UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 No. 0-3108
TRION, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0922753
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 760, 101 McNeill Road, Sanford, North Carolina 27331-0760
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 919-775-2201
Not Applicable
(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 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 the number of shares outstanding of each of the issuer's classes of
common stock as of August 14, 1998.
7,149,247 shares of Common Stock, par value $.50
<p>-1-
<TABLE>
Part I
Item 1. Financial Statements
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Six Months Three Months
Ended June 30 Ended June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $ 30,591 $ 31,329 $ 14,610 $ 17,757
Cost and expenses:
Cost of products sold . . . . . 19,756 21,123 9,023 11,948
Selling, administration
and engineering expenses . . . 9,000 8,683 4,417 4,573
Litigation Settlement. . . . . . 3,000 - 3,000 -
Interest . . . . . . . . . . . . 401 475 182 251
Amortization . . . . . . . . . . 172 172 86 86
Other expense (income), net. . . (84) (33) (27) -
32,245 30,420 16,681 16,858
Income (loss) before income taxes . (1,654) 909 (2,071) 899
Income tax expense (benefit). . . . (682) 402 (828) 398
Net income (loss) for the period. . $ (972) $ 507 $(1,243) $ 501
Earnings (loss) per share of common
stock - basic . . . . . . . . . $ (0.13) $ 0.07 $ (0.09) $ 0.07
Earnings (loss) per share of common
stock - assuming dilution . . . $ (0.13) $ 0.07 $ (0.09) $ 0.07
Cash dividends declared
per common share. . . . . . . . $ 0.02 $ 0.04 $ 0.00 $ 0.02
See notes to consolidated condensed financial statements
</TABLE>
<p> -2-
<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
ASSETS
June 30 December 31
_ 1998* _ _ 1997
<S>
CURRENT ASSETS <C> <C>
Cash . . . . . . . . . . . . . . . . . . . . . $ 1,138 $ 2,979
Trade accounts receivable, less allowance
for doubtful accounts (1998 - $269,000 and
1997 - $454,000) . . . . . . . . . . . . . . 9,111 11,815
Inventories . . . . . . . . . . . . . . . . . 10,813 9,228
Prepaid expenses and other current assets . . 753 536
Refundable income taxes. . . . . . . . . . . . 1,064 -
Deferred current income taxes . . . . . . . . 90 163
Total current assets . . . . . . . . . . . 22,969 24,721
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . 78 78
Building . . . . . . . . . . . . . . . . . . . 5,408 5,428
Equipment. . . . . . . . . . . . . . . . . . . 20,593 19,810
Allowance for depreciation . . . . . . . . . . (15,756) (14,861)
10,323 10,455
OTHER ASSETS
Goodwill less accumulated amortization:
($1,003,000 in 1998 and $831,000 in 1997) . 5,877 6,049
Deferred income taxes . . . . . . . . . . . . 331 323
Other non-current assets . . . . . . . . . . . 650 644
6,858 7,016
$40,150 $42,192
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals . . . . . . . . $ 8,890 $ 8,567
Current portion of long-term debt . . . . . . 2,500 2,508
Total current liabilities . . . . . . . . . 11,390 11,075
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 7,000 8,250
18,390 19,325
SHAREHOLDERS' EQUITY
Common stock, par value $0.50 a share:
Authorized 20,000,000 shares
Issued and outstanding:
1998 - 7,149,247 and
1997 - 7,128,797 . . . . . . . . . . . . 3,575 3,564
Additional paid-in capital . . . . . . . . . . 1,558 1,448
Retained earnings . . . . . . . . . . . . . . 16,423 17,681
Accumulated other comprehensive income . . . . 204 174
21,760 22,867
$40,150 $42,192
See notes to consolidated condensed financial statements
* Unaudited
</TABLE>
<p> -3-
<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months
Ended June 30
1998 1997
<S>
OPERATING ACTIVITIES <C> <C>
Net income (loss). . . . . . . . . . . . . . . . . . $ (972) $ 507
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 895 840
Amortization . . . . . . . . . . . . . . . . . 172 172
Deferred income taxes . . . . . . . . . . . . . 65 -
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . 2,704 12
Inventory and other. . . . . . . . . . . . . (1,808) (678)
Refundable income taxes. . . . . . . . . . . (1,064) -
Accounts payable and accrued expenses . . . 1,323 707
Foreign currency transaction loss (gain). . . . (29) (45)
Net cash provided by
operating activities . . . . . . . . . . . 1,286 1,515
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net . . . (763) (2,239)
Net cash used by investing activities . . . (763) (1,233)
FINANCING ACTIVITIES
Net proceeds from (payments on)
master credit facility . . . . . . . . . . . . (1,008) 2,200
Principal payments on long-term debt . . . . . . . . (1,250) (1,253)
Stock issued . . . . . . . . . . . . . . . . . . . . 121 36
Cash dividends paid. . . . . . . . . . . . . . . . . (286) (280)
Net cash provided (used) by
financing activities . . . . . . . . . . . (2,423) 703
Effect of foreign exchange rate changes on cash . . . . 59 (97)
Increase (decrease) in cash . . . . . . . . . . . . . . (1,841) (118)
Cash and cash equivalents at beginning of period . . . 2,979 2,073
Cash and cash equivalents at end of period . . . . . . $ 1,138 $ 1,955
See notes to consolidated condensed financial statements
</TABLE>
<p> -4-
TRION, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
Note A - Subsequent Events
On August 14, 1998, the Company entered into a definitive merger agreement
with McLeod Russel Holdings PLC pursuant to which a newly-formed subsidiary of
McLeod Russel Holdings PLC would be merged into the Company and each issued
and outstanding share of Common Stock of the Company would be converted into
the right to receive $7.27 in cash. The transaction would be subject to
approval of the respective shareholders of Trion, Inc. and McLeod Russel
Holdings PLC, and to the receipt of any necessary governmental approvals.
In conjunction with the above, on August 10, 1998, the Company settled for
$2,900,000 a lawsuit filed on December 2, 1997 by Carico International, Inc.
in the Circuit Court for Broward County, Florida seeking damages alleged to be
in the millions of dollars for injury to its business allegedly caused by a
defective specialty air filter manufactured by the Company. The Company
continued to vigorously defend its position. On July 23, 1998, Carico filed a
Demand for Judgement in the amount of $5869,071. In addition, discussions
with Mcleod Russel, as described above, were being conducted and as a result
of these discussions, on August 10, 1998, the Company settled the suit for
$2,900,000 payable one-half by September 9, 1998 and one-half not later than
January 10, 1999. The Company also incurred legal fees approximating $100,000
in defending such suit. The entire amount was recorded in the second quarter
in accordance with generally accepted accounting principles.
Note B - Basis of presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and therefore
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been reflected in the
reported financial information. Operating results for the six month period
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information,
refer to the consolidated financial statements and footnotes included in the
Registrant's annual report on Form 10-K for the year ended December 31, 1997.
It is a standard and accepted practice used by the Company in the preparation
of the financial statements in conformity with generally accepted accounting
principles that estimates and assumptions are used by management that affect
the amounts reported in the financial statements. Actual results could differ
from those estimates.
<p> -5-
<TABLE>
Note C - Earnings per Share of Common Stock
The following tables set forth the computation of basic and diluted earnings
per share:
<CAPTION>
Three Months Ended June 30
<S> 1998 1997
Numerator for basic and
diluted earnings per share: <C> <C>
Net income (loss). . . . . . . $(1,243,000) $ 501,000
Denominator:
Denominator for basic
earnings per share - weighted
average shares: . . . . . . . 7,145,400 7,003,931
Effect of dilutive securities:
Employee stock options . . 93,863 86,777
Denominator for diluted
earnings per share - adjusted
weighted average shares and
assumed conversions . . . . . 7,239,532 7,090,708
Basic earnings (loss) per share . . $ (0.17) $ 0.07
Diluted earnings (loss) per share . $ (0.17) $ 0.07
</TABLE>
Note D - Inventories
The Registrant does not maintain an integrated dollar perpetual inventory
system. During the interim periods, inventories are charged with actual costs
incurred and relieved at products standard costs. Such standards are updated
at least annually. Based upon the components of inventory at the preceding
physical inventory date and charges to and relief of inventories during the
interim period, the components of inventory are estimated as follows (in
thousands):
March 30 December 31
__ 1998 ___ 1997
Raw materials . . . . . . . . . . . . . $ 6,057 $ 5,169
Work-in-process and finished goods. . . 4,756 4,059
$10,813 $ 9,228
Cost of domestic inventory is determined by the last-in, first-out method. No
provision has been made during the interim period to reflect changes in last-
in, first-out values since the preceding December 31. Management believes
that such provision, if any, would not be significant.
Note E - Segment Information
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131), which is effective for years beginning after
December 15, 1997. SFAS 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 is not required to be applied
to interim periods in the initial year of adoption and therefore the Company
<p> -6-
will make the new disclosure requirements in its 1998 annual report. The
adoption of SFAS 131 did not affect results of operations or financial
position and will not have a significant effect on the Company's reported
segment disclosures in its 1998 annual report.
