======
<PAGE>
The income tax provision (benefit) differs from a provision (benefit) computed
at the U.S. statutory rate as follows:
Year Ended December 31,
----------------------
1996 1995 1994
---- ---- ----
Statutory rate (34.0%) 34.0% 34.0%
State income taxes
(net of Federal benefit) (5.6%) 5.0% 5.0%
Inability to utilize
foreign operating losses 25.6% 6.8% 1.2%
Net operating loss utilized -- -- (2.7%)
Provision for contingencies (18.3%) 5.8% --
Foreign sales corporation (14.1%) -- --
Reversal of foreign valuation allowance -- (6.8%) --
Provision for non-deductible expenses 19.2% -- --
Other -- -- 1.7%
----- ---- ----
Total (27.2%) 44.8% 39.2%
===== ==== ====
The consolidated balance sheet includes the following:
December 31, 1996
-----------------
Current Non-current Total
------- ----------- -----
Deferred income tax assets $1,670 $4,793 $6,463
Valuation allowance -- (803) (803)
-------- --------- --------
Total $1,670 $3,990 $5,660
====== ====== ======
December 31, 1995
-----------------
Current Non-current Total
------- ----------- -----
Deferred income tax assets $1,345 $2,794 $4,139
Valuation allowance -- (472) (472)
------ ------ ------
Total $1,345 $2,322 $3,667
====== ====== ======
The components of the deferred tax asset balance (tax effected) are as follows:
December 31, 1996 December 31, 1995
----------------- -----------------
Temporary Tax Temporary Tax
Difference Effect Difference Effect
---------- ------ ---------- ------
Property, plant and equipment $ 1,954 $ 761 $ 1,427 $ 549
Intangible assets 410 159 420 163
Allowance for doubtful accounts 905 353 517 200
Inventory obsolescence
reserve and capitalization 1,963 766 1,951 757
Accrued vacation 503 196 520 202
Accrued post-retirement benefits 405 158 467 181
Accrued warranty 910 354 510 198
Stock option compensation 925 364 925 364
Restructuring reserve 4,000 1,560 -- --
Inter-company profits 364 141 364 141
Foreign NOLs 3,302 1,651 2,768 1,384
-------- -------- -------- --------
Subtotals 15,641 6,463 9,869 4,139
Less valuation allowance (1,651) (803) (943) (472)
-------- -------- -------- --------
Total $ 13,990 $ 5,660 $ 8,926 $ 3,667
======== ======== ======== ========
<PAGE>
As of December 31, 1996 and 1995, the Company had foreign net operating loss
carry forwards of approximately $3,302 and $2,768, respectively. The carry
forwards were generated principally in Europe and Australia and have no
expiration date. During 1995, management implemented certain tax planning
strategies to utilize the carry forwards attributable to Australia. As a result,
the valuation allowance associated with the Australian carry forwards was
reduced to zero as of December 31, 1995. As of December 31, 1996, the valuation
allowance and related increase in the valuation allowance relates to the
European deferred tax assets and is recorded as a result of the uncertainty of
their ultimate realization.
10. Employee Benefit Plans:
The Company has a 401(k) savings plan covering substantially all of its salaried
employees. The Company matches 25% of certain employee's pretax contributions
under this plan. Contributions eligible for Company matching are limited to 6%
of eligible earnings. Company matching contributions vest immediately. Company
contributions under these plans for the years ended December 31, 1996, 1995 and
1994 were approximately $456, $541 and $446, respectively.
The Company has an agreement with an executive officer that provides for
deferred compensation. The agreement provides for deferred payments based on
years of service. For the years ended December 31, 1996, 1995 and 1994, expenses
recorded under this plan were $70, $39 and $160, respectively.
11. Post-Retirement Benefits Other Than Pensions:
The Company is obligated to provide post-retirement benefits consisting mainly
of medical coverage and life insurance to certain employees and their dependents
who retired prior to July 31, 1991 as well as active employees age 55 or older
on July 31, 1991 who are eligible for coverage when they retire and reach age
65.
For the years ended December 31, 1996, 1995 and 1994, the periodic expense for
the post-retirement benefits consisted only of interest costs of $39, $46 and
$62, respectively.
The discount rate used in determining the APBO as of December 31, 1996 and 1995
was 7.0% at each year end. The assumed health care cost trend rate used in
measuring the APBO as of December 31, 1996 and 1995 varies by the age of the
participant and the retirement date and ranges from 9% to 14%.
If the health care cost trend rate assumptions were increased by 1%, the APBO as
of December 31, 1996 and 1995 would be increased by 2.0% at each year end. The
effect of this change on net periodic post-retirement benefit expense for the
years ended December 31, 1996 and 1995 would be an increase of 1.8% for each
year, resulting from the increase in interest expense.
12. Commitments:
The Company leases its office, warehouse and manufacturing facilities under
non-cancelable operating leases which expire through 2008. The leases for these
facilities contain renewal options, escalation clauses and requirements that the
Company pay real estate taxes, insurance, utilities and maintenance.
<PAGE>
Rent expense for the years ended December 31, 1996, 1995 and 1994 were
approximately $1,926, $1,412 and $850, respectively. Annual minimum future
payments for the next five years under all lease commitments are as follows:
Year Ending
December 31,
1997.............................. $1,979
1998.............................. 1,807
1999.............................. 1,622
2000.............................. 1,269
2001.............................. 1,151
13. Credit Risk:
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of trade receivables. The majority of the
Company's sales are made to state governments and independent contractors and
are related to highway construction and maintenance. The Company has a policy of
obtaining letters of credit on most foreign sales, and payment bonds on most
contractor sales. The Company generally sells on an unsecured basis to other
customers including governmental agencies and distributors.
14. Geographic Segment Data:
The Company's operations consist of a single business segment which manufactures
and markets reflective highway safety products. Transfers between geographic
areas were at cost plus a negotiated mark-up. Sales and selected financial
information by geographic area for the years ended December 31, 1996, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1996 United States International Eliminations Consolidated
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues................................................. $78,467 $6,492 $(2,247) $82,712
Operating income......................................... 2,499 (528) -- 1,971
Net income (loss)........................................ (252) (596) -- (848)
Total assets............................................. 74,488 5,739 (8,357) 71,870
1995 United States International Eliminations Consolidated
------------- ------------- ------------ ------------
Revenues................................................. $64,262 $6,833 $(2,976) $68,119
Operating income......................................... 8,619 (1,178) -- 7,441
Net income (loss)........................................ 3,788 (1,178) -- 2,610
Total assets............................................. 75,766 6,016 (14,186) 67,596
1994 United States International Eliminations Consolidated
------------- ------------- ------------ ------------
Revenues................................................. $52,496 $5,689 $(2,244) $55,941
Operating income......................................... 13,342 (821) (353) 12,168
Net income .............................................. 5,832* 451* (147) 6,136
Total assets............................................. 51,927 5,206 (6,197) 50,936
</TABLE>
* United States other expenses and international other income include
$1,327 of debt forgiveness owing by Stimsonite GmbH to the Company on
liquidation of Stimsonite GmbH in 1994.
<PAGE>
International assets are principally trade receivables, inventory and goodwill
associated with the acquisition of Simsco. United States revenue includes export
sales for the years ended December 31, 1996 and 1995 of $3,859 and $2,876,
respectively, inclusive of transfers between geographic areas, which are
eliminated.
15. Acquisition of Pave-Mark Corporation:
On May 31, 1995, the Company, through a wholly owned subsidiary, purchased
substantially all of the assets of Pave-Mark Corporation, a manufacturer of
thermoplastic materials and related application equipment used primarily for
highway marking. This acquisition was accounted for under the purchase method of
accounting. The operating results of Pave-Mark have been included in the
Company's consolidated results of operations since the acquisition date. The
final purchase price was $7.5 million. In addition to the purchase price, the
Company capitalized approximately $0.5 million acquisition costs. Proforma
unaudited results of operations for the years ended December 31, 1995 and 1994
assuming the Pave-Mark acquisition had occurred on January 1, 1995 and January
1, 1994, respectively, are as follows:
Stimsonite Corporation and Subsidiaries
Proforma Condensed Combined Statement of Operations
For the Periods Indicated
(Unaudited)
Year ended Year ended
December 31, 1995 December 31, 1994
----------------- -----------------
Net sales $77,405 $82,460
Income before extraordinary item 2,628 5,413
Extraordinary item, net of tax benefit -- (104)
Net income 2,628 5,309
Income per common and
common equivalent share:
Income before extraordinary item $0.29 $0.60
Extraordinary item, net of tax benefit -- (0.01)
----- -----
Net income $0.29 $0.59
===== =====
Average number of common and common 9,118,912 9,074,529
equivalent shares outstanding
In conjunction with the above purchase, liabilities of $5.7 million were
assumed. Goodwill acquired is being amortized over no more than 20 years using
the straight-line method.
16. Extraordinary Item:
In 1994, the Company recorded a pre-tax extraordinary loss of $143 resulting
from the elimination of a portion of deferred financing fees upon the
application of the net proceeds of the additional shares of common stock issued
pursuant to exercise of the underwriters' over-allotment option granted in
connection with the initial public offering to repay amounts borrowed under the
credit agreement then in effect. A tax benefit of $39 was allocated to the
extraordinary loss.
<PAGE>
In 1996, the company recorded a pre-tax extraordinary loss of $554 resulting
from the write-off of the remaining deferred financing fees relating to the
repayment of the Company's prior indebtedness. A tax benefit of $222 was
allocated to the extraordinary loss.
17. Restructuring Charge:
The Company incurred a $4.0 million restructuring charge in the fourth quarter
of 1996. Substantially all of the charges relate to anticipated losses in
conjunction with the proposed sale of land and a building under construction in
Waukegan, IL. In April 1996, the Company purchased 20 acres of undeveloped land
in Waukegan, IL for the purpose of constructing a new manufacturing and office
complex. The Company intended to relocate its principal manufacturing and office
functions from Niles, IL to the Waukegan site during 1997. The Company initiated
the construction of a 137,000 square foot building on the land in May 1996. In
December 1996, when the facility was partially completed, the Company decided to
remain in its Niles, IL facilities and not relocate any operations to Waukegan.
