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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 Commission File No. 0-23082
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
BELDING HEMINWAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1574754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1430 Broadway
New York, NY 10018
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 556-4700
Former name, former address and former fiscal year, if changed since
last report: N/A
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 2, 1996, 7,397,282 shares of Common Stock were outstanding.
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PAGE 1 OF 13
<PAGE>
BELDING HEMINWAY COMPANY, INC.
1430 Broadway
New York, NY 10018
TABLE OF CONTENTS
PAGE NO.
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995.....................3
Consolidated Statements of Operations
for the Three Months Ended March 31, 1996 and 1995.............4
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1996 and 1995..............................5
Notes to Unaudited Consolidated
Financial Statements - March 31, 1996.................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................8
Part II -- Other Information
Item 1. Legal Proceedings...........................Not Applicable
Item 2. Changes in Securities.......................Not Applicable
Item 3. Defaults upon Senior Securities.........................12
Item 4. Submission of Matters to
a Vote of Security Holders...............Not Applicable
Item 5. Other Information..........................Not Applicable
Item 6. Exhibits and Reports on Form 8-K...........Not Applicable
Signatures......................................................13
PAGE 2 OF 13
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 31, 1996 December 31, 1995
Current Assets: (Unaudited) (Note)
<S> <C> <C>
Cash and cash equivalents $ 186 $ 629
Accounts receivable trade, net 12,108 11,314
Inventories 19,179 18,360
Federal income taxes receivable 222 787
Current deferred tax asset -- 313
Other current assets 693 953
-------- ---------
Total current assets 32,388 32,356
-------- ---------
Property, plant and equipment, at cost 32,821 33,013
Less: Accumulated depreciation and amortization (3,986) (3,538)
-------- ---------
Net property, plant and equipment 28,835 29,475
-------- ---------
Goodwill, net 20,295 20,450
Deferred tax assets 9,309 9,515
Other assets 2,438 2,328
-------- ---------
Total Assets $ 93,265 $ 94,124
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,877 $ 5,593
Current maturities of long-term debt 4,462 4,029
Other current liabilities 11,668 12,948
--------- -------
22,007 22,570
--------- -------
Long-Term debt 44,295 44,666
Other Liabilities 18,619 19,386
--------- --------
Total Liabilities 84,921 86,622
--------- -------
Redeemable Preferred Stock, par value $0.01 per share
20,805,060 shares authorized;
Shares issued and outstanding:
Series A - None
Series B - 20,805,060 20,805 20,805
Accumulated dividends on preferred stock 1,706 1,374
-------- ------
22,511 22,179
-------- ------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
March 31, 1996: 7,398,282 74
December 31, 1995: 7,409,282 74
Paid in Capital 19,858 19,859
Retained Earnings (34,099) (34,610)
-------- --------
Total Common Stockholders' Equity (14,167) (14,677)
-------- --------
Total Liabilities and Stockholders' Equity $ 93,265 $ 94,124
========= ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
PAGE 3 OF 13
<PAGE>
<TABLE>
<CAPTION>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended March 31,
1996 1995
<S> <C> <C>
Net Sales ............................................................. $ 22,007 $ 23,313
Cost of Sales ......................................................... 15,910 16,305
------- -------
6,097 7,008
Selling, general & administrative expenses ............................ 3,641 4,303
Other (income) expense -- net ......................................... (53) (91)
-------- --------
Income from continuing operations before
interest and income taxes ......................................... 2,509 2,796
Interest expense ...................................................... 1,095 1,081
-------- --------
Income from continuing operations before
income taxes ...................................................... 1,414 1,715
Provision for income taxes ............................................ 616 809
-------- --------
Income from continuing operations ..................................... 798 906
Less dividends on preferred stock ..................................... 332 309
-------- --------
Income applicable to common stock
from continuing operations ........................................ 466 597
Income from discontinued operations,
net of income tax provision ....................................... 45 298
-------- --------
Income applicable to common stock ..................................... $ 511 $ 895
======== ========
Earnings per common share:
Continuing operations ................................................. $ 0.06 $ 0.08
Discontinued operations ............................................... 0.01 0.04
-------- --------
Total ............................................................. $ 0.07 $ 0.12
======== ========
Weighted average common shares
outstanding (in thousands) ........................................ 7,399 7,421
======== ========
Total depreciation and amortization ................................... 773 787
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements ..............