Supplemental information regarding the segments historically reported by the
Company are included in the Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Note F - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this Statement had no impact on
the Company's net income or shareholders' equity. SFAS 130 requires
unrealized gains and losses on the Company's available-for-sale securities and
foreign currency translation adjustments, which prior adoption were reported
separately in shareholders' equity to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform to
the requirements of SFAS 130.
For the three month period ended June 30, 1998 and 1997 total comprehensive
income amounted to a loss of $1,234,000 and income of $493,000, respectively.
During the first six months of 1998 total comprehensive income amounted to a
loss of $942,000 and income of $356,000 in 1997. The differences between
reported net income or loss and these amounts was due to foreign currency
translation adjustments.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Recent Developments
On August 14, 1998, the Company entered into a definitive merger agreement
with McLeod Russel Holdings PLC pursuant to which a newly-formed subsidiary of
McLeod Russel Holdings PLC would be merged into the Company and each issued
and outstanding share of Common Stock of the Company would be converted into
the right to receive $7.27 in cash. The transaction would be subject to
approval of the respective shareholders of Trion, Inc. and McLeod Russel
Holdings PLC, and to the receipt of any necessary governmental approvals.
In conjunction with the above, on August 10, 1998, the Company settled for
$2,900,000 a lawsuit filed on December 2, 1997 by Carico International, Inc.
in the Circuit Court for Broward County, Florida seeking damages alleged to be
in the millions of dollars for injury to its business allegedly caused by a
defective specialty air filter manufactured by the Company. The Company
continued to vigorously defend its position. On July 23, 1998, Carico filed a
Demand for Judgement in the amount of $5869,071. In addition, discussions
with Mcleod Russel, as described above, were being conducted and as a result
of these discussions, on August 10, 1998, the Company settled the suit for
$2,900,000 payable one-half by September 9, 1998 and one-half not later than
January 10, 1999. The Company also incurred legal fees approximating $100,000
in defending such suit. The entire amount was recorded in the second quarter
in accordance with generally accepted accounting principles.
<p> -7-
<TABLE>
Results of Operations
SEGMENT DATA
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30 _
1998 1997 1998 1997
<S>
Net sales to unaffiliated customers:
North American Operations: <C> <C> <C> <C>
Engineered Products . . . . . . $22,758 $21,972 $11,338 $11,648
Consumer Products . . . . . . . 4,642 6,764 1,531 4,735
European Operations . . . . . . . 3,191 2,593 1,741 1,374
30,591 31,329 14,610 17,757
Income (loss) from operations:
North American Operations:
Engineered Products . . . . . . 2,679 2,421 1,535 1,542
Consumer Products . . . . . . . 197 262 80 262
European Operations . . . . . . . 132 (139) 195 9
3,008 2,544 1,810 1,813
General Corporate:
Settlement of litigation. . . . . (3,000) - (3,000) -
Other income . . . . . . . . . . 83 33 26 -
Interest (U.S.) . . . . . . . . . (401) (475) (182) (251)
Other expense . . . . . . . . . . (1,344) (1,193) (725) (663)
(4,662) (1,635) (3,881) (914)
Income before income taxes . . . . . $(1,654) $ 909 $(2,071) $ 899
</TABLE>
Consolidated net sales for the quarter ended June 30, 1998 were $14,610,000
compared to $17,757,000 from the same period a year ago, an 18 percent decline
from 1997. This decline was primarily attributable to a lower sales volume in
the Company's Consumer Products segment, specifically lower shipments to a
major retailer. In 1997, the Company recorded a significant increase in sales
in the Consumer Products segment due to the introduction of a new appliance
line of products which created a pipeline fill for a major retailer.
In addition, on an overall basis sales in the Engineered Products segment
declined by approximately 3% primarily due to lower second quarter shipments
of the Company's fan filter products caused by the softness in the
semiconductor capital equipment market and the deterioration of the Asian
economies. Partially offsetting this decline was an increase in the sales of
the Company's residential products.
On a year to date basis, the Company's sales in 1998 were $30,591,000 as
compared to $31,329,000 in 1997. This 2% decline was primarily due to the
aforementioned reduction in Consumer Products segment sales. Within the
Engineered Products segment, the second quarter decline in shipments to
customers in the semiconductor capital equipment was more than offset by the
increases in sales of the Company's residential products.
The Company's backlog of unshipped customer orders was $5,632,000 at June 30,
1998, down from the $8,033,000 backlog reported a year ago primarily due to
the aforementioned softness in the semiconductor capital equipment market.
On a consolidated basis, the cost of products sold as a percentage of sales
for the three and six month period ended June 30, 1998 was 61.8 percent and
64.6 percent, respectively, as compared to 67.3 percent and 67.4 percent,
respectively, a year ago. These improvements were due to several factors
including: lower Consumer Products content, which carries a higher cost of
-8-
goods sold as a percentage of sales as compared to most of the Company's other
products; significant cost improvements being achieved on the new appliance
product line as well as on the fan filter units; and a higher sales mix of
residential products, which carries a lower cost of goods sold as a percentage
of sales as compared to the Company's other product lines.
Consolidated gross profit for the second quarter ended June 30, 1998 was
$5,587,000 as compared to $5,809,000 in the 1997 period, the decline was due
to the lower sales volume during the second quarter offset by the improved
cost of goods sold as a percentage of sales discussed above. Consolidated
gross profit for the first six months ended June 30, 1998 was $10,835,000 as
compared to $10,206,000 in the 1997 period, the difference being primarily
attributable to the lower cost of goods sold as a percentage of sales
discussed above.
Consolidated selling, administration and engineering expenses declined
$156,000 during the second quarter of 1998 as compared to spending during the
same quarter last year. As a percentage of net sales consolidated selling,
administration and engineering expenses increased to 30.2 percent during the
second quarter ended June 30, 1998, as compared to 25.8 percent in 1997. This
increase in the percentage is primarily attributable to the lower sales
volume. On a year to date basis, selling, administration and engineering
expenses increased approximately 4 percent in terms of dollars spent in 1998
as compared to 1997 which was 29.4 percent of sales in 1998 as compared to
27.7 percent of sales for 1997. The primary reason for these increases is a
higher mix of products having variable selling expense ratios above the
average.
Additionally, the Company's operating efficiencies were impacted in the three
and six month period ended June 30, 1998 by the consolidation of the Company's
Lancaster, Pennsylvania manufacturing plant into its Sanford, North Carolina
facility. This was completed during the second quarter of 1998.
For discussion concerning the settlement of litigation, see comments in
"Recent Events" above.
Interest expense during the second quarter and first six months of 1998 was
$182,000 and $401,000, respectively as compared to $251,000 and $475,000 for
the second quarter and first six months of 1997, respectively. These
reductions are due to lower borrowings offset by a slightly higher rate of
interest in the current periods.
The Company recorded an income tax benefit for the second quarter of $828,000
yielding a year to date 1998 income tax benefit of $682,000. This benefit was
generated by the recording of the settlement of litigation. Excluding this
item and its impact on income taxes, income taxes for the second quarter of
1998 would have been $291,000 or an effective tax rate of 32.5 percent as
compared to $398,000 or an effective tax rate of 44.3 percent during the same
period in 1997. This difference is primarily due to the significant change in
income from operations generated by the European Operations segment which has
tax loss carryforwards available. The effective tax rate on a year to date
basis is consistent with the discussion above.
The net loss for the second quarter ended June 30, 1998 was $1,243,000 as
compared to net income of $501,000 for the same period a year ago. The net
loss for the six month period ended June 31, 1998 was $972,000 as compared to
net income of $507,000 for the same period in 1997. The reason for the
decline is solely attributable to the settlement of litigation discussed
below.
<p> -9-
The resulting loss per share (basic and diluted) reported for the second
quarter and first six months of 1998 were $0.17 and $0.13, respectively. This
is compared to earnings per share (basic and diluted) of $0.07 for the second
quarter and six month periods of 1997.
Liquidity and Sources of Capital
The financial condition of the Company remains solid with the current ratio at
2.0 : 1 as compared to 2.2 : 1 at 1997 year-end. Working capital decreased to
$11,579,000 due to the recording of the settlement of litigation and its
related impact on the balance sheet. Long-term debt is at 32.2 percent of
equity and total shareholders' equity is $21,760,000. The Company expects to
replace its existing credit agreement shortly and the Company's financial
institutions anticipate that the credit facility will be renewed upon
completion of the above referenced merger agreement.
Implications of the Year 2000 Issue
The Company uses numerous software applications and computer programs
throughout the various functions within its organization which may require
modification in order to address the upcoming millennium change in the year
2000. The Company's assessment of the year 2000 issue, the impact on
operations and the estimated cost will be completed in early 1999. The cost
of making the necessary corrections will be expensed as incurred. Management
does not expect these costs to have a material impact on the Company's ongoing
results of operations.
The foregoing discussion contains forward-looking statements about the
Company's financial condition and results of operations, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's judgment only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events and circumstances that arise after the date hereof. Factors
that may cause the Company's actual results to differ materially from those
anticipated in forward-looking statements include the following: generally
adverse economic and industry conditions, including a decline in demand for
IAQ products or significant changes in preferences in or use of such products;
changes in the competitive environment, including increased competition in the
Company's primary markets and consolidation in the air quality industry;
economic or political changes in the countries in which the Company operates
or adverse trade regulations; and non-availability of resources for the
Company, or its suppliers and customers, to complete their respective Year
2000 compliance effectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
<p> -10
PART II
Item 1. Legal Proceedings.
