SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
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: 0-23474
Triple S Plastics, Inc.
(Exact name of registrant as specified in its charter)
Michigan 38-1895876
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
14320 Portage Road, Vicksburg, Michigan 49097-0905
(Address of principal executive offices) (Zip Code)
(616) 649-0545
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
The registrant had 3,753,476 shares of common stock outstanding as of
September 30, 1999.
<PAGE>
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
September 30, 1999 and March 31, 1999
Condensed Consolidated Statements of Income - Three 4
Months and Six Months Ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - 5
Six Months Ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk (not applicable)
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
<TABLE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
<S> <C> <C>
September 30 March 31
1999 1999
------------ -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,732 $ 5,594
Accounts receivable, less allowance
of $300 and $709 for possible losses 11,235 9,487
Inventories (Note 4) 5,644 4,386
Deferred income taxes 384 384
Other 1,035 1,223
------------ -------------
Total Current Assets 20,030 21,074
Property, Plant and Equipment 39,001 42,003
Less accumulated depreciation
and amortization 16,391 16,293
------------ -------------
Net Property, Plant and Equipment 22,610 25,710
Other:
Assets held for sale (Note 2) 3,457 --
Goodwill, net of accumulated amort-
ization of $720 and $592 3,769 3,897
Miscellaneous 86 128
------------ -------------
Total Other Assets 7,312 4,025
------------ -------------
$ 49,952 $ 50,809
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,059 $ 6,649
Accrued compensation 1,104 921
Deferred mold revenue 1,299 750
Other accrued expenses (Note 6) 1,654 1,133
Current maturities of long-term debt 1,351 1,334
------------ -------------
Total Current Liabilities 10,467 10,787
Long-Term Debt, less current maturities 5,953 6,862
Deferred Income Taxes 2,207 2,207
------------ -------------
Total Liabilities 18,627 19,856
Shareholders' Equity:
Preferred stock, no par value,
1,000,000 shares authorized, none
issued -- --
Common stock, no par value, 10,200,000
shares authorized, 3,753,476 and
3,747,268 shares issued and outstanding 14,488 14,468
Retained earnings 16,837 16,485
------------ -------------
Total Shareholders' Equity 31,325 30,953
------------ -------------
$ 49,952 $ 50,809
============ =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net Sales $ 23,709 $ 16,398 $ 42,955 $ 32,039
Cost of Sales 19,165 13,470 34,871 26,183
---------- ---------- ---------- ----------
Gross Profit 4,544 2,928 8,084 5,856
Selling and marketing expenses 1,427 858 2,409 1,571
General and administrative expenses 1,494 1,855 3,651 3,443
Plant closing costs (Note 6) -- -- 1,312 --
---------- ---------- ---------- ----------
Total Operating Expenses 2,921 2,713 7,372 5,014
Operating Income 1,623 215 712 842
Interest Expense (Income):
Interest expense 131 173 266 322
Interest income (41) (77) (111) (154)
---------- ---------- ---------- ----------
Net Interest Expense 90 96 155 168
---------- ---------- ---------- ----------
Income Before Income Taxes 1,533 119 557 674
Income Tax Expense 560 42 205 237
---------- ---------- ---------- ----------
Net Income $ 973 $ 77 $ 352 $ 437
========== ========== ========== ==========
Basic Earnings per Share of Common Stock $ .26 $ .02 $ .09 $ .12
========== ========== ========== ==========
Diluted Earnings per Share of Common Stock $ .24 $ .02 $ .09 $ .12
========== ========== ========== ==========
Shares Used in Computing Earnings
per Share:
Basic 3,753 3,744 3,752 3,744
Diluted 4,057 3,745 3,952 3,749
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
<S> <C> <C>
Six Months Ended
September 30
----------------------------
1999 1998
------------ ------------
OPERATING ACTIVITIES:
Net income $ 352 $ 437
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,975 1,862
Changes in assets and liabilities:
Accounts receivable (1,748) 3,432
Inventories (1,258) (577)
Accounts payable and accrued expenses 424 (760)
------------ ------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (255) 4,394
INVESTING ACTIVITIES:
Capital expenditures (2,735) (2,651)
Decrease in restricted cash -- 1,084
Business acquisition (Note 5) -- (909)
------------ ------------
CASH USED IN INVESTING ACTIVITIES (2,735) (2,476)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 20 12
Principal payments on long-term debt (892) (874)
------------ ------------
CASH USED IN FINANCING ACTIVITIES (872) (862)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (3,862) $ 1,056
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TRIPLE S PLASTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, Dollars in thousands)
1. Presentation of Interim Information
In the opinion of the management of Triple S Plastics, Inc. (the Company),
the accompanying unaudited condensed consolidated financial statements include
all normal adjustments considered necessary to present fairly the financial
position of the Company as of September 30, 1999 and the results of its
operations for the periods shown. Interim results are not necessarily indicative
of results for a full year.
The condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
2. Assets Held for Sale
As discussed in Note 6 to the Condensed Consolidated Financial Statements,
the Company's Tucson, Arizona facility is closed and along with the former
Victor Plastics facility, is being held for sale. These facilities were written
down to their estimated fair market value in the first quarter ended
June 30, 1999, and depreciation of the facilities was terminated at the time of
closure.
3. Business
During the six months ended September 30, 1999 and 1998, a Telecommuni-
cations customer accounted for 56% and 28% of net sales, respectively.
4. Inventories
Inventories are summarized as follows:
September 30 March 31
1999 1999
-------------- --------------
Raw materials and packaging $ 3,411 $ 2,582
Finished goods and work-in-process 2,233 1,804
-------------- --------------
Total Inventories $ 5,644 $ 4,386
============== ==============
5. Acquisition of Dynacept Company, Inc.
On June 1, 1998, Triple S Plastics, Inc. purchased, for cash and long-term
debt, the assets of Dynacept Company, Inc. (Dynacept). Dynacept is a rapid
prototyping and model making organization that produces concept models,
engineering prototypes, and pre-production samples. The transaction has been
accounted for using the purchase method.
6. Plant Closing Costs
On June 18, 1999, the Company announced that it was closing its Tucson,
Arizona facility and transferring the machinery and equipment to its new
facility in Fort Worth, Texas and other locations in Michigan. The charge
recorded in the first quarter ended June 30, 1999, reflects the cost of closing
the Tucson facility and disposition of the former Victor Plastics facility. The
estimated loss on closing included the writedown of property, plant and
equipment to market value based on an independent appraisal, as well as
closedown expenses. The pre-tax effect of this charge is shown in the
Condensed Consolidated Statements of Income as plant closing costs. All
expenses related to these actions are expected to be incurred by the end of
the current fiscal year.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands)
Certain matters discussed in this Form 10-Q constitute forward-looking
statements which are necessarily subject to certain risks and uncertainties, and
they may change in a material way based upon various market, industry and other
important factors. From time to time, the Company identifies factors in its
Form 10-K filed with the Securities and Exchange commission and its other
interim reports that may influence future results, and the Company recommends
that investors consult those reports. The Company cautions investors that actual
results may differ materially from the forward-looking statements contained in
these reports.
Overview
The Company designs and builds molds and manufactures complex, highly
engineered thermoplastic molded components based on customers' specifications
and orders. Its customers are primarily in the telecommunications,
medical/pharmaceutical, information technologies, consumer products, and
automotive markets. The Company considers both the manufacture of molded
products and mold sales to be an integral part of its business. The Company's
fiscal year end is March 31.
Results of Operations
On June 18, 1999, the Company announced that it was closing its Tucson,
Arizona facility and transferring the machinery and equipment to its new
facility in Fort Worth, Texas and other locations in Michigan. The impact of
these actions is discussed in Note 6 to the Condensed Consolidated Financial
Statements.
The following table sets forth, for the three and six month periods ended
September 30, 1999 and 1998, certain items from the Company's Condensed
Consolidated Statements of Income expressed as a percentage of net sales.