The building is an enclosed shell which could be occupied upon a buildout of the
office facilities. The site is currently listed for sale with a commercial
broker. The building was constructed to meet the specific manufacturing
requirements of the Company, including special electrical power requirements and
environmental safety features. The Company believes that the cost of certain
unique features of the building may not be recoverable. In addition, the 20-acre
land site is approximately twice as large as is necessary for the existing
building and the cost of the additional land may not be recoverable. In
recognition of the potentially unrecoverable costs and the marketing expenses
associated with prospective sale of the building, the Company recorded the
restructuring charge.
The restructuring charge also includes certain other costs associated with a
series of actions to reduce expenses. Among these actions were a 10% reduction
in the salaried workforce and consolidation into the Niles, IL facility of
several administrative functions that were previously performed in other
domestic locations.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company will be set forth under
the caption "Election of Directors" in Stimsonite's proxy statement related to
the Company's 1997 annual meeting of stockholders (the "Proxy Statement") and is
incorporated herein by reference. Information regarding executive officers of
the Company is included as Item 4A of Part I as required by Instruction 3 of
Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation
S-K will be set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement and is incorporated herein by
reference.
ITEM 11--EXECUTIVE COMPENSATION.
Information required by this item will be set forth under the caption
"Executive Compensation" in the Proxy Statement and, except for the information
under the captions "Executive Compensation--Compensation Committee Report on
Executive Compensation" and "Executive Compensation--Performance Graph," is
incorporated herein by reference.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item will be set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement and is incorporated herein by reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding any disclosable relationships and related
transactions of directors and executive officers will be set forth under the
caption "Executive Compensation" in the Proxy Statement and is incorporated
herein by reference.
<PAGE>
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. The following financial statements are included in Part II
of this report:
Report of Independent Accountants.
Consolidated Balance Sheets as of December 31, 1996
and 1995.
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for
the years ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
2. The following financial statement schedule is included
herein:
Report of Independent Accountants
II Valuation and Qualifying Accounts.
All other schedules are not submitted because the required
criteria has not been met, or because the required
information is included in the consolidated financial
statements or notes thereto.
3. Exhibits:
Exhibit
Number Description of Document
3.1 Certificate of Incorporation of the Company,
incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No.
0-22978)(the "1993 10-K").
3.2 By-laws of the Company, as amended to date,
incorporated by reference to Exhibit 3.2 to the 1993
10-K.
4.1 Specimen certificate for the Company's common stock,
$.01 par value, incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form
S-1, as amended (Commission File No. 33-70633) (the
"Registration Statement").
<PAGE>
4.2 Registration Rights Agreement, dated as of October
19, 1993, among the Company, Quad-C Partners, L.P.,
Quad-C Partners C.V. and Commonwealth Investors,
L.P., incorporated by reference to Exhibit 4.7 to the
Registration Statement.
4.3 Loan Agreement, dated July 23, 1996, among the
Company as borrower, and LaSalle National Bank as
co-lender and Harris Trust and Savings Bank as
co-lender, incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.
*10.1 Form of Employment Agreement, dated August 20, 1990,
between the Company and Robert Pricone, Michael A.
Cherwin and Charles Hulsey for minimum salaries of
$78,800, $51,000 and $71,100, respectively,
incorporated by reference to Exhibit 10.2 to the
Registration Statement.
*10.2 Employment Agreement, dated as of September 7, 1993,
between the Company and Thomas C. Ratchford,
incorporated by reference to Exhibit 10.3 to the
Registration Statement.
*10.3 Stimsonite Corporation 1991 Stock Option Plan,
incorporated by reference to Exhibit 10.4 to the
Registration Statement.
*10.4 Stimsonite Corporation Executive Stock Option Plan,
incorporated by reference to Exhibit 10.5 to the
Registration Statement.
*10.5 Stimsonite Corporation 1993 Incentive Equity Plan,
incorporated by reference to Exhibit 10.6 to the
Registration Statement.
*10.6 Amended and Restated Stock Option Plan for
Non-Employee Directors.
*10.7 Non-qualified Stock Option Agreement, dated October
1, 1993, between the Company and Thomas C. Ratchford,
incorporated by reference to Exhibit 10.7 to the
Registration Statement.
*10.8 Non-qualified Stock Option Agreement, dated as of
March 22, 1994, between the Company and Richard J.
Cisek, incorporated by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (commission file
No. 0-22978)(the "1994 10-K").
*10.9 Non-qualified Stock Option Agreement, dated as of
February 20, 1995, between the Company and Clifford
S. Deremo, incorporated by reference to Exhibit 10.10
to the 1994 10-K.
*10.10 Amerace Corporation Supplemental Executive Retirement
Plan, incorporated by reference to Exhibit 10.8 to
the Registration Statement.
*10.11 Form of Non-qualified Stock Option Agreement, dated
February 13, 1996, between the Company and each of
Michael A. Cherwin for 4,000 shares, Richard J. Cisek
<PAGE>
for 5,000 shares, Clifford S. Deremo for 7,000
shares, Walter Finley for 6,500 shares, Charles L.
Hulsey for 5,000 shares, Robert M. Pricone for 7,000
shares, Thomas C. Ratchford for 5,500 shares and Jay
R. Taylor for 13,000 shares. Incorporated by
reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995 (commission file No.
0-22978)(the "1995 10-K").
10.12 Lease, dated December 12, 1986, between the Company
(as assignee of Amerace Corporation) and American
National Bank and Trust Company of Chicago, as
trustee, incorporated by reference to Exhibit 10.11
to the Registration Statement.
10.13 Lease, dated December 12, 1986, between the Company
(as assignee of Amerace Corporation) and American
National Bank and Trust Company of Chicago, as
trustee, incorporated by reference to Exhibit 10.12
to the Registration Statement.
10.14 Lease, dated June 24, 1991, between the Company and
OTR, an Ohio general partnership as nominee for The
State Teachers Retirement System of Ohio,
incorporated by reference to Exhibit 10.13 to the
Registration Statement.
10.15 Sublease Agreement, dated December 28, 1983, between
Southland bonded Warehouse, Inc. Pave-Mark
Corporation and The Stephen W. Wright Company.
Incorporated by reference to Exhibit 10.16 to the
1995 10-K.
10.16 Commercial Lease Contract, dated August 18, 1993,
between John Chandler and Pave-Mark Corporation.
Incorporated by reference to Exhibit 10.17 to the
1995 10-K.
10.17 Commercial Lease Agreement, dated December 14, 1995,
between Selig Enterprises, Inc. and the Company
(related to Plymouth Road). Incorporated by reference
to Exhibit 10.18 to the 1995 10-K.
10.18 Commercial Lease Agreement, dated December 14, 1995,
between Selig Enterprises, Inc. and the Company
(related to Chattahoochee Road). Incorporated by
reference to Exhibit 10.19 to the 1995 10-K.
10.19 Consulting Agreement dated November 14, 1996 between
the Company and Jay R. Taylor.
10.20 Commercial Lease Agreement dated December 13, 1996
between the Company and American National Bank and
Trust Company of Chicago, as trustee.
21.1 List of subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand, L.L.P.
24.1 Powers of Attorney
__________________
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter ended
December 31, 1996.
<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 March 27, 1997 STIMSONITE CORPORATION
/s/ Robert E. Stutz
-------------------
Robert E. Stutz
President and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 27, 1997:
/s/ Robert E. Stutz /s/ Thomas C. Ratchford
- ------------------- -----------------------
Robert E. Stutz Thomas C. Ratchford
President and Chief Executive Vice President-Finance,
Officer and Director Treasurer, Secretary and
(Principal Executive Officer) Chief Financial Officer
(Principal Financial and
Accounting Officer)
*_______________________ *_______________________
Terrence D. Daniels Anthony R. Ignaczak
Chairman of the Board and Director Director
*_______________________ *_______________________
Lawrence S. Eagleburger Richard J.M. Poulson
Director Director
*_______________________ *_______________________
Donald H. Haider Jay R. Taylor
Director Director
*_______________________
Edward T. Harvey, Jr.
Director
* The undersigned by signing his name hereunto has hereby signed this
report on behalf of the above-named officers and directors, on March 27, 1997,
pursuant to a power of attorney executed on behalf of each such director and
officer and filed with the Securities and Exchange Commission as Exhibit 24.1 to
this report.
By: /s/ Thomas C. Ratchford
-----------------------
Thomas C. Ratchford
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Stimsonite Corporation
Our report on the consolidated financial statements of Stimsonite
Corporation and Subsidiaries is included in Part II, Item 8 to this Form 10-K.
In connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in Part IV of Form 10-K, Item
14(a) 2 for each of the three years in the period ended December 31, 1996.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 18, 1997
<PAGE>
SCHEDULE II
STIMSONITE CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged Deductions Balance
Beginning Costs and to Other from at End
Description of Year Expenses Accounts Reserves of Year
- ----------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31,
1994 $243 $279 $20 $502
1995 502 531 138 (a) 895
1996 895 379 68 (a) 1,206
Accrued warranty costs
Year ended December 31,
1994 528 247 475 (b) 300
1995 300 619 409 (b) 510
1996 510 939 540 (b) 909
- -------------
</TABLE>
(a) Uncollectible items written off.
(b) Change in accounting estimate.
