UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________
FORM 10-K
/X/ ANNUAL REPORT Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (Fee required)
/ / TRANSITION REPORT Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (No fee required)
________________________________________________________________
For the fiscal year ended June 24, 1995
________________________________________________________________
Commission File No. 1-6485
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ACTION INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________
Pennsylvania
(State or other jurisdiction of incorporation or organization)
________________________________________________________________
25-0918682
(I.R.S. Employer Identification No.)
________________________________________________________________
Allegheny Industrial Park, Cheswick, Pennsylvania 15024-1098
(Address of principal executive offices) (Zip
Code)
________________________________________________________________
Registrant's telephone number, including area code: (412)
782-4800
_________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common stock, par value American Stock Exchange
$.10 per share
9% Convertible Subordinated
Debentures Due 1998
________________________________________________________________
Securities registered pursuant to Section 12(g) of the Act: None
________________________________________________________________
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(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
________________________________________________________________
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
-----
________________________________________________________________
As of September 11, 1995, the aggregate market value of the
Registrant's common stock held by nonaffiliates of Registrant was
approximately $4,164,819.
________________________________________________________________
The number of shares of the Registrant's common stock outstanding
at September 11, 1995 was 5,539,458.
________________________________________________________________
Documents incorporated by reference: Portions of the Registrant's
definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on December 8, 1995, are incorporated by reference in
Part III of the Form 10-K.
________________________________________________________________
PART I
ITEM 1. BUSINESS
NOTE: References to a fiscal year in this Form 10-K are to the
Registrant's fiscal year ending for the five most recent fiscal years on
June 24, 1995, June 25, 1994, June 26, 1993, June 27, 1992, and June 29,
1991. Unless otherwise indicated, information is presented for
continuing operations.
GENERAL DEVELOPMENTS IN THE BUSINESS - FIVE YEARS ENDED JUNE 24, 1995
Organization and Business. The organization and business of the
Registrant and its Subsidiaries (collectively, the "Company") have
undergone significant changes beginning in fiscal 1990 and continuing
through fiscal 1995 in connection with a major restructuring effort and
the Company's response to declining sales.
In fiscal 1990 the Company began to implement a restructuring plan which
focused critically on every aspect of its business. This process
resulted in a complete reevaluation of the Company's business. While
progress was made initially, on-going changes in the retail marketplace
necessitated continuing change in order for the Company to position
itself for the future. The Company has focused on its core business and
the disposal or elimination of those noncore business units and assets
which were not profitable or were not consistent with its overall
strategic objectives.
In fiscal 1993 continued declining sales and a significant operating
loss resulted in the adoption of a strategy to downsize the Company's
core business, through the reduction of low margin and/or guaranteed
sales business. This strategy was successful in fiscal 1994, as
evidenced by improved operating margins from the previous year and a
slight profit. This strategy has contributed to continued declining
sales in 1994 and 1995.
In fiscal 1995 the decline in sales continued, principally due to
significantly reduced business ($9.5 million) with the Company's largest
customer of fiscal 1994. In addition, the implementation of the
strategy to reduce low margin and/or guaranteed sale business, which is
particularly applicable to the Company's seasonal Gift business, was the
major contributor to a $6.4 million decrease in Gift sales in fiscal
1995.
The Company's current strategy is focused on development of value-
oriented products, programs, displays and services for the retail market
to achieve sales stability in its core business, while maintaining or
improving gross margin and reducing operating costs and the level of
inventories required to operate the business. The Company's growth
strategy is focused on its Replenishment business and development of an
expanded import agency business. The Company's core information systems
and related hardware are being replaced in a project which began over a
year ago, and is expected to be completed over the next twelve to
eighteen months.
In fiscal 1995 the Company implemented plans to close its plastic
manufacturing facility and to sell its lamp business, consistent with
the focus on the core business. The Company's retail store in Holland
Michigan was closed in September 1995.
The Company's demand for plastics has decreased along with its declining
level of sales. Further, many of the Company's plastic items have been
replaced with other merchandise which is a better fit, both physically
and from a marketing standpoint, with the display vehicles and concepts
currently being offered. The Company has arranged to obtain plastic
products at prices comparable to its recent manufacturing costs, and
does not expect the closing of the manufacturing operation in August
1995 to result in any reduction in sales. Sales of machinery and
equipment resulted in a gain of $300,000 in fiscal 1995, and will result
in a modest additional gain in fiscal 1996.
The Company's lamp business has had mixed operating results since its
inception, generally due to lower than desired gross margin performance.
The lamp business has been operated primarily as an "item" business,
independent of the Company's core promotional business. The lamp
business was sold to a company formed by its management in September of
1995 for approximately the book value of the net assets sold. This
business is reported as a discontinued operation.
In September of 1995 the Company announced the resignation of R. Craig
Kirsch as its Chairman, President and Chief Executive Officer. T.
Ronald Casper was appointed Acting President and Chief Executive Officer
and Joel M. Berez was elected Chairman of the Board.
Declining sales and related reductions in inventories in recent years,
as well as planned further reductions of inventories in fiscal year 1996
and beyond (including significant reduction of bulky plastic
inventories), have significantly reduced the Company's need for
warehouse space. As a result, the Company agreed in September of 1995
to terminate the lease on its headquarters office/warehouse facility
(where it has been the sole tenant) and to enter into a new lease as a
sub-tenant for significantly reduced space in this facility. The new
arrangements are operating leases, and will materially reduce the
Company's future occupancy costs. In addition, it is expected that the
new arrangements will provide the Company's landlord in the facility
with sufficient cash flow to begin to repay a $3.5 million note
receivable due to the Company from its sale/leaseback of the facility in
1991.
Restructuring charges of $5.1 million were recorded in fiscal 1993,
including severance and other personnel costs associated with
downsizing, and the writeoff of inventories and computer software costs.
Also related to restructuring, the Company sold substantially all the
assets of Action Nicholson Color Company (ANC), a wholly-owned
subsidiary, in April of 1994. ANC is reported as a discontinued
operation. Prior restructuring activities have included the liquidation
of Action Tungsram, Inc., an affiliated company, and the sale/leaseback
of the Company's headquarters which was completed in fiscal 1991.
Fiscal 1991 was not impacted by restructuring charges. In fiscal 1992
the Company continued the restructuring process, including
reorganization of several areas of the Company, with the emphasis on
improving customer service and execution of customer orders. Severance
and other costs associated with these 1992 decisions were adequately
covered by restructuring charges taken in fiscal 1990.
DESCRIPTION OF BUSINESS AND MARKETING SEGMENT
The Company is the successor to a business which was founded in 1917 and
incorporated in 1946. In 1969 the Company first sold its common stock
in the public market. For more than thirty years the Company's
principal business has been the sale of comprehensive promotional
programs to retailers, including DOLLAR-AMA (Registered Trademark) and
others. More recently, the Company introduced ACTION EXPRESS
(Registered Trademark) and in 1995 POWER PALLET (Trademark) and other
similar programs designed to provide a broad range of value-oriented
products, programs, displays and services to meet the traditional
promotional objectives of the retailer and reduce the need for in-store
labor. The Company's current focus is on its core promotional business
consisting of two distinct business-marketing units designed to meet the
needs of both its retail customers and the consumer as follows:
1. "Core" Promotions, which concentrate on the development of
innovative promotional programs designed to increase sales and
profitability for the retail industry. Included in this area
historically has been a Christmas Gift program designed to
take advantage of the holiday selling season;
2. Replenishment, which focuses on "store within a store"
concepts using a combination of promotional programs, themed
events, and other selected items.
The sale of the Company's lamp business in September of 1995 will result
in elimination of substantially all of the Specialty Products business,
which has been the Company's "Item" business, wherein proprietary
branded lines of merchandise have been sold independent of any
promotional programs.
The principal product categories sold by the Company are housewares
(kitchenware, cleaning aids, food storage), plastic products for the
home, picture frames, toys, stationery, closet accessories, health and
beauty aids and the like.
In fiscal 1995 one of the Company's customers accounted for 11.6% of
consolidated net sales. In fiscal 1994 another customer accounted for
15.3% of consolidated net sales. Business with the 1994 large customer
decreased significantly in fiscal 1995, as a result of the customer's
directing its business with the Company to smaller/older stores as
compared to a much broader scope of stores in fiscal 1994. In fiscal
1993 no single customer accounted for more than 10% of consolidated net
sales. The Company currently has several large customers, however,
which are significant to its business. In fiscal 1995 the Company sold
in excess of $1 million to each of 11 customers who, in the aggregate,
accounted for 48% of consolidated net sales. In fiscal 1994 the Company
sold in excess of $1 million to each of 19 customers who, in the
aggregate, accounted for 57% of consolidated net sales. The loss of any
large customer could have an adverse effect on the Company.
There are no long-term arrangements or contracts which obligate any
customer to purchase from the Company. The Company generally receives
firm orders from its customers only a short time before shipment and
consequently has no significant dollar amount of backlog of firm orders.
In its promotional retail marketing programs (DOLLAR-AMA [Registered
Trademark], deep discount Gift promotions, ACTION EXPRESS [Registered
Trademark] and others), the Company sells selected assortments of its
products to retailing chains in various trading areas at different times
throughout the year, and generally furnishes promotional advertising and
display materials, sometimes including related newspaper circulars and
inserts for advertising the merchandise. While newspaper circulars were
a major part of the Company's programs in the past, this activity has
been decreasing for the last several years, to the point where it is
utilized in only a small part of the Company's business at present.
The Company sells these assortments of merchandise to its customers at
fixed percentage discounts from the retail prices at which the
merchandise is advertised for sale to the consumer, resulting in uniform
overall profitability to the Company's customers. The overall
profitability to the Company of the promotional programs depends upon
the aggregate costs of the various items included in the assortments.
The assortments are continually under review, items being added or
discontinued from time to time, based upon customer demand and overall
profitability to the Company.
Promotional programs are the principal marketing vehicle for the
Company's products. Promotional programs, which enhance sales volume
and store traffic as compared to the results which might be attained
independent of such programs, are the Company's primary area of
expertise. The Company believes all of the items in its merchandise
line are marketable independent of its promotional programs.
The Company's Gift program business is seasonal to the Christmas selling
season. In recent years including fiscal 1995, approximately 50% to 70%
of the Company's annual Gift volume has been sold in the Company's
second quarter (October, November and December). As a result, the
commitments to purchase Gift inventories must be made early, in advance
of the selling season, and inventory levels are more difficult to adjust
as sales volume fluctuates. In addition, as the mix of its customer
base has changed in recent years to major drug store and grocery store
chains, the demand for guaranteed sales has increased. In 1993 and 1994
approximately 50% of the Gift program was sold under guaranteed sales
terms. Significant execution problems and excessive returns in 1993
resulted in planned reduction of the business in 1994. While the
problems of 1993 were overcome in 1994, the Gift program still did not
meet the Company's expectations and, as a result, the Company offered
a significantly reduced Gift program principally on a non-guaranteed
basis in fiscal 1995.
RISK ELEMENTS OF THE COMPANY'S BUSINESS
The Company is currently subject to many business risks which could
adversely affect its financial condition and/or ability to operate at a
reasonable level of profitability. Many of these risks are inherent in
any business, while others, the Company believes, warrant specific
discussion:
Recession. While few businesses are immune to potential adverse impact
in a recessionary environment, the Company believes it may have
substantial exposure in a prolonged period of recession. Customers
often turn to the Company in periods of economic slowdown to improve
retail store sales and traffic through promotional programs designed to
generate additional business. On the other hand, economic slowdown may
tend to adversely affect the financial health of the Company's
customers, which can result in pressure to reduce inventories and
consequently the cancellation or reduction in volume of orders for the
Company's promotional programs. Additionally, many of the Company's
retailer customers are already heavily leveraged, resulting in risk of
the Company's loss of the account or inability to collect accounts
receivable from the customer.
Guaranteed Sales. In recent years the Company has experienced increased
demand for sales terms whereby the customer retains the right to return
goods which remain unsold at the close of the promotional period. As of
June 24, 1995 the Company's financial statements include approximately
$3.2 million in net sales and accounts receivable, representing the
estimated sales, net of returns, arising from shipments subject to
customer return privileges (i.e., guaranteed sales). The Company
believes it absorbed a significant decrease in sales in fiscal 1995 and
1994 as a result of its concerted effort to reduce guaranteed sales.
Gross margins, however, have improved as a result of this action.
As a result of order execution difficulties during fiscal 1993, the
Company experienced customer returns and other costs in excess of its
historical experience with guaranteed sale business. While the demand
for such sales has continued, the Company has successfully reduced
guaranteed sale business with many of its existing customers, and did
not accept new guaranteed sale programs with new customers without
adequate compensation and risk reduction provisions. The Company's
business with several of its ongoing customers continues to be sold
under guaranteed sale provisions. The Company's efforts to reduce its
level of guaranteed sale business have resulted in significant lost
sales volume.
Sales Decline. The Company's sales volume has declined materially in
each of the last five fiscal years. While all of the reasons for the
sales declines cannot be quantified with precision, significantly
reduced business ($9.5 million) with the Company's largest customer in
1994 was the principal reason for the decrease in sales in 1995. In
addition, planned reductions of the Gift program and reduction in the
amount of guaranteed sales were also major contributors to the reduction
in sales from fiscal 1994 to 1995 and from 1993 to 1994. It is the
Company's belief that economic conditions and other changes in the
retail marketplace, along with increased ability on the part of the
Company's customers to create their own promotional programs, and a
shifting customer base, have contributed to the historical decline in
sales volume. While the Company continues to implement marketing plans
designed to refocus its business and take advantage of this changing
retail marketplace, there can be no assurance that further sales
declines will not occur for these or other reasons. In addition, as
discussed above, the decisions to further reduce Gift program business
and to minimize the level of guaranteed sale business will likely have
a continuing adverse impact on the Company's core promotional sales
volume in fiscal 1996 and beyond.
PRODUCTS
The products sold by the Company consist of imported products, Company-
manufactured products, and products purchased from other United States
manufacturers and suppliers.
The breakdown of consolidated net sales by source is as follows:
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Imported Products 72% 75% 76%
Company-manufactured Plastics 15% 17% 16%
Domestic Products 13% 8% 8%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
Imported Products
Imported products currently consist of approximately 600 items. Most of
these items are manufactured and packaged to the Company's
specifications under the Company's brand names. Imported products are
purchased from various manufacturers in twenty countries, primarily in
the Far East and Europe.
The Company's importing activities are subject to the effects of
inflation and fluctuations in the value of the U.S. dollar in relation
to other currencies, as well as various other economic and political
risks, the effects of which cannot be quantified. It is the Company's
practice to purchase in U.S. dollars wherever possible, and to
continually evaluate these risks, as well as the cost and availability
of merchandise from all of its product sources, and to change suppliers
and countries of origin as necessary to meet its purchasing objectives.
While the Company considers its current sources of supply adequate for
its operations and has generally been successful at developing
alternative sources of supply, there can be no assurance that suitable
merchandise from foreign countries will continue to be available to the
Company at satisfactory U.S. dollar prices, or that it will not become
necessary to develop new sources in other foreign countries or to
purchase increasing quantities of merchandise from manufacturers in the
United States at prices which could be higher than the Company's present
sources.
Company-manufactured Plastics
Until August of 1995 the Company manufactured in its own plant (located
at its headquarters facility) more than 100 plastic housewares items,
such as wastebaskets, laundry baskets, pails, food storage containers,
tumblers, storage bins, and the like. As a result of declining sales
volume and a decreasing proportionate use of plastics in existing
business, the Company has closed its manufacturing facility, and has
made arrangements to meet its needs for plastic products through outside
purchases from both domestic and import sources. The Company expects to
be able to acquire plastic products at prices which permit the Company
to meet its operating needs. There can be no assurance that suitable
supplies will continue to be available to meet future needs at prices
which will permit the Company to maintain its present sales volume
and/or gross margin levels.
Products Purchased from Other United States Manufacturers and Suppliers
Domestically manufactured products purchased from others currently
consist of approximately 100 items sold in the Company's promotional
programs and independent of those programs. As with its imported
products, while the Company considers its current sources of supply
adequate for its operations, there can be no assurance that suitable
merchandise from domestic manufacturers will continue to be available to
the Company at satisfactory prices, or that it will not become necessary
to develop new sources or to purchase increasing quantities of
merchandise at prices which could be higher than the Company's present
sources. Generally, however, there are competitive sources and products
available in the marketplace.
COMPETITION
The business of importing and marketing the categories of merchandise
sold by the Company is highly competitive. While the Company has
experienced some competition recently from certain importers in terms of
"direct import" promotional programs, no competitor is known to provide
the breadth of program selection and services which the Company does.
The Company however, does compete with a large number of firms, many of
which have greater financial resources, including large manufacturers
selling branded promotional items, the retailers' own internally
developed promotional programs, wholesalers and importers.
The Company's promotional programs, which in the fiscal year ended June
24, 1995 accounted for approximately 97% of net sales, constitute the
Company's principal method of competing with other suppliers of like
merchandise to retail chains. The Company endeavors to provide a broad
range of value-oriented products and programs, as well as merchandising
and point-of-sale displays and other promotional support materials and
services in a unique fashion, responsive to the retailers' needs. The
success of the promotional programs depends on achieving the goal of
increasing sales and enhancing gross margin contribution in the stores
of the Company's customers.
The Company believes it is the leading independent marketer of
promotional programs to the retail trade. The Company's principal
competition in providing these programs often comes from its own
customers, most of whom have the capabilities to conduct promotional
programs internally. The Company's success at building sales and store
traffic and providing the retailer with comprehensive, turnkey programs
(including promotional merchandise with consistent, reasonable profit
margins for the retailer) are the Company's basis for competition with
the internally created promotions of its customers.
SEASONALITY
Fluctuations in sales of the Company's DOLLAR-AMA and similar
promotions from quarter to quarter reflect the cumulative result of
individual decisions made by various customers with regard to the timing
and placement of orders. Sales of the Company's Gift programs are
seasonally highest in the Company's second fiscal quarter. The December
quarter has accounted for approximately 50% to 70% of the annual volume
for Gift sales during the last three fiscal years.
TRADEMARKS HELD, AND LICENSES AND FRANCHISES GRANTED
The Company's trademarks - DOLLAR-AMA (Registered Trademark), DOLLAR
POWER (Registered Trademark) and others - are recognized by consumers
throughout the United States, and represent the basic concepts under
which the Company's promotional programs are sold. Trademarks are
considered to be an integral part of the Company's ability to market its
promotional program business. Trademark rights endure as long as the
Company continues to properly use them in the conduct of its business.
In connection with the majority of the Company's promotional program
sales, licenses to use DOLLAR-AMA (Registered Trademark) and other
trademarks are granted to stores in various geographic trading areas
throughout the year. The licenses are granted at no additional cost to
the customer (the Company charges only for the merchandise provided) for
limited periods of time, usually one to two weeks, during which the
licensed stores advertise their sales of the Company's merchandise.
EMPLOYEES
At August 31, 1995 the Company employed 255 regular employees (including
90 represented by a labor union) and 79 temporary employees. At August
31, 1994 it employed 321 regular (including 90 represented by a labor
union) and 64 temporary employees. The decrease is primarily due to
decreased manufacturing and distribution activity in August of 1995 and
work force reductions related to downsizing during the year. The
Company considers its working relationship with the business agent for
its union employees to be good. The Company communicates regularly with
union representatives to resolve any issues or conflicts.
ITEM 2. PROPERTIES
The Company occupies the following facilities:
Headquarters. The Company's corporate headquarters and primary
distribution center are located in a 580,000-square foot building on a
43-acre tract of land in Harmar Township, Pennsylvania (near
Pittsburgh). The facility is leased from Allegheny Capital Growth
Limited Partnership.
Other Distribution Facilities. The Company presently occupies about
55,000 square feet at an additional distribution facility in Mt. Vernon,
Ohio. The facility is occupied under a short-term lease arrangement
permitting the Company to expand or contract its space to accommodate
the Company's fluctuating inventory and distribution volume.
Other Facilities. Lease obligations remain for one office and one
retail store location. Both of these facilities are sublet to other
businesses.
