SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
March 31, 1996 0-23752
OVERHEAD DOOR CORPORATION
(Exact Name of Registrant as Specified in its Charter)
INDIANA 35-0564120
(State of Incorporation) (I.R.S. Employer
Identification Number)
6750 LBJ Freeway 75240
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 233-6611
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
There were 1,000 shares of the Registrant's Common Stock, $1 par value,
outstanding as of May 6, 1996.
1
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
Part I Financial Information
---------------------
Item 1. Financial Statements (unaudited)
--------------------
Condensed Consolidated Statements of Operations - 3
Three months ended March 31, 1996 and 1995.
Condensed Consolidated Statements of 4
Financial Condition - March 31, 1996
and December 31, 1995.
Condensed Consolidated Statements of 5
Cash Flows - Three months ended
March 31, 1996 and 1995.
Notes to Condensed Consolidated Financial 6
Statements.
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
---------------------------------------------
Part II Other Information 12
-----------------
Signatures 12
2
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data) Three Months Ended March 31,
------------------------------
1996 1995
-------------- --------------
Net Sales $126,242 $126,174
Costs and Expenses
Cost of products sold 102,309 102,099
Selling, general & administrative 16,459 15,180
Amortization 1,999 2,039
-------- --------
Total Costs and Expenses 120,767 119,318
-------- --------
Operating Income 5,475 6,856
Interest Expense (6,702) (7,280)
Other (Expense), Net (474) (360)
-------- --------
Loss Before Income Taxes (1,701) (784)
Income Tax (Expense) Benefit 758 (174)
-------- --------
Net Loss $ (943) $ (958)
======== ========
Net Loss Per Common Share $ (943) $ (958)
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands except number of shares and per March 31, December 31,
share data) 1996 1995
--------- ------------
(Unaudited) (See Note)
ASSETS
Current Assets
Cash and cash equivalents $ 161 $ 2,604
Notes and accounts receivable, less allowances
(1996-$5,581; 1995-$5,824) 83,849 90,914
Inventories, net 83,028 81,037
Prepayments and other current assets 8,344 7,569
-------- --------
Total Current Assets 175,382 182,124
Property, Plant and Equipment
Land and buildings 48,097 48,094
Machinery and equipment 66,756 66,757
Construction in progress 3,413 2,458
Accumulated depreciation (46,375) (43,862)
-------- --------
Total Property, Plant and Equipment 71,891 73,447
Cost in excess of net assets of businesses
acquired, less amortization
(1996-$12,579; 1995-$11,559) 149,434 150,454
Other assets 69,271 69,405
-------- --------
$465,978 $475,430
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 55,238 $ 71,815
Accrued liabilities 23,505 30,408
Current maturities of long-term debt 16,063 15,077
-------- --------
Total Current Liabilities 94,806 117,300
Long-term Debt, Less Current Maturities 224,680 209,730
Deferred Income Taxes 34,595 35,287
Other Long-term Liabilities 11,683 11,831
-------- --------
Total Noncurrent Liabilities 270,958 256,848
Shareholder's Equity
Common stock, par value $1 per share;
1,000 shares authorized and outstanding 1 1
Additional capital 100,492 100,492
Currency translation adjustment (700) (575)
Retained earnings 421 1,364
-------- --------
Total Shareholder's Equity 100,214 101,282
-------- --------
$465,978 $475,430
======== ========
NOTE: The condensed consolidated statement of financial condition at December
31, 1995 has been derived from the audited financial statements at that
date.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
(in thousands) 1996 1995
-------- --------
OPERATING ACTIVITIES
Loss from Operations $ (943) $ (958)
Adjustments to reconcile net loss to net
cash flows used for operating activities:
Depreciation and amortization 4,499 4,380
(Increase) in net operating assets (20,021) (8,603)
-------- --------
Net Cash Flows Used for Operating Activities (16,465) (5,181)
INVESTING ACTIVITIES
Proceeds from sales of property, plant
and equipment 3 -
Expenditures for property, plant and
equipment (967) (1,933)
(Increase) in other assets (825) (818)
-------- --------
Net Cash Flows Used for Investing Activities (1,789) (2,751)
FINANCING ACTIVITIES
Net proceeds from long-term borrowings on
revolver 17,500 7,300
Net proceeds from other long-term borrowings - 150
Principal payments on long-term debt (1,564) (2,472)
-------- --------
Net Cash Flows Provided by Financing Activities 15,936 4,978
EFFECT OF EXCHANGE RATE CHANGES ON CASH (125) 138
-------- --------
Decrease in Cash and Cash Equivalents (2,443) (2,816)
CASH AND CASH EQUIVALENTS
Beginning of period 2,604 4,477
-------- --------
End of period $ 161 $ 1,661
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
OVERHEAD DOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
Note A - Basis of Presentation
- - ------------------------------
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. Although the Company believes the
disclosures made are adequate to make the information presented not
misleading, these condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's annual report for the year ended December 31, 1995.