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
--------------------
EXHIBITS
To
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED
DECEMBER 31, 1996
--------------------
STIMSONITE CORPORATION
Exhibit 10.6
STIMSONITE CORPORATION
AMENDED AND RESTATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
<PAGE>
STIMSONITE CORPORATION
AMENDED AND RESTATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Table of Contents
PAGE
1. Purposes.................................................... 1
2. Definitions................................................. 1
3. Shares Available under the Plan............................. 4
4. Initial Options............................................. 4
5. Elective Options............................................ 5
6. Annual Options.............................................. 8
7. Adjustments................................................. 9
8. Fractional Shares........................................... 9
9. Administration of the Plan.................................. 9
10. Amendments and Other Matters................................ 10
11. No Additional Rights........................................ 10
12. Securities Law Matters. .................................... 10
13. Change in Control........................................... 11
14. Termination of the Plan..................................... 12
15. Effective Date.............................................. 12
<PAGE>
STIMSONITE CORPORATION
AMENDED AND RESTATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purposes. The purposes of this Plan are to encourage
outside Directors of Stimsonite Corporation (the "Corporation") to own shares of
the Corporation's stock and thereby to align their interests more closely with
the interests of the other stockholders of the Corporation, to encourage the
highest level of Director performance by providing the Directors with a direct
interest in the Corporation's attainment of its financial goals, and to provide
financial incentives that will help attract and retain the most qualified
Directors.
2. Definitions. As used in this Plan:
"Annual Option" means an Option Right granted to a Director
pursuant to Section 6 of this Plan.
"Board" means the Board of Directors of the
Corporation.
"Change in Control" has the meaning set forth in
Section 13.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the Committee described in Section 9
of this Plan.
"Common Shares" means (i) shares of the Common Stock, $.01 par
value, of the Corporation and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 7 of this Plan.
"Date of Grant" means the date on which a grant of Initial
Options, Elective Options or Annual Options, as the case may be, shall become
effective as provided in Sections 4(a) the penultimate sentence of Section 5(b)
and Section 6(a), respectively.
"Director" means a member of the Board who is not an employee
of the Corporation. For purposes of this Plan, an employee is an individual
whose wages are subject to the withholding of federal income tax under Section
3401 and 3402 of the Code. A Director who becomes an employee (within the
meaning of this Section) shall not forfeit any Option Right granted hereunder
solely by reason of assuming employee status.
<PAGE>
"Disability" means the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months. A
Director shall not be considered to be subject to a Disability until he
furnishes a certification from a practicing physician in good standing to the
effect that such Director meets the criteria described in this Section.
"Effective Date" has the meaning set forth in Section 15.
"Elected" has the meaning set forth in Section 5(a).
"Election" has the meaning set forth in Section 5(a).
"Elective Options" means One-Year Elective Options and
Five-Year Elective Options granted to Directors pursuant to
Section 5 of this Plan.
"Elective Option Exercise Price" has the meaning, for each
Elective Option granted pursuant to Section 5 of this Plan, set forth in Section
5(c).
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fifth Annual Meeting" means, with respect to a Director, the
fifth annual meeting of stockholders following the date on which such Director
is Elected to the Board with respect to which an Election to receive an Elective
Option shall have been made.
"First Annual Meeting" means, with respect to a Director, the
first annual meeting of stockholders following the date on which such Director
is Elected to the Board with respect to which (a) in the case of an Initial
Option and an Annual Option, such Option Right has been granted, and (b) in the
case of an Elective Option, an Election to receive such Elective Option shall
have been made.
"Five-Year Elective Option" has the meaning set forth
in Section 5(a).
"Five-Year Period" has the meaning set forth in
Section 5(a).
"Five-Year Retainer" has the meaning set forth in
Section 5(a).
"Initial Option" means an Option Right granted to a Director
pursuant to Section 4 of this Plan.
<PAGE>
"Market Value" as of a given date means (a) the closing sale
price of the Common Shares as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on such date, or (b) if the price
of the Common Shares is not reported on NASDAQ, the closing sale price of the
Common Shares on the principal securities exchange on which Common Shares are
then trading on such date. If there are no Common Share transactions on such
date, the Market Value per Share shall be determined as of the immediately
preceding date on which there were Common Share transactions.
"One-Year Elective Option" has the meaning set forth in
Section 5(a).
"One-Year Period" has the meaning set forth in
Section 5(a).
"One-Year Retainer" has the meaning set forth in
Section 5(a).
"Optionee" means the Director so designated in an
agreement evidencing an outstanding Option Right.
"Option Price" means the purchase price payable upon the
exercise of an Option Right.
"Option Right" means the right to purchase Common Shares from
the Corporation upon the exercise of an Initial Option, an Elective Option or an
Annual Option granted pursuant to this Plan. Option Rights shall be evidenced by
written agreements containing terms and conditions not inconsistent with this
Plan.
"Plan" means the Stimsonite Corporation Amended and
Restated Stock Option Plan for Non-Employee Directors, as the
same may be amended from time to time.
"Retainer" means the cash amounts which a Director is entitled
to receive during such Director's term as a Director as his annual fee for
serving as a Director and a member of any committees of the Board, other than
fees or expenses for attendance at meetings of the Board or any committee of the
Board; provided, however, that if a Director makes an Election pursuant to
Section 5(b) to receive Elective Options in lieu of only a portion of the
Retainer, the Retainer shall equal such portion of the Retainer.
"Rule 16b-3" means Rule 16b-3, as promulgated and amended from
time to time by the Securities and Exchange Commission under the Exchange Act.
"Termination of Service" means the time at which the
Optionee ceases to serve as a member of the Board for any reason,
<PAGE>
with or without cause, which includes termination by resignation, removal, death
or retirement.
"Voting Stock" has the meaning set forth in Section
13(a).
3. Shares Available under the Plan. (a) Subject to Sections
3(b) and 7 of this Plan, the number of Common Shares issued or transferred, plus
the number of Common Shares covered by outstanding awards granted under this
Plan, shall not in the aggregate exceed 150,000 Common Shares, which may be
Common Shares of original issuance or Common Shares held in treasury or a
combination thereof.
(b) For the purposes of this Section 3, any Common Shares
subject to an Option Right that has been cancelled or terminated shall again be
available for the grant of Option Rights under this Plan.
4. Initial Options. (a) With respect to each person
who is first Elected a Director of the Corporation on or after
the Effective Date of this Plan, an option to purchase 2,000
Common Shares shall be automatically granted as of the date such
person is first Elected a Director.
(b) The Option Price per share of each Initial Option shall be
the Market Value per Common Share as of the Date of Grant.
(c) (i) Subject to subsection (ii) of this Section 4(c) and
Section 13 of this Plan, each Initial Option, until terminated as provided in
Section 4(d), shall become exercisable to the extent of 20% of the Common Shares
subject thereto after the Optionee has continuously served as a Director through
the date of the First Annual Meeting, and to the extent of an additional 20% of
the Common Shares subject to the Initial Option after each of such Director's
four annual terms of service as a Director following the date of the First
Annual Meeting during which the Optionee shall have continuously served as a
Director. To the extent exercisable, each Initial Option shall be exercisable in
whole or in part from time to time.
(ii) If an Optionee ceases to be a Director by reason of death
or Disability, all Initial Options held by such Optionee that would
have otherwise become exercisable had such Director continuously served
as a Director through the date of the Corporation's annual meeting of
stockholders immediately following such death or Disability shall,
notwithstanding subsection (i) of this Section 4(c), become immediately
exercisable in full.
(d) Each Initial Option shall terminate on the
earliest of the following dates:
<PAGE>
(i) Three (3) months following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results other than from Optionee's death or Disability;
(ii) One (1) year following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results from Optionee's death or Disability; or
(iii) Ten (10) years from the Date of Grant.
(e) The Option Price shall be payable (a) in cash or by check
acceptable to the Corporation, (b) by transfer to the Corporation of
Common Shares which have been owned by the Optionee for more than six
months prior to the date of exercise and which have a Market Value on
the date of exercise equal to the Option Price, or (c) by a combination
of such methods of payment.
(f) Initial Options granted pursuant to this Section 4 shall
be options that are not intended to qualify under any particular
provision of the Code.
5. Elective Options. (a) Beginning with the May 1994 annual
term, each Director may make an election (the "Election") to receive
all or any portion of his Retainer in the form of an award of a
One-Year Elective Option or a Five-Year Elective Option (each as
hereinafter defined) upon the terms and conditions described in this
Section 5. A "One-Year Elective Option" is an option to purchase Common
Shares in lieu of the Director's Retainer ("One-Year Retainer") that
would be paid for the Director's service during the period commencing
on the date on which the Director has been elected to the Board
(whether pursuant to a vote of stockholders or by the Board to fill a
vacancy ("Elected")) and ending on the date of the First Annual Meeting
("One-Year Period"). A "Five-Year Elective Option" is an option to
purchase Common Shares in lieu of the Director's Retainer ("Five-Year
Retainer") that would be paid for the Director's service during the
period commencing on the date on which the Director has been Elected to
the Board and ending on the date of the Fifth Annual Meeting
("Five-Year Period"). A Director who elects to receive a Five-Year
Elective Option may not elect to receive any other Elective Option,
including a One-Year Elective Option, for any period that begins prior
to the expiration of the Five- Year Period with respect to which such
Five-Year Elective Option has been granted.
(b) A Director's Election to receive an Elective Option shall
(i) be in writing, (ii) specify whether the Election is for a One-Year
Elective Option or a Five-Year Elective Option, (iii) specify a
percentage, up to 100%, of
<PAGE>
the One-Year Retainer or Five-Year Retainer, as the case may be, to be
paid in the form of an Elective Option, and (iv) be delivered to the
Secretary of the Corporation no later than the last business day of the
month during which the Director has been Elected to the Board (the
"Election Expiration Date"). Any Election made by a Director pursuant
to this Section 5 shall be irrevocable. The grant of Elective Options
shall be made automatically and shall be effective on the first
business day after the expiration of the six-month period immediately
following the Election Expiration Date. Directors Elected to office as
Directors more than six months after the date of the preceding annual
meeting of stockholders of the Corporation shall not be entitled to
receive all or any portion of the Retainer payable through the
following annual meeting of stockholders in the form of Elective
Options, and shall receive such Retainer in the form of cash.
(c) The Option Price per share of each Elective Option shall
be equal to twenty percent (20%) of the Market Value per Common Share
on the Date of Grant ("Elective Option Exercise Price").