ITEM 3. LEGAL PROCEEDINGS
The Company previously reported an adversary action against the Company
and some 50 other defendants, filed on August 16, 1994 by the Official
Committee of Unsecured Creditors of Phar-Mor, Inc. in the United States
Bankruptcy Court, Northern District of Ohio, and subsequently
transferred to the United States District Court for the Western District
of Pennsylvania. The Official Committee sought the recovery of
approximately $75 million (about $2.6 million in the case of Action
Industries) paid to the defendants for Phar-Mor shares tendered by them
in a July 1991 tender offer. The claim was based upon allegations that
at the time of the tender offer Phar-Mor was insolvent or had
unreasonably small capital, and, therefore, the transfers pursuant to
the tender offer constituted fraudulent conveyances. On August 22,
1995, summary judgment was entered in favor of the Company and the other
defendants. In September 1995, the Official Committee filed an appeal
of this decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and business experience of the Company's
executive officers are set forth below.
Kenneth L. Campbell, 48. Mr. Campbell has served as Senior Vice
President, Finance and Chief Financial Officer since 1989. He has been
an executive officer of the Company since his employment in 1984.
T. Ronald Casper, 51. Mr. Casper was appointed as Acting President and
Chief Executive Officer on September 7, 1995. Since 1988, he has been
Managing Director of Cornerstone Capital Advisors, Ltd., a merchant
banking organization, of which he is a co-founding principal. Mr.
Casper serves under a contract between the Company and Cornerstone, and
is not an employee of the Company. He had been a consultant to the
Company, reviewing its strategic plans, for about two months prior to
his appointment.
Robert I. Christian, 43. Mr. Christian joined the Company in May 1994
as Senior Vice President, Sales. An experienced sales executive with
several major companies, his most recent prior positions include serving
from 1993 as National Sales Manager for Goody Products, Inc., a personal
grooming products distributor, and serving from 1989 to 1993 as National
Sales Manager for McNeil Specialty Products Company (a division of
Johnson & Johnson), a food products distributor.
Robert P. Garrity, 45. Mr. Garrity joined the Company in January 1994
as Senior Vice President, Operations. He had previously been employed
for seventeen years by Price Waterhouse, an independent accounting firm,
where he most recently served as Director of Middle Market Consulting.
In his capacity with Price Waterhouse, Mr. Garrity had been a consultant
to the Company in 1993 in connection with the Company's installation of
a new distribution system.
Linda S. Wyckoff, 47. Ms. Wyckoff is Vice President, General Counsel
and Secretary of the Company. An officer of the Company since 1984, she
has served as General Counsel since 1989 and Secretary since 1990. She
has been employed by the Company since 1974.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded on the American Stock Exchange
(trading symbol ACX). The following table sets forth the high and low
sale prices of the stock during each quarter of the last two fiscal
years:
<TABLE>
<CAPTION>
FISCAL YEAR 1995 FISCAL YEAR 1994
---------------- ----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <S> <C> <C>
First Quarter 2-1/2 2 First Quarter 2-7/16 1-1/4
Second Quarter 2-5/16 1-5/8 Second Quarter 2-11/16 1-5/8
Third Quarter 2-1/8 1-5/16 Third Quarter 3-1/16 2-1/16
Fourth Quarter 1-1/2 15/16 Fourth Quarter 2-9/16 2-1/16
</TABLE>
There are approximately 1,300 holders of record of the Company's common
stock, including brokers named on listings provided by clearing
agencies. It is estimated that these holders represent approximately
2,700 beneficial owners of the Company's stock.
The Company's Board of Directors has not declared cash dividends during
the last two fiscal years and has no present plans to do so.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands except per share amounts)
OPERATING RESULTS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $ 45,088 $ 60,049 $ 76,684 $ 84,059 $ 100,921
Cost of Products Sold 34,374 44,527 62,725 58,360 74,981
------------------------------------------------------
Gross Margin $ 10,714 $ 15,522 $ 13,959 $ 25,699 $ 25,940
Earnings (Loss) from Continuing Operations (a)(b) $ (2,907) $ 128 $ (10,390) $ 5,557 $ 2,842
------------------------------------------------------
Earnings (Loss) Per Share from Continuing
Operations (a) $ (0.52) $ 0.02 $ (1.88) $ 0.97 $ 0.51
Cash Dividends - - - - -
Weighted Average Shares Outstanding 5,539 5,561 5,539 5,738 5,600
------------------------------------------------------
BALANCE SHEET DATA
Total Assets $ 39,546 $ 39,363 $ 56,873 $ 66,137 $ 61,590
Long-Term Debt $ 7,854 $ 8,487 $ 9,022 $ 9,427 $ 11,141
======================================================
(a) Losses for 1993 include $5,123,000 of restructuring costs. Net earnings for 1992 include deferred
income tax credits of $500,000. The loss for 1990 includes $12,942,000 restructuring costs.
(b) Excludes losses from discontinued operations in 1995 of $808,000 ($0.15 per share, in 1994 of $3,000,
in 1993 of $3,990,000 ($0.72 per share), in 1992 of $1,697,000 ($0.30 per share), and in 1991 of
$297,000 ($0.05 per share).
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company has experienced declining sales in its traditional
promotional business in recent years. The decline continued in fiscal
1995 principally due to significantly reduced business ($9.5 million)
with the Company's largest customer of fiscal 1994, as a result of the
decision by that customer to utilize the Company's programs only in a
small group of its stores in 1995. Also contributing to the decrease in
sales was the Company's implementation in 1994 of the strategy to
downsize the Company's core business by reducing low margin and/or
guaranteed sale business. This strategy is particularly applicable to
the Company's Gift business, which has historically had a high incidence
of guaranteed sale provisions, and which is also highly seasonal. A
significant percentage of the Company's Gift sales in the year ended
June 25, 1994 was shipped on a guaranteed sale basis. As a result, the
Company did not offer its traditional Gift program for the 1995 fiscal
year, rather it offered a limited Gift program on a non-guaranteed
basis. A new Gift program has been developed for sale in fiscal 1996
which has been offered on a limited basis with the intent of further
development for the future. Gift sales decreased $6.4 million from 1994
to 1995.
The Company experienced additional lost sales opportunities in fiscal
1994 and 1995 in programs other than Gift because certain customers
elected not to buy the Company's programs without guaranteed sales
terms.
The Company does not expect the closing of its plastic manufacturing
facility to result in any reduction in sales in the future, since
replacement products are available. Sales of the discontinued lamp
business are not included in reported sales in the Company's financial
statements, and are not expected to be replaced.
The historical decline in sales is the result of many factors, including
a changing retail marketplace, the increasing complexity of the
promotional business itself, and strategic decisions to exit or downsize
unprofitable product lines. In fiscal 1993 an imbalance between
specific item inventory on hand and actual customer demand for specific
items resulted in poor customer order execution and decreased order fill
rates. This was exacerbated by insufficient cash resources to support
the Company's merchandise buying strategy, which continued until
December of 1992. Since then the Company has been able to properly
finance the majority of its inventory needs, and accordingly, has
experienced improved results in both order fill rates and on-time
shipping, which the Company believes to have contributed to improved
gross margins.
Restructuring charges of $5.1 million were reported in fiscal 1993, and
the Company took a $2.2 million charge to write down its investment in
its discontinued Action Nicholson Color Company (ANC) subsidiary to
estimated realizable value. Substantially all of the operating assets
of ANC were sold in April 1994 at a price which included partial payment
at closing and future consideration based on future sales. The
estimated realizable value of the future consideration has been reduced,
and the carrying amount of the anticipated future proceeds has been
written down to net realizable value as of June 24, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The major source of cash during the 1995 fiscal year was short-term
borrowings. Operating losses and increased accounts receivable and
inventories were the primary uses of cash. Working capital of $12.8
million at June 24, 1995 decreased from $16.4 million at June 25, 1994.
The current ratio at June 24, 1995 was 1.76, decreased from 2.37 at June
25, 1994. The long-term debt to equity ratio (including the
sale/leaseback financing obligation) was 0.60, increased from 0.50 at
June 25, 1994. The changes in these ratios were primarily the result of
the operating results during the period and other matters discussed
above.
Cash and cash equivalents were $567,000 at June 24, 1995 as compared to
$800,000 at June 25, 1994. Cash balances fluctuate daily to meet
operating requirements.
Accounts receivable of $9.9 million at June 24, 1995 increased from $8.9
million at June 25, 1994, as a result of increased sales in the month of
June and the fourth quarter taken as a whole in the current year.
Inventories of $18.1 million increased from $17.6 million at June 25,
1994. The increase is temporary in nature, related to the timing of
delivery of merchandise. Inventory reductions are anticipated for the
1996 fiscal year, as the Company continues to pursue its inventory
reduction plan.
Aggregate borrowings (notes payable and long-term debt) increased from
$13.9 million at June 25, 1994 to $18.0 million at June 24, 1995 as a
result of losses incurred in the current year. Letters of credit
outstanding decreased from $1.6 million at June 25, 1994 to $909,000 at
June 24, 1995 as a result of reduced purchasing under the Company's
inventory reduction plan.
Accounts payable of $4.4 million at June 24, 1995 were comparable to
$4.3 million at June 25, 1994.
The Company's Credit Agreement provides for up to $17 million in
committed credit lines through January of 1996. Negotiations have been
finalized to extend the agreement through June of 1997 under
substantially the same terms, except that the aggregate amount of
available credit will be reduced to $15 million through December of 1995
and $10 million through June of 1997, consistent with the Company's
anticipated needs. Availability under the line is further limited by the
level of eligible accounts receivable and inventories.
The Company believes the credit available under its borrowing
arrangements, together with funds expected to be generated from
operations (including anticipated reduction of inventories) are
sufficient to meet its operating needs.
The Company's capital expenditures were $759,000 in fiscal 1995,
primarily for core systems replacement and a package design computer
system. The Company initiated a system replacement project for all of
its core information systems computer hardware and software in 1994.
Future expenditures of $700,000 to $1 million will be made in fiscal
1996 or later in connection with this project.
Inflation
The Company periodically discontinues or replaces in its promotional
programs items for which costs increase. This practice serves as an
offset to the effects of inflation. The Company believes its FIFO cost
method of valuing inventories provides for appropriate matching of
current costs with current revenues, and that the Company's buying
practices and improving inventory turnover significantly reduce the
appreciation in inventory values due to inflation and other price
increases.
Inflationary increases in the Company's costs of acquiring merchandise
may adversely affect the Company's operating margins, since there is no
assurance that the Company can pass such increases along to its
customers.
RESULTS OF OPERATIONS
Fiscal 1995 Compared with Fiscal 1994
Net Sales. Aggregate net sales for fiscal 1995 were $45,088,000, a
decrease of $14,961,000 (24.9%) compared to $60,049,000 in the prior
year.
Sales to the Company's largest customer in 1994 decreased $9.5 million
in the current year as a result of that customer's decision to use the
Company's programs in a limited manner in 1995. In addition, Gift
program sales decreased $6.4 million as a result of the Company's
decision to reduce the offering of this program in order to reduce
guaranteed sales and improve gross margins while developing an improved
Gift program for the future.
The Company's sales volume has declined materially in each of the last
several years. It is the Company's belief that economic conditions and
other changes in the retail marketplace, along with increased ability on
the part of the Company's customers to create their own promotional
programs and a shifting customer base, have contributed to the decline
in sales volume. While the Company is implementing marketing plans
designed to refocus its business and take advantage of this changing
retail marketplace, there can be no assurance that further sales
declines will not occur for these or other reasons. In addition, the
decisions to reduce the Gift program business and to reduce the level of
guaranteed sale business will likely have a continuing adverse impact on
the Company's core promotional sales volume.
Following is a comparison of net sales by type of program:
<TABLE>
<CAPTION>
NET SALES
-------------------------------
Fiscal Year Ended Increase
June 24, 1995 June 25, 1994 (Decrease)
------------- ------------- ----------
<S> <C> <C> <C>
Dollar Days $31,933,000 $41,257,000 $ (9,324,000)
Replenishment 9,560,000 8,224,000 1,336,000
Retail 643,000 785,000 (142,000)
----------- ----------- -------------
Core Promotional Business 42,136,000 50,266,000 (8,130,000)
Gift 2,122,000 8,521,000 (6,399,000)
Other Specialty Products 830,000 1,262,000 (432,000)
----------- ----------- -------------
$45,088,000 $60,049,000 $(14,961,000)
=========== =========== =============
</TABLE>
Cost of Products Sold and Gross Profit Margins. Gross profit margins
(as a percentage of sales) decreased from 25.8% last year to 23.8% in
the current year, principally due to increased cost of merchandise sold
in core business programs, related primarily to the mix of programs sold
and increased plastic manufacturing costs related to the lower level of
production in 1995.
Operating Expenses. Operating expenses decreased from $13,245,000
(22.1% of sales) in fiscal 1994 to $12,461,000 (27.6% of sales) in
fiscal 1995. The increase in costs as a percentage of sales was
primarily the result of increased selling and merchandising costs
related to the development of programs for the future, and the lower
level of sales in 1995.
Interest Expense. The decrease of $238,000 was due to lower average
borrowing levels in the current year net of increased interest rates and
other borrowing costs.
Other Income (Expense), Net. Other income of $674,000 in fiscal 1995
includes a gain on the sale of property in Mt. Clemens Michigan (site of
a previously discontinued operation) in the amount of $950,000 and gains
from the sale of plastic production equipment of $296,000, net of the
writedown of the estimated value of remaining amounts due from the prior
sale of Action Nicholson Color Company of $518,000 and other
miscellaneous items. The prior year income amount of $77,000 was
comprised of miscellaneous items.
Earnings (Loss) From Continuing Operations Before Income Taxes.
Earnings (Loss) decreased from earnings of $128,000 in fiscal 1994 to a
loss of $2,907,000 in fiscal 1995. The decrease of $3,035,000 reflects
the combined effect of all the above.
Provision for Income Taxes. No income tax benefits were provided on the
loss in fiscal year 1995 because realization of such benefits is not
reasonably assured. No income tax expense was provided on earnings in
fiscal year 1994, because previously unrecognized deferred income tax
benefits and net operating loss deductions from prior years were
available to offset income taxes on current earnings. Net operating
loss carryforwards available to offset future taxable income and thereby
reduce income taxes payable in fiscal 1995 and beyond are approximately
$20 million for income tax reporting purposes.
Earnings (Loss) From Continuing Operations. The decrease of $3,035,000
reflects the combined effect of all the above.
Loss From Discontinued Operation. In fiscal 1995 the Company adopted a
plan to sell its lamp business, and completed the sale in September of
1995. Operating losses of $808,000 for 1994 were reclassified.
Net Earnings (Loss). The decrease of $3,840,000 reflects the combined
effect of all the above.
Fiscal 1994 Compared with Fiscal 1993
Net Sales. Aggregate net sales for fiscal 1994 were $60,049,000, a
decrease of $16,635,000 (21.7%) compared to $76,684,000 in the prior
year. The Company's Dollar Days, Replenishment, Gift and Retail sales
all decreased in comparison to the prior year. The decreases were
primarily the result of the Company's "downsizing to profitability"
strategy, which focused on the elimination of low margin and/or
guaranteed sale business, as discussed above. This strategy resulted in
a 44% reduction in the Company's Gift business sales, which often
involve guarantees and are also subject to significant seasonal sales
risks. Dollar Days and other sales were also lost as a result of the
efforts to reduce guaranteed sale business. Reduced Replenishment sales
were related to lower initial store setup orders in the current year,
and reduced retail store sales are related to operating one retail store
in 1994 after closing two of the Company's three stores during the prior
year. The Company has experienced declining sales in its traditional
Promotional business in recent years, in the form of reduced repeat
business and order reductions. Further, the Company has continued to
experience changes in its customer base, with a higher proportion of its
business currently being done with supermarkets and drug stores and with
smaller discounters, resulting in a tendency toward smaller individual
promotions and reduced order sizes. Much of the Company's business
continues to be done with large customers. Improvements were made in
customer order fill rates and on-time deliveries in 1994. Order
execution problems experienced in 1993 were resolved during fiscal 1994.
Following is a comparison of net sales by type of program:
<TABLE>
<CAPTION>
NET SALES
-------------------------------
Fiscal Year Ended Increase
June 25, 1994 June 26, 1993 (Decrease)
------------- ------------- ----------
<S> <C> <C> <C>
Dollar Days $41,257,000 $44,787,000 $ (3,530,000)
Replenishment 8,224,000 11,979,000 (3,755,000)
Retail 785,000 1,774,000 (989,000)
----------- ----------- -------------
Core Promotional Business 50,266,000 58,540,000 (8,274,000)
Gift 8,521,000 15,113,000 (6,592,000)
Other Specialty Products 1,262,000 3,031,000 (1,769,000)
----------- ----------- -------------
$60,049,000 $76,684,000 $(16,635,000)
=========== =========== =============
</TABLE>
Cost of Products Sold and Gross Profit Margins. Gross profit margins
(as a percentage of sales) increased from 18.2% in 1993 to 25.8% in the
1994, principally due to:
1) decreased cost of merchandise sold, related primarily to the mix
of programs sold and improved inventory availability, resulting
in a 2% improvement to gross margin as a percentage of net
sales;
2) reduced levels of customer returns, markdowns and allowances,
and freight costs related to improved order execution, fill rate
and inventory availability in the current year, and the
Company's efforts to reduce guaranteed sales, resulting in gross
margin improvement of 4% to 5% of net sales; and
3) improved plastics production costs, as a result of favorable
material prices and increased non-promotional plastic sales,
resulting in improved plastics contribution to margin of 1-1/2%
of net sales.
Operating Expenses. Operating expenses decreased from $18,207,000
(23.7% of sales) in fiscal 1993 to $13,245,000 (22.1% of sales) in
fiscal 1994. The decrease was primarily the result of reduced sales
volume and overall operating cost reductions in conjunction with the
Company's continuing cost reduction program, including reductions in
personnel and other costs related to restructuring.
Interest Expense. The decrease of $125,000 was due to decreased average
borrowing levels in the current year, net of increased interest rates
and other borrowing costs.
Other Income (Expense), Net. Other expense of $77,000 in fiscal 1994
represented miscellaneous items. The prior year income amount of
$1,178,000 was comprised of income of $1,116,000 from the Company's
investment in Action Tungsram, a joint venture in liquidation, and
miscellaneous items.
Earnings (Loss) From Continuing Operations Before Income Taxes.
Earnings (Loss) increased from a loss of $10,390,000 in fiscal 1993 to
earnings of $128,000 in fiscal 1994. The increase of $10,518,000
reflects the combined effect of all the above.
Provision for Income Taxes. No income taxes were provided on earnings
in fiscal year 1994 because previously unrecognized deferred income tax
benefits and net operating loss deductions from prior years are
available to offset income taxes on current earnings. No income tax
benefits were provided on the loss in fiscal 1993 because realization of
such benefits was not reasonably assured.
Earnings (Loss) From Continuing Operations. The increase of $10,518,000
reflects the combined effect of all the above.
Loss From Discontinued Operation. In fiscal 1993 the Company adopted a
plan to sell its Action Nicholson Color Company subsidiary (ANC). A
charge of $2,176,000 was recorded in 1993 to write down the Company's
investment in ANC to estimated net realizable value. Operating losses
of $1,028,000 for 1993 were reclassified. ANC was sold in April 1994.
Net Earnings (Loss). The increase of $14,505,000 reflects the combined
effect of all the above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules
included as part of Item 14 appearing on Page 23 of this Form 10-K
Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There are no disagreements between the Company and its independent
accountants concerning matters of accounting principles or practices or
financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information required by Item 10 is contained in the Company's
Proxy Statement for the 1995 Annual Meeting of Shareholders and is
incorporated herein by reference. The information concerning Directors
is set forth under the caption "Election of Directors" on page 2, and
the information concerning compliance with the Section 16(a)
requirements of the Securities Exchange Act of 1934 is set forth under
the caption "Compliance with Certain Filing Requirements" on page 8.