PAGE 4 OF 13
<PAGE>
<TABLE>
<CAPTION>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31,
1996 1995
Cash Flows From Operating Activities:
<S> <C> <C>
Income from continuing operations ........................................ $ 798 $ 906
Reconciliation of net income from continuing
operations to net cash provided by operations:
Depreciation and amortization ....................................... 773 787
Deferred tax provision .............................................. 519 793
Changes in operating assets and liabilities:
Accounts receivable, trade ........................................ (794) (2,982)
Merchandise inventories ........................................... (819) (1,124)
Federal income taxes receivable ................................... 565 --
Other current assets .............................................. 259 (365)
Accounts payable .................................................. 284 1,099
Other current liabilities ......................................... (861) (693)
Other liabilities ................................................. (200) --
Other operating assets and liabilities ............................ 173 (5)
Cash flow from discontinued operations ............................ (373) 2,016
------- -------
324 432
------- -------
Cash Flows From Investing Activities:
Capital expenditures ..................................................... (276) (278)
Investments in other assets .............................................. (216) (50)
Adjustments related to acquisitions ...................................... (30) (30)
------- -------
(522) (358)
Cash Flows From Financing Activities:
Proceeds from revolving credit facility and capitalized
lease obligations .................................................... 7,800 7,405
Repayment of long term debt and capital lease obligations ................ (7,738) (7,756)
Payment of long term liabilities ......................................... (307) (738)
------- -------
(245) (1,089)
Decrease in cash and cash equivalents .................................... (443) (1,015)
Cash and cash equivalents beginning of period ............................ 629 1,015
------- -------
Cash and cash equivalents end of period .................................. $ 186 $ --
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest .............................................................. $ 1,011 $ 1,081
======= =======
Income taxes .......................................................... $ 38 $ 529
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
PAGE 5 OF 13
<PAGE>
BELDING HEMINWAY COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the three-month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1995. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiaries manufacture and market
industrial and consumer threads and distribute a line of home sewing and craft
products, principally buttons. The Company has announced its decision to divest
the Home Furnishings division (See Note 5).
Consolidation: The accompanying consolidated financial statements include
the accounts of the Company and all subsidiaries after elimination of
intercompany items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable and
amortizable asset based on their estimated useful lives. Buildings and
improvements, machinery and equipment, and furniture, fixtures and leasehold
improvements are generally depreciated over periods of 20-35, 5-25 and 5-10
years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
PAGE 6 OF 13
<PAGE>
<TABLE>
<CAPTION>
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
March 31, 1996 December 31, 1995
<S> <C> <C>
Raw materials and greige goods ............................... $ 4,077 $ 3,189
Manufacturing supplies ....................................... 1,315 1,346
Work in Progress ............................................. 6,769 6,033
Finished goods ............................................... 7,018 7,792
-------- --------
$19,179 $18,360
======== ========
</TABLE>
NOTE 5: DISCONTINUED OPERATIONS
During the fourth quarter of 1995, the Company announced its decision to
divest the Home Furnishings division. Consequently, the results of operations of
the Home Furnishings division for the three months ended March 31, 1996 and 1995
have been classified as discontinued operations. In connection with this
decision, the Company has retained an investment banker and has begun the
process of identifying prospective buyers. Although there is no assurance, the
Company believes, that it may be able to complete the sale of the Home
Furnishings division by July 31, 1996. Income from discontinued operations
recorded during the three months ended March 31, 1996 represents the division's
results for the period after provision for income taxes.