In the opinion of the Registrant, all adjustments, which are of a normal
recurring nature, necessary to present the information fairly have been made.
The results of operations for such interim periods are not necessarily
indicative of results for a full year.
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current presentation.
Note B - Inventories
- - --------------------
Substantially all inventories are valued on the LIFO method. The accounting
records for any interim period do not reflect inventory values as between raw
materials, work-in-process and finished goods. The March 31, 1996 amounts
represent an estimated breakdown between raw materials, work-in-process, and
finished goods inventories, based upon each category's proportionate share at
December 31, 1995. The cost of material included in cost of products sold
during the interim periods is determined by using estimated material cost
rates. Inventories are classified as follows:
March 31, December 31,
1996 1995
--------- ------------
(in thousands)
At current cost:
Raw materials $39,329 $38,420
Work in process 18,764 18,330
Finished goods 30,173 29,475
------- -------
88,266 86,225
Excess of current cost over LIFO (5,238) (5,188)
------- -------
Inventories, net $83,028 $81,037
======= =======
Current cost of inventories is determined using the first-in, first-out (FIFO)
method of inventory accounting, which approximates current cost.
6
Note C. Litigation and Other Contingencies
- - -------------------------------------------
The Company is a defendant in a number of lawsuits in which the plaintiffs seek
damages for personal injuries alleged to have been incurred in handling
"Jifflox" converter dollies previously manufactured by the Company. Currently,
five such cases are pending. These converter dollies are used to connect truck
trailers in tandem. As a result of a separate product line divestiture and the
resultant closing of the manufacturing facility where that product and the
Jifflox converter dollies were manufactured, Jifflox production was discontinued
in the second quarter of 1987. The plaintiffs are truck drivers or truck yard
employees who allege they have suffered personal injuries in moving a Jifflox
dolly. The lawsuits allege various theories of liability, including negligence,
warranty, failure to warn and strict liability. The lawsuits allege that
Jifflox dollies are defectively designed so as to preclude safe maneuvering in
truck yards or that they are too heavy or that they do not contain adequate
warnings against misuse. Unspecified damages are claimed. The Company denies
liability in each of the lawsuits.
The Company is a defendant in a number of lawsuits in which damages are sought
for property damage alleged to have been caused or contributed to by aluminum
windows manufactured by Premier Products, a former division of the Company which
was divested in 1989. At March 31, 1996, 53 such cases were pending, all of
which are venued in state courts in California. The cases typically involved
multi-family residences. The general contractor and all subcontractors who were
originally involved in the construction of these residences, including the
Company, are typically joined as defendants or cross-defendants. The suits
allege various theories of liability, including negligence and contract under
California's ten year construction defect statute of limitations. The Company
denies liability in each of the lawsuits.
The Company is a defendant in a lawsuit filed in May 1995, in the United States
District Court for the Central District of California, which alleges that
certain revolving doors manufactured by the Company's Horton Automatics division
infringe four patents owned by a competitor of Horton. The suit alleges that
the infringement is willful and requests an injunction as well as unspecified
damages. The Company denies liability.
The Company filed a Complaint for Declaratory Judgment in August 1995, in the
United States District Court for the Northern District of Texas against The
Chamberlain Group, Inc. The Complaint requests a declaratory judgment that a
new line of residential garage door openers which the Company has recently
introduced does not infringe a particular patent owned by Chamberlain, which
patent Chamberlain has claimed such operators infringe.
The Company is a defendant in a lawsuit filed in November 1995, in the United
States District Court for the District of Connecticut. The Complaint alleges
that an executive hired by the Company in August 1995, misappropriated
confidential information of his prior employer, a competitor of the Company, and
used it for the Company's benefit. The suit requests an injunction as well as
unspecified compensatory and punitive damages. The Company considers the suit
to be entirely without merit.
