UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 05, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24912
WELCOME HOME, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1379322
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
309 D RALEIGH STREET, WILMINGTON, NORTH CAROLINA 28412
(Address of principal executive offices)
(Zip code)
(910) 791-4312
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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 and Exchange Act of 1934
during the preceeding 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 [ ]
Number of shares of common stock of registrant outstanding at August 25, 1997:
7,453,615
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of July 5, 1997
and December 31, 1996......................................................3
Consolidated Statements of Operations for the Three and Six Months
Ended July 5, 1997 and June 29, 1996.......................................4
Consolidated Statements of Cash Flows for the Three and Six Months
Ended July 5, 1997 and June 29, 1996.......................................5
Notes to Consolidated Financial Statements.....................................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................7
PART II. OTHER INFORMATION.................................................10
Signatures....................................................................10
Exhibit Index.................................................................11
2
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WELCOME HOME, INC.
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AT JULY 5, 1997 AND DECEMBER 31, 1996
(in thousands of dollars)
July 5, Dec. 31,
1997 1996
----------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 846 $ 612
Inventories 10,733 16,291
Prepaid assets 228 626
--------- --------
Total Current Assets 11,087 17,529
Property & equipment, net 7,441 8,563
Other assets 267 222
--------- --------
Total Assets $19,515 $26,314
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Note payable- line of credit $11,089 $12,123
Note Payable to Jordan Industries 0 1,224
Accounts payable 3,545 14,894
Accounts Payable to Jordan Industries 795 0
Accrued expenses 508 7,787
Current portion of capital lease obligation 0 473
------------- ---------
Total current liabilities 15,937 36,501
Pre-Petition liabilities:
Accounts payable 12,304 0
Accrued expenses 6,941 0
Capital lease obligation 912 0
Note payable to Jordan Industries 1,583 0
----- ---------
Total Pre-Petition liabilities 21,740 0
Capital lease obligation 0 454
Note payable to Jordan Industries 2,223 1,595
Shareholders' equity (deficiency)
Series A Redeemable Preferred stock, $0.01 par value;
11,100 shares authorized, 4,451 shares issued. 4,510 4,510
Common stock, $.01 par value; 13,000,000 shares
authorized; 8,500,000 shares issued 85 85
Preferred stock, $.01 par value; 1,000,000
shares authorized; none outstanding 0 0
Additional paid-in capital 8,832 8,832
Cumulative translation adjustment (37) (12)
Retained earnings (deficit) (28,890) (20,766)
-------- --------
Subtotal (15,500) (7,351)
Less treasury stock, at cost
(1,046,385 shares) 4,885 4,885
--------- ---------
Total Shareholders' Equity (Deficiency) (20,385) (12,236)
-------- --------
Total Liabilities and Shareholders' Equity (Deficiency) $19,515 $26,314
======= =======
See Notes to Consolidated Financial Statements
3
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WELCOME HOME, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
AND SIX MONTHS ENDED JULY 5, 1997 AND JUNE 29, 1996
(in thousands of dollars except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
July 5, June 29, July 5, June 29,
1997 1996 1997 1996
(13 wks) (14 wks) (26 wks) (27 wks)
<S> <C> <C> <C> <C>
Net sales $13,735 $18,737 $27,059 $31,219
Cost of sales 9,123 10,656 18,202 17,214
----- ------ ------ ------
Gross margin 4,612 8,081 8,857 14,005
Selling, general and administrative expense 6,673 9,431 14,563 17,945
(excluding depreciation)
Depreciation 551 483 1,024 954
--- --- ----- ---
Operating loss (2,612) (1,833) (6,730) (4,894)
Interest expense:
Jordan Industries 0 102 0 191
Other 436 360 823 637
Bankruptcy Fees 255 0 571 0
Other expense 0 51 0 19
--------- ------- -------- -------
Pretax loss (3,303) (2,346) (8,124) (5,741)
Provision (benefit) for income taxes 0 0 0 (1,256)
------- ------- ------- -------
Net loss ($3,303) ($2,346) ($8,124) ($4,485)
======== ======== ======== ========
Net loss per share ($0.44) ($0.31) ($1.09) ($0.60)
======= ======= ======= =======
Weighted average shares outstanding 7,454 7,454 7,454 7,454
(in thousands)
</TABLE>
See Notes to Consolidated Financial Statement
4
<PAGE>
WELCOME HOME, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JULY 5, 1997 AND JUNE 29, 1996
(in thousands of dollars)
(Unaudited)
1997 1996
(26 wks) (27 wks)
Cash flows from operating activities:
Net loss ($8,124) ($4,485)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,097 998
Deferred income taxes 0 (1,256)
Changes in operating assets and liabilities:
Inventories 5,558 (4,688)
Prepaid expenses and other assets 353 (94)
Accounts payable 1,750 512