PAGE 7 OF 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of
Financial Condition and Result of Operations
RESULTS OF OPERATIONS
Sales
Sales during the first quarter of 1996 totaled $22.0 million as compared
to $23.3 million during the first quarter of 1995.
Sales in the consumer product segment increased 22.6% during the first quarter
of 1996 to $11.7 million as compared with $9.5 million during the same period in
1995. The increase in consumer product segment sales was largely attributable to
sales contributed by Culver Textile Company ("Culver") which was acquired in the
third quarter of 1995.
Sales in the industrial products segment during the first quarter of 1996
totaled $10.3 million as compared with $13.8 million during the first quarter of
1995. Weakness that began last year in our customers' primary markets continued
to have a direct impact on industrial thread sales during the first quarter of
1996.
Gross Margin
Gross margin during the first quarter of 1996 totaled $6.1 million as compared
to $7.0 million during the first quarter of 1995. The gross margin percent in
the first quarter of 1996 was 27.7% compared to 30.1% for the same period in
1995.
Gross margin in the consumer product segment totaled $3.7 million during the
first quarter of 1996 as compared to $3.4 million in the first quarter of 1995.
The gross margin percent in the consumer product segment during the first
quarter of 1996 was 31.5% as compared with 35.9% during the same period in 1995.
The increase in gross margin dollars in the consumer product segment during the
first quarter of 1996 was primarily attributable to the gross margin
contribution of Culver which was acquired during the third quarter of 1995.
Gross margin in the industrial product segment totaled $2.4 million during the
first quarter of 1996 as compared with $3.6 million during the first quarter of
1995. The gross margin percent in the industrial product segment was 23.4%
during the first quarter of 1996 as compared with 26.0% during the first quarter
of 1995.
Selling, General and Administrative
Selling, general and administrative expenses declined 15.4% during the first
quarter of 1996 to $3.6 million as compared to $4.3 million during the same
period in 1995.
Selling, general, and administrative expenses in the consumer segment totaled
$1.2 million during the first quarter of 1996 as compared with $1.0 million
during the first quarter of 1995. The increase in selling, general and
administrative expenses in the consumer product segment was primarily
attributable to incremental expenses associated with Culver which was acquired
in the third quarter of 1995.
Selling, general and administrative expenses in the industrial product segment
totaled $1.4 million during the first quarter of 1996 as compared to $2.0
million during the first quarter of 1995 for a reduction of $.6 million. $.5
million of this decrease was attributable to headcount reductions made during
the second half of 1995. In addition, goodwill amortization declined by
approximately $.1 million as the result of the goodwill impairment write-off
recorded during the fourth quarter of 1995.
PAGE 8 OF 13
<PAGE>
Selling, general and administrative expenses at the corporate level declined
during the first quarter of 1996 to $1.0 million as compared with $1.3 million
during the first quarter of 1995.
Interest Expense
Interest expense during the first quarter of 1996 totaled $1.1 million as
compared to $1.1 million during the first quarter of 1995. The weighted average
interest rate during the first quarter of 1996 was 9.0% compared to 9.2% during
the first quarter of 1995.
Income Taxes
The provision for income taxes during the three months ended March 31, 1996 was
$.6 million as compared to $.8 million for the first quarter of 1995. For both
1996 and 1995, the effective income tax rates are higher than the combined
statutory federal and state income tax rates primarily as a result of
nondeductible goodwill amortization.
Preferred Dividends
Preferred dividends during the first quarter of 1996 and 1995 totaled $.3
million. Preferred dividends are accrued and compound at a rate of 6% per annum.
No dividend payments have been made by the Company.
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on manufacturing
and operating costs. Historically, the Company has used selling price
adjustments, cost containment programs and improved operating efficiencies to
offset the otherwise negative impact of inflation on its operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the first quarter of 1996 totaled
$.3 million and represents principally net income from continuing
operations of $.8 million, adjusted by: $.8 million of depreciation and
amortization, $.5 of deferred taxes less $1.4 million from working capital
changes and less $.4 million from discontinued operations. The discontinued
operations cash outflows are due primarily to working capital changes in the
Company's Home Furnishings division.
