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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
[ ] OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-12282
CORRPRO COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1422570
---- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1090 ENTERPRISE DRIVE, MEDINA, OHIO 44256
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 723-5082
SECURITIES REGISTERED PURSUANT SECURITIES REGISTERED PURSUANT TO
TO SECTION 12(B) OF THE ACT: SECTION 12(G) OF THE ACT:
COMMON SHARES WITHOUT PAR VALUE NONE
------------------------------- ----
(TITLE OF CLASS) (TITLE OF CLASS)
NEW YORK STOCK EXCHANGE
-----------------------
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)
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 is not contained herein, and will not be contained, to the
best of the 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. X
---
The aggregate market value of Common Shares held by nonaffiliates of the
Registrant was approximately $89,210,000 at May 26, 1998. (The aggregate
market value has been computed using the closing market price of the stock as
reported by the New York Stock Exchange on May 26, 1998.)
7,950,138
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(Number of shares of common stock outstanding as of May 26, 1998. This
amount reflects the five-for-four stock split that will be effected via a stock
dividend payable June 19, 1998 to shareholders of record as of June 5, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
The Company intends to file with the Securities and Exchange Commission a
definitive Proxy Statement pursuant to Regulation 14A of the Securities Exchange
Act of 1934 within 120 days of the close of its fiscal year ended March 31,
1998, portions of which document shall be deemed to be incorporated by reference
in Part I and Part III of this Annual Report on Form 10-K from the date such
document is filed.
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PART I
ITEM 1. BUSINESS
Corrpro Companies, Inc. was founded in 1984 and organized under the
laws of the State of Ohio. References herein to "Corrpro" or to the "Company"
are to Corrpro Companies, Inc. and its subsidiaries unless the context indicates
otherwise.
The Company operates in one industry segment which consists of
providing corrosion control engineering and monitoring services, systems and
equipment to the infrastructure, environmental and energy markets. Within the
corrosion control market, Corrpro has a specialty in the design, manufacture and
application of cathodic protection systems. Cathodic protection is an
electrochemical process which prevents corrosion in new structures and mitigates
the corrosion process in existing structures. Structures commonly protected
against corrosion by the cathodic protection process include above and
underground storage tanks, offshore platforms, ships, electric power plants,
bridges, oil and gas pipelines, parking garages, transit systems and water and
waste treatment equipment. Due to its ability to mitigate corrosion, cathodic
protection can provide a cost effective alternative to replacement of corroding
structures.
The Company has expanded its presence in the domestic and international
corrosion control markets through internal growth and the following
acquisitions: Corrosion Engineering and Research Company (CERCO) (fiscal 1987);
PSG Corrosion Engineering, Inc. (PSG) (fiscal 1988); Ocean City Research
Corporation (OCR) (fiscal 1988); Harco Technologies Corporation (Harco) (fiscal
1990); Commonwealth Seager Group (CSG) (fiscal 1994); the assets of Good-All
Electric, Inc. (Good-All) (fiscal 1994); UCC Corporation (UCC) (fiscal 1994);
The Wilson Walton Group Limited (WWGL) (fiscal 1994); Rohrback Cosasco Systems,
Inc. (RCS) (fiscal 1995); certain of the assets of Thermal Reduction Company
(TRC) (fiscal 1995); and the assets of American Corrosion Services, Inc. (ACS)
(fiscal 1995). During fiscal 1995, the operations of TRC and ACS were combined
to form Corrtherm, Inc. (Corrtherm). In fiscal 1998, the Company acquired
Cathodic Protection Services Company (CPS). The effective date of the
acquisition was July 1, 1997.
RECENT DEVELOPMENTS
On May 19, 1998, the Company announced that its Board of Directors
approved a five-for-four stock split of the Company's common shares. The stock
split will be effected as a stock dividend payable on June 19, 1998 to
shareholders of record as of June 5, 1998. The stock split will increase
outstanding shares by approximately 1.6 million to approximately 7.9 million.
The Company's consolidated financial statements and other financial data
contained herein have been restated to reflect the stock split.
On May 12, 1998, the Company announced that it has started to explore a
potential sale of its United Kingdom and Far East foundry operations. The
Company has retained an investment banker in the UK to help evaluate this
potential divestiture. In addition, the Company is exploring the feasibility of
marketing its Corrtherm foundry operation in the U.S. along with the other
foundry operations. Corrtherm is currently being reported as a discontinued
operation in the Company's consolidated financial statements.
GENERAL
The Company's operating units and a description of the products and
services they provide are described below:
Corrpro Services and Products. The Corrpro "core businesses" (which
includes all pre-fiscal 1994 acquisitions as well as CPS) offer services which
include contract research in various areas of corrosion control, cathodic
protection engineering services and general corrosion engineering services
associated with failure analysis, metallurgical problems and material selection.
This operating unit maintains advanced corrosion
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research and testing laboratories in order to analyze the scope of a corrosion
problem and to recommend appropriate methods of corrosion control. The
engineering services are provided to private sector customers in the aerospace,
defense, marine, chemicals, petroleum and utilities industries and to
governmental entities in connection with water treatment and delivery systems,
marine vessels, transit systems, weapons and infrastructure assets. This sector
also sells material and equipment in conjunction with its services, and often
sells these products to other engineering and construction firms in connection
with corrosion control projects. Products sold include various cathodic
protection anodes, rectifier units and instrumentation, computer hardware and
software for monitoring corrosion, and accessory products. An additional service
offered includes combining the design, manufacture, installation and maintenance
of cathodic protection systems to customers who desire a "turnkey" response to
their corrosion protection needs. This operating unit also provides services for
the prevention of corrosion on the internal surfaces of water storage tanks and
waste water treatment equipment. These services are provided to municipal,
state, and federal government agencies and industrial customers. In total,
Corrpro core businesses' services and products accounted for approximately 49%,
45% and 46% of the Company's revenues during fiscal 1998, 1997 and 1996,
respectively.
Corrpro Canada, Inc. (Corrpro Canada) Services and Products. This
operating unit resulted from the combination of CSG and UCC during fiscal 1995.
Corrpro Canada offers a combination of expertise in engineering, construction
and product supply in cathodic protection. In addition, this operating unit
provides material and equipment to customers in the oil and gas industry with
its primary focus on the needs of pipeline operators. Corrpro Canada also
specializes in pipeline integrity issues, and designs internal inspection
programs that are used to detect corrosion and pipe weld flaws, clean pipelines,
and confirm pipeline orientation. This operating unit accounted for
approximately 12%, 15% and 16% of the Company's revenues during fiscal 1998,
1997 and 1996, respectively.
Good-All Products. This operating unit designs and manufactures power
supplies (rectifiers) and junction, monitoring and control boxes for use in the
impressed current cathodic protection process. In addition, Good-All
manufactures a line of battery chargers for the utility (power,
telecommunication and gas) market. This operating unit accounted for
approximately 2%, 3% and 2% of the Company's revenues during fiscal 1998, 1997
and 1996, respectively.
WWGL Services and Products. This operating unit provides corrosion
engineering services and equipment supply primarily to the marine, offshore and
industrial markets. In the marine market, this operating unit manufactures and
supplies cathodic protection systems for hulls and ballast tanks on new ships
and those which are in need of repair. In the offshore market, it provides
cathodic protection equipment for new and existing subsea pipelines, offshore
drilling rigs and production platforms. Having manufacturing and distribution
centers in Europe, the Middle East and Asia enables it to serve many of the
world's major offshore oil production areas. WWGL offers electrolytic
antifouling systems for use on water inlets, electrolytic descaling systems for
marine vessel ballast tanks and corrosion control monitoring systems. In the
industrial market, it offers corrosion engineering, cathodic protection
equipment and installation services. Wilson Walton UK (WWUK) is an ISO 9001
certified company. This operating unit accounted for approximately 29%, 28% and
26% of the Company's revenues during fiscal 1998, 1997 and 1996, respectively.
RCS Services and Products. This operating unit provides corrosion
engineering services and equipment supply for monitoring internal corrosion on
gas and liquid pipelines, storage vessels, well casings and refining and process
equipment. RCS's CORROSOMETER(R), CORRATER(R), and COSASCO(R) lines of
instruments, probes, fittings and accessories are industry accepted standards
for internal corrosion monitoring. RCS also offers B-Scan ultrasonic inspection
services, utilizing the patented TMI-150 system, which provides real-time, hard
copy and electronically stored integrity analyses of underground and aboveground
storage tanks, pressure vessels, pulp and paper digesters, pipelines, boiler
tubing and other related assets. RCS is an ISO 9001 certified company. This
operating unit accounted for approximately 8%, 9% and 10% of the Company's
revenues in fiscal 1998, 1997 and 1996, respectively.
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The Company markets its products and services primarily through its
sales personnel. The technical nature of its products and services requires a
highly trained, professional sales force, and, as a result, many of the sales
personnel have engineering or technical expertise and experience. Because of the
problem solving experience of its engineering staff, advice from the technical
personnel is regularly sought out by potential and existing customers, resulting
in business opportunities on an ongoing basis.
The Company's products and services are marketed in the Middle East,
Asia, Europe and South America by sales personnel operating out of its Saudi
Arabia, Singapore, United Kingdom, Bahrain, UAE, Hong Kong, Indonesia, Portugal
and two U.S. offices. In addition, 95 independent, foreign sales representatives
are used to supplement the efforts of its direct sales force and to market its
services in other regions of the world. The independent sales representatives
earn commissions on sales which vary by product and service type. Certain
products (e.g., Good-All rectifiers and RCS materials) are marketed through
networks of both domestic and international distributors.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Certain of the Company's operations convert raw aluminum, zinc and
magnesium metals to anode castings. The Company is currently able to obtain
adequate quantities of these metals, however the availability of these metals
could be limited by market conditions.
PATENTS AND LICENSES
The Company owns patents, patent applications and licenses relating to
certain of its products and processes. While the Company's rights under the
patents and licenses are of some importance to its operations, the Company's
businesses are not materially dependent on any one patent or license or on the
patents and licenses as a group.
SEASONAL TRENDS
The Company's business is somewhat seasonal as winter weather can
adversely impact its operations in the northern U.S., Canada and the United
Kingdom. Therefore, the Company's revenues during the fourth quarter of its
fiscal year (i.e. January through March) are typically lower than revenues
during each of the other three quarters.
CUSTOMERS
Sales are made to a broad range of customers. During the fiscal year
ended March 31, 1998 no one customer accounted for more than 10% of the
Company's sales. The Company does not believe that the loss of any one customer
would have a materially adverse effect on its business.
The Company sells products and services to the U.S. government and
agencies and instrumentalities thereof, including the U.S. Navy. Sales to these
customers accounted for approximately 3%, 4% and 5% of the Company's net sales
during fiscal 1998, 1997 and 1996, respectively. The Company's contracts with
the U.S. government contain standard provisions permitting the government to
terminate such contracts without cause. In the event of termination, the Company
is entitled to receive reimbursement on the basis of the work completed (cost
plus a reasonable profit). These contracts are also subject to renegotiation of
profits. The Company has no knowledge of any pending or threatened termination
of any of its material government contracts or subcontracts. In addition,
government procurement programs are subject to budget cutbacks and policy
changes that could alter the demand for the Company's products. Accordingly, the
Company's future sales to the government are subject to these budgetary and
policy changes.
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BACKLOG
The backlog of unshipped orders as of March 31, 1998, 1997 and 1996 was
approximately $63 million, $59 million and $82 million, respectively. Backlog is
generally represented by purchase orders that may be terminated under certain
conditions. However, the actual use of purchase orders by the Company's
customers as well as timing of the issuance of such purchase orders can vary
significantly. Accordingly, the Company does not believe backlog is a good
predictor of future revenue trends, as based on its recent experience, there is
not a direct correlation between changes in backlog and changes in revenue. The
increase in backlog between 1998 and 1997 is primarily the result of the CPS
acquisition. The decrease in backlog between 1997 and 1996 is primarily the
result of the performance of several large offshore projects at the Company's
Wilson Walton UK operation that were in backlog in fiscal 1996. The Company
estimates that, based on recent experience, approximately 70% of its backlog of
orders at March 31, 1998 will be filled during the fiscal year ending March 31,
1999.
COMPETITIVE CONDITIONS
The Company competes principally on the basis of quality, technical
expertise, customer service and product innovation. Because many different types
of businesses use one or more of the methods of corrosion protection, the
corrosion control market includes many companies which could be considered
competitors, even though only a few of these companies offer the broad range of
corrosion control engineering services, systems and products offered by the
Company. Within the cathodic protection market, the Company faces competition
primarily from smaller domestic and international companies. The Company
believes that no other company currently offers the comprehensive services that
it provides, however, competition in all areas of the corrosion control industry
is likely to increase as the demand for corrosion control products and services
grows and more companies enter the market and expand the range of their
services. In that regard, the Company's competitors may in some cases have
substantially greater financial, technical and marketing resources than those of
the Company.
RESEARCH AND DEVELOPMENT
The Company's engineering and product development activities are
primarily directed toward designing new products and services to meet customers'
specific requirements. Product development costs amounted to approximately
$694,000, $783,000, and $718,000 during fiscal years 1998, 1997 and 1996,
respectively.
GOVERNMENT REGULATIONS
The Company believes that its current operations and its current uses
of property, plant and equipment conform in all material respects to applicable
laws and regulations. The Company has not experienced, nor does it anticipate,
any material claim or material capital expenditure in connection with
environmental laws and other regulations.
EMPLOYEES
As of March 31, 1998 the Company had 1,107 employees (35 of whom
related to discontinued operations), 319 of whom were located outside the United
States.
FOREIGN OPERATIONS
The Company's foreign subsidiaries generally conduct business in local
currency. In addition, foreign sales activities are subject to other customary
risks of operating in a global environment, such as unstable political
situations, the effect of local laws and taxes, tariff increases and regulations
and requirements for export licenses, the potential imposition of trade or
foreign exchange restrictions and transportation delays.
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ITEM 2. PROPERTIES
As of March 31, 1998, eight locations were owned by the Company and
approximately fifty locations were leased from unrelated third parties. Certain
property locations may contain multiple operations, such as an office and
warehouse facility.
The real properties owned by the Company are: its corporate headquarters located
in Medina, Ohio (8,000 sq. ft.); an office and manufacturing facility located in
Medina, Ohio (64,000 sq. ft.); an office and warehouse facility located in
Schaumburg, Illinois (10,000 sq. ft.); two office and warehouse facilities
located in Edmonton, Alberta (42,000 sq. ft.); an office and warehouse facility
located in Estevan, Saskatchewan (4,000 sq. ft.); and an office, manufacturing
and warehouse facility located in Stockton-on-Tees, UK (34,000 sq. ft.). The
principal real properties (over 5,000 sq. ft. of floor space) leased by the
Company from unrelated third parties are: an office and warehouse facility
located in Glendale, Arizona; an office and warehouse facility located in
Hayward, California; an office and warehouse facility located in Decatur,
Georgia; an office facility located in Ocean City, New Jersey; an office and
warehouse facility located in West Chester, Pennsylvania; an office and
warehouse facility located in Houston, Texas; an office, manufacturing and
warehouse facility located in Santa Fe Springs, California; an office,
manufacturing and warehouse facility located in Belle Chasse, Louisiana which is
included in net assets held for sale on the consolidated balance sheets; an
office and warehouse facility located in Billings, Montana; an office and
warehouse facility located in Liberal, Kansas; an office and warehouse facility
located in Metairie, Louisiana; an office and warehouse in Midland, Texas;
office, manufacturing and warehouse facilities in Sand Springs, Oklahoma; an
office and warehouse facility in Union, New Jersey; an office and manufacturing
facility located in Sharjah, UAE; an office facility located in Singapore; a
manufacturing facility in Johor Baharu, Malaysia; an office and warehouse
facility in Jakarta, Indonesia; and an office, manufacturing and warehouse
facility in Dammam, Saudi Arabia.
The Company considers the properties owned or leased by it to be
generally sufficient to meet its requirements for office, manufacturing and
warehouse space. With the exception of its manufacturing facility in
Stockton-on-Tees, the Company does not consider any one of its properties to be
material, since it believes that if it becomes necessary or desirable to
relocate any of its office, manufacturing and warehouse facilities, other
suitable properties could be found.
ITEM 3. LEGAL PROCEEDINGS
As previously reported, in June 1995 the Company announced that its
earning per share for fiscal 1995 were expected to be substantially below
analysts' expectations, and in August 1995 the Company restated its previously
reported results for the second and third quarters of fiscal 1995. The Company
cooperated in an ensuing investigation by the Securities and Exchange
Commission ("SEC") and has offered to enter into an agreement with the SEC
pursuant to which the Company would, without admitting or denying SEC findings,
agree to an order to cease and desist from committing or causing violations of
the reporting, records and accounting systems and control requirements under the
federal securities laws. The Company's offer has not yet been approved by the
SEC. In the opinion of management, the ultimate resolution of this matter will
not materially affect future operations, the financial position or cash flows
of the Company.
The Company is not involved in any other material litigation; however,
the Company is involved in routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of fiscal 1998.
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ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names of all executive officers of
the Company and certain other information relating to their position held with
the Company and other business experience.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE RECENT BUSINESS EXPERIENCE
- ----------------- --- --------------------------
<S> <C> <C>
Joseph W. Rog 58 Chairman of the Board of Directors since June 1993 and Chief
Executive Officer since the Company's formation in 1984. President
of the Company since June 1995 and from January 1984 to June 1993.
Michael K. Baach 43 Executive Vice President since April 1993, Assistant Secretary
since June 1995 and Senior Vice President since 1992. Prior to
that, Mr. Baach was Vice President of Sales and Marketing since the
Company's formation in 1984.
George A. Gehring, Jr. 54 Executive Vice President since April 1993 and Senior Vice President
since 1991. Prior to that, Mr. Gehring served as President of
Ocean City Research Corporation.
David H. Kroon 48 Executive Vice President since April 1993 and Senior Vice President
since the Company's formation in 1984.
Barry W. Schadeck 47 Executive Vice President since June 1995 and President of Corrpro
Canada, Inc., a wholly-owned subsidiary of the Company, since its
formation in May 1994. Prior to that, Mr. Schadeck served as
President since April 1993 and Chief Financial Officer since 1979
of the Company's Commonwealth Seager Group subsidiary.
David M. Hickey 52 Executive Vice President of Manufacturing and International
Operations since June 1995. Prior to that, Mr. Hickey was
President of Rohrback Cosasco Systems, Inc., a wholly-owned
subsidiary of MascoTech, Inc. Rohrback Cosasco Systems, Inc.
was acquired by the Company in August 1994.
Neal R. Restivo 38 Executive Vice President, Chief Financial Officer, Secretary and
Treasurer since March 1998. Senior Vice President, Chief Financial
Officer, Secretary and Treasurer since October 1995. From November
1989 to September 1995, Mr. Restivo was with Waxman Industries,
Inc., most recently as Senior Vice President, Finance and Chief
Financial Officer. Prior to that, from August 1982 to November
1989, Mr. Restivo was employed by Arthur Andersen LLP, where he was
an Audit Manager since 1988.
Mozelle T. Jackson 31 Vice President and Corporate Controller since July 1996. Corporate
Controller since December 1995. Prior to that Ms. Jackson was with
Waxman Industries, Inc. most recently as Vice President, Corporate
Controller. Ms. Jackson had prior experience with the Allen Group
Inc. and Arthur Andersen LLP.
</TABLE>
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<TABLE>
<S> <C> <C>
John D. Moran 40 General Counsel and Assistant Secretary since December 1996. Prior
to that, Mr. Moran was in-house counsel for Sealy Corporation for
ten years and served as Secretary. Mr. Moran had prior experience
with Grant Thornton.
</TABLE>
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
PRICE RANGE OF COMMON SHARES
The Company's Common Shares have been listed on the New York Stock
Exchange ("NYSE") since September 30, 1993 under the symbol "CO". The following
table sets forth the high and low closing sale prices for the Common Shares on
the NYSE for the fiscal periods indicated.
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------- -----------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $ 8.00 $ 6.70 $ 8.20 $ 5.80
Second Quarter 10.35 7.50 7.10 6.10
Third Quarter 12.20 9.80 7.60 5.80
Fourth Quarter 11.90 10.40 8.20 7.20
</TABLE>
The above information reflects the five-for-four stock split that will be
effected via a stock dividend payable June 19, 1998 to shareholders of record
as of June 5, 1998.
HOLDERS OF RECORD
On May 26, 1998, there were 253 holders of record of the Company's
Common Shares.
DIVIDENDS
In recent years, the Company has not paid any cash dividends on its
Common Shares. The Company currently anticipates that it will retain all future
earnings for use in its business and does not anticipate paying any cash
dividends in the foreseeable future. Provisions within the Company's domestic
bank credit agreement and Senior Note Indenture limit the Company's ability to
pay cash dividends.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues $172,653 $ 139,604 $ 127,773 $ 118,515 $ 69,536 $50,075
Cost of sales 121,337 97,813 94,609 82,118 45,833 33,054
-------- --------- --------- --------- -------- -------
Gross profit 51,316 41,791 33,164 36,397 23,703 17,021
Selling, general and administrative expenses 37,396 30,421 31,322 29,557 16,206 12,493
Unusual items -- 1,700 4,368 -- 1,622 --
-------- --------- --------- --------- -------- -------
Operating income (loss) 13,920 9,670 (2,526) 6,840 5,875 4,528
Interest expense 2,434 1,696 1,937 888 887 1,328
-------- --------- --------- --------- -------- -------
Income (loss) from continuing operations before
income taxes, extraordinary charge and
cumulative effect of change in accounting
principle 11,486 7,974 (4,463) 5,952 4,988 3,200
Income tax provision (benefit) 4,595 3,167 (1,056) 2,661 2,282 1,200
-------- --------- --------- --------- -------- -------
Income (loss) from continuing operations before
extraordinary charge and cumulative effect of
change in accounting principle 6,891 4,807 (3,407) 3,291 2,706 2,000
Discontinued operations:
Loss from operations, net of tax benefit -- (1,037) (1,735) (455) -- --
Loss on disposal, net of tax benefit -- (3,960) -- -- -- --
Extraordinary charge, net of tax benefit -- -- (70) -- (102) --
Cumulative effect on prior years of change
in accounting principle -- -- -- -- 136 --
-------- --------- --------- --------- -------- -------
Net income (loss) $ 6,891 $ (190) $ (5,212) $ 2,836 $ 2,740 $ 2,000
======== ========= ========= ========= ======== =======
EARNINGS PER SHARE - BASIC:
Income (loss) from continuing operations before
extraordinary charge $ 0.85 $ 0.58 $ (0.44) $ 0.46 $ 0.73 $ 0.87
Discontinued operations:
Loss from operations, net of tax benefit -- (0.12) (0.22) (0.06) -- --
Loss on disposal, net of tax benefit -- (0.48) -- -- -- --
Extraordinary charge, net of tax benefit -- -- (0.01) -- (0.03) --
Cumulative effect of change in accounting
principle -- -- -- -- 0.04 --
-------- --------- --------- --------- -------- -------
Net income (loss) $ 0.85 $ (0.02) $ (0.67) $ 0.40 $ 0.74 $ 0.87
======== ========= ========= ========= ======== =======
Weighted average number of Common Shares
outstanding - Basic (1) 8,155 8,266 7,764 7,164 3,681 2,291
EARNINGS PER SHARE - DILUTED:
Income (loss) from continuing operations before
extraordinary charge $ 0.81 $ 0.57 $ (0.44) $ 0.39 $ 0.53 $ 0.65
Discontinued operations:
Loss from operations, net of tax benefit -- (0.12) (0.22) (0.05) -- --
Loss on disposal, net of tax benefit -- (0.47) -- -- -- --
Extraordinary charge, net of tax benefit -- -- (0.01) -- (0.02) --
Cumulative effect of change in accounting
principle -- -- -- -- 0.03 --
-------- --------- --------- --------- -------- -------
Net income (loss) $ 0.81 $ (0.02) $ (0.67) $ 0.34 $ 0.54 $ 0.65
======== ========= ========= ========= ======== =======
Weighted average number of Common Shares
outstanding - Diluted (1) 8,468 8,486 7,764 8,334 5,034 3,085
MARCH 31,
---------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
BALANCE SHEET DATA:
Working capital, excluding net assets held for sale $ 51,078 $ 35,082 $ 30,358 $ 31,229 $ 20,441 $ 8,526
Total assets 136,275 106,918 107,398 108,758 67,858 21,880
Long-term debt, net of current portion 47,695 25,635 26,616 25,869 21,492 10,700
Minority interest 469 473 502 4,067 4,022 --
Shareholders' equity 57,961 54,676 54,281 56,060 24,301 2,814
<FN>
(1) Weighted average shares reflect the five-for-four stock split that will be effected via a stock dividend payable
June 19, 1998 to shareholders of record as of June 5, 1998.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Effective July 1, 1997, the Company acquired all the outstanding shares
of capital stock of CPS. The acquisition has been accounted for using the
purchase method of accounting and the results of CPS have been included in the
Company's results since the effective date.
The integration of CPS' operations into Corrpro is essentially complete
and the Company has been able to take advantage of synergies and consolidation
opportunities that existed between the two companies. Five of CPS' offices were
located in cities where Corrpro also had facilities. In each of these cities,
the Company physically merged the operations in order to reduce overhead and
administrative costs. The Company's integration plans also included the
consolidation of CPS' corporate and administrative functions into Corrpro's. The
results attributable to CPS are not separable due to the integration of CPS'
operations into Corrpro.
This document contains certain statements, that constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Factors that might affect such forward-looking
statements include the Company's mix of products and services, timing of jobs,
the availability and value of larger jobs, the impact of weather on the
Company's operations and the Company's ability to successfully integrate
acquired businesses in a timely manner.
During March 1997, the Company adopted a formal plan to sell its
Corrtherm operations. Corrtherm is reported as a discontinued operation and its
net assets and results of operations are reported separately in the consolidated
financial statements. The process of selling Corrtherm is on-going.
OPERATING RESULTS OF THE COMPANY
YEAR ENDED MARCH 31, 1998 COMPARED TO YEAR ENDED MARCH 31, 1997
REVENUES
Revenues for fiscal 1998 totaled $172.7 million compared with $139.6
million for fiscal 1997, an increase of 23.7%. The fiscal 1998 revenues include
the results of CPS, which was acquired effective July 1, 1997. The results of
CPS are no longer separable due to the integration of CPS' operations. Excluding
the impact of the CPS acquisition, management estimates that revenues increased
approximately 10%.
During fiscal 1998, approximately 51% of the Company's revenues related
to services and 49% related to product sales. In fiscal 1997, approximately 48%
of the Company's revenues related to services and 52% related to product sales.