(d) The total number of Common Shares subject to an Elective
Option ("Elective Option Shares") shall be the number of Common Shares
equal to the nearest whole number determined in accordance with the
following formula:
Amount of Retainer
to be received in the
Number of Shares = form of Elective Options
Market Value Per Share
on Date of Grant minus
Elective Option Exercise
Price
(e) (i) Subject to subsection (ii) of this Section 5(e) and
Section 13 of this Plan, (A) each One-Year Elective Option, until
terminated as provided in Section 5(f), shall become exercisable to the
extent of 100% of the Common Shares subject thereto after the Optionee
has continuously served as a Director through the date of the First
Annual Meeting, and (B) each Five-Year Elective Option, until
terminated as provided in Section 5(f), shall become exercisable to the
extent of 20% of the Common Shares subject thereto after the Optionee
has continuously served as a Director through the date of the First
Annual Meeting, and to the extent of an additional 20% of the Common
Shares subject to the Five-Year Elective Option after each of such
Director's four annual terms of service as a Director following the
date of the First Annual Meeting. To the extent exercisable, each
Elective Option shall be exercisable in whole or in part from time to
time.
<PAGE>
(ii) If an Optionee ceases to be a Director by reason of death
or Disability, all Elective Options held by such Optionee that would
have otherwise become exercisable had such Director continuously served
as a Director through the date of the Corporation's annual meeting of
stockholders immediately following such death or Disability shall,
notwithstanding subsection (i) of this Section 5(e), become immediately
exercisable in full.
(f) Each Elective Option shall terminate on the
earliest of the following dates:
(i) Three (3) months following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results other than from Optionee's death or Disability;
(ii) One (1) year following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results from Optionee's death or Disability; or
(iii) Ten (10) years from the Date of Grant.
(g) The Option Price shall be payable (a) in cash or by check
acceptable to the Corporation, (b) by transfer to the Corporation of
Common Shares which have been owned by the Optionee for more than six
months prior to the date of exercise and which have a Market Value on
the date of exercise equal to the Option Price, or (c) by a combination
of such methods of payment.
(h) Elective Options granted pursuant to this Section 5 shall
be options that are not intended to qualify under any particular
provision of the Code.
(i) Except as provided in Section 5(e) with respect to the
exercisability of an Elective Option and Section 5(j), no adjustment
shall be made to an Elective Option to reflect either Termination of
Service as a Director or a change in the Director's Retainer after the
applicable Date of Grant. If the Corporation increases the amount of a
Director's Retainer following the Date of Grant of an Elective Option,
the Director shall receive in cash the amount of the increased Retainer
in excess of the amount of the Retainer with respect to which the
Director elected to receive in the form of Elective Options.
(j) No Elective Options shall be granted if a Director ceases
to be a Director after the Election Expiration Date but prior to the
applicable Date of Grant, in which event such Director's Retainer
otherwise payable to such Director shall be paid in cash.
<PAGE>
6. Annual Options. (a) Each Director Elected at an
annual meeting of stockholders of the Corporation (beginning with
the meeting to be held on the Effective Date), shall be
automatically granted an option to purchase 1,500 Common Shares
as of the date of such meeting.
(b) The Option Price per share of each Annual Option shall be
the Market Value per Common Share as of the Date of Grant.
(c) (i) Subject to subsection (ii) of this Section 6(c) and
Section 13 of this Plan, each Initial Option, until terminated as provided in
Section 6(d), shall become exercisable to the extent of 20% of the Common Shares
subject thereto after the Optionee has continuously served as a Director through
the date of the First Annual Meeting, and to the extent of an additional 20% of
the Common Shares subject to the Annual Option after each of such Director's
four annual terms of service as a Director following the date of the First
Annual Meeting during which the Optionee shall have continuously served as a
Director. To the extent exercisable, each Annual Option shall be exercisable in
whole or in part from time to time.
(ii) If an Optionee ceases to be a Director by reason of death
or Disability, all Annual Options held by such Optionee that would have
otherwise become exercisable had such Director continuously served as a
Director through the date of the Corporation's annual meeting of
stockholders immediately following such death or Disability shall,
notwithstanding subsection (i) of this Section 6(c), become immediately
exercisable in full.
(d) Each Annual Option shall terminate on the earliest
of the following dates:
(i) Three (3) months following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results other than from Optionee's death or Disability;
(ii) One (1) year following the effective date of the
Optionee's Termination of Service, if such Termination of Service
results from Optionee's death or Disability; or
(iii) Ten (10) years from the Date of Grant.
(e) The Option Price shall be payable (a) in cash or by check
acceptable to the Corporation, (b) by transfer to the Corporation of
Common Shares which have been owned by the Optionee for more than six
months prior to the date of exercise and which have a Market Value on
the date of exercise equal to the Option Price, or (c) by a combination
of such methods of payment.
<PAGE>
(f) Annual Options granted pursuant to this Section 6 shall be
options that are not intended to qualify under any particular provision
of the Code.
7. Adjustments. The Committee shall make or provide for such
adjustments in the number of Common Shares covered by Option Rights granted
hereunder, the Option Prices per Common Share applicable to any such Option
Rights, and the kind of shares (including shares of another issuer) covered
thereby, as the Committee shall in good faith determine to be equitably required
in order to prevent dilution or expansion of the rights of Optionees that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Corporation, 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 any of the
foregoing. The Committee shall also make or provide for such adjustments in the
maximum number of Common Shares specified in Section 3(a) of this Plan as the
Committee may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 7.
8. Fractional Shares. The Corporation shall not be required to
issue any fractional Common Shares pursuant to this Plan. Whenever under the
terms of this Plan a fractional Common Share would otherwise be required to be
issued, an amount in lieu thereof shall be paid in cash based upon the Market
Value of such fractional Common Share.
9. Administration of the Plan. (a) This Plan shall be
administered by a committee of the Board, which shall be composed of not less
than two members of the Board ("Committee"). Until further action of the Board,
the Director Plan Committee of the Board will act as the Committee.
Notwithstanding the foregoing, grants of Option Rights under this Plan shall be
automatic as described in Sections 4, 5 and 6, and the Committee shall have no
authority, discretion or power to determine the terms of the Option Rights to be
granted pursuant to the Plan, the number of Common Shares to be issued
thereunder or the time at which such Option Rights are to be granted, or
establish the duration and nature of Option Rights, except in the sense of
administering the Plan subject to the provisions of the Plan.
(b) Subject to subsection (a) of this Section 9, the
interpretation and construction by the Committee of any provision of this Plan
or any agreement, notification or document evidencing the grant of Option
Rights, and any determination by the Committee pursuant to any provision of this
Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Committee shall be liable for any such action taken
or determination made in good faith.
<PAGE>
10. Amendments and Other Matters. (a) This Plan may be
terminated, and from time to time amended, by the Board; provided, however, that
except as expressly authorized by this Plan, no such amendment shall (i)
increase the number of Common Shares specified in Section 3(a) hereof,
materially modify the requirements as to eligibility for participation in this
Plan, or otherwise cause this Plan or any grant, award or election made pursuant
to this Plan to cease to satisfy any applicable condition of Rule 16b-3, without
further approval of the stockholders of the Corporation, or (ii) cause any
Optionee to fail to qualify as a "disinterested person" within the meaning of
Rule 16b-3; provided further that Plan provisions relating to the amount and
price of securities to be awarded and the timing of awards under the Plan shall
not be amended more than once every six months, other than to comport with
changes in the Code, the Employment Retirement Income Security Act, or the rules
promulgated thereunder. No amendment or termination of the Plan shall adversely
affect any outstanding award theretofore granted under the Plan without the
consent of the Director holding such award.
(b) Any grant, award or election that may be made pursuant to
an amendment to this Plan shall be null and void if it is subsequently
determined that (i) stockholder approval of such amendment was required in order
for this Plan to continue to satisfy the applicable conditions of Rule 16b-3, or
(ii) such grant, award, election or amendment disqualified any Optionee as a
"disinterested person" within the meaning of Rule 16b-3.
11. No Additional Rights. Nothing contained in this Plan or in
any award granted under this Plan shall interfere with or limit in any way the
right of the stockholders of the Corporation to remove any Director from the
Board pursuant to state law or the Bylaws or Certificate of Incorporation of the
Corporation, nor confer upon any Director any right to continue in the service
of the Corporation.
12. Securities Law Matters. (a) The Corporation may require
any Optionee, as a condition of receiving Option Rights, to give written
assurances in substance and form satisfactory to the Corporation and its counsel
to the effect that such person is acquiring the Common Shares subject to the
Option Rights for his own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Corporation deems necessary or appropriate in order to comply
with federal and applicable state securities laws.
(b) Each award of Option Rights shall be subject to the
requirement that, if at any time counsel to the Corporation shall determine that
the listing, registration or qualification of the Common Shares subject to such
Option Rights upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is
<PAGE>
necessary as a condition of, or in connection with, the issuance of shares
thereunder, such award of Option Rights may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to such
counsel. Nothing herein shall be deemed to require the Corporation to apply for
or to obtain such listing, registration or qualification.
(c) To the extent necessary for an Option Right, its exercise
or the sale of Common Shares acquired thereunder to be exempt from Section 16(b)
of the Exchange Act, such Option Right shall be held six months from the Date of
Grant, or at least six months shall elapse from the Date of Grant to the date of
disposition of the Common Shares acquired upon exercise of such Option Right.
13. Change in Control. Upon a Change in Control (as
hereinafter defined), all Option Rights held by an Optionee that would become
exercisable with respect to such Optionee's service as a Director through the
date of the Corporation's annual meeting of stockholders immediately following
such Change in Control shall, notwithstanding Sections 4(c), 5(e) and 6(c) of
this Plan, 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 Sections
4(c), 5(e) and 6(c) shall be reinstated but without prejudice to any exercise of
any Option Right that may have occurred prior to such nullification. For
purposes of this Plan, "Change in Control" means the occurrence of any of the
following events:
(a) The execution by the Corporation 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 Corporation ("Voting Stock") immediately prior to such transaction;
(b) The execution by the Corporation 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
<PAGE>
the aggregate by the holders of Voting Stock of the Corporation
immediately prior to such sale or transfer.