On December 2, 1997, Carico International, Inc. ("Carico") filed a
lawsuit against the Company in the Circuit Court for Broward County,
Florida seeking damages alleged to be in the millions of dollars for
injury to its business allegedly caused by a defective specialty air
filter manufactured by the Company.
On July 23, 1998, Carico filed a Demand for Judgement in the amount of
$5,869,071. On August 10, 1998, the Company settle the suit for
$2,900,000 payable one-half by September 9, 1998 and one-half not
later than January 10, 1999. The entire amount was recorded in the
second quarter in accordance with generally accepted accounting
principles.
Item 5. Other Information
The Company's press release date August 14, 1998 reporting execution
of a definitive merger agreement with McLeod Russel Holdings PLC on
August 14, 1998 is attached hereto as Exhibit 99 and incorporated
herein by reference.
Item 6(a). Exhibits
The following exhibits are filed herewith:
10.1 Amended Stock Option Agreement with Steven L. Schneider
10.2 Employment Agreement with David M. Schlegel
10.3 Change of Control Agreement with Calvin J. Monsma
10.4 Severance Agreement with J. Gary Waters
27 Financial Data Schedule
99 Press Release Dated August 14, 1998.
Item 6(b). Report on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the
period covered by this report.
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.
TRION, INC.
(Registrant)
Date: August 14, 1998 /s/ Steven L. Schneider
Steven L. Schneider
President and
Chief Executive Officer
Date: August 14, 1998 /s/ Calvin J. Monsma
Calvin J. Monsma
Vice President and
Chief Financial Officer
<p> -11-
-11-
EXHIBIT 10.1
SECOND AMENDMENT TO STOCK OPTION AGREEMENT
This Second Amendment to Stock Option Agreement
("Amendment") is entered into as of the 7th day of May, 1998 by and
between Trion, Inc. (hereinafter called the "Company"), a Pennsylvania
corporation.
a
n
d
Steven L. Schneider, a key employee of the Company
residing in Sanford, North Carolina (hereinafter called the "Optionee");
W I T N E S S E T H
WHEREAS, the Company and the Optionee entered into that
certain Stock Option Agreement, dated as of March 31, 1993 and as first
amended on July 28, 1995 (the "Stock Option Agreement"); and
WHEREAS, the parties acknowledge that it is desirable,
necessary and appropriate to amend the Stock Option Agreement to extend
the Option Period to ten years;
NOW THEREFORE, for valuable consideration, receipt of
which is hereby acknowledged, and intending to be legally bound hereby,
the parties agree as follows:
1. Definitions. Effective as of the date hereof,
Section 1 Subsection (g) thereof is amended to read in its entirely as
follows:
"Option Period" means the period of time beginning
on the Commencement Date and ending on the tenth anniversary of such
date, inclusive of such dates.
2. Effective of Amendment. Except as expressly
modified hereunder, the Stock Option Agreement shall remain in full
force and effect.
3. Headings. The headings of paragraphs herein are
included solely for convenience of reference and shall not control the
meanings or interpretation of any provisions of this Amendment.
4. Merger. The Stock Option Agreement, as amended by
this Amendment, contains the entire understanding between the parties
hereto and supersedes any prior or contemporary contracts, agreements,
understandings and/or negotiations, whether oral or written.
5. Counterparts. This amendment may be executed in two
or more counterparts each of which shall be deemed to be an original,
but all of which together shall be deemed to be one and the same
instrument.
1
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Attest: TRION, INC.
/s/Calvin J. Monsma By /s/ J.W. Deering
Witness: OPTIONEE
/s/Gloria J. Hubbard /s/ Steven L. Schneider
2
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
(David M. Schlegel)
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
this 1st day of August, 1995, by and among David M. Schlegel, a citizen
and resident of the State of New Mexico (the "Employee"), Trion, Inc., a
corporation organized and existing under the laws of the State of
Pennsylvania with its principal office in Sanford, North Carolina
("Trion"), and Envirco Corporation, a corporation organized and existing
under the laws of the State of New Mexico with its principal office in
Albuquerque, New Mexico (the "Company").
W I T N E S S E T H:
WHEREAS, the Employee is a stockholder of the Company and has been
employed by the Company as its President and Chief Executive Officer;
WHEREAS, the Employee and the other security holders of the Company
are selling all outstanding securities of the Company (the "Stock Sale")
to Trion pursuant to and upon the terms and conditions set forth in that
certain Stock Purchase Agreement dated as of July 28, 1995 by and among
Trion, the Company, the Employee and the other security holders of the
Company as set forth therein (the "Stock Purchase Agreement");
WHEREAS, pursuant to the Stock Purchase Agreement, it is a
condition to Trion's consummation of the Stock Sale that the Employee
enter into this Agreement providing for (i) the continued employment of
Employee by the Company for the term and upon the conditions set forth
herein, (ii) certain agreements by the Employee not to compete with the
Company or Trion during the term of such employment and for a certain
period thereafter, and (iii) certain payments to the Employee by the
Company and by Trion as additional consideration for the execution and
delivery of this Agreement by the Employee;
WHEREAS, the parties acknowledge and agree that this Agreement is
supported by valuable consideration and is entered into voluntarily by
the parties;
NOW, THEREFORE, for and in consideration of the terms of the Stock
Purchase Agreement, and the mutual covenants, conditions and additional
consideration set forth herein, the parties, intending legally to be
bound, hereby agree as follows:
1. Employment. The Company agrees to continue the employment of the
Employee during the Employment Term (as defined in Section 3
hereof). The Employee hereby accepts such employment and agrees
to serve the Company as its President and Chief Executive Officer
subject to the general supervision and direction of the Board of
Directors of the Company (the "Board").
2. Duties. During the Employment Term, the Employee shall perform
such services and duties as are customarily associated with the
office of the president and chief executive officer and as the
Board may from time to time reasonably designate, shall devote the
Employee's full time and best efforts to the business affairs of
the Company and shall not become engaged as an employee or
otherwise in any other business or commercial activities without
the prior written consent of the Board. Nothing in this Agreement
shall be construed to prohibit Employee from devoting his
reasonable time and attention to civic and charitable activities
not inconsistent with the business affairs of the Company, and
Employee is expressly authorized to continue his involvement with
and to devote during normal business hours his reasonable time and
attention, as an officer, director or otherwise, to the Asthma
and Allergy Foundation of America and to the Association of
Commerce and Industry of New Mexico and to receive from the
Company reimbursement of his reasonable expenses for so doing;
provided, however, in no event shall the total amount of time and
attention spent by the Employee in connection with such
activities, in the opinion of the Board, prevent or interfere
with the Employee's performance of his duties hereunder.
3. Employment Term. The Employee shall be employed by the Company
for a period beginning on the date of the closing of the Stock Sale
and continuing until August 1, 2000 or until earlier terminated
pursuant to Section 5 hereof (the "Employment Term").
4. Compensation and Benefits.
a) Base Compensation. During the Employment Term, the Company will
pay the Employee and annual base salary (the "Base Salary") as
compensation for the Employee's services hereunder of $166,397,
payable in equal bi-weekly installments or in such other manner
to which the parties agree. Any Basic Salary increases shall be
in the sole and absolute discretion of the Board based upon his
performance and the performance of the Company.
b) Other Compensation. In addition to the Base Salary provided for
in Section 4(a) above, during the Employment Term the Company
agrees to pay or cause to be provided to the Employee the
following benefits:
(1) Bonus Incentive Plan. This plan shall provide for the
payment of a cash bonus each fiscal year up to a maximum
amount equal to the product of (i) 35%, (ii) 1.5 and (iii )
the Base Salary of the Employee for such fiscal year (the
"Maximum Bonus Amount"). The amount payable as cash bonus
shall be determined based on the achievement by the Company
of certain budget goals for the Company for such fiscal
year. The budget goals will be established annually by
Trion prior to each fiscal year based on a budget for the
Company prepared by the Employee and approved by Trion prior
to each fiscal year. The budget goals will have minimum
targets and maximum targets. If the Company exceeds the
maximum targets, the Maximum Bonus Amount will be paid. If
the Company does not exceed the minimum targets, no bonus
will be payable. If the Company exceeds the minimum
targets, but not the maximum targets, the bonus amount will
be prorated. Notwithstanding the foregoing, for the period
from March 1, 1995 to December 31, 1995, the following shall
apply to determine the amount of cash bonus payable to the
Employee:
(i) from March 1, 1995 to the date of closing of the
Stock Sale (the "Closing"), the bonus payable
shall be that amount which would otherwise be
payable pursuant to the Company's bonus incentive
plan in effect prior to such Closing based on the
plan and budget goals attached hereto as Exhibit
A, prorated for such period. Any bonus payable
will be paid upon completion of the Closing
Balance Sheet contemplated by the Stock Purchase
Agreement.
(ii) from Closing to December 31, 1995, the bonus
payable shall be based upon the bonus plan and
budget goals for such period as described on the
exhibit attached hereto as Exhibit B, prorated for
such period.