The information concerning executive officers required by Item 10 is
contained at the end of Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information concerning executive compensation required by Item 11 is
contained in the Company's Proxy Statement for the 1995 Annual Meeting
of Shareholders under the caption "Compensation of Directors and
Executive Officers" on pages 9-15 and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is contained in the Company's Proxy
Statement for the 1995 Annual Meeting of Shareholders. Information
concerning the security ownership of management is set forth under the
caption "Security Ownership of Management" on pages 6-7, and information
concerning the security ownership of certain other beneficial owners is
found under the caption "Security Ownership of Certain Others" on page
7, which portions are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is contained in the Company's Proxy
Statement for the 1995 Annual Meeting of Shareholders under the caption
"Family Relationships" and "Business Relationships, Transactions with
Management and Involvement in Legal Proceedings" on page 8 and is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets at
June 24, 1995 and June 25, 1994
Consolidated Statements of Operations for the years
ended June 24, 1995, June 25, 1994, and June 26, 1993
Consolidated Statements of Shareholders' Equity
for the years ended June 24, 1995, June 25, 1994,
and June 26, 1993
Consolidated Statements of Cash Flows for the years
ended June 24, 1995, June 25, 1994, and June 26, 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
For the years ended June 24, 1995, June 25, 1994,
and June 26, 1993 (as required)
Schedule II - Valuation and Qualifying Accounts
Other schedules are omitted because they are not applicable or because
the required information is shown in the consolidated financial
statements or notes thereto.
3. Exhibits:
3.1 Articles of Incorporation, as amended, filed as
Exhibit 3.1 to 1994 Form 10-K and incorporated
herein by reference.
3.2 Bylaws, as amended, filed as Exhibit 3.2 to 1992
Form 10-K and incorporated herein by reference.
4.1 Amendment 2 to Form S-1 Registration Statement
(File No. 2-31014), filed April 1, 1969 and
incorporated herein by reference.
4.2 Amendment 1 to Form S-1 Registration Statement
(File No. 2-42809), filed January 26, 1972 and
incorporated herein by reference.
4.3 Amendment 1 to Form S-8 Registration Statement
(File No. 2-44531), filed October 15, 1972 and
incorporated herein by reference.
4.4 Amendment 4 to Form S-7 Registration Statement
(File No. 2-59334), filed September 21, 1977, and
Form of Indenture dated as of September 15, 1977,
filed as an Exhibit thereto, both incorporated
herein by reference. First Supplemental Indenture
dated as of May 15, 1982, filed September 23, 1983
and incorporated herein by reference.
4.5 Amendment 2 to Form S-2 Registration Statement
(File No. 2-81849), filed April 6, 1983, and Form
of Indenture dated as of April 1, 1983, filed as
Exhibit 4.2 thereto, both incorporated herein by
reference. Supplemental Indenture dated as of
August 31, 1983, filed as Exhibit 4.5 to 1984 Form
10-K and incorporated herein by reference.
4.6 Form S-8 Registration Statement No. 33-48361,
filed June 3, 1992 and incorporated herein by
reference.
4.7 Form S-8 Registration Statement No. 33-48362,
filed June 3, 1992 and incorporated herein by
reference.
10.1 Letter dated July 31, 1990 regarding employment
and retirement agreement of Ernest S. Berez, filed
as Exhibit 10.5 to 1990 Form 10-K and incorporated
herein by reference.
10.2 Deferred Compensation arrangement, filed as
Exhibit 10.2 to 1994 Form 10-K and incorporated
herein by reference.
10.3 Stock Option Plan, filed as Exhibit 10.10 to 1990
Form 10-K and incorporated herein by reference.
10.4 Nonemployee Director Stock Option Plan, filed
herein as Exhibit 10.10 to 1992 Form 10-K and
incorporated herein by reference.
10.5 Deferred Compensation Plan for Directors of Action
Industries, Inc., filed herein.
10.6 Plan of Liquidation of Action Tungsram, Inc.,
dated April 25, 1990, filed as Exhibit 10.12 to
1990 Form 10-K and incorporated herein by
reference.
10.7 Addendum to Plan of Liquidation of Action
Tungsram, Inc., dated April 30, 1993, filed as
Exhibit 10.24 to 1993 Form 10-K and incorporated
herein by reference.
10.8 Employment Agreement dated March 12, 1992 with R.
Craig Kirsch, filed as Exhibit 10.14 to 1992 Form
10-K and incorporated herein by reference.
10.9 Employment Agreement dated as of July 1, 1994 with
Ronald A. Gagnon, filed as Exhibit 10.11 to 1994
Form 10-K and incorporated herein by reference.
10.10 Employment Agreement dated December 15, 1993 with
Robert P. Garrity, filed herein.
10.11 Employment Agreement dated April 15, 1994 with
Robert I. Christian, filed herein.
10.12 Loan Agreement with Allegheny Capital Growth
Limited Partnership dated February 4, 1991, filed
as Exhibit 10.15 to 1991 Form 10-K and
incorporated herein by reference.
10.13 Lease Agreement and Restated Second Amendment to
Lease Agreement with Allegheny Capital Growth
Limited Partnership dated June 29, 1990 and
February 4, 1991, filed as Exhibit 10.16 to 1991
Form 10-K and incorporated herein by reference.
10.14 Loan and Security Agreement (and related
Agreements) dated January 20, 1994, filed as
Exhibit 10 to fiscal 1994 second quarter Form 10-Q
and incorporated herein by reference.
10.15 Amendments One, Two, Three and Four, dated May 27,
1994, November 11, 1994, December 9, 1994, and May
11, 1995, respectively, filed herein.
10.16 Asset Purchase Agreement and Bill of Sale,
Assignment and Assumption Agreement with Filmet
Color Laboratories, Inc., dated April 21, 1994,
filed as Exhibit 10.17 to 1994 Form 10-K and
incorporated herein by reference.
10.17 Purchase/Sale Agreement with Riverside Associates,
dated February 14, 1995, filed herein.
10.18 Remediation and Indemnification Agreement with
Riverside Associates, dated June 16, 1995, filed
herein.
10.19 Asset Purchase Agreement with Kensington
Collection, Inc. dated September 18, 1995, filed
herein.
22 Subsidiaries of Registrant, filed as Exhibit 22 to
1993 Form 10-K and incorporated herein by
reference.
23 Consent of Independent Auditors, filed herein.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
the 1995 fiscal year.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Action Industries, Inc.
We have audited the accompanying consolidated balance sheets of Action
Industries, Inc. and Subsidiaries listed in the accompanying index to
financial statements Item 14(a). Our audits also included the financial
statement schedule listed in the index at 14(a). These financial
statements and the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Action Industries, Inc. and Subsidiaries at June 24, 1995
and June 25, 1994, and the consolidated results of its operations and
cash flows for each of the three years in the period ended June 24, 1995
in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
September 14, 1995
Pittsburgh, Pennsylvania
ACTION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 24, June 25,
1995 1994
-------- --------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $567 $800
Trade accounts receivable, less allowances of $478 and $1,134 9,908 8,862
Inventories 18,133 17,584
Other current assets 1,111 1,187
------- -------
TOTAL CURRENT ASSETS 29,719 28,433
PROPERTY, PLANT AND EQUIPMENT 7,964 8,260
OTHER ASSETS 1,863 2,670
------- -------
$39,546 $39,363
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and acceptances payable $10,162 $5,439
Accounts payable 4,406 4,323
Restructuring and discontinued operations 926 699
Other accrued liabilities 1,382 1,560
------- -------
TOTAL CURRENT LIABILITIES 16,876 12,021
LONG-TERM LIABILITIES
Financing obligation - sale/leaseback 7,739 8,372
Long-term debt 115 115
Deferred compensation 1,688 2,012
------- -------
TOTAL LONG-TERM LIABILITIES 9,542 10,499
SHAREHOLDERS' EQUITY
Common stock, $0.10 par value;
authorized 20,000,000 shares; issued 7,187,428 shares 719 719
Capital in excess of par 25,498 25,498
Retained earnings (deficit) (1,515) 2,200
------- -------
24,702 28,417
Less treasury shares, at cost 11,574 11,574
------- -------
TOTAL SHAREHOLDERS' EQUITY 13,128 16,843
------- -------
$39,546 $39,363
======= =======
</TABLE>
See notes to consolidated financial statements.
ACTION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended
----------------------------------
June 24, June 25, June 26,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET SALES $45,088 $60,049 $76,684
COSTS AND EXPENSES
Cost of products sold 34,374 44,527 62,725
Operating expenses 12,461 13,245 18,207
Interest expense 1,834 2,072 2,197
Restructuring costs - - 5,123
------- ------- -------
48,669 59,844 88,252
OTHER INCOME (EXPENSE), NET 674 (77) 1,178
------- ------- -------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (2,907) 128 (10,390)
PROVISION FOR INCOME TAXES - - -
------- ------- -------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (2,907) 128 (10,390)
LOSS FROM DISCONTINUED OPERATIONS
Operating loss (808) (3) (1,814)
Provision for loss on disposal - - (2,176)
------- ------- -------
Total Loss from Discontinued Operations (808) (3) (3,990)
NET EARNINGS (LOSS) ($3,715) $125 ($14,380)
======= ======= =======
EARNINGS (LOSS) PER SHARE
Continuing operations ($0.52) $0.02 ($1.88)
Discontinued operations (0.15) 0.00 (0.72)
------- ------- -------
NET EARNINGS (LOSS) PER SHARE ($0.67) $0.02 ($2.60)
======= ======= =======
Weighted average shares outstanding 5,539 5,561 5,539
</TABLE>
See notes to consolidated financial statements.
ACTION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands except share amounts)
<TABLE>
<CAPTION>
For the Years Ended June 24, 1995, June 25, 1994, and June 26, 1993
---------------------------------------------------------------------------
Capital Retained
Common Stock In Excess Earnings Treasury Stock
Shares Amount of Par (Deficit) Shares Amount Total
------ ------ --------- --------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - JUNE 27, 1992 7,187 $719 $25,509 $16,455 1,653 ($11,610) $31,073
Net Loss - - - (14,380) - - (14,380)
Other - - (11) - (5) 36 25
---------------------------------------------------------------------------
BALANCE - JUNE 26, 1993 7,187 719 25,498 2,075 1,648 (11,574) 16,718
Net Earnings - - - 125 - - 125
---------------------------------------------------------------------------
BALANCE - JUNE 25, 1994 7,187 719 25,498 2,200 1,648 (11,574) 16,843
Net Loss - - - (3,715) - - (3,715)
---------------------------------------------------------------------------
BALANCE - JUNE 24, 1995 7,187 $719 $25,498 ($1,515) 1,648 ($11,574) $13,128
===========================================================================
</TABLE>
See notes to consolidated financial statements.
ACTION INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
June 24, 1995 June 25, 1994 June 26, 1993
------------- ------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings (loss) from continuing operations ($2,907) $128 ($10,390)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,055 1,248 1,415
Provision (credit) for doubtful accounts (656) 873 1,074
Provision for restructuring costs - - 5,123
Cash used in discontinued operations (290) (367) (860)
Changes in operating assets and liabilities:
Trade accounts receivable (390) 7,178 (1,767)
Inventories (549) 6,203 8,797
Other current assets 76 1,953 222
Accounts payable and accrued expenses 132 (5,193) (2,918)
------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,529) 12,023 696
======= ======= =======
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (759) (127) (1,501)
------- ------- -------
NET CASH USED IN INVESTMENT ACTIVITIES (759) (127) (1,501)
======= ======= =======
FINANCING ACTIVITIES:
Current maturities of long-term obligations - - (1,200)
Notes and acceptances payable 4,723 (11,001) 2,990
Payment of deferred compensation (324) (602) -
Principal payments on long-term obligations (633) (535) (405)
Other, net 289 312 (319)
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,055 (11,826) 1,066
======= ======= =======
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (233) 70 261
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 800 730 469
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $567 $800 $730
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACTION INDUSTRIES, INC. AND SUBSIDIARIES
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements
include the accounts of Action Industries, Inc. and its
wholly-owned subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated. The
Company has operated a lamp business as Kensington Lamp Company, a
wholly-owned subsidiary (KLC). The business and certain assets of
KLC were sold in September of 1995, a fourth quarter, fiscal 1995
event for reporting purposes. The lamp business is reported as a
discontinued operation. Action Nicholson Color Company (ANC), a
wholly-owned subsidiary, was sold in April of 1994. ANC was held
for sale as of June 26, 1993, and is reported as a discontinued
operation.
Cash and Cash Equivalents: Cash equivalents are carried at cost,
which approximates market. The Company considers all highly liquid
investments with a maturity date of three months or less when
purchased to be cash equivalents.
Inventories: Inventories are valued at the lower of first-in,
first-out (FIFO) cost or market.
Property, Plant and Equipment: Property, plant and equipment is
carried at cost. The Company provides for depreciation (including
amortization of assets held under capital leases) over the
estimated useful lives or lease terms of the assets, principally on
the straight-line method. Estimated useful lives used in providing
for depreciation are 20-40 years for buildings and 3-15 years for
machinery and equipment.
Property, plant and equipment is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 521 $ 521
Buildings 7,965 7,965
Machinery and equipment 21,833 21,760
------- -------
30,319 30,246
(Less accumulated depreciation
and amortization) (22,355) (21,986)
-------- --------
$ 7,964 $ 8,260
======== ========
</TABLE>
Income Taxes: The Company accounts for income tax expense and
liabilities under the liability method. Deferred income taxes are
provided for temporary differences between financial and income tax
reporting, relating principally to restructuring charges, reserves
for losses on investments and other assets, depreciation, deferred
compensation and sale/leaseback transaction. The Company adopted
the provisions of FASB Statement No. 109 "Accounting for Income
Taxes" in 1993, which had no effect on the financial statements.
Employees' Retirement Plans: The Company has defined contribution
retirement plans covering substantially all of its employees. The
plans provide for defined contributions based on eligible
employees' compensation. It is the policy to fund retirement plan
costs accrued.
Revenue Recognition: The Company recognizes revenue from the sale
of merchandise at the time of shipment to its customers. In the
case of sales where the customer has the right to return unsold
goods (guaranteed sales), revenue recognized is reduced for
estimated returns, based on historical experience.
Interest Allocation: The Company has allocated interest to
discontinued operations based on the receivables and inventories
used in such operations.
NOTE B -- DISCONTINUED OPERATIONS
Kensington Lamp Company: The Company owns 100% of the common stock
of Kensington Lamp Company (KLC) an assembler of 24% lead crystal
and other table lamps. The Company sold certain of the assets and
the business to KLC management in September of 1995 at a price
approximating net book value. Terms of the sale include retention
of accounts receivable by the Company, assumption of inventory-related
accounts payable by the buyer, and an interest bearing note
secured by a second mortgage on inventories and receivables,
payable over a 42 month period beginning November 1, 1995.
The estimated realizable value from the sale is included in other
current assets and other long-term assets in the accompanying
balance sheet as if the sale had taken place in the year ended June
24, 1995. The statements of operations for 1994 and 1993 have been
restated to reflect KLC as a discontinued operation. Total sales
for KLC were $10.1 million for 1995, $9.3 million for 1994 and
$10.5 million for 1993.
Interest allocated to KLC in the accompanying statement of
operations was $334,000 in fiscal 1995, $283,000 in fiscal 1994 and
$337,000 in fiscal 1993.
Action Nicholson Color Company: The Company owns 100% of the
common stock of Action Nicholson Color Company (ANC), formerly a
producer of color separations. The Company sold the assets and the
business of ANC in April of 1994. Terms of the sale included a
cash payment at closing and future payments based on sales of the
business over the three years subsequent to April 1994. The
estimated net realizable value of the future payments ($405,000) is
included in long-term assets in the accompanying balance sheet.
During fiscal 1993, as part of its continuing restructuring effort,
the Company adopted a plan to sell ANC and, as a result, wrote down
its investment in ANC to estimated net realizable value. Total
sales of ANC were $9.4 million for 1993.
NOTE C -- LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt outstanding at June 24, 1995 and June 25, 1994
consisted of $115,000 in 9% Convertible Subordinated Debentures,
due in 1998. There are no current maturities of long-term debt.
Convertible Subordinated Debentures: The Debentures may be
converted into common stock at a price of $9.87 per share at any
time prior to maturity. If conversion does not occur, the Company
is required to redeem the Debentures on the maturity date, April 1,
1998. The Debentures may be redeemed early, at the Company's
option, upon payment of a premium.
Credit Facilities: The Company has a Credit Agreement which
provides for up to $17 million in committed credit lines through
January of 1996. Negotiations have been finalized to extend the
Credit Agreement through June of 1997 under substantially the same
terms, except that the aggregate amount of available credit will be
reduced to $15 million through December of 1995 and $10 million
through June of 1997, consistent with the Company's anticipated
needs. Availability under the credit line is further limited by
the level of eligible accounts receivable and inventories.
Interest is payable at 3.5% over the prime rate of interest. The
Company is required to meet certain levels of tangible net worth
and other ratios under the Agreement. The Company is restricted
from the payment of dividends under the Agreement.
Borrowings are used for short-term financing under notes payable
and to back up letters of credit issued against purchases of
imported merchandise. Borrowings are secured by substantially all
of the Company's assets, including its cash balances, accounts
receivable, inventories, and property, plant and equipment.
Short-term borrowings against the credit lines ranged from a high
of $14.6 million to a low of $4.6 million during the 1995 fiscal
year. At June 24, 1995 the unused borrowing capacity based on the
borrowing formula in the agreement was $2.9 million. During the
year ended June 25, 1994, borrowings ranged from a high of $19.0
million to a low of $5.0 million.
Maturities of Debt: There are no maturities of long-term debt for
the five fiscal years subsequent to 1995, with the exception of the
Convertible Subordinated Debentures due April 1, 1998 ($115,000).
Interest paid was $2,098,000 during the year ended June 24, 1995,
$2,585,000 in 1994, and $2,342,000 in 1993.
NOTE D -- SALE/LEASEBACK
In 1991 the Company refinanced its headquarters facility under a
sale/leaseback arrangement. The facility was sold for $14 million,
$3.5 million of which was in the form of an interest bearing note
receivable. The note was due in April of 1995 and remains
outstanding. $10.5 million was received in cash. The transaction
was accounted for as a financing, wherein the property remains on
the books and continues to be depreciated. A financing obligation
representing the proceeds was recorded, and is reduced based on
payments under the lease.
The lease (under which the Company has been the sole tenant) has a
term of twelve years for the office and eight years for the
warehouse (beginning in April 1991) and requires minimum annual
rental payments of $1,935,000 in 1996, $1,980,000 in 1997,
$1,980,000 in 1998, $1,980,000 in 1999, $641,000 in 2000 and
$1,284,000 thereafter. The Company has the option to renew the
lease at the end of the respective lease terms, and the option to
purchase the property at the end of the warehouse lease.
The Company expects to renegotiate this lease and become a sub-tenant
for significantly reduced space in this facility during
fiscal 1996. This is consistent with the Company's decreased
warehouse space requirements arising from reduced sales and
inventory levels. New leases involved will be operating leases
with minimum annual rentals equal to or less than the existing
arrangements. Termination of the existing lease will result in
elimination of the lease obligation ($7.7 million at June 24, 1995)
from the balance sheet, substantially offset by the elimination of
the land, building and certain equipment. It is expected that the
new arrangements will provide the Company's landlord in the
facility with sufficient cash flow to begin to repay the Company's
note receivable from the original sale/leaseback transaction. Such
repayments will be reported as income when received.
NOTE E -- INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying value of assets and liabilities
for financial reporting purposes and the amounts reported for
income tax purposes. Significant components of the Company's
deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred Tax Assets:
Deferred tax benefits associated
with losses provided for
restructuring, discontinued
operations and other asset
valuation allowances $ 4,085,000 $ 4,197,000
Deferred gain on sale/leaseback 1,865,000 2,141,000
Net operating loss carryforwards 7,480,000 6,724,000
Alternative minimum tax credit 805,000 805,000
----------- -----------
14,235,000 13,867,000
Deferred Tax Liabilities:
Excess tax depreciation over book 1,454,000 1,229,000
Change from LIFO to FIFO 1,027,000 1,284,000
----------- -----------
2,481,000 2,513,000
----------- -----------
Net deferred tax asset 11,754,000 11,354,000
Valuation allowance 11,754,000 11,354,000
----------- -----------
NET DEFERRED TAX ASSET REPORTED $ 0 $ 0
=========== ===========
</TABLE>
The income tax provision (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ - $ - $(1,028)
State - - -
---- ---- --------
- - (1,028)
Deferred:
Federal - - 1,028
State - - -
---- ---- --------
- - 1,028
---- ---- --------
$ - $ - $ -
==== ==== ========
</TABLE>
The deferred income tax provision for 1993 was comprised of
realization of deferred tax benefits previously provided, in the
amount of $1,028,000.