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated
pursuant to the Exchange Act 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;
(d) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the
directors of the Corporation cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of this
subsection (d) each director who is first elected, or first nominated
for election by the Corporation's stockholders, by a vote of at least
two-thirds of the directors of the Corporation (or a committee thereof)
then still in office who were directors of the Corporation at the
beginning of any such period shall be deemed to have been a director of
the Corporation at the beginning of such period; or
(e) except pursuant to a transaction described in the proviso
to subsection (a) of this Section 13, the Corporation adopts a plan for
the liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, to the extent necessary for an
Option Right, its exercise or the sale of Common Shares acquired thereunder to
be exempt from Section 16(b) of the Exchange Act (i) except in the case of death
or Disability, an Optionee shall not be entitled to exercise any Option Rights
granted within six months prior to the occurrence of a Change in Control until
the expiration of the six-month period following the Date of Grant of such
Option Rights, or (ii) at least six months shall elapse from the Date of Grant
of such Option Rights to the date of disposition of the Common Shares acquired
upon exercise of such Option Rights.
14. Termination of the Plan. No further awards shall be
granted under this Plan after the passage of ten years from the date on which
this Plan is first approved by the stockholders of the Corporation.
15. Effective Date. The effective date of this Plan
(the "Effective Date") shall be May 30, 1996 if, on or prior to
<PAGE>
such date, (a)the Plan shall have been approved by the affirmative vote of the
holders of a majority of the securities of the Corporation present, or
represented, and entitled to vote at a meeting duly held in accordance with the
Delaware General Corporation Law. Upon the Effective Date, this Plan shall be
deemed to amend and supersede the Stimsonite Corporation 1994 Stock Option Plan
for Non-Employee Directors (the "Existing Plan"), with the effect that (i) all
Option Rights granted pursuant to the Existing Plan prior to the Effective Date
shall be deemed granted under this Plan, (ii) any and all references to the
Existing Plan in written agreements evidencing Option Rights granted pursuant to
the Existing Plan prior to the Effective Date shall be deemed to be references
to this Plan, and (iii) the terms of such written agreements, as they relate to
a Change in Control shall be deemed to include the definition of Change in
Control contained in Section 13 of this Plan.
EXHIBIT 10.19
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and
entered into as of this 14th day of November, 1996, between Stimsonite
Corporation, a Delaware corporation (the "Company"), and Jay R. Taylor (the
"Consultant").
RECITALS
A. The Consultant, up to the effective date hereof, pursuant
to an Employment Agreement dated May 30, 1996 between the Consultant and the
Company (the "Employment Agreement") has been the President and Chief Executive
Officer of the Company. On October 24, 1996, at the suggestion of the Company's
Board of Directors (the "Board of Directors"), the Consultant agreed to
conditionally resign from such positions with the Company and to terminate his
Employment Agreement, pending the hiring of, and the commencement of duties and
responsibilities and salary of, a new President and Chief Executive Officer of
the Company and of the adoption and execution by the Company of a consulting
agreement substantially in the form hereof.
B. The Consultant, as the President and Chief Executive
Officer of the Company, had significant policy-making and operational
responsibilities in the conduct of the Company's business.
C. The Consultant possesses valuable skills and experience of
a special and unique nature, and unique, personal and confidential business
knowledge about the operation of the Company's business.
D. The Company desires to secure for itself or its
subsidiaries the benefit of the Consultant's background, experience, ability and
expertise.
E. The Company desires to engage the Consultant to provide,
and the Consultant has indicated his willingness to provide, consulting and
advisory 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. Term. Subject to the provisions and conditions of this
Agreement, the Consultant shall provide the Company with consulting services for
a two-year term (the "Initial Term") beginning on the date on which a new
President and Chief Executive Officer of the Company, appointed or elected by
the Board of Directors, becomes a salaried employee of the Company; provided,
however, that such term will, on each scheduled expiration date (each, an
"Expiration Date"), automatically be extended for an additional year unless, no
later than sixty (60) days prior to each Expiration Date, the Company or the
Consultant shall have given written notice that it or the Consultant, as the
case may be, does not wish to have such term extended (hereinafter referred to
as the "Consulting Term"), unless otherwise terminated pursuant to the terms
hereof.
<PAGE>
2. Duties, Schedule and Location.
(a) Duties. During the Consulting Term, the Consultant shall
function in an advisory and consulting capacity, and shall assume and perform
such reasonable advisory and consulting responsibilities and duties as may be
assigned to him from time to time by the Chairman of the Board of Directors or
by the Company's Chief Executive Officer. The Consultant shall also (i)
undertake to facilitate the transition of the successor Chief Executive Officer
of the Company, (ii) continue to serve the remainder of his term as President of
ARTBA and serve as Chairman Emeritus thereof when and if elected or appointed
after the Consultant's term as President thereof, and while holding either such
office shall continue to represent the Company at ARTBA and (iii) continue to
represent the Company in such other trade associations with respect to which the
Consultant has been representing the Company; provided, however, that if the
successor Chief Executive Officer of the Company desires to participate in any
such trade association (other than ARPTRA) and would be precluded from such
participation by reason of the Consultant's representation of the Company in
such trade association, then the Consultant shall cease to represent the Company
in such trade association, although the Consultant may continue any personal
membership in such trade association. The Consultant shall perform his services
during the Consulting Term as an independent contractor and not as an employee
of the Company.
(b) Schedule and Location. During the Consulting Term, the
Consultant shall render consulting services to the Company during normal
business hours upon reasonable notice given to the Consultant by the Company.
During the Consulting Term, the Consultant shall be available for the
performance of his duties hereunder (including representing the Company at trade
associations pursuant to Section 2(a) above) for up to 80 hours per month (or
such higher number of hours as the Consultant and the Company shall agree with
respect to a particular month), subject to an aggregate of 720 hours each year
(subject to such lesser monthly availability resulting from any vacation of
Consultant for which Consultant has provided written notice to the Company and
unavailability due to illness of the Consultant). The Consultant shall perform
his consulting duties hereunder at such locations in the greater Chicago,
Illinois area as the Company may direct, subject to ordinary and normal business
trips as reasonably requested by the Company from time to time during the
Consulting Term. The Company shall provide the Consultant with office space and
such other services and equipment as may be required for the Consultant to
perform adequately his duties hereunder, provided that it shall be within the
Consultant's sole discretion whether and to what extent to make use of such
facilities.
3. Payments and Benefits. During the Consulting Term,
the Consultant shall be entitled to the following payments and
benefits:
(a) Compensation Payments. (i) The Company shall
pay the Consultant annually, in equal monthly installments (subject to such
adjustments as may be required from time to time hereunder), consulting fees
equal to difference of $222,600.00 less (x) any amounts actually paid to the
Consultant under the Participation Agreement for Supplemental Executive
Retirement Plan (the "SERP Plan") dated December 15, 1988 between Amerace
Corporation, a Delaware corporation ("Amerace"), and the Consultant, (y) any
amounts actually paid to the Consultant under the Company's pension plan and (z)
any directors retainer fees paid to the Consultant as a member of the Board of
Directors. The parties acknowledge that Exhibit A hereto sets forth the
calculation of such consulting fees as of the date hereof. Notwithstanding any
contrary provision of the SERP Plan, the date of the first day of the Consulting
Term shall be deemed to be the Consultant's Retirement Date, as such term is
used in the SERP Plan.
<PAGE>
(ii) In addition, with respect to each tax year
for which the Consultant reports income received pursuant to Section 3(a)(i)
above, the Company shall pay the Consultant in April of the following year an
additional consulting fee equal to the difference between what the Consultant's
"FICA" contribution will be for such reported income, less what the Consultant's
FICA deduction would have been if such income had been wages of a salaried
employee of the Company during that period.
(b) Welfare Benefits. During the Consulting Term,
the Consultant shall continue to be entitled to participate in group health,
disability, vision and dental benefit plans (the "Health Plans") provided by the
Company to the same extent as are afforded from time to time hereafter to
executive employees of the Company, or substantially equivalent benefits shall
be provided by the Company.
(c) Automobile. The Company shall continue to
provide Consultant with the use, and shall reimburse the Consultant for the
costs of maintenance, of the automobile currently provided by the Company to the
Consultant (the "Vehicle") during the Consulting Term, to the same effect and
costs to the Company as existed at the effective date of the termination of the
Employment Agreement; provided that the Consultant shall pay his own fuel costs,
subject to reimbursement to the extent permitted by Section 7 hereof. The
Consultant shall have the option to (i) purchase from the Company, if the
Vehicle is then owned by the Company, at any time not more than ninety days
subsequent to the expiration of the Consulting Term, the Vehicle, at a purchase
price equal to the average book value for dealer purchases of such automobile on
the date of purchase as indicated in any "blue book" of automobile value which
the Company generally uses for such purpose, or (ii) assume the Company's rights
and obligations, by notice given no later than 90 days subsequent to the
expiration of the Consulting Term, pursuant to the lease agreement covering the
Vehicle, if leased by the Company, to the extent permitted by such lease
agreement.
(d) Club Membership. During the Consulting Term, the
Consultant shall be entitled to the use and benefit of the Company's membership
in the Royal Melbourne Country Club (the "Golf Club"); provided, however, that
the Consultant shall be responsible for and shall pay all expenses associated
with such use, including, without limitation, monthly dues and any charges or
expenses incurred by the Consultant at the Golf Club.
4. Board Membership. During the Consulting Term, the Company
shall use reasonable efforts to maintain the Consultant's membership on the
Board of Directors. While a member of the Board of Directors, the Consultant
shall be entitled to all of the rights and benefits (including, without
limitation, director or other fees, expenses and stock option grants) generally
available to members of the Board of Directors who are not employees of the
Company or its subsidiaries. If this Agreement is terminated by the Company
pursuant to Section 9(a) hereof, the Consultant shall resign from the Board of
Directors immediately following the effective time of such termination.