Revenues from services increased approximately $21.1 million or 31.3%
as a result of the CPS acquisition as well as growth at the domestic core
businesses, RCS and the international operations in Europe and the Middle East.
The Company has continued to make progress in diversifying its international
operations' revenues more towards the service side of the business.
10
<PAGE> 11
Product revenues increased $11.9 million or 16.5%, which related, in
part, to CPS. The remainder of the increase in product revenues related to the
Company's European operations. The European operations continued to benefit from
several large offshore projects, which had been in progress since fiscal 1997.
GROSS PROFIT
The Company's gross profit for fiscal 1998 totaled $51.3 million (or
29.7% of revenues) compared to $41.8 million (or 29.9% of revenues) for fiscal
1997, an increase in gross profit dollars of 22.8%.
Gross profit related to services totaled $28.9 million (or 32.6% of
revenues) for fiscal 1998 compared to $23.3 million (or 34.5% of revenues) for
fiscal 1997, an increase in gross profit dollars of 24.2%. The lower service
margin percentages resulted primarily from mix differences between years. In
addition, as a result of the acquisition of CPS, the Company now has a larger
component of construction-related business, which typically has lower gross
profit margins than the other engineering services business.
Gross profit related to product sales totaled $22.4 million (or 26.7%
of revenues) for fiscal 1998 compared to $18.5 million (or 25.7% of revenues)
for fiscal 1997, an increase in gross profit dollars of 21.0%. The improvement
in product margins related to the Company's European operations as well as RCS.
Gross profit margins at Good-All have been negatively impacted as the Company
has worked to return it to normal operating levels after the rectifier
operations were moved from Colorado to Ohio in late fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
S,G&A expense for fiscal 1998 totaled $37.4 million (or 21.7% of
revenues) compared to $30.4 million (or 21.8% of revenues) for fiscal 1997, an
increase of 22.9%. The increase related to CPS as well as higher levels of
business activity.
UNUSUAL ITEMS
During fiscal 1997, the Company recorded a net unusual charge totaling
$1.7 million. The unusual charge included a $2.4 million charge related to the
final settlement of the securities and class action and shareholder derivative
lawsuits filed in 1995, offset by a $0.7 million gain on the sale of a small
non-core business recorded during the fourth quarter.
OPERATING INCOME
Operating income for fiscal 1998 totaled $13.9 million compared with
$9.7 million during fiscal 1997, an increase of 44.0%. The fiscal 1997 results
included an unusual charge of $1.7 million. Excluding the impact of the
prior-year unusual charge, operating income increased 22.4% between years.
INTEREST EXPENSE
Interest expense for fiscal 1998 totaled $2.4 million compared to $1.7
million for fiscal 1997. The increase relates primarily to increased borrowings
in connection with the CPS acquisition.
INCOME TAX PROVISION
The Company recorded a provision for income taxes of $4.6 million for
fiscal 1998 compared to $3.2 million for fiscal 1997. The effective tax rate for
fiscal 1998 was 40.0% compared to 39.7% for fiscal 1997. See Note 6 to Notes to
Consolidated Financial Statements for reconciliation of the Company's effective
tax rates.
11
<PAGE> 12
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations for fiscal 1998 totaled $6.9 million,
compared with income of $4.8 million in fiscal 1997.
DISCONTINUED OPERATIONS
The Company's operating loss from discontinued operations for fiscal
1997 totaled $1.0 million. The Company also recognized a loss on the disposal of
Corrtherm of $4.0 million, net of tax benefit in fiscal 1997.
NET INCOME
The Company had net income of $6.9 million for fiscal 1998 compared to
a net loss of $0.2 million for fiscal 1997.
YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996
REVENUES
Revenues for fiscal 1997 totaled $139.6 million compared with $127.8
million for fiscal 1996, an increase of 9.3%. The increase was all internally
generated, as there were no acquisitions in either fiscal year. During fiscal
1997, approximately 48% of the Company's revenues related to services and 52%
related to product sales. In fiscal 1996, service and product sales represented
approximately 52% and 48%, respectively, of the Company's revenues.
Revenues from services increased approximately $1.6 million or 2.4% as
the Company emphasized profitability over revenue growth. Fiscal 1996 service
revenues were negatively impacted during the fourth quarter by unusually severe
winter weather in parts of the U.S. and Canada, resulting in certain engineering
and construction projects being delayed to future periods.
Product revenues increased $10.3 million or 16.6% primarily due to
growth at the Company's Wilson Walton UK operations as well as growth from the
Company's core businesses. Wilson Walton's results benefited from several large
offshore projects that were in process during fiscal 1997.
GROSS PROFIT
The Company's gross profit for fiscal 1997 totaled $41.8 million (or
29.9% of revenues) compared to $33.2 million (or 26.0% of revenues) for fiscal
1996, an increase in gross profit dollars of 26.0%.
Gross profit related to services totaled $23.3 million (or 34.5% of
service revenues) for fiscal 1997 compared to $17.6 million (or 26.7% of service
revenues) for fiscal 1996, an increase in gross profit dollars of 32.2%. The
improvement in service margins is primarily the result of the pricing
disciplines effected during fiscal 1996. The full benefit of these were realized
in fiscal 1997. During fiscal 1996, the Company completed a number of lower
margin jobs and orders which were in the backlog at the beginning of the fiscal
year.
Gross profit related to product sales totaled $18.5 million (or 25.7%
of product sales) for fiscal 1997 compared to $15.6 million (or 25.2% of product
sales) for fiscal 1996, an increase in gross profit dollars of 19.0%.
12
<PAGE> 13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
S,G&A expense for fiscal 1997 totaled $30.4 million (or 21.8% of
revenues) compared to $31.3 million (or 24.5% of revenues) for fiscal 1996, a
decrease of 2.9%. The decrease is primarily due to the cost reduction measures
implemented in fiscal 1996.
UNUSUAL ITEMS
During fiscal 1997, the Company recorded a net unusual charge totaling
$1.7 million. The unusual charge includes a $2.4 million charge related to the
final settlement of the securities and class action and shareholder derivative
lawsuits filed in 1995, offset by a $0.7 million gain on the sale of a small
non-core business recorded during the fourth quarter. During fiscal 1996, the
Company recorded unusual charges totaling $4.4 million. Such charges consisted
primarily of litigation-related legal expenses as well as costs associated with
the consolidation of facilities.
OPERATING INCOME (LOSS)
Operating income for fiscal 1997 totaled $9.7 million compared with an
operating loss of $2.5 million during fiscal 1996. The increase is attributable
to higher gross margins and a reduction in S,G&A expense. The current year
results include a net unusual charge of $1.7 million. The fiscal 1996 operating
loss included a $4.4 million unusual charge. Excluding the impact of the unusual
items, operating income for fiscal 1997 increased 517% over fiscal 1996 results.
INTEREST EXPENSE
Interest expense for fiscal 1997 totaled $1.7 million compared to $1.9
million for fiscal 1996. The decrease is primarily attributable to the paydown
of long-term debt and a decrease in the average interest rate.
INCOME TAX PROVISION (BENEFIT)
The Company recorded a provision for income taxes of $3.2 million for
fiscal 1997 compared to a benefit of $1.1 million for fiscal 1996. The effective
tax rate for fiscal 1997 was 39.7% compared to (23.7)% for fiscal 1996. See Note
6 to Notes to Consolidated Financial Statements for reconciliation of the
Company's effective tax rates.
INCOME (LOSS) FROM CONTINUING OPERATIONS
Income from continuing operations for fiscal 1997 totaled $4.8 million,
compared with a loss of $3.4 million in fiscal 1996.
DISCONTINUED OPERATIONS
The Company's operating loss from discontinued operations totaled $1.0
million in fiscal 1997 compared to $1.7 million in fiscal 1996. During fiscal
1997, the Company recorded a $4.0 million charge (net of tax benefit) relating
to the decision to sell Corrtherm.
13
<PAGE> 14
NET LOSS
The Company incurred a net loss of $0.2 million for fiscal 1997
compared to a net loss of $5.2 million for fiscal 1996. The fiscal 1996 net loss
includes a $0.1 million extraordinary charge related to the early retirement of
bank debt.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had working capital (excluding net
assets held for sale), of $51.1 million compared to $35.1 million at March 31,
1997, an increase of $16.0 million or 45.6%. Approximately $5.7 million of this
increase related to the acquisition of CPS. The remainder of the increase
results primarily from a higher cash balance and higher inventory levels. The
increased inventory level is due, in part, to the acquisition of CPS. Excluding
the impact of CPS, receivables remained relatively flat. During fiscal 1998,
the Company generated cash flow from operations of $6.5 million.
Cash used for investing activities totaled $17.6 million during fiscal
1998 and included $2.6 million of net capital expenditures and $15.0 million
related to the acquisition of CPS. Cash generated by financing activities
totaled $17.4 million during fiscal 1998 which included the refinancing of the
domestic credit facility of $26.6 million and initial borrowings of $42.4
million under the new domestic credit facility. Financing activities also
included the repayment of the domestic term loan of $20 million, the issuance of
the Senior Notes of $30 million and the repurchase of 332,000 shares of the
Company's Common Shares for a total cost of $3.3 million.
On July 16, 1997, the Company entered into a five-year, $55 million
domestic bank credit facility. The credit facility consisted of a $35 million
revolver which expires on July 15, 2002 and a $20 million term loan which was
scheduled to mature on June 30, 2002. Initial borrowings under the credit
facility were used to finance the acquisition of CPS and to repay all
outstanding borrowings under the Company's $37.5 million domestic bank credit
facility. On September 18, 1997 the domestic credit facility was amended to
increase the revolver from $35 million to $40 million.
On January 21, 1998, the Company completed the private placement of $30
million of Senior Notes due 2008. The Notes, which are unsecured, have a fixed
interest rate of 7.6% per annum and require annual principal payments of $4.3
million commencing in 2002. Proceeds from the Notes were used to pay down
borrowings under the Company's domestic bank credit facility including the
prepayment of its $20 million term loan. The domestic bank credit facility now
consists of a $40 million revolver that expires in 2002.
In addition to the domestic bank credit facility, the Company has
various smaller lines of credit with foreign banks which totaled approximately
$5.0 million. Total availability under the domestic and foreign credit
facilities at March 31, 1998 was approximately $28.4 million. The Company was in
compliance with all of its debt covenants at March 31, 1998.
The Company believes that cash generated by operations and amounts
available under its domestic bank credit facility and foreign lines of credit
will be sufficient to satisfy the Company's liquidity requirements through at
least fiscal 1999.
CHANGES IN ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share", which is required to be adopted on December 31,
1997. At that time, the Company was required to change the method currently used
to compute earnings per share and to restate all prior periods presented in
comparative statements. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options are excluded from the
calculation. The impact of SFAS No. 128 on the calculation of
14
<PAGE> 15
fully diluted earnings per share for these periods is also immaterial.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting on Comprehensive Income." SFAS 130 will become effective for the
Company in the first quarter of fiscal 1999. The adoption of this Statement
will have no effect on the Company's financial position or results of
operations.
In June 1997, SFAS 131, "Disclosure about Segments of an Enterprise and
Related Information," was issued. The statement must be adopted by the Company
in fiscal 1999. Under provisions of this statement, the Company will be required
to modify or expand the financial statement disclosures for its products and
services and geographic areas. Implementation of this disclosure standard will
not affect the Company's financial position or results of operations.
EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSLATION
The Company does not believe that inflation has had a significant
effect on the Company's results of operations for the periods presented.
The Company has not been significantly affected by currency
fluctuations or foreign exchange restrictions. Management believes that these
risks resulting from the Company's increased foreign sales are manageable.
YEAR 2000
The Company has developed plans to address possible exposures related
to the impact on its computer systems of the Year 2000 issue. The Company is
currently upgrading the software utilized by the majority of its U.S.
operations. The upgrade is being implemented for business reasons in
addition to resolving certain Year 2000 issues. Maintenance and modification
costs including costs attributable to the Year 2000 issue will be expensed as
incurred, while the costs of new information technology will be capitalized and
amortized in accordance with Company policy and generally accepted accounting
principles. The total cost of upgrading the software, including the cost of
Year 2000 compliance which is not separately determinable, is expected to
range from $500,000 - $700,000. Project completion is planned for
the fourth quarter of fiscal 1999. Management is keeping the Board of Directors
informed as to the status of the upgrade as well as other Year 2000 related
issues.
The Company expects that it will be able to modify or replace the
various systems effected by the Year 2000 issue in time to avoid any material
disruption to its operations; however, unforeseen developments or delays
could cause this expectation to change. Also, in the event that any of the
Company's significant suppliers or customers do not successfully achieve timely
Year 2000 compliance, the Company's operations could be adversely affected. The
Company is currently in the process of contacting those key suppliers and
customers to determine whether any possible exposures exist.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Begins on following page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
15
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Corrpro Companies, Inc.
We have audited the accompanying consolidated balance sheets of Corrpro
Companies, Inc. and subsidiaries (the Company) as of March 31, 1998 and 1997,
and the related consolidated statements of income, shareholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. The
accompanying consolidated financial statements of the Company for the year ended
March 31, 1996, were audited by other auditors whose report thereon dated May
28, 1996, expressed an unqualified opinion on those statements, before the
restatements described in Note 1 for earnings per share, Note 11 for
discontinued operations and Note 13 for the stock split.
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 amount 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 1998 and 1997 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Corrpro Companies, Inc. and subsidiaries as of March 31, 1998 and 1997, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
We also audited the adjustments described in Note 1 for earnings per share,
Note 11 for discontinued operations and Note 13 for the stock split that were
applied to restate the 1996 consolidated financial statements. In our opinion,
such adjustments are appropriate and have been properly applied.
KPMG PEAT MARWICK LLP
Cleveland, Ohio
May 8, 1998
Except for Note 13 as to which the date is May 19, 1998.
16
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Corrpro Companies, Inc.
In our opinion, the consolidated statements of income, of shareholders' equity
and of cash flows, prior to restatement for discontinued operations, adoption of
SFAS 128 "Earnings Per Share" (SFAS 128) and retroactive stock split (not
presented herein), present fairly, in all material respects, the results of
operations and cash flows of Corrpro Companies, Inc. and its subsidiaries (the
Company) for the year ended March 31, 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management, our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of the Company for any period subsequent to
March 31, 1996, nor have we examined any adjustments applied to the 1996
financial statements which give effect to the Company's 1997 decision to
discontinue certain operations, its 1998 adoption of SFAS 128 and its 1998 stock
split.
PRICE WATERHOUSE LLP
Cleveland, Ohio
May 28, 1996
17
<PAGE> 18
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
(In Thousands)
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,687 $ 3,233
Accounts receivable, net 38,733 32,622
Inventories 24,458 18,031
Prepaid expenses and other 7,315 6,624
Net assets held for sale 10,662 11,277
--------- ---------
Total current assets 89,855 71,787
--------- ---------
PROPERTY AND EQUIPMENT:
Land 547 553
Buildings and improvements 4,545 4,840
Equipment, furniture and fixtures 15,696 12,358
--------- ---------
20,788 17,751
Less accumulated depreciation (8,278) (7,231)
--------- ---------
Property and equipment, net 12,510 10,520
--------- ---------
OTHER ASSETS:
Goodwill, net 27,315 21,218
Other assets 6,595 3,393
--------- ---------
Total other assets 33,910 24,611
--------- ---------
$ 136,275 $ 106,918
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
18
<PAGE> 19
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
(In Thousands, Except per Share Data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ -- $ 249
Current portion of long-term debt 683 1,803
Accounts payable 17,319 13,607
Accrued liabilities and other 10,113 9,769
--------- ---------
Total current liabilities 28,115 25,428
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION 17,695 25,635
SENIOR NOTES 30,000 --
DEFERRED INCOME TAXES 2,035 706
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST 469 473
SHAREHOLDERS' EQUITY:
Serial Preferred Shares, voting, no par value;
1,000 shares authorized and unissued -- --
Common Shares, voting, no par value, stated value
$0.26 per share; 12,000 shares authorized; 8,413
and 8,388 shares issued in 1998 and 1997; 7,941 and
8,247 shares outstanding in 1998 and 1997 2,245 2,238
Additional paid-in capital 50,708 50,590
Accumulated earnings 8,664 1,773
--------- ---------
61,617 54,601
Cumulative translation adjustment 482 894
Common Shares in treasury, at cost (4,138) (819)
--------- ---------
Total shareholders' equity 57,961 54,676
--------- ---------
$ 136,275 $ 106,918
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
19
<PAGE> 20
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Engineering and construction services $ 88,601 $ 67,486 $ 65,916
Product sales 84,052 72,118 61,857
-------- --------- ---------
172,653 139,604 127,773
-------- --------- ---------
Cost of sales:
Engineering and construction services 59,720 44,236 48,330
Product sales 61,617 53,577 46,279
-------- --------- ---------
121,337 97,813 94,609
-------- --------- ---------
Gross profit 51,316 41,791 33,164
Selling, general and administrative expenses 37,396 30,421 31,322
Unusual items -- 1,700 4,368
-------- --------- ---------
Operating income (loss) 13,920 9,670 (2,526)
Interest expense 2,434 1,696 1,937
-------- --------- ---------
Income (loss) from continuing operations before
income taxes and extraordinary charge 11,486 7,974 (4,463)
Provision (benefit) for income taxes 4,595 3,167 (1,056)
-------- --------- ---------
Income (loss) from continuing operations before
extraordinary charge 6,891 4,807 (3,407)
Discontinued operations:
Loss from operations, net of tax benefit -- (1,037) (1,735)
Loss on disposal, net of tax benefit -- (3,960) --
-------- --------- ---------
Income (loss) before extraordinary charge 6,891 (190) (5,142)
Extraordinary charge, net of tax benefit -- -- (70)
-------- --------- ---------
Net income (loss) $ 6,891 $ (190) $ (5,212)
======== ========= =========
Earnings per share - Basic:
Income (loss) from continuing operations before
extraordinary charge $ 0.85 $ 0.58 $ (0.44)
Discontinued operations:
Loss from operations, net of tax benefit -- (0.12) (0.22)
Loss on disposal, net of tax benefit -- (0.48) --
Extraordinary charge, net of tax benefit -- -- (0.01)
-------- --------- ---------
Net income (loss) $ 0.85 $ (0.02) $ (0.67)
======== ========= =========
Weighted average shares outstanding - Basic 8,155 8,266 7,764
======== ========= =========
Earnings per share - Diluted:
Income (loss) from continuing operations before
extraordinary charge $ 0.81 $ 0.57 $ (0.44)
Discontinued operations:
Loss from operations, net of tax benefit -- (0.12) (0.22)
Loss on disposal, net of tax benefit -- (0.47) --
Extraordinary charge, net of tax benefit -- -- (0.01)
-------- --------- ---------
Net income (loss) $ 0.81 $ (0.02) $ (0.67)
======== ========= =========
Weighted average shares outstanding - Diluted 8,468 8,486 7,764
======== ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
20
<PAGE> 21
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
COMMON
SHARES COMMON
SERIAL ($0.26) ADDITIONAL CUMULATIVE SHARES
PREFERRED STATED PAID-IN ACCUMULATED TRANSLATION IN
SHARES VALUE) CAPITAL EARNINGS ADJUSTMENT TREASURY* TOTAL
------ ------ ------- -------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $ -- $1,989 $46,333 $ 7,175 $ 615 $ (52) $ 56,060
Net loss -- -- -- (5,212) -- -- (5,212)
Exercise of 111 stock options -- 30 391 -- -- -- 421
Conversion of 630 CSG shares -- 177 3,319 -- -- -- 3,496
Cumulative translation adjustment -- -- -- -- (484) -- (484)
-------- ------ ------- ------- ------- ------- --------
March 31, 1996 -- 2,196 50,043 1,963 131 (52) 54,281
Net loss -- -- -- (190) -- -- (190)
Exercise of 158 stock options -- 42 547 -- -- -- 589
Repurchase of 109 Common Shares -- -- -- -- -- (767) (767)
Cumulative translation adjustment -- -- -- -- 763 -- 763
-------- ------ ------- ------- ------- ------- --------
March 31, 1997 -- 2,238 50,590 1,773 894 (819) 54,676
Net income -- -- -- 6,891 -- -- 6,891
Exercise of 25 stock options -- 7 118 -- -- -- 125
Repurchase of 332 Common Shares -- -- -- -- -- (3,319) (3,319)
Cumulative translation adjustment -- -- -- -- (412) -- (412)
-------- ------ ------- ------- ------- ------- --------
March 31, 1998 $ -- $2,245 $50,708 $ 8,664 $ 482 $(4,138) $ 57,961
======== ====== ======= ======= ======= ======= ========
</TABLE>
*Shares held in treasury totaled 31 at March 31, 1995 and 1996; 141 at March 31,
1997 and 473 at March 31, 1998.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
21
<PAGE> 22
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(In Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,891 $ (190) $(5,212)
Adjustments to reconcile net income (loss)
to net cash provided by continuing operations:
Depreciation and amortization 3,665 3,259 2,791
Deferred income taxes 234 (529) (900)
(Gain) loss on sale of assets (173) (105) 94
Loss from discontinued operations -- 1,037 1,735
Loss on disposal of discontinued operations -- 3,960 --
Minority interest (4) (47) (54)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (640) (3,556) 2,694
Inventories (3,332) (3,128) (1,286)
Prepaid expenses and other (1,357) 3,634 1,090
Accounts payable and accrued expenses 609 (1,147) 3,039
Other assets (53) 206 (557)
-------- ------- -------
Total adjustments (1,051) 3,584 8,646
-------- ------- -------
Net cash provided by continuing operations 5,840 3,394 3,434
Net cash provided by discontinued operations 615 271 2,813
-------- ------- -------
Net cash provided by operations 6,455 3,665 6,247
-------- ------- -------
Cash flows from investing activities:
Additions to and disposals of property, plant and equipment (2,596) (1,887) (2,864)
Acquisitions, net of cash acquired (15,023) -- (700)
Other assets -- (500) (731)
-------- ------- -------
Net cash used for investing activities (17,619) (2,387) (4,295)
-------- ------- -------
Cash flows from financing activities:
Long-term debt, net (4,644) (494) 1,390
Repayment of other debt (396) (230) (1,783)
Refinance of domestic credit facility (26,619) -- --
Initial borrowings under new domestic credit facility 42,350 -- --
Issuance of Senior Notes 30,000 -- --
Repayment of Term Loan (20,000) -- --
Net proceeds from issuance of Common Shares 56 297 207
Repurchase of Common Shares (3,319) (767) --
-------- ------- -------
Net cash provided by (used for) financing activities 17,428 (1,194) (186)
-------- ------- -------
Effect of changes in foreign currency exchange rates (810) (100) 99
-------- ------- -------
Net increase (decrease) in cash 5,454 (16) 1,865
Cash and cash equivalents at beginning of period 3,233 3,249 1,384
-------- ------- -------
Cash and cash equivalents at end of period $ 8,687 $ 3,233 $ 3,249
======== ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
22
<PAGE> 23
CORRPRO COMPANIES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(In Thousands, Except per Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation and basis of presentation
The consolidated financial statements include the accounts of Corrpro
Companies, Inc. and its wholly-owned subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain fiscal 1997 and 1996 amounts have been reclassified to conform with the
fiscal 1998 presentation.
The Company operates in a single industry segment domestically and
through subsidiaries headquartered in Canada, United Kingdom, Saudi Arabia and
Indonesia with various other locations in Europe, the Middle East and Asia,
which consists of providing corrosion control engineering and monitoring
services, systems and equipment to the infrastructure, environmental and energy
markets.
Cash and cash equivalents
The Company considers cash and all other highly liquid investments with
a maturity of three months or less at the time of purchase to be cash
equivalents.
Accounts receivable
Accounts receivable are presented net of allowances for doubtful
accounts of $2,151, $1,735, $1,185 and $1,013 at March 31, 1998, 1997, 1996 and
1995, respectively. Bad debt expense totaled $498, $498 and $654 in fiscal 1998,
1997 and 1996, respectively.
The Company performs ongoing credit evaluations of its customers'
financial condition. Corrosion control services and products are provided to a
large number of customers with no substantial concentration in a particular
industry.
Inventories
Inventories are valued at the lower of cost or market with cost being
determined on the first-in, first-out method. Inventories are stated net of
reserves for excess, slow moving and potentially obsolete materials. Inventories
consist of the following at March 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Component parts and raw materials $10,007 $ 8,437
Work in process 1,908 955
Finished goods 12,543 8,639
------ -------
$24,458 $18,031
====== ======
</TABLE>
23
<PAGE> 24
Property and equipment
Property and equipment are stated at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. The cost and accumulated depreciation for property and equipment sold,
retired, or otherwise disposed of are removed from the accounts, and resulting
gains or losses are reflected in income.
Substantially all of the Company's operations compute depreciation on
the straight-line method. Depreciation for the Company's Canadian operations is
computed on the declining balance method. Estimated useful lives range from 25
to 40 years for buildings and from 4 to 10 years for equipment, furniture and
fixtures. Leasehold improvements are depreciated over the term of the lease. For
income tax reporting purposes, depreciation is computed principally using
accelerated methods.
Depreciation expense totaled $2,107, $1,905 and $1,754 in fiscal 1998,
1997 and 1996, respectively.
Goodwill, patents and other intangibles
Goodwill is being amortized on a straight-line basis, over 30 to 40
years. Goodwill amortization totaled $967, $777 and $796 in fiscal 1998, 1997
and 1996, respectively. Accumulated amortization was $3,448 and $2,481 at March
31, 1998 and 1997, respectively.
Included in patents and other intangibles are amortizable assets
consisting primarily of patents, trademarks and covenants not to compete. Such
assets, with a cost of $3,242 and $3,102 at March 31, 1998 and 1997,
respectively, are amortized on the straight-line method over their estimated
useful lives ranging from 4 to 20 years. Amortization expense for such assets
totaled $282, $345 and $295 in fiscal 1998, 1997 and 1996, respectively.
The Company uses an undiscounted cash flow method to periodically
review the net realizable value of goodwill and other intangible assets and
believes that such assets are realizable.
Fair value of financial instruments
The recorded value of cash and cash equivalents, receivables, payables,
accrued liabilities and short-term borrowings approximates fair value because of
the short maturity of these instruments. The recorded value of the Company's and
Senior Notes is considered to approximate fair value based on the borrowing
rates currently available to the Company for loans with similar terms and
maturities.
Revenue recognition
The Company records income from construction and engineering contracts
under the percentage-of-completion method. Under this method, revenues are
recognized in proportion to the ratio of costs incurred to currently estimated
total contract costs. Estimated earnings and costs on contracts are subject to
revision throughout the terms of the contracts, and any required adjustments are
recorded in the periods in which revisions are made. Accounts receivable
includes $896 and $861 at March 31, 1998 and 1997, respectively, of amounts
billed but not paid by customers under retainage provisions of contracts.