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate (34.0)% 34.0 % (34.0)%
Deferred tax charge (credit) - - -
Effect of net operating loss carry-
forward and valuation allowance 34.0 % (34.0)% 34.0 %
State income tax, net of
Federal benefit - - -
Other - - -
------- ------- -------
Effective income tax rate 0.0% 0.0% 0.0%
======= ======= =======
</TABLE>
The Company has net operating loss carryforwards available for
income tax reporting purposes of approximately $19 million expiring
in 2008 through 2010 which, upon recognition, based on current tax
rates, may result in future tax benefits of approximately $7.5
million. The Company made no tax payments during the years ended
June 24, 1995, June 25, 1994 and June 26, 1993.
NOTE F -- EMPLOYEES' RETIREMENT PLANS
Contributions under the Company's retirement plans were $123,000 in
1995, $133,000 in 1994 and $160,000 in 1993. Contributions were
for employees subject to a collective bargaining agreement, which
provides for such contributions at a rate of 6% of eligible
compensation.
NOTE G -- OTHER INCOME (EXPENSE), NET
Other income (expense) consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gain on sale of equipment $296 $ - $ -
Gain on sale of property 950 - -
Writedown of investment (518) - -
Interest income - - 157
Gain on sale of investments - - 1,116
Other income (expense), net (54) (77) (95)
------ ----- ------
$ 674 $(77) $1,178
====== ===== ======
</TABLE>
NOTE H -- LEASES
The Company leases property and equipment under noncancelable
operating leases. Future minimum lease payments under operating
leases (excluding the new facility leases referred to in Note D
above are $434,000 in 1996; $240,000 in 1997; $209,000 in 1998;
$203,000 in 1999 and $104,000 in 2000. Currently there are no
leases with payments due beyond 2000. Rent expense under
operating leases (excluding the sale/leaseback transaction)
amounted to $855,000 in 1995, $905,000 in 1994, and $932,000 in
1993.
NOTE I -- COMMITMENTS AND CONTINGENCIES
Commitments as of June 24, 1995 for outstanding letters of credit
for merchandise purchases were $909,000.
The Company's importing activities are subject to the effects of
inflation and fluctuations in the value of the U.S. dollar in
relation to other currencies, as well as other economic and
political risks, the effects of which cannot be quantified. It is
the Company's practice to purchase in U.S. dollars whenever
possible, and to change items, suppliers, or countries of origin as
necessary to meet its purchasing objectives, including reducing the
risk of foreign currency fluctuations. Because it has had limited
foreign currency activity, the Company has not found it necessary
to utilize currency contracts or other derivatives to hedge its
exposure.
The Company owned property located in Mt. Clemens, Michigan, the
book value of which was previously written off. The Company sold
the property in June of 1995. Certain necessary environmental
cleanup procedures will be completed by the buyer of the property
under the terms of the sale.
Creditors of Phar-Mor, Inc. previously filed a claim against the
Company (and other shareholders and former shareholders of Phar-Mor)
to recover certain proceeds (approximately $2.6 million)
received by the Company in connection with a Phar-Mor tender offer
in fiscal 1992 for part of the Company's investment in the common
stock of Phar-Mor. The claim has been denied by summary judgment,
with no repayment required of the Company. An appeal of the denial
was filed by the Creditors in September 1995.
NOTE J -- SEGMENT INFORMATION AND CREDIT CONCENTRATION
The Company operates in one market segment - sales to retailers.
Substantially all of the Company's accounts receivable are from
retailers. The Company's credit arrangements with its customers
are generally unsecured. Credit loss experience has been in line
with the expectations of management.
Substantially all operations are located in the United States.
Export sales are less than 10% of net sales.
During fiscal 1995 one of the Company's customers accounted for
11.6% of consolidated net sales. One customer accounted for 15.3%
of consolidated net sales in 1994. No customer accounted for more
than 10% of consolidated net sales in 1993.
NOTE K -- RESTRUCTURING COSTS
In 1993 restructuring charges of $5.1 million were recorded,
including severance and other personnel costs to provide for work
force reductions associated with the Company's downsizing ($1.5
million), reserves against inventories and other costs associated
with the elimination of merchandise lines not included in future
operating plans ($1.6 million), and the writeoff of the computer
software related to the Company's ADS warehouse system which, as a
result of the Company's downsizing, would no longer provide the
expected benefits ($1.7 million), as well as other costs of
$300,000.
NOTE L -- STOCK OPTION PLANS
The Company has adopted Stock Option Plans which provide for the
granting of stock options to certain key employees and directors.
The Plans reserve 1,055,300 shares of common stock, 550,000 shares
of which are subject to shareholder approval. Options are granted
at no less than fair market value of the shares at the date of
grant. Option activity for 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Options outstanding at
beginning of year 739,600 597,075 613,400
Granted 332,900 204,500 41,000
Exercised - - (1,600)
Canceled (208,769) (61,975) (55,725)
------- ------- -------
Outstanding at end of year 863,731 739,600 597,075
======= ======= =======
Option price range $1.00 $1.63 $2.88
at end of year to to to
$6.25 $6.25 $6.25
Exercisable at end of year 378,800 295,000 270,100
======= ======= =======
</TABLE>
NOTE M -- UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following table summarizes the reported results of continuing
operations for each quarterly period in fiscal 1995 and 1994. The
quarterly results have been restated from the amounts previously
reported to reflect the discontinuance of the Company's lamp
assembly business. Amounts shown are stated in thousands of
dollars, except per share data.
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
------------------------------------------
Cost of Earnings
Net Products Earnings (Loss)
Quarter Ended Sales Sold (Loss) Per Share
------------- ----- -------- -------- ---------
1995
<S> <C> <C> <C> <C>
September 24, 1994 $11,035 $ 7,846 $ (119) $(0.02)
December 24, 1994 16,494 12,467 ( 9) 0.00
March 25, 1995 6,201 4,770 (1,709) (0.31)
June 24, 1995 11,358 9,291 (1,070) (0.19)
------- ------- --------- -------
$45,088 $34,374 $ (2,907) $(0.52)
======= ======= ========= =======
1994
September 25, 1993 $16,869 $12,384 $ (89) $(0.02)
December 25, 1993 20,444 15,688 232 0.04
March 26, 1994 12,557 9,014 338 0.06
June 25, 1994 10,179 7,441 (353) (0.06)
------- ------- --------- -------
$60,049 $44,527 $ 128 $ 0.02
======= ======= ========= =======
</TABLE>
SCHEDULES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Charged to Other Balance at
Beginning Cost or Accounts Deductions End
Description of Period Expenses (Describe) (Describe) of Period
----------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended June 26, 1993
Estimated future costs of discontinued
operation $780 $ - $ - ($359) (b) $421
Allowance for Doubtful Accounts 2,086 1,074 - (1,582) (a) 1,578
Restructure reserve:
Inventory - 1,300 - (585) (c) 715
Property, plant and equipment 578 - - (578) (d) -
------------------------------------------------------------------
$3,444 $2,374 $0 ($3,104) $2,714
==================================================================
Year ended June 25, 1994
Estimated future costs of discontinued
operation $421 $ - $ - ($304) (b) $117
Allowance for Doubtful Accounts 1,578 873 - (1,317) (a) 1,134
Restructure reserve:
Inventory 715 - - (234) (c) 481
Property, plant and equipment - - - - -
------------------------------------------------------------------
$2,714 $873 $0 ($1,855) $1,732
==================================================================
Year ended June 24, 1995
Estimated future costs of discontinued
operation $117 $ - $ - ($117) (b) $0
Allowance for Doubtful Accounts 1,134 298 - (954) (a) 478
Restructure reserve:
Inventory 481 - - (481) (c) 0
Property, plant and equipment - - - - -
------------------------------------------------------------------
$1,732 $298 $0 ($1,552) $478
==================================================================
(a) Doubtful accounts charged off as uncollectible, net of recoveries and claims (primarily reserved in
prior years).
(b) Charges related to the discontinued business reserved previously.
(c) Inventory disposals.
(d) Property disposals.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ACTION INDUSTRIES, INC.
(Registrant)
Date: September 21, 1995 By /s/T. Ronald Casper
-----------------------
T. Ronald Casper
Acting President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Name Title Date
/s/T. Ronald Casper Acting President and September 21, 1995
------------------------ Chief Executive Officer
T. Ronald Casper
/s/Kenneth L. Campbell Senior Vice President, September 21, 1995
------------------------ Finance (Principal
Kenneth L. Campbell Financial and Accounting
Officer)
/s/Joel M. Berez Chairman of the Board September 21, 1995
------------------------
Joel M. Berez
------------------------ Director September 21, 1995
Ernest S. Berez
/s/Charles C. Cohen Director September 21, 1995
------------------------
Charles C. Cohen
------------------------ Director September 21, 1995
Joel L. Gold
------------------------ Director September 21, 1995
James H. Knowles, Jr.
/s/David S. Shapira Director September 21, 1995
------------------------
David S. Shapira
/s/William B. Snow Director September 21, 1995
------------------------
William B. Snow
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF ACTION INDUSTRIES, INC.
1. Purpose. The purpose of the Deferred Compensation Plan for
Directors (the "Plan") of Action Industries, Inc. (the "Company")
is to offer nonemployee members of the Board of Directors of the
Company the opportunity to defer receipt of their cash
compensation.
2. Definitions. Except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in
Section 2 shall have the meanings assigned to them below and
shall include the plural as well as the singular.
2.1 "Beneficiary" shall mean the person or persons
entitled to receive payments under the Plan after the death of a
Participant pursuant to Section 7.1.
2.2 "Common Stock" shall mean the stock of the Company,
par value $0.10 per share.
2.3 "Compensation" shall mean all cash payments which a
Participant is entitled to receive from the Company for services
as a member of its Board of Directors and committees of the
Board. Such payments may include directors' fees, retainers,
meeting fees and the like but shall exclude direct reimbursement
of expenses and any awards or grants of Common Stock, restricted
shares or stock options to purchase Common Stock under any
benefit plan established by the Company.
2.4 "Deferral Period" shall mean the period of time
beginning on the date compensation would otherwise be paid and
ending as provided in Section 6.1(a).
2.5 "Deferred Account" shall mean a memorandum account
established pursuant to Section 5.1 for the purpose of crediting
Deferred Amounts and any additional amounts accrued thereon.
2.6 "Deferred Amount" shall mean that portion of any
Compensation, the payment of which has been deferred under the
Plan.
2.7 "Director" shall mean a member of the Board of
Directors of the Company who is not an officer or employee of the
Company or any of its respective subsidiaries.
2.8 "Fair Market Value" shall mean as of any date the
average (rounded to the nearest cent) closing price of a share of
Common Stock, as reported currently on the American Stock
Exchange on each of the 30 trading days immediately preceding
such date.
2.9 "Interest Rate Method" shall mean the method of valuing
Deferred Accounts described in Section 5.3(b).
2.10 "Participant" shall mean a Director who has elected,
as provided in Section 4 to have all or a portion of his or her
Compensation deferred under the Plan.
2.11 "Plan" shall mean this Deferred Compensation Plan for
Directors, as amended from time to time.
2.12 "Seven Year Treasury Rate" shall mean the average for
the preceding calendar year of the constant maturity rates for
seven-year United States government securities, as published by
the Federal Reserve Board (such publication currently being
contained in statistical release H.15 (519)).
2.13 "Share Unit Method" shall mean the method of valuing
Deferred Accounts described in Section 5.3(1).
3. Authority.
3.1 Approval. The Board of Directors of the Company
approved the Plan on March 2, 1995. The Plan may be amended from
time to time as provided in Section 7.2.
3.2 Administration. The Plan shall be administered by the
Chief Executive Officer of the Company (the "Chief Executive
Officer") and such other person or persons from time to time
designated by the Chief Executive Officer.
3.3 Legal Opinions. The Company and the Chief Executive
Officer may consult with legal counsel, who may be counsel for
the Company or other counsel, with respect to their obligations
or duties hereunder, or with respect to any action or proceeding
or any question of law, and shall not be liable with respect to
any action taken or omitted by them in good faith pursuant to the
advice of counsel.
3.4 Liability. Any decision made or action taken by the
Company, the Board of Directors of the Company, or the Chief
Executive Officer arising out of or in connection with the
construction, administration, interpretation and effect of the
Plan shall be within the absolute discretion of all and each of
them, as the case may be, and will be conclusive and binding on
all parties. No member of the Board of Directors and no employee
of the Company shall be liable for any act or action hereunder,
whether of omission or commission, by any other member or
employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in
circumstances involving his or her bad faith, for anything done
or omitted to be done by himself or herself.
4. Deferral of Compensation. Each Director may elect to have
25%, 50%, 75% or 100% of his or her Compensation for any calendar
year deferred under the Plan, provided that no part of a
Director's Compensation may be deferred under the Plan after the
Director attains age 69 1/2. Such election shall be executed in
writing by the Director, prior to the start of the fiscal year
during which such Compensation would otherwise have been paid, on
the election form attached as Exhibit A and filed with the
Secretary of the Company. An election, once made, shall be
irrevocable for that fiscal year and shall continue in effect for
subsequent fiscal years until changed prospectively.
5. Treatment of Deferred Compensation.
5.1 Memorandum Account. The Company shall establish on its
books separate memorandum accounts for each fiscal year for which
a Participant elects to defer Compensation under the Plan. All
Compensation deferred during that year and all amounts accrued
thereon, whether during or after that year, shall be credited to
the account. Amounts deferred during the year shall be credited
to the Participant's Deferred Account as of the date on which any
Deferred Amount would otherwise have been payable to the
Participant.
5.2 Assets. No assets shall be segregated or earmarked for
any Deferred Account, and nothing contained in the Plan shall be
deemed to create a trust or fund of any kind or create any
fiduciary relationship. Nothing in this Plan shall be deemed to
give any Participant any ownership or other proprietary, security
or other rights in any funds, stock or assets owned or possessed
by the Company, whether or not earmarked for the Company's own
purposes as a reserve or fund to be utilized by the Company for
the discharge of its obligations under the Plan. The creation of
memorandum accounts shall be merely for the purpose of recording
an unsecured contractual obligation of the Company, and to the
extent that any person acquires a right to receive payments or
distributions from the Company under the Plan, that right shall
be no greater than the right of any unsecured creditor of the
Company.
5.3 Valuation of Accounts. Amounts in a Participant's
Deferred Account shall be valued as follows. Each Participant's
Deferred Account shall be valued pursuant to both the Share Unit
Method and the Interest Rate Method. On the last day of March,
June, September and December in each year, there shall be
credited to each Participant's Deferred Account the amounts
accrued thereon pursuant to the Share Unit Method, and on the
last day of December in each year, there shall be credited to
each Participant's deferred Account the amount accrued thereon
pursuant to the Interest Rate Method, in each case as provided
below.
(a) Share Unit Method. Under the Share Unit Method,
Deferred Amounts credited to a Deferred Account shall be valued
by reference to the Fair Market Value of the Common Stock, plus
the value of any distributions on the Common Stock as provided
below. At the end of each fiscal quarter, Deferred Amounts
credited to each Deferred Account during that quarter, if any,
plus any cash dividends on the Common Stock credited to each
Deferred Account during the quarter with respect to Share Units
held in the Deferred Account during the quarter, shall be
converted into a number of whole and fractional Share Units equal
to (i) the Deferred Amount plus the dividends, divided by (ii)
the Fair Market Value of the Common Stock as of the last date of
the quarter on which the Common Stock was traded. Fractional
Share Units shall be calculated to four decimal places.
Share Units credited to a Participant's Deferred
Account shall be deemed to earn cash dividends equivalent to that
paid on the Common Stock during any fiscal quarter in an amount
equal to any cash dividend paid per share of Common Stock during
the fiscal quarter, multiplied by the number of Share Units
credited to the Deferred Account on the record date for the
dividend payment. Such amounts shall be converted to Share Units
at the end of each quarter pursuant to the terms of the
immediately preceding paragraph. In the event of any stock
dividend, stock distribution, stock split, reverse stock split,
recapitalization or reclassification of securities,
reorganization, combination or exchange of shares or other
similar changes with respect to the Common Stock, appropriate
adjustments shall be made in the Share Units credited to
Participants' Deferred Accounts as the Chief Executive Officer,
in his or her sole discretion, shall determine.
(b) Interest Rate Method. Under the Interest Rate
Method, amounts credited to a Deferred Account shall accrue
interest at the end of each year in an amount equal to (i) the
Seven Year Treasury Rate for the year then ended, multiplied by
(ii) the average of the month-end balances of the Deferred
Account during the year. Interest so accrued shall be credited
to each Participant's Deferred Account as of the last day of each
year.
5.4 Reports. Until all Deferred Accounts of a Participant
have been paid in full, the Company shall, prior to April 30th of
each year, furnish to the Participant an annual statement setting
forth the status of his or her Deferred Accounts as of December
31st of the preceding year.
6. Payment of Deferred Amounts.
6.1 End of Deferral Period; Amount and Form of Payment.
(a) The Deferral Period shall end with respect to
the Deferred Amount credited to the Deferred Account in any year
on the December 31st of the year which is from five to ten years
(as designated by the Participant at the time of the deferral
election) after the year in which the Deferred Amount was
credited. Notwith-standing the foregoing, however, the Deferral
Period shall end with respect to the entire Deferred Account upon
the earliest occurrence of any of the following: the Participant
attains age 70, dies, or ceases to be a director of the Company
for any reason.
(b) The aggregate amount to be paid to a Participant
or his or her Beneficiary at the end of the applicable Deferral
Period with respect to the Participant's Deferred Account shall
be equal to the greater of the value of the Deferred Account
calculated pursuant to the Share Unit Method or the Interest Rate
Method, rounded to the nearest cent. Payments shall be made in
cash in accordance with the Participant's election under Section
6.2.
6.2 Elections.
(a) A Participant shall elect to receive payment of
the aggregate value of his or her Deferred Account as follows:
(i) in a lump sum cash payment within the first 90
days following the end of the applicable Deferral Period; or
(ii) in five annual cash installments commencing
within the first 90 days of the year immediately following the
end of the applicable Deferral Period.
Such election shall be made in writing on the election form
attached as Exhibit A, filed with the Secretary of the Company or
his or her designee no later than the December 31st preceding the
commencement of the year in which the Compensation to be deferred
would otherwise have been paid. Once made, the election shall be
irrevocable for the next year and shall continue in effect for
amounts deferred in subsequent years until changed prospectively.
For purposes of determining the value of a Deferred Account, any
Share Units credited to a Participant's Deferred Account at the
end of the applicable Deferral Period shall be converted into a
dollar amount equal to (i) the number of whole and fractional
Share Units then credited to the Deferred Account, multiplied by
(ii) the Fair Market Value of the Common Stock as of the last day
in the Deferral Period.
(b) The unpaid balance of any Deferred Account shall
accrue interest at the Seven Year Treasury Rate compounded
annually from the end of the applicable Deferral Period.
(c) In the case of a Deferred Account for which a
Participant has elected to receive payment in five annual
installments, the amount of each annual installment shall be
equal to (i) the amount credited to the Deferred Account,
together with interest as provided herein to the December 31st
immediately prior to the date of payment, divided by (ii) the
number of unpaid installments with respect to the Deferred
Account.
(d) Notwithstanding anything in Section 6.2 to the
contrary, a Participant's estate or Beneficiary, as the case may
be, shall receive payment of the entire unpaid balance credited
to his or her Deferred Account in a lump sum within 90 days
following the Participant's death.