In addition, the Company is a defendant in various other legal proceedings
arising in the ordinary course of business.
The Company is self-insured with respect to a portion of its potential losses
relating to product and general liability and workers' compensation claims. The
Company is responsible for the first $0.5 million of loss related to each
product or general liability claim and the first $0.3 million of loss related to
each worker's compensation claim. Third-party insurance, up to $50.0 million,
is maintained for losses in excess of these amounts. The Company maintains
reserves for anticipated self insurance losses.
7
Note C. Litigation and Other Contingencies (continued)
- - -------------------------------------------------------
Although the results of any litigation or claims cannot be predicted with
certainty, management believes that the outcome of pending litigation and
claims, when considered in conjunction with self insurance reserves established
therefore ($14.1 million at December 31, 1995 and $14.5 million at March 31,
1996) will not have a material adverse effect on the Company's results of
operations or financial condition.
The Company has been determined by the United States Environmental Protection
Agency (the "EPA") to be a potentially responsible party concerning a Superfund
third-party waste disposal site near Syracuse, New York. This determination was
made because of alleged disposal at the site of certain waste material generated
by a manufacturing operation that formerly had been operated by the Company near
the site. In December 1989, the Company and two other potentially responsible
parties entered into an administrative order on consent with the EPA to perform
a Remedial Investigation and Feasibility Study (RI/FS) at the site. The EPA
subsequently issued an administrative order to four additional companies and one
individual requiring them to participate with the three consenting companies in
the implementation of the RI/FS. Two of these additional companies have entered
into an agreement with the three consenting companies to so participate. In
1992, the participating companies brought a lawsuit against 13 nonparticipating
companies in the United States District Court, Northern District of New York.
The suit seeks to have each of the defendants declared to be jointly and
severally liable with the plaintiffs for all past and future expenses. Two
defendants have been voluntarily dismissed by the plaintiffs, and two new
defendants were subsequently added. One defendant has filed for Chapter 11
bankruptcy protection. The RI/FS has been submitted to the EPA, but has not yet
been accepted by the EPA. The EPA and the participating companies have agreed
that the participating companies will perform some limited additional site
investigation before the EPA accepts the RI/FS and issues a Record of Decision
for the site.
A preliminary engineering investigation prepared in 1987 for the State of New
York estimated that the cost of remediation efforts at this site could range
from $24 million to $29 million. However, this estimate, which is nine years
old, was based only on a preliminary investigation and made certain assumptions
about the nature and extent of the remediation required. Until the EPA issues a
Record of Decision for this site, it is not possible to know what, if any,
activities the EPA may attempt to require at the site or which companies may be
named as potentially responsible parties in connection with any such
requirements. Five parties have participated in the implementation of the RI/FS
but the ultimate number of companies that may be jointly and severally liable
could be between five and 18 and the portion of any liability for which any one
party may be responsible is not necessarily a pro rata amount. How any
liability is ultimately allocated cannot now be determined.
Due to all the foregoing uncertainties, it is not possible at this time to
determine what the Company's future liability (if any) in connection with this
site will be. However, with the limited information currently available, the
Company estimates that its liability at this site could be between $1.5 million
and $6.0 million depending on the type and scope of the remediation, the number
of responsible parties and how the liability is shared. Any such liability to
the Company would probably be payable over three to five years. For the
foregoing reasons, the Company has created a reserve for environmental
liabilities for the site of $1.5 million. This reserve may need to be changed
from time to time as more information becomes available, and there can be no
assurance that the existing reserves will be adequate for the intended purpose.
After consideration of this reserve, the above stated estimated liability is not
expected to have a material adverse effect on the Company's results of
operations, financial condition or liquidity.
8
Note C. Litigation and Other Contingencies (continued)
- - -------------------------------------------------------
Genie's manufacturing sites at Shenandoah, Virginia and Alliance, Ohio have been
contaminated as a result of the former operations at these facilities. Pursuant
to the terms of a 1990 asset purchase agreement between Genie and North American
Philips Corporation ("NAPC"), NAPC, a former owner of Genie, agreed to
investigate and remediate any pre-closing contamination at these sites. NAPC
also agreed to fully indemnify Genie for all environmental liabilities arising
out of such pre-closing contamination, including third party lawsuits. The
Company has not expended any funds, nor does it expect to expend any, for
investigation and remediation at these sites because of NAPC's contractual
assumptions of liability.