(2) Stock Options. Trion will enter into a Stock Option
Award Agreement with Employee by which the Employee will be
eligible for awards of options to purchase up to 100,000
shares of Trion common stock on the following terms and
conditions:
a. Options to purchase up to 20,000 shares may be
awarded in the period from the Closing to December
31, 1995 and in each of the following four fiscal
years beginning January 1, 1996 (each such period or
fiscal year an "Option Period").
b. Each option must be exercised within five years of
the date of award or it will expire.
c. With respect to each Option Period, no option will
be awarded unless the Company has achieved at least
a 10% increase in gross revenues and a 10% increase
in operating profit for such Option Period over
gross revenues and operating profit for the
immediately preceding comparable period, with
such amounts for both comparison periods to be
determined in accordance with generally accepted
accounting principles consistently applied. If the
performance goals are not met for an Option Period,
no option for such Option Period will be granted.
d. With respect to each Option Period, if the Company
achieves at least a 20% increase in gross revenues
and a 20% increase in operating profit for such
Option Period over gross revenues and operating
Profit for the immediately preceding comparable
period, options for 20,000 shares shall be awarded.
If the Company achieves at least a 10% increase in
both gross revenues and operating profit, but less
than a 20% increase in either gross revenues or
operating profit, for such Option Period over gross
revenues and operating profit for the immediately
preceding comparable period, then the number of
shared covered by options awarded shall be reduced
to an amount equal to 20,000 multiplied by a
fraction, (x) the numerator of which is the
difference between (A) the lower of the increase in
gross revenue and the increase in operating profit
and (B) 10%, and (y)the denominator of which is 10%.
e. The exercise price for each share shall be
established as the average closing price for Trion
common stock for the five business days immediately
preceding the date hereof (but in no event less than
$6.00 per share).
f. Awards, if any, for an Option Period will be made by
April 1 of the following year or earlier if the
audited financials of the Company are available.
g. The Stock Option Award Agreement and the right to
the award of options thereunder shall automatically
terminate upon the Employee's termination of
employment with the Company for any reason;
provided, such termination shall not affect any
options already granted or options which may be
granted pursuant to Section 5(e)(5).
h. The stock to be issued upon exercise of options will
be restricted stock and not registered under any
applicable federal or state laws. The Employee will
be required to execute a certificate and agreement
stating that the stock cannot be sold without
registration under applicable federal and state
securities laws or an exemption therefrom and
certifying as to the investment intent of Employee.
Trion agrees to cause the stock to be issued upon
exercise of such options to be registered with the
Securities Exchange Commission ("SEC") the next time
Trion registers shares with the SEC in connection
With its benefit plans.
i. The number of shares covered by the Stock Option
Award Agreement, including the number of shares
covered by options outstanding and by options not
yet awarded, shall be increased or decreased in the
same proportion as the total of the outstanding
shares of common stock of Trion is increased or
decreased as the result of any stock split.
Similarly, the exercise price for each option shall
Be reduced or increased in the same proportion as
the total of the outstanding shares of Trion is
increased or reduced by any stock split.
(3) Trion Incentive Stock Option Plan. Employee will be
entitled to participate in the Trion Incentive Stock
Option Plan adopted in 1995 on the same terms and
conditions contained in that plan on the date thereof.
(c) Fringe Benefits. During the Employment Term, the Company shall
provide to the Employee all benefits which are generally
available to other employees of the Company similarly situated
on a basis consistent with the terms and conditions of such
benefits. In addition, the Company shall provide to the
Employee (i) an automobile allowance of $1,680.00 per month or,
at the option of the company, maintenance by the Company of the
automobile currently provided by the Company for Employee and
payment of operating expenses in accordance with past practices
and (ii) payment of dues and other items to the country club to
which Employee currently belongs in accordance with his current
arrangement.
(d) Withholding. The compensation provided to the Employee
pursuant to this Agreement shall be subject to any withholdings
and deductions required by any applicable tax laws.
(e) Indemnification. The employee will be provided with
indemnification provided to officers and directors of the
Company in effect on July 1, 1995 or as otherwise may be set
forth in the bylaws of the Company. Nothing in this
subparagraph (e) shall diminish or alter the effect of the
Employee's absolute waiver of any right of indemnification by
the Company as set forth in Section 9.9 of the Stock Purchase
Agreement. The indemnification provided pursuant hereto shall
be in lieu of and shall supersede the indemnification Agreement
between the Employee and the Company dated July 20, 1995.
5. Termination. The employment Term is subject to earlier
termination as follows:
(a) Termination For Cause. The Company shall have the right
immediately to terminate the Employee's employment with the
Company, by giving written notice to the Employee for any of
the following reasons, each of which shall be deemed to be
"For Cause": (i) any material breach by the Employee, for
whatever reason, of any provision of this Agreement; (ii)
failure by the Employee to follow reasonable instructions or
directions from the Board relating to the performance of his
or her duties hereunder; (iii) any material violation by the
Employee of any written or verbal employment policy established
from time to time by the Board; (iv) intentional
misappropriation by the Employee of funds or property of the
Company; (v) illegal use or distribution of drugs or chronic
alcohol abuse; (vi) commission by the Employee of an act of
fraud upon, or materially evidencing bad faith, dishonesty or
disloyalty toward, the Company; or (vii) conviction of a felony
or misdemeanor involving moral turpitude.
(b) Termination Without Cause. After the third anniversary of the
date hereof, the Company shall have the right to immediately
terminate the Employee's employment upon thirty (30) days'
prior written notice to Employee of Termination Without Cause.
For purposes hereof, "Termination Without Cause" means
termination by the Company for any reason other than termination
due to Disability (hereinafter defined) or termination "For
Cause." In the case of such termination, the Company shall
continue to pay to the Employee his Base Salary then in effect
for a period of the lesser of (i) 24 months or (ii) the
remaining Employment Term. The amount payable by the Company
shall be reduced by the gross earnings of the Employee earned
during the period such payments are payable by the Company. On
request, the Employee shall certify to the Company the amount of
such earnings. For purposes hereof, gross earnings of the
Employee shall be those earnings subject to the Medicare portion
of the Federal Self Employment Tax.
(c) Death of the Employee. The Employment Term shall terminate
immediately upon the death of the Employee.
(d) Disability of the Employee. The Employment Term shall terminate
upon the 180th day of the Disability of the Employee. For
purposes hereof, "Disability" shall have the meaning ascribed to
such term in the Company's existing long-term disability plan.
The Employee agrees to submit, at the Company's expense, such
medical evidence regarding such disability or infirmity as is
reasonably requested by the Company.
(e) Earned Compensation and Benefits. Upon termination of this
Agreement prior to the end of the Employment Term, the
Employee's compensation and benefits provided for in Section 4
shall be prorated and paid to the Employee, his heirs,
Successors and assigns, as follows:
(1) Base Salary shall be paid to the end of the month in
which termination occurs in accordance with Section 4(a):
(2) Earned by unpaid cash incentive bonus, if any, for the
most recent fiscal year ending prior to the termination
date shall be paid as provided in Section 4(b)(1).
(3) Any cash incentive bonus payable under Section 4(b)(1) for
the fiscal year in which termination occurs shall be
determined as set forth in Section 4(b)(1),provided that
the period during which such performance goals shall be
measured shall be the period of employment during such
year compared, if applicable, to performance during the
comparable period in the previous year. Such cash bonus,
if any, shall be prorated for the period of employment and
shall be payable at the time such amounts would otherwise
be payable if the Employee was employed for the entire
fiscal year.
(4) Stock options payable pursuant to Section 4(b)(2) for the
most recent Option Period ending prior to the termination
date, if any, shall be awarded as provided in Section
4(b)(2).
(5) Any stock options payable under Section 4(b)(2) for the
fiscal year which the termination occurs shall be determined
as set forth in Section 4(b)(2), provided that the Option
Period shall be the period of employment during such year
and shall be compared to the comparable period in the
preceding year. The number of such stock options, if any,
to be granted shall be prorated for the period of employment
and shall be granted at the time such grants would otherwise
be made if the Employee was employed for the entire fiscal
year.
Except for the payment of any earned but unpaid salary due at the time
of termination of the Employment Term, any payment required under
subparagraphs (b) or (e) herein, and the continuation of benefits as
provided by law or the Company's benefit plans applicable to the
Employee, the Employee shall not be entitled to receive any additional
compensation of any kind from the Company upon termination of the
Employment Term.
6. Non-Competition. For and in consideration of this Agreement, the
continued employment of Employee and the additional consideration set
forth in Section 7 hereof, the Employee agrees that, unless specifically
authorized by the Company in writing, he will not, during any period in
which he is employed by the Company and for a period of two (2) calendar
year(s) after the termination or end of the Employee's employment with
the Company (whatever the reason for the end of the employment
relationship):
(a) Solicit, encourage or support any employee of the Company to
leave the employment of the Company;
(b) Solicit, encourage or support any supplier of goods or services
to the Company to reduce the amount of business with the Company;
(c) Solicit, encourage or support any "Company Customer" (as defined
below)to reduce the amount of or to not do business with the
Company;
(d) Serve as an employee, agent, officer, consultant, advisor, or
director of, or own any interest in (other than as beneficial
owner of not more than five percent (5%) of the outstanding
shares of a class of equity security of a corporation or other
entity, which class of equity securities is registered pursuant
to the Securities Exchange Act of 1934, as amended), any entity
that engages in "Competitive Activity" with the Company;
(e) Engage in any "Competitive Activity" (as defined below) with any
"Company Customer" (as defined below): or
(f) Engage in any "Competitive Activity" (as defined below) with the
"Restricted Territory" (as defined below).