7. Miscellaneous.
7.1. Beneficiaries. Each Participant may designate any
person or legal entity, including his or her estate, as
Beneficiary under the Plan. The designation shall be made in
writing on the election form attached as Exhibit A and filed with
the Secretary of the Company, and may be revoked or changed by
the Participant at any time by filing written notice of
revocation or change with the Secretary of the Company. If no
person is designated by a Participant as Beneficiary or if no
person designated by the Participant as Beneficiary survives the
Participant, the Participant's Beneficiary shall be his or her
estate. If the Participant's estate is Beneficiary or if the
Participant's Beneficiary survives him or her but dies before
receiving all payments, the unpaid balance of the Participant's
Deferred Account shall be paid to the Participant's or
Beneficiary's estate, as the case may be, in a lump sum,
notwithstanding the Participant's election to receive payment of
his or her Deferred Account in annual cash installments pursuant
to Section 6.2(a).
7.2 Amendment or Termination. The Board of Directors of
the Company may modify or amend, in whole or in part, any or all
of the provisions of the Plan or suspend or terminate it
entirely. However, any such modification, amendment, suspension
or termination may not, without the Participant's consent,
adversely affect any Deferred Amount credited to him or her for
any year ended prior to the effective date of the modification,
amendment, suspension or termination. The Plan shall remain in
effect until terminated pursuant to this Section.
7.3 Expenses. All expenses and costs in connection with
the operation of the Plan shall be borne by the Company.
7.4 Withholding. The Company shall have the right to
deduct from any payment to be made pursuant to the Plan any
federal, state or local taxes required by law to be withheld.
7.5 Governing Law. The Plan shall be construed and its
provisions enforced and administered in accordance with the laws
of the Commonwealth of Pennsylvania except as such laws may be
superseded by any federal law.
7.6 Assignment. A Participant may not assign, anticipate
or alienate in any manner any interest arising under the Plan,
nor shall any such interest be subject to attachment, bankruptcy
proceedings or to any other legal processes or to the
interference or control of creditors or others.
7.7 Incompetency. If the Chief Executive Officer
determines that any Participant or Beneficiary, as the case may
be, to whom a payment is due hereunder is incompetent by reason
of physical or mental disability, or is a minor, the Chief
Executive Officer shall have the power to cause the payment
becoming due to the Participant or Beneficiary to be made to
another for the benefit of the incompetent or minor, without
responsibility of the Company or the Chief Executive Officer to
see to the application of the payment. Payments made pursuant to
such power shall operate as a complete discharge of
responsibility of the Company and the Chief Executive Officer.
7.8 Notices. All notices, consents, requests,
instructions, approvals and other communications to the Company
pursuant to this Plan shall be validly given, made or served, if
in writing and delivered personally, sent by telecopier (and
receipt confirmed), telegram, overnight courier service, or by
registered mail, postage prepaid, to:
Action Industries, Inc.
460 Nixon Road
Cheswick, PA 15024
Attention: Secretary
or to such other address as the Company may from time to time
designate in a written notice given in like manner. Notice given
by telegram shall be deemed delivered when received by the
recipient. Notice given by registered mail as set out above
shall be deemed delivered five calendar days after the date it is
mailed, or two calendar days after it is sent by courier service.
EMPLOYMENT AGREEMENT
This Agreement is made December 15, 1993, between ACTION
INDUSTRIES, INC. (the "Company"), a Pennsylvania corporation with
principal offices located at Allegheny Industrial Park, Cheswick,
PA 15024, and ROBERT P. GARRITY ("Executive"), an individual
residing at 20 Alexander Place, Pittsburgh, Pennsylvania 15243.
In consideration of the severance benefit and the mutual promises
herein, the parties agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive, and
Executive agrees to serve, as an officer of the Company for a
term beginning January 4, 1994 and ending January 3, 1996, or
until Executive's employment with the Company is terminated by
either party as specified in Section 6 (the "Employment Period").
2. DUTIES. Executive is engaged to perform and shall perform
the duties described in his Job Description, which the parties
shall finalize no later than January 31, 1994, as well as any
other duties which may be assigned to him by the Company's Chief
Executive officer. Executive acknowledges that the Company may
revise his Job Description and title from time to time, and the
Company specifically reserves the right to do so in its sole
discretion. Executive shall devote his full working time and
attention to the performance of his duties. At no time during
the Employment Period shall Executive take any additional
employment without written permission from the Chief Executive
Officer.
3. COMPENSATION
3.1 Base Salary. For all services rendered by Executive
during the Employment Period, the Company shall pay Executive a
base salary, which shall be $105,000 for the first twelve months
of the Employment Period. Salary payments shall be subject to
withholding of applicable taxes. Executive shall be eligible for
increases or decreases in salary as determined by the Company's
Chief Executive Officer in his sole discretion.
3.2 Additional Compensation
3.2.1 Participation in Executive Compensation
Programs. In addition to receiving base salary, Executive shall
be entitled, beginning with the Company's fiscal year 1995, to
participate in any bonus program, incentive compensation program,
and stock option plan established for executives of the Company.
3.2.2 Grant of Stock Options. Executive is hereby
granted the option to purchase 20,000 shares of common stock of
the Company at the closing market value of the shares as of
Executive's first day of employment. this grant is subject to
the terms and conditions of the Company's Stock Option Plan and
to Executive's execution of the Company's Stock Option Agreement.
3.3 Benefits. Executive shall be eligible during the
Employment Period to participate in all other employee benefit
plans in which the Company's executives are generally entitled to
participate, including the Employees' Retirement Plan, except as
may be required by law or relevant plan provisions.
4. DISCLOSURE OF CONFIDENTIAL INFORMATION. Executive will,
during the Employment Period, have access to and become familiar
with various trade secrets and other confidential information,
consisting of technologies, formulas, patterns, devices,
inventions, processes, compilations of information, records, and
specifications owned by the Company and/or regularly used in the
operation of its business, and including but not limited to:
(a) information on the Company's finances and sales,
customers and prospective customers, sources of supply and
identity of suppliers and key purchasing personnel;
(b) the Company's manufacturing formulas and processes,
product research and development, merchandising and marketing
methods; and
(c) the Company's business plans and projections; but not
including information publicly reported by the Company.
Executive shall not during or within two (2) years after any
termination of his employment, disclose all or any part of such
confidential information, which constitute valuable, special, and
unique assets of the Company's business, to any person,
corporation, association, or other entity for any reason
whatsoever.
Disclosure of any confidential information shall not be
prohibited if such disclosure is directly pursuant to the valid
and existing order of a court or other governmental body or
agency within the United States; provided, however, that (i)
Executive shall first have given prompt notice to the Company of
any such possible or prospective order (or proceeding pursuant to
which any such order may result) and (ii) the Company shall have
been afforded a reasonable opportunity to prevent or limit any
such disclosure.
In the event of a breach or a threatened breach by Executive of
the provisions of this Section, the Company shall be entitled to
an injunction restraining Executive from disclosing in whole or
in part the Company's confidential information. Nothing herein
shall prohibit the Company from pursuing any other remedies
legally available to the Company for such breach or threatened
breach, including the recovery of damages from Executive.
5. COVENANT NOT TO COMPETE. Executive acknowledges that the
Company is in the business of marketing and distributing nation-
ally to retailers the following products and services, among
others: (i) promotional programs, i.e. "Dollar Days" and other
similar programs, consisting of a broad array of low price, high
value household goods together with in-store display and print
advertising, (ii) replenishment programs, i.e., ongoing programs
consisting of a broad array of low price, high value household
goods displayed in a promotion format, and (iii) electric table
lamps for basic stock lines.
During the Employment Period and for two years thereafter,
Executive shall not individually or on behalf of or in
conjunction with any other person or entity (except on behalf of
the Company):
(a) directly or indirectly own, manage, operate or otherwise be
engaged in, be employed by, contract with, participate in, or be
connected in any manner with the ownership, management,
operation, or control of any corporation, partnership,
proprietorship, or other entity engaged in the business of the
Company as defined above,
(b) solicit the trade of or do business with the suppliers,
vendors or customers of the Company or its subsidiaries or
affiliates for any business purpose that is in competition with
the Company's business as defined above,
(c) directly or indirectly hire any employee of the Company or
its subsidiaries or affiliates or solicit or induce any employee
of the Company or its subsidiaries or affiliates to leave the
employ of the Company for any reason whatever.
6. TERMINATION
6.1 Disability. If Executive becomes disabled during the
Employment Period, i.e., he is prevented from effectively
performing all or substantially all of his duties hereunder by
reason of physical or mental illness or injury, his employment
hereunder shall terminate if the disability extends for a period
of one year. Prior to any termination for disability, Executive
shall be eligible to participate in any Company Salary
Continuance Program and the Long-Term Disability Plan which
Executive has elected under the Company's flexible benefits
program.
6.2 Death. In the event Executive's employment with the
Company is terminated by reason of his death during the
Employment Period, Executive's estate shall be entitled to
payment of only the base salary earned by Executive under Section
3.1 prior to the date of death and not to any other compensation
otherwise payable under this Agreement.
6.3 Without Cause. In the event Executive's employment is
terminated by the Company prior to the expiration of the
Employment period, other than for cause, the Company shall
continue to provide Executive (or Executive's estate in the event
of Executive's death subsequent to termination) the following:
(i) the base salary set forth in Section 3.1 for the remainder of
the Employment Period, or, with the mutual consent of the Company
and Executive (or Executive's estate) and in lieu thereof, a lump
sum equal to the remaining unpaid base salary under Section 3.1,
discounted at the prime interest rate then in effect, and (ii)
continuation of health care benefits for the remainder of the
Employment Period, provided that Executive continues to make
timely payment to the Company for his portion of the premium for
the health care benefit he selected. If termination without
cause occurs within the last 12 months of the Employment period,
Executive's compensation and benefits shall be provided for 12
months from termination. No compensation other than that
specifically provided shall be payable.
6.4 Resignation. Executive may resign from employment with
the Company upon one (1) month's written notice, in which event
Executive shall be entitled to payment of only his base salary
earned prior to the date of resignation and not to any other
compensation otherwise payable under this Agreement.
6.5 For Cause. In the event Executive's employment is
terminated by the Company for cause prior to the end of the
Employment period, Executive shall be entitled to payment of only
his base salary earned under Section 3.1 prior to the date of
termination and not to any other compensation otherwise payable
under this Agreement. Termination of employment "for cause"
means a dismissal of Executive by the Company because of:
(a) Executive's gross negligence, willful misconduct, or
gross neglect of duty;
(b) any criminal act by Executive or any conduct by
Executive involving fraud or constituting bad faith by Executive
in dealing with or on behalf of the Company; or
(c) the material violation by Executive of any of the
agreements, covenants, terms, or conditions of this Agreement,
provided that the Company has given Executive notice in writing
reasonably specifying the violation(s), and Executive has failed
to cure the violation(s) within thirty (30) days thereafter.
6.6 Expenses of Enforcement. In the event Executive's
employment is terminated by the Company, other than for cause,
prior to the expiration of the Employment Period, then,
notwithstanding any provisions in this Agreement to the contrary,
the Company shall pay all reasonable legal fees and expenses
incurred by Executive in the successful enforcement of
Executive's rights under this Agreement.
6.7 Limitations. Executive shall in no event have any claims
or causes of action against the Company for any amounts not
specifically provided for in this Agreement, except as to
indemnification rights and contractual limitations on liability
provided for directors, officers, and/or employees of the Company
pursuant to the Company's bylaws then in effect.
7. NOTICES. Notices to Executive shall be sent to Executive's
address set forth above or to such other address as Executive may
provide to the Company in writing. Notices to the Company shall
be sent to its address set forth above, to the attention of the
Chief Executive Officer, or to such other address as the Company
may provide to Executive in writing.
8. WAIVER OF BREACH. The failure by a party to enforce its
rights against the other party following a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any other provision hereof or any subsequent breach
by such other party.
9. SEVERABILITY. The provisions of this Agreement will be
deemed to be severable. If any provision is held to be void or
illegal under applicable law, it shall be modified to conform to
the law in a manner that is consistent with the intention of the
parties. If the provision cannot be so modified, then it shall
be void, and the remaining provisions of the Agreement shall
remain binding upon the parties unless those provisions are so
impaired as to render the entire Agreement void.
10. GOVERNING LAW. This Agreement shall be governed by and con-
strued in accordance with the laws of the Commonwealth of
Pennsylvania.
11. ENTIRE AGREEMENT. This Agreement supersedes and replaces
all prior employment agreements between the parties. Subject to
the Incentive Stock Option Agreement and other benefit and
compensation plans to which Executive is entitled under Section
3, this Agreement contains the entire understanding of the
parties as to the subject matter hereof and can be amended or
supplemented only by a written agreement signed by the parties.
Intending to be legally bound, the parties hereby execute this
Agreement.
ATTEST: ACTION INDUSTRIES, INC.
LINDA S. WYCKOFF By: R. CRAIG KIRSCH
R. Craig Kirsch, President
and Chief Executive Officer
WITNESS:
LINDA S. WYCKOFF ROBERT P. GARRITY
Robert P. Garrity
April 15, 1994
Mr. Robert I. Christian
20 Gridley Circle
Milford, NJ 08848
Dear Rob:
This letter will confirm our offer and your acceptance of
employment with Action Industries, Inc., based upon the terms and
conditions below.
Your employment will begin about May 9, 1994 and will continue "at
will" for an indefinite term.
You will act as Vice President and National Sales Manager,
reporting directly to the Chief Executive Officer. Pending the
development of a complete job description, your duties will be as
assigned by the Chief Executive Officer and generally within the
scope of duties of executives in comparable positions. You will
participate in meetings of the board of directors as necessary and
appropriate.
Your compensation and benefits are comprised of the following:
Base salary: $125,000 annually, subject to adjustment in the
discretion of the Chief Executive Officer.
Performance compensation: Payable each year based upon your
performance pursuant to goals established at the beginning of each
fiscal year. For fiscal year 1995, your performance compensation
will be based upon a percentage of the Company's gross margin for
the year, which percentage will be established prior to the
beginning of the fiscal year, with no cap on the amount payable.
Guaranteed bonus for fiscal year 1995: $30,000, payable after
fiscal year-end.
Stock option: Nonqualified option to purchase 75,000 shares of
the Company's stock, to be granted on or around July 1, 1994 at the
closing price of the stock on the American Stock Exchange on the
date of grant. The option is nonassignable and will vest in equal
installments of 25,000 shares on the first, second, and third
anniversaries of the date of grant. The option is exercisable for
a period of ten years following the date of grant. In the event of
the termination of your employment, however, you may exercise the
option to purchase any vested option shares during the three months
following termination of employment, after which the option will
expire. The option to purchase any unvested option shares will
expire on the date of termination of your employment. Should the
Company's shareholders approve a new management stock option plan
or an increase in the number of shares reserved for the Company's
existing management stock option plan, you and the Company may
mutually agree to the grant of an option under the plan in lieu of
this option.
In the event of a "change in control" of the Company, your option
will become fully exercisable and will be cashed out, unless
otherwise determined by the board of directors. The cash out price
will be the difference between the exercise price and the defined
change-in-control price. A "change in control" is the acquisition
by any person of 50% or more of the outstanding shares of the
Company, or the occurrence of a transaction requiring shareholder
approval and involving the sale of all or substantially all the
assets of the Company, or the merger of the Company with or into
another corporation. The change-in-control price is either, as
determined by the board, (1) the highest closing price of the
shares as reported on the American Stock Exchange in the 60 days
prior to the date of the board's determination or (2) the highest
price paid or offered, as determined by the board, in any bona fide
transaction or offer related to the change in control of the
Company in the 60 days prior to the board's determination.
In the event of an asset sale or merger, as described above, in
which your option is not accelerated and cashed out as provided
above, your option will be assumed or an equivalent option will be
substituted by the successor corporation in the transaction (or a
parent or subsidiary of the successor) unless the board determines
in its discretion that you will have the right to exercise your
option as to all the shares, including those not otherwise
exercisable. If the board makes the option fully exercisable, the
Company will notify you that your option will be fully exercisable
for 30 days from the date of notice, after which period the option
will terminate.
Group benefits: Participation in the Company's group health
care, life insurance and disability plan and in any pension plan in
which executives of the Company participate, in accordance with the
terms of each respective plan.
You are also entitled to the benefit of the Company's relocation
policy, a copy of which is attached. The period of your temporary
living expenses is subject to our mutual agreement.
In the event of the termination of your employment, other than
"dismissal for cause," you will be entitled to a severance benefit
equal to one year's base salary, payable in installments on the
Company's normal salary payment cycle (less customary withholdings),
in consideration of your execution of the Company's separation
agreement. The agreement provides, among other things, for your
release of the Company from all claims and your agreement of
confidentiality. For the purpose of this agreement, "dismissal for
cause" is defined to mean dismissal because of (1) gross
negligence, willful misconduct or gross neglect of duty, or (2) any
criminal act or conduct involving fraud or constituting bad faith
by you in dealing with or on behalf of the Company.
If this is consistent with your understanding, please sign and
return the enclosed copy of this letter.
I look forward to seeing you in May.
Very truly yours,
ACTION INDUSTRIES, INC.
CRAIG KIRSCH
R. Craig Kirsch
President and Chief Executive Officer
Accepted by: ROBERT I. CHRISTIAN
AMENDMENT NO. ONE TO THE
LOAN AND SECURITY AGREEMENT
ACTION INDUSTRIES, INC.
This Amendment No. One To The Loan And Security Agreement (the
"Amendment") is entered into as of the 27th day of May, 1994, by and
between ACTION INDUSTRIES, INC., a Pennsylvania corporation
("Borrower"), whose chief executive office is located at 460 Nixon
Road, Cheswick, Pennsylvania 15024 and FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrower have previously entered into
that certain Loan And Security Agreement, dated January 20, 1994
(the "Agreement").
FACT TWO: Foothill and Borrower desires to amend the Agreement
as provided herein. Terms defined in the Agreement which are used
herein shall have the same meanings as set forth in the Agreement,
unless otherwise specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend
the Agreement as follows:
1. Paragraph (g) under the Definition of "Eligible Accounts"
shall be amended in its entirety to read as follows: "(g) Accounts
with respect to an Account Debtor whose total obligations owing to
Borrower exceed the higher of:
(a) ten percent (10%) (or in the case of Walmart, twenty
percent (20%) and in the case of each of American Drug Stores,
Consolidated Stores, Family Dollar, Lucky Stores, Phar-Mor, Revco
Drug Stores and Supermarket Services (A&P), fifteen percent (15%))
of all Eligible Accounts, to the extent of the obligations owing by
such account Debtor in excess of such percentage or
(b) a dollar amount equal to the level of credit
insurance acceptable to Foothill obtained by Borrower for a Debtor,
to the extent that said Debtors (I) maintain a D&B rating of 3A2 or
better, where such ratings are available, (ii) concentration be
limited to policy limit of credit insurance, less any deductible,
(iii) no single Debtor exceed 45% of Eligible Accounts, and (iv) no
grouping of six Debtors can comprise more than 90% of total
Eligible Accounts;"
2. Borrower shall pay to Foothill a facility fee in the
amount of $5,000.00 as of May 20, 1994. This facility fee has been
earned at the time of payment and shall be non-refundable.
3. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the
Agreement, the terms and provisions of this Amendment shall govern.
In all other respects, the Agreement, as supplemented, amended and
modified, shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the day and year first written above.
FOOTHILL CAPITAL CORPORATION ACTION INDUSTRIES, INC.
By: LISA M. GONZALES By: KENNETH L. CAMPBELL
Its: Assistant Vice President Its: Senior Vice President
-----------------------------------------------------------------
By its acceptance below this ___ day of May, 1994, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated January
20, 1994 and consents to the above-stated terms.
ACTION INVESTMENT COMPANY,
a Delaware corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
-----------------------------------------------------------------
By its acceptance below this ___ day of May, 1994, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated January
20, 1994 and consents to the above-stated terms.
KENSINGTON LAMP COMPANY,
a Pennsylvania corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
_________________________________________________________________
AMENDMENT NO. TWO TO THE
LOAN AND SECURITY AGREEMENT
ACTION INDUSTRIES, INC.
This Amendment Number Two to Loan and Security Agreement
("Amendment") is entered into as of November 11, 1994, between
FOOTHILL CAPITAL CORPORATION ("Foothill") and ACTION INDUSTRIES,
INC. ("Borrower").
FACT ONE: Foothill and Borrower entered into that certain Loan
and Security Agreement as of January 20, 1994, as amended on May
27, 1994 (the "Agreement").