Accrued liabilities (338) (537)
---------- ---------
Net cash provided by (used in) operating activities 296 (9,550)
Cash flows from investing activities:
Capital expenditures 25 (669)
Other 0 (2,237)
-------- ------
Net cash provided by (used in) investing activities 25 (2,906)
Cash flows from financing activities:
Proceeds (repayment) from line of credit, net (1,034) 10,605
Proceeds (repayment) from Jordan Industries, net 987 2,152
Loan fees, line of credit, net 0 (56)
Other (40) (250)
------- --------
Net cash (used in) provided by financing activities: (87) 12,451
Net increase (decrease) in cash and cash equivalents 234 (5)
Cash and cash equivalents at beginning of period 612 7
------ --------
Cash and cash equivalents at end of period $846 $2
==== =======
See Notes to Consolidated Financial Statements
5
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WELCOME HOME , INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
JULY 5, 1997 AND JUNE 29, 1996
(in thousands of dollars)
(Unaudited)
(Continued)
1997 1996
------- -----
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest - third party $580 $590
===== ====
Income taxes $79 $43
======= =====
See Notes to Consolidated Financial Statements
6
<PAGE>
WELCOME HOME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars)
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared by Welcome Home, Inc.
(together with its subsidiary the "Company" or "Welcome Home") pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31,1996.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the results for interim periods.
The Company's sales volume has historically varied between quarters based on
several factors including the Christmas shopping season and accordingly, the
results of operations for the three month and six month periods ended July 5,
1997 are not necessarily indicative of annual results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is a specialty retailer of gifts and decorative home furnishings and
accessories in North America, with 127 stores located primarily in outlet
centers in 36 states as of July 5, 1997. Welcome Home's products, which
currently range in price from $.25 to $1,500, cover a broad line of 6,000 to
10,000 Stock Keeping Units ("SKU's") and consist of eleven basic groups,
including textiles, afghans, framed art, home fragrance, stationery, brass,
picture frames, doilies, chimes and bird feeders, wood and seasonal products.
The Company's average sales transaction was approximately $17.82 for the quarter
ended July 5, 1997 as compared to $15.93 for the quarter ended June 29, 1996.
On January 21, 1997, the Company filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"). During
the first six months of 1997, the Company closed 59 non-profitable stores and as
of July 31, 1997 the Company has closed an additional three non-profitable
stores. This gives the Company a core group of 124 stores. The Company may close
additional stores in late 1997, depending on the performance of the stores as
well as obtaining rent concessions from landlords.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain selected income statement data of the
Company expressed as a percentage of net sales and certain operating statistics
of the Company :
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JULY 5 JUNE 29 JULY 5, JUNE 29,
1997 1996 1997 1996
------ ------- ------- --------
<S> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA
AS A PERCENTAGE OF NET SALES:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 66.4 56.9 67.3 55.1
Gross profit 33.6 43.1 32.7 44.9
Selling, general and administrative
expenses (excluding depreciation) 48.6 50.3 53.8 57.5
Operating loss (19.0) (9.8) (24.9) (15.7)
Interest expense 3.2 2.5 3.0 2.7
Benefit for income taxes 0.0 0.0 0.0 4.0
Net loss (24.0) (12.5) (30.0) (14.4)
OPERATING STATISTICS:
Stores open at period end 127 215 127 215
Total square feet of store space at
period end (in thousands) 397 585 397 585
Percentage decrease in
comparable store sales (2.1%) (13.1%) (7.5%) (12.7%)
</TABLE>
THREE MONTHS ENDED JULY 5, 1997 AS COMPARED TO THREE MONTHS ENDED JUNE 29, 1996
NET SALES. Net sales for the three months ended July 5, 1997 decreased by
approximately $5.0 million or 26.7%, as compared to the three months ended June
29, 1996. This decrease reflects a $0.9 million decrease from 1996 due to an
additional week in 1996 vs. 1997. $4.2 million of the decrease is attributable
to stores closed in the fall of 1996 and the first six months of 1997. Net sales
decreased $0.3 million, or 2.6% in comparable store sales (as adjusted to
reflect the same number of weeks). The 124 core stores remaining open after July
31, 1997 had an increase in sales of $0.1 million, or 0.8%. These 124 core
stores had a comparable store sales decrease of $0.2 million, or 1.7%. The
Company believes the decrease in comparable store sales was primarily the result
of the Company filing a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code in January 1997, which resulted in inventory levels being
reduced and lower levels of traffic in outlet malls, where 96% of the Company's
stores are located.