Prepaid expenses and other includes $2,879 and $2,498 at March 31, 1998 and
1997, respectively, of amounts related to costs and estimated earnings in excess
of billings on uncompleted contracts. The Company recognizes revenue from
product sales upon shipment.
Product development expenses
Expenditures for product development totaled approximately $694, $783
and $718 in fiscal 1998, 1997 and 1996, respectively.
24
<PAGE> 25
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires the application of the asset and
liability method.
Unusual items
During fiscal 1997, the Company recorded an unusual charge totaling
$1,700. This amount included a $2,400 charge which represented the Company's
share of the settlement cost relating to the securities class action and
shareholder derivative lawsuits, net of estimated litigation related legal fees
to be reimbursed by the Company's D&O carrier. The fiscal 1997 amount also
included a $700 gain on the sale of a non-core business operation. See Note 3.
At March 31, 1997, accrued liabilities included $2.1 million related to
the securities class action and shareholder derivative lawsuit matters.
During fiscal 1996, the Company recorded unusual charges totaling
$4,368. Such charges consisted primarily of litigation related legal and
professional expenses as well as costs associated with the consolidation of
facilities and the integration of acquisitions.
Extraordinary charges
During fiscal 1996, the Company recorded a $70 extraordinary charge,
net of tax benefit, as a result of the refinancing of borrowings under its
domestic revolving credit facility. The extraordinary charge represented the
write-off of unamortized deferred financing costs.
Earnings per share
In February 1997, The Financial Accounting Standards Board issued
Statement of Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." The
Statement replaces the presentation of primary earnings per share (EPS) with the
presentation of basic EPS, and replaces fully diluted EPS with diluted EPS. The
Company was required to adopt SFAS 128 for the quarter ending December 31, 1997.
All fiscal years presented have been restated to conform with SFAS 128.
Basic EPS is computed by dividing net income for the period by the
weighted average number of shares of common shares outstanding for the period.
Diluted EPS is computed by dividing net income by the weighted average number of
shares of common shares and potential common shares outstanding for the period.
Stock options are the only potential common shares and are considered in the
Company's diluted EPS calculation. Potential common shares are computed using
the treasury stock method.
Weighted average shares reflects the five-for-four stock split that will be
effected June 19, 1998. See Note 13.
Foreign currency translation
The functional currency for each of the Company's foreign operations is
the applicable local currency. Accordingly, assets and liabilities are
translated into U.S. dollars at the exchange rate in effect at the balance sheet
date, and income and expenses are translated at average exchange rates
prevailing during the year. Translation gains or losses are accumulated as a
separate component of shareholders' equity entitled cumulative translation
adjustment. Foreign currency transaction gains or losses are credited or charged
to income, and such amounts have been insignificant for the periods presented.
25
<PAGE> 26
Financial statement 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," and will continue to account for
stock-based compensation using Accounting Principles Board Opinion (APB) No. 25
"Accounting for Stock Issued to Employees."
2. ACQUISITIONS AND DISPOSITIONS:
Effective July 1, 1997, the Company acquired all the outstanding shares
of capital stock of Cathodic Protection Services Company ("CPS"). The purchase
price was $15,023 in cash which included the repayment in full of certain
indebtedness and management fees owed by CPS to its senior lenders and its
former stockholders as well as certain costs directly related to the
acquisition. The acquisition was funded using proceeds from the Company's new
domestic credit facility. See Note 3.
CPS provides materials and services for the evaluation, design,
installation and maintenance of cathodic protection systems. CPS operated mainly
in the energy sector and had extensive field service operations and construction
experience.
The acquisition of CPS has been accounted for using the purchase method
of accounting. Accordingly, the purchase price has been allocated to the net
assets acquired based upon preliminary estimate of their fair market values at
the date of acquisition. The excess of the purchase price over the estimated
fair value of net assets acquired totaled $7,000 at March 31, 1998 and is being
amortized over 40 years on a straight-line basis. This allocation was based on
preliminary estimates and is subject to revision at a later date.
The results of CPS have been included in the Company's results since
the effective date of the acquisition. Pro forma results of operations have not
been presented as the effect of the acquisition on the Company's financial
statements were not material.
In March 1997, the Company sold substantially all of the assets of a
non-core business operation located in Lafayette, Louisiana. Proceeds from the
sale totaled $2,500 and resulted in a gain of $700 which has been reflected as
an unusual item in the accompanying consolidated statements of income. The
proceeds consisted of a $2,100 short-term note receivable which was paid in full
in June, 1997 and a $400 five-year note receivable. Revenues relating to the
Lafayette operation, which are included in the consolidated results, totaled
$3,832 and $3,230 in fiscal 1997 and 1996, respectively.
26
<PAGE> 27
3. LONG-TERM DEBT:
Long-term debt at March 31, 1998 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Domestic bank credit facility --
Revolver $16,530 $19,669
Term loan -- 4,400
Other term notes payable 1,265 2,286
Mortgages payable 583 1,083
------- -------
18,378 27,438
Less: current portion 683 1,803
------- -------
$17,695 $25,635
======= =======
</TABLE>
On July 16, 1997, the Company entered into a new five-year, $55 million
domestic bank credit facility. The credit facility consisted of a $35 million
revolver which expires on July 15, 2002 and a $20 million term loan which was
scheduled to mature on June 30, 2002. Initial borrowings under the credit
facility were used to finance the acquisition of CPS and to repay all
outstanding borrowings under the Company's $37.5 million domestic bank credit
facility. On September 18, 1997 the domestic credit facility was amended to
increase the revolver from $35 million to $40 million. Interest on the revolver
borrowings is based, at the Company's option, on either (a) the prime rate, as
defined in the credit agreement or (b) the Euro Rate, as defined in the credit
agreement, plus 0.5% to 1.5%. The spread over the Euro Rate varies based upon
certain financial covenants. The Company is required to pay a commitment fee
ranging from 0.2% to 0.3% on the unused revolver commitment. Borrowings under
the credit facility were initially secured by the Company's domestic accounts
receivable, inventories, certain intangibles and fixed assets, including those
relating to CPS. Such collateral was released on January 21, 1998. See below.
The credit agreement also requires the Company to maintain certain financial
covenants and places certain restrictions on the Company's ability to pay cash
dividends and to effect major acquisitions.
The weighted average interest rate on borrowings outstanding under the
$40 million credit facility was 6.6% during fiscal 1998.
Other term notes payable include certain other promissory notes. These
notes bear interest at various rates, which ranged from 6.75% to 11.0% at March
31, 1998. The obligations mature at various intervals between 1999 and 2002.
Mortgages payable, which bear interest from 8.75% to 9.5% and are due
on various dates between 2003 and 2010, are repayable in monthly installments
and are secured by the fixed assets of certain subsidiaries.
The Company's long-term debt matures as follows: $683 in 1999, $398 in
2000, $189 in 2001, $21,003 in 2002, $4,402 in 2003 and $21,703 after 2003.
The Company also maintains available lines of credit from various
foreign banks approximating $4,965 at March 31, 1998, which are secured by the
assets of certain foreign subsidiaries. Short-term borrowings amounted to $0 and
$249 at March 31, 1998 and 1997, respectively, under these lines of credit. The
interest rates on such borrowings at March 31, 1998 ranged from 7.0% to 13.0%.
Cash paid for interest totaled $2,784, $2,135 and $2,006 for fiscal
years 1998, 1997 and 1996, respectively.
4. SENIOR NOTES:
On January 21, 1998, the Company completed the private placement of $30
million of Senior Notes due 2008. The Notes, which are unsecured, have a fixed
interest rate of 7.6% per annum and require annual principal payments of $4.3
million commencing in 2002. The Senior Notes require the Company to maintain
certain
27
<PAGE> 28
financial covenants. Proceeds from the Notes were used to pay down borrowings
under the Company's domestic bank credit facility including the prepayment of
its $20 million term loan.
5. LEASES:
The Company leases certain office and warehouse space and equipment
under operating leases which expire at various dates through 2012. Future
minimum rental payments are as follows: $2,357 in 1999, $1,461 in 2000, $1,065
in 2001, $374 in 2002, $299 in 2003 and $1,272 after 2003 with a cumulative
total of $6,828.
In addition, the Company rents other property on a month-to-month
basis. Total rental expense was $2,664, $2,408 and $2,177 for fiscal 1998, 1997
and 1996, respectively.
6. INCOME TAXES:
Components of income (loss) from continuing operations before income
taxes and extraordinary charge follow:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
United States $ 6,596 $4,075 $(6,558)
Foreign 4,890 3,899 2,095
------- ----- ------
$11,486 $7,974 $(4,463)
======= ====== =======
</TABLE>
Components of the provision (benefit) for income taxes by jurisdiction
follow:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current -- Federal 419 $ 978 $(1,200)
-- State and local 425 296 146
-- Foreign 2,562 1,867 863
------- ------- -------
3,406 3,141 (191)
------- ------- -------
Deferred -- Federal 904 (114) (533)
-- State and local 284 197 (460)
-- Foreign 1 (57) 128
------- ------- -------
1,189 26 (865)
------- ------- -------
$ 4,595 $ 3,167 $(1,056)
======= ======= =======
</TABLE>
Differences between the statutory United States federal income tax rate
(34%) and the effective income tax rate are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal income tax provision (benefit)
at statutory rate $3,905 $ 2,711 $(1,517)
State income taxes, net 468 393 (164)
Reduction of valuation reserves -- (83) --
Foreign tax rate differential 127 432 282
Meals and entertainment 95 80 78
Other -- (366) 265
------ ------- -------
Effective income tax $4,595 $ 3,167 $(1,056)
====== ======= =======
</TABLE>
28
<PAGE> 29
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities were comprised of the following at March 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
DEFERRED TAX ASSETS
Bad debts $ 633 $ 553
Other reserves 310 594
Uniform cost capitalization 141 141
Accrued expenses 641 1,678
Pension and other benefit reserves 284 262
Federal tax carryforward and other tax credit
and carryforwards 1,632 809
State net operating loss carryforwards 230 230
Other 454 115
------- -------
4,325 4,382
Valuation reserve (28) (28)
------- -------
Total deferred tax assets 4,297 4,354
DEFERRED TAX LIABILITIES
Fixed assets (1,781) (1,874)
Other (332) (62)
------- -------
Total deferred tax liabilities (2,113) (1,936)
------- -------
Total net deferred taxes $ 2,184 $ 2,418
======= =======
</TABLE>
At March 31, 1998, accrued liabilities included $1,407 related to
accrued income taxes.
The valuation reserve has been established for foreign tax credit
carryforwards because management believes that it is more likely than not that
such benefits will not be realized.
No provision for United States income tax on approximately $9,887 of
undistributed earnings of foreign subsidiaries at March 31, 1998, has been made,
because the earnings are indefinitely reinvested in the subsidiaries.
Determination of the amount of the unrecognized deferred tax liability for
temporary differences related to investments in foreign subsidiaries is not
practicable.
At March 31, 1998, the Company had state net operating loss
carryforwards of approximately $3,930 and federal credit carryforwards of
$1,862. At March 31, 1998, the Company had federal net operating loss
carryforwards of $3,236 which expire through 2018 and state net operating loss
carryforwards of approximately $3,930. The Company also has federal credit
carryforwards of $431 relating to non-expiring alternative minimum tax credits.
The remaining federal credit carryforwards and the state carryforwards expire in
various future periods. There can be no assurance that tax carryforwards will be
utilized. The federal credit carryforwards of $431 represent non-expiring
alternative minimum credit carryforwards. The remaining federal credit
carryforwards and the state carryforwards expire in various future periods.
There can be no assurance that tax carryforwards will be utilized.
Cash paid for income taxes totaled $2,637, $1,852 and $1,776 for fiscal
1998, 1997 and 1996, respectively.
7. EMPLOYEE BENEFIT PLANS:
The Company maintains the Corrpro Companies, Inc. Profit Sharing Plan
and Trust for all eligible employees in the United States under Section 401(k)
of the Internal Revenue Code. The Company may, at its discretion, make
contributions to the plan. In addition, the Company matches a portion of
employees' contributions. The matching contributions totaled $327, $83 and $81
in fiscal 1998, 1997 and 1996, respectively.
One of the Company's foreign subsidiaries has a contributory defined
benefit pension plan for certain salaried employees. The Company funds the plan
in accordance with recommendations from independent actuaries. Pension benefits
generally depend on length of service and job grade.
29
<PAGE> 30
Pension expense for fiscal years 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost $ 269 $ 235 $ 210
Interest cost 220 182 150
Actual return on plan assets (176) (141) (133)
Net amortization and deferrals (16) (33) (6)
----- ----- -----
Net periodic pension cost $ 297 $ 243 $ 221
===== ===== =====
</TABLE>
The funded status of the plan at March 31, 1998 and 1997 is summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accumulated benefit obligation $(2,504) $(1,899)
Effect of increase in compensation levels (530) (403)
------- -------
Projected benefit obligation (3,034) (2,302)
Plan assets at fair value 2,504 2,130
------- -------
Funded status (530) (172)
Unrecognized gain 173 (52)
------- -------
Accrued pension liability $ (357) $ (224)
======= =======
</TABLE>
Significant actuarial assumptions include a discount rate of 6.5% and
8.5% in fiscal 1998 and 1997, respectively, an expected long-term return on plan
assets of 8.5% in both fiscal 1998 and 1997, and an assumed rate of increase in
compensation levels of 4.5% in 1998 and 6.5% in 1997.
The Company has entered into an employment agreement with one of its
executives which provides, among other things, that such employee shall be
eligible at 63 1/2 to receive retirement income, with a lifetime survivor
benefit, in an amount equal to 50% of base salary. The Company is providing for
this deferred compensation benefit over the term of the agreement.
8. SHAREHOLDERS' EQUITY:
On July 23, 1997, the Company adopted a shareholder rights plan and
declared a dividend of one Right on each outstanding share of the Company's
common stock. Each Right would entitle shareholders to buy, upon certain
triggering events, one one-hundredth of a newly created Series A Junior
Participating Preferred Share at an exercise price of $75 (subject to certain
adjustments). The record date for the distribution was August 7, 1997.
Subject to certain exceptions, Rights will become exercisable only
after a person or group acquires 20% or more of the Company's Common shares or
announces a tender offer for 20% or more of the Company's Common Shares. The
Company's Board of Directors can redeem the Rights at $0.01 per Right at any
time before a person acquires 20% or more of the Company's Common Shares. If a
person or group acquires 20% or more of the Company's Common Shares, each right
will entitle holders, other than the acquiring party, to purchase Common Shares
of the Company having a market value of twice the exercise price of the Right.
If, after the Rights have become exercisable, the Company merges or otherwise
combines with another entity, each Right then outstanding will entitle its
holder to purchase a number of the acquiring party's common shares having a
market value of twice the exercise price of the Right. The Plan also contains
other customary provisions and is similar to plans adopted by many other
companies. The Rights will expire in July 2007.
30
<PAGE> 31
In November 1996, the Board of Directors authorized a program to
repurchase up to 600 shares of the Company's outstanding common shares. During
fiscal 1998 and 1997, respectively the Company repurchased approximately 332 and
109 shares, respectively, at a total cost of $3,319 and $767 for 1998 and 1997,
respectively, under this program.
In connection with the acquisition of the Commonwealth Seager Group in
April 1993, the Company issued to the sellers preferred stock of a subsidiary
that could be exchanged for a maximum of 850 Common Shares of the Company. At
March 31, 1996, all preferred shares had been exchanged for Common Shares.
9. STOCK PLANS:
The Company has options outstanding under various options plans
including the 1997 Long-Term Incentive Plan (the "1997 Option Plan") and the
1997 Non-Employee Directors' Stock Option Plan (the "1997 Directors Plan"). The
Company's 1994 Corrpro Stock Option Plan (the "1994 Plan") and the 1994 Corrpro
Outside Directors' Stock Option Plan (the "Directors Plan") were terminated upon
adoption of the 1997 Option Plan and the 1997 Directors Plan. In addition, prior
to its initial public offering in September 1993, the Company issued stock
options under various arrangements.
The 1997 Option Plan was adopted on April 28, 1997, subject to
shareholder approval, which was obtained on July 23, 1997. The 1997 Option Plan
provides for the granting of up to 469 non-qualified stock options, stock
appreciation rights, restricted stock awards or stock bonus awards to officers,
key employees and consultants of the Company. In addition, the 1997 Option Plan
provides that shares exercised, forfeited or otherwise terminated under
previously granted stock awards, other than awards under the 1994 Directors
Plan, will also be available for grant under the new plan. The option price per
share will generally be the fair market value of the Company's Common Shares on
the date of grant and the term of the options will not exceed 10 years. The 1997
Option Plan will terminate on April 28, 2007.
The 1997 Directors Plan was also adopted on April 28, 1997, subjected
to shareholder approval, which was obtained on July 23, 1997. The 1997 Directors
Plan provides for the granting of up to 63 non-qualified stock options to
current and future non-employee directors of the Company. Under this plan, each
non-employee director will annually be granted options to purchase 3 Common
Shares. The option price per share will be the fair market value of the
Company's Common Shares on the date of grant and the term of the options will be
10 years. The 1997 Directors Plan will terminate on April 28, 2007.
31
<PAGE> 32
Stock option activity for the Company during fiscal 1998, 1997 and 1996
was as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES 1998 1997 1996
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Options outstanding, beginning of year 806 774 851
Granted 401 204 343
Exercised (25) (158) (111)
Expired or canceled (17) (14) (309)
----- ----- -----
Outstanding, end of year 1,165 806 774
----- ----- -----
Exercisable, end of year 789 491 514
Available for grant, end of year 218 110 210
Price range of options:
Granted $7.50 to $6.49 to $4.78 to
$12.00 $8.97 $6.87
Exercised $7.70 to $1.86 to $1.86
$11.30 $5.50
Outstanding, end of year $1.86 to $1.86 to $1.86 to
$17.33 $17.33 $17.33
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", and will continue to account for
stock-based compensation using APB No. 25 "Accounting for Stock Issued to
Employees." Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's income
(loss) from continuing operations and income (loss) from continuing operations
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations:
As reported $ 6,891 $ 4,807 $ (3,407)
Pro forma 6,549 4,573 (3,487)
Income from continuing operations per share - Basic:
As reported $ 0.85 $ 0.58 $ (0.44)
Pro forma 0.80 0.55 (0.45)
Income from continuing operations per share - Diluted:
As reported $ 0.81 $ 0.57 $ (0.44)
Pro forma 0.77 0.54 (0.45)
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model. The significant assumptions used
were risk-free interest rates ranging from 6.9% to 7.0%, expected volatility of
37.9% for 1998 and 36.7% for both 1997 and 1996, an expected life of 8 years and
no expected dividends.
The pro forma effects on net income for 1998, 1997 and 1996 are not
representative of the pro forma effects on net income in future years as the
compensation cost for each year's grant is recognized over its vesting period
and compensation costs for options granted prior to April 1, 1995 is not
considered.
10. BUSINESS SEGMENTS:
The Company operates in a single industry segment domestically and
through subsidiaries headquartered in Canada, United Kingdom, Saudi Arabia and
Indonesia, with various other locations in Europe, the Middle East and Asia.
Inventory transfers between geographic locations are recorded at cost plus a
mark-up; intercompany
32
<PAGE> 33
revenues and profits are eliminated. Assets of geographic areas are identified
with the operations of each area. Assets used for general corporate purposes are
not considered significant and have therefore been reflected in the United
States segment information.
The Company's operations by geographic area are presented below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net revenues, including intercompany:
United States $ 107,821 $ 75,133 $ 72,698
Canada 14,061 18,315 17,981
United Kingdom and Europe 26,349 25,237 19,376
Middle East and Asia 38,963 31,065 24,236
Intercompany (14,541) (10,146) (6,518)
--------- --------- ---------
$ 172,653 $ 139,604 $ 127,773
========= ========= =========
Income (loss) from continuing operations before taxes:
United States $ 10,094 $ 6,797 $ (4,312)
Canada 1,780 2,126 1,810
United Kingdom and Europe 2,457 1,502 (78)
Middle East and Asia 1,667 727 54
Adjustments/eliminations (2,078) (1,482) --
--------- --------- ---------
Operating income (loss) 13,920 9,670 (2,526)
Interest expense (2,434) (1,696) (1,937)
--------- --------- ---------
$ 11,486 $ 7,974 $ (4,463)
========= ========= =========
Identifiable assets from continuing operations:
United States $ 83,214 $ 57,463 $ 59,505
Canada 17,823 17,473 17,726
United Kingdom and Europe 15,123 14,756 19,650
Middle East and Asia 20,115 17,226 10,172
Adjustments/eliminations -- -- 345
--------- --------- ---------
$ 136,275 $ 106,918 $ 107,398
========= ========= =========
</TABLE>
11. NET ASSETS HELD FOR SALE:
During March 1997, the Company adopted a formal plan to put its
Corrtherm operation up for sale. Corrtherm is reported as a discontinued
operation and the consolidated financial statements have been reclassified to
report separately Corrtherm's net assets and results of operations. Prior period
consolidated financial statements have been reclassified to the current period
presentation.
As a result of the adoption of the divestiture plan, the Company
recorded a $6,000 charge ($3,960 net of the related tax benefit). The charge
included the estimated loss on disposal and provisions for other estimated costs
to be incurred in connection with the disposal. The amounts the Company will
ultimately realize could differ from these estimates.
Net assets held for sale relating to Corrtherm before adjustment for
the estimated loss on disposal at March 31, 1998 consisted of working capital of
$4,279, net property and equipment of $6,588, and other assets of $2,932. These
amounts are offset by a reserve for the estimated loss on disposal and
provisions for other estimated costs to be incurred in connection with the
disposal. The amounts the Company will ultimately receive could differ from
these estimates.
The Company allocated interest of $638, $638 and $696 for fiscal years
1998, 1997 and 1996 to Corrtherm based on the estimated proceeds to be realized
from the divestiture.
33
<PAGE> 34
Revenues from Corrtherm, which are excluded from consolidated revenues
totaled $11,083, $13,237 and $15,354 in fiscal 1998, 1997 and 1996,
respectively. These revenues included intercompany sales of $4,683, $1,090 and
$2,606 in fiscal 1998, 1997 and 1996, respectively. Loss from discontinued
operations totaled $1,174, $1,037 and $1,735 in fiscal 1998, 1997 and 1996 and
are net of income tax benefits of $783, $493 and $823, respectively.
Corrtherm was formed in November 1994 through the combination of the
operations of Thermal Reduction Company (TRC) and American Corrosion Services,
Inc. (ACS). The Company purchased substantially all of the assets of TRC for
$9,309 on October 30, 1994. The excess of the purchase price over the fair value
of net assets acquired totaled $2,797. Effective November 1, 1994, the Company
purchased ACS for cash of $1,500 and promissory notes aggregating $3,387. The
excess of the purchase price over the fair value of net assets acquired totaled
$356.
At March 31, 1997, net assets held for sale includes $1,635 relating to
a building located in Colorado which was sold in April 1997. Proceeds received
approximated the net book value of the building.
12. LEGAL MATTERS:
The Company has cooperated in an investigation conducted by the
Securities and Exchange Commission ("SEC") relating to events that occurred in
connection with the release of its fiscal 1995 earnings. The Company has offered
to enter into an agreement with the SEC pursuant to which the Company would,
without admitting or denying SEC findings, agree to an order to cease and desist
from committing or causing violations of the reporting, records, and accounting
systems and control requirements under the federal securities laws. The
Company's offer has not yet been approved by the SEC. In the opinion of
management, the ultimate resolution of this matter will not materially affect
future operations, the financial position or cash flows of the Company.
The Company is subject to other legal proceedings and claims which
arise in the ordinary course of business. In the opinion of management, the
amount of ultimate liability, if any, with respect to any such matters will not
materially affect future operations, the financial position or cash flows of the
Company.
13. SUBSEQUENT EVENT:
On May 19, 1998, the Company announced that its Board of Directors
approved a five-for-four stock split of the Company's common shares. The stock
split will be effected as a stock dividend payable on June 19, 1998 to
shareholders of record as of June 5, 1998. The stock split will increase
outstanding shares by approximately 1.6 million to approximately 7.9 million.
All share amounts contained in the consolidated statements and notes thereto
have been adjusted to reflect the stock split.
34
<PAGE> 35
SUPPLEMENTAL FINANCIAL INFORMATION
Quarterly Results of Operations (unaudited):
The following is a summary of the unaudited quarterly results of operations for
the fiscal years ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended 06/30/97 09/30/97 12/31/97 03/31/98 Total
- ---------------------------------------------------------------------------------------------------------------------
(In Thousands, Except per Share Data)
<S> <C> <C> <C> <C> <C>
Revenues $35,550 $48,666 $47,392 $ 41,045 $ 172,653
Operating income 2,900 4,629 4,147 2,244 13,920
Income from continuing operations 1,523 2,367 2,083 918 6,891
Net income 1,523 2,367 2,083 918 6,891
Earnings per share - Basic:
Income from continuing operations $ 0.18 $ 0.29 $ 0.26 $ 0.11 $ 0.85
Net income 0.18 0.29 0.26 0.11 0.85
Weighted average number of shares - Basic 8,247 8,175 8,135 8,061 8,155
Earnings per share - Diluted:
Income from continuing operations $ 0.18 $ 0.28 $ 0.24 $ 0.11 $ 0.81
Net income 0.18 0.28 0.24 0.11 0.81
Weighted average number of shares - Diluted 8,450 8,456 8,507 8,444 8,468
Three Months Ended 06/30/96 09/30/96 12/31/96 03/31/97 Total
- ---------------------------------------------------------------------------------------------------------------------
(In Thousands, Except per Share Data)
Revenues $33,978 $37,290 $36,511 $ 31,825 $ 139,604
Operating income 2,801 1,532 3,170 2,167 9,670
Income from continuing operations 1,448 628 1,666 1,065 4,807
Net income (loss) 1,220 483 1,480 (3,373) (190)
Earnings per share - Basic:
Income from continuing operations $ 0.18 $ 0.08 $ 0.20 $ 0.13 $ 0.58
Net income (loss) 0.15 0.06 0.18 (0.41) (0.02)
Weighted average number of shares - Basic 8,206 8,297 8,308 8,254 8,266
Earnings per share - Diluted:
Income from continuing operation $ 0.17 $ 0.07 $ 0.20 $ 0.13 $ 0.57
Net income (loss) 0.14 0.06 0.17 (0.40) (0.02)
Weighted average number of shares - Diluted 8,481 8,501 8,493 8,473 8,486
</TABLE>
35
<PAGE> 36
PART III
Part III, except for certain information relating to Executive Officers
included in Part I, Item 4A, is omitted inasmuch as the Company intends to file
with the Securities and Exchange Commission within 120 days of the close of its
fiscal year ended March 31, 1998 a definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) THE FOLLOWING CONSOLIDATED FINANCIAL STATEMENTS ARE INCLUDED IN
PART II, ITEM 8:
Reports of Independent Accountants
Consolidated Balance Sheets at March 31, 1998 and 1997
Consolidated Statements of Income for the years ended March 31,
1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years
ended March 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended March
31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULES:
The financial statement schedules have been omitted as they are
not required or not applicable, or as the information is
furnished elsewhere in the consolidated financial statements or
the notes thereto.