Net cash used by investing activities during the first quarter of 1996 totaled
$.5 million and represents principally $.3 million of capital expenditures and
$.2 million of investments in other assets.
Net cash used by financing activities totaled $.2 million. Reductions in long
term liabilities of $.3 million reflects primarily pension payment and payments
on other long term liabilities.
At March 31, 1996, the Company's principal sources of liquidity included cash
and cash equivalents of $.2 million and trade accounts receivable of $12.1
million. At March 31, 1996 the Company had $2.1 million of unused availability
under its revolving credit facility (the "Revolving Facility").
PAGE 9 OF 13
<PAGE>
At December 31, 1995, the Company was in default on certain of its loan
covenants specified in the Credit Agreement dated October 29, 1993, as amended
("Credit Agreement"). As a result, on March 15, 1996, the Credit Agreement was
amended to provide, among other changes, the following:
Defaults at December 31, 1995 were waived.
Maturity of Senior Bank Facilities was changed to July 1, 1997
from December 31, 1999.
Loans bear interest at the rate of NationsBank prime rate plus
1.75%. Previously the Company had the option of selecting an
interest rate equivalent to (a) 1.75% plus the higher of (1)
NationsBank's prime rate and (2) the Federal funds rate plus
1/2 of 1% or (b) a rate based upon certain rates offered for
U.S. dollar deposits in the London interbank market plus 2.75%.
If Revolving Facility advances exist against the Company's Home
Furnishings division receivables and inventory on July 31,
1996 and August 31, 1996, the Company will pay fees of
$100,000 and $200,000, respectively.
If the Company has not refinanced or repaid the Term Facility in
full by December 31, 1996, the Company will be obligated to
demonstrate progress towards disposition of assets in addition to
the Home Furnishings division and complete a sale of those assets
by the due date at sufficient levels to repay the Term Facility,
in order to avoid the payment of fees as follows: September 30,
1996, $300,000; November 15, 1996, $700,000; December 31, 1996,
$1,500,000.
The requirement for the Company to maintain an interest rate cap
agreement was deleted.
Financial covenant tests were revised.
Terms of the Revolving Facility were revised to reduce
advances available against work in process inventory effective
September 30 and December 31, 1996.
The Company is presently involved in active discussions and negotiations with a
prospective purchaser of its Home Furnishings division. On the basis of these
discussions and negotiations, the Company believes, although there can be no
assurance, that it may be able to complete the sale of its Home Furnishings
Division on or prior to July 31, 1996 (and use the net proceeds to fully repay
existing credit facility advances against the Company's Home Furnishings
Division receivables and inventory) and thus avoid the fees which would
otherwise be payable under the credit facility if advances against the Home
Furnishings Division remain outstanding on that date.
If the sale of the Home Furnishings division is not completed prior to July 31,
1996, the Company believes that the fees could be funded by cash flows from
operations. However, there can be no assurance such funds will be available. If
the Company is unable to pay those fees when due it will be in default under the
credit facility.
In addition, the Company may not generate sufficient proceeds from the sale of
Home Furnishings to repay the revolving credit facility advances existing
against the Company's Home Furnishings Division. If the Company generates
insufficient proceeds from the sale, the Banks could prevent the sale or the
Company could be in default under the credit agreement.
In order to meet the requirements of the Term Facility and thus avoid fees
payable on September 30, November 15 and December 31,1996, the Company expects
that it will have to refinance the Term Facility by September 30, 1996. If the
Company is not successful in refinancing the Term Facility by September 30, 1996
it will be obligated to demonstrate progress toward the sale of assets in
addition to the Home Furnishings division by September 30 and complete a sale
of these assets by December 31, 1996, at sufficient levels to repay the
Term Facility by December 31, 1996, in order to avoid the payment of fees.