GROSS PROFIT. Gross profit for the three months ended July 5, 1997 decreased
$3.5 million, or 43.2%, as compared to the three months ended June 29, 1996. The
Company recorded large markdowns in the second quarter of 1997 due primarily to
liquidation markdowns instituted in the 26 stores that ran "Going Out of
Business" sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended July 5, 1997 decreased $2.8
million, or 29.8%, as compared to the three months ended June 29, 1996. Selling,
general and administrative expenses as a percentage of net sales decreased to
48.6% for the three months ended July 5, 1997 as compared to 50.3 % for the
three months June 29, 1996. The decrease is primarily due to the reduction in
the average number of stores open for the quarter and the reduction in payroll
and occupancy expenses associated with fewer stores. Corporate general and
administrative expenses decreased $0.5 million, or 25.0% for the three months
ended July 5, 1997 compared to the three months ended June 29, 1996. The
decrease is primarily due to a reduction in payroll and occupancy expenses
associated with a corporate lay-off.
8
<PAGE>
INTEREST EXPENSE. Interest expense for both the three months ended July 5, 1997
and the three months ended June 29, 1996, was approximately $0.4 million.
NET LOSS. The net loss for the three months ended July 5, 1997 was $3.3 million
as compared to $2.3 million for the three months ended June 29, 1996. The
increase occurred primarily as a result of the comparable store sales decline
and the increase in markdowns in the second quarter of 1997.
SIX MONTHS ENDED JULY 5, 1997 AS COMPARED TO SIX MONTHS ENDED JUNE 29, 1996
NET SALES. Net sales for the six months ended July 5, 1997 decreased by
approximately $4.2 million or 13.5%, as compared to the six months ended June
29, 1996. This decrease is attributable to stores closed in the fall of 1996 and
the first six months of 1997. Net sales decreased $1.6 million, or 7.4% in
comparable store sales. The 124 core stores remaining open after July 31, 1997
had a decrease in sales of $0.6 million, or 2.8%. These 124 core stores had a
comparable store sales decrease of $1.3 million, or 6.1%. The Company believes
the decrease in comparable store sales was primarily the result of the Company
filing a voluntary petition for relief under Chapter 11 of the Bankruptcy Code
in January 1997, which resulted in inventory levels being reduced and lower
levels of traffic in outlet malls, where 96% of the Company's stores are
located.
GROSS PROFIT. Gross profit for the six months ended July 5, 1997 decreased $5.1
million, or 36.4%, as compared to the six months ended June 29, 1996. The
Company recorded large markdowns in the first six months of 1997 due primarily
to liquidation markdowns instituted in the 62 stores that ran "Going Out of
Business" sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the six months ended July 5, 1997 decreased $3.4
million, or 19.0%, as compared to the six months ended June 29, 1996. Selling,
general and administrative expenses as a percentage of net sales decreased to
53.8% for the six months ended July 5, 1997 as compared to 57.5 % for the six
months June 29, 1996. The decrease is primarily due to the decrease in the
average number of stores open for the first six months and the reduction in
payroll and occupancy expenses associated with fewer stores. Corporate general
and administrative expenses decreased $0.3 million, or 9.1% for the three months
ended July 5, 1997 compared to the six months ended June 29, 1996.