"Competitive Activity" means the business of the manufacture, sale,
service or development of indoor air quality equipment, products, or
applications which are competitive with products manufactured, sold,
serviced or developed by the Company or Trion.
"Company Customer" means any company or individual customer of the
Company, Environmental Air Control, Inc. ("Environmental") or Trion who
purchased products or services from the Company, Environmental or Trion
during the Employee's employment with the Company or Environmental.
"Restricted Territory" means the territory in which the Company,
Environmental, or Trion conducted its business during the last three
years of Employee's employment with the Company or Environmental.
The Employee further agrees that during any period in which he is
employed with the Company, he will not engage in any "Competitive
Activity" (as defined above) individually or with any company or
individual other than the Company.
The Employee acknowledges that the restrictions placed upon him by this
Section 6 are reasonable given the nature of the Employee's position
with the Company that involves overall management of the Company
wherever it does business, the area in which the Company markets its
products and services, and the additional consideration provided by the
Company to the Employee pursuant to this Agreement. Specifically, the
Employee acknowledges that the length of the covenant not to compete is
reasonable and that the definitions of "Competitive Activity,"
"Restricted Territory" and "Company Customer" are reasonable.
The Employee acknowledges that all of the provisions of this Section 6
are fair and necessary to protect the interests of the Company.
Accordingly, the Employee agrees not to contest the validity or
enforceability of this Section 6 and agrees that if any court should
hold any provision of this Section 6 to be unenforceable, the remaining
provisions will nonetheless be enforceable according to their terms.
Further, if any provision or subsection is held to be over broad as
written, the Employee agrees that a court should view the above
provisions and subsections as separable and uphold those separable
provisions and subsections deemed to be reasonable.
7. Additional Consideration. As additional consideration for
the Employee's execution of this Agreement and the covenant not to
compete contained herein, the Company agrees to pay the Employee, his
heirs, successors or assigns the sum of $50,000, to be paid on the date
hereof as payment for the covenant not to compete. The Company further
agrees to pay the Employee, his heirs, successors or assigns $50,000 per
year for a period of four years for his execution of this agreement, to
be paid on the first day of August of each year, commencing August 1,
1996, until August 1, 1999.
8. Company Information. The employee acknowledges and agrees
that all sales files, customer records, customer lists, and reports
used, prepared or collected by him are the property of the Company and
agrees that, in the event of the end of his employment with the Company
for any reason, he will return and make available to the Company prior
to the last day of his employment all sales files, customer records,
customer lists, and reports in his possession.
9. Confidentiality. For an in consideration of the terms of
this Agreement, the Employee agrees to the following for the protection
of the Company:
(a) During the term of the Employee's employment with the Company and
for perpetuity after the Employee's separation of employment with
the Company, for whatever reason, the Employee agrees that he will
not, without prior written approval by the Company:
(1) misappropriate, (2) use for the purpose of competing with the
Company, either directly or indirectly, (3) disclose to any third
party, either directly or indirectly, or (4) aid anyone else in
disclosing to any third party, either directly or indirectly, all
or any part of any "Confidential Information" (as that term is
defined below).
(b) "Confidential Information" mean: (1) any Company information
regarding a "Company Customer" (as that term is defined above),
including but not limited to customer lists, contracts,
information, requirements, billing histories, needs and products
or services provided by the Company to such customers; or (2) all
financial information concerning the Company, including but not
limited to, financial statements, balance sheets, profit and loss
statements, earnings, commissions and salaries paid to employees,
sales data and projections, cost analyses and similar information;
or (3) all sources and methods of supply to the Company, including
but not limited to contracts and similar information; or (4) all
plans and projections for business opportunities for new or
developing business of the Company; or (5) all information
relating to the Company's prices, costs, rebates, research and
development activities, service performance, financial data and
operating results, employee lists, personnel matters and other
confidential or proprietary information, designs, patents, ideas
and trade secrets.
"Confidential Information," however, shall not mean or apply to
any information or materials to the extent that the same (1) is
now in, or later enters, the public domain through no fault of the
Employee, (2) was known to the Employee prior to the disclosure by
the Company or Environmental or Trion and such knowledge can be
supported by written documentation supplied by the Employee, or
(3) was rightfully obtained by the Employee from a third party in
rightful possession of such information.
10. Inventions and Improvements. The Employee agrees that the Company
and not the Employee shall be the owner of all right, title and
interest in any apparatus, products, processes, systems, methods,
means, or other intellectual creations or innovations, including
improvements or changes in or to any of the foregoing, whether
patentable or unpatentable, relating to the business, products,
services, or investigations of Company, and any and all designs,
functions, techniques, and procedures relating thereto
(hereinafter referred to as "Inventions and Improvements").
Employee agrees to promptly and fully assign to Company all rights
title and interests in and to all Inventions and Improvements made
or conceived by Employee during the Employment Term. Employee
further agrees to cooperate with and assist Company in its
obtaining, for its benefit, patents or similar invention-
protection rights in the United States and/or foreign countries
with respect to Inventions and Improvements made or conceived by
Employee;
(ii) in any legal or administrative proceedings relating
to such Inventions and Improvements or patents or similar
invention-protection rights pertaining thereto; and (iii) by
executing and delivering any and all documents, instruments, and
writings of every kind and nature as may be necessary or desirable
for Company to obtain, perfect, or protect its rights hereunder or
to accomplish the purposes hereof.
11. Enforcement; Arbitration. In the event of any breach or
threatened breach of Sections 6, 8, 9 or 10 of the Agreement by the
Employee, the Company shall be entitled to an injunction, without bond,
restraining such breach, and costs and attorney's fees relating to any
such proceeding or any other legal action to enforce those sections of
the Agreement, but nothing herein shall be construed as prohibiting the
Company from pursuing other remedies available to it for such breach or
threatened breach. The Employee also agrees that the Company may
disclose this Agreement to any person or entity who, at any time during
the Employee's employment with the Company or for a period of two (2)
years after the Employee's employment with the Company, employs or
considers employing the Employee.
Except for claims barred by the applicable statute of limitations
(which may not be pursued by the parties) and except for claims for
injunctive relief (which may be pursued in federal or state court or by
arbitration), the parties agree that any and all disputes between them
which cannot be amicably settled shall be determined solely and
exclusively by arbitration administered by the American Arbitration
Association under its rules for such disputes at its office in
Albuquerque, New Mexico and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
The parties agree to share equally the costs and expenses associated
with the arbitration.
12. Working Facilities. During the period the Employee is
employed by the Company, the Employee shall be furnished with an office
and secretarial help and such other facilities and services within the
greater Albuquerque, New Mexico area (i.e., within 50 miles of the city
limits of Albuquerque) as are suitable for Employee's position and
adequate for the performance of his duties.
13. Expenses. The Employee is authorized to incur reasonable and
necessary expenses incident to promoting the business of the Company, in
such amounts and in accordance with such policies, statements, and
directives as may, from time to time, be promulgated by the Company and
upon the presentation by the Employee of such itemized accounts of such
expenditures supported by the usual and customary vouchers or receipts
as the Company's policy may require.
14. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefits of the parties hereto and their respective
successors, assigns, heirs and personal representatives; provided,
however, that the Employee may not assign any of his rights, title or
interest in this Agreement.
15. Applicable Law. The parties agree that this Agreement shall
be construed in accordance with the laws of the State of New Mexico.
16. Waiver of Breach. No waiver of any breach of this Agreement
shall operate or be construed as a waiver of any subsequent breach by
any party. No waiver shall be valid unless in writing and assigned by
the party waiving any particular provision.
17. Severability. If any provision of this Agreement is deemed
invalid or unenforceable, the validity of the other provisions of this
Agreement shall not be impaired. If any provision of this Agreement
shall be deemed invalid as to its scope, then notwithstanding such
invalidity, that provision shall be deemed valid to the fullest extent
permitted by law, and the parties agree that, if any court makes such a
determination, it shall have the power to reduce the duration, scope
and/or area of such provisions and/or to delete specific words and
phrases by "blue penciling" and, in its reduced or blue penciled form,
such provisions shall then be enforceable as allowed by law.
18. Notices. All notices, requests, demands and other
communications (collectively, "Notices") that are required or may be
given under this Agreement shall be in writing. All Notices shall be
deemed to have been duly given or made: if by hand, immediately upon the
beginning of the first business day after being sent; if by Federal
Express, Express Mail or any other reputable overnight delivery service,
one day after being placed in the exclusive custody and control of said
courier; and if mailed by certified mail, return receipt requested,
seven (7) business days after mailing. In addition, notwithstanding the
foregoing, a notice of a change of address by a party hereto shall not
be effective until received by the party to whom such notice of a change
of address is sent. All Notices are to be given or made to the parties
at the following addresses (or to such other address as either party may
designate by notice in accordance with the provision of this Section):
(a) If to the Employee:
David M. Schlegel
11412 Woodmar Lane, N.E.
Albuquerque, New Mexico 87111
(b) If to the Company:
Envirco Corporation
6701 Jefferson N.E.
Albuquerque, New Mexico 87109
Attention: Steven L. Schneider
with a copy to:
Trion, Inc.