Three Months Ended Six Months Ended
September 30 September 30
-------------------- ------------------
1999 1998 1999 1998
-------- -------- -------- --------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 80.8 82.1 81.2 81.7
-------- -------- -------- --------
Gross Profit 19.2 17.9 18.8 18.3
Selling & Marketing Expenses 6.0 5.3 5.6 4.9
General & Administrative Exp. 6.3 11.3 8.5 10.8
Unusual Item -- -- 3.0 --
-------- -------- -------- --------
Operating Expenses 12.3 16.6 17.1 15.7
Operating Income 6.9 1.3 1.7 2.6
Interest Expense, net 0.4 0.6 0.4 0.5
-------- -------- -------- --------
Income Before Income Taxes 6.5 0.7 1.3 2.1
Income Tax Expense 2.4 0.2 0.5 0.7
-------- -------- -------- --------
Net Income 4.1% 0.5% 0.8% 1.4%
======== ======== ======== ========
Net Sales
Net sales for the second quarter ended September 30, 1999 increased 44.6%
compared to the second quarter of the prior year. This increase in net sales
reflected strength in the Company's shipments to the Telecommunications market.
Sales to customers in the Automotive market showed a moderate increase. Sales
to customers in the Medical and Information Technologies markets showed a
combined decrease and sales to the Consumer Products market were down due to
the exit from the Tucson facility customer base.
Net sales for the first six months of fiscal 2000 were up 34.1% compared to
the same period last year. For the first half of the year, sales to customers
in the Telecommunications market comprised 58% of net sales, with sales to the
Consumer Products market at 14%, and the balance (28%) to the Medical,
Automotive and Information Technologies markets.
The overall increase in sales is principally related to volume as no
significant price increases occurred during the first six months of fiscal
2000. The Company's ten largest customers accounted for approximately 77% of
the Company's net sales for the first six months of fiscal 2000 and 64% in
fiscal 1999. Net sales to the Telecommunications market for the three and six
months ended September 30, 1999 were primarily to one customer, which is
expected to continue into the foreseeable future.
Cost of Sales
Cost of sales as a percentage of sales decreased to 80.8% in the second
quarter of fiscal 2000 compared to 82.1% for the second quarter last year. The
lower cost of sales percentage in fiscal 2000 is primarily attributed to molded
part manufacturing cost reductions, primarily in material and labor cost, as a
result of manufacturing efficiency improvement initiatives at the Company. For
the first six months of fiscal 2000, the cost of sales percentage decreased to
81.2% compared to 81.7% for the comparable period last year.
Selling and Marketing Expenses
Selling and marketing expenses increased $569 compared to the second
quarter of the prior year and represented 6.0% of net sales compared to 5.3%
in the prior year second quarter. For the first six months of fiscal 2000,
these expenses increased 53.3% and represented 5.6% and 4.9% of net sales for
fiscal 2000 and 1999, respectively. The increase principally relates to
increased commissions as a result of a one-time expense incurred to settle a
commission contract in addition to the shift in sales from non-commissioned
accounts to commissioned accounts.
General and Administrative Expenses
General and administrative expenses decreased 19.5% in the second quarter
of fiscal 2000 compared to the second quarter of the prior year and represented
6.3% and 11.3% of sales for fiscal 2000 and 1999, respectively. This decrease
was principally due to decreased legal fees. For the first six months of fiscal
2000, these expenses increased $208 and represented 8.5% and 10.8% of net sales
for fiscal 2000 and 1999, respectively. This increase is primarily due to
increased compensation and professional fees.
Income Taxes
The Company's effective tax rate of 36.8% for the first six months of
fiscal 2000 increased when compared to the prior year rate of 35.2%. This
increase is primarily due to the addition of the State of New York in the
effective rate.
Liquidity and Capital Resources
The Company's primary cash requirements are for operating expenses and
capital expenditures. Capital expenditures related to the facility expansion
in Texas are estimated to be $3.5 million. Historically, the Company's main
sources of cash have been from operations, bank borrowings and industrial
revenue bonds. The Company has adequate liquidity and expects this to continue
into the future.
Cash used from operations of $255 for the first six months of fiscal year
2000 consisted primarily of an increase in accounts receivable and inventories.