FACT TWO: Borrower and Foothill desire to further amend the
Agreement as provided herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the
Agreement as follows:
1. Section 1.1 of the Agreement is amended to add the
following definitions:
"Agency Business" means transactions in which Borrower
serves as an agent for certain of its customers in the
purchasing of merchandise for which Borrower will only be
paid a commission.
2. Section 2.1 of the Agreement is hereby amended by adding
the following subsection (e):
(e) In addition to revolving advances pursuant to
Section 2.1(a) and the issuance of L/Cs or L/C
Guarantees pursuant to Section 2.2, Foothill agrees
to issue additional commercial L/Cs for the account
of Borrower or L/C Guarantees arising out of
Borrower's Agency Business in an aggregate amount
outstanding at any one time of not more than Five
Million Dollars ($5,000,000). Such L/Cs shall be
issued to suppliers of merchandise for customers of
Borrower's Agency Business. Foothill will only
issue such L/Cs or L/C Guarantees to the extent
that Borrower has a firm purchase order from an
Agency Business customer for merchandise which
purchase order is secured by a commercial letter of
credit in form and substance satisfactory to
Foothill, issued by a financial institution
satisfactory to Foothill, and payable to Foothill
or an account controlled by Foothill. Foothill's
L/C or L/C Guaranty shall not exceed ninety five
percent (95%) of the amount of each customer order
for the Agency Business.
3. As to Agency Business, the fees set forth in Section
2.2(d) of the Agreement shall be three and one-half per
cent (3.5%) per annum times the average daily balance of
undrawn L/Cs and L/C Guarantees arising out of the Agency
Business that were outstanding during the immediately
preceding month.
4. Commencing as of November 1, 1994, the servicing fee
provided in Section 2.8(e) of the Agreement shall be
increased to $3,500 per month. In addition, Borrower is
concurrently herewith paying to Foothill a loan
modification fee in the amount of $5,000.
5. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provision
of the Agreement, the terms and provisions of this
Amendment shall govern. In all other respects, the
Agreement shall remain in full force and effect.
6. All initially capitalized terms used in this Agreement
shall have the meanings given to them in the Agreement
unless specifically defined herein.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By: STEVE COLE
Title: Assistant Vice President
ACTION INDUSTRIES, INC.
By: KENNETH L. CAMPBELL
Title: Senior Vice President
Each of the undersigned has executed a Continuing Guaranty in
favor of Foothill Capital Corporation ("Foothill") respecting the
obligations of Action Industries, Inc. ("Borrower") owing to
Foothill. Each of the undersigned acknowledges the terms of the
above Amendment and reaffirms and agrees that: its Continuing
Guaranty remains in full force and effect; nothing in such
Continuing Guaranty obligates Foothill to notify the undersigned of
any changes in the financial accommodations made available to
Borrower or to seek reaffirmations of the Continuing Guaranty; and
no requirement to so notify the undersigned or to seek
reaffirmations in the future shall be implied by the execution of
this reaffirmation.
ACTION INVESTMENT COMPANY
By: KENNETH L. CAMPBELL
Title: Treasurer
KENSINGTON LAMP COMPANY
By: KENNETH L. CAMPBELL
Title: Treasurer
__________________________________________________________________
AMENDMENT NO. THREE TO THE
LOAN AND SECURITY AGREEMENT
ACTION INDUSTRIES, INC.
This Amendment No. Three To The Loan and Security Agreement
("Amendment") is entered into as of the 9th day of December, 1994,
by and between ACTION INDUSTRIES, INC., a Pennsylvania corporation
("Borrower"), whose chief executive office is located at 460 Nixon
Road, Cheswick, Pennsylvania 15024 and FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 20025-3333, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrower have previously entered into
that certain Loan and Security Agreement, dated January 20, 1994,
(as amended and supplemented, the "Agreement").
FACT TWO: Foothill and Borrower desires to amend the Agreement
as provided herein. Terms defined in the Agreement which are used
herein shall have the same meanings as set forth in the Agreement,
unless otherwise specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend
the Agreement as follows:
1. Section 2.1(a)(ii) of the Agreement is hereby amended in
its entirety to read as follows: "(ii) an amount equal to the
lowest of : (x) fifty-five percent (55%) of the amount of Eligible
Inventory, (y) two hundred percent (200%) of credit availability
created by Section 2.1(a)(I) above, if the Borrowing Base is being
determined from October through December and June through August,
or one hundred fifty percent (150%) of such amount, if the
determination is made at any other time, and (z) Ten Million
Dollars."
2. Borrower shall pay to Foothill a fee of $5,000. Said fee
shall be fully-earned, non-refundable, and due and payable on the
date of signing and delivery of this Amendment by Borrower to
Foothill.
3. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the
Agreement, the terms and provisions of this Amendment shall govern.
In all other respects, the Agreement, as supplemented, amended and
modified, shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the day and year first written above.
FOOTHILL CAPITAL CORPORATION ACTION INDUSTRIES, INC.
By: LISA M. GONZALES By: KENNETH L. CAMPBELL
Its: Assistant Vice President Its: Senior Vice President
-----------------------------------------------------------------
By its acceptance below this ___ day of December, 1994, the
undersigned guarantor hereby reaffirms its Continuing Guaranty
dated January 20, 1994 and consents to the above-stated terms.
ACTION INVESTMENT COMPANY,
a Delaware corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
-----------------------------------------------------------------
By its acceptance below this ___ day of December, 1994, the
undersigned guarantor hereby reaffirms its Continuing Guaranty
dated January 20, 1994 and consents to the above-stated terms.
KENSINGTON LAMP COMPANY,
a Pennsylvania corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
_________________________________________________________________
AMENDMENT NO. FOUR TO THE
LOAN AND SECURITY AGREEMENT
ACTION INDUSTRIES, INC.
This Amendment No. Four To The Loan and Security Agreement
("Amendment") is entered into as of the 11th day of May, 1995, by
and between ACTION INDUSTRIES, INC., a Pennsylvania corporation
("Borrower"), whose chief executive office is located at 460 Nixon
Road, Cheswick, Pennsylvania 15024 and FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 20025-3333, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrower have previously entered into
that certain Loan and Security Agreement, dated January 20, 1994,
(as amended and supplemented, the "Agreement").
FACT TWO: Foothill and Borrower desires to amend the Agreement
as provided herein. Terms defined in the Agreement which are used
herein shall have the same meanings as set forth in the Agreement,
unless otherwise specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend
the Agreement as follows:
1. Section 2.1(a)(ii) of the Agreement is hereby amended in
its entirety to read as follows: "(ii) an amount equal to the
lowest of: (x) fifty-five percent (55%) of the amount of Eligible
Inventory, (y) three hundred percent (300%) of the amount of credit
availability created by Section 2.1(a)(i) above, and an additional
$1,700,000, if the Borrowing Base is being determined from April
26, 1995 through July 31, 1995; two hundred percent (200%) of such
amounts if the Borrowing Base is being determined from August 1,
1995 through December 31, 1995; on January 1, 1996, the
availability shall revert to two hundred percent (200%), if the
Borrowing Base is being determined from October through December
and June through August, or one hundred fifty percent (150%) of
such amount, if the determination is made at any other time, and
(z) Ten Million Dollars."
2. Section 2.5(a) of the Agreement is hereby amended in its
entirety to read as follows: "Interest Rate. All obligations,
except for undrawn L/Cs and L/C Guarantees, shall bear interest, on
the average Daily Balance, at a rate per annum equal to three and
one half (3.5) percentage points above the Reference Rate.
3. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the
Agreement, the terms and provisions of this Amendment shall govern.
In all other respects, the Agreement, as supplemented, amended and
modified, shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the day and year first written above.
FOOTHILL CAPITAL CORPORATION ACTION INDUSTRIES, INC.
By: STEVEN COLE By: KENNETH L. CAMPBELL
Its: Vice President Its: Senior Vice President
-----------------------------------------------------------------
By its acceptance below this ___ day of May, 1995, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated January
20, 1994 and consents to the above-stated terms.
ACTION INVESTMENT COMPANY,
a Delaware corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
-----------------------------------------------------------------
By its acceptance below this ___ day of May, 1995, the undersigned
guarantor hereby reaffirms its Continuing Guaranty dated January
20, 1994 and consents to the above-stated terms.
KENSINGTON LAMP COMPANY,
a Pennsylvania corporation
By: KENNETH L. CAMPBELL
Its: Treasurer
PURCHASE/SALE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 14th day of
February, 1995, by and between Riverside Associates, a Michign
co-partnership, whose address is 79 Macomb Place, Mt. Clemens,
Michigan 48043 (the "Purchaser"), and Action Real Estate
Development, Inc., a Delaware corporation whose address is 460
Nixon Road, Cheswick Pennsylvania 15024-1098 (the "Seller").
R E C I T A L S
A. Seller is the owner of certain vacant land located in the
City of Mt. Clemens, Macomb County, Michigan and more particularly
described on Exhibit A attached hereto (the "Property").
B. Seller desires to sell and Purchaser desires to purchase
the Property on the terms and subject to the conditions contained
in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, terms and
conditions contained in this Agreement, Seller and Purchaser agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. When used herein, the following terms shall
have the respective meanings set forth opposite each such term:
Closing Date: June 1, 1995, or such earlier date as Purchaser
may designate by at least ten (10) days prior written notice to
Seller.
Deposit: The sum of $25,000.00 which shall be placed in
escrow as provided in Section 11.1 and held as earnest money
subject to the terms of this Agreement.
Effective Date: The date of the last party's execution of this
Agreement; provided, however, that if the last party does not
execute this Agreement and deliver a fully executed counterpart of
the same to the first signing party within five (5) days after the
first party's execution date, then the offer or commitment to be
bound hereby by the first executing party shall automatically be
revoked and withdrawn, whereupon neither party shall be bound
hereto.
Escrowee: Chicago Title and Trust Company, through its agent,
Philip Greco Title Company.
Title Commitment: A commitment for an owner's title insurance
policy for the Property issued by the Title Insurer in the full
amount of the Purchase Price, covering title to the Property on or
after the date hereof, showing Seller as owner of the Property in
fee simple, subject to those exceptions which have been approved by
Purchaser or waived pursuant to Sections 4.1 or 5.1 (the "Permitted
Title Exceptions"), and other exceptions pertaining to liens or
encumbrances of a definite or ascertainable amount which may be
removed by the payment of money at closing and which Seller agrees
to so remove at closing (the "Removable Liens").
Title Insurer: Chicago Title Insurance Company, through its
agent, Philip Greco Title Company.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. On the terms and subject to the
conditions contained in this Agreement, Seller agrees to sell the
Property to Purchaser and Purchaser agrees to purchase the Property
from Seller for and in consideration of the Purchase Price.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price. The Purchase Price shall be One Million
Fifty Thousand Dollars ($1,050,000.00) plus or minus prorations,
payable as follows:
(a) The Deposit shall be deposited with the Escrowee
and, on the Closing Date, shall applied against the Purchase
Price.
(b) On the Closing Date, Purchaser shall pay the balance
of the Purchase Price to Seller, plus or minus prorations, as
hereinafter provided.
ARTICLE 4
SURVEY
4.1 Survey. Seller shall provide to Purchaser a copy of
every survey now in its possession, within five (5) days after the
Effective Date. Purchaser, at its sole cost and expense, shall
have the right, but not the obligation, to obtain a survey (the
"Survey") sufficient to remove the survey exceptions of the Title
Commitment. In the event Purchaser elects not to obtain a Survey,
then the survey exceptions shall be deemed "Permitted Title
Exceptions" hereunder. In the event Purchaser obtains the Survey
and the Survey shows any encroachments, violation of building
lines, restrictions or easements or violations or other matters
indicating exceptions to title or possible rights to third parties,
then Purchaser shall notify Seller in writing on or before the
expiration of the Investigation Period (as defined in Article 10)
stating with specificity the nature of the claimed defect. Seller
shall have thirty (30) days from the date of the receipt of the
notice to have the claimed defect removed from the Survey, and to
deliver a revised Survey to Purchaser. If Seller fails to have the
claimed defect removed from the Survey within the thirty (30) day
period, Purchaser may elect, by the delivery of written notice
thereof to Seller within the following five (5) days, to (i)
terminate this Agreement, in which event the Deposit shall
forthwith be returned to Purchaser, as its sole and exclusive
remedy, and except for Purchaser's obligations under Sections 7.1
and 10.2, this Agreement shall terminate or (ii) accept the
Property subject to the claimed defect. If Purchaser fails to make
such election, Purchaser shall be deemed to have elected to accept
the Property in accordance with (ii) above.
ARTICLE 5
TITLE COMMITMENT
5.1 Title Commitment. No later than thirty (30) days
following the Effective Date, Purchaser shall obtain the Title
Commitment and forward a copy of same to Seller, at Seller's sole
cost and expense. If the Title Commitment discloses exceptions to
title other than the Permitted Title Exceptions or the Removable
Liens, then Purchaser shall notify Seller in writing within ten
(10) days after the delivery of the Title Commitment identifying
with specificity the unpermitted exception. Seller shall have
thirty (30) days from the date of the delivery of the notice to
have the unpermitted exceptions removed from the Title Commitment
and to deliver a revised Title Commitment to Purchaser. If Seller
fails to provide Purchaser with the revised Title Commitment within
the thirty (30) day period, Purchaser may elect, by the delivery of
written notice thereof to Seller within the following five (5)
days, to (i) terminate this Agreement, in which event the Deposit
shall be forthwith returned to Purchaser, as its sole and exclusive
remedy, and except for Purchaser's obligations under Sections 7.1
and 10.2, this Agreement shall terminate or (ii) accept title
subject to the unpermitted exceptions which have not been removed
from the Title Commitment. If Purchaser fails to make such
election, Purchaser shall be deemed to have elected to accept title
in accordance with (ii) above. On the Closing Date, Seller shall,
at Seller's sole cost and expense, cause the Title Insurer to issue
an owner's title insurance policy or prepaid commitment therefor
(herein a "Title Policy") pursuant to and in accordance with the
Title Commitment, insuring fee simple title to the Property in
Purchaser, subject to the Permitted Title Exceptions.
ARTICLE 6
POSSESSION, PRORATIONS AND EXPENSES
6.1 Possession. Possession of the Property, subject to the
Permitted Title Exceptions, shall be delivered to Purchaser on the
Closing Date.
6.2 Prorations. All delinquent real estate taxes and
installments of special assessments, if any, including any interest
or penalty which is a lien or charge against the Property on the
Closing Date, shall be charged to Seller and paid in full at
Closing, unless Purchaser has agreed to take subject thereto, in
which case the Purchase Price shall be reduced by a credit for such
amount. Current real estate taxes and current installments of
special assessments, if any, shall be prorated as of the Closing
Date on the due date basis, it being agreed that such taxes and
assessments are paid in advance.
6.3 Expenses. Seller shall be responsible for the payment of
all transfer taxes, title insurance premiums and charges for the
issuance of the Title Policy. Purchaser shall be responsible for
payment of all recording fees (other than those incurred by Seller
in removing or releasing any unpermitted title exceptions) and all
costs of the Survey. Except as otherwise provided herein, the fees
and expenses of Seller's designated representatives, accountants
and attorneys shall be borne by Seller, and the fees and expenses
of Purchaser's designated representatives, accountants and
attorneys shall be borne by Purchaser.
ARTICLE 7
AFFIRMATIVE COVENANTS OF SELLER
7.1 Purchaser's Access to the Property. Seller shall permit
representatives, agents, employees, contractors, appraisers,
architects and engineers designated by Purchaser access to, and
entry upon, the Property to examine, inspect, measure and test the
Property for the purpose set forth in Section 10.1 hereof and for
all other reasonable purposes. Purchaser shall indemnify, defend
and hold Seller harmless from any loss, cost, damage, liability or
expense (including actual attorneys fees and litigation expenses)
caused by the activities of Purchaser or Purchaser's agents or
employees under this Section 7.1. Seller shall promptly notify
Purchaser in writing of any occurrence, after discovery by Seller,
which Seller believes would give rise to a claim under this
indemnity. If Purchaser fails to close this transaction, Purchaser
shall repair, in a commercially reasonable manner, any damage to
the Property caused by the activities of Purchaser, Purchaser's
agents or employees under this Section 7.1, and shall restore the
Property to its pre-existing condition.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF SELLER
8.1 Representations and Warranties of Seller. Seller
represents and warrants to Purchaser on and as of the Effective
Date that:
(a) Authorization. Seller has full capacity, right,
power and authority to execute, deliver and perform this
Agreement and all documents to be executed by Seller pursuant
hereto, and all required action and approvals therefor have
been duly taken and obtained. The individuals signing this
Agreement and all other documents executed or to be executed
pursuant hereto on behalf of Seller are and shall be duly
authorized to sign the same on Seller's behalf and to bind
Seller thereto. This Agreement and all documents to be
executed pursuant hereto by Seller are and shall be binding
upon and enforceable against Seller in accordance with their
respective terms.
(b) Violations. Buyer and Seller acknowledge that the
Property may be contaminated with certain "hazardous wastes or
materials" regulated under certain federal and/or state
environmental or other laws. As soon as practicable after the
Effective Date (but in no event later than five (5) days after
the Effective Date), Seller shall deliver copies of the
environmental site reports listed on Exhibit B attached hereto
(the "Environmental Reports"). Seller represents and warrants
that the Environmental Reports are the only written reports of
the environmental condition of the Property it obtained in
connection with its ownership of the Property. If the
contents of the Environmental Reports are objectionable to
Purchaser, Purchaser shall have the right to terminate this
Agreement by the deliver of written notice thereof to Seller
on or before April 15, 1995, and each party, except for
Purchaser's obligations under Sections 7.1 and 10.2, shall be
released therefrom, in which event the Deposit shall be
forthwith returned to Purchaser, as its sole and exclusive
remedy.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF PURCHASER
9.1 Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to Seller of the Effective Date that
Purchaser has full capacity, right, power, and authority to
execute, deliver and perform this Agreement and all documents to be
executed by Purchaser pursuant hereto, and all required actions and
approvals therefor have been duly taken and obtained. The
individuals signing this Agreement and all other documents executed
or to be executed pursuant hereto on behalf of Purchaser are and
shall be duly authorized to sign the same on Purchaser's behalf and
to bind Purchaser thereto. This Agreement and all documents to be
executed pursuant hereto by Purchaser are and shall be binding upon
and enforceable against Purchaser in accordance with their
respective terms.
ARTICLE 10
CONDITIONS PRECEDENT AND TERMINATION; OTHER COVENANTS OF
PURCHASER
10.1 Conditions Precedent. Purchaser contemplates acquiring
the Property for the construction and operation of a commercial
development (the "Intended Use"). Purchaser's obligations under
this Agreement are subject to Purchaser's satisfaction (or waiver)
that all of the following conditions (the "Conditions") have been
fulfilled on or before April 15, 1995 (the "Investigation Period"):
(a) Purchaser may accept or waive the Survey and Title
Commitment requirements at the times and in the manner set
forth in Sections 4.1 and 5.1;
(b) Purchaser may obtain soil tests, soil borings and
percolation tests showing that the physical aspects and the
condition of the Property are suitable for the Intended Use
and determined that water (fire and domestic), electricity,
telephone, gas and sanitary and storm sewer services presently
exist at the perimeter of the Property, and that all such
utilities have sufficient capacity to service the Intended
Use;
(c) Purchaser may obtain any additional environmental
tests or studies confirming the absence, presence or extent of
any hazardous waste or materials at, in under, on or near the
Property and that the costs of remediation shall not be
excessive, as determined in Purchaser's sole and absolute
discretion;
(d) Purchaser may confirm that the Property is not a
designated wetland that would prevent Purchaser from the
Intended Use nor are there conditions and obligations required
by the Michigan Department of Natural Resources (the "DNR") or
United States Environmental Protection Agency (the "EPA")
which Purchaser reasonably believes would impair its value or
use;
(e) Purchaser may confirm that the Intended Use will not
violate any zoning classification, land use classification, or
any other building classification or requirement and that the
adjoining roads and streets (existing) can be abandoned, to
create a contiguous parcel for development; and
(f) Purchaser may obtain financing for the acquisition
of the Property.