As of December 31, 1995 and March 31, 1996, accounts receivable from companies
in the construction industry totaled $81.6 million and $74.3 million,
respectively. The Company extends credit and requires collateral, if necessary,
based on the evaluation of each customer's financial condition. Credit losses
are provided for in the financial statements and consistently have been within
management's expectations.
Note D - Income Taxes
- - ---------------------
The principal differences between the U.S. federal income tax rate and the
Company's effective income tax rate for the three months ended March 31, 1996
are state income taxes and amortization of goodwill.
At March 31, 1996, the total deferred tax liability for taxable temporary
differences was $45.3 million and the total deferred tax asset for deductible
temporary differences and operating loss carryforwards was $15.7 million net of
a $2.3 million valuation allowance. The net noncurrent deferred tax liability
totaled $34.6 million and the net current deferred tax asset which is included
in Prepayments and Other Current Assets totaled $5.0 million.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
Net sales during the first three months of 1996 were unchanged from the same
period in 1995 at $126.2 million. Severe winter weather in the first quarter
resulted in lost production, delays in construction projects, and reduced
traffic through home centers. However, the sales of residential sectional
doors, commercial rolling doors, sliding entrance doors, and swinging entrance
doors were higher but were offset by lower sales of residential garage door
operators and vehicular doors.
Gross profit decreased by $0.2 million (less than 1%) from $24.1 million in the
first three months of 1995 to $23.9 million for the same period in 1996. This
decline was mainly due to higher material costs which was largely offset by
lower direct labor and manufacturing expenses. For interim reporting purposes,
the cost of material included in cost of products sold during the interim
periods is determined using estimated material cost rates and the results from
physical inventories taken during all quarters of the year.
Operating income for the first three months of 1996 was $5.5 million, a decrease
of $1.4 million from the $6.9 million reported in 1995. Higher selling, general
and administrative expenses accounted for most of this decline. Consulting and
professional fees, personnel costs, and higher sales and marketing costs on
higher sales of automatic entrance doors were the largest contributors to the
higher expense level.
Interest expense decreased to $6.7 million in the first three months of 1996
from $7.3 million for the same period in 1995. The decrease is mainly due to
the lower remaining balance on the term loans. Other Expense is slightly
higher at $0.5 million.
The income tax benefit of $0.8 million in the first three months of 1996
compares to a tax expense of $0.2 million in the same period of 1995. The
income tax benefit in 1996 resulted from lower taxable income. The tax benefit
in 1996 is based on the estimated effective tax rate for the year while the 1995
tax provision was calculated on the actual effective rate for the quarter.
See Note C of Notes to Condensed Consolidated Financial Statements for
disclosure on Litigation and Other Contingencies.
10
Financial Condition
- - -------------------
The Company uses a Revolving Credit Facility to help fund seasonal cash flow
requirements. The outstanding balance of the Revolving Credit Facility at March
31, 1996 was $46.5 million. Availability under the Revolving Credit Facility at
March 31, 1996 was $21.4 million. Due to the seasonal nature of the Company's
business, borrowings to fund working capital needs generally increase beginning
late in the second quarter and begin to decline late in the fourth quarter.
Effective September 30, 1994, the Company purchased a two year interest rate cap
to cover the notional principal amounts of its floating rate debt with the LIBOR
rate capped at 7.0%. In the first quarter of 1996 the Company repaid $1.5
million of bank term loans.
Capital expenditures totaled $1.0 million in the first three months of 1996, a
$0.9 million decrease over the same period in 1995. Last year's capital
expenditures included a new commercial operator facility and equipment for a new
retail product.
For the three months ended March 31, 1996, net cash flows used for operating
activities totaled $16.5 million compared with $5.2 million for the first three
months of 1995. The higher use of funds in 1996 was mainly to reduce accounts
payable levels. The Company has a historical seasonal pattern of improved
results over the last half of a calendar year when compared to the first half of
a year. While there is no way of assuring that this pattern will continue, the
Company has no reason to believe that construction industry patterns will change
in the foreseeable future.