101 McNeill Road
Sanford, North Carolina 27331
Attention: Steven L. Schneider
(c) If to Trion:
Trion, Inc.
101 McNeill Road
Sanford, North Carolina 27331
Attention: Steven L. Schneider
19. Entire Agreement. This Agreement contains all the terms and
conditions agreed upon by the parties and shall supersede any other
agreement between the Employee and the Company or its predecessors
concerning the subject matter hereof. Except as otherwise provided
herein, this Agreement shall not be altered, modified or in any way
changed, except in writing signed by the Employee and the Company.
20. Counterparts. This agreement may be executed in two (2)
counterparts, each of which shall be deemed to be an original, but both
of which, together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto set their hand and seal as
of the dates indicated below:
WITNESS:
/s/------- /s/David M. Schlegel
Date: 7/28/94 Employee
TRION, INC.
/s/Steven L. Schneider
President and CEO
ATTEST: ENVIRCO CORPORATION
/s/------ /s/Elmer A. Erickson
Date: 8/1/95 CFO V.P. Finance
EXHIBIT 10.3
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this ___ day of
___________, 1998 (the "Effective Date"), by and among Trion, Inc., a
Pennsylvania corporation (hereinafter referred to as the "Company"), and
Calvin J. Monsma (the "Employee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has approved the
Company entering into agreements with certain key executives of the Company
providing for certain severance protection following a Change in Control (as
hereinafter defined);
WHEREAS, the Employee is a key executive of the Company;
WHEREAS, the Board of the Company believes that, should the possibility of a
Change in Control arise, it is imperative that the Company be able to receive
and rely upon the Employee's advice, if requested, as to the best interests of
the Company and its shareholders without concern that he might be distracted
by the personal uncertainties and risks created by the possibility of a Change
in Control; and
WHEREAS, in addition to the Employee's regular duties, he may be called upon
to assist in the assessment of a possible Change in Control, advise management
and the Board of the Company as to whether such Change in Control would be in
the best interests of the Company and its shareholders, and to take such other
actions as the Board determines to be appropriate;
NOW THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control,
and to induce the Employee to remain in the employ of the Company, and for
other good and valuable consideration, the Company and the Employee, intending
to be legally bound, agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following terms shall have the meanings
set forth below when the initial letter of the word is capitalized:
(a) "Base Salary" shall mean the salary of record paid by the Company to the
Employee as annual salary, excluding amounts received under incentive or other
bonus plans, whether or not deferred.
(b) "Beneficiary" shall mean the persons or entities designated or deemed
designated by the Employee pursuant to Section 6.2 herein.
(c) "Cause" shall mean conviction of the Employee of (or a plea of no
contest with respect to) a felony or a misdemeanor involving moral turpitude
or a determination by the Board that the Employee has engaged in serious
misconduct (such as dishonesty, insubordination, willful failure to perform a
material or significant portion of his duties or other act or omission
materially detrimental to the business or reputation of the Company or
materially damaging to the relationships of the Company with its customers,
suppliers or employees).
(d) A "Change in Control" shall mean, and shall be deemed to have occurred
upon the occurrence of, any one of the following events:
(i) The acquisition in one or more transactions, other than from the
Company, by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of either (i) 30% or more of the
outstanding Common Stock of the Company (the "Outstanding Common Stock") or
30% or more of the Company Voting Securities; provided, however, that the
following shall not constitute a Change in Control: any acquisition by (1) the
Company or any of its subsidiaries, any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its subsidiaries, or
(2) any corporation with respect to which, following such acquisition, more
than 70% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Common Stock and Company Voting Securities, as the case may be; or
(ii) Individuals who constitute the Board as of the date of this Agreement
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date of this Agreement whose election or nomination for
election by the Company was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (unless such nomination or
election (a) was at the request of an unrelated third party who has taken
steps reasonably calculated to effect a Change in Control, or (b) otherwise
arose in connection with or in anticipation of the Change in Control) shall be
considered as though such individual were a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a reorganization, merger
or consolidation, unless, following such reorganization, merger or
consolidation, all or substantially all of the individuals and entities who
were the respective beneficial owners of the Outstanding Common Stock and
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, following such reorganization, merger or consolidation
beneficially own, directly or indirectly, more than 70% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same proportion
as their ownership of the Outstanding Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation,
as the case may be; or
(iv) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) a sale or other disposition
of 60% or more by value of the assets of the Company other than to a
corporation with respect to which, following such sale or disposition, more
than 70% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Common Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities, as the case may be,
immediately prior to such sale or disposition.
(e) "Company Voting Securities" shall mean the combined voting power of all
outstanding voting securities of the Company entitled to vote generally in the
election of directors for the Board.
(f) "Effective Date of Termination" shall mean the date on which the
Employee's employment terminates in a circumstance in which Section 2.1
provides for Severance Benefits (as defined in Section 2.1).
(g) "Termination Without Cause" shall mean a discharge by the Company of the
Employee from his employment without Cause.
(h) "Resignation With Good Reason" shall mean any termination by the
Employee of the Employee's employment within one (1) year after the occurrence
of any of the following:
(i) A substantial reduction in the base salary, benefits or perquisites
provided the Employee;
(ii) A relocation of the Employee's principal place of business to a location
which is more than 50 miles from its current location;
(iii) The assignment to the Employee of any duties inconsistent in any
respect with the Employee's current position with the Company (including
status, offices, titles and reporting requirements), or any action by the
Company which results in diminution in such positions, or the Employee's
current authority, duties or responsibilities, but excluding for this purpose
any isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company, promptly after receipt of written notice
thereof given by the Employee in accordance with this Agreement; or
(iv) Any failure by the Company to comply with and satisfy Article 4 of this
Agreement.
Article 2. Severance Benefits
2.1. Right to Severance Benefits. The Employee shall be entitled to receive
from the Company the severance benefits as described in Section 2.2
("Severance Benefits") if a Change in Control shall occur and within two years
after the Change in Control there shall occur a Termination Without Cause or a
Resignation With Good Reason.
2.2. Severance Benefits. In the event that the Employee becomes entitled to
receive Severance Benefits, as provided in Section 2.1, the Company shall
provide the Employee with total Severance Benefits as follows (but subject to
Sections 2.5 and 2.6):
(a) The Employee shall receive a single lump sum payment within thirty (30)
days of the Effective Date of Termination in an amount equal to sum of (i) the
product of two (2) times the sum of (A) the highest Base Salary during the
term of this Agreement and (B) the full "Target Award" fixed for the Employee
under the Company's incentive bonus program for the then current fiscal year,
(ii) an amount equal to the full "Target Award" fixed for the Employee under
the Company's incentive bonus program for the then current fiscal year
multiplied by a fraction, the numerator of which is the number of days in the
then current fiscal year through the Effective Date of Termination and the
denominator of which is 365 and (iii) an amount equal to the sum of (A) the
maximum contributions that could have been made by the Company on the
Employee's behalf to all defined contribution plans of the Company (assuming
that the Employee had made the maximum allowable contributions to such plans)
and (B) the present value of the benefits that the Employee could have accrued
under all defined benefit plans of the Company, had the Employee continued to
participate in such plans for the three (3)-year period following the
Effective Date of Termination.
(b) The Employee shall receive an amount, paid within thirty (30) days of
the Effective Date of Termination, equal to the sum of (A) the Employee's Base
Salary through the Effective Date of Termination to the extent not theretofore
paid, (B) the amount of any bonus, incentive compensation, deferred
compensation and other cash compensation accrued by the Employee as of the
Effective Date of Termination to the extent not theretofore paid and (C) any
vacation pay, expense reimbursements and other cash entitlements accrued by
the Employee as of the Effective Date of Termination to the extent not
theretofore paid.
(c) For a period of two (2) years, the Company shall arrange to provide the
Employee, at the Company's cost, with life, disability and health-and-accident
insurance coverage providing substantially similar benefits to those which the
Employee was receiving immediately prior to the Effective Date of Termination,
to the extent the Company continues to maintain benefit plans providing for
such benefits for executives generally; provided, however, that the Company
may cease providing such benefits at such time as the Employee is provided
with substantially equivalent benefits by another employer.
2.3. Termination for any other Reason. If the Employee's employment with the
Company is terminated under any circumstances other than those set forth in
Section 2.1, including without limitation by reason of retirement, death,
disability, discharge for Cause or resignation other than a Resignation With
Good Reason, or any termination for any reason that occurs prior to a Change
in Control or after two years following a Change in Control, the Employee
shall have no right to receive the Severance Benefits under this Agreement or
to receive any payments in respect of this Agreement. In such event
Employee's benefits, if any, in respect of such termination shall be
determined in accordance with the Company's retirement, survivor's benefits,
insurance, and other applicable plans, programs, policies and practices then
in effect. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated prior to the date on
which a Change in Control occurs either (i) by the Company other than for
Cause or (ii) by the Employee for Good Reason, and it is reasonably
demonstrated that termination of employment (a) was at the request of an
unrelated third party who has taken steps reasonably calculated to effect a
Change in Control, or (b) otherwise arose in connection with or in
anticipation of the Change in Control, then for all purposes of this Agreement
the termination shall be deemed to have occurred upon a Change in Control and
the Employee will be entitled to Severance Benefits as provided in Section 2.2
hereof.