As a result of the higher sales level, accounts receivable increased by
$1.7 million at September 30, 1999 compared to the prior fiscal year end, and
represented 39 days sales outstanding which is comparable to the days at the
end of the prior fiscal year. Inventories increased by $1.3 million at
September 30, 1999 compared to the prior fiscal year end, and represented
29 days in inventory compared to 28 days at the end of the prior fiscal year.
The increase is primarily due to increased inventory requirements related to the
higher sales in our Texas facility in addition to having more tooling projects
in process at September 30, 1999 compared to the prior fiscal year end.
The Company has a $5.0 million unsecured line of credit agreement with a
bank which has not been drawn on this fiscal year. Management believes that
this source of cash, along with internally generated cash, will be adequate
to fund future operating and capital requirements.
Other Matters
In the second quarter of fiscal 2000, the Company's program to address the
Year 2000 date recognition problem continued to make progress toward its goal to
ensure the millennium event does not have a material adverse effect on its
business operations. The Company has substantially completed and continues to
test the process of identifying, evaluating and implementing changes to computer
programs and equipment necessary to address the Year 2000 issue. This issue
involves the ability of computer systems and equipment that have time-sensitive
programs to properly recognize the Year 2000. The inability to do so could
result in major failures or miscalculations. These plans provide for systems to
be Year 2000 compliant by the end of 1999. Costs to date consisting of internal
costs, which are not incremental in nature, have not been tracked by the
Company. Future costs to be incurred to complete Y2K compliance and testing
procedures, primarily internal costs related to direct Company personnel, are
not expected to have a material impact on the Company's results of operations
or financial position.
During fiscal year 1999, the Company developed a plan to determine the
Year 2000 compliance status of its key suppliers and customers. The plan
involves soliciting information from suppliers and customers through use of
surveys, and follow-up discussions and testing where needed. The Company has
sent out surveys to all of its key suppliers and certain key customers and
received back a majority of these surveys. While the Company cannot guarantee
Year 2000 compliance by its key suppliers and customers, and in many cases will
be relying on statements from outside vendors without independent verification,
preliminary surveys indicate that key suppliers and customers are aware of this
issue and are working on a solution to achieve compliance before the Year 2000.
The Company continues to review and refine its contingency plan to deal with
those key suppliers and customers who may not be Year 2000 compliant prior to
the Year 2000. If certain key suppliers or customers were not year 2000
compliant and the Company did not have a contingency plan in place related to
those key suppliers or customers because the Company was unaware of the
noncompliance, the Company's results of operations and financial condition
could be significantly and negatively impacted. However, at this time the
Company is not aware, based on information received from these customers and
suppliers, of any key suppliers or customers who will not be Year 2000
compliant by the Year 2000.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10 - Employment Agreement - Albert Christian Schauer
(b) Exhibit 27 - Financial Data Schedule
(c) A report was filed on Form 8-K during this filing period.
- Form 8-K, filed pursuant to Item 5, dated July 9, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIPLE S PLASTICS, INC.
(Registrant)
Date: November 5, 1999 _/s/ MARLAN R. SMITH__________________
Marlan R. Smith
Chief Financial Officer
Date: November 5, 1999 _/s/ CATHERINE A. TAYLOR______________
Catherine A. Taylor
Corporate Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000918642
<NAME> TRIPLE S PLASTICS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1732000
<SECURITIES> 0
<RECEIVABLES> 11535000
<ALLOWANCES> 300000
<INVENTORY> 5644000
<CURRENT-ASSETS> 20030000
<PP&E> 39001000
<DEPRECIATION> 16391000
<TOTAL-ASSETS> 49952000
<CURRENT-LIABILITIES> 10467000
<BONDS> 5953000
0
0
<COMMON> 14488000
<OTHER-SE> 16837000
<TOTAL-LIABILITY-AND-EQUITY> 49952000
<SALES> 42955000
<TOTAL-REVENUES> 42955000
<CGS> 34871000
<TOTAL-COSTS> 34871000
<OTHER-EXPENSES> 1312000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266000
<INCOME-PRETAX> 557000
<INCOME-TAX> 205000
<INCOME-CONTINUING> 352000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 352000
<EPS-BASIC> .09
<EPS-DILUTED> .09
</TABLE>
EMPLOYMENT CONTRACT
This Agreement made this 11th day of May,1999, between
TRIPLE S PLASTICS, INC. (hereinafter referred to as "Corporation"),
and ALBERT CHRISTIAN SCHAUER (hereinafter referred to as "Schauer").