The Company believes that the cash flow generated by its operations, together
with borrowings under the Revolving Credit Facility, should be sufficient to
fund its cash needs during the balance of the year.
11
Part II. Other Information
-----------------
Item 1. Incorporated by reference to Note C, Litigation and Other
Contingencies, in Part I of this report.
Item 2-5. All items are either inapplicable or would be responded to in the
negative.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits as shown in the Index of Exhibits on page 13 are
filed as a part of this report.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
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.
OVERHEAD DOOR CORPORATION
-------------------------
(Registrant)
Date: May 10, 1996 By: /s/ John C. Macaulay
----------------------- -----------------------------------------
John C. Macaulay
Vice President/Controller
(Chief Accounting Officer)
By: /s/ James F. Brum
------------------------------------------
James F. Brum
Executive Vice President
(Chief Financial Officer)
12
EXHIBIT INDEX
Exhibit Sequential
Number Exhibit Page Number
- - ------- ------- -----------
10.1 Employment Agreement dated as of March 27, 1996, 14
with John Venema
13
EMPLOYMENT AGREEMENT
--------------------
This is an Employment Agreement dated as of March 27, 1996 between OVERHEAD
DOOR CORPORATION, an Indiana corporation, the principal place of business of
which is in Dallas, Texas (the "Company") and JOHN VENEMA ("Employee").
The Company and Employee hereby agree as follows:
1. EMPLOYMENT AND TERM.
-------------------
The Company hereby employs Employee, and Employee hereby accepts and agrees to
such employment, for a term commencing March 27, 1996, and terminating March 26,
1998. Employee shall have the title of Senior Vice President Marketing & Market
Development with such duties as may be properly assigned to him from time to
time by the Board of Directors, the Chief Executive Officer or the President.
The services required of Employee hereunder shall be those usually and
customarily performed in the position assigned to Employee from time to time and
shall be reasonable in terms of usual business practice. During the term of
this Agreement, Employee shall not render services to anyone other than the
Company and will devote his full business time, attention and best efforts to
the business of the Company and to the fulfillment of the duties and
responsibilities as may be delegated to him from time to time. The preceding
sentence shall not prevent Employee from acting as a director of other
corporations with the consent of the Company's Board of Directors. This
Employment Agreement may be extended for an additional term or terms upon the
mutual written agreement of the Company and the Employee.
2. COMPENSATION.
------------
(a) The Company shall pay the Employee, in twice monthly payments, a base
salary of $185,000 per annum. Employee's base salary shall be subject to an
annual review and adjustment in accordance with the Company's normal salary
review procedures for its senior executive management.
(b) Employee shall be eligible to participate in the Company's Bonus Plan, in
accordance with the Bonus Plan terms and procedures, consistent with the
Company's practice for its senior executive management. Employee's bonus
potential shall be up to 75% of annual base salary based on the achievement of
budgeted objectives and achievement of other specific identified annual
objectives within Employee's areas of responsibility as such objectives are set
by the Company's Chief Executive Officer. In accordance with the Company's
normal practices, Employee must be employed by the Company at the time bonuses
are paid with respect to any particular year in order to be eligible for a bonus
with respect to such year.
3. FRINGE BENEFITS.
---------------
(a) Employee shall be entitled to participate in the Company's benefit and
pension plans listed on Exhibit A hereto. Nothing herein shall be deemed to
prevent the Company from modifying or discontinuing any benefit or pension plan,
provided that in the event that, after the date hereof, the
14
Company replaces any of the benefit or pension plans on Exhibit A hereto with
new plans or adds additional plans which are available to other senior officers
of the company, then Employee shall be entitled to participate in any such
replacement or additional plans. The Company shall also reimburse Employee for
any amounts paid by Employee to his former employer under COBRA to retain his
prior medical insurance benefits until Employee and his family are eligible for
the Company's medical benefit plan.
(b) Employee shall be provided with (i) either a car allowance of $600 monthly
or a Company approved leased car, (ii) reimbursement for athletic club
membership (if requested and used), (iii) reimbursement for approved country
club monthly dues, but not the initiation fee (up to a maximum of $15,000 per
year for such athletic and country club combined), (iv) reimbursement for
reasonable assistance from Ernst & Young with tax planning relating to
Employee's prior moves to and from Singapore, and (v) an annual physical, each
in a manner consistent with the Company's practices for senior officers and in
accordance with the Company's usual procedures.