2.4. Notice of Termination. Any termination by the Company for Cause or by
the Employee for Good Reason shall be communicated by Notice of Termination to
the other party. For purposes of this Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated.
2.5. Withholding of Taxes. The Company shall withhold from any amounts
payable under this Agreement all Federal, state, local, or other taxes as
legally shall be required to be withheld.
2.6. Certain Limitations on Payments by the Company. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, if tax
counsel selected by the Company and acceptable to the Employee determines that
any portion of any payment under this Agreement would constitute an "excess
parachute payment," then the payments to be made to the Employee under this
Agreement shall be reduced (but not below zero) such that the value of the
aggregate payments that the Employee is entitled to receive under this
Agreement and any other agreement or plan or program of the Company shall be
one dollar ($1) less than the maximum amount of payments which the Employee
may receive without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code; provided, however, that the foregoing limitation shall
not apply in the event that such tax counsel determines that the benefits to
the Employee under this Agreement on an after-tax basis (i.e., after federal,
state and local income and excise taxes) if such limitation is not applied
would exceed the after-tax benefits to the Employee if such limitation is
applied.
Article 3. Unconditional Obligations; Dispute Resolution.
The Company's obligation to make the payments provided for under this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others.
Any controversy or claim arising out of or relating to this Agreement or the
breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in accordance with the internal laws of the
State of North Carolina by three arbitrators, one of whom shall be appointed
by the Board, one by the Employee and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be
appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall
be as provided in this Article 3. The cost of any arbitration proceeding
hereunder shall be borne equally by the Company and the Employee. The award
of the arbitrators shall be binding upon the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
Article 4. Binding Effect; Successors
This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than
by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal representatives.
This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
Article 5. Term of Agreement
The term of this Agreement shall commence on the Effective Date and shall
continue in effect for three (3) full years. However, in the event a Change
in Control occurs during the term, this Agreement will remain in effect for
the longer of: (i) twenty-four (24) months beyond the month in which such
Change in Control occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required hereunder have
been paid to the Employee or other party entitled thereto. The term of this
Agreement may be extended by written agreement of the parties.
Article 6. Miscellaneous
6.1. Employment Status. Neither this Agreement nor any provision hereof
shall be deemed to create or center upon the Employee any right to be retained
in the employ of the Company or any subsidiary or other affiliate thereof.
6.2. Beneficiaries. The Employee may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Employee under this Agreement. Such designation must be
in the form of a signed writing acceptable to the Board of Directors of the
Company. The Employee may make or change such designation at any time.
6.3. Entire Agreement. This Agreement contains the entire understanding of
the Company and the Employee with respect to the subject matter hereof. The
payments provided for under this Agreement in the event of the Employee's
termination of employment shall be in lieu of any severance benefits payable
under any severance plan, program, or policy of the Company to which he might
otherwise be entitled.
6.4. Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
6.5. Notices. All notices, requests, demands, and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first-
class certified mail, return receipt requested, postage prepaid, to the other
party, addressed as follows:
(a) if to the Company:
Trion, Inc.
101 McNeill Road
Sanford, North Carolina 27331-0760
(b) if to Employee, to him at the address set forth at the end of this
Agreement. Addresses may be changed by written notice sent to the other party
at the last recorded address of that party.
6.6. Execution in Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed to be original,
but all such counterparts shall constitute one and the same instrument, and
all signatures need not appear on any one counterpart.
6.7. Severability. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Agreement are not part of the
provisions hereof and shall have no force and effect.
6.8. Modification. No provision of this Agreement may be modified, waived,
or discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by the Employee and on behalf of the Company.
6.9. Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the State of North Carolina, other than the conflict of
law provisions thereof, shall be the controlling law in all matters relating
to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
TRION, INC.
By:
Title:
EMPLOYEE
Name: Calvin J. Monsma
Address: 1717 Windmill Drive
Sanford, NC 27330
- - 9 -
PI-166928.01
EXHIBIT 10.4
SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the ________ day of ______________,
1998, by and between TRION, INC. (hereinafter called the "Company"), a
Pennsylvania corporation with principal executive offices in Sanford, North
Carolina, and J.G. Waters (hereinafter called the "Employee"), an individual
employee of the Company.
WITNESSETH THAT:
WHEREAS, the Company may be a party to a proposed transaction which
contemplates the acquisition of the Company by McLeod Russel Holdings PLC
and as a result of the completion of the transaction;
WHEREAS, Employee presently serves as an employee of the Company; and
WHEREAS, the parties desire to set forth in this Agreement the terms and
conditions of their employment relationship from and after the actual date of
closing of the transaction contemplated (the "Closing Date");
NOW, THEREFORE, the Company and the Employee, each intending to be legally
bound, hereby mutually covenant and agree as follows:
1. Employment and Term. The Company shall employ the Employee in a full time
capacity for the term commencing on the Closing Date and continuing for a
period of one (1) year from and after such date, and the Employee shall
accept such employment, subject to earlier termination in accordance with
Section 6; provided, however, that this Agreement shall be of no force or
effect unless and until the Closing Date shall occur. Such employment term
may be extended by the written agreement of the parties hereto. Capitalized
terms used in this Agreement shall, unless the context clearly indicates
otherwise, have the respective meanings given to such terms in Section 15.
2. Position and Duties. During the period of his employment as provided in
Section 1 hereof, the Employee shall serve the Company, and any one or more of
its affiliates, in such capacities as the Chief Executive Officer of the
Company shall determine and shall have such duties as may be assigned to him
from time to time by the Chief Executive Officer of the Company.
3. Base Salary. For his services performed pursuant to this Agreement,
during the period of employment as provided in Section 1 hereof, the Company
shall pay the Employee a base salary at the rate that is no less than the rate
of the Employee's base salary from the Company that was in effect immediately
prior to the Closing Date, payable in accordance with the Company's regular
payroll practices.
4. Other Benefits. In addition to the base salary to be paid to the Employee
pursuant to Section 3, the Employee shall be entitled to the following:
(a) Employee Benefits. The Employee shall be eligible for participation in any
pension, retirement, profit sharing, health, life, disability, vacation, bonus,
incentive, stock option or similar plan or program now in effect or hereafter
established by the Company in the same manner and to the same extent as, and
subject to the same criteria pertaining to, other similarly situated executives
of the Company.
(b) Fringe Benefits. The Employee shall be entitled to perquisites of office,
fringe benefits and other similar benefits consistent with the Company's
present practices.
(c) Expense Reimbursement. The Company shall reimburse the Employee, upon
proper accounting, for reasonable business expenses and disbursements incurred
by him in the course of the performance of his duties under this Agreement.
5. Confidentiality. Except for an act on behalf of the Company with the
consent of or as directed by the Chief Executive Officer of the Company or as
may be required by law, the Employee shall keep confidential and shall not
divulge to any other person or entity, during the term of employment or
thereafter, any of the business secrets or other confidential information
regarding the Company and its affiliates, which has not otherwise become public
knowledge; provided, however, that nothing in this Agreement shall preclude the
Employee from disclosing information (i) to parties retained to perform
services for the Company or its subsidiaries, or (ii) under any other
circumstances to the extent such disclosure is, in the reasonable judgment
of the Employee, appropriate or necessary to further the best interest of the
Company or its affiliates, or (iii) as may be required by law.
6. Termination.
(a) Termination Without Cause. The Employee shall be entitled to receive from
the Company the severance benefits as described below ("Severance Benefits") if
during the term of this Agreement there shall occur a Termination Without Cause
(as such capitalized terms are defined below). The Severance Benefits shall
consist of the following:
(i) The Employee shall receive a single lump sum payment within thirty (30)
days of the effective date of termination in an amount equal to sum of (i) the
product of one (1) times the sum of (A) the Employee's highest base salary
during the term of this Agreement and (B) the full "Target Award" fixed for the
Employee under the Company's incentive bonus program for the then current fiscal
year, (ii) an amount equal to the full "Target Award" fixed for the Employee
under the Company's incentive bonus program for the then current fiscal year
multiplied by a fraction, the numerator of which is the number of days in the
then current fiscal year through the effective date of termination and the
denominator of which is 365 and (iii) an amount equal to the sum of (A) the
maximum contributions that could have been made by the Company on the Employee's
behalf to all defined contribution plans of the Company (assuming that the
Employee had made the maximum allowable contributions to such plans) and (B)
the present value of the benefits that the Employee could have accrued under
all defined benefit plans of the Company, had the Employee continued to
participate in such plans for the one (1) year period following the effective
date of termination.
(ii) The Employee shall receive an amount, paid within thirty (30) days of the
effective date of termination, equal to the sum of (A) the Employee's base
salary through the effective date of termination to the extent not theretofore
paid, (B) the amount of any bonus, incentive compensation, deferred
compensation and other cash compensation accrued by the Employee as of the
effective date of termination to the extent not theretofore paid not included
in section 6 (a) (I) (ii) and (C) any vacation pay, expense reimbursements
and other cash entitlements accrued by the Employee as of the effective date
of termination to the extent not theretofore paid.