(a) (3) INDEX TO EXHIBITS:
EXHIBIT
NO. EXHIBIT
--- -------
3.1 Amended and Restated Articles of Incorporation of the Company.
(1)
3.2 Amended and Restated Code of Regulations of the Company. (2)
3.3 Amendment to Amended and Restated Articles of Incorporation
of the Company as recorded with the Secretary of State of
Ohio on August 18, 1997.
4.1 Specimen certificate for the Common Shares. (3)
4.2 Credit Agreement dated July 16, 1997 by and among the
Company, the Guarantors Party Thereto, PNC Bank National
Association, as Agent and the Banker Party Thereto and
Amendment No. 1 and 2, Thereto. Other long term debt
agreements of the Company, except for Note Purchase Agreement,
are not filed pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. The Company will furnish copies of any such agreements to
the Securities and Exchange Commission upon its request. (4),
(5), (6)
4.3 Note Purchase Agreement dated as of January 21, 1998 by and
among the Company and the Purchaser herein. (6)
4.4 Third Amendment to Credit Agreement dated as of April 1, 1998
by and among the Company the lenders Party thereto and PNC
Bank National Association, as Agent.
4.5 Rights Agreement, dated as of July 23, 1997, between the
Company and National City Bank. (7)
36
<PAGE> 37
10.1 Form of Indemnification Agreement for Officers and Directors
of the Company. (3)
10.2 Consulting Agreement dated April 1, 1997 by and between
Commonwealth Seager Holdings Ltd. and Corrtech Consulting
Group.
10.3 Employment Agreement effective April 1, 1998 by and between
the Company and Joseph W. Rog.
10.4 Employment Agreement effective April 1, 1998 by and between
the Company and Michael K. Baach.
10.5 Employment Agreement effective April 1, 1998 by and between
the Company and George A. Gehring, Jr.
10.6 Employment Agreement effective April 1, 1998 by and between
the Company and David M. Hickey.
10.7 Employment Agreement effective April 1, 1998 by and between
the Company and David H. Kroon.
10.8 Employment Agreement effective April 1, 1998 by and between
the Company and Neal R. Restivo.
10.9 Stock Option Agreement dated as of June 15, 1992 by and
between the Company and C. Richard Lynham, as amended. (3)
10.10 Stock Option Agreement dated as of November 15, 1992 by and
between the Company and C. Richard Lynham. (3)
10.11 Stock Option Agreement dated as of November 15, 1992 by and
between the Company and Michael K. Baach. (3)
10.12 Stock Option Agreement dated as of November 15, 1992 by and
between the Company and George A. Gehring, Jr. (3)
10.13 Stock Option Agreement dated as of November 15, 1992 by and
between the Company and David H. Kroon. (3)
10.14 Stock Option Agreement dated as of November 15, 1992 by and
between the Company and Joseph W. Rog. (3)
10.15 Company Incentive Option Plan as amended. (3)
10.16 1997 Long-Term Incentive Plan of Corrpro Companies, Inc. (3)
10.17 1997 Non-Employee Directors' Stock Option Plan. (3)
10.18 Stock Purchase Agreement dated June 4, 1997, as amended, by
the Company, Airlog International Inc., Curran Holdings,
Inc., and Offshore Logistics, Inc. (8)
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
27.1 Financial Data Schedule.
----------------
(1) A copy of this exhibit filed as Exhibit 4.1 of the Company's
Registration Statement on Form S-8 (Registration No. 33-74814) is
incorporated herein by reference.
(2) A copy of this exhibit filed as Exhibit 4.2 of the Company's
Registration Statement on Form S-8 (Registration No. 33-74814) is
incorporated herein by reference.
(3) A copy of this exhibit filed as exhibit number of the Company's
Registration Statement on Form S-1 (Registration No. 33-64482) is
incorporated herein by reference.
(4) A copy of this exhibit filed as Exhibit 4.1 to the Company's
report on Form 10-Q for the quarterly period ended June 30, 1997.
(5) A copy of this exhibit filed as Exhibit 10 to the Company's report on
Form 10-Q for the quarterly period ended September 30, 1997.
(6) A copy of this exhibit filed as Exhibits 4.1 and 4.2 to the Company's
report on Form 10-Q for the quarterly period ended December 31, 1997.
(7) A copy of this exhibit filed as Exhibit 1.1 to the Company's Form 8-A
filed August 7, 1997 is incorporated herein by reference.
(8) A copy of this exhibit filed as Exhibits 2.1 and 2.2 to the Company's
Form 8-K filed July 31, 1997 is incorporated herein by reference.
37
<PAGE> 38
(b) REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed during the three months
ended March 31, 1998.
(c) EXHIBITS
See "Index to Exhibits" at Item 14(a) above.
38
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
an Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CORRPRO COMPANIES, INC.
June 2, 1998 By /s/ Joseph W. Rog
Joseph W. Rog
Chairman of the Board of Directors,
President and Chief Executive Officer
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 and on the dates indicated.
June 2, 1998 /s/ Joseph W. Rog
Joseph W. Rog
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
June 2, 1998 /s/ Neal R. Restivo
Neal R. Restivo
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
June 2, 1998 /s/ David H. Kroon
David H. Kroon, Director
June 2, 1998 /s/ Barry W. Schadeck
Barry W. Schadeck, Director
June 2, 1998 /s/ Robert E. Hodge
Robert E. Hodge, Director
June 2, 1998 /s/ C. Richard Lynham
C. Richard Lynham, Director
June 2, 1998 /s/ Warren F. Rogers
Warren F. Rogers, Director
June 2, 1998 /s/ Walter W. Williams
Walter W. Williams, Director
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
CORRPRO COMPANIES, INC.
The undersigned, being the Secretary of Corrpro Companies, Inc., an
Ohio corporation (the "Company"), hereby certifies that at a meeting of the
Board of Directors called and held on the 23rd day of July, 1997, the following
resolution was adopted pursuant to Section 1701.70(B)(1) of the Ohio General
Corporation Law:
RESOLVED FURTHER, that pursuant to the authority vested in the Board of
Directors in accordance with the provisions of the Ohio General
Corporation Law, as amended, and by Article FOURTH of the Company's
Amended and Restated Articles of Incorporation (the "Amended Articles
of Incorporation"), such Article FOURTH is amended to add a new
paragraph (c) providing for a series of Serial Preferred Shares,
without par value, of the Company, and that the designation and the
authorized number of shares of, and the relative rights, preferences,
and limitations of, such series shall be as set forth on ANNEX A
hereto.
EXECUTED this ___ day of _______, 1997.
-----------------------------------------
Secretary
<PAGE> 2
ANNEX A
-------
(c) Series A Junior Participating Preferred Shares:
(1) DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Shares" (the "Series A
Preferred Shares") and the number of shares constituting the Series A Preferred
Shares shall be 500,000.
(2) DIVIDENDS AND DISTRIBUTIONS.
(i) Subject to the rights of the holders of any shares of any
class of preferred shares ranking prior and superior to the Series A
Preferred Shares with respect to dividends, the holders of Series A
Preferred Shares, in preference to the holders of Common Shares,
without par value (the "Common Shares"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
that purpose, quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a Series A Preferred Share, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
Common Shares or a subdivision of the outstanding shares of Common
Shares (by reclassification or otherwise), declared on the Common
Shares since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of Series A Preferred
Shares. In the event that the Corporation shall at any time declare or
pay any dividend on the Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Shares (by reclassification or otherwise than by
payment of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the amount to which holders of
Series A Preferred Shares were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of Common Shares outstanding immediately after such event and
the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(ii) The Corporation shall declare a dividend or distribution
on the Series A Preferred Shares as provided in paragraph (i) of this
Section immediately after it declares a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares);
provided that, in the event that no dividend or distribution shall have
been declared on the Common Shares during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of
1
<PAGE> 3
$1 per share on the Series A Preferred Shares shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to accrue and be cumulative on
outstanding Series A Preferred Shares from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless
the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of Series A
Preferred Shares entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the Series A Preferred Shares in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of
Series A Preferred Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than
60 days prior to the date fixed for the payment thereof.
(3) VOTING RIGHTS. The holders of Series A Preferred Shares shall have
the following voting rights:
(i) Each Series A Preferred Share shall entitle the holder
thereof to one vote on all matters submitted to a vote of the
shareholders of the Corporation. The holders of fractional Series A
Preferred Shares shall not be entitled to any vote on any matter
submitted to a vote of the shareholders of the Corporation.
(ii) Except as otherwise provided herein, in the Amended
Articles of Incorporation of the Corporation, in any other Certificate
of Amendment creating a series of Serial Preferred Shares or any
similar stock, or by law, the holders of Series A Preferred Shares and
the holders of Common Shares and any other capital stock of the
Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of shareholders of the
Corporation.
(iii) Except as set forth herein, in the Amended Articles of
Incorporation of the Corporation, or as otherwise provided by law,
holders of Series A Preferred Shares shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Shares as set forth
herein) for taking any corporate action.
(4) CERTAIN RESTRICTIONS.
(i) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Shares as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on
2
<PAGE> 4
Series A Preferred Shares outstanding shall have been paid in full, the
Corporation shall not:
(a) declare or pay dividends, or make any other
distributions, on any shares of any class ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Shares;
(b) declare or pay dividends, or make any other
distributions, on any shares of any class ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Shares, except
dividends paid ratably on the Series A Preferred Shares and
all such shares ranking on a parity with the Series A
Preferred Shares on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(c) redeem or purchase or otherwise acquire for
consideration shares of any class ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Shares, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A
Preferred Shares; or
(d) redeem or purchase or otherwise acquire for
consideration any Series A Preferred Shares, or any shares of
any class ranking on a parity with the Series A Preferred
Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(ii) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of the Corporation unless the Corporation could, under paragraph
(i) of this Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
(5) REACQUIRED SHARES. Any Series A Preferred Shares purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued Serial Preferred Shares and
may be reissued as part of a new series of Serial Preferred Shares subject to
the conditions and restrictions on issuance set forth herein, in the Amended
Articles of Incorporation, or in any other Certificate of Amendment creating a
series of Serial Preferred Shares or any similar class of shares or as otherwise
required by law.
3
<PAGE> 5
(6) LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of any class ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Shares,
including the Common Shares, unless, prior thereto, the holders of Series A
Preferred Shares shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of Series A Preferred
Shares shall be entitled to receive an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common Shares, or (2)
to the holders of shares of any class ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Shares, except distributions made ratably on the Series A Preferred
Shares and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event that the Corporation shall at any time declare or pay
any dividend on the Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
aggregate amount to which holders of Series A Preferred Shares were entitled
immediately prior to such event under the proviso in clause (1) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(7) CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the Common Shares are exchanged for or changed into other shares or securities,
cash and/or any other property, then in any such case each Series A Preferred
Share shall at the same time be similarly exchanged or changed into an amount
per share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount of shares, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is changed or exchanged. In the event that the Corporation shall at
any time declare or pay any dividend on the Common Shares payable in Common
Shares, or effect a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common Shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of Series A Preferred Shares shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
(8) NO REDEMPTION. The Series A Preferred Shares shall not be
redeemable.
(9) RANK. The Series A Preferred Shares shall rank, with respect
to the payment of dividends and the distribution of assets, on a parity with any
other series of Serial Preferred
4
<PAGE> 6
Shares and shall rank junior to any series of any other class of preferred
shares of the Corporation which by its terms is senior to the Serial Preferred
Shares.
(10) AMENDMENT. Subject to the provisions of Article FOURTH of the
Amended Articles of Incorporation, the Amended Articles of Incorporation and the
Code of Regulations of the Corporation shall not be amended, altered or repealed
in any manner which would affect adversely the voting powers or any other rights
or preferences of the holders of the Series A Preferred Shares so as to affect
them adversely without the affirmative vote of the holders of at least a
majority of the outstanding Series A Preferred Shares, voting together as a
single class.
5
<PAGE> 1
Exhibit 4.4
AMENDMENT NO 3. TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (the "AMENDMENT") dated as of
April 1, 1998 by and among Corrpro Companies. Inc., an Ohio corporation (the
"BORROWER"), PNC Bank, National Association ("PNC"), Bank One, N.A. ("BANK
ONE"), National City Bank ("NCB") and LaSalle National Bank ("LASALLE" and
together with PNC, Bank One and NCB, the "BANKS"), and PNC Bank, National
Association, in its capacity as agent for the Banks (the "AGENT").
WITNESSETH:
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain
Credit Agreement dated as of July 16, 1997 (the "CREDIT AGREEMENT"), as amended
by Amendment No. 1 to Credit Agreement dated as of September 18, 1997 and
Amendment No. 2 dated as of January 21, 1998; and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
hereinafter provided.
NOW, THEREFORE the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. DEFINITIONS.
Defined terms used herein unless otherwise defined herein have the meanings
ascribed to them in the Credit Agreement as amended by this Agreement.
2. AMENDMENTS OF CREDIT AGREEMENT.
A. Section 8.2.6(2) of the Credit Agreement is hereby deleted in its
entirety and the following is inserted in lieu thereof:
"(2) the Borrower, or any Subsidiary may acquire, whether by purchase
or by merger, (A) all of the ownership interests of another Person or (B)
substantially all of assets of another Person or of a business or division
of another Person (each an "PERMITTED ACQUISITION"), PROVIDED that each of
the following requirements is met:
(i) the board of directors or other equivalent governing body of
such Person shall have approved such Permitted Acquisition to the extent
required by law and the charter documents of such entity and, if the
Borrower or any Subsidiary shall use any portion of the Loans to find such
Permitted Acquisition, the Borrower or such Subsidiary also shall have
delivered to the
<PAGE> 2
Banks written evidence of the approval of the board of directors (or
equivalent body) of such Person for such Permitted Acquisition;
(ii) the business acquired, or the business conducted by the Person
whose ownership interests are being acquired, as applicable, shall be
similar or complimentary to one or more line or lines of business conducted
by the Borrower or its Subsidiaries and shall comply with Section 8.2.10
[Continuation of or Change in Business];
(iii) no Potential Default or Event of Default shall exist
immediately prior to and after giving effect to such Permitted Acquisition;
(iv) the Borrower shall demonstrate that it shall be in compliance
on a pro forma basis with the covenants contained in Sections 8.2.15-8.2.17
and Sections 8.2.19-8.2.20 after giving effect to such Permitted
Acquisition (including in such computation Indebtedness or other
liabilities assumed or incurred in connection with such Permitted
Acquisition and income earned and expenses incurred by the Person,
business or assets to be acquired prior to the date of such Permitted
Acquisition) by delivering at least five (5) Business Days prior to such
Permitted Acquisition a certificate in the form of EXHIBIT 8.2.6
evidencing such compliance;
(v) the Consideration paid by the Borrower and its Subsidiaries
for all Permitted Acquisitions made during the current fiscal year of the
Borrower shall not exceed $10,000,000 and the aggregate of the
Consideration paid by the Borrower and its Subsidiaries for such Permitted
Acquisition and all other Permitted Acquisitions made between the Closing
Date and the date of such Permitted Acquisition shall not exceed
$25,000,000; and
(vi) the Borrower shall deliver or cause to be delivered to the Agent
at least five (5) Business Days before, such Permitted Acquisition copies
of any agreements entered into or proposed to be entered into by the
Borrower or such Subsidiary in connection with such Permitted Acquisition
and shall deliver to the Agent such other information about such Person
or its assets as any Bank may reasonably require;
(3) the Borrower or any Subsidiary may acquire an ownership interest
in less than all of another Person if the Consideration is less than
$1,000,000 in the aggregate in any fiscal year provided that the
Consideration paid under this Section 8.2.6(3) when added to the
Consideration for Permitted Acquisitions shall not exceed the amount
permitted under Section 8.2.6(2)(v)."
B. Schedule 1.1 (B)(1) of the Credit Agreement is hereby amended and
restated to read as set forth on the new Schedule 1.1 (B)(1) attached hereto.
-2-
<PAGE> 3
3. CONDITIONS OF EFFECTIVENESS OF THIS AGREEMENT.
The effectiveness of this Amendment No. 3 is expressly conditioned upon
satisfaction of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES: NO DEFAULTS. The representations and
warranties of the Loan Parties contained in Section 6 of the Credit Agreement
shall be true and accurate on the date hereof with the same effect as though
such representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein); the Loan Parties shall have
performed and complied with all covenants and conditions hereof; and no Event
of Default or Potential Default under the Credit Agreement shall have occurred
and be continuing or shall exist.
(b) LEGAL DETAILS; COUNTERPARTS. All legal details and proceedings in
connection with the transactions contemplated by this Amendment shall be in form
and substance satisfactory to the Agent. The Agent shall have received
counterparts of this Amendment No. 3 duly executed by the Borrower and the
Banks, and the Agent shall have received all such other counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions, in form and substance satisfactory to the Agent. This
Amendment No. 3 may be executed by the parties hereto in any number of separate
counterparts, each of which when taken together and duly executed and delivered
shall together constitute one and the same instrument.
(c) BORROWER CERTIFICATE. The Agent shall have received a certificate
signed by the Secretary or Assistant Secretary of the Borrower certifying as to
all action taken by the Borrower to authorize the execution, delivery and
performance of this Amendment No. 3.
4. FORCE AND EFFECT. No novation is intended by the Amendment No. 3
and except as expressly modified by this Amendment, the Credit Agreement and
the other Loan Documents are hereby ratified and confirmed and shall remain in
full force and effect on and after the date hereof.
5. GOVERNING LAW. This Amendment No. 3 shall be deemed to be a contract
under the laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
6. EFFECTIVE DATE. This Amendment No. 3 shall be dated as of and shall be
effective as of the date and year first above written, which date shall be the
date of the satisfaction of all conditions precedent to effectiveness set forth
in this Amendment No. 3.
[SIGNATURE PAGE FOLLOWS]
-3-
<PAGE> 4
[SIGNATURE PAGE 1 OF 1 TO AMENDMENT NO. 3 TO CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Amendment as of the day and year as above
written.
CORRPRO COMPANIES, INC.
By:
-------------------------------------
Title:
----------------------------------
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By:
-------------------------------------
Title:
----------------------------------
BANK ONE, N.A., individually and as
Documentation Agent
By:
-------------------------------------
Title:
----------------------------------
NATIONAL CITY BANK
By:
-------------------------------------
Title:
----------------------------------
LASALLE NATIONAL BANK
By:
-------------------------------------
Title:
----------------------------------
<PAGE> 5
SCHEDULE 1.1 (B)(1)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
PART I - COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES TO BANKS
<TABLE>
<CAPTION>
Amount of Commitments
--------------------------------
Revolving Credit Ratable
---------------- -------
Bank Loans Share
---- ----- -----
<S> <C> <C>
PNC Bank, National Association
One Cleveland Ctr.
1375 East 9th St., Ste. 1250
Cleveland, OH 44114
Attention: David J. Williams
Telephone (216) 348-8562
Telecopy: (216) 348-8594 $15,333,333.33 38.3333%
Bank One. N.A.
600 Superior Ave.
Cleveland, OH 44114
Attention: Babette C. Coerdt
Telephone (216) 781-2226
Telecopy: (216) 348-6642 $12,000,000.00 30.0000%
National City Bank
1900 East 9th St.
Cleveland, OH 44114
Attention: Sean Richardson
Telephone (216) 575-2488
Telecopy: (216) 575-9396 $7,666,666,67 19.1667%
LaSalle Banks
One American Square, Suite 1600
Indianapolis, IN 46282
Fax: 317-756-7021
Attention: Keith D. Slifer or
Gary L. Jacobson
Telephone (317) 756-7013
Telecopy: (317) 756-7021 $5,000,000.00 12.5000%
Total $40,000,000.00 100.0000%
============== ========
</TABLE>
Page 1 of 2 to Schedule
<PAGE> 6
SCHEDULE 1.1(B)(1)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
PART 2 - ADDRESSES FOR NOTICES TO BORROWER AND THE OTHER LOAN PARTIES:
BORROWER:
Name: Corrpro Companies, Inc.
Address: 1090 Enterprise Drive
Medina, OH 44256
Attention: Neal R. Restivo
Telephone: (330) 723-5082
Telecopy: (330) 723-0244
Page 2 of 2 to Schedule
<PAGE> 1
Exhibit 10.2
THIS AGREEMENT DATED THE 1ST DAY OF APRIL, 1997
BETWEEN:
COMMONWEALTH SEAGER HOLDINGS LTD.
(the "Corporation"),
OF THE FIRST PART
- and -
CORRTECH CONSULTING GROUP,
a Corporate Partnership
(the "Consultant"),
OF THE SECOND PART
CONSULTING AGREEMENT
WHEREAS the Corporation is the registered owner of all of the issued
common shares of Corrpro Canada, Inc. and, in turn, controls Eighty (80%)
Percent of Alcoke Distributors Ltd. and One Hundred (100%) Percent of D. Foley
Pipeline Services Ltd. (the "Subsidiaries").
AND WHEREAS the Corporation intends to continue to operate the
Subsidiaries;
AND WHEREAS the Consultant is in the business of providing managerial,
administrative, engineering, marketing and technical services (the "Consulting
Services");
AND WHEREAS the Corporation desires the Consultant to render the
Consulting Services to the Corporation, its Subsidiaries and Affiliates in
accordance with provisions of this contract;
<PAGE> 2
-2-
AND WHEREAS the Consultant is a corporate partnership consisting of the
corporations listed in Schedule "A" attached hereto;
AND WHEREAS the corporate members of the partnership shall make
available the key individuals listed on Schedule "B" (the "Key Individuals")
attached hereto to supply to the Corporation the Consulting Services;
NOW THEREFORE WITNESSETH that in consideration of the recitals and
mutual covenants and agreements contained herein and other good and valuable
consideration, the parties hereto agree as follows:
1. SERVICES
(A) ENGAGEMENT
The Corporation hereby engages the Consultant and the Consultant
hereby agrees to render, at the request of the Corporation Consulting
Services to the Corporation, its Subsidiaries and Affiliates, to the
best of its ability, and upon the terms and conditions hereinafter set
forth.
(B) DUTIES
(i) The Consultant shall provide, through the Key Individuals, to
standards acceptable to the Corporation such management,
administrative, engineering, marketing, and technical services as
are necessary to ensure the continued operations of the
Corporation, the Subsidiaries, and the Affiliates.
(ii) In the event any of the Key Individuals are unable or fail for
any reason to perform the Consulting Services as requested of
that Key Individual to standards acceptable to the Corporation,
then the Consultant may designate a third person or persons of
<PAGE> 3
-3-
equal or greater ability and qualifications to provide the
consulting services the Key Individual is unable to provide.
(iii) It is understood and agreed that a Key Individual shall not be
substituted without the written consent of the Corporation and
agreement as to adjustment in compensation, if any.
2. COMPENSATION
(a) As compensation for all services rendered by the Consultant, pursuant
to this Agreement, the Corporation shall pay to the Consultant or such
designates, a monthly sum which is agreed to from time to time being a
base of Eighty-Two Thousand Five Hundred and Eighty Three ($82,583.00)
Dollars (CDN) plus Goods and Services Tax ("G.S.T.").
(b) All such compensation shall be payable without deductions whatsoever.
The Consultant shall be responsible for the remission of any and all
taxes with respect to compensation paid to the Consultant by the
Corporation under this Agreement. The Consultant shall indemnify the
Corporation for any and all taxes and other liabilities which the
Corporation may hereafter incur as a result of the Consultant's or any
of the Key Individuals' failure to report and pay any taxes due on
taxable amounts paid to or on behalf of the Consultant by the
Corporation.
(c) As additional compensation, the parties contemplate that the
Consultant may be entitled to bonuses from time to time, based on the
performance of the Corporation, the Subsidiaries and as mutually
agreed upon by the parties.
3. TERMS
(a) The parties hereto acknowledge that the term of this Agreement shall
be for a period of one (1)
<PAGE> 4
-4-
year commencing on the 1st day of April, 1997 and ending on the 31st
day of March, 1998, unless sooner terminated pursuant to this
Agreement.
4. OPERATION OF SUBSIDIARIES
(a) Insofar as it is the intent that the Consultant shall provide
Consulting Services directly to the Corporation, its subsidiaries, and
Affiliates, the parties hereto acknowledge that all consulting
services rendered to the Corporation are governed and bound by this
Agreement.
(b) The Corporation shall guarantee the due performance and obligations of
all agreements that the subsidiaries and the Affiliates may enter into
with Consultant pursuant hereto.
5. TIME COMMITMENT AND PERFORMANCE
(a) The Consultant shall ensure that such key Individuals that perform
services pursuant to this Agreement shall devote their best efforts
and substantially all of their business time, attention and skill to
the performance of the Consulting Services hereunder and shall do so
at all times in a manner consistent with the intention of this
Agreement and in accordance with good managerial, administrative,
engineering, marketing and technical practice, including without
limitation, the adherence to professional rules of conduct.
(b) The consultant shall ensure that each Key Individual;
(i) specializing in a branch of professional engineering shall at all
time be a member of the Association of Professional Engineers;
(ii) specializing in a branch of engineering technology shall at all
times be a member of the Association of Engineering
Technologists;
(iii) specializing in accounting services shall at all times be a
member of a recognized
<PAGE> 5
-5-
accounting body in Canada.
6. CONFIDENTIAL INFORMATION
(a) The Consultant will have access to the Corporation's confidential
information including, without limitation, customer lists and
information and data or relating to its customers. Such information
and data is understood to include all information and data relating to
the Corporation's or the customer's project and administrative files,
drawings, sketches, plans, designs and business data. The Consultant
agrees to accept and retain such information and data in confidence
and, at all times during or after the termination of this Agreement,
not to disclose or reveal such information and data to others and to
refrain from using such information and data for purposes other than
those authorized by the Corporation. At the request of the
Corporation, the Consultant will promptly turn over to the Corporation
all of the Corporation's written or descriptive material in the
Consultants possession or under its control. This section is not
intended to restrict the use by the Consultant of its own intellectual
property which does not relate to the Corporation's confidential
information after the termination hereof.
(b) All project and administrative files, drawings, sketches, plans,
designs, trade secrets and any other documentation or data furnished
to or prepared by the Consultant in connection with this Agreement
shall be the property of the Corporation.