5. Amendment to Stock Options. (i) The Consultant's
outstanding stock option agreement dated October 6, 1992, which grants a
non-qualified stock option for the purchase of 87,500 shares of the Company's
Common Stock, par value $.01 per share ("Common Stock"), shall be amended to
provide that such option shall be exercisable through May 5, 1999, (ii) the
Consultant's outstanding stock option agreement dated February 13, 1996, which
grants a non-qualified, time vesting stock option for the purchase of up to
13,000 shares of Common Stock, shall be amended to provide that such option
shall continue to vest and be exercisable in accordance with the terms of such
option during the Initial Term and
<PAGE>
shall fully vest and become exercisable on the expiration of the Initial Term
and such option shall be exercisable through May 5, 1999 and (iii) the
Consultant's outstanding stock option agreement dated February 13, 1996, which
grants a non-qualified, performance stock option for the purchase of up to
12,389 shares of Common Stock, shall be amended to provide that such option
shall, subject to Section 1(b) of such agreement relating to the number of
shares of Common Stock that may be purchased thereunder, shall continue to vest
and be exercisable in accordance with the terms of such option during the
Initial Term and shall fully vest and become exercisable on the expiration of
the Initial Term and such option shall be exercisable through May 5, 1999;
provided, however, that each such amendment shall provide that if this Agreement
is terminated by the Company pursuant to Section 9(a) hereof or by the
Consultant pursuant to Section 9(b)(i) hereof, the option subject to such
amendment shall cease to vest in any additional amount on the effective date of
any such termination, and shall expire 90 days after the effective date of any
such termination.
6. Prior Earned Bonus. Notwithstanding any requirements as to
employment status under the Company's executive bonus plan, the Consultant shall
be entitled to receive a bonus for his services as an executive of the Company
during its fiscal year ended December 31, 1996 equal in amount to the bonus he
would have received had he remained an employee of the Company as of December
31, 1996 multiplied by a fraction, the numerator of which is the number of days
during the Company's fiscal year ended December 31, 1996 that the Consultant was
an employee of the Company and the denominator of which is 366.
7. Reimbursement for Expenses. Upon the presentation of
itemized expenses, the Company shall reimburse the Consultant for all travel,
meals, program fees, membership dues and other expenses incurred by the
Consultant in connection with his representation of the Company in trade
associations pursuant to Section 2(a) hereof and for all other travel, meals,
entertainment and other expenses reasonably incurred by the Consultant 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.
8. Non-Exclusive. Subject to Section 11 hereof, the Consultant
shall not be prohibited from seeking or obtaining employment, engagement as a
consultant or otherwise providing services to any person or entity. Nothing in
this Agreement shall be deemed to prevent the Consultant from investing his
personal, immediate family or trust assets; provided, however, that with respect
to businesses that compete with the Company's business, his participation, or
that of his immediate family or such trust, is solely that of a passive investor
owning no more than 5% of any class of such company's outstanding debt or equity
securities, provided that such activities do not contravene the provisions of
Section 11 hereof.
9. Termination.
(a) If the Board of Directors determines that the
Consultant has (A) committed an act of fraud or embezzlement against the Company
or an act which he knew to be in gross violation of his duties to the Company
(including the unauthorized disclosure of confidential information); (B)
continually failed to render services to the Company in accordance with this
Agreement, which failure (I) amounts to gross neglect of his contractual
obligations to the Company and (II) is not remedied within ten (10) days after
notice thereof by the Company, or if such matter is not capable of remedy within
such 10 day period, such period shall be extended through the thirtieth (30th)
day after such notice; (C) been convicted of a felony; or (D) willfully
<PAGE>
disregards the lawful directives of the Chairman of the Board of Directors or
the Chief Executive Officer of the Company which is not remedied within thirty
(30) days after notice thereof by the Company, the Company shall be entitled to
terminate this Agreement (other than Sections 11, 12 and 13 hereof unless
otherwise specified by the Company) and the consulting relationship established
hereby immediately upon the giving of written notice to the Consultant of such
termination specifying the grounds therefor.
(b) If (i) the Consultant gives notice to the
Company that he intends to terminate this Agreement (other than for reasons that
would entitle the Consultant to terminate this Agreement pursuant to Section
9(d) below), (ii) the Consultant gives notice pursuant to Section 1 that he does
not wish to have the term of this Agreement extended as provided therein (other
than for reasons that would entitle the Consultant to terminate this Agreement
pursuant to Section 9(d) below), or (iii) the Company gives notice pursuant to
Section 1 that it does not wish to have the term of this Agreement extended as
provided therein (other than for reasons that would entitle the Company to
terminate this Agreement pursuant to Section 9(a) above), this Agreement, other
than Sections 11, 12 and 13 hereof, and the consulting relationship established
hereby shall terminate immediately upon the receipt by the Company or the
Consultant, as the case may be, of such a notice or, if later, the effective
date of such termination as specified in such a notice.
(c) In the event that the Consultant dies or becomes
Disabled (as hereinafter defined) during the term of this Agreement, this
Agreement, other than Sections 11, 12 and 13 hereof, and the consulting
relationship established hereby shall terminate immediately upon the date on
which the Consultant dies or becomes Disabled, as the case may be. After the
effective date of termination under this Section 9(c), the Company shall make
any further payments under this Agreement to the Consultant or the Consultant's
heirs, executors, administrators or legal representatives, as the case may be,
of all amounts due the Consultant hereunder, including any amounts or benefits
to which the Consultant may be entitled under the terms of any benefit plan of
the Company, as in effect on the effective date of such termination. For
purposes of this Section 9(c) "Disabled" shall mean, as of any date, the
permanent disability of the Consultant as defined in the disability benefit
program of the Company generally available to executives of the Company.
(d) If the Consultant terminates this Agreement
following a Substantial Breach, as defined in this Section 9(d) (such
Substantial Breach having not been corrected by the Company within 30 days of
receipt of written notice from the Consultant 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 termination), the Company shall
continue to provide the benefits and pay the Consultant as provided in Section 3
hereof. "Substantial Breach" shall mean any material breach by the Company of
its obligation under this Agreement including without limitation, (A) the
assignment of any duties to the Consultant materially inconsistent with the
Consultant's background and expertise; (B) the failure of the Company to pay
timely amounts due hereunder; (C) the failure by the Company to allow the
Consultant to participate in the Company's Health Plans, or to provide
substantially equivalent benefits, pursuant to Section 3(b) hereof; or (D) the
failure of any successor to all or substantially all of the business and/or
assets of the Company to assume this Agreement; 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 clause (A)
above or (y) a termination for cause under Section 9(a) hereof. The date of
termination of this Agreement by the Consultant under this Section 9(d) shall be
30 days after receipt by the Company of written notice of such termination,
provided that the Substantial Breach specified in such notice shall not have
been corrected by the Company during such 30-day period.
<PAGE>
(e) Notwithstanding anything in this Section 9 to
the contrary, the Consultant's participation in any Health Plans offered by the
Company shall be governed by the rules of such plans as well as by applicable
law and agreement.
(f) The Company shall not terminate this Agreement
for any reason whatsoever unless and until such termination has been approved by
the Board of Directors.
10. Termination Benefits.
(a) If the Consultant's consulting obligations are
terminated for any reason whatsoever during the Initial Term other than by the
Company pursuant to Section 9(a) hereof or by the Consultant pursuant to Section
9(b)(i) hereof, the Company shall (x) continue to provide the benefits and pay
to the Consultant as provided in Sections 3 and 6 hereof for the remainder of
such Initial Term, and (y) provide the Consultant with all of the benefits
(including, without limitation, director fees and stock option grants),
assuming, for all such purposes (including vesting of stock options) that the
Consultant remains a consultant to the Company and a member of the Board of
Directors, generally available to members of the Board of Directors who are not
employees of the Company or its subsidiaries for the remainder of such Initial
Term.
(b) If the Company terminates this Agreement
pursuant to Section 9(a) hereof during the Initial Term, the Company shall
continue to pay to the Consultant as provided in Sections 3(a) and 6 hereof for
the remainder of such two-year period.
11. Secrecy and Non-Competition.
(a) No Competing Employment. The Consultant
acknowledges that (i) the agreements and covenants contained in this Section 11
are essential to protect the value of the Company's business and assets and (ii)
by virtue of his past employment with Amerace and the Company, and the
consulting arrangement established hereby, the Consultant has obtained and will
obtain such knowledge, know-how, training and experience and 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 Consultant agrees that, for
the period (the "Restricted Period") commencing on the date of the first day of
the Consulting Term and ending on the date which is 12 months after the date on
which the Company ceases to make timely payments and provide the benefits
required by and in accordance with Section 3 hereof, the Consultant shall not,
in (a) any location where the Company, or any predecessor to the Company's
business, has conducted business during the three year period prior to the
expiration of the Consulting Term or (b) in any location in which the Company
then specifically intends to conduct business which location shall be described
in a written notice delivered to the Consultant within ninety (90) days
following the expiration of the Consulting Term (if the Company fails to provide
such written notice to the Consultant, the provisions of this Section 11(a)
shall apply only to those locations described in (a) above), 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
products or services then
<PAGE>
being manufactured, produced, sold or provided by the Company or any of its
subsidiaries; provided, however, that the Consultant may maintain and/or
undertake purely passive investments on behalf of himself, his immediate family
or any trust in companies engaged in a Competitive Activity so long as the
aggregate interest represented by such investments does not exceed 5% of any
class of the outstanding debt or equity securities of any company engaged in a
Competitive Activity. The Consultant shall not be bound by the restrictions
contained in this Section 11(a) if (i) this Agreement is terminated pursuant to
Section 9(d) hereof, and (ii) the Company shall have failed to comply with its
obligations under Section 10(a) hereof.
(b) Nondisclosure of Confidential Information. The
Consultant, except in connection with his duties or obligations hereunder or as
a member of the Board of Directors, shall not disclose to any person or entity
or use, either during the Consulting Term or at any time thereafter, any
information not in the public domain, in any form, acquired by the Consultant
while employed by the Company or any predecessor to the Company's business or
while performing services hereunder or, if acquired following the Consulting
Term, such information which, to the Consultant'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 plans, code books, invoices and other
financial statements, computer programs, discs and printouts, sketches, plans
(engineering, architectural or otherwise), customer and supplier lists,
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 Consultant 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 engagement by the
Company hereunder, the Consultant shall return to the Company the originals and
all copies of any such information provided to or acquired by the Consultant in
connection with the performance of his duties for the Company, and shall return
to the Company all files, correspondence and/or other communications received,
maintained and/or originated by the Consultant during the course of his
employment or while providing consulting services hereunder.