INTEREST EXPENSE. Interest expense for the six months ended July 5, 1997 and the
six months ended June 29, 1996, was $0.8 million.
NET LOSS. The net loss for the six months ended July 5, 1997 was $8.1 million as
compared to $4.5 million for the six months ended June 29, 1996. This increase
occurred primarily as a result of higher markdowns associated with the
liquidation of 62 stores that ran "Going Out of Business" sales and additional
expenses associated with the bankruptcy proceedings.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $26.6 million working capital deficit at July 5, 1997, including
pre-petition liabilities, as compared to $19.0 million deficit at December 31,
1996. The decrease in working capital was due primarily to a decrease in
inventory levels from $16.3 million at December 31, 1996 compared to $10.7
million as of July 5, 1997 along with an increase in accounts payables.
On May 15, 1996 the Company closed the Waiver and Amendment No. 1 to the Loan
and Security Agreement (the "New Bank Credit Facility") with Fleet Capital
Corporation (formerly Shawmut Capital Corporation). The New Bank Credit Facility
provides for borrowings of up to 65% of Eligible Inventory (as defined), with
the maximum borrowings of $20 million and also provides for up to $4 million in
additional borrowings through December 31, 1996 (`Additional Borrowings"). The
Company's majority shareholder, Jordan Industries Inc., ("Jordan Industries")
purchased a fifty percent participation in the additional borrowings. The New
Bank Credit Facility, as amended, is secured by substantially all of the
Company's assets.
9
<PAGE>
On January 21, 1997, in connection with the Chapter 11 Bankruptcy filing,
Welcome Home closed the second waiver and amendment to allow for post-petition
advances up to $12.0 million. This amendment was effective through March 31,
1997.
On March 28, 1997, the Company closed the third waiver and amendment, to
continue to allow post-petition advances, up to $12.75 million. In connection
with this amendment, Jordan Industries purchased a $0.75 million junior
participation in this facility. This amendment is effective through March 31,
1998 and it carries an interest rate of one and a half percent above the
lender's prime rate. The Company expects to satisfy its anticipated demands and
commitments for cash from borrowings under this post-petition credit facility.
NET OPERATING LOSS CARRYFORWARD
At December 31, 1996, the Company had approximately $22.3 million in net
operating loss carryforwards for Federal income tax purposes. Due to the
uncertainty of generating future taxable income, management believes it is
appropriate to fully reserve the deferred tax asset.
PART II. OTHER INFORMATION
WELCOME HOME, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS: The separate Index to Exhibits accompanying this filing is
incorporated by reference.
(B) REPORT ON FORM 8-K. None.
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.
By:
/S/ MARK S. DUDECK
NAME: MARK S. DUDECK
TITLE: VICE PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
Date: August 25, 1997
10
<PAGE>
EXHIBIT INDEX
INDEX. DESCRIPTION
10 Employment and Non Competition Agreement by and between
R. Thomas Wolfe and the Company
27 Financial Data Schedule
11
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AND NONCOMPETIITION AGREEMENT (this
"Agreement"), dated as of the 1st day of May 1997, by and between WELCOME HOME,
INC., a Delaware corporation ("Company"), and R. THOMAS WOLFE, an individual
("Executive");
WITNESSETH;
WHEREAS, Company desires to retain the services of Executive
and Executive desires to be retained by Company;
WHEREAS, the continued involvement by Executive in a business
in competition with Company after the termination of Executive's employment with
Company would potentially harm Company's business; and
WHEREAS, as an inducement to Company to employ Executive,
Executive has agreed to be employed and not to compete with Company to the
extent set forth below;
NOW, THERFORE, in consideration of the premises, covenants and
agreements contained herein and the payments by Company to Executive required
below, the parties hereto agree as follows:
1. Employment and Term. Subject to the termination provisions
set forth hereinafter, Company shall employ Executive as the Chief Operating
Officer of Company or in a higher ranking management position with Company for a
period of one year (the "Employment Term") from the date of execution of this
Agreement. In such position, Executive shall report to the Chairman of the Board
of Directors of Company and the Chief Executive Officer or President of Company.