4. RELOCATION EXPENSES.
--------------------
Employee shall be provided a moving cost reimbursement for his reasonable and
necessary expenses incurred in relocating to Dallas, Texas, in accordance with
the Company's Standard Operating Procedures. In addition to the relocation
benefits under the Company's Standard Operating Procedures, the Company agrees
to reimburse Employee for each of the following expenses:
(i) Employee's three month rental subsidy in Singapore, up to a total
maximum of $17,850, to the extent not paid by the Employee's former employer;
(ii) Employee's temporary living expenses in Dallas, Texas through June,
1996, consistent with the Company's practices for other transferred senior
officers;
(iii) Employee's cost of relocating his dog from Singapore to Dallas,
Texas;
(iv) Employee's cost of his daughter's second term at school in Singapore,
up to a maximum of $3,500, to the extent not paid by Employee's former employer;
and
(v) Employee's American Club membership cost, up to a maximum of $3,200,
to the extent not paid by Employee's former employer.
5. OPTIONS.
-------
Subject to the achievement during 1996 of specific objectives within
Employee's area of responsibility, on or about January 1, 1997, Employee will be
awarded an additional option to purchase 37,500 shares of the common stock of
Overhead Door Incorporated, which option will be evidenced by an Option
Agreement having the same terms and conditions as those contained in the Option
Agreement evidencing the option to purchase 37,500 of such shares entered into
with Employee substantially concurrently herewith. In the event that, prior to
January 1, 1997, any of Employee's current options vest due to sales of Publicly
Sold Shares or Privately Sold Shares as defined in said Option Agreement, then
the above additional option shall be awarded early, on the date of such vesting,
and such additional option shall be vested to the same extent as Employee's
current options so vest.
15
6. TERMINATION.
-----------
Notwithstanding the foregoing or any other provision of this Employment
Agreement, the Company may terminate the employment of Employee without further
obligation to Employee (i) if Employee shall commit an act of dishonesty, gross
incompetency or intentional or willful misconduct, which act occurs in the
course of Employee's performance of his duties as an employee or (ii) in
accordance with paragraph 9 by reason of Employee's incapacity. This Employment
Agreement shall terminate automatically upon the death of Employee at any time
during the term hereof. If the Company terminates the employment of Employee
during the term hereof for any reason other than those stated hereinabove in
this paragraph 6, it is agreed that Employee shall be entitled to the following
payments and benefits as liquidated damages: (i) continuation of Employee's base
salary for the remainder of the term of this Agreement, and (ii) continuation of
coverage by the Company's medical and life insurance plans for the period of
twelve months after such termination; provided, however, that if Employee should
enter into other employment, his right to salary continuation from the Company
shall be diminished to the extent of his new salary from such other employment,
and his participation in such benefit plans of the Company shall cease to the
extent of his coverage by his new employer's plans.
7. VACATION.
--------
Employee shall be entitled to an annual vacation of 15 working days (without
deduction in salary or other compensation or benefits). Such vacation shall be
taken at such time or times as may be convenient to the operations of the
Company and shall be consistent with prevailing vacation policies of the
Company.
8. REIMBURSEMENT OF EXPENSES.
-------------------------
Employee will be reimbursed for his reasonable and necessary business and
traveling expenses in accordance with the Company's policies in effect from time
to time.
9. INCAPACITY.
----------
If any non-performance by Employee under this Employment Agreement is due to
the incapacity of Employee, and such condition is not cured within 180 days of
the first incurrence of such incapacity, the Company may terminate this
Employment Agreement. The term "incapacity" shall mean any material physical,
mental or other disability rendering Employee incapable of substantially
performing his services hereunder. In the event of any dispute between the
Company and Employee as to whether Employee is incapacitated as defined herein,
the determination of whether Employee is so incapacitated shall be made by an
independent physician selected by the Company's Board of Directors and the
decision of such physician shall be binding upon the Company and Employee.
10. TRADE SECRETS AND EMPLOYMENT OF COMPANY EMPLOYEES.
-------------------------------------------------
(a) Without the Company's prior written consent, Employee shall not disclose
or use at any time, either during or subsequent to his employment by the
Company, any material secret
16
or confidential information, whether or not patentable or copyrightable,
belonging to the Company of which Employee becomes informed during his
employment, whether or not developed by Employee, except as required by
Employee's duties to the Company. Such material secrets or confidential
information shall in any event, without limitation, include:
(1) The names of any or all of the customers of the Company.