WHEREAS, Schauer is an important and valuable executive with
recognized leadership and experience; and
WHEREAS, the Corporation deems it in its best interest to secure
the services of Schauer as a director and officer of the Corporation; and
WHEREAS, the Corporation, as an incentive to Schauer to accept and
continue employment with the Corporation, is willing to offer Schauer the
opportunity to increase his proprietary interest in the Corporation.
THEREFORE, in consideration of the promises and mutual agreements
hereafter contained and for other good and valuable consideration, it is
agreed as follows:
1. Employment. The Corporation shall employ, and Schauer shall
serve as the Chief Executive Officer of the Corporation, upon the terms
and conditions set forth below.
2. Term. The employment of Schauer shall be for five (5) years
commencing on the date hereof.
3. Duties and Location. Schauer shall serve the Corporation as one
of its Directors and its Chief Executive Officer and shall faithfully, and
to the best of his ability under the direction of the Board of Directors of
the Corporation, devote his entire time (except as set forth in paragraph 19
below), energy, and skill during regular business hours of such employment
and shall perform the duties that are customarily performed by a Chief
Executive Officer and shall, from time to time, perform such other services
as the Board of Directors shall reasonably require. It is understood that
Schauer shall be responsible and report directly to the Board and to no other
individual or officer(s) in the Corporation. The Corporation shall provide
adequate and appropriate office space at its corporate headquarters for Schauer
to perform the duties of his position in Kalamazoo County, Michigan. Schauer
shall not be required to relocate to any other location.
4. Compensation. The Corporation shall pay Schauer for the term of his
employment hereunder, as base annual salary, the sum of Two Hundred Fifty
Thousand Dollars ($250,000) per annum (or such higher amount as may be agreed
to by Schauer and the Corporation), paid in equal bi-weekly installments in
accordance with the general practice of the Corporation. The salary may be
increased annually in an amount to be determined by the Board of Directors.
The Corporation will establish a "Salary Reduction Deferred Compensation Plan"
for the benefit of Schauer as described in paragraph 6(I).
5. Expenses. The Corporation shall reimburse Schauer (upon submission of
appropriate expense vouchers) for all out-of-pocket expenses for travel, meals,
hotel accommodations, entertainment, and the like incurred by him in the
interest of the Corporation's business, and which are deemed reasonable in
accordance with Corporation's policies and practices.
6. Benefits. When this Agreement is in effect and during any severance
period, Schauer shall receive the fringe benefits detailed below and any other
benefits or perquisites provided to or available to any other executive
officer(s) of the Corporation. In no event shall the level of fringe benefits
be decreased, except in the situation where standardized fringe benefits for
executive officers of the Corporation are decreased for all such officers.