Executive shall diligently, faithfully and competently perform all duties of the
Office of Chief Operating Officer and shall devote as much of his productive
time and abilities to the performance of such duties as is required to
accomplish such duties. Company shall also use its best efforts to cause
Executive to be elected to the Board of Directors of the Company at the next
annual meeting of the stockholders of the Company.
2. Base Salary. During the Employment Term, Company will pay
Executive a base salary ("Base Salary") of Two Hundred Thousand Dollars
($200,000) per annum, payable in equal bi-weekly installments.
3. Incentive Bonus Plan. During the Employment Term, Executive
shall be entitled to participate in an annual incentive bonus plan ("Bonus
Plan") for the fiscal year ending April 30, 1998 with a target bonus payment
amount of a minimum of Fifty Thousand Dollars ($50,000). The Bonus Plan shall be
based upon goals and criteria recommended by the President and Chief Operating
Officer of Company and approved by the Board of Directors of Company. For the
fiscal year ending December 31, 1998, such goals and criteria will be presented
to the Board of Directors within sixty (60) days following the date hereof and
approved within a reasonable time thereafter. Any bonus earned by Executive
under the Bonus Plan shall be paid within thirty (30) days after completion of
Company's financial statements for the period ending December 31, 1998, as
prepared by independent auditors.
4. Stock Option Plan. The parties acknowledge that Company is
currently operating in Chapter 11 under the laws of New York. If and upon
Company's reemergence from bankruptcy, Company will grant Executive an option to
purchase 2.5% of the then outstanding fully-diluted common stock of the Company
(estimated to be 200,000 shares) upon the vesting schedule as set forth
hereinafter. The
<PAGE>
Executive must be employed by the Company on each vesting date
in order for such vesting to occur. Such stock option grant shall vest in five
equal amounts on each of the first five anniversaries of the date hereof (i.e.,
one-fifth will vest on the one year anniversary of the date hereof and an
additional one-fifth will vest on each anniversary of the date hereof up to and
including the fifth anniversary of the date hereof, at which time Executive
shall be fully vested in the grant). Such stock options will be forfeited if
Executive's employment with the Company is terminated for cause. The stock
options shall be exercisable beginning on the date any such options are vested.
Such stock options will expire on the tenth anniversary of the date of the grant
of such stock options. The exercise price for all stock options shall be the
then current fair market value of the Company's stock on the date such stock
options are granted. The parties agree that the stock options will be granted
pursuant to a detailed Stock Option Agreement to be executed at the time of
grant.
5. Business Expenses. During the Employment Term, Company
shall reimburse Executive for all ordinary and necessary expenses incurred and
paid by Executive in the course of the performance of Executive's duties
pursuant to this Agreement and consistent with Company's policies in effect from
time to time with respect to travel, entertainment and other business expenses,
and subject to Company's requirements with respect to the manner of reporting
such expenses.
6. Relocation Expenses. Company will pay, or reimburse
Executive, for reasonable relocation expenses in moving Executive's household
furnishings and goods from Raleigh, North Carolina to Wilmington, North
Carolina. Company will reimburse Executive, within ten (10) days of Executive's
relocation, $6,000 to be used to terminate Executive's Raleigh residential lease
and all reasonable and customary closing costs Executive incurs in purchasing a
new residence in the greater Wilmington, North Carolina area. Notwithstanding
anything contained in this Section 6 to the contrary, all relocation expenses to
be paid by Company to Executive pursuant to this Section 6 shall be "grossed up
for income tax purposes," as appropriate, to accomplish a net no cost
reimbursement to Executive.
7. Automobile Allowance. During the Employment Term, Company
will pay Executive an automobile allowance of Six Hundred Dollars ($600.00) per
month.
8. Benefits. During the Employment Term, Company will provide
for Executive's participation in Company's employee benefit programs on the same
basis as other executive officers of Company including, without limitation group
medical, dental and hospitalization insurance, disability insurance, life
insurance and pension and profit sharing plans, all to the extent such plans are
available for other key executives of the Company. Additionally, until Executive
becomes eligible to participate in Company's group medical insurance plan,
Company will reimburse Executive for his monthly COBRA expenses. Executive shall
be entitled to ten (10) paid vacation days during the fiscal year ending April
30, 1998.