(iii) For a period of one (1) year following the effective date of termination,
the Company shall arrange to provide the Employee, at the Company's cost, with
life, disability and health-and-accident insurance coverage providing
substantially similar benefits to those which the Employee was receiving
immediately prior to the effective date of termination, to the extent the
Company continues to maintain benefit plans providing for such benefits for
executives generally; provided, however, that the Company may cease providing
such benefits at such time as the Employee is provided with substantially
equivalent benefits by another employer
(b) Termination for any other Reason. If the Employee's employment with the
Company is terminated under any circumstances other than those set forth in
Section 6(a), including without limitation by reason of retirement, death,
disability, discharge for Cause or resignation other than a Resignation With
Good Reason, the Employee shall have no right to receive the Severance Benefits
under this Agreement or to receive any payments in respect of this Agreement.
In such event Employee's benefits, if any, in respect of such termination shall
be determined in accordance with the Company's retirement, survivor's benefits,
insurance, and other applicable plans, programs, policies and practices then in
effect.
(c) Notice of Termination. Any termination of this Agreement by either party
shall be communicated by notice of termination to the other party. For
purposes of this Agreement, a "notice of termination" shall mean a written
notice which shall indicate the specific termination provision in this
Agreement relied upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
(d) Withholding of Taxes. The Company shall withhold from any amounts
payable under this Agreement all Federal, state, local, or other taxes as
legally shall be required to be withheld.
(e) Certain Limitations on Payments by the Company. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, if tax
counsel selected by the Company and acceptable to the Employee determines that
any portion of any payment under this Agreement would constitute an "excess
parachute payment," then the payments to be made to the Employee under this
Agreement shall be reduced (but not below zero) such that the value of the
aggregate payments that the Employee is entitled to receive under this
Agreement and any other agreement or plan or program of the Company shall
be one dollar ($1) less than the maximum amount of payments which the
Employee may receive without becoming subject to the tax imposed by
Section 4999 of the Internal Revenue Code; provided, however, that the
foregoing limitation shall not apply in the event that such tax counsel
determines that the benefits to the Employee under this Agreement on an
after-tax basis (i.e., after federal, state and local income and excise
taxes) if such limitation is not applied would exceed the
after-tax benefits to the Employee if such limitation is applied.
(f) Unconditional Obligations; Dispute Resolution. The Company's obligation
to make the payments provided for under this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Employee or others. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof (including the arbitrability
of any controversy or claim), shall be settled by arbitration in accordance
with the internal laws of the State of North Carolina by three arbitrators,
one of whom shall be appointed by the Board of Directors of the Company, one
by the Employee and the third of whom shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment
of a third arbitrator, then the third arbitrator shall be appointed by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except
with respect to the selection of arbitrators which shall be as provided in
this Section 6(f). The cost of any arbitration proceeding hereunder shall
be borne equally by the Company and the Employee. The award of the
arbitrators shall be binding upon the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
7. Entire Agreement. This Agreement constitutes and expresses the entire
agreement of the parties with respect to subject matter hereof and supersedes
and cancels all prior negotiations, discussions, agreements and understandings
relating to such subject matter.
8. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Company, to:
Trion, Inc.
101 McNeill Road
Sanford, North Carolina 27331-0760
(b) if to Employee, to him at the address set forth at the end of this
Agreement. Such addresses may be changed by written notice sent to the other
party at the last recorded address of that party.
9. Binding Effect and Benefit. This Agreement may not be assigned by either
party, whether by operation of law or otherwise, without the prior written
consent of the other party, except that any right, title or interest of the
Company arising out of this Agreement may be assigned to any corporation
controlling, controlled by, or under common control with the Company, or
succeeding to the business and substantially all of the assets of the Company or
any affiliates for which the Employee performs substantial services, provided,
however, that no such assignment shall relieve the Company of its obligations
hereunder without the express written consent of the Employee. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties and their respective heirs, legatees, devisees, personal
representatives, successors and assigns.
10. Severability. If any provision of this Agreement shall be adjudged by any
court of competent jurisdiction to be invalid or unenforceable for any reason,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement.
11. Further Assurance. Each party agrees to cooperate with the other, and to
execute and deliver, or cause to be executed and delivered, all such other
instruments and documents, and to take all such other actions as may be
reasonably requested of it from time to time, in order to effectuate the
provisions and purposes of this Agreement.
12. Amendment. This Agreement can be amended or modified only by a written
agreement of the parties hereto.
13. Counterparts. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
14. Applicable Law. This Agreement shall be construed and interpreted in
accordance with and governed by the laws of the Commonwealth of Pennsylvania
other than the conflict of laws provisions of such laws.
15. Certain Defined Terms. Whenever used in this Agreement, the following terms
shall have the meanings set forth below when the initial letter of the word is
capitalized:
(a) "Cause" shall mean conviction of the Employee of (or a plea of no contest
with respect to) a felony or a misdemeanor involving moral turpitude or a
determination by the Chief Executive Officer of the Company that the Employee
has engaged in serious misconduct (such as dishonesty, insubordination, willful
failure to perform a material or significant portion of his duties or other act
or omission materially detrimental to the business or reputation of the Company
or materially damaging to the relationships of the Company with its customers,
suppliers or employees).
(b) "Termination Without Cause" shall mean a discharge by the Company of the
Employee from his employment without Cause; or
(i) A substantial reduction in the base salary, benefits or perquisites
provided the Employee; or
(ii) A relocation of the Employee's principal place of business to a location
which is more than 50 miles from its current location.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
TRION, INC.
By:_____________________________
Title:____________________________
EMPLOYEE
Name: J. G. Waters
Address:
9
PI-239116.01
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,138,000
<SECURITIES> 0
<RECEIVABLES> 9,380,000
<ALLOWANCES> 269,000
<INVENTORY> 10,813,000
<CURRENT-ASSETS> 22,969,000
<PP&E> 26,079,000
<DEPRECIATION> 15,756,000
<TOTAL-ASSETS> 40,150,000
<CURRENT-LIABILITIES> 11,390,000
<BONDS> 3,200,000
0
0
<COMMON> 3,575,000
<OTHER-SE> 18,185,000
<TOTAL-LIABILITY-AND-EQUITY> 40,150,000
<SALES> 30,591,000
<TOTAL-REVENUES> 30,591,000
<CGS> 19,756,000
<TOTAL-COSTS> 32,245,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 401,000
<INCOME-PRETAX> (1,654,000)
<INCOME-TAX> (682,000)
<INCOME-CONTINUING> (972,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (972,000)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
For more information contact:
C. J. Monsma (919/775-2201)
FOR IMMEDIATE RELEASE
Sanford, NC, August 14, 1998 - TRION, INC. (NASDAQ: TRON)
Trion announced today that it has entered into a definitive agreement to be
acquired by McLeod Russel Holdings PLC in a merger transaction. Each
outstanding share of Trion would be converted in the merger into $7.27 per
share in cash. The directors of Trion and McLeod Russel are unanimously
recommending the merger transaction to their respective shareholders. The
transaction would be subject to approval of the respective shareholders of
Trion and McLeod Russel and to the receipt of any necessary governmental
approvals. Trion's management team, led by Steven L. Schneider, will remain
in place, strengthening McLeod Russel's existing North American management.
McLeod Russel is an international company located in the United Kingdom and
listed on the London Stock Exchange with subsidiaries in Europe and North
America, which specializes in clean air filtration systems and surface coating
products. McLeod Russel has arranged definitive financing for the
transaction.
Mr. Schneider, Chief Executive Officer of Trion, commenting upon the
transaction said: "McLeod Russel and Trion are an excellent match and we look
forward to expanding our current offerings to all customers. As a leader in
US clean air systems business with a well- established name and market
position, we will benefit from McLeod Russel's leading position in Europe and
their determined focus upon building an international clean air group uniquely
combining media technology, clean air technology and systems know-how."
(more)
Page 2
Trion, Inc.
August 14, 1998
McLeod Russel's Chief Executive, Ian Hazlehurst, commented: "The acquisition
of Trion is a major step in McLeod Russel's development of its international
clean air business. Combining our respective businesses provides us with a
stronger platform to serve the important North American market with a unique
range of products. Trion's products will complement and
broaden our existing product offering in Europe. Our existing North American
business will be strengthened by the addition of Trion's proven management
team led by Steve Schneider."
On August 10, 1998 the Company settled a lawsuit pending against it for
$2.9 million in cash, payable by the Company one-half by September 9, 1998 and
one-half not later than January 10, 1999. As a result of this settlement, the
Company's previously announced results for the second quarter of 1998 have
been revised to reflect a loss of $1,243,000 for the second quarter, and a
loss of $972,000 for the first half of 1998, after the net charge of
$1,881,000 associated with the settlement.
Trion, a leader in indoor air quality (IAQ) since 1947, specializes in
products that focus on health and safety with specific emphasis on the
environment in industry and the home. Trion is a publicly traded company and
is listed as TRON on the NASDAQ exchange.
###