Those benefits shall include:
A. Participation in Corporation's health, hospitalization, and
medical insurance program for Schauer, his spouse, and legal
dependents, subject to and in accordance with applicable laws;
B. Participation in any Corporation retirement and/or pension program
applicable to Corporation's executive officers;
C. Long term and short term disability insurance at levels applicable
to Corporation's executive officers, fully paid by the Corporation;
D. Four (4) weeks annual paid vacation, plus such paid holidays as are
provided to all executive and management personnel;
E. A dental insurance plan covering Schauer, his spouse, and legal
dependents;
F. All membership dues, initiation fees, and other dues and fees in
connection with Schauer's membership in the Kalamazoo Country Club
and the Beacon Club. In addition, the Corporation shall reimburse
Schauer for all reasonable entertainment expenses and costs Schauer
incurs for the benefit of the Corporation, in accordance with
Corporation's policies and practices;
G. Life insurance in the amount of $2,000,000.00 or such lesser amount
as can be purchased by Corporation at an annual premium not to
exceed $6.000.00; the beneficiary of such insurance shall be
designated by Schauer;
H. Participation in Corporation's Share the Success Plan, an incentive
compensation plan which is currently being designed and is scheduled
for implementation within ninety (90) days of the date hereof; and
I. The Corporation will establish a nonqualified Salary-Reduction
Deferred Compensation Plan which will allow Schauer to annually
determine and direct a portion of his base salary for deposit into
the Plan trust. In addition, Corporation shall contribute annually
to such Plan trust an amount equal to the difference between
Twenty-Five Thousand and no/100 ($25,000.00) and Corporation's
annual matching contribution to Schauer's account under
Corporation's 401(k) Deferred Compensation Plan. The Plan shall be
on terms and conditions acceptable to Schauer, but shall include,
at a minimum the creation of an irrevocable "Rabbi" trust by the
Corporation, subject to the claims of the general creditors of the
Corporation. The Plan will further provide that the principal and
interest of all sums in the Plan would become immediately due and
payable to Schauer if his employment is terminated for any reason
as described in paragraphs 11(A) through 11(E), of if there is a
sale of all, or substantially all, of the Corporation's assets, a
controlling interest in the common shares, a merger, consolidation,
reorganization, or dissolution of the Corporation.
J. All membership and professional dues in the AICPA, MACPA, and one
airline club.
K. An automobile allowance of seven hundred dollars ($700.00) per
month.
7. Covenant Not to Compete. During the term of Schauer's employment and
for a period of 2 years following the effective date of his separation from
employment with Corporation, Schauer agrees that he will not, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, be employed by or be connected in any
manner with any person or entity engaged in the custom injection molding
business or any other business in which Corporation, its divisions or
subsidiaries are engaged at the time of Schauer's separation from employment
with Corporation. This Covenant not to Compete shall apply within the
geographic areas consisting of both the entire states in which Corporation,
its divisions or subsidiaries have a manufacturing facility, and a 200-mile
radius from any of Corporation's physical facilities at the time of Schauer's
separation from employment with Corporation.
8. Non-Solicitation of Customers. During the term of Schauer's employment
and for a period of two (2) year following the effective date of his separation
from employment with Corporation, Schauer shall not, directly or indirectly,
solicit, contact, accept or otherwise attempt to establish for himself or
any other person, firm or entity any business relationship of a nature that
is competitive with the business or relationship of Corporation with any person,
firm or entity which was a customer of Corporation or was involved in actual
negotiations with Corporation over formation of a customer-supplier
relationship at any time during the twelve (12) months prior to Schauer's
separation regardless of whether he had any contact with said customer.
9. Non-Solicitation of Corporation's Employees. Schauer agrees he will
not, either during his employment or during the two (2) year period thereafter,
solicit or attempt to solicit any employees of Corporation to leave
Corporation's employ, and he will not employ or contract with any employee of
Corporation except as such employee may be acting as a representative of
Corporation with Corporation's express authority.
10. Confidentiality Agreement. Schauer will not directly or indirectly
use for his personal benefit or disclose to any person (whether such person
is employed by the Corporation or not), without the prior written permission
of an officer of the Corporation, at any time during or subsequent to Schauer's
employment with the Corporation, any knowledge or information concerning its
inventions, processes, customers, suppliers, pricing or any other business
affairs, which was acquired during the period of Schauer's employment by the
Corporation or his services as Director of the Corporation. Such knowledge and
information shall include, without limitation, all matters:
(a) of a technical nature such as but not limited to methods, know-how,
formulae, compositions, processes, discoveries, machines,
inventions, research projects, computer programs and similar
items;
(b) of a business nature such as, but not limited to, information
about selling prices, cost, purchasing, profits, market, sales or
lists of customers, customer names, and suppliers.