9. Termination for Cause and Voluntary Termination. Company
may terminate this Agreement, all of Company's obligations under this Agreement,
and Executive's employment hereunder, for "cause", by written notice to
Executive, upon the occurrence of any one of the following on the part of
Executive (a) fraud, embezzlement, dishonesty, or conviction of a felony; (b)
failure to diligently, faithfully and competently perform any of the directions
of Company's Board of Directors; (c) breach of any of the terms or covenants of
this Agreement: (d) death or disability preventing Executive from performing
Executive's duties under the terms of this Agreement; or (e) upon Executive's
voluntary termination. In the event of termination of this Agreement for
"cause", no sums shall be payable by Company thereafter and Executive shall also
have terminated all other rights under this Agreement,
2
<PAGE>
including, without limitation, future rights to the grant of stock options.
Sections 11 and 12 shall survive such termination.
10. Liquidation of the Company or Termination without Cause;
Severance Pay. If Company is liquidated, terminates this Agreement without cause
(other than Sections 11 and 12 hereof which shall survive such liquidation or
termination) at a time when Executive is fully willing and able to perform his
duties as defined herein, or if Executive's employment with Company is
terminated by Company due to the Company's bankruptcy of the Company or
substantially all of the assets of the Company are sold to another entity and
this Agreement is not assumed by such entity, then (a) the Company shall be
required to pay to Executive, as "Severance Pay," an amount equal to one year's
Base Salary; (b) Company shall provide Executive six (6) months from the date of
termination of executive out-of placement service with a national firm of
Executive's choice, provided, however, if Executive does not gain similar
employment within such 6-month period and Executive is using his best efforts to
find such employment, then Company shall continue to pay for such out-placement
services on a month to month basis until Executive finds suitable Employment up
to a maximum of an additional six months; and (c) Company will provide or pay
for Executive's COBRA group medical, dental, and hospitalization insurance for
the time remaining on Employment Term.
11. Restrictive Covenants. During Executive's employment with
Company and for a period equal to one year after Executive is no longer employed
by Company, Executive shall not:
(a) directly or indirectly, either individually or
as a principal, partner, agent, employee,
employer, consultant, stockholder, joint
venturer, or investor, or as a director or
officer of any corporation or association, or in
any other manner or capacity whatsoever, engage
in, assist or have any active interest in a
business located anywhere in the United States
or Canada that competes with or is similar in
concept, design, format, or otherwise to the
business conducted by Company on the date hereof
or at any time during the term of this covenant.
Notwithstanding the above, this paragraph shall
not be construed to prohibit Executive from
owning less than three percent (3%) of the
outstanding securities of a corporation which is
publicly traded on a securities exchange or
over-the-counter.
(b) directly or indirectly, either individually, or
as a principal, partner, agent, employee,
employer, consultant, stockholder, joint
venturer, or investor, or as a director or
officer of any corporation or association, or in
any other manner or capacity whatsoever, (i)
divert or attempt to divert from Company any
business with any customer or account with which
Executive had any contact or association, which
was under the supervision of Executive, or the
identity of which was learned by Executive as a
result of Executive's employment with Company,
or (ii) induce any salesperson, distributor,
supplier, vendor, manufacturer, representative,
agent, jobber or other person transacting
business with Company to terminate their
relationship or association with Company, or to
represent, distribute or sell services or
products in competition with services or
products of Company, or (iii) induce or cause
any employee of Company to leave the employ of
Company.
12. Non-Disclosure. Executive shall not at any time or in any
manner, directly or indirectly, use or disclose to any party other than Company
any trade secrets or other Confidential Information (as defined below) learned
or obtained by him while a
3
<PAGE>
stockholder, officer or director of Company. As used herein, the term
"Confidential Information" means information disclosed to or known by Executive
as a consequence of his position with Company and not generally known in the
industry in which Company is engaged and that in any way relates to Company's
products, processes, services, inventions (whether patentable or not), formulas,
techniques or know-how, including, but not limited to, information relating to
distribution systems and methods, research, development, manufacturing,
purchasing, accounting, engineering, marketing, merchandising and selling.