(c) The consultant shall, after termination of this Agreement for any
reason whatsoever unless terminated by the Corporation, upon
reasonable notice and upon payment of reasonable expenses by the
Corporation, furnish such information and proper assistance to the
Corporation as may be reasonably required by the Corporation in
connection with any litigation in which it is or may become a party
other than litigation by the Corporation against the Consultant, its
Partners,
<PAGE> 6
-6-
or the Key Individuals.
7. POST-TERMINATION OBLIGATIONS
(a) The consultant has carefully read and considered the provisions of
this Section and, having done so, agrees that the restrictions set
forth in this Section are fair and reasonable and are reasonably
required for the protection of the interests of the Corporation. The
Consultant, during the term of this Agreement, further acknowledges
and agrees that it will be assigned duties that will give it knowledge
of confidential and proprietary information which relates to the
conduct and details of the Corporation's business including the
Corporation's customers and marketing programs, and which may result
in irreparable injury to the Corporation if the Consultant should
engage in competition with the Corporation involving the Corporation's
Existing Customers of Prospective Customers.
(b) The Consultant agrees with, and for the benefit of, the Corporation
that the Consultant shall not without the prior written approval of
the Corporation during the term of this Agreement with the Corporation
or at any time within the period of time set forth below following the
date of termination of this Agreement however caused, either directly
or as a partner, joint venturer, shareholder, or otherwise in
conjunction with any person or persons, firm, association, syndicate,
company or corporation, as principal, agent, consultant, investor or
in any other manner whatsoever, directly or indirectly, carry on, be
engaged in, be interested in, or by concerned with, or permit its name
or any part thereof to be used or employed by any such person or
persons, firm association, syndicate, company or corporation, carrying
on, engaged in, interested in, or concerned with, a business which is
similar to the Business and which involves all Existing Customer or
any Prospective Customer for a period of one (1) Year following the
<PAGE> 7
termination of this Agreement:
(i) the Provinces of British Columbia, Alberta, Saskatchewan and
Manitoba;
(ii) any Province of Canada in which the Business is or may in the
future be carried on;
(iii) any Province of Canada;
(iv) Canada;
(v) any state in the United States of America in which the Business
or may in the future be carried on;
(vi) the United States of America;
(vii) any part of the world in which the Business is or may in the
future be carried on; or
(viii) the world.
(c) The Consultant represents and warrants to the Corporation that it has
not previously signed a confidentiality or non-completion agreement of
any kind whatsoever with another party which would impair its ability
to carry out its duties hereunder.
8. MEANINGS
For the purposes of this Agreement as referenced in Articles 6 and 7, the
following terms will have the meanings set out below:
(a) "Business" shall mean those businesses carried on by the Corporation,
its Subsidiaries and Affiliates (for purposes of this Section, any
entity Ten (10%) Percent or more of which is owned by the Corporation)
directly or indirectly of the Corporation from time to time;
(b) "Existing Customers" means an individual, firm, body corporate,
joint venture or trust with whom the Corporation, its Subsidiaries and
Affiliates is currently conducting Business or in the past has
conducted Business; and
<PAGE> 8
-8-
(c) "Prospective Customer" means an individual, firm, body corporate,
joint venture or trust with whom the Corporation, its Subsidiaries and
Affiliates is currently discussing Business or to whom or in
connection with whom the Corporation, its Subsidiaries and Affiliates
has made a proposal regarding Business.
9. TERMINATION BY THE CORPORATION
This Agreement may be terminated at the option of the Corporation upon the
happening of any of the following events:
(a) the dissolution of the Consultant;
(b) upon the consultant becoming bankrupt or insolvent;
(c) upon the failure of the Consultant to comply with any of the
substantive terms and conditions of this Agreement.
10. TERMINATION BY THE CONSULTANT
The Agreement may be terminated at the option of the Consultant upon the
happening of any of the following events:
(a) upon the Corporation becoming bankrupt or insolvent;
(b) upon the Corporation failing to perform its duties hereunder in a
manner required by the Consultant, including the due performance by
any of its Subsidiaries and Affiliates.
11. ARBITRATION
All disputes and questions which shall arise during the term of this
Agreement between Corporation and the Consultant touching this Agreement or
the construction or application thereof
<PAGE> 9
-9-
or any clause or thing herein contained or as to any manner in any way
relating to the rights, duties and liabilities of any party under this
Agreement shall be referred to a single arbitrator in case the parties
agree upon one; otherwise to two arbitrators, one to be appointed by each
party. The two arbitrators so appointed shall by instructed to attempt to
reach agreement on a third arbitrator and that third arbitrator, together
with the arbitrators appointed by the disputants, shall determine all
questions. In the event that the parties appointed are unable to agree on
an arbitrator, then the parties, or either of them, may apply to any
Justice of the Court of Queen's Bench of Alberta, to appoint the third
arbitrator and in all other respects the provisions of the Arbitrators Act
of the Province of Alberta shall apply.
12. SEVERABILITY
The provisions contained in this Agreement are severable and in the event
any provision shall be held to be invalid, unenforceable or overbroad, in
whole or in part, by a court of other entity of competent jurisdiction, the
remainder of such provision and of this Agreement shall not be affected
thereby and shall remain in full force and effect.
13. This Agreement supersedes all previous agreements between the parties.
14. NOTICES
Any notice, direction or other instrument required or permitted to be given
under the provisions of this Agreement shall be in writing and may be given
by the delivery of same or sending by facsimile transmission to the
parties:
(a) In the case of the Corporation to:
<PAGE> 10
-10-
Mr. Joseph W. Rog
Corrpro Companies, Inc.
1055 West Smith Road
MEDINA, Ohio 44256
Fax: (330) 723-0694
and to:
Albert N. Salvatore, Esq.
McDonald, Hopkins, Burke & Haber
2100 Bank One Center
600 Superior Avenue, E.
Cleveland, Ohio 44114-2653
Fax: (330) 348-5474
and to:
Robert V. Lloyd, Q.C.
Ogilvie and Company
Barristers and Solicitors
1400, 10303 Jasper Avenue
Edmonton, Alberta T5J 3N6
Fax: (403) 429-4453
or to such other person or address as the Corporation shall furnish to the
Consultant in writing pursuant to the above.
(b) In the case of the Consultant to:
c/o Garry G. Wetsch, Q.C.
Peterson Hustwick Wetsch & Moffat
Barristers and Solicitors
200, 9707 - 110 Street
Edmonton, Alberta T5K 2L9
Fax: (403) 482-6613
and to:
c/o Barry W. Schadeck
Corrtech Partnership
10848 - 214 Street
Edmonton, Alberta T5S 2A7
Fax: (403) 447-3215
<PAGE> 11
or to such other person or address as the Consultant shall furnish to
the Corporation in writing pursuant to the above.
Any such notice, direction or other instrument shall:
(a) If delivered, be handed to an adult person at the designated address,
and shall be deemed to have been given or received on the day on which
it was so delivered if delivered prior to 3:00 o'clock P.M. (local
time) on a Business Day. If delivered after 3:00 P.M. (local time) or
if not a Business Day, then it shall have been deemed to have been
given or received on the Business Day next following the day of
delivery.
(b) If mailed, shall be mailed by prepaid registered or certified post
from a post office within the Province of Alberta, and shall be
deemed to have been given or received on the fifth (5th) Business
Day following the date of mailing.
(c) If sent by facsimile transmission, it shall be deemed to have been
given or received on the next Business Day following the day of
confirmed transmission.
"Business Day" where used in this Agreement shall mean a day in which
the offices of the Provincial Government of Alberta are open for
business.
15. SUCCESSORS AND ASSIGNS
The provisions hereof shall enure to the benefit of and shall be binding
upon the parties hereto, their successors and assigns.
16. JURISDICTION AND APPLICABLE LAW
The parties hereto agree that this contract shall be government and
construed in accordance with the
<PAGE> 12
-12-
laws of the Province of Alberta.
17. AMENDMENT
The parties hereto covenant and agree to execute such further and other
undertakings as may be required to properly give effect to the intention of
this Agreement.
18. TIME
Time is of the essence in this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto affixed their
corporate seals by the hand, of their proper officers in that behalf as of
the date and year first above written.
COMMONWEALTH SEAGER HOLDINGS LTD. CORRTECH CONSULTING GROUP
Per: Per:
------------------------------ ---------------------------
Per: Per:
------------------------------ ---------------------------
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this 26th day of March, 1998, and effective as of April
1, 1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and Joseph W. Rog ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(c) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Chairman of the Board, Chief
Executive Officer and President of the Company. The Company
shall nominate Executive to serve as a director on the Board
of Directors of the Company and shall use its best efforts to
facilitate Executive's election. Executive shall have the
right to serve on the board of directors of any newly formed
holding company and subsidiary of the Company. In these
capacities, Executive will retain the right to approve, select
and/or hire employees of the Company plus have the authority
to determine and implement programs and establish direction
for the Company and shall serve at the direction of the Board
of Directors of the Company.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
1
<PAGE> 2
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of two hundred
seventy four thousand dollars ($274,000) as compensation for
his services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be set
by the Board of Directors (or its designated committee). In
the event the Base Compensation is adjusted, such adjusted
Base Compensation (adjusted either upward or downward) shall
be payable to Executive under this Agreement for that fiscal
year.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in
accordance with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
2
<PAGE> 3
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
(h) RETIREMENT INCOME. Executive has become vested in the
retirement income provided for in Executive's previous
employment contract with the Company. Such retirement income
is payable as set forth and subject to the provisions of this
Agreement. The Company shall provide Executive with retirement
income, with a lifetime survivor benefit to Executive's
spouse, in an amount equal to fifty percent (50%) of
Executive's Base Compensation in effect on the date of
Executive's retirement, payable on a monthly basis as set
forth below:
(i) RETIREMENT BEFORE AGE 63-1/2. In the event of
Executive's retirement prior to reaching the age of
63-1/2, monthly lifetime retirement payments will
commence on the first day of the month following
Executive's reaching the age of 63-1/2.
(ii) RETIREMENT ON OR AFTER AGE 63-1/2. In the event of
Executive's retirement on or after reaching the age
of 63-1/2, monthly lifetime retirement payments will
commence on the first day of the month following
Executive's retirement.
(iii) DEATH. In the event of Executive's death, whether
prior to or subsequent to Executive's retirement,
monthly lifetime survivor retirement payments to his
spouse will commence on the first day of the month
following Executive's death and will cease upon the
death of Executive's spouse.
(iv) DISABILITY. In the event that Executive's employment
terminates due to Disability, monthly lifetime
retirement payments will commence on the first day of
the month following the later of (a) the termination
of disability payments provided for in the first
sentence of Section 6 hereof, or (b) the termination
of benefits received by Executive from disability
insurance the premiums for which were paid by the
Company.
(v) TERMINATION WITHOUT GOOD CAUSE. In the event that
Executive's
3
<PAGE> 4
employment terminates due to termination by the
Company without Good Cause as defined in Section 7
hereof, monthly lifetime retirement payments will
commence on the first day of the monthly following
the termination of the severance payments provided
for in Section 7 hereof.
As long as the retirement payments provided for in this Section 2(h)
are made, Executive agrees not to compete with the Company as provided
in Section 4 hereof. In the event Executive violates any of the
provisions of Section 4 hereof, the Company may cease making the
retirement payments which are provided for in this Section 4.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Chairman of
the Board, Chief Executive Officer and President of the Company; except,
however, Executive may serve on corporate, civic, or charitable boards or
committees and manage his personal investments and affairs provided such
activities do not interfere with the performance of Executive's duties under
this Agreement and provided Executive keeps the Board of Directors reasonably
informed of Executive's commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and until the later of (i) three (3) years following the termination
of Executive's employment with the Company, or (ii) as long as Executive is
receiving payment pursuant to Section 2(h) hereof, Executive will not, directly
or indirectly, either for himself or on behalf of any other corporation,
partnership, person, group, or entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose
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stock is regularly traded on any national securities exchange or regularly
traded in the over-the-counter market. Executive acknowledges and agrees that
the restrictions contained in this Section 4 are reasonable and necessary for
the protection of the business interests of the Company and that such
restrictions are not unduly burdensome in scope or duration.
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
(a) PROPRIETARY INFORMATION. During his employment pursuant to this
Agreement and at any time thereafter, Executive shall not disclose, or cause to
be disclosed in any manner, to any corporation, partnership, person, group, or
entity (other than to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy regarding trade
secrets) or otherwise use for any purpose other than the Company's business, any
trade secrets or confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective customer lists;
(b) information concerning the Company's promotional, pricing, or
marketing practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other confidential and
proprietary information.
Upon termination of employment under any circumstances, Executive or his estate
or representatives, shall promptly return to the Company all property of the
Company including any and all electronic devices and related data storage
devices and shall destroy or erase any data which cannot be returned. This
Section 5 shall survive the termination of this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly and fully and
hereby assigns all of Executive's rights in all inventions or improvements made
or conceived by Executive (alone or jointly with others) during Executive's
employment and for a period of one year thereafter, which are along the lines of
the business, work or investigations of the Company or which result from or are
suggested by any work Executive may do for the Company. Executive agrees that
any such invention or improvement, whether or not patentable, shall be and
remain the sole and exclusive property of the Company. Executive agrees to keep
and maintain adequate and current written records of all such inventions or
improvements at all stages thereof, which records shall be and remain the
property of the Company. Executive agrees to take such actions and execute such
documents and instruments, including but not limited to patent applications, as
the Company requests to vest or maintain title to such inventions or
improvements in the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this Agreement the
Executive's inventions and improvements, patented and unpatented, which were
made prior to Executive's employment by the Company,
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and which, if Executive has any such inventions, are listed on an attached
exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due to Disability (as hereinafter defined). In the
event of Executive's Disability and a determination by the Board of Directors
that sufficient reasonable accommodations for the Disability cannot be made, the
Company may terminate Executive's employment under this Agreement. If the
Company terminates Executive's employment under this Agreement because of
Executive's Disability, the Company shall pay to Executive the amounts, and
provide to Executive the benefits, specified in Section 7 hereof. The amount of
benefits to be paid by the Company to Executive under this Section 6 or under
Section 7 shall be reduced by any amount paid or to be paid pursuant to Company
sponsored disability plans. For purposes of this Agreement, "Disability" shall
mean Executive's inability, through physical or mental illness or accident or
other cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS
OBLIGATIONS/TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate this
Agreement if the Company fails to honor its obligations, subject to the
procedures as provided in this Section 7. The Company may terminate
Executive's employment for any reason at any time upon 30 days notice
to Executive, provided that the Company pay Executive the amounts as
determined in this Section 7. Anything to the contrary contained in
this Agreement notwithstanding, (i) if the Company fails to honor any
of its obligations under this Agreement, and if the Company does not
cure the determined failure within thirty (30) days after a
determination of a failure in accordance with the procedures set forth
below and if as a result Executive resigns his employment with the
Company or (ii) the Company terminates Executive's employment with the
Company under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive shall be
entitled to receive and the Company shall pay to Executive the
following:
(1) SALARY. Executive's Base Compensation earned through the date
of resignation or
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<PAGE> 7
termination and a lump sum payment for any unused vacation shall be
paid on or before the next regularly scheduled pay-date after the
effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one year (two
years if Executive is terminated by the Company without Good
Cause within the period three months before or twelve months
after a Change in Control as defined in EXHIBIT A) shall be
paid in consecutive periodic payments commencing on the first
pay day in the month following such resignation or termination
in the aggregate amount (net of any required withholdings and
Disability payment offsets as provided in Section 6) equal to
one year (two years if Executive is terminated by the Company
without Good Cause within the period three months before or
twelve months after a change in Control as defined in EXHIBIT
A) of Executive's Base Compensation then in effect, provided
that in the event of Executive's death prior to the receipt of
all payments, any remaining payments shall cease to be made.
During the period which severance is payable, the Company
agrees to provide, through a group life insurance arrangement
or individual life insurance policy or otherwise, life
insurance with a death benefit at least equal to the remaining
severance payments. Upon Executive's death during the
severance period and prior to receipt of all severance
payments, the death benefit shall be payable to Executive's
designated beneficiary or, if none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination for which a
payment under Section 7(a)(2) is owing, Executive, or his
spouse and eligible dependents in the event of Executive's
death, shall continue to participate at the expense of the
Company until the date of Executive's 65th birthday in the
same or comparable hospital, medical, accident, disability and
life insurance benefits as Executive participated in
immediately prior to resignation or termination of his
employment unless by law, the terms of any insurance policy or
the terms of the applicable benefit plans, continued coverage
is not permitted. Executive and eligible dependents may
continue coverage under such benefit plan for subsequent
periods and subject to applicable premium contributions, to
the extent permitted by law or by such plans. If because of
the application of law, the terms of any insurance policy or
the terms of the applicable benefit plans Executive cannot be
covered under any benefit program referred to above, then the
Company shall pay to Executive, or his spouse and eligible
dependents in the event of Executive's death, on a regular
basis the amount which the Company would have paid for the
benefit had Executive continued to participate in the
Company's group plan. To the extent that during Executive's
employment, any such benefits were part of a program of
benefits for Senior Level Executives of the Company,
generally, then any subsequent modification, substitution, or
termination of any such benefits, generally, shall also apply
to Executive and to the benefits available to Executive
pursuant to this Section 7(a)(3).
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(4) EARLY CESSATION OF BENEFITS. All benefits (other than those
with respect to which continuation is required by law) under
Section 7(a)(3) above shall cease upon the death of Executive
and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect as
provided for in Section 2 hereof shall be paid to Executive
within the time period prescribed by such plan, (i.e. the
Executive will be paid based upon actual results as if the
Executive had been employed the full twelve months and had
received the full twelve month Base Compensation). In
addition, any payments due Executive under the incentive plans
then in effect as provided for in Section 2 hereof (other than
any annual bonus plans) in accordance with the terms of such
plans shall be paid to Executive within the time period
prescribed by such plans.
(6) Retirement Income. Executive shall be paid the retirement
income provided in Section 2 (h) hereof, payable in accordance
with the provisions of Section 2 (h).
(b) PROCEDURES. For purposes of this Section 7, the following procedure
shall be used to determine whether the Company has failed to honor any
of its obligations under this Agreement; (i) Executive shall submit a
claim to the Company's Board of Directors specifically identifying the
nature of the failure; (ii) within thirty (30) days of receipt of such
claim, the Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate, in
writing, their determination to Executive; and (iii) if Executive
disagrees with the determination of the Board of Directors, Executive,
within ten (10) days of Executive's receipt of such determination, may
submit the claim to arbitration in accordance with the provisions of
Section 16 of this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall represent
the sole remedy for any claim Executive may have arising out of the
Company's failure to honor its obligations and termination without Good
Cause. The Company may condition payment of amounts due under this
Section 7 (other than Retirement Income and payments due to Disability)
upon the receipt of a release and covenant not to sue in a form
reasonably satisfactory to the Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate Executive's
employment with
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<PAGE> 9
the Company under this Agreement for Good Cause. As used in this
Agreement, the term "Good Cause" shall mean:
(1) any wrongful act or acts by Executive, adverse to the
interests of the Company, resulting in, or intended
to result directly or indirectly in, significant gain
or personal enrichment to Executive;
(2) a material failure by Executive substantially to
perform his duties with the Company (other than any
such failure resulting from incapacity due to mental
or physical illness), and such failure results in
demonstrably material injury to the Company;
(3) the willful, wanton, or reckless failure by Executive
properly to perform his duties with the Company
(other than such failure resulting from incapacity
due to mental or physical illness); or
(4) The conviction of a felony.
(b) PROCEDURES. Executive's employment shall in no event be considered to
have been terminated by the Company for Good Cause if such termination
took place as the result of (i) bad judgment or negligence, or (ii) any
act or omission reasonably believed in good faith to have been in or
not opposed to the interest of the Company. Executive shall not be
deemed to have been terminated for Good Cause unless and until there
shall have been delivered to him a copy of a resolution duly adopted by
the affirmative vote of not less than sixty percent (60%) of the entire
membership of the Board of Directors (excluding Executive if a member
of the Board) at a meeting of the Board (after reasonable notice to
Executive and an opportunity for him, together with his counsel, to be
heard before the Board), finding that, in the good faith opinion of the
Board, Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority to place
Executive on "leave of absence status", with or without pay in the sole
discretion of the Board as determined by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall terminate
Executive's employment under this Agreement for Good Cause, the Company
shall have no further obligation to Executive under this Agreement
except to pay his Base Compensation and unused vacation earned through
the date of termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations as imposed
by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the
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Company. In the event that Executive terminates his employment pursuant to this
Section 9, the Company shall have no further obligation to Executive under this
Agreement except to pay his Base Compensation and unused vacation earned through
the date of resignation and to perform such other obligations as imposed by law.
Notwithstanding the preceding sentence, Executive shall also be paid the
retirement income provided for in Section 2 (h) hereof provided Executive
satisfies the requirements contained in Section 2 (h).
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
(d) RETIREMENT INCOME. The retirement income shall be paid as
provided in Section 2 (h) hereof.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - EQUITABLE REMEDIES. Executive acknowledges and agrees that
in
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the event that Executive violates the undertakings set forth in Section 4 or
5 hereof, other than in an immaterial fashion, the Company, in addition to any
other rights or remedies to which it may be entitled under law or this
Agreement, shall be entitled to enforce the provisions of Section 4 or 5 by
injunction or other equitable relief, without having to prove irreparable harm
or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a written
document signed by both parties.
SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all
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prior agreements between the parties, whether written or oral, regarding the
subject matter hereof, including, but not limited to, the employment agreement
entered into between the parties effective April 1, 1996.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE
To the extent the Company is unable to make any of the payments or
perform any of the obligations hereunder due to restrictions imposed by law, by
the Company's Articles of Incorporation or Code of Regulations, or by loan
agreements or other contracts to which the Company is or becomes party to, the
Company agrees to take such reasonable steps as are necessary to remove such
restrictions. In the event the Company is unable to remove such restrictions,
Executive and the Company shall enter into negotiations to effect reasonable
alternatives. The Company's obligations shall be suspended until such time as
such restrictions are removed or such reasonable alternatives are effected.
SECTION 22 - CHANGE IN CONTROL AND RABBI TRUST. If Executive's
employment with the Company under this Agreement is terminated with twelve (12)
months following a change in control (as defined in EXHIBIT A), by the Company
without Good Cause, then Executive shall receive, and the Company shall pay or
provide to Executive or his spouse, eligible dependents, and designated
beneficiaries, the termination payments and benefits provided for in Section 7
of this Agreement; provided however, immediately following a change in control
(as defined in EXHIBIT A), the Company shall establish a grantor trust
conforming with Revenue Procedure 92-64 ("Rabbi Trust"). A copy of such Trust to
be executed by the Company is attached hereto as EXHIBIT B. Within ten (10) days
following a change in control, the Company shall fund the entire obligation to
Executive under this Section 22.
SECTION 23 - EXCESS PARACHUTE PAYMENT REDUCTION. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise) (a "Payment") would be nondeductible
by the Company for Federal income tax purposes because of Section 280G of the
Internal Revenue Code and applicable regulations promulgated thereunder, then
the aggregate present value of amounts payable or distributable to or for the
benefit of Executive pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced (but not below zero) to the Reduced Amount. The "Reduced
Amount" shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Internal Revenue
Code and applicable regulations promulgated thereunder. For purposes of this
Section 23, present value shall be determined in accordance with Section
280G(d)(4) of the Internal Revenue Code and applicable regulations promulgated
thereunder. All determinations required to be made under this Section 23 shall
be made by the independent certified public accounting firm performing the
year-end audit on the Company (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within thirty
(30) days after the termination date
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or such earlier time as is requested by the Company. The Company and Executive
shall cooperate with each other and the Accounting Firm and will provide
necessary information so that the Accounting Firm may make all such
determinations. All such determinations by the Accounting Firm shall be final
and binding upon the Company and Executive. Executive shall determine which of
the Agreement Payments (or, at the election of Executive, other payments) shall
be eliminated or reduced consistent with the requirements of this Section 23,
provided that, if Executive does not make such determination within twenty (20)
days of the receipt of the calculations made by the Accounting Firm, the Company
shall elect which of the Agreement Payments shall be elimination or reduced
consistent with the requirements of this Section 23 and shall notify Executive
promptly of such election. As a result of the uncertainty in the application of
Section 280G of the Internal Revenue Code and applicable regulations promulgated
thereunder at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments will be made by the Company
which should not have been made ("Overpayment") or that additional Agreement
Payments will not be made by the Company which could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm or a court of competent
jurisdiction (in a final judgment as to which the time for appeal has lapsed or
no appeal is available) determines at any time that an Overpayment has been
made, any such Overpayment shall be treated for all purposes as a loan to
Executive which Executive shall repay to the Company together with interest at
the applicable short-term Federal rate provided for in Section 1274(d)(1) of the
Internal Revenue Code, compounded semi-annually; provided, however, that no
amount shall be payable by Executive to the Company (or if paid by Executive to
the Company, such payment shall be returned to Executive) if and to the extent
such payment should not reduce the amount which is subject to taxation under
Section 4999 of the Internal Revenue Code. In the event that the Accounting Firm
or a court of competent jurisdiction (in a final judgment as to which tie time
for appeal has lapsed or no appeal is available) determines at any time that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable short-term Federal rate provided for in Section 1274(d)(1) of the
Internal Revenue Code, compounded semi-annually.
SECTION 24 - ENFORCEMENT COSTS ON CHANGE OF CONTROL. If Executive's
employment is terminated following a "change in control" as defined in EXHIBIT A
hereof and Executive institutes any litigation or other action in order to
secure the benefits intended to be provided Executive under this Agreement, or
if Executive is required to defend litigation or other action instituted by the
Company or any other person to declare this Agreement void or unenforceable or
to deny, diminish, or recover from Executive the benefits intended to be
provided to Executive under this Agreement, then, regardless of whether
Executive prevails, in whole or part, in the prosecution or defense of such
litigation or action, the fees and expenses of Executive's counsel shall be paid
or reimbursed to Executive by the Company upon presentation to the Company by
Executive of statements prepared by such counsel in accordance with counsel's
customary practices. As security for the payment of such enforcement expenses,
the Company agrees that upon the initiation of the litigation described in
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this Section 24, the Company shall deposit into an escrow account with Bank One,
Cleveland, NA an amount equal to twenty percent (20%) of the payment claimed by
Executive pursuant to any other section, which funds shall be payable to
Executive pursuant to the terms of this Section 24. Such payment shall be in
addition to the payments due Executive pursuant of Section 23 thereof. If
Executive's legal fees and expenses actually incurred in connection with the
litigation or legal action described in this Section 24 exceed the amount
deposited in escrow, the Company shall be obligated to pay the legal fees and
expenses actually incurred by Executive.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By:
---------------------------------
Its:
--------------------------------
"COMPANY"
JOSEPH W. ROG
---------------------------
"EXECUTIVE"
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EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND
JOSEPH W. ROG
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period
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constituted a majority of the Board of Directors of the
Company cease serving on the Board; however, if a person
ceases to serve as a director of the Company for any reason
not related to the Company (as, for example, because of family
reasons, or health reasons, or a lack or time), then such
cessation shall not be considered as a "cessation" under this
Exhibit A, and any replacement director shall, for purposes of
this Exhibit A, be treated as the same person as the director
who so ceased serving.