11. Remedies. Based upon previous service to Corporation as a Director,
Schauer acknowledges that the restrictions contained in paragraphs 7, 8, 9
and 10 are reasonable and necessary to protect the business and interests of
Corporation and that any violation of these restrictions will cause substantial
and irreparable injury to Corporation. Schauer agrees that Corporation is
entitled, in addition to any other appropriate remedies, to preliminary and
permanent injunctive relieve to secure specific performance, and to prevent a
contemplated breach of this Agreement.
12. Termination of Employment. Schauer's employment may be terminated
upon the occurrence of any of the following:
A. His death;
B. At Schauer's option at any time upon twelve (12) months prior
written notice to the Corporation;
C. If Schauer is unable to perform the services hereunder for a
continuous period of six (6) months by reason of his physical or
mental illness or incapacity. If there is any dispute as to whether
Schauer is or was physically or mentally unable to perform his
duties under this Agreement, such question shall be submitted
to a licensed physician agreed upon by the Corporation and
Schauer or his authorized representative or, if the parties are
unable to agree, appointed by the Corporation's physician and
Schauer's family physician. Schauer shall submit to such
examination as such physician may request and such physician's
determination of physical and mental condition shall be binding
and conclusive on the parties;
D. At any time by the Corporation for cause, which cause shall include
and be limited to, theft, conviction of a felony, fraudulent
misconduct, gross dereliction of duty on the part of Schauer, and
any material breach of this Agreement which, after ninety (90) days
from Corporation's written notice to Schauer of such breach,
remains unremedied; or
E. At the option of the Board of Directors at any time without cause
upon written notice to Schauer.
An additional condition of Schauer's employment under this Agreement is his
receipt of a proxy from Daniel B. Canavan and Victor V. Valentine, Jr. to vote
their shares of Company stock for Schauer as a Director of the Corporation as
long as he serves as its CEO. In the absence of such proxy, Schauer may
terminate his employment under this Agreement and such termination shall be
treated as pursuant to paragraph 11E., above.
13. Compensation Upon Termination.
A. If Schauer's employment is terminated pursuant to paragraph 11(E),
he shall be entitled to continue to receive his base salary,
bonuses, incentive compensation and fringe benefits during the
"severance" period. Prior to the second anniversary date of this
Agreement, the severance period shall be that period between the
effective date of termination and the third anniversary date of this
Agreement. Following the second anniversary date of this Agreement,
the severance period shall be twelve months from the effective date
of termination, but shall in no event extend past the Agreement's
expiration date. In fulfilling its severance obligations under this
paragraph, Corporation shall be entitled to a setoff for Schauer's
interim earnings from all other employment during the severance
period. During any severance period, Schauer shall not be obligated
to perform any services for the Corporation, but shall be required
to lend Corporation all requested reasonable assistance on any
matter relevant to Schauer's employment or service as a Director
with the Corporation.
B. If Schauer's employment is terminated for cause pursuant to
paragraph 11(D) or voluntarily terminates pursuant to paragraph
11(B), the Corporation shall pay him his base salary up to and
including the date of termination and have no further obligation
to Schauer. If Schauer's employment is terminated pursuant to
either paragraph 11 A or paragraph 11 C, Schauer's legal repre-
sentative or guardian shall be entitled to receive any base salary
installments, prorated bonuses and incentive compensation, and
other benefits accrued, due and earned, up to and including the
date of death or termination due to disability only.
14. Outside Directorships. Schauer may serve as an outside director on a
maximum of three (3) boards of directors without violating the terms of
paragraph 3; PROVIDED the directorships are disclosed to the Board of Directors
of the Corporation and provided, further, that such service does not constitute
a conflict of interest or otherwise materially detract from Schauer's
fulfillment of obligations under this Agreement. In the event Corporation's
Board of Directors determines Schauer's service as an outside director fails
to satisfy any of the provisions in this paragraph, it shall notify Schauer of
the issue and its determination in writing, and Schauer shall thereafter have
ninety (90) days to remedy the issue. It is understood that service on the
boards of affiliated or related entities shall constitute service on only one
board of directors for purposes of this provision. This provision shall in
no way limit Schauer from serving as a director of any non-profit or charitable
organizations.
15. Modifications. This Agreement may not be waived, modified, amended,
changed, supplemented nor may any rights hereunder be waived, except by written
instrument signed by both parties.