(c) No Interference. During the Restricted Period,
the Consultant 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), intentionally 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 Consultant, 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, its predecessor or any of its subsidiaries (a "Customer");
provided, however, that this Section 11(c) shall not prohibit the Consultant
from employing, for his own account, any person employed by a Customer or
supplier, if such employment is not in connection with a Competitive Activity.
<PAGE>
(d) Inventions. During the Restricted Period and
thereafter, the Consultant shall sell, transfer and assign to the Company or to
any person or entity designated by the Company all of the entire right, title
and interest of the Consultant in and to all inventions, ideas, disclosures and
improvements, whether patented or unpatented, and copyrightable material, made
or conceived by the Consultant, solely or jointly, or in whole or in part,
during the term hereof (and including employment prior to the Consulting Period)
by the Company or Amerace or while performing services hereunder which are not
generally known to the public or recognized as standard practice and which (i)
relate to methods, apparatus, designs, products, processes or devices sold,
leased, used or under construction or development by the Company, any
predecessor of the Company or any subsidiary and (ii) arise (wholly or partly)
from the efforts of the Consultant during his employment with the Company or any
predecessor of the Company or during the course of performing services hereunder
(an "Invention"). During the Restricted Period and thereafter, the Consultant
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
Consultant 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 Consultant to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and, as to copyrightable
material, to obtain a copyright thereon. The Company shall pay all costs
incident to the execution and delivery of such transfers, assignments and other
documents. Any invention by the Consultant within six months following the
termination of this Agreement shall be deemed to fall within the provisions of
this Section 11(d) unless the Consultant can prove that the Invention was first
conceived and made following such termination.
12. Deductions from Amounts. The Consultant agrees that the
Company shall be entitled to deduct and withhold from any amounts payable to the
Consultant hereunder any taxes in respect of the Consultant that the Company is
required to deduct and withhold under federal, state or local law.
13. SERP Plan. The Company has agreed to assume all
obligations of Amerace under the SERP Plan. The Company hereby agrees that it
shall assume and discharge the obligations of Amerace under the SERP Plan in
accordance with the terms thereof, and such agreement by the Company shall
survive the termination (for whatever reason) of this Agreement and the
Employment Agreement. The Consultant acknowledges and agrees that the Company
shall succeed to all of Amerace's rights under the SERP Plan.
CHMAIN02 Doc: 165234_2
096990-108-001
<PAGE>
14. Company Representations. The Company represents and
warrants that this Agreement, all actions to be taken hereunder by the Company
(including without limitation all amendments to the Company's stock option plans
affecting the Consultant), and any other matters relating hereto requiring
approval or vote of the Board of Directors or an authorized committee thereof
have been or, prior to the effectiveness of this Agreement, will be duly and
timely approved by the Board of Directors or such committee.
15. Injunctive Relief. Without intending to limit the remedies
available to the Company, the Consultant acknowledges that a breach of any of
the covenants contained in Section 11 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 Consultant from engaging in activities
prohibited by Section 11 hereof or such other relief as may be required to
specifically enforce any of the covenants in Section 11 hereof. The Consultant
hereby agrees and consents that such injunctive relief may be sought in any
state or federal court of record in the State of Illinois, or in the state and
<PAGE>
county in which such violation may occur, or in any other court, at the election
of the Company.
16. Extension of Restricted Period. In addition to the
remedies the Company may seek and obtain pursuant to Section 15 hereof, the
Restricted Period shall be extended by any and all periods during which the
Consultant shall be found by a court to have been in violation of the covenants
contained in Section 11 hereof.
17. 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 without such consent shall be null and void and shall be
disregarded by the Company.
(c) The Company will require any successor of the
Company (as such term is used in subsection (a) above), whether by operation of
law or otherwise, to assume the Company's obligations under 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 Consultant,
upon termination of this Agreement, to benefits described in Section 10 hereof
upon notice to the Company within three business days of the date such
succession becomes effective.
18. 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
member of the Board of Directors other than the Consultant. 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.
19. Severability and Governing Law. The Consultant
acknowledges and agrees that the covenants set forth in Section 11 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 conflict
of laws provisions thereof.
<PAGE>
20. Blue-Pencilling. Notwithstanding the first sentence of
Section 19 hereof, if any of the provisions of Section 11 relating to the
geographic or temporal scope of the covenants contained therein or the nature of
the business restricted thereby 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.
21. Arbitration. The parties agree to submit any dispute
arising under this Agreement to arbitration. Arbitration shall be by a single
arbitrator experienced in the matters at issue selected by the Company and the
Consultant 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.
22. 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, Stimsonite Corporation, 7542 North
Natchez Avenue, Niles, Illinois 60714, Attention: Chairman, Fax (847) 647-2310,
with a copy to Ronald A. Sandler, Esq., Jones, Day Reavis & Pogue, 77 West
Wacker Drive, Chicago, Illinois, 60601, Fax: (312) 782-8585 and, in the case of
the Consultant, Jay R. Taylor, 1296 West Kajer Lane, Lake Forest, Illinois
60045, or, in each case, to such other address as may be designated in writing
by any such party.
23. Termination of Employment Agreement. Effective upon the
first day of the Consulting Term, the Employment Agreement shall be deemed
terminated and of no further force or effect.
24. 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.
25. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the engagement of
the Consultant for consulting services.
26. 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:
----------------------
----------------------
Title:
CONSULTANT
By:
----------------------
Jay R. Taylor
<PAGE>
CONSULTING AGREEMENT
Exhibit A
Calculation of Consulting Fee
As of the date of the Consulting Agreement to which this Appendix A is attached,
the annual consulting fee required by Section 3(a) of such Consulting Agreement
is equal to $111,724, which amount was calculated by subtracting from $222,600
the following annual payments:
A. Payments of $69,696 payable in monthly installments, in
arrears, under the SERP Plan, computed as follows:
An initial SERP benefit of: $111,300
less (x) Social Security Benefits 16,128
less (y) Stimsonite Retirement Plan 21,180
less (z) Amerace Corporation ACAP Plan 4,296
------
Total Present SERP Deductions 41,604
= $69,696
B. Payments of $21,180, payable in monthly installments,
under the Company's retirement plan.
C. Retainer payments of $20,000 for service as a non-
employee member of the Board of Directors.
The actual annual consulting fee to be paid to the Consultant would thus be
computed as follows:
Total Annual Payments $222,600
Less (x) SERP Payments 69,696
Less (y) Company Retirement Plan Payments 21,180
Less (z) Outside Director Retainer Fees 20,000
-------
Annual Consulting Fee $111,724*
- ------------------------
* Plus any additional amounts payable pursuant to Section
3(a)(ii) of the Consulting Agreement.
<PAGE>
Exhibit 10.19
CONSULTING AGREEMENT
Exhibit B
AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT
AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT, dated as of
March ___, 1997 (this "Amendment"), between Jay R. Taylor (the "Optionee") and
Stimsonite Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee and the Company entered into a
Nonqualified Stock Option Agreement (the "Option Agreement") dated as of October
6, 1992 for the purchase of 87,500 shares of the Company's Common Stock, par
value $.01 per share;
WHEREAS, the Optionee has announced his intention to resign as
a senior executive of the Company;
WHEREAS, in connection with his resignation as a senior
executive of the Company, the Optionee and the Company entered into a Consulting
Agreement dated as of November 14, 1996 (the "Consulting Agreement") pursuant to
which the Consultant will provide the Company with consulting and advisory
services pursuant to the terms and conditions set forth therein;
WHEREAS, the Consulting Agreement provides for the amendment
of certain provisions of the Option Agreement;
WHEREAS, the execution of the Consulting Agreement and this
Amendment has been previously approved by the Board of Directors of the Company;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Section 1(d) of the Option Agreement is amended to read as
follows:
"(d) This Option shall terminate on the earliest of the
following dates:
(i) On May 5, 1999.
(ii) 90 days after the Consulting Agreement is
terminated by the Company pursuant to
Section 9(a) thereof.
(iii) 90 days after the Consulting Agreement is
terminated by the Consultant pursuant to
Section 9(b)(i) thereof."
EXECUTED at Niles, Illinois this ___ day of March, 1997.
STIMSONITE CORPORATION
By ___________________
Terrence D. Daniels
Chairman of the Board
OPTIONEE
By ________________
Jay R. Taylor
<PAGE>
Exhibit 10.19
CONSULTING AGREEMENT
Exhibit C
STIMSONITE CORPORATION
Amendment to Non qualified Stock Option Agreement
AMENDMENT TO NON QUALIFIED STOCK OPTION AGREEMENT, dated as of
March ___, 1997 (this "Amendment"), between Jay R. Taylor ("Optionee") and
Stimsonite Corporation, a Delaware Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Optionee and the Company entered into a Non
qualified Stock Option Agreement (the "Option Agreement") dated as of February
13, 1996 for the purchase of 13,000 shares of the Company's Common Stock, par
value $.01 per share;
WHEREAS, the Optionee has announced his intention to resign as
an employee of the Company;
WHEREAS, in connection with his resignation as an employee of
the Company, the Optionee and the Company entered into a Consulting Agreement
dated as of November 14, 1996 (the "Consulting Agreement") pursuant to which the
Consultant will provide the Company with consulting and advisory services
pursuant to the terms and conditions set forth therein;
WHEREAS, the Consulting Agreement provides for the amendment
of certain provisions of the Option Agreement;
WHEREAS, the execution of the Consulting Agreement and this
Amendment has been previously approved by the Board of Directors of the Company;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereto hereby agree as follows:
1. Section 2(a) of the Option Agreement is amended to read as
follows:
"(a) Unless and until terminated as hereinafter
provided, the Option shall become exercisable to the extent of one-third of the
Option Shares (rounded to the nearest whole share) on December 31, 1998. The
Option shall become exercisable to the extent of the remaining Option Shares on
the expiration of the Initial Term (as such term is defined in the Consulting
Agreement). To the extent that the Option shall have become exercisable, it may
be exercised in whole or in part from time to time. Notwithstanding the
foregoing, if the Consulting Agreement is terminated by the Company pursuant to
Section 9(a) thereof or by the Optionee pursuant to Section 9(b)(i) thereof, the
Option shall cease to vest in any additional amount on the effective date of
such termination."