(c) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling
the holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
17
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 1 OF 12
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this 8th day of April, 1998, and effective as of April 1,
1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and Michael K. Baach ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(c) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Executive Vice President of Marketing
and Sales of the Company, and shall be responsible for the
duties attendant to such office. Executive shall report to the
Chief Executive Officer (or such other officer as determined
by the Chief Executive Officer), and shall be subject to the
policies and procedures adopted by the Company from time to
time. Executive agrees to serve as an officer or director of
such of the Company's subsidiaries or affiliates as the
Company may reasonably request.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
<PAGE> 2
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 2 OF 12
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of One Hundred
Sixty-Five Thousand Dollars ($165,000) as compensation for his
services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be
subject to review and a recommendation by the Chief Executive
Officer of the Company to the Board of Directors (or its
designated committee) and any adjustment shall be subject to
the approval of the Board or its designated committee. In the
event the Base Compensation is adjusted, such adjusted Base
Compensation (adjusted either upward or downward) shall be
payable to Executive under this Agreement for that fiscal
year; provided that any downward adjustment shall be limited
to ten percent (10%) of Base Compensation unless the Base
Compensation of all Senior Level Executives (all persons with
the title Vice President and above employed by the Company) of
the Company are similarly affected by a reduction in excess of
10%.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in accordance
with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
<PAGE> 3
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 3 OF 12
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Executive
Vice President of Marketing and Sales of the Company; except, however, Executive
may serve on corporate, civic, or charitable boards or committees and manage his
personal investments and affairs provided such activities do not interfere with
the performance of Executive's duties under this Agreement and provided
Executive keeps the Chief Executive Officer reasonably informed of Executive's
commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and one (1) year following the later of (i) termination of Executive's
employment with the Company, or (ii) termination of any consulting agreement
which the parties may enter into immediately subsequent to termination of
Executive's employment, Executive will not, directly or indirectly, either for
himself or on behalf of any other corporation, partnership, person, group, or
entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or regularly traded in the over-the-counter market.
Executive acknowledges and agrees that the restrictions contained in this
Section 4 are reasonable and necessary for the protection of the business
interests of the Company and that such restrictions are not unduly burdensome in
scope or duration.
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
<PAGE> 4
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 4 OF 12
(a) PROPRIETARY INFORMATION. During his employment pursuant to
this Agreement and at any time thereafter, Executive shall not
disclose, or cause to be disclosed in any manner, to any
corporation, partnership, person, group, or entity (other than
to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy
regarding trade secrets) or otherwise use for any purpose
other than the Company's business, any trade secrets or
confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective
customer lists;
(b) information concerning the Company's
promotional, pricing, or marketing
practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other
confidential and proprietary information.
Upon termination of employment under any circumstances, Executive or
his estate or representatives, shall promptly return to the Company all
property of the Company including any and all electronic devices and
related data storage devices and shall destroy or erase any data which
cannot be returned. This Section 5 shall survive the termination of
this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly
and fully and hereby assigns all of Executive's rights in all
inventions or improvements made or conceived by Executive
(alone or jointly with others) during Executive's employment
and for a period of one year thereafter, which are along the
lines of the business, work or investigations of the Company
or which result from or are suggested by any work Executive
may do for the Company. Executive agrees that any such
invention or improvement, whether or not patentable, shall be
and remain the sole and exclusive property of the Company.
Executive agrees to keep and maintain adequate and current
written records of all such inventions or improvements at all
stages thereof, which records shall be and remain the property
of the Company. Executive agrees to take such actions and
execute such documents and instruments, including but not
limited to patent applications, as the Company requests to
vest or maintain title to such inventions or improvements in
the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this
Agreement the Executive's inventions and improvements,
patented and unpatented, which were made prior to Executive's
employment by the Company, and which, if Executive has any
such inventions, are listed on an attached exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due
<PAGE> 5
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 5 OF 12
to Disability (as hereinafter defined). In the event of Executive's Disability
and a determination by the Board of Directors that sufficient reasonable
accommodations for the Disability cannot be made, the Company may terminate
Executive's employment under this Agreement. If the Company terminates
Executive's employment under this Agreement because of Executive's Disability,
the Company shall pay to Executive the amounts, and provide to Executive the
benefits, specified in Section 7 hereof. The amount of benefits to be paid by
the Company to Executive under this Section 6 or under Section 7 shall be
reduced by any amount paid or to be paid pursuant to Company sponsored
disability plans. For purposes of this Agreement, "Disability" shall mean
Executive"s inability, through physical or mental illness or accident or other
cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS OBLIGATIONS
AND TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate
this Agreement if the Company fails to honor its obligations,
subject to the procedures as provided in this Section 7. The
Company may terminate Executive's employment for any reason at
any time upon 30 days notice to Executive, provided that the
Company pay Executive the amounts as determined in this
Section 7. Anything to the contrary contained in this
Agreement notwithstanding, (i) if the Company fails to honor
any of its obligations under this Agreement, and if the
Company does not cure the determined failure within thirty
(30) days after a determination of a failure in accordance
with the procedures set forth below and if as a result
Executive resigns his employment with the Company or (ii) the
Company terminates Executive's employment with the Company
under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive
shall be entitled to receive and the Company shall pay to
Executive the following:
(1) SALARY. Executive's Base Compensation earned through
the date of resignation or termination and a lump sum
payment for any unused vacation shall be paid on or
before the next regularly scheduled pay-date after
the effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one
year (two years if Executive is terminated by the
Company without Good Cause within the period three
<PAGE> 6
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 6 OF 12
months before or twelve months after a Change in
Control as defined in EXHIBIT A) shall be paid in
consecutive periodic payments commencing on the first
pay day in the month following such resignation or
termination in the aggregate amount (net of any
required withholdings and Disability payment offsets
as provided in Section 6) equal to one year (two
years if Executive is terminated by the Company
without Good Cause within the period three months
before or twelve months after a change in Control as
defined in EXHIBIT A) of Executive's Base
Compensation then in effect, provided that in the
event of Executive's death prior to the receipt of
all payments, any remaining payments shall cease to
be made. During the period which severance is
payable, the Company agrees to provide, through a
group life insurance arrangement or individual life
insurance policy or otherwise, life insurance with a
death benefit at least equal to the remaining
severance payments. Upon Executive's death during the
severance period and prior to receipt of all
severance payments, the death benefit shall be
payable to Executive's designated beneficiary or, if
none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination
for which a payment under Section 7(a)(2) is owing,
Executive, or his spouse and eligible dependents in
the event of Executive's death, shall continue to
participate at the expense of the Company for a
period of twelve (12) months following such
resignation or termination in the same or comparable
hospital, medical, accident, disability and life
insurance benefits as Executive participated in
immediately prior to resignation or termination of
his employment unless by law, the terms of any
insurance policy or the terms of the applicable
benefit plans, continued coverage is not permitted.
Executive and eligible dependents may continue
coverage under such benefit plan for subsequent
periods and subject to applicable premium
contributions, to the extent permitted by law or by
such plans. To the extent that during Executive's
employment, any such benefits were part of a program
of benefits for Senior Level Executives of the
Company, generally, then any subsequent modification,
substitution, or termination of any such benefits,
generally, shall also apply to Executive and to the
benefits available to Executive pursuant to this
Section 7(a)(3).
(4) EARLY CESSATION OF BENEFITS. All benefits (other than
those with respect to which continuation is required
by law) under Section 7(a)(3) above shall cease upon
the death of Executive and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect
as provided for in Section 2 hereof shall be paid to
Executive within the time period prescribed by such
plan, (i.e. the Executive will be paid based upon
actual results as if the Executive had been employed
the full twelve months and had received the full
twelve month Base Compensation). In addition, any
payments due Executive under the incentive plans then
in effect as provided for in Section 2 hereof (other
than any annual bonus plans) in
<PAGE> 7
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 7 OF 12
accordance with the terms of such plans shall be paid
to Executive within the time period prescribed by
such plans.
(b) PROCEDURES. For purposes of this Section 7, the following
procedure shall be used to determine whether the Company has
failed to honor any of its obligations under this Agreement;
(i) Executive shall submit a claim to the Company's Board of
Directors specifically identifying the nature of the failure;
(ii) within thirty (30) days of receipt of such claim, the
Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate,
in writing, their determination to Executive; and (iii) if
Executive disagrees with the determination of the Board of
Directors, Executive, within ten (10) days of Executives's
receipt of such determination, may submit the claim to
arbitration in accordance with the provisions of Section 16 of
this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall
represent the sole remedy for any claim Executive may have
arising out of the Company's failure to honor its obligations
and termination without Good Cause. The Company may condition
payment of amounts due under this Section 7 (other than
payments due to Disability) upon the receipt of a release and
covenant not to sue in a form reasonably satisfactory to the
Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate
Executive's employment with the Company under this Agreement
for Good Cause. As used in this Agreement, the term "Good
Cause" shall mean:
(1) personal dishonesty within the course of employment
with the Company which evidences a want of integrity
or is a breach of trust;
(2) persistent failure to abide by reasonable rules and
regulations governing the transaction of business of
the Company as the Company's Board of Directors may
from time to time adopt or approve;
(3) persistent inattention to duties, or the commission
of acts within employment with the Company amounting
to gross negligence or willful misconduct.
(4) misappropriation of funds or property of the Company
or committing any fraud against the Company or
against any other person or entity in the course of
employment with the Company;
(5) misappropriation of any corporate opportunity, or
otherwise obtaining personal profit from any
transaction which is adverse to the interests of the
Company or
<PAGE> 8
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 8 OF 12
to the benefits of which the Company is entitled;
(6) The conviction of a felony; or
(7) any material violation of the terms of this
Agreement.
(b) PROCEDURES. Executive's employment shall in no event be
considered to have been terminated by the Company for Good
Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission reasonably
believed in good faith to have been in or not opposed to the
interest of the Company. Executive shall not be deemed to have
been terminated for Good Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (excluding
Executive if a member of the Board) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for
him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority
to place Executive on "leave of absence status", with or
without pay in the sole discretion of the Board as determined
by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall
terminate Executive's employment under this Agreement for Good
Cause, the Company shall have no further obligation to
Executive under this Agreement except to pay his Base
Compensation and unused vacation earned through the date of
termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations
as imposed by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the Company. In the event that Executive terminates his
employment pursuant to this Section 9, the Company shall have no further
obligation to Executive under this Agreement except to pay his Base Compensation
and unused vacation earned through the date of resignation and to perform such
other obligations as imposed by law.
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
<PAGE> 9
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 9 OF 12
(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - BREACHES AND REMEDIES. Executive acknowledges and agrees
that in the event that Executive violates the undertakings set forth in Section
4 or 5 hereof, other than in an immaterial fashion, in addition to any other
rights or remedies to which it may be entitled under law or this Agreement, the
Company shall, except as prohibited by applicable law, cease making any
severance or other payments hereunder and shall be entitled to enforce the
provisions of Section 4 or 5 by injunction or other equitable relief, without
having to prove irreparable harm or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
<PAGE> 10
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 10 OF 12
SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a
written document signed by both parties.
SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all prior agreements between the parties, whether written or oral,
regarding the subject matter hereof, including, but not limited to, the
employment agreement entered into between the parties effective April 1, 1997.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE. To the extent the
Company is unable to make any of the payments or perform any of the obligations
hereunder due to restrictions imposed by law, by the Company's Articles of
Incorporation or Code of Regulations, or by loan agreements or other contracts
to which the Company is or becomes party to, the Company agrees to take such
reasonable steps as are necessary to remove such restrictions. In the event the
Company is unable to remove such restrictions, Executive and the Company shall
enter into negotiations to effect reasonable alternatives. The Company's
obligations shall be suspended until such time as such restrictions are removed
or such reasonable alternatives are effected.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By: ___________________________
Its: ___________________________
"COMPANY"
---------------------------
Michael K. Baach
<PAGE> 11
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 11 OF 12
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND EXECUTIVE
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period constituted a majority
of the Board of Directors of the Company cease serving on the
Board; however, if a person ceases to serve as a director of
the Company for any reason not related to the Company (as, for
example, because of family reasons, or health reasons, or a
lack or time), then such cessation shall not be considered as
a "cessation" under this Exhibit A, and any replacement
director shall, for purposes of this Exhibit A, be treated as
the same person as the director who so ceased serving.
<PAGE> 12
EMPLOYMENT AGREEMENT - MICHAEL K. BAACH
---------------------------------------
APRIL 1, 1998
PAGE 12 OF 12
(b) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling the
holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 1 OF 12
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this 1st day of April, 1998, and effective as of April 1,
1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and George A. Gehring, Jr. ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(c) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Executive Vice President, Eastern
Region, of the Company, and shall be responsible for the
duties attendant to such office. Executive shall report to the
Chief Executive Officer (or such other officer as determined
by the Chief Executive Officer), and shall be subject to the
policies and procedures adopted by the Company from time to
time. Executive agrees to serve as an officer or director of
such of the Company's subsidiaries or affiliates as the
Company may reasonably request.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
<PAGE> 2
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 2 OF 12
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of One Hundred
Sixty-Five Thousand Dollars ($165,000) as compensation for his
services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be
subject to review and a recommendation by the Chief Executive
Officer of the Company to the Board of Directors (or its
designated committee) and any adjustment shall be subject to
the approval of the Board or its designated committee. In the
event the Base Compensation is adjusted, such adjusted Base
Compensation (adjusted either upward or downward) shall be
payable to Executive under this Agreement for that fiscal
year; provided that any downward adjustment shall be limited
to ten percent (10%) of Base Compensation unless the Base
Compensation of all Senior Level Executives (all persons with
the title Vice President and above employed by the Company) of
the Company are similarly affected by a reduction in excess of
10%.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in accordance
with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
<PAGE> 3
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 3 OF 12
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Executive
Vice President, Eastern Region, of the Company; except, however, Executive may
serve on corporate, civic, or charitable boards or committees and manage his
personal investments and affairs provided such activities do not interfere with
the performance of Executive's duties under this Agreement and provided
Executive keeps the Chief Executive Officer reasonably informed of Executive's
commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and one (1) year following the later of (i) termination of Executive's
employment with the Company, or (ii) termination of any consulting agreement
which the parties may enter into immediately subsequent to termination of
Executive's employment, Executive will not, directly or indirectly, either for
himself or on behalf of any other corporation, partnership, person, group, or
entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or regularly traded in the over-the-counter market.
Executive acknowledges and agrees that the restrictions contained in this
Section 4 are reasonable and necessary for the protection of the business
interests of the Company and that such restrictions are not unduly burdensome in
scope or duration.
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
<PAGE> 4
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 4 OF 12
(a) PROPRIETARY INFORMATION. During his employment pursuant to
this Agreement and at any time thereafter, Executive shall not
disclose, or cause to be disclosed in any manner, to any
corporation, partnership, person, group, or entity (other than
to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy
regarding trade secrets) or otherwise use for any purpose
other than the Company's business, any trade secrets or
confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective
customer lists;
(b) information concerning the Company's
promotional, pricing, or marketing
practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other
confidential and proprietary information.
Upon termination of employment under any circumstances, Executive or
his estate or representatives, shall promptly return to the Company all
property of the Company including any and all electronic devices and
related data storage devices and shall destroy or erase any data which
cannot be returned. This Section 5 shall survive the termination of
this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly
and fully and hereby assigns all of Executive's rights in all
inventions or improvements made or conceived by Executive
(alone or jointly with others) during Executive's employment
and for a period of one year thereafter, which are along the
lines of the business, work or investigations of the Company
or which result from or are suggested by any work Executive
may do for the Company. Executive agrees that any such
invention or improvement, whether or not patentable, shall be
and remain the sole and exclusive property of the Company.
Executive agrees to keep and maintain adequate and current
written records of all such inventions or improvements at all
stages thereof, which records shall be and remain the property
of the Company. Executive agrees to take such actions and
execute such documents and instruments, including but not
limited to patent applications, as the Company requests to
vest or maintain title to such inventions or improvements in
the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this
Agreement the Executive's inventions and improvements,
patented and unpatented, which were made prior to Executive's
employment by the Company, and which, if Executive has any
such inventions, are listed on an attached exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due
<PAGE> 5
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 5 OF 12
to Disability (as hereinafter defined). In the event of Executive's Disability
and a determination by the Board of Directors that sufficient reasonable
accommodations for the Disability cannot be made, the Company may terminate
Executive's employment under this Agreement. If the Company terminates
Executive's employment under this Agreement because of Executive's Disability,
the Company shall pay to Executive the amounts, and provide to Executive the
benefits, specified in Section 7 hereof. The amount of benefits to be paid by
the Company to Executive under this Section 6 or under Section 7 shall be
reduced by any amount paid or to be paid pursuant to Company sponsored
disability plans. For purposes of this Agreement, "Disability" shall mean
Executive's inability, through physical or mental illness or accident or other
cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS OBLIGATIONS
AND TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate
this Agreement if the Company fails to honor its obligations,
subject to the procedures as provided in this Section 7. The
Company may terminate Executive's employment for any reason at
any time upon 30 days notice to Executive, provided that the
Company pay Executive the amounts as determined in this
Section 7. Anything to the contrary contained in this
Agreement notwithstanding, (i) if the Company fails to honor
any of its obligations under this Agreement, and if the
Company does not cure the determined failure within thirty
(30) days after a determination of a failure in accordance
with the procedures set forth below and if as a result
Executive resigns his employment with the Company or (ii) the
Company terminates Executive's employment with the Company
under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive
shall be entitled to receive and the Company shall pay to
Executive the following:
(1) SALARY. Executive's Base Compensation earned through
the date of resignation or termination and a lump sum
payment for any unused vacation shall be paid on or
before the next regularly scheduled pay-date after
the effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one
year (two years if Executive is terminated by the
Company without Good Cause within the period three
<PAGE> 6
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 6 OF 12
months before or twelve months after a Change in
Control as defined in EXHIBIT A) shall be paid in
consecutive periodic payments commencing on the first
pay day in the month following such resignation or
termination in the aggregate amount (net of any
required withholdings and Disability payment offsets
as provided in Section 6) equal to one year (two
years if Executive is terminated by the Company
without Good Cause within the period three months
before or twelve months after a change in Control as
defined in EXHIBIT A) of Executive's Base
Compensation then in effect, provided that in the
event of Executive's death prior to the receipt of
all payments, any remaining payments shall cease to
be made. During the period which severance is
payable, the Company agrees to provide, through a
group life insurance arrangement or individual life
insurance policy or otherwise, life insurance with a
death benefit at least equal to the remaining
severance payments. Upon Executive's death during the
severance period and prior to receipt of all
severance payments, the death benefit shall be
payable to Executive's designated beneficiary or, if
none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination
for which a payment under Section 7(a)(2) is owing,
Executive, or his spouse and eligible dependents in
the event of Executive's death, shall continue to
participate at the expense of the Company for a
period of twelve (12) months following such
resignation or termination in the same or comparable
hospital, medical, accident, disability and life
insurance benefits as Executive participated in
immediately prior to resignation or termination of
his employment unless by law, the terms of any
insurance policy or the terms of the applicable
benefit plans, continued coverage is not permitted.
Executive and eligible dependents may continue
coverage under such benefit plan for subsequent
periods and subject to applicable premium
contributions, to the extent permitted by law or by
such plans. To the extent that during Executive's
employment, any such benefits were part of a program
of benefits for Senior Level Executives of the
Company, generally, then any subsequent modification,
substitution, or termination of any such benefits,
generally, shall also apply to Executive and to the
benefits available to Executive pursuant to this
Section 7(a)(3).
(4) EARLY CESSATION OF BENEFITS. All benefits (other than
those with respect to which continuation is required
by law) under Section 7(a)(3) above shall cease upon
the death of Executive and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect
as provided for in Section 2 hereof shall be paid to
Executive within the time period prescribed by such
plan, (i.e. the Executive will be paid based upon
actual results as if the Executive had been employed
the full twelve months and had received the full
twelve month Base Compensation). In addition, any
payments due Executive under the incentive plans then
in effect as provided for in Section 2 hereof (other
than any annual bonus plans) in
<PAGE> 7
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 7 OF 12
accordance with the terms of such plans shall be
paid to Executive within the time period prescribed
by such plans.
(b) PROCEDURES. For purposes of this Section 7, the following
procedure shall be used to determine whether the Company has
failed to honor any of its obligations under this Agreement;
(i) Executive shall submit a claim to the Company's Board of
Directors specifically identifying the nature of the failure;
(ii) within thirty (30) days of receipt of such claim, the
Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate,
in writing, their determination to Executive; and (iii) if
Executive disagrees with the determination of the Board of
Directors, Executive, within ten (10) days of Executive's
receipt of such determination, may submit the claim to
arbitration in accordance with the provisions of Section 16 of
this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall
represent the sole remedy for any claim Executive may have
arising out of the Company's failure to honor its obligations
and termination without Good Cause. The Company may condition
payment of amounts due under this Section 7 (other than
payments due to Disability) upon the receipt of a release and
covenant not to sue in a form reasonably satisfactory to the
Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate
Executive's employment with the Company under this Agreement
for Good Cause. As used in this Agreement, the term "Good
Cause" shall mean:
(1) personal dishonesty within the course of employment
with the Company which evidences a want of integrity
or is a breach of trust;
(2) persistent failure to abide by reasonable rules and
regulations governing the transaction of business of
the Company as the Company's Board of Directors may
from time to time adopt or approve;
(3) persistent inattention to duties, or the commission
of acts within employment with the Company amounting
to gross negligence or willful misconduct.
(4) misappropriation of funds or property of the Company
or committing any fraud against the Company or
against any other person or entity in the course of
employment with the Company;
(5) misappropriation of any corporate opportunity, or
otherwise obtaining personal profit from any
transaction which is adverse to the interests of the
Company or
<PAGE> 8
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 8 OF 12
to the benefits of which the Company is entitled;
(6) The conviction of a felony; or
(7) any material violation of the terms of this
Agreement.
(b) PROCEDURES. Executive's employment shall in no event be
considered to have been terminated by the Company for Good
Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission reasonably
believed in good faith to have been in or not opposed to the
interest of the Company. Executive shall not be deemed to have
been terminated for Good Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (excluding
Executive if a member of the Board) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for
him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority
to place Executive on "leave of absence status", with or
without pay in the sole discretion of the Board as determined
by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall
terminate Executive's employment under this Agreement for Good
Cause, the Company shall have no further obligation to
Executive under this Agreement except to pay his Base
Compensation and unused vacation earned through the date of
termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations
as imposed by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the Company. In the event that Executive terminates his
employment pursuant to this Section 9, the Company shall have no further
obligation to Executive under this Agreement except to pay his Base Compensation
and unused vacation earned through the date of resignation and to perform such
other obligations as imposed by law..
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
<PAGE> 9
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 9 OF 12
(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - BREACHES AND REMEDIES. Executive acknowledges and agrees
that in the event that Executive violates the undertakings set forth in Section
4 or 5 hereof, other than in an immaterial fashion, in addition to any other
rights or remedies to which it may be entitled under law or this Agreement, the
Company shall, except as prohibited by applicable law, cease making any
severance or other payments hereunder and shall be entitled to enforce the
provisions of Section 4 or 5 by injunction or other equitable relief, without
having to prove irreparable harm or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
<PAGE> 10
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 10 OF 12
SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a
written document signed by both parties.
SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all prior agreements between the parties, whether written or oral,
regarding the subject matter hereof, including, but not limited to, the
employment agreement entered into between the parties effective April 1, 1997.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE. To the extent the
Company is unable to make any of the payments or perform any of the obligations
hereunder due to restrictions imposed by law, by the Company's Articles of
Incorporation or Code of Regulations, or by loan agreements or other contracts
to which the Company is or becomes party to, the Company agrees to take such
reasonable steps as are necessary to remove such restrictions. In the event the
Company is unable to remove such restrictions, Executive and the Company shall
enter into negotiations to effect reasonable alternatives. The Company's
obligations shall be suspended until such time as such restrictions are removed
or such reasonable alternatives are effected.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By:
---------------------------------
Its:
--------------------------------
"COMPANY"
--------------------------------
George A. Gehring, Jr.
<PAGE> 11
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 11 OF 12
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND EXECUTIVE
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period constituted a majority
of the Board of Directors of the Company cease serving on the
Board; however, if a person ceases to serve as a director of
the Company for any reason not related to the Company (as, for
example, because of family reasons, or health reasons, or a
lack or time), then such cessation shall not be considered as
a "cessation" under this Exhibit A, and any replacement
director shall, for purposes of this Exhibit A, be treated as
the same person as the director who so ceased serving.
<PAGE> 12
EMPLOYMENT AGREEMENT - GEORGE A. GEHRING, JR.
---------------------------------------------
APRIL 1, 1998
PAGE 12 OF 12
(b) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling the
holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 1 OF 13
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this 4th day of April, 1998, and effective as of April 1,
1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and David M. Hickey ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(C) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Executive Vice President of
Manufacturing and International Operations of the Company, and
shall be responsible for the duties attendant to such office.
Executive shall report to the Chief Executive Officer (or such
other officer as determined by the Chief Executive Officer),
and shall be subject to the policies and procedures adopted by
the Company from time to time. Executive agrees to serve as an
officer or director of such of the Company's subsidiaries or
affiliates as the Company may reasonably request.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
<PAGE> 2
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 2 OF 13
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of One Hundred
Seventy Thousand Dollars ($170,000) as compensation for his
services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be
subject to review and a recommendation by the Chief Executive
Officer of the Company to the Board of Directors (or its
designated committee) and any adjustment shall be subject to
the approval of the Board or its designated committee. In the
event the Base Compensation is adjusted, such adjusted Base
Compensation (adjusted either upward or downward) shall be
payable to Executive under this Agreement for that fiscal
year; provided that any downward adjustment shall be limited
to ten percent (10%) of Base Compensation unless the Base
Compensation of all Senior Level Executives (all persons with
the title Vice President and above employed by the Company) of
the Company are similarly affected by a reduction in excess of
10%.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in accordance
with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
<PAGE> 3
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 3 OF 13
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Executive
Vice President of Manufacturing and International Operations of the Company;
except, however, Executive may serve on corporate, civic, or charitable boards
or committees and manage his personal investments and affairs provided such
activities do not interfere with the performance of Executive's duties under
this Agreement and provided Executive keeps the Chief Executive Officer
reasonably informed of Executive's commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and one (1) year following the later of (i) termination of Executive's
employment with the Company, or (ii) termination of any consulting agreement
which the parties may enter into immediately subsequent to termination of
Executive's employment, Executive will not, directly or indirectly, either for
himself or on behalf of any other corporation, partnership, person, group, or
entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or regularly traded in the over-the-counter market.