13. Specific Performance. The parties hereto agree that their
rights hereunder are special and unique and that any violation thereof would not
be adequately compensated by money damages, and each grants the other the right
to specifically enforce (including injunctive relief where appropriate) the
terms of this Agreement.
14. Notices: Any notice, request, consent or communication
(collectively, a "Notice") under this Agreement shall be effective only if it is
in writing and (i) personally delivered, (ii) sent by certified or registered
mail, return receipt requested, postage prepaid, (iii) sent by a nationally
recognized overnight delivery service, with delivery confirmed, or (iv) telexed
or telecopied, with receipt confirmed, addressed as follows:
(a) If to Executive:
R.Thomas Wolfe
c/o Welcome Home, Inc.
309D Raleigh Street
Wilmington, NC 28412
Telephone # (910) 791-4312
Telecopier # (910) 791-4945
(b) If to Company:
Thomas H. Quinn, President
c/o Jordan Industries, Inc.
ArborLake Centre, Suite 550
1751 Lake Cook Road
Deerfield, Illinois 60015
Telephone # (847) 945-5522
Telecopier # (847) 945-5698
G. Robert Fisher, Esq.
Bryan Cave LLP
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Telephone # (816) 374-3200
Telecopier # (816) 374-3300
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the
4
<PAGE>
telex or telecopy is confirmed, as the case may be, unless the sending party has
actual knowledge that a Notice was not received by the intended recipient.
15. Assignment. this Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by Executive.
16. Governing Law: Waiver of Jury Trial. This Agreement shall
be governed by the law of the State of North Carolina as to all matters,
including, but not limited to, matters of validity, construction, effect and
performance, except that no doctrine of choice of law shall be used to apply any
law other than that of North Carolina. IN THE EVENT OF ANY LITIGATION WITH
RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREUNDER ALL OF THE PARTIES HERETO WAIVE ALLRIGHTS TO A TRIAL BY
JURY.
17. Severability. Company and Executive believe the covenants
against competition contained in this Agreement are reasonable and fair in all
respects, and are necessary to protect the interests of Company. However, in
case any one or more of the provisions or parts of a provision contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect in any jurisdiction, such invalidity, illegality or
unenforceability shall not shall not affect any other provision or part of a
provision of this Agreement or any other jurisdiction, but this Agreement shall
be reformed and construed in any such jurisdiction as if such invalid or
unenforceable provision or part of a provision had never been contained herein
and such provision or part shall be reformed so that it would be valid, legal
and enforceable to the maximum extent permitted in such jurisdiction.
18. Neutral Interpretation. This Agreement constitutes the
product of the negotiation of the parties hereto and the enforcement hereof
shall be interpreted in a neutral manner, and not more strongly for or against
any party based upon the source of the draftsmanship hereof.
19. Miscellaneous. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. This Agreement
embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and may not be modified orally, but only
by a writing subscribed by the party charged therewith. There are no
restrictions, promises, representations, warranties, covenants or undertakings,
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings (whether oral or written)
between the parties with respect to such subject matter.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered
into this Agreement the date first herinabove set forth.
COMPANY:
WELCOME HOME, INC.
By: /s/ John J. Hillmann
Name: John J. Hillmann
Title: President
EXECUTIVE:
/s/ R. Thomas Wolfe
R. Thomas Wolfe
LIMITED GUARANTY BY JORDAN INDUSTRIES, INC.
The undersigned, Jordan Industries, Inc., a Delaware corporation, hereby agrees
to guaranty only those obligations of Company as described in Section 10 above
relating to payment of severance pay, certain benefits and out-placement
services.
JORDAN INDUSTRIES, INC.
By: /s/ Thomas H. Quinn
Name: Thomas H. Quinn
Title: CEO, President
6
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUL-05-1997
<CASH> 846
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<INVENTORY> 10,733
<CURRENT-ASSETS> 11,087
<PP&E> 13,165
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0
7,510
<COMMON> 85
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<TOTAL-LIABILITY-AND-EQUITY> 19,515
<SALES> 27,059
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