If the Company refinances the Term Facility, it is likely that the new
borrowing arrangements will carry higher rates of interest and increased
PAGE 10 OF 13
<PAGE>
administrative costs. If the Company raises funds through asset sales to
discharge the Term Facility, the reduction in interest expense resulting
therefrom will not be sufficient to offset the diminution in income that
would result from such asset sales. There can be no assurance that the
Company will be able to refinance the Term Facility on commercially acceptable
terms or demonstrate sufficient progress towards asset sale(s) by the dates fees
are due and or complete a transaction sufficient to discharge the Term Facility
by December 31, 1996. If the Company cannot satisfy those conditions, the
Company would be obligated to pay fees under the agreement. There is no
assurance that the Company's cash flow would be sufficient to pay those fees. If
the Company is unable to pay any of the fees when due it will be in default
under the Term Facility. The Company has engaged a financial advisor in order to
assist it in the evaluation of strategic alternatives in light of the issues
posed by its current borrowing arrangements.
The Company's ability to make interest and installment principal payments on
outstanding debt also depends on generating sufficient cash flow from operations
as well as maintaining certain levels of receivables and inventory. However,
there can be no assurance the Company will have sufficient cash flow or working
capital levels will be sufficient to make such payments. If the Company is
unable to make installment principal and interest payments when due it will be
in default of the Credit Agreement.
If the Company is not successful in refinancing the Credit Facility and thereby
does not repay all of the amounts outstanding under the Credit Facility on its
final maturity date of July 1, 1997 or meet other covenant provisions it will be
in default under the Credit Facility.
Any such default or non-compliance with the Credit Facility would entitle the
lender to require immediate payment of the outstanding indebtedness and to
refuse advances and to exercise various rights against the Company, including,
without limitation, the right to foreclose its security interest in the
Company's assets and realize upon its collateral by any available judicial
procedure and/or to take possession of and sell any or all of the collateral
with or without judicial process. If such non-compliance occurred and the lender
demanded payment or refused to make further loans and the Company was unable to
obtain alternative financing, the lack of appropriate liquidity would have a
material adverse effect on the Company's results of operations and its ability
to continue as a going concern.
The Company was also in default on one covenant of certain leasing
arrangements totaling $2.2 million in debt at December 31, 1995. The leasing
arrangements have been amended on terms parallel to the amendment of the Credit
Agreement. The maturity date has been moved to July 1, 1997 and interest rate
increased to prime rate plus 1.50%. Lessor has also received a second lien on
certain Company assets. The Company believes it will be in compliance with the
provisions of these leasing arrangements during 1996. If the Company does not
comply with the provisions and is unable to obtain alternative financing, the
Company would be in default and the lender could take back the equipment under
lease which would have an adverse effect on the Company's operations.
Pursuant to the terms of the Company's Series B Preferred Stock, 20% of such
shares were scheduled to be redeemed on March 15 of each year commencing in 1995
and ending in 1999. Dividends on the Series B Preferred Stock accrue at an
annual rate of 6% and are payable quarterly on March 15, June 15, September 15,
and December 15. Both the preferred stock redemptions and the quarterly dividend
payments are subject to approval of the banks participating in the Company's
credit facility. The Company was notified as of March 15, 1995 that the banks
declined approval of the dividend and redemption payments and no such payments
have been made. As a result, additional dividends will accrue on the scheduled
but unpaid dividends at a rate of 6% per annum.
PAGE 11 OF 13
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
a) None
b) Redeemable Series B preferred stock
Scheduled dividend payments totaling $1,316,018 in 1995
and an additional $330,907 on March 15, 1996 were subject to
the approval of the Company's bank lenders. Such approval was
not granted by the banks and the dividend payments were not
made. As a result, the unpaid dividends accrue at a compounded
rate of 6% per annum.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Sequentially
Number Exhibit Numbered Page
10.1 Consulting Agreement, dated
March 22, 1996 between the
Company and Karen Brenner
b) Reports on Form 8-K.