Executive acknowledges and agrees that the restrictions contained in this
Section 4 are reasonable and necessary for the protection of the business
interests of the Company and that such restrictions are not unduly burdensome in
scope or duration.
<PAGE> 4
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 4 OF 13
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
(a) PROPRIETARY INFORMATION. During his employment pursuant to
this Agreement and at any time thereafter, Executive shall not
disclose, or cause to be disclosed in any manner, to any
corporation, partnership, person, group, or entity (other than
to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy
regarding trade secrets) or otherwise use for any purpose
other than the Company's business, any trade secrets or
confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective
customer lists;
(b) information concerning the Company's
promotional, pricing, or marketing
practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other
confidential and proprietary information.
Upon termination of employment under any circumstances, Executive or
his estate or representatives, shall promptly return to the Company all
property of the Company including any and all electronic devices and
related data storage devices and shall destroy or erase any data which
cannot be returned. This Section 5 shall survive the termination of
this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly
and fully and hereby assigns all of Executive's rights in all
inventions or improvements made or conceived by Executive
(alone or jointly with others) during Executive's employment
and for a period of one year thereafter, which are along the
lines of the business, work or investigations of the Company
or which result from or are suggested by any work Executive
may do for the Company. Executive agrees that any such
invention or improvement, whether or not patentable, shall be
and remain the sole and exclusive property of the Company.
Executive agrees to keep and maintain adequate and current
written records of all such inventions or improvements at all
stages thereof, which records shall be and remain the property
of the Company. Executive agrees to take such actions and
execute such documents and instruments, including but not
limited to patent applications, as the Company requests to
vest or maintain title to such inventions or improvements in
the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this
Agreement the Executive's inventions and improvements,
patented and unpatented, which were made prior to Executive's
employment by the Company, and which, if Executive has any
such inventions, are listed on an attached exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base
<PAGE> 5
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 5 OF 13
Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due to Disability (as hereinafter defined). In the
event of Executive's Disability and a determination by the Board of Directors
that sufficient reasonable accommodations for the Disability cannot be made, the
Company may terminate Executive's employment under this Agreement. If the
Company terminates Executive's employment under this Agreement because of
Executive's Disability, the Company shall pay to Executive the amounts, and
provide to Executive the benefits, specified in Section 7 hereof. The amount of
benefits to be paid by the Company to Executive under this Section 6 or under
Section 7 shall be reduced by any amount paid or to be paid pursuant to Company
sponsored disability plans. For purposes of this Agreement, "Disability" shall
mean Executive's inability, through physical or mental illness or accident or
other cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS OBLIGATIONS
AND TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate
this Agreement if the Company fails to honor its obligations,
subject to the procedures as provided in this Section 7. The
Company may terminate Executive's employment for any reason at
any time upon 30 days notice to Executive, provided that the
Company pay Executive the amounts as determined in this
Section 7. Anything to the contrary contained in this
Agreement notwithstanding, (i) if the Company fails to honor
any of its obligations under this Agreement, and if the
Company does not cure the determined failure within thirty
(30) days after a determination of a failure in accordance
with the procedures set forth below and if as a result
Executive resigns his employment with the Company or (ii) the
Company terminates Executive's employment with the Company
under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive
shall be entitled to receive and the Company shall pay to
Executive the following:
(1) SALARY. Executive's Base Compensation earned through
the date of resignation or termination and a lump sum
payment for any unused vacation shall be paid on or
before the next regularly scheduled pay-date after
the effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one
year (two years if Executive
<PAGE> 6
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 6 OF 13
is terminated by the Company without Good Cause
within the period three months before or twelve
months after a Change in Control as defined in
EXHIBIT A) shall be paid in consecutive periodic
payments commencing on the first pay day in the month
following such resignation or termination in the
aggregate amount (net of any required withholdings
and Disability payment offsets as provided in Section
6) equal to one year (two years if Executive is
terminated by the Company without Good Cause within
the period three months before or twelve months after
a change in Control as defined in EXHIBIT A) of
Executive's Base Compensation then in effect,
provided that in the event of Executive's death prior
to the receipt of all payments, any remaining
payments shall cease to be made. During the period
which severance is payable, the Company agrees to
provide, through a group life insurance arrangement
or individual life insurance policy or otherwise,
life insurance with a death benefit at least equal to
the remaining severance payments. Upon Executive's
death during the severance period and prior to
receipt of all severance payments, the death benefit
shall be payable to Executive's designated
beneficiary or, if none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination
for which a payment under Section 7(a)(2) is owing,
Executive, or his spouse and eligible dependents in
the event of Executive's death, shall continue to
participate at the expense of the Company for a
period of twelve (12) months following such
resignation or termination in the same or comparable
hospital, medical, accident, disability and life
insurance benefits as Executive participated in
immediately prior to resignation or termination of
his employment unless by law, the terms of any
insurance policy or the terms of the applicable
benefit plans, continued coverage is not permitted.
Executive and eligible dependents may continue
coverage under such benefit plan for subsequent
periods and subject to applicable premium
contributions, to the extent permitted by law or by
such plans. To the extent that during Executive's
employment, any such benefits were part of a program
of benefits for Senior Level Executives of the
Company, generally, then any subsequent modification,
substitution, or termination of any such benefits,
generally, shall also apply to Executive and to the
benefits available to Executive pursuant to this
Section 7(a)(3).
(4) EARLY CESSATION OF BENEFITS. All benefits (other than
those with respect to which continuation is required
by law) under Section 7(a)(3) above shall cease upon
the death of Executive and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect
as provided for in Section 2 hereof shall be paid to
Executive within the time period prescribed by such
plan, (i.e. the Executive will be paid based upon
actual results as if the Executive had been employed
the full twelve months and had received the full
twelve month Base Compensation). In addition, any
payments due Executive under the incentive plans then
in effect
<PAGE> 7
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 7 OF 13
as provided for in Section 2 hereof (other than any
annual bonus plans) in accordance with the terms of
such plans shall be paid to Executive within the time
period prescribed by such plans.
(b) PROCEDURES. For purposes of this Section 7, the following
procedure shall be used to determine whether the Company has
failed to honor any of its obligations under this Agreement;
(i) Executive shall submit a claim to the Company's Board of
Directors specifically identifying the nature of the failure;
(ii) within thirty (30) days of receipt of such claim, the
Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate,
in writing, their determination to Executive; and (iii) if
Executive disagrees with the determination of the Board of
Directors, Executive, within ten (10) days of Executives's
receipt of such determination, may submit the claim to
arbitration in accordance with the provisions of Section 16 of
this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall
represent the sole remedy for any claim Executive may have
arising out of the Company's failure to honor its obligations
and termination without Good Cause. The Company may condition
payment of amounts due under this Section 7 (other than
payments due to Disability) upon the receipt of a release and
covenant not to sue in a form reasonably satisfactory to the
Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate
Executive's employment with the Company under this Agreement
for Good Cause. As used in this Agreement, the term "Good
Cause" shall mean:
(1) personal dishonesty within the course of employment
with the Company which evidences a want of integrity
or is a breach of trust;
(2) persistent failure to abide by reasonable rules and
regulations governing the transaction of business of
the Company as the Company's Board of Directors may
from time to time adopt or approve;
(3) persistent inattention to duties, or the commission
of acts within employment with the Company amounting
to gross negligence or willful misconduct.
(4) misappropriation of funds or property of the Company
or committing any fraud against the Company or
against any other person or entity in the course of
employment with the Company;
(5) misappropriation of any corporate opportunity, or
otherwise obtaining personal
<PAGE> 8
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 8 OF 13
profit from any transaction which is adverse to the
interests of the Company or to the benefits of which
the Company is entitled;
(6) The conviction of a felony; or
(7) any material violation of the terms of this
Agreement.
(b) PROCEDURES. Executive's employment shall in no event be
considered to have been terminated by the Company for Good
Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission reasonably
believed in good faith to have been in or not opposed to the
interest of the Company. Executive shall not be deemed to have
been terminated for Good Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (excluding
Executive if a member of the Board) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for
him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority
to place Executive on "leave of absence status", with or
without pay in the sole discretion of the Board as determined
by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall
terminate Executive's employment under this Agreement for Good
Cause, the Company shall have no further obligation to
Executive under this Agreement except to pay his Base
Compensation and unused vacation earned through the date of
termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations
as imposed by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the Company. In the event that Executive terminates his
employment pursuant to this Section 9, the Company shall have no further
obligation to Executive under this Agreement except to pay his Base Compensation
and unused vacation earned through the date of resignation and to perform such
other obligations as imposed by law..
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
<PAGE> 9
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 9 OF 13
(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - BREACHES AND REMEDIES. Executive acknowledges and agrees
that in the event that Executive violates the undertakings set forth in Section
4 or 5 hereof, other than in an immaterial fashion, in addition to any other
rights or remedies to which it may be entitled under law or this Agreement, the
Company shall, except as prohibited by applicable law, cease making any
severance or other payments hereunder and shall be entitled to enforce the
provisions of Section 4 or 5 by injunction or other equitable relief, without
having to prove irreparable harm or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
<PAGE> 10
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 10 OF 13
SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a written
document signed by both parties.
<PAGE> 11
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
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APRIL 1, 1998
PAGE 11 OF 13
SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all prior agreements between the parties, whether written or oral,
regarding the subject matter hereof, including, but not limited to, the
employment agreement entered into between the parties effective April 1, 1997.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE. To the extent the
Company is unable to make any of the payments or perform any of the obligations
hereunder due to restrictions imposed by law, by the Company's Articles of
Incorporation or Code of Regulations, or by loan agreements or other contracts
to which the Company is or becomes party to, the Company agrees to take such
reasonable steps as are necessary to remove such restrictions. In the event the
Company is unable to remove such restrictions, Executive and the Company shall
enter into negotiations to effect reasonable alternatives. The Company's
obligations shall be suspended until such time as such restrictions are removed
or such reasonable alternatives are effected.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By:
-------------------------------
Its:
-------------------------------
"COMPANY"
-------------------------------
David M. Hickey
<PAGE> 12
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 12 OF 13
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND EXECUTIVE
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period constituted a majority
of the Board of Directors of the Company cease serving on the
Board; however, if a person ceases to serve as a director of
the Company for any reason not related to the Company (as, for
example, because of family reasons, or health reasons, or a
lack or time), then such cessation shall not be considered as
a "cessation" under this Exhibit A, and any replacement
director shall, for purposes of this Exhibit A, be treated as
the same person as the director who so ceased serving.
<PAGE> 13
EMPLOYMENT AGREEMENT - DAVID M. HICKEY
--------------------------------------
APRIL 1, 1998
PAGE 13 OF 13
(b) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling the
holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 1 OF 12
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this 4th day of April, 1998, and effective as of April 1,
1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and David H. Kroon ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(c) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Executive Vice President, South
Central Region, of the Company, and shall be responsible for
the duties attendant to such office. Executive shall report to
the Chief Executive Officer (or such other officer as
determined by the Chief Executive Officer), and shall be
subject to the policies and procedures adopted by the Company
from time to time. Executive agrees to serve as an officer or
director of such of the Company's subsidiaries or affiliates
as the Company may reasonably request.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
<PAGE> 2
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 2 OF 12
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of One Hundred
Sixty Thousand Dollars ($160,000) as compensation for his
services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be
subject to review and a recommendation by the Chief Executive
Officer of the Company to the Board of Directors (or its
designated committee) and any adjustment shall be subject to
the approval of the Board or its designated committee. In the
event the Base Compensation is adjusted, such adjusted Base
Compensation (adjusted either upward or downward) shall be
payable to Executive under this Agreement for that fiscal
year; provided that any downward adjustment shall be limited
to ten percent (10%) of Base Compensation unless the Base
Compensation of all Senior Level Executives (all persons with
the title Vice President and above employed by the Company) of
the Company are similarly affected by a reduction in excess of
10%.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in accordance
with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
<PAGE> 3
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 3 OF 12
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Executive
Vice President, South Central Region, of the Company; except, however, Executive
may serve on corporate, civic, or charitable boards or committees and manage his
personal investments and affairs provided such activities do not interfere with
the performance of Executive's duties under this Agreement and provided
Executive keeps the Chief Executive Officer reasonably informed of Executive's
commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and one (1) year following the later of (i) termination of Executive's
employment with the Company, or (ii) termination of any consulting agreement
which the parties may enter into immediately subsequent to termination of
Executive's employment, Executive will not, directly or indirectly, either for
himself or on behalf of any other corporation, partnership, person, group, or
entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or regularly traded in the over-the-counter market.
Executive acknowledges and agrees that the restrictions contained in this
Section 4 are reasonable and necessary for the protection of the business
interests of the Company and that such restrictions are not unduly burdensome in
scope or duration.
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
<PAGE> 4
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 4 OF 12
(a) PROPRIETARY INFORMATION. During his employment pursuant to
this Agreement and at any time thereafter, Executive shall not
disclose, or cause to be disclosed in any manner, to any
corporation, partnership, person, group, or entity (other than
to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy
regarding trade secrets) or otherwise use for any purpose
other than the Company's business, any trade secrets or
confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective
customer lists;
(b) information concerning the Company's
promotional, pricing, or marketing
practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other
confidential and proprietary information.
Upon termination of employment under any circumstances, Executive or
his estate or representatives, shall promptly return to the Company all
property of the Company including any and all electronic devices and
related data storage devices and shall destroy or erase any data which
cannot be returned. This Section 5 shall survive the termination of
this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly
and fully and hereby assigns all of Executive's rights in all
inventions or improvements made or conceived by Executive
(alone or jointly with others) during Executive's employment
and for a period of one year thereafter, which are along the
lines of the business, work or investigations of the Company
or which result from or are suggested by any work Executive
may do for the Company. Executive agrees that any such
invention or improvement, whether or not patentable, shall be
and remain the sole and exclusive property of the Company.
Executive agrees to keep and maintain adequate and current
written records of all such inventions or improvements at all
stages thereof, which records shall be and remain the property
of the Company. Executive agrees to take such actions and
execute such documents and instruments, including but not
limited to patent applications, as the Company requests to
vest or maintain title to such inventions or improvements in
the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this
Agreement the Executive's inventions and improvements,
patented and unpatented, which were made prior to Executive's
employment by the Company, and which, if Executive has any
such inventions, are listed on an attached exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due
<PAGE> 5
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 5 OF 12
to Disability (as hereinafter defined). In the event of Executive's Disability
and a determination by the Board of Directors that sufficient reasonable
accommodations for the Disability cannot be made, the Company may terminate
Executive's employment under this Agreement. If the Company terminates
Executive's employment under this Agreement because of Executive's Disability,
the Company shall pay to Executive the amounts, and provide to Executive the
benefits, specified in Section 7 hereof. The amount of benefits to be paid by
the Company to Executive under this Section 6 or under Section 7 shall be
reduced by any amount paid or to be paid pursuant to Company sponsored
disability plans. For purposes of this Agreement, "Disability" shall mean
Executive's inability, through physical or mental illness or accident or other
cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS OBLIGATIONS
AND TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate
this Agreement if the Company fails to honor its obligations,
subject to the procedures as provided in this Section 7. The
Company may terminate Executive's employment for any reason at
any time upon 30 days notice to Executive, provided that the
Company pay Executive the amounts as determined in this
Section 7. Anything to the contrary contained in this
Agreement notwithstanding, (i) if the Company fails to honor
any of its obligations under this Agreement, and if the
Company does not cure the determined failure within thirty
(30) days after a determination of a failure in accordance
with the procedures set forth below and if as a result
Executive resigns his employment with the Company or (ii) the
Company terminates Executive's employment with the Company
under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive
shall be entitled to receive and the Company shall pay to
Executive the following:
(1) SALARY. Executive's Base Compensation earned through
the date of resignation or termination and a lump sum
payment for any unused vacation shall be paid on or
before the next regularly scheduled pay-date after
the effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one
year (two years if Executive is terminated by the
Company without Good Cause within the period three
<PAGE> 6
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 6 OF 12
months before or twelve months after a Change in
Control as defined in EXHIBIT A) shall be paid in
consecutive periodic payments commencing on the first
pay day in the month following such resignation or
termination in the aggregate amount (net of any
required withholdings and Disability payment offsets
as provided in Section 6) equal to one year (two
years if Executive is terminated by the Company
without Good Cause within the period three months
before or twelve months after a change in Control as
defined in EXHIBIT A) of Executive's Base
Compensation then in effect, provided that in the
event of Executive's death prior to the receipt of
all payments, any remaining payments shall cease to
be made. During the period which severance is
payable, the Company agrees to provide, through a
group life insurance arrangement or individual life
insurance policy or otherwise, life insurance with a
death benefit at least equal to the remaining
severance payments. Upon Executive's death during the
severance period and prior to receipt of all
severance payments, the death benefit shall be
payable to Executive's designated beneficiary or, if
none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination
for which a payment under Section 7(a)(2) is owing,
Executive, or his spouse and eligible dependents in
the event of Executive's death, shall continue to
participate at the expense of the Company for a
period of twelve (12) months following such
resignation or termination in the same or comparable
hospital, medical, accident, disability and life
insurance benefits as Executive participated in
immediately prior to resignation or termination of
his employment unless by law, the terms of any
insurance policy or the terms of the applicable
benefit plans, continued coverage is not permitted.
Executive and eligible dependents may continue
coverage under such benefit plan for subsequent
periods and subject to applicable premium
contributions, to the extent permitted by law or by
such plans. To the extent that during Executive's
employment, any such benefits were part of a program
of benefits for Senior Level Executives of the
Company, generally, then any subsequent modification,
substitution, or termination of any such benefits,
generally, shall also apply to Executive and to the
benefits available to Executive pursuant to this
Section 7(a)(3).
(4) EARLY CESSATION OF BENEFITS. All benefits (other than
those with respect to which continuation is required
by law) under Section 7(a)(3) above shall cease upon
the death of Executive and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect
as provided for in Section 2 hereof shall be paid to
Executive within the time period prescribed by such
plan, (i.e. the Executive will be paid based upon
actual results as if the Executive had been employed
the full twelve months and had received the full
twelve month Base Compensation). In addition, any
payments due Executive under the incentive plans then
in effect as provided for in Section 2 hereof (other
than any annual bonus plans) in
<PAGE> 7
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 7 OF 12
accordance with the terms of such plans shall be paid
to Executive within the time period prescribed by
such plans.
(b) PROCEDURES. For purposes of this Section 7, the following
procedure shall be used to determine whether the Company has
failed to honor any of its obligations under this Agreement;
(i) Executive shall submit a claim to the Company's Board of
Directors specifically identifying the nature of the failure;
(ii) within thirty (30) days of receipt of such claim, the
Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate,
in writing, their determination to Executive; and (iii) if
Executive disagrees with the determination of the Board of
Directors, Executive, within ten (10) days of Executives's
receipt of such determination, may submit the claim to
arbitration in accordance with the provisions of Section 16 of
this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall
represent the sole remedy for any claim Executive may have
arising out of the Company's failure to honor its obligations
and termination without Good Cause. The Company may condition
payment of amounts due under this Section 7 (other than
payments due to Disability) upon the receipt of a release and
covenant not to sue in a form reasonably satisfactory to the
Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate
Executive's employment with the Company under this Agreement
for Good Cause. As used in this Agreement, the term "Good
Cause" shall mean:
(1) personal dishonesty within the course of employment
with the Company which evidences a want of integrity
or is a breach of trust;
(2) persistent failure to abide by reasonable rules and
regulations governing the transaction of business of
the Company as the Company's Board of Directors may
from time to time adopt or approve;
(3) persistent inattention to duties, or the commission
of acts within employment with the Company amounting
to gross negligence or willful misconduct.
(4) misappropriation of funds or property of the Company
or committing any fraud against the Company or
against any other person or entity in the course of
employment with the Company;
(5) misappropriation of any corporate opportunity, or
otherwise obtaining personal profit from any
transaction which is adverse to the interests of the
Company or
<PAGE> 8
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 8 OF 12
to the benefits of which the Company is entitled;
(6) The conviction of a felony; or
(7) any material violation of the terms of this
Agreement.
(b) PROCEDURES. Executive's employment shall in no event be
considered to have been terminated by the Company for Good
Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission reasonably
believed in good faith to have been in or not opposed to the
interest of the Company. Executive shall not be deemed to have
been terminated for Good Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (excluding
Executive if a member of the Board) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for
him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority
to place Executive on "leave of absence status", with or
without pay in the sole discretion of the Board as determined
by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall
terminate Executive's employment under this Agreement for Good
Cause, the Company shall have no further obligation to
Executive under this Agreement except to pay his Base
Compensation and unused vacation earned through the date of
termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations
as imposed by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the Company. In the event that Executive terminates his
employment pursuant to this Section 9, the Company shall have no further
obligation to Executive under this Agreement except to pay his Base Compensation
and unused vacation earned through the date of resignation and to perform such
other obligations as imposed by law..
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
<PAGE> 9
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 9 OF 12
(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - BREACHES AND REMEDIES. Executive acknowledges and agrees
that in the event that Executive violates the undertakings set forth in Section
4 or 5 hereof, other than in an immaterial fashion, in addition to any other
rights or remedies to which it may be entitled under law or this Agreement, the
Company shall, except as prohibited by applicable law, cease making any
severance or other payments hereunder and shall be entitled to enforce the
provisions of Section 4 or 5 by injunction or other equitable relief, without
having to prove irreparable harm or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
<PAGE> 10
EMPLOYMENT AGREEMENT - DAVID H. KROON
-------------------------------------
APRIL 1, 1998
PAGE 10 OF 12
SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a written
document signed by both parties.
SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all prior agreements between the parties, whether written or oral,
regarding the subject matter hereof, including, but not limited to, the
employment agreement entered into between the parties effective April 1, 1997.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE. To the extent the
Company is unable to make any of the payments or perform any of the obligations
hereunder due to restrictions imposed by law, by the Company's Articles of
Incorporation or Code of Regulations, or by loan agreements or other contracts
to which the Company is or becomes party to, the Company agrees to take such
reasonable steps as are necessary to remove such restrictions. In the event the
Company is unable to remove such restrictions, Executive and the Company shall
enter into negotiations to effect reasonable alternatives. The Company's
obligations shall be suspended until such time as such restrictions are removed
or such reasonable alternatives are effected.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By:
-------------------------------
Its: -------------------------------
"COMPANY"
-------------------------------
David H. Kroon
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EMPLOYMENT AGREEMENT - DAVID H. KROON
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APRIL 1, 1998
PAGE 11 OF 12
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND EXECUTIVE
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period constituted a majority
of the Board of Directors of the Company cease serving on the
Board; however, if a person ceases to serve as a director of
the Company for any reason not related to the Company (as, for
example, because of family reasons, or health reasons, or a
lack or time), then such cessation shall not be considered as
a "cessation" under this Exhibit A, and any replacement
director shall, for purposes of this Exhibit A, be treated as
the same person as the director who so ceased serving.
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EMPLOYMENT AGREEMENT - DAVID H. KROON
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APRIL 1, 1998
PAGE 12 OF 12
(b) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling the
holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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APRIL 1, 1998
PAGE 1 OF 13
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made in Medina, Ohio
and is entered into on this ______ day of _________, 1998, and effective as of
April 1, 1998, by and between Corrpro Companies, Inc., an Ohio corporation (the
"Company"), and Neal R. Restivo ("Executive").
WITNESSETH:
In consideration of the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
parties agree as follows:
SECTION 1 - TERM AND DUTIES.
(a) TERM. The Company shall employ Executive, subject to the
provisions of this Agreement, for a three-year term effective
April 1, 1998 and ending on March 31, 2001. This Agreement at
all times may otherwise be terminated in accordance with the
provisions of this Agreement.
(b) SUBSEQUENT TERM. Executive and the Company may, but shall be
under no obligation to, negotiate terms and conditions of any
subsequent term of employment. In the event, however, that
Executive remains in the employ of the Company after the term
of this Agreement without the parties having entered into a
new employment agreement or extending this Agreement, then 1)
the terms of this Agreement shall not be applicable, 2)
Executive shall be an employee-at-will subject to the
benefits, programs, and policies of the Company then in
effect, and 3) either party may terminate the employment
relationship at any time with or without cause.
(c) DUTIES. During his employment pursuant to this Agreement,
Executive shall serve as Executive Vice President, Chief
Financial Officer, Treasurer and Secretary of the Company, and
shall be responsible for the duties attendant to such office.
Executive shall report to the Chief Executive Officer (or such
other officer as determined by the Chief Executive Officer),
and shall be subject to the policies and procedures adopted by
the Company from time to time. Executive agrees to serve as an
officer or director of such of the Company's subsidiaries or
affiliates as the Company may reasonably request.
(d) CHANGES IN STATUS. The Company agrees that it will not,
without Executive's consent, (i) assign to Executive duties
materially inconsistent with or which materially diminish his
current positions, authority, duties, responsibilities and
status with the Company, or (ii) materially change his title
as currently in effect, or (iii) require Executive to perform
duties which would necessitate changing his present residence,
or (iv) remove him from, or fail to re-elect him to, any of
such positions, except in connection with the termination of
his employment as provided for in this Agreement. Except as so
limited, the powers and duties of Executive are to be more
specifically determined and set by the Company from time to
time.
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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APRIL 1, 1998
PAGE 2 OF 13
SECTION 2 - COMPENSATION AND BENEFITS.
(a) BASE SALARY. During his employment pursuant to this Agreement,
Executive shall receive an annual base salary of One Hundred
Seventy-Five Thousand Dollars ($175,000) as compensation for
his services to the Company (the "Base Compensation"), such
compensation to be payable in regular installments in
accordance with Company policy for salaried employees.
(b) SALARY ADJUSTMENTS. Effective as of the first day of each
fiscal year of the Company during Executive's employment
pursuant to this Agreement, the Base Compensation shall be
subject to review and a recommendation by the Chief Executive
Officer of the Company to the Board of Directors (or its
designated committee) and any adjustment shall be subject to
the approval of the Board or its designated committee. In the
event the Base Compensation is adjusted, such adjusted Base
Compensation (adjusted either upward or downward) shall be
payable to Executive under this Agreement for that fiscal
year; provided that any downward adjustment shall be limited
to ten percent (10%) of Base Compensation unless the Base
Compensation of all Senior Level Executives (all persons with
the title Vice President and above employed by the Company) of
the Company are similarly affected by a reduction in excess of
10%.