10.2 Non-Disclosure, Purchaser's Investigation and Inspection.
Although Purchaser may disclose the contents of the Environmental
Reports to its environmental consultant, attorneys and financial
consultants, prior to the Closing Date it may not and shall not
disclose the Environmental Reports to DNR, EPA or any other person
or entity without first obtaining the prior written consent of
Seller. In lieu of granting such consent, Seller may, in its sole
and absolute discretion, terminate this Agreement, in which event
the Deposit shall be forthwith returned to Purchaser, as its sole
and exclusive remedy. Nothing set forth in this Section 10.2 shall
prohibit Purchaser from reporting any fact or condition which
Purchaser has been advised in writing it has a legal obligation to
report provided Purchaser first notifies Seller of such fact or
condition and of Purchaser's intention to report the fact or
condition at least twenty-four (24) hours prior to Purchaser's
report. If Purchaser terminates this Agreement pursuant to this
Article 10 or otherwise, Purchaser shall deliver to Seller all
copies of the Environmental Reports it or its environmental
consultant may have together with copies of all reports,
certificates and other documentation obtained by Purchaser with
respect to the Property during Purchaser's due diligence review of
the Property.
10.3 Diligence and Environmental Remediation . Purchaser
agrees to diligently pursue satisfying the Conditions it is
required to fulfill. On the Closing Date Purchaser shall enter
into an environmental remediation agreement with the Seller and its
affiliates, a draft of which shall be provided to Purchaser prior
to the expiration of the Investigation Period (the "Remediation
Agreement"), whereby Purchaser will agree to undertake and perform
an environmental remediation of the Property in full accordance
with all federal and state laws, including the submission of the
remediation plan to the DNR, and clean-up consistent with an
approved plan. The Remediation Agreement will further provide that
Purchaser will protect Seller and its affiliates from any liability
in connection with the environmental condition of the Property.
The protection may be in the form of a hold harmless and
indemnification agreement, appropriate bonding or insurance
coverage (the terms of which shall be acceptable to Purchaser), but
must be satisfactory protection in Seller's sole and absolute
discretion.
10.4 Satisfaction of Conditions. If all the Conditions have
been satisfied or waived on or before the expiration of the
Investigation Period, then Deposit shall become non-refundable,
except as set forth in Section 11.1, and shall be delivered to
Seller at closing. If any of the Conditions are not satisfied on
or before the expiration of the Investigation Period, then
Purchaser may, at its option, elect to terminate this Agreement by
notice given to Seller not later the expiration of the
Investigation Period, in which event the Deposit shall be
immediately returned to Purchaser, and thereupon neither party
shall have any further rights or obligations hereunder, except for
Purchaser's obligations under Sections 7.1 and 10.2. If Purchaser
does not elect to terminate this Agreement as herein provided, then
the Conditions shall be deemed satisfied or waived and the Deposit
shall become non-refundable, except as set forth in 11.1.
ARTICLE 11
ESCROW AND DEPOSITS
11.1 Escrow and Deposits.
(a) Deposit. Purchaser shall make the Deposit in Escrow
with Escrowee within two (2) days after the Effective Date,
which sums shall be refundable or non-refundable in accordance
with Section 10.4. The Deposit shall be applicable to the
Purchase Price at Closing.
(b) Disbursements. The Deposit shall be retained by
Escrowee for the benefit of Seller in accordance with the
provisions of this Agreement. Seller shall have the right to
direct Escrowee to invest the Deposit in interest-bearing
securities, bank deposits and/or so-called "money market
funds" established and managed by nationally recognized firms;
provided, however, that the primary objective of such
investment shall be to preserve the principal and insure that
the same shall be timely available for disbursement as herein
provided. Seller and Purchaser further agree to execute any
and all directions in a timely fashion that are necessary to
cause Escrowee to disburse the Deposit and any and all
interest earned on the Deposit as required by any provision of
this Agreement and in the following circumstances:
(i) if Purchaser defaults in its obligations
hereunder, the Deposit and the interest thereon, if any,
shall be disbursed to and retained by Seller; and
(ii) if Seller defaults in its obligations
hereunder, the Deposit and the interest thereon, if any,
shall be disbursed to and paid to Purchaser.
ARTICLE 12
BROKERAGE
12.1 Brokerage. Seller hereby represents and warrants to
Purchaser that Seller has not dealt with any broker or finder with
respect to the transaction contemplated hereby other than Anton,
Zorn & Associates (the "Broker"), whose commission shall be paid by
Seller pursuant to the terms of a separate agreement. Seller
hereby agrees to indemnify, defend and hold Purchaser harmless from
and against any claim for brokerage commission or finder's fee
asserted by any other person, firm or corporation claiming to have
been engaged by Seller. Purchaser hereby represents and warrants
to Seller that Purchaser has not dealt with any broker or finder
with respect to the transaction contemplated hereby other than the
Broker, and Purchaser hereby agrees to indemnify, defend and hold
Seller harmless from and against any other claim for brokerage
commission or finder's fee asserted by any person, firm or
corporation, claiming to have been engaged by Purchaser. Purchaser
hereby discloses and Seller acknowledges that Gebran S. Anton, one
of the principal owners of the Broker, is a general partner in a
limited partnership which owns a twenty-five percent (25%) interest
in Purchaser.
ARTICLE 13
CONDEMNATION
13.1 Condemnation. If any material portion of the Property is
condemned or access thereto is taken prior to the Closing Date,
then either Seller or Purchaser may terminate this Agreement by
notifying the other in writing of such termination within thirty
(30) days after learning of such condemnation action, in which
event the Deposit shall be returned to Purchaser. If the Agreement
is not terminated pursuant to the preceding sentence, the Purchase
Price of the Property shall not be affected, it being agreed that
if the award is paid prior to the Closing Date of this transaction,
such amount shall be held in escrow and delivered to Purchaser at
the time of closing; and if the award has not been paid prior to
the Closing Date, then at the closing Seller shall assign to
Purchaser all of Seller's right, title and interest with respect to
such award and shall further execute any other instrument requested
by Purchaser to assure that such award is paid to Purchaser. If
Purchaser does not terminate this Agreement, it shall have the
right to contest the condemnation of the Property and/or the award
resulting therefrom.
ARTICLE 14
CLOSING
14.1 Closing. The transaction contemplated hereby shall close
at 10:00 A.M. on the Closing Date at the offices of the Escrowee at
118 Cass, Mt. Clemens, Michigan 48043 or on such other date, time
and place as the parties may mutually agree.
14.2 Seller's Deliveries. On the Closing Date, Seller shall
deliver to the Purchaser and in exchange for the payment to Seller
of the Purchaser Price (plus or minus prorations) the following
closing documents:
(a) A covenant deed from Seller conveying to Purchaser
fee simple title to the Property, subject only to the
Permitted Title Exceptions;
(b) The Remediation Agreement;
(c) The Title Commitment recertified and updated to the
Closing Date, and the Seller shall cause the Title Policy to
be issued pursuant to the Title Commitment, at Seller's sole
cost and expense;
(d) A Closing Statement showing the computation of funds
payable to Seller; and
(e) Such other documents, instruments, certifications
and confirmations as may be reasonably required and designated
by Purchaser, Seller or the Title Insurer to fully effect and
consummate the transactions contemplated hereby and/or to
issue the Title Policy which, in the other parties' counsel's
opinion, does not increase such party's liability or decrease
such party's rights.
14.3 Purchaser's Deliveries. On the Closing Date, Purchaser
shall deliver to the Seller in exchange for Seller's deliveries as
aforesaid the following:
(a) A Closing Statement showing the computation of funds
payable to Seller;
(b) The Remediation Agreement;
(c) The balance of the Purchase Price as provided in
Section 3.1 by Purchaser's certified check or wire transfer of
available funds; and
(d) Such other documents, instruments, certifications
and confirmations as may be reasonably required and designated
by Purchaser, Seller or the Title Insurer to fully effect and
consummate the transactions contemplated hereby and/or to
issue the Title Policy which, in the other parties' counsel's
opinion, does not increase such party's liability or decrease
such party's rights.
ARTICLE 15
DEFAULT
15.1 Default by Purchaser. In the event of a default by
Purchaser of any of Purchaser's obligations under this Agreement,
Seller shall have only the right to demand and obtain the Deposit
from Escrowee, and, in the event of a default under Sections 7.1 or
10.2, the right to seek specific performance and sue for money
damages for a default under Section 7.1 or 10.2.
15.2 Default by Seller. In the event of a default by Seller
of any of Seller's obligations under this Agreement, Purchaser
shall have the right as it sole and exclusive remedy to either: (i)
to terminate this Agreement, in which event neither party shall
have any further rights or obligations hereunder and the Deposit
shall be paid to Purchaser; or (ii) seek specific performance of
Seller's obligations hereunder.
ARTICLE 16
NOTICES
16.1 Notices. Any notice, request, demand, instruction or
other document to be given or served hereunder or under any
document or instrument executed pursuant to hereto shall be in
writing and shall be delivered personally with a receipt requested
therefor or sent by a recognized overnight courier service or by
United States registered or certified mail, return receipt
requested, postage prepaid, or by telecopy and, in each case,
addressed to the parties at their respective addresses set forth
below, and the same shall be effective (a) upon telecopy
transmission if sent via telecopy , or receipt or refusal if
delivered personally; (b) one (1) business day after depositing
with such an overnight courier service; or (c) two (2) business
days after deposit in the mail if mailed. A party may change its
address for receipt of notices by service of a notice of such
change in accordance herewith.
If to Purchaser: Riverside Associates
79 Macomb Place
Mt. Clemens, Michigan 48043
Attention: Gebran S. Anton
Telecopy Number: (810) 469-3049
With a required copy to:
Schlenke, Staugaard & Hearsch, P.C.
85 Macomb Place
Mount Clemens, Michigan 48043
Attention: Francis J. Hearsch, Jr.
Telecopy Number: (810) 307-8904
If to Seller: Action Real Estate Development, Inc
460 Nixon Road
Cheswick Pennsylvania 15024-1098
Attention: Linda S. Wyckoff
Telecopy Number: (412) 782-8606
With a required copy to:
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Mark P. Krysinski
Telecopy Number: (313) 961-8358
ARTICLE 17
MISCELLANEOUS
17.1 Entire Agreement, Amendments and Waivers. This Agreement
contains the entire agreement and understanding of the parties with
respect to the subject matter hereof, and all previous negotiations
and understandings between Seller and Purchaser or their respective
agents and employees with respect to the transaction set forth
herein are merged in this Agreement. Further, this Agreement may
not be amended, modified or discharged nor may any of its terms be
waived except by an instrument in writing signed by the party to be
bound thereby.
17.2 Further Assurances. The parties each agree to do,
execute, acknowledge and deliver all such further acts, instruments
and assurances and to take all such further actions before or after
the closing as shall be necessary or desirable to fully carry out
this Agreement and to fully consummate and effect the transactions
contemplated hereby.
17.3 Survival and Benefit. All representations, warranties,
agreements, indemnifications and obligations of the party shall,
notwithstanding any investigation made by any party hereto, survive
the closing and the same shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
The obligations of the parties to return or deliver or cause to be
returned or delivered the Deposit, shall survive any termination of
this Agreement.
17.4 No Third Party Benefits; Assignment. This Agreement is
for the sole and exclusive benefit of the parties hereto and their
permitted successors and assigns, and no third party is intended to
or shall have any rights hereunder. Seller shall have the right to
assign its interest under this Agreement without the consent of
Purchaser provided the Assignee is also the fee owner of the
Property. Otherwise, neither Seller nor Purchaser shall have the
right to assign its interest under this Agreement without first
obtaining the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
17.5 Interpretation.
(a) The headings and captions herein are inserted for
convenience reference only and the same shall not limit or
construe the paragraphs or sections to which they apply or
otherwise affect the interpretation hereof.
(b) The terms "hereby", "hereof", "herein", "hereunder"
and any similar terms shall refer to this Agreement, and the
term "hereafter" shall mean after, and the term "heretofore"
shall mean before, the Effective date.
(c) Words of the masculine, feminine or neuter gender
shall mean and include the correlative words of the other
genders, and words importing the singular number shall mean
and include the plural number and vice versa.
(d) Words importing persons shall include firms,
associations, partnerships (including limited partnerships),
trusts, corporations and other legal entities, including
public bodies, as well as natural persons.
(e) The terms "include", "including" and similar terms
shall be construed as if followed by the phrase "without being
limited to".
(f) This Agreement and any document or instrument
executed pursuant hereto may be executed in any number of
counterparts each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(g) Whenever under the terms of this Agreement the time
for performance of a covenant or condition falls on a
Saturday, Sunday or legal holiday, such time for performance
shall be extended to the next business day; otherwise all
references herein to "days" shall mean calendar days.
(h) This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
(i) Time is of the essence of this Agreement.
(j) For the purposes of this Agreement, the phrases, "to
the best of Seller's knowledge", "to Seller's knowledge" and
similar phrases shall mean all facts actually known by Seller,
without any duty to investigate.
(k) This Agreement shall not be construed more strictly
against one party than against the other merely by virtue of
the fact that it may have been prepared primarily by counsel
for one of the parties, it being recognized that both
Purchaser and Seller have contributed substantially and
materially to the preparation of this Agreement.
17.6 Foreign Seller Affidavit. Pursuant to Section 1445 of
the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (the "Code"), Seller agrees to deliver to
Purchaser, at or prior to the Closing Date, a certification as
required by the Code.
17.7 Disclosure to Internal Revenue Service. Each of Seller
and Purchaser agree to cooperate fully with the other in completing
of filing any disclosure documents or in otherwise satisfying any
disclosure requirements of the Code.
17.8 Discrepancy in Legal Description. The parties intend
that the Property which is the subject matter hereof include all of
the real property and all interest held by Seller therein.
Accordingly, if prior to the delivery of the deed, it appears that
the legal description of the Property set forth on Exhibit A does
not include or correctly describe all such real property or
interests therein or appurtenances thereto owned by Seller, the
legal description of the Property to be conveyed by Seller to
Purchaser hereunder shall be modified, at Seller's sole cost and
expense, to correctly describe the same.
17.9 Confidentiality. Purchaser shall not disclose the
existence of this Agreement or any of the terms and provisions
hereof without the prior written approval of the Seller and
Purchaser shall use all reasonable efforts to keep the details of
the transaction contemplated hereby strictly confidential.
17.10 Authority. The undersigned person signing on behalf
of Purchaser represents and warrants to Seller that he has the
authority to act for and on behalf of Purchaser and bind Purchaser.
IN WITNESS WHEREOF, Purchaser and Seller have caused this
Agreement to be executed by their duly authorized representatives,
intending to be legally bound by the provisions herein contained.
PURCHASER:
Riverside Associates, a
Michigan co-partnership
Dated: February 9, 1995 By: SALVATORE COTTONE
Salvatore Cottone, Partner
SELLER:
Action Real Estate Development,
Inc.
Dated: February 14, 1995 By: KENNETH L. CAMPBELL
Its: Treasurer
RECEIPT OF DEPOSIT
The undersigned does hereby acknowledge receipt of the sum of
$25,000.00) Dollars, to be deposited in an interest bearing account
and to be held pursuant to the terms and conditions in this
Purchase Agreement.
CHICAGO TITLE AND TRUST COMPANY
By: Philip Greco Title Company,
Agent
Dated: February 15, 1995 By: BRENDA MAEDIL
EXHIBIT A
Legal Description
Land in the City of Mt. Clemens, Macomb County, Michigan described
as:
PARCEL 1-A: Lots 145 through 150, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 1-B: Lots 151 through 156, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 1-C: Lots 157 through 162, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 2: Lot 3, Assessors Plat no. 17A, according to the plat
thereof as recorded in liber 16, page 20 of Plats, Macomb County
Records.
PARCEL 3: Lot 7, Assessors Plat no. 17A, (being re-plat of
Assessors Plat no. 17), according to the plat thereof as recorded
in liber 16, page 20 of Plats, Macomb County Records, excepting the
south 250.0 feet of said Lot 7, said exception being more
particularly described as: Beginning at a point on the west side of
Floral Avenue south 12 degrees 19 minutes west 266.2 feet from the
southwest corner of Church and Floral Avenues: thence south 12
degrees 19 minutes west 250 feet along Floral Avenue: thence north
75 degrees 58 minutes west 727.16 feet; thence north 37 degrees 05
minutes east 271.06 feet; thence south 75 degrees 58 minutes west
613.8 feet to the point of beginning.
PARCEL 4: Lot 1, Assessors Plat no. 21, according to the plat
thereof as recorded in liber 13, page 38 of Plats, Macomb County
Records.
EXHIBIT B
ENVIRONMENTAL REPORTS
Date Name of Firm Title or Nature of Report
12-12-88 Earth Science Letter report of environmental site
Consultants, Inc. investigation
06-14-90 WMMC, Incorporated Letter report of site investigation
and remediation activities
10-23-90 Testing Engineers Phase I and II Environmental
& Consultants, Inc. Site Assessments
11-15-90 Testing Engineers Phase III Environmental Site
& Consultants, Inc. Assessment
03-08-91 ASTI Subsurface
03-12-91 ASTI Remedial Action Plan Outline
(Revised)*
04-05-91 Michigan Depart- Letter citing interior violations
ment of Natural
Resources
05-03-91 Klett Leiber Letter response to MDNR
Rooney & Schorling
06-19-91 WMMC, Incorporated Analytical results from samples
collected at site
06-28-91 Klett Leiber Letter to MDNR
Rooney & Schorling
07-23-91 NTH Consultants, Contamination Assessment and Pro-
LTD. posed Remedial Option (missing
exhibits were not provided to
seller)*
07-31-91 Klett Leiber Letter to MDNR
Rooney & Schorling
08-02-91 WMMC, Incorporated Water analysis
10-23-91 The Dragun Corpor- Letter review of NTH report
ation
01-08-92 NTH Consultants, Additional Investigation Outline
LTD.
02-06-92 The Dragun Corpor- Letter of review of NTH work plan
ation
03-09-92 NTH Consultants, Letter of response to Dragun letter
LTD.
03-16-92 NTH Consultants, Letter review of quality control
LTD. data
02-02-94 Wm. Murphy Demoli- Letter of comment on environmental
tion & Salvage Co. Reports*
* Reports previously delivered to and received by Purchaser.
April 7, 1995
Action Real Estate Development, Inc.
460 Nixon Road
Cheswick, Pennsylvania 15024-1098
Attention: Linda S. Wyckoff
RE: Purchase Agreement dated February 14, 1995 between
Riverside Associates, a Michigan co-partnership (the
"Purchaser"), and Action Real Estate Development, Inc.,
a Delaware corporation (the "Seller"), covering premises
in the City of Mt. Clemens, Macomb County, State of
Michigan
Dear Ms. Wyckoff:
This letter, when signed by you, will confirm our agreement to
extend the Inspection Period (as defined in Section 10.1 of the
Purchase Agreement) to May 15, 1995. Except as amended hereby, the
Purchase Agreement shall remain in full force and effect.
If the foregoing correctly sets forth our agreement regarding
this matter, please signify below in the space provided therefore.
Sincerely,
Riverside Associates,
a Michigan co-partnership
GEBRAN S. ANTON
Gebran S. Anton, Partner
The foregoing is accepted and agreed to:
Action Real Estate Development, Inc.
By: LINDA S. WYCKOFF
Linda S. Wyckoff, Secretary
Dated: April 10, 1995
REMEDIATION AND INDEMNIFICATION AGREEMENT
THIS REMEDIATION AND INDEMNIFICATION AGREEMENT (the
"Agreement") is made and entered into this 16th day of June, 1995
by and between Riverside Associates, a Michigan co-partnership,
whose address is 79 Macomb Place, Mt. Clemens, Michigan 48043 (the
"Purchaser") and Action Real Estate Development, Inc., a Delaware
corporation whose address is 460 Nixon Road, Cheswick Pennsylvania
15024-1098 (the "Seller").
Preliminary Statement
The Purchaser and Seller have entered into a certain Purchase
Agreement dated February 14, 1995, covering the purchase and sale
of certain real property (the "Property") located in the City of
Mt. Clemens, County of Macomb, State of Michigan, which Property is
more particularly described in Exhibit A hereto. Seller has
provided Purchaser with the environmental reports regarding the
Property as listed in Exhibit B of the Purchase Agreement which
indicated that certain contaminants are present on the Property.