(2) Prices and terms charged to customers.
(3) Prices at which merchandise is purchased by the Company.
(4) Any aspects of advertising or merchandising.
(5) Any information relating to the Company's financial systems
and operations, or any part thereof, and any information
relating to the Company's administration and operations or any
part thereof.
(b) During the term of Employee's employment with the Company and for a period
of three (3) years from the date of termination of such employment for whatever
reason, Employee shall not, directly or indirectly:
(1) Induce or attempt to induce away, or aid, assist or abet any other
party or person in inducing or attempting to induce away, from his
or her employment with the Company any other employee of the
Company.
(2) Take away or attempt to take away, or aid, assist or abet any other
party or person in taking away or attempting to take away, any
customers of the Company who were such customers at the date of
termination of employment with the Company.
11. NONCOMPETITION.
--------------
During the term of employment with the Company and for a period of three (3)
years from the date of termination of such employment, Employee will not,
anywhere in the United States, engage, directly or indirectly, whether
individually or as a member of a partnership or an officer, director, investor,
stockholder, employee or consultant of a corporation or of any other person,
partnership or other entity, in a business which competes with any line of
business of the Company on the date of termination of such employment. The
ownership of Employee of three (3) percent or less of the outstanding stock of
any corporation engaged in any such competitive business, but whose stock is
listed on a national securities exchange or actively traded in the over-the-
counter market, shall not be deemed a violation by Employee of this paragraph 11
provided that Employee shall not be an officer, director or employee of, or a
consultant to, such corporation. Notwithstanding the foregoing, the provisions
of this paragraph 11 shall not be applicable if (but only if) Employee's
employment is terminated by the Company in breach of this Employment Agreement,
or if this Agreement (or any renewal hereof) expires (without any prior
termination having occurred) without
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the Company having offered to renew the Agreement on substantially the same
terms then in effect for any additional term of at least one year.
In the event that for any reason there should be a determination by a court of
competent jurisdiction that the provisions of this paragraph 11 are too broad or
unreasonable or unenforceable as such, such provisions shall be deemed modified,
and fully enforceable as so modified, to the extent that such a court would find
them to be fair, reasonable and enforceable under the circumstances.
12. ENTIRE AGREEMENT.
----------------
This Employment Agreement (a) contains the entire agreement concerning
employment arrangements between the Company and Employee, (b) supersedes and
replaces any previously dated agreement relating to such employment and (c) may
not be changed except by a writing signed by the party against whom the
enforcement of any waiver, change, extension, modification or discharge is
sought.
13. NOTICES.
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Any notice required or permitted to be given under this Employment Agreement
shall be sufficient if in writing, and sent by registered or certified mail, in
the case of the Employee to 28 Leonie Hill, #18-30, Singapore 239227; in the
case of the Company, to Post Office Box 809046, Dallas, Texas 75380-9046,
Attention: General Counsel, or to any subsequent address as such party properly
advises the other.
14. ASSIGNMENT.
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This Employment Agreement shall inure to the benefit of, and shall be binding
upon, the Company, its successors and assigns, and Employee, his heirs, personal
representatives and permitted assigns, but may not be assigned by Employee
without the Company's prior written consent.
15. SEVERABILITY.
------------
In the event any term, paragraph or provision of this Employment Agreement or
its application to any circumstances shall to any extent be deemed invalid or
unenforceable, the remainder of this Employment Agreement shall be valid and
enforceable to the fullest extent permitted by law.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first above written.
OVERHEAD DOOR CORPORATION
By: Brian J. Bolton
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Title: Chairman and CEO
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/s/ John Venema
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JOHN VENEMA
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EXHIBIT A
1. Overhead Door Corporation Group Insurance Plan (life, health, and dental),
2. Personal Accident Insurance Plan for Salaried Employees,
3. Overhead Door Corporation Group Welfare Benefit (long-term disability),
4. Short-Term Disability for Salaried Employees,
5. Group Universal Life Insurance Program,
6. Overhead Door Corporation Salaried Employees Pension Plan,
7. MAP-- Overhead Door Corporation Money Accumulation Plan (401k).
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