(c) VACATION. Executive shall be entitled to four weeks of paid
vacation each year of this Agreement to be taken in accordance
with Company policy then in effect.
(d) ANNUAL BONUS PLAN. Executive shall be a participant in the
Company's annual bonus plan subject to the attainment of
performance objectives and other provisions of such plan as in
effect each year of this Agreement.
(e) BENEFIT PLANS. During his employment pursuant to this
Agreement, subject to eligibility and applicable employee
contributions, and except as otherwise expressly provided in
this Agreement, Executive shall be entitled to participate on
substantially the same terms as other Senior Level Executives
in all employee benefit and executive benefit plans, pension
plans, medical benefit plans, group life insurance plans,
hospitalization plans, or other employee welfare plans that
the Company may adopt from time to time during Executive's
employment pursuant to this Agreement, and as such plans may
be modified, amended, terminated, or replaced from time to
time. In addition, Executive shall receive such other
compensation as the Board of Directors of the Company (or a
committee thereof designated by the Board) may from time to
time determine to pay Executive whether in the form of
bonuses, stock options, incentive compensation or otherwise.
(f) FRINGE BENEFITS. During his employment pursuant to this
Agreement, and except as otherwise provided in this Agreement,
Executive shall be entitled to participate on substantially
the same terms and conditions as other Senior Level Executives
in all fringe benefits provided such personnel, such as sick
pay and company car or car allowance.
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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APRIL 1, 1998
PAGE 3 OF 13
(g) EXPENSE REIMBURSEMENTS. The Company shall reimburse, in
accordance with Company policy, Executive's ordinary and
reasonable business expenses, including professional dues and
expenses, incurred in furtherance of Executive's performance
of Executive's duties under this Agreement.
SECTION 3 - TIME COMMITMENT AND PERFORMANCE. Executive shall devote his
best efforts and all of his business time, attention, and skill to the business
and the operations of the Company and shall perform his duties and conduct
himself at all times in a manner consistent with his appointment as Executive
Vice President, Chief Financial Officer, Treasurer and Secretary of the Company;
except, however, Executive may serve on corporate, civic, or charitable boards
or committees and manage his personal investments and affairs provided such
activities do not interfere with the performance of Executive's duties under
this Agreement and provided Executive keeps the Chief Executive Officer
reasonably informed of Executive's commitments.
SECTION 4 - COMPETITIVE ACTIVITY. From the effective date of this
Agreement and one (1) year following the later of (i) termination of Executive's
employment with the Company, or (ii) termination of any consulting agreement
which the parties may enter into immediately subsequent to termination of
Executive's employment, Executive will not, directly or indirectly, either for
himself or on behalf of any other corporation, partnership, person, group, or
entity:
(a) enter into any contract or agreement, or own, directly or
indirectly, any interest in, or engage in or conduct in any
manner or capacity (whether as shareholder, consultant,
advisor, principal, agent, partner, officer, director,
employee, or otherwise), any business competitive with any
line of business then being conducted or planned to be
conducted by the Company;
(b) attempt to divert or take away, in any manner, the business or
patronage of any customer or potential customer of the Company
or otherwise take from or deprive the Company of any business
opportunity;
(c) attempt to hire or employ, whether as an employee, agent,
independent contractor or otherwise, any employee of the
Company; or
(d) materially interfere, in any manner, with the business, trade,
good will, sources of supply, or customers of the Company.
For purposes of this Section 4, there shall be disregarded any interest
of Executive arising solely from the ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or regularly traded in the over-the-counter market.
Executive acknowledges and agrees that the restrictions contained in this
Section 4 are reasonable and necessary for the protection of the business
interests of the Company and that such restrictions are not unduly burdensome in
scope or duration.
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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APRIL 1, 1998
PAGE 4 OF 13
SECTION 5 - PROPRIETARY INFORMATION/INVENTIONS.
(a) PROPRIETARY INFORMATION. During his employment pursuant to
this Agreement and at any time thereafter, Executive shall not
disclose, or cause to be disclosed in any manner, to any
corporation, partnership, person, group, or entity (other than
to Company employees or authorized representatives, or in the
ordinary course of business consistent with Company policy
regarding trade secrets) or otherwise use for any purpose
other than the Company's business, any trade secrets or
confidential or proprietary information of the Company,
including, but not limited to, the following:
(a) the Company's customer or prospective
customer lists;
(b) information concerning the Company's
promotional, pricing, or marketing
practices;
(c) the Company's business records; and
(d) the Company's trade secrets and other
confidential and proprietary information.
Upon termination of employment under any circumstances, Executive or
his estate or representatives, shall promptly return to the Company all
property of the Company including any and all electronic devices and
related data storage devices and shall destroy or erase any data which
cannot be returned. This Section 5 shall survive the termination of
this Agreement.
(b) INVENTIONS. Executive will communicate to the Company promptly
and fully and hereby assigns all of Executive's rights in all
inventions or improvements made or conceived by Executive
(alone or jointly with others) during Executive's employment
and for a period of one year thereafter, which are along the
lines of the business, work or investigations of the Company
or which result from or are suggested by any work Executive
may do for the Company. Executive agrees that any such
invention or improvement, whether or not patentable, shall be
and remain the sole and exclusive property of the Company.
Executive agrees to keep and maintain adequate and current
written records of all such inventions or improvements at all
stages thereof, which records shall be and remain the property
of the Company. Executive agrees to take such actions and
execute such documents and instruments, including but not
limited to patent applications, as the Company requests to
vest or maintain title to such inventions or improvements in
the Company or otherwise to carry out the intent of this
agreement. There shall be excluded from the operation of this
Agreement the Executive's inventions and improvements,
patented and unpatented, which were made prior to Executive's
employment by the Company, and which, if Executive has any
such inventions, are listed on an attached exhibit.
SECTION 6 - COMPENSATION DURING DISABILITY. Executive shall receive his
Base
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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APRIL 1, 1998
PAGE 5 OF 13
Compensation (net of applicable withholdings) during the first ninety (90)
business days of absence due to Disability (as hereinafter defined). In the
event of Executive's Disability and a determination by the Board of Directors
that sufficient reasonable accommodations for the Disability cannot be made, the
Company may terminate Executive's employment under this Agreement. If the
Company terminates Executive's employment under this Agreement because of
Executive's Disability, the Company shall pay to Executive the amounts, and
provide to Executive the benefits, specified in Section 7 hereof. The amount of
benefits to be paid by the Company to Executive under this Section 6 or under
Section 7 shall be reduced by any amount paid or to be paid pursuant to Company
sponsored disability plans. For purposes of this Agreement, "Disability" shall
mean Executive's inability, through physical or mental illness or accident or
other cause, to perform his major and substantial duties on a full time basis as
determined by a physician hired by the Board of Directors for this determination
(the "Company Physician"). If the physician regularly attending Executive (the
"Executive Physician") disagrees with the opinion of the Company Physician, the
Company Physician and the Executive Physician shall choose a third consulting
physician (the expense of which shall be borne by the Company), and the written
opinion of the third consulting physician shall be conclusive as to such
disability. In conjunction with this Section 6, Executive consents to such
examination, to furnish any medical information requested by any examining
physician, and to waive any applicable physician-patient privilege that may
arise because of such examination. All physicians, except the Executive
Physician, selected hereunder must be board-certified in the specialty most
closely related to the nature of the disability alleged to exist.
SECTION 7 - RESIGNATION DUE TO COMPANY FAILING TO HONOR ITS OBLIGATIONS
AND TERMINATION WITHOUT GOOD CAUSE OR DUE TO DISABILITY.
(a) GENERALLY. Executive may resign his employment and terminate
this Agreement if the Company fails to honor its obligations,
subject to the procedures as provided in this Section 7. The
Company may terminate Executive's employment for any reason at
any time upon 30 days notice to Executive, provided that the
Company pay Executive the amounts as determined in this
Section 7. Anything to the contrary contained in this
Agreement notwithstanding, (i) if the Company fails to honor
any of its obligations under this Agreement, and if the
Company does not cure the determined failure within thirty
(30) days after a determination of a failure in accordance
with the procedures set forth below and if as a result
Executive resigns his employment with the Company or (ii) the
Company terminates Executive's employment with the Company
under this Agreement without Good Cause (as defined in Section
8), or (iii) if Executive's employment terminates by reason of
Disability as provided for in Section 6 hereof, Executive
shall be entitled to receive and the Company shall pay to
Executive the following:
(1) SALARY. Executive's Base Compensation earned through
the date of resignation or termination and a lump sum
payment for any unused vacation shall be paid on or
before the next regularly scheduled pay-date after
the effective date of the resignation or termination.
(2) SEVERANCE. Severance payments for a period of one
year (two years if Executive
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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PAGE 6 OF 13
is terminated by the Company without Good Cause
within the period three months before or twelve
months after a Change in Control as defined in
EXHIBIT A) shall be paid in consecutive periodic
payments commencing on the first pay day in the month
following such resignation or termination in the
aggregate amount (net of any required withholdings
and Disability payment offsets as provided in Section
6) equal to one year (two years if Executive is
terminated by the Company without Good Cause within
the period three months before or twelve months after
a change in Control as defined in EXHIBIT A) of
Executive's Base Compensation then in effect,
provided that in the event of Executive's death prior
to the receipt of all payments, any remaining
payments shall cease to be made. During the period
which severance is payable, the Company agrees to
provide, through a group life insurance arrangement
or individual life insurance policy or otherwise,
life insurance with a death benefit at least equal to
the remaining severance payments. Upon Executive's
death during the severance period and prior to
receipt of all severance payments, the death benefit
shall be payable to Executive's designated
beneficiary or, if none, to Executive's estate.
(3) BENEFITS. Following any resignation or termination
for which a payment under Section 7(a)(2) is owing,
Executive, or his spouse and eligible dependents in
the event of Executive's death, shall continue to
participate at the expense of the Company for a
period of twelve (12) months following such
resignation or termination in the same or comparable
hospital, medical, accident, disability and life
insurance benefits as Executive participated in
immediately prior to resignation or termination of
his employment unless by law, the terms of any
insurance policy or the terms of the applicable
benefit plans, continued coverage is not permitted.
Executive and eligible dependents may continue
coverage under such benefit plan for subsequent
periods and subject to applicable premium
contributions, to the extent permitted by law or by
such plans. To the extent that during Executive's
employment, any such benefits were part of a program
of benefits for Senior Level Executives of the
Company, generally, then any subsequent modification,
substitution, or termination of any such benefits,
generally, shall also apply to Executive and to the
benefits available to Executive pursuant to this
Section 7(a)(3).
(4) EARLY CESSATION OF BENEFITS. All benefits (other than
those with respect to which continuation is required
by law) under Section 7(a)(3) above shall cease upon
the death of Executive and his spouse.
(5) ANNUAL BONUS PLANS. An amount equal to a full year's
participation in the annual bonus plan then in effect
as provided for in Section 2 hereof shall be paid to
Executive within the time period prescribed by such
plan, (i.e. the Executive will be paid based upon
actual results as if the Executive had been employed
the full twelve months and had received the full
twelve month Base Compensation). In addition, any
payments due Executive under the incentive plans then
in effect
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EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
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PAGE 7 OF 13
as provided for in Section 2 hereof (other than any
annual bonus plans) in accordance with the terms of
such plans shall be paid to Executive within the time
period prescribed by such plans.
(b) PROCEDURES. For purposes of this Section 7, the following
procedure shall be used to determine whether the Company has
failed to honor any of its obligations under this Agreement;
(i) Executive shall submit a claim to the Company's Board of
Directors specifically identifying the nature of the failure;
(ii) within thirty (30) days of receipt of such claim, the
Board of Directors shall determine whether they agree with
Executive that a failure has occurred and shall communicate,
in writing, their determination to Executive; and (iii) if
Executive disagrees with the determination of the Board of
Directors, Executive, within ten (10) days of Executive's
receipt of such determination, may submit the claim to
arbitration in accordance with the provisions of Section 16 of
this Agreement, and such determination shall be final and
binding upon the Company and Executive.
(c) SOLE REMEDY. The payments provided in this Section 7 shall
represent the sole remedy for any claim Executive may have
arising out of the Company's failure to honor its obligations
and termination without Good Cause. The Company may condition
payment of amounts due under this Section 7 (other than
payments due to Disability) upon the receipt of a release and
covenant not to sue in a form reasonably satisfactory to the
Company.
SECTION 8 - TERMINATION FOR GOOD CAUSE.
(a) GENERALLY. The Company shall have the right to terminate
Executive's employment with the Company under this Agreement
for Good Cause. As used in this Agreement, the term "Good
Cause" shall mean:
(1) personal dishonesty within the course of employment
with the Company which evidences a want of integrity
or is a breach of trust;
(2) persistent failure to abide by reasonable rules and
regulations governing the transaction of business of
the Company as the Company's Board of Directors may
from time to time adopt or approve;
(3) persistent inattention to duties, or the commission
of acts within employment with the Company amounting
to gross negligence or willful misconduct.
(4) misappropriation of funds or property of the Company
or committing any fraud against the Company or
against any other person or entity in the course of
employment with the Company;
(5) misappropriation of any corporate opportunity, or
otherwise obtaining personal
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profit from any transaction which is adverse to the
interests of the Company or to the benefits of which
the Company is entitled;
(6) The conviction of a felony; or
(7) any material violation of the terms of this
Agreement.
(b) PROCEDURES. Executive's employment shall in no event be
considered to have been terminated by the Company for Good
Cause if such termination took place as the result of (i) bad
judgment or negligence, or (ii) any act or omission reasonably
believed in good faith to have been in or not opposed to the
interest of the Company. Executive shall not be deemed to have
been terminated for Good Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board of Directors (excluding
Executive if a member of the Board) at a meeting of the Board
(after reasonable notice to Executive and an opportunity for
him, together with his counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board,
Executive was guilty of any of the conduct set forth above in
clauses (a)-(c),(e) and (g) above. However, pending a final
determination of the Board, the Board shall have the authority
to place Executive on "leave of absence status", with or
without pay in the sole discretion of the Board as determined
by a majority of the Board.
(c) FURTHER OBLIGATIONS. In the event that the Company shall
terminate Executive's employment under this Agreement for Good
Cause, the Company shall have no further obligation to
Executive under this Agreement except to pay his Base
Compensation and unused vacation earned through the date of
termination, on or before the next regularly scheduled pay
date after termination and to perform such other obligations
as imposed by law.
SECTION 9 - VOLUNTARY TERMINATION OTHER THAN SECTION 7. Executive may
voluntarily terminate his employment with the Company under this Agreement,
other than as provided in Section 7 hereof, upon not less than ninety (90) days
prior written notice to the Company. In the event that Executive terminates his
employment pursuant to this Section 9, the Company shall have no further
obligation to Executive under this Agreement except to pay his Base Compensation
and unused vacation earned through the date of resignation and to perform such
other obligations as imposed by law..
SECTION 10 - TERMINATION UPON DEATH. Executive's employment under this
Agreement shall terminate upon the death of Executive. Upon such termination,
Executive's designated beneficiary, or his personal representative shall receive
the payments/benefits described below from the Company:
(a) SALARY. Executive's unpaid Base Compensation earned through
the date of termination and a lump sum payment for any unused
vacation shall be paid on or before the next regularly
scheduled pay date after termination.
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(b) BONUS. An amount equal to a full year's participation in the
annual bonus plan then in effect as provided for in Section
2(d) hereof shall be paid within the time period prescribed by
such plan (i.e. the Executive will be paid based upon actual
results as if the Executive had been employed the full twelve
months and had received the full twelve month Base
Compensation).
(c) BENEFITS. Benefits will continue for Executive's spouse and
eligible dependents in accordance with Company policy and as
required by law.
SECTION 11 - POST TERMINATION CONSULTING AND COOPERATION. For a period
of six (6) months following the termination of Executive's employment under this
Agreement, regardless of whether such termination is by Executive or by the
Company or whether it is with or without Good Cause, Executive, at the sole
discretion of the Company, shall provide the Company and its designated agents,
advisors, and executives with such consultation as the Company may reasonably
require up to a maximum of twenty (20) hours per week. However, Executive shall
have no consulting obligation under this Section 11 if he resigns under
circumstances, which entitle him to payments under Section 7 hereof. Company
shall pay Executive an hourly rate of one hundred fifty dollars ($150.00) per
hour and reimburse Executive for all reasonable expenses and out-of-pocket costs
incurred in connection with fulfilling his obligations under this Section 11.
The Company shall endeavor to schedule such consulting so that Executive's
obligations under this Section 11 to assist Company shall not unreasonably
interfere with Executive's business prospects or responsibilities to a new
employer.
SECTION 12 - BREACHES AND REMEDIES. Executive acknowledges and agrees
that in the event that Executive violates the undertakings set forth in Section
4 or 5 hereof, other than in an immaterial fashion, in addition to any other
rights or remedies to which it may be entitled under law or this Agreement, the
Company shall, except as prohibited by applicable law, cease making any
severance or other payments hereunder and shall be entitled to enforce the
provisions of Section 4 or 5 by injunction or other equitable relief, without
having to prove irreparable harm or inadequacy of money damages.
SECTION 13 - SEVERABILITY. The provisions contained in this Agreement
are severable and in the event any provision shall be held to be invalid,
unenforceable or overbroad, in whole or in part, by a court of competent
jurisdiction, the remainder of such provision and of this Agreement shall not be
affected thereby and shall be given full force and effect.
SECTION 14 - NOTICES. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient if made in
writing delivered personally or if sent by registered or certified mail, return
receipt requested.
SECTION 15 - SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company, its successors and assigns, and to
the benefit of Executive, his heirs and legal representatives, except that
Executive's duties to perform future services are expressly agreed to be
personal and not to be assignable or transferable.
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SECTION 16 - APPLICABLE LAW, ARBITRATION AND JURISDICTION. This
Agreement shall be governed by and construed under the laws of the State of
Ohio. The parties agree that any dispute arising out of this employment
relationship except for disputes arising under Sections 4 and 5 of this
Agreement shall be settled by arbitration conducted in accordance with the rules
of conciliation and arbitration of the American Arbitration Association, such
arbitration to be conducted in Cleveland, Ohio, or at such other location as the
parties may agree. Costs of such arbitration, including Executive's attorneys
fees (to the extent such fees are reasonable), shall be borne by the Company.
With respect to disputes arising under Sections 4 and 5 of this Agreement,
Executive and the Company consent and submit themselves to the jurisdiction of
the courts of the State of Ohio.
SECTION 17 - AMENDMENT. This Agreement may be amended only by a
written document signed by both parties.
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SECTION 18 - NO WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
SECTION 19 - HEADINGS. The headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
SECTION 20 - PRIOR AGREEMENTS. This Agreement supersedes in all
respects all prior agreements between the parties, whether written or oral,
regarding the subject matter hereof, including, but not limited to, the
employment agreement entered into between the parties effective April 1, 1997.
SECTION 21 - RESTRICTIONS OF PAYMENTS OR PERFORMANCE. To the extent the
Company is unable to make any of the payments or perform any of the obligations
hereunder due to restrictions imposed by law, by the Company's Articles of
Incorporation or Code of Regulations, or by loan agreements or other contracts
to which the Company is or becomes party to, the Company agrees to take such
reasonable steps as are necessary to remove such restrictions. In the event the
Company is unable to remove such restrictions, Executive and the Company shall
enter into negotiations to effect reasonable alternatives. The Company's
obligations shall be suspended until such time as such restrictions are removed
or such reasonable alternatives are effected.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
CORRPRO COMPANIES, INC.
By:
--------------------------------
Its:
--------------------------------
"COMPANY"
--------------------------------
Neal R. Restivo
<PAGE> 12
EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
--------------------------------------
APRIL 1, 1998
PAGE 12 OF 13
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
CORRPRO COMPANIES, INC.
AND EXECUTIVE
For purposes of Section 7(a) of the Agreement, "Change in Control" means and
shall have occurred at any time during Executive's employment pursuant to this
Agreement, and if any of the following shall occur:
(i) The Company is merged, consolidated, or reorganized into or
with another corporation or other Legal Person, and
immediately after such merger, consolidation, or
reorganization Voting Securities entitled to exercise a
majority of the Voting Power of the surviving or resulting
corporation or other Legal Person are not (A) Voting
Securities of the Company outstanding immediately prior to
such merger, consolidation or reorganization, or (B)
securities received in exchange for such Voting Securities of
the Company.
(ii) Any person becomes the Beneficial Owner of Voting Securities
representing twenty percent or more of the combined Voting
Power of the Company. The change in control shall be deemed to
have occurred no later than the date on which a report is
filed on Schedule 13D or Schedule 14D-1 as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any Person has become
the Beneficial Owner of Voting Securities representing twenty
percent or more of the combined voting power of the Company.
(iii) A "change in control" or possible "change in control" which
would be required to be disclosed in response to an item in
Form 8-K or Schedule 14A in connection with the filing of a
report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act, has or may have
occurred or will or may occur in the future pursuant to any
then existing contract or transaction. The change in control
will be deemed to have occurred no later than the date on
which the Company files such report or proxy statement with
the Securities and exchange Commission disclosing the "change
in control" or possible "change in control."
(iv) During any consecutive six (6) month period commencing before
or after the date of this Agreement, individuals who at the
beginning of such six (6) month period constituted a majority
of the Board of Directors of the Company cease serving on the
Board; however, if a person ceases to serve as a director of
the Company for any reason not related to the Company (as, for
example, because of family reasons, or health reasons, or a
lack or time), then such cessation shall not be considered as
a "cessation" under this Exhibit A, and any replacement
director shall, for purposes of this Exhibit A, be treated as
the same person as the director who so ceased serving.
<PAGE> 13
EMPLOYMENT AGREEMENT - NEAL R. RESTIVO
--------------------------------------
APRIL 1, 1998
PAGE 13 OF 13
(b) Any reference in this Exhibit A to a section of the Exchange Act, a
rule or regulation promulgated under the Exchange Act, or any schedule,
form or report promulgated under the Exchange Act or any subdivision or
item included in any of the foregoing, shall be deemed to refer to any
successor, replacement or amended section, rule, regulation, schedule,
form, report, subdivision, or item in effect at the time a
determination is made. The following words and phrases when used in
this Exhibit A, shall have the meanings indicated:
(i) PERSON shall have the meaning used in Section 12 (d)(3) or
Section 14(d)(2) of the Exchange Act, and shall also include
all affiliates and associates of such Person as defined in
Rule 12b-2 promulgated under the Exchange Act.
(ii) LEGAL PERSON means any Person other than a natural person,
including any entity which can acquire, hold and dispose of
property in its own name, a fictitious name, or in the name of
its owners or owners.
(iii) BENEFICIAL OWNER shall have the meaning defined under Rule
13d-3 promulgated under the Exchange Act, but without the
sixty (60) days limitation specified in paragraph (3)(1)(I) of
said Rule.
(iv) VOTING SECURITIES means any stock or securities entitling the
holder to exercise Voting Power.
(v) VOTING POWER means the right to vote in the election of
directors or persons serving in a similar capacity with a
corporation or other Legal Person, or if there is no board of
directors or similar body, the right to vote to retain or
dismiss the management or the Legal Person.
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Subsidary State/Country of Incorporation
<S> <C>
Commonwealth Seager Holdings, Ltd. Canada
Corrpro Canada, Inc. Canada
418012 Alberta Ltd. Canada
Alcoke Distributors Ltd. Canada
Commonwealth Pipeline Services (U.S.A.) Inc. Delaware
D. Foley Pipeline Services Ltd. Canada
Corrosion Interventions, Ltd. Canada
Corrtherm, Inc. Ohio
CCFC, Inc. Nevada
Cathodic Protection Services Company Delaware
CCI Trading, Inc. Barbados
Good-All Electric, Inc. Ohio
Harco Arabia Cathodic Protection Co. Ltd. Saudi Arabia
Harco Arabia Ground Electrode Manufacturing Co. Ltd. Saudi Arabia
Corrpro Companies Middle East LLC United Arab Emirates
Harco Pacific Technologies Pte, Ltd. Singapore
Harcotec de Mexico, S.A. de C.V. Mexico
Ocean City Research Corporation New Jersey
Rohrback Cosasco Systems, Inc. California
Rohrback Cosasco Systems Ltd. United Kingdom
Wilson Walton Group Ltd.
1. Wilson Walton CP Ltd. United Kingdom
2. Wilson Walton Overseas Holding Ltd. United Kingdom
1. Corrpro Companies Asia Pacific Ltd. Singapore
2. Corrpro Companies Far East Ltd. Hong Kong
3. Wilson Walton (Portugal) Anti Corrosivos Lda. Portugal
3. Corrpro Companies, Europe Ltd. United Kingdom
4. Wilson Walton (Gulf) Ltd. Jersey
5. Wilson Walton Belgium, sa Belgium
6. Wilson Walton Investments Ltd. United Kingdom
1. Wilson Walton Middle East Ltd. Jersey
7. Wilson Walton Malaysia Sdn Bnd. Malaysia
8. Wilson Walton Indonesia Indonesia
</TABLE>
<PAGE> 1
DRAFT
[LETTERHEAD KPMG Peat Marwick LLP]
1500 National City Center Telephone 216 696 9100
1900 East Ninth Street Telefax 216 696 7792
Cleveland, OH 44114-3495
The Board of Directors
Corrpro Companies, Inc.:
We consent to incorporation by reference in the registration statement (No.
333-38767) on Form S-8 of Corrpro Companies, Inc. of our report dated May 8,
1998, except for Note 13, as to which the date is May 19, 1998, relating to the
consolidated balance sheets of Corrpro Companies, Inc. and subsidiaries as of
March 31, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity, and cash flows for the years then ended, which report
appears in the March 31, 1998 Annual Report on Form 10-K of Corrpro Companies,
Inc.
KPMG Peat Marwick LLP
Cleveland, Ohio
June 3, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000907072
<NAME> Corrpro Companies, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 8,687
<SECURITIES> 0
<RECEIVABLES> 40,884
<ALLOWANCES> (2,151)
<INVENTORY> 24,458
<CURRENT-ASSETS> 89,855
<PP&E> 20,788
<DEPRECIATION> (8,278)
<TOTAL-ASSETS> 136,275
<CURRENT-LIABILITIES> 28,115
<BONDS> 47,695
0
0
<COMMON> 2,245
<OTHER-SE> 55,716
<TOTAL-LIABILITY-AND-EQUITY> 136,275
<SALES> 172,653
<TOTAL-REVENUES> 172,653
<CGS> 121,337
<TOTAL-COSTS> 37,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,434
<INCOME-PRETAX> 11,486
<INCOME-TAX> 4,595
<INCOME-CONTINUING> 6,891
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,891
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.81
</TABLE>