16. Governing Law And Choice of Forum. This Agreement shall be construed
and interpreted under and in accordance with laws of the State of Michigan.
17. Waiver. The waiver by either party of a violation of any provision
of this agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach of the same or other provisions hereof.
18. Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances, other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
19. Headings. Headings, in this agreement, are provided solely for the
convenience of the parties and shall not be used to interpret or construe its
provisions.
20. Notices. Any notice, demand, or communication required, permitted,
or desired to be given hereunder, shall be deemed effectively given when
personally delivered or mailed by prepaid, certified mail, return receipt
requested, addressed as follows:
Triple S Plastics, Inc.
14320 Portage Rd.
Vicksburg, Michigan 49097
A. Christian Schauer
5512 Bobwhite
Kalamazoo, Michigan 49009
Or such other address, and to the attention of such other persons or officers
as either party may designate by advance written notice.
21. Drafting. This Agreement has been executed after negotiation and
the opportunity by both parties to have this Agreement reviewed and revised by
legal counsel of their choice. None of the provisions of this Agreement shall
be interpreted or construed against a party hereto solely by virtue of the fact
that any such provision shall have been drafted by legal counsel representing
such party.
22. Schauer's Attorney's Fees. The Corporation shall reimburse Schauer
for the reasonable attorney's fees he incurs in the drafting, negotiation and
finalization of this Agreement in a maximum amount of five thousand dollars
($5,000.00).
23. Arbitration. With the specific exclusion of disputes arising out of
paragraph 7. Covenant Not to Compete, 8. Non-Solicitation of Customers, 9.
Non-Solicitation of Corporation's Employees and 10. Confidentiality Agreement,
the sole and exclusive method for resolving any dispute arising out of this
Agreement (or relating to the Employment or any termination of the Employment
occurring during the term of this Agreement) shall be arbitrated in accordance
with this paragraph. A party wishing to invoke arbitration of an issue will
deliver written notice to the other party, including a description of the issue
to be arbitrated not more than one hundred (180) days after the alleged
breach occurred. Thereafter, the parties or their representatives shall meet
promptly and attempt to select a mutually acceptable arbitrator, using whatever
means and resources available to them. If the parties fail to agree upon
an arbitrator within thirty days (30) or such longer period as they expressly
agree upon, the matter shall be submitted to arbitration pursuant to the
Employment Dispute Resolution Rules of the American Arbitration Association.
The arbitration hearing shall take place in Kalamazoo, Michigan absent the
parties' agreement to another acceptable location. The fees and expenses of the
arbitrator(s), any filing fees or other American Arbitration Association fees,
shall be paid one-half by each party. The arbitrator(s) shall award costs
and expenses, including reasonable attorney fees, to the prevailing party; if
neither party prevails on all issues, the arbitrator(s) shall allocate costs
and expenses in the arbitrator's discretion based on the extent to which each
party has prevailed. The decision of the Arbitrator(s) will be final and
binding on the parties and there shall be no appeal therefrom. Judgment may
be entered on the arbitrators' award in any court having jurisdiction.
24. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, personal
representatives, successors, and assigns. As used herein, the successor of
the Corporation shall include, but not be limited to, any successor by way of
merger, consolidation, sale of all or substantially all of its assets, change
of control, or similar reorganization. Notwithstanding the assignment of this
Agreement by the Corporation, the Corporation agrees that it shall not be
released from its obligations hereunder. Schauer acknowledges that services
to be rendered by him are unique and personal. Accordingly, in no event may
Schauer assign any of his rights or delegate any of his duties or obligations
under this Agreement. However, if Schauer should die while any amounts are
due and owing hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to his estate.
IN WITNESS WHEREOF, this Agreement has been executed the day and
year first above written.
TRIPLE S PLASTICS, INC.
DATED: May 11, 1999 /s/ Victor V. Valentine, Jr.
By: Victor V. Valentine, Jr.
Its: President
DATED: May 11, 1999 /s/ Albert Christian Schauer
ALBERT CHRISTIAN SCHAUER