During the first quarter of 1996, the Company did not file a
Current Report on Form 8-K.
PAGE 12 OF 13
<PAGE>
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.
BELDING HEMINWAY COMPANY, INC.
(Registrant)
/S/ Gregory H. Cheskin
Gregory H. Cheskin, President and Chief Executive Officer
/S/ Edward F. Cooke
Edward F. Cooke, Vice President and Chief Accounting Officer
Date May 14, 1996
KAREN BRENNER
NEW YORK, NEW YORK 10021
March 22, 1996
CONFIDENTIAL
Mr. Gregory H. Cheskin
President & Chief Executive Officer
1430 Broadway
New York, New York 10018
Dear Greg:
This letter will confirm the agreement between me and Belding
Heminway Company, Inc. (the "Company") (hereinafter referred to as the
"Agreement") whereby I will serve as a Consultant to the Company with respect to
financings, strategic planning and operating performance. In accordance with our
agreement, I began acting as a Consultant to the Company beginning February 1,
1996 with respect to such matters and upon such terms as set forth below.
A. Services. At the request of the board of directors of the Company, I have
provided and will provide the following services:
1. Analysis and evaluation of the Company's business plan and
strategic alternatives.
2. Assistance in soliciting and evaluating proposals from prospective
sources of financing.
3. Exploring and assisting in implementing methodologies for improving
the Company's cash flows and operating performance.
4. In connection with each of the above, I will participate in
negotiations with lenders and other third parties and assist in
coordinating the efforts of other consultants to and employees of the
Company.
During the term of this agreement I will devote such time to my duties
hereunder as I and the Company agree is necessary or appropriate, and
in any event, not less than fifty percent (50%) of my business time.
<PAGE>
Mr. Gregory H. Cheskin
March 22, 1996
Page -2-
A. Fees and Expenses.
1. Fees. In connection with the services described above, the Company
shall pay to me during the term of this agreement fees for consulting
services within the scope of Section A above at an annual rate of
$100,000 payable in monthly installments of approximately $8,333 each.
In addition, in connection with such services, the Company has granted
to me Options to purchase 200,000 share of the Company's common stock,
exercisable at the fair market value on the date of grant, February 9,
1996. 50,000 of such Options were exercisable immediately upon grant and
the remaining 150,000 become exercisable (i.e. "vest") at the rate of
12,500 per month beginning February 29, 1996, with provisions for full
and immediate vesting in the event of a change of control, provided that
I am continuing to act as a Consultant to the Company at each vesting
time.
2. Expenses. In addition to any fees payable to me hereunder, the
Company hereby agrees, from time to time upon request, to reimburse me
for all reasonable travel and other out-of-pocket expenses
incurred in connection with my role hereunder.
B. Termination. Either party may terminate my engagement hereunder at any
time by giving the other party written notice, which notice shall be
deemed given when received by the party to whom it is addressed;
provided, however, that during the thirteen (13) months ending
March 31, 1997 any such notice from the Company to me shall be validly
given only if based on a finding by the Company's board of directors
that my performance of my duties hereunder has not been satisfactory.
C. Choice of Law. The Company and I acknowledge that this Agreement has
been negotiated, executed and delivered in New York, New York and that
this Agreement shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the laws of the Sate
of New York.
<PAGE>
Mr. Gregory H. Cheskin
March 22, 1996
Page -3-
I am please to accept this engagement and look forward to working with
you. Please confirm that the foregoing is in accordance with your
understanding and agreement with me by signing and returning to me the
enclosed duplicate of this Agreement.
Sincerely,
/S/ Karen Brenner
Karen Brenner
ACCEPTED AND AGREED TO:
BELDING HEMINWAY COMPANY, INC.
By: /S/Gregory H. Cheskin
Title: President/CEO
Date: 3/25/96