<PAGE>
2. Section 4 of the Option Agreement is amended to read as
follows:
"4. Termination of Option.
The Option shall terminate on the earliest of the
following dates:
(a) May 5, 1999.
(b) 90 days after the Consulting Agreement is
terminated by the Company pursuant to Section 9(a) thereof.
(c) 90 days after the Consulting Agreement is
terminated by the Optionee pursuant to Section 9(b)(i) thereof."
This Amendment is executed by the Company and the Optionee as
of the ___ day of March 1997.
STIMSONITE CORPORATION
By _____________________
Terrence D. Daniels
Chairman of the Board
OPTIONEE
By ____________________
Jay R. Taylor
Exhibit 10.20
LEASE EXTENSION AGREEMENT
This Lease Extension Agreement ("Agreement") is entered into this 13th day of
December 1996, by and between American National Bank & Trust Company of Chicago
as Trustee under Trust No. 67006 ("Landlord") and Stimsonite Corporation, a
Delaware corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Amerace Corporation, a Delaware corporation
("Amerace") entered into a lease dated December 12, 1986 ("7642 Lease") for
property located at 7542 North Natchez, Niles, Illinois ("7542 Building"); and
WHEREAS, Landlord and Amerace entered into a lease dated December 12,
1986 ("7530 Lease") for property located at 7530 North Natchez, Niles, Illinois
("7530 Building") (the 7542 Lease and the 7530 Lease are collectively referred
to as the "Leases"); and
WHEREAS, Amerace assigned to Tenant all of its right, title, and interest
as tenant under the Leases pursuant to an Assignment of Lease for the 7542 Lease
and an Assignment of Lease for the 7530 Lease both dated August 23, 1990; and
WHEREAS, the terms of the Leases will expire on January 31, 1997; and
WHEREAS, the parties desire to extend the terms of the Leases and
otherwise modify the Leases upon the terms and conditions set forth in the
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Recitals. The recitals stated above are hereby incorporated into, and
made a material part of, this Agreement.
2. Extension of Term. The Leases are hereby extended for an additional
ten year term ("Renewal Term"). The Renewal Term shall commence on February 1,
1997 ("Renewal Term Commencement Date") and expire on January 31, 2007.
3. Rent. Beginning on the Renewal Term Commencement Date, initial Basic
Rent, as defined in the Leases, shall be payable during the Renewal Term as
follows:
7542 Building: $5.00 per square foot X 48,331 sq. ft. = $241,665.00
7530 Building: $5.00 per square foot X 25,960 sq. ft. = $129,800.00
Tenant shall make payments of Basic Rent in monthly installments in accordance
with the terms of the Leases. Basic Rent shall be adjusted on February 1, 2001
and February 1, 2004 in accordance with paragraph 1(c) of the Lease, provided,
however, that adjustments to Basic Rent shall not exceed three percent (3%) per
annum for each year during such adjustment periods. (As an example, the maximum
CPI adjustment for each three year period will not exceed 9%.)
<PAGE>
4. Options. Provided Tenant is not in default under the Lease, Tenant
shall have two (2) options (each an "Option" and collectively "Options") to
extend the Lease for additional terms of five (5) years each (each an "Option
Term" and collectively "Option Terms"). Tenant shall exercise each Option by
giving Landlord written notice of such exercise no less than three hundred
sixty-five (365) days prior to the expiration of the Renewal Term or the first
Option Term, as applicable. If Tenant exercises the first Option, Basic Rent
shall be adjusted on February 1, 2007 and February 1, 2010 in accordance with
paragraph 1(c) of the Lease, provided, however, that adjustments to Basic Rent
shall not exceed three percent (3%) per annum. If Tenant exercises the second
Option, Basic Rent shall be adjusted on February 1, 2013 in accordance with
paragraph 1(c) of the Leases, provided, however, that adjustments to Basic Rent
shall not exceed three percent (3%) per annum for each year during such
adjustment period.
5. Assignment and Subletting. Notwithstanding anything to the contrary or
inconsistent contained in Paragraph 13 of the Lease, any permitted assignment or
sublease shall not relieve Tenant of its obligations under the respective Lease
and each instrument which effects a permitted assignment or sublease shall
evidence the survival of Tenant's obligations.
6. Agreement Controlling and Deletion of Provision. In the event of any
conflict or inconsistency between the Lease and this Agreement, the Agreement
shall in all instances prevail. Paragraphs 1(b), and 32 are hereby deleted from
the 7542 Lease. Paragraphs 1(b) and 32 are hereby deleted from the 7530 Lease.
7. Continuation. Except as expressly set forth herein, the Leases shall
remain in full force and effect and all terms, covenants, conditions,
provisions, and restrictions contained in the Lease shall apply throughout the
Renewal Term and any Option Term thereafter. Tenant is currently occupying the
premises described in the Lease and accepts them in their "as-is" condition for
purposes of this Agreement.
8. Authority. Landlord and Tenant represent and warrant to each other
that each has full power and authority to execute this Agreement and that the
individuals executing this Agreement on behalf of Landlord and Tenant are duly
authorized to execute this Agreement on behalf of Landlord and Tenant,
respectively.
9. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
10. Notices. Notwithstanding Paragraph 24 of each of the 7530 Lease and
the 7542 Lease, all notices shall be sent to the following addresses:
If to the Landlord: c/o Resnick Partners
9830 Huber Lane
Niles, Illinois 60714
Attention: Michael Resnick
<PAGE>
With a copy to: Robbins, Salomon & Patt, Ltd.
800 Waukegan Road
Glenview, Illinois 60025
Attention: Stephen P. Patt
If to Tenant: Stimsonite Corporation
7542 N. Natchez Avenue
Niles, Illinois 60714
Attention: President
With a copy to: Jones, Day Reavis & Pogue
77 W Wacker Drive
Chicago IL 60601
Attention: Timothy R. Melton
11. Headings. Descriptive headings contained at the beginning of each
paragraph of this Agreement are for convenience only and shall not serve to
alter, limit or expand the terms, covenants, conditions, provisions and
restrictions contained in the Agreement.
12. Acceptance. This Agreement is expressly subject to acceptance by
Landlord within ten (10) days after receipt of an original signed by Tenant
along with a certificate of good standing and a certified corporate resolution
evidencing corporate approval and authorization of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
American National Bank & Trust Company Stimsonite Corporation,
Trust No. 60076 a Delaware corporation
By: /s/ Jay R. Taylor
Its: President
By: /s/ Michael Resnick
Michael Resnick, authorized agent Attest:
for the Beneficiary By: /s/ Thomas C. Ratchford
Its: Secretary
Exhibit 21.1
Subsidiaries
1. Stimsonite Paint Corporation, a Delaware corporation.
2. Stimsonite Europa Limited, a corporation organized under the laws of United
Kingdom.
3. Stimsonite Australia Pty Limited, a corporation organized under the laws of
New South Wales, Australia.
4. Stimsonite Hong Kong Limited, a corporation organized under the laws of Hong
Kong, China.
Exhibit 23.1
CONSENT OF INDEPENDENCE ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Stimsonite Corporation of Form S-8 (Registration Nos. 33-79506 and 33-79508) of
our report dated February 18, 1997 on our audits of the consolidated financial
statements and financial statement schedule of Stimsonite Corporation and
Subsidiaries as of December 31, 1996 and 1995, and for each of three years in
the period ended December 31, 1996, included in or incorporated by reference in
Stimsonite Corporation's Annual Report on form 10-K for the year ended December
31, 1996.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 25, 1997
Exhibit 24.1
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Terrence D. Daniels
-----------------------
Terrence D. Daniels
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Lawrence S. Eagleburger
---------------------------
Lawrence S. Eagleburger
<PAGE>
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Edward T. Harvey, Jr.
-------------------------
Edward T. Harvey, Jr.
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Anthony R. Ignaczak
-----------------------
Anthony R. Ignaczak
<PAGE>
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Donald H. Haider
--------------------
Donald H. Haider
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Richard J.M. Poulson
------------------------
Richard J.M. Poulson
<PAGE>
POWER OF ATTORNEY
The undersigned, as a director and/or an officer of Stimsonite Corporation (the
"Company"), does hereby constitute and appoint Thomas C. Ratchford as his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 and any and all amendments thereto, and to file the same
with exhibits and schedules thereto and other documents therewith, with the
Securities and Exchange commission, granting unto said attorney-in-fact, full
power and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully as to all intents and
purposes as he might or could do in person, thereby ratifying and confirming all
that said attorney-in-fact, or his substitute, may lawfully do or cause to be
dome by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25 day of March 1997.
/s/ Jay R. Taylor
-----------------
Jay R. Taylor
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-K.
</LEGEND>
<CIK> 0000876400
<NAME> STIMSONITE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.000
<CASH> 227
<SECURITIES> 0
<RECEIVABLES> 18,336
<ALLOWANCES> 1,206
<INVENTORY> 11,938
<CURRENT-ASSETS> 33,395
<PP&E> 33,395
<DEPRECIATION> 14,488
<TOTAL-ASSETS> 71,870
<CURRENT-LIABILITIES> 18,269
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 24,580
<TOTAL-LIABILITY-AND-EQUITY> 71,870
<SALES> 82,712
<TOTAL-REVENUES> 82,712
<CGS> 55,835
<TOTAL-COSTS> 55,835
<OTHER-EXPENSES> 24,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,680
<INCOME-PRETAX> (709)
<INCOME-TAX> (193)
<INCOME-CONTINUING> (516)
<DISCONTINUED> 0
<EXTRAORDINARY> (332)
<CHANGES> 0
<NET-INCOME> (848)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