Otherwise, Seller has made no representations or warranties to
Purchaser with respect to the environmental condition of Property.
Pursuant to Section 10.3 of the Purchase Agreement, Purchaser has
agreed to conduct a remediation of the Property and to indemnify
Seller from any liability related thereto. This Agreement is the
agreement Purchaser and Seller are entering into to satisfy the
terms of Section 10.3 of the Purchase Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions.
The following terms have the meanings set forth below for all
purposes of this Agreement, and the definitions of such terms are
equally applicable both to the singular and the plural forms
thereof:
"Action" mean Action Industries, Inc., a Pennsylvania
corporation.
"Affiliate" means as to any specified person any person
controlled by, controlling, or under common control with such
person. The term "control" of any person means possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether
through the ownership of voting securities or by contract or
otherwise.
"Agency" means the Michigan Department of Natural Resources or
any other governmental agency that is exercising lead or primary
jurisdiction over the Property (the "Agency").
"Contaminants" means collectively contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and
constituents; petroleum products or fractions thereof;
polychlorinated biphenyls; medical wastes; radioactive materials;
infectious wastes; asbestos; paint containing lead; and urea
formaldehyde.
"Environmental Laws" means any past, present, future or
amended, federal, state, local or foreign statutory or common law
or any regulation, code, guideline, plan, order, decree, judgment,
permit, grant, franchise, concession, restriction, agreement or
injunction issued, entered, promulgated or approved thereunder,
relating to the environment, human health or safety, including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of Contaminants into the
environment (including, without limitation, air, surface water,
groundwater or land), or relating to the manufacture, generation,
refining, recycling, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport, arranging for
transport or handling of Contaminants and, including, without
limitation:
(i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C.A. Section 9601 et
seq. ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986;
(ii) the Solid Waste Disposal Act, 42 U.S.C.A. Section 6901 et
seq., as amended by the Resource Conservation and Recovery
Act;
(iii) the Toxic Substances Control Act, 15 U.S.C.A. Section
2601 et seq.;
(iv) the Safe Drinking Water Act, 42 U.S.C.A. Section 300(f) et
seq.;
(v) the Refuse Act, 33 U.S.C.A. Section 407 et seq.;
(vi) the Clean Water Act, 33 U.S.C.A. Section 1251 et seq.;
(vii) the Clean Air Act, 42 U.S.C.A. Section 7401 et seq.
(viii) the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C.A. Section 11001 et seq.;
(ix) the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C.A. Section 136 et seq.,
(x) the Hazardous Materials Transportation Act, 49
U.S.C.A. Section 1801 et seq.; and
(xi) the Occupational Safety and Health Act, 29 U.S.C.A.
Section 651 et seq.
(xii) Michigan Environmental Response Act, M.C.L.A.
Section 299.601 et seq.
"Indemnitees" is defined in paragraph 6(a).
"Migrating Contaminants" means Contaminants which have
migrated, leaked, leached, flowed, emitted or otherwise moved from
the Property prior to the completion of the Work.
"Permits" means permits, consents, licenses, approvals and
registrations, and any renewals and modifications of any of the
foregoing.
"Plan" is defined in paragraph 2.
"Property" is defined in the Preliminary Statement.
"Purchase Agreement" is defined in the Preliminary Statement.
"Purchaser" is defined in the introductory paragraph of this
Agreement.
"Seller" is defined in the introductory paragraph of this
Agreement.
"Work" is defined in paragraph 3(a).
2. Development of Remediation Plan.
Purchaser shall, at its expense, select and retain a
nationally recognized, independent contractor, qualified by
training and experience, to develop an investigation and
remediation plan (together with any amendments thereto which may be
approved in accordance with the terms of this Agreement, the
"Plan") for the Property. After the selection of the contractor,
Purchaser and the contractor shall deliver a copy of the Plan to
Seller, together with any changes to the Plan which Purchaser, the
contractor or any other party may require from time to time and any
other information reasonably requested by Seller related thereto.
After Seller and Purchaser have reviewed the Plan, Purchaser shall
submit the Plan to the Agency for its approval.
3. Remediation.
(a) After the Plan has been developed pursuant to
Paragraph 2 and approved by the Agency, Purchaser at its expense
shall select and retain a nationally recognized, independent
contractor, qualified by training and experience to investigate,
define, cleanup, respond, remove, remediate, contain, restore,
treat, dispose and monitor, including post-remedial monitoring,
with respect to Contaminants and, to the extent required by the
Plan, Migrating Contaminants (all of which is collectively called
the "Work"). After the retention of the contractor, Purchaser and
the contractor shall commence and diligently pursue completion of
the Work.
(b) Purchaser shall, at its expense, perform the Work
with diligence and continuity, and complete the Work within the
time set forth in the Plan and, if no time is set forth in the Plan
within twelve (12) months after the date of this Agreement. At any
reasonable time and from time to time on and after the date of this
Agreement, Seller and its employees, agents, contractors and
consultants shall have access to the Property and Purchaser's
records for the purpose of monitoring the development of the Plan
and the performance Work, including collecting samples, performing
tests, and verifying any data or information concerning the Plan or
the Work, and inspecting and copying all records, operating logs,
contracts and other documents required to monitor compliance with
the terms of this Agreement. In the exercise of it rights under
this paragraph (b), Seller shall use reasonable efforts to avoid
interfering the performance of the Work by Purchaser.
(c) The Work shall be complete upon delivery by the
Agency to Seller of a certification that implementation of the Plan
and conduct of the Work has been completed.
(d) If the Work is not performed with diligence and
continuity in accordance with this Agreement, Seller, without
excluding any other right or remedy, shall have the right, but not
the obligation, to perform and complete all or part of the Work
upon the following terms and conditions:
(i) Seller shall provide Purchaser with written notice
of Purchaser's failure to perform the Work with diligence and
continuity.
(ii) Purchaser shall have thirty (30) days (or such
shorter period of time as Seller may grant in the event of an
emergency or, in other cases, as shall then be permitted for
the initiation or resumption of the Work under applicable
Environmental Laws, the Plan or by the Agency) after the
giving of such notice to initiate or resume performance of the
Work and thereafter to pursue the Work to completion with
diligence and continuity.
(iii) If Purchaser fails to comply with the procedure
and obligations contained in the immediately preceding
subparagraph, Seller may immediately undertake performance and
completion of all or some portion of the Work and shall be
deemed to have an irrevocable license to enter upon the
Property for that purpose.
(iv) Purchaser shall, upon Seller's request, at any time
and from time to time, reimburse Seller for all costs and
expenses incurred in connection with the Work and the exercise
of its rights and remedies hereunder, including, without
limitation, all actual out-of-pocket legal, accounting,
consulting, engineering, contractor and laboratory costs and
expenses.
(v) Purchaser shall, at Seller's request, provide Seller
and its contractors, consultants and other designees with all
necessary and reasonable cooperation and assistance and, at
Seller's request, shall appoint an officer of Seller or at
Seller's option, Action, as designated from time to time by
Seller, to act as attorney-in-fact to sign, on Purchaser's
behalf, all manifests and other required documents as the
generator of any hazardous waste generated as part of the
Work.
(vi) If Seller elects to perform the Work or otherwise
exercises its rights and remedies hereunder, Purchaser shall
have no rights, legal or equitable, against Seller for any
alleged noncompliance with the Plan, any Permit or any
applicable federal, state and local statutes, laws, ordinances
or regulations, agreements with governments and regulatory
agencies, and court and administrative orders, including,
without limitation, all applicable Environmental Laws.
4. Compliance with Laws.
In connection with development of the Plan and performance of
the Work by Purchaser, its Affiliates, their respective general and
limited partners, and their respective officers, directors,
shareholders, members, managers, employees and agents shall comply,
or assure compliance, with all applicable federal, state and local
statutes, laws, ordinances or regulations, agreements with
governments and regulatory agencies, and court and administrative
orders, including, without limitation, all applicable Environmental
Laws.
5. Covenants.
(a) Purchaser covenants to Seller that, until the
completion of the Work:
(i) To the extent that it relates to the Property or the
Contaminants or, to the extent covered by the Work, Migrating
Contaminants, Purchaser shall notify Seller of any written
communication from or to any government officials or third
parties and shall deliver copies of the communications to
Seller.
(ii) Seller shall have the right to provide comments for
any communication noted in paragraph 5(a)(i) of the Agreement.
6. Indemnification.
(a) Purchaser shall indemnify, defend and hold harmless
Seller, Action, any assignee of Seller or Action, their respective
Affiliates, their respective general and limited partners, and
their respective officers, directors, shareholders, members,
managers, employees and agents (collectively, the "Indemnitees")
from and against all liabilities, costs, claims, damages, demands,
litigation, suits, proceedings, actions, losses, obligations,
penalties, fines, judgments, sums paid in settlement of any of the
above, and disbursements arising from or out of, or in any way
related to:
(i) any failure by Purchaser to perform or observe any
covenant or condition to be performed or observed by Purchaser
under this Agreement;
(ii) the lack of any Permit required at or in connection
with the Property under any applicable Environmental Laws;
(iii) noncompliance with any such Permit or any
applicable Environmental Laws at or in connection with the
Property;
(iv) the presence, emission, discharge, release or
threatened release from the Property into the environment of
any Contaminants on, in, under or above the Property;
(v) the presence or suspected presence of any
Contaminants on, in, under or above the Property or any
location containing Contaminants removed in connection with
the performance of the Work;
(vi) the migration, leaking, leaching, flowing, emitting
or other movement of Contaminants from the Property to any
other location;
(vii) the characterization of the Property or any
portion thereof as a "facility," as defined in and for purpose
of CERCLA, or as any Contaminant facility, site, storage area,
landfill or refuse location under and for purpose of any
applicable Environmental Laws, as a result of the presence of
Contaminants and, to the extent covered by the Work, Migrating
Contaminants;
(viii) any event at the Property or any portion
thereof constituting an actual or threatened release of
Contaminants and, to the extent covered by the Work, Migrating
Contaminants, as defined in CERCLA or any other applicable
Environmental Law;
(ix) the migration, leaking, leaching, flowing, emitting,
emission, discharge, release or threatened release or other
movement of the Contaminants or, to the extent covered by the
Work, Migrating Contaminants, resulting from the
transportation of the Contaminants and, if applicable, the
Migrating Contaminants, in connection with the performance of
the Work; or
(x) the migration, leaking, leaching, flowing, emitting,
emission, discharge, release or threatened release or other
movement of the Contaminants or, to the extent covered by the
Work, Migrating Contaminants, from the site(s) of disposal of
the Contaminants and, if applicable, the Migrating
Contaminants, to any other location.
Without limiting the generality of the foregoing, this
indemnification shall specifically cover actual out-of-pocket fees
and expenses for attorneys, accountants, laboratories, consultants,
engineers, contractors and experts, and out-of-pocket costs of
investigation, cleanup, response, removal, remediation,
containment, restoration, treatment, disposal or monitoring.
(b) Seller shall notify Purchaser of (i) any claim
asserted against any Indemnitee which is subject to the indemnity
contained in this paragraph 6 within 60 days after Seller receives
written notice of such claim, and (ii) any other claim which Seller
has as an Indemnitee under this paragraph 6 with reasonable
promptness after Seller obtains knowledge of the existence of such
claim, but failure to notify Purchaser shall not affect the rights
of the Indemnitees or the obligations of Purchaser under this
paragraph 6 unless Purchaser fails to obtain knowledge of such
claim from any other source and Purchaser suffers pecuniary loss by
reason of such failure or such failure materially impairs
Purchaser's ability to defend such claim, and then only to the
extent of such loss or impairment.
7. Security.
Upon the execution hereof by Purchaser, Purchaser and
Purchaser' lender, First National Bank in Macomb County (the
"Bank") shall enter into an agreement, of which Seller shall be a
third party beneficiary, pursuant to which the Bank shall hold
funds in amount which is not less than 125% of the cost of
completing the Work, as the security for the performance of the
Work and Purchaser's other obligations under this Agreement, and
the punctual payment of all sums which may be due Seller or the
Indemnitees under this Agreement. Within ten (10) days after the
selection of the contractor pursuant to Paragraph 3(a) of this
Agreement, Purchaser and the approved contractor shall certify to
Seller the estimated cost of completion of the Work. In the event
the estimated cost of completion of the Work shall change or if
Seller requests confirmation of the cost of completion, Purchaser
and the contractor shall submit a new certification of the cost of
completion to Seller. At any time and from time to time, Seller
may require that Purchaser provide an additional funds so that the
account at all times is not less than 125% of the estimated cost of
completion. The agreement with the Bank shall provide that
agreement shall not be cancelled or changed in any manner for any
reason whatsoever without the written consent of Seller.
8. Release and Waiver.
(a) Notwithstanding anything set forth elsewhere in this
Agreement, neither Seller nor any of the other Indemnitees waives
any of its rights and remedies (i) under CERCLA or (ii) against any
other potentially responsible party.
(b) Purchaser hereby releases and waives any rights it
may have had, or may hereinafter have against the Indemnitees, or
any one or any combination of them, contingent or liquidated, known
or unknown, arising from or with respect to any acts or omissions
of any one or any combination of them, from the beginning of time
to the date of this Agreement, under common law, rule, regulation
or statute, including, but not limited to, all Environmental Laws,
with respect to Contaminants, Migrating Contaminants or the
Property. Purchaser agrees that all its legal and equitable
remedies against Seller are contained in this Agreement.
(c) In the event Seller elects to complete the Work,
Purchaser hereby releases and waives any rights it may have had, or
may hereinafter have against the Indemnitees, or any one or any
combination of them, contingent or liquidated, known or unknown,
arising from or with respect to any acts or omissions of any one or
any combination of them, under common law, rule, regulation or
statute, including, but not limited to, all Environmental Laws,
with respect to any claim that Seller on any other person or entity
has not properly performed the Work or otherwise with respect to
Contaminants, Migrating Contaminants or the Property.
9. Miscellaneous.
(a) This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Michigan.
(b) Any notice, request, demand, instruction or other
document to be given or served hereunder or under any document or
instrument executed pursuant to hereto shall be in writing and
shall be delivered personally with a receipt requested therefor or
sent by a recognized overnight courier service or by United States
registered or certified mail, return receipt requested, postage
prepaid, or by telecopy and, in each case, addressed to the parties
at their respective addresses set forth below, and the same shall
be effective (a) upon telecopy transmission if sent via telecopy,
or receipt or refusal if delivered personally; (b) one (1) business
day after depositing with such an overnight courier service; or (c)
two (2) business days after deposit in the mail if mailed. A party
may change its address for receipt of notices by service of a
notice of such change in accordance herewith.
If to Purchaser: Riverside Associates
79 Macomb Place
Mt. Clemens, Michigan 48043
Attention: Gebran S. Anton
Telecopy Number: (810) 469-3049
With a required copy to:
Schlenke, Staugaard & Hearsch, P.C.
85 Macomb Place
Mount Clemens, Michigan 48043
Attention: Francis J. Hearsch, Jr.
Telecopy Number: (810) 307-8904
If to Seller: Action Real Estate Development, Inc
460 Nixon Road
Cheswick Pennsylvania 15024-1098
Attention: Linda S. Wyckoff
Telecopy Number: (412) 782-8606
With a required copy to:
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Mark P. Krysinski
Telecopy Number: (313) 961-8358
(c) The captions and paragraph numbers appearing in this
Agreement are inserted only as a matter of convenience and do not
define, limit, construe or describe the scope or intent of such
paragraphs of this Agreement nor in any way affect this Agreement.
(d) This Agreement is the entire agreement between the
parties with respect to the subject matter hereof and supersedes
all prior and contemporaneous oral and written agreements and
discussions. Neither this Agreement nor any of the terms hereof
may be terminated, amended or waived orally, but only by an
instrument in writing signed by all the parties.
(e) Notwithstanding any other provision of this
Agreement, if any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any
extent, be invalid or unenforceable in accordance with its terms,
the remainder of this Agreement or the application of such term or
provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby,
and each term and provision of this Agreement shall be valid and
enforceable to the extent permitted by law.
(f) This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, and it
shall not be necessary in making proof of this Agreement to produce
or account for more than one such counterpart.
(g) In the event of litigation relating to this
Agreement, the prevailing party to this Agreement and its
successors or assigns shall be entitled to its reasonable
attorneys' fees and disbursements.
(h) Purchaser shall not have the right to assign this
Agreement or delegate its duties hereunder without first obtaining
the prior written consent of Seller in action. Seller and Action
reserves the right to assign this Agreement and to delegate their
duties hereunder, and all provisions of this Agreement shall inure
to the benefit of Seller's and Action's respective successors and
assignees.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
PURCHASER:
Riverside Associates, a
Michigan co-partnership
Dated: July 11, 1995 By: SALVATORE COTTONE
Salvatore Cottone, Partner
By: CARLO T. CATENACCI
Carlo T. Catenacci, Partner
By: JOSEPTH E. CATENACCI
Joseph E. Catenacci,
Partner
By: GEBRAN S. ANTON
Gebran S. Anton, Partner
SELLER:
Action Real Estate Development,
Inc.
Dated: June 14, 1995 By: KENNETH L. CAMPBELL
Its: Treasurer
STATE OF MICHIGAN )
)SS
COUNTY OF )
The foregoing instrument was acknowledged before me this 11th
day of July, 1995, by Salvatore Cottone, a Partner of Riverside
Associates, on behalf of said co-partnership.
DAVID F. GIRODAT
Notary Public, Macomb County
Michigan
My Commission Expires: 2-21-98
STATE OF MICHIGAN )
)SS
COUNTY OF )
The foregoing instrument was acknowledged before me this _____
day of _____________, 1995, by Carlo T. Catenacci, a Partner of
Riverside Associates, on behalf of said co-partnership.
JACK NELSON
Notary Public, Macomb County
Michigan
My Commission Expires: 1-29-96
STATE OF MICHIGAN )
)SS
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day
of _____________, 1995, by Joseph E. Catenacci, a Partner of
Riverside Associates, on behalf of said co-partnership.
JACK NELSON
Notary Public, Macomb County
Michigan
My Commission Expires: 1-29-96
STATE OF MICHIGAN )
)SS
COUNTY OF )
The foregoing instrument was acknowledged before me this _____
day of _____________, 1995, by Gebran S. Anton, the General Partner
of LCDA ENTERPRISES, a Michigan limited, a Partner of Riverside
Associates, on behalf of said partnerships.
JACK NELSON
Notary Public, Macomb County
Michigan
My Commission Expires: 1-29-96
STATE OF PENNSYLVANIA )
)SS
COUNTY OF ALLEGHENY )
The foregoing instrument was acknowledged before me this 14th
day of June 1995, by Kenneth L. Campbell, the Treasurer of Action
Real Estate Development, Inc., on behalf of said corporation.
PATRICIA A. PERRI
Notary Public, Allegheny County
State of Pennsylvania
My Commission Expires: 6-4-96
<PAGE>
EXHIBIT A
Legal Description
Land in the City of Mt. Clemens, Macomb County, Michigan described
as:
PARCEL 1-A: Lots 145 through 150, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 1-B: Lots 151 through 156, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 1-C: Lots 157 through 162, both inclusive, the Wood
Subdivision, according to the plat thereof as recorded in liber 2,
page 100 of Plats, Macomb County Records.
PARCEL 2: Lot 3, Assessors Plat no. 17A, according to the plat
thereof as recorded in liber 16, page 20 of Plats, Macomb County
Records.
PARCEL 3: Lot 7, Assessors Plat no. 17A, (being re-plat of
Assessors Plat no. 17), according to the plat thereof as recorded
in liber 16, page 20 of Plats, Macomb County Records, excepting the
south 250.0 feet of said Lot 7, said exception being more
particularly described as: Beginning at a point on the west side of
Floral Avenue south 12 degrees 19 minutes west 266.2 feet from the
southwest corner of Church and Floral Avenues: thence south 12
degrees 19 minutes west 250 feet along Floral Avenue: thence north
75 degrees 58 minutes west 727.16 feet; thence north 37 degrees 05
minutes east 271.06 feet; thence south 75 degrees 58 minutes west
613.8 feet to the point of beginning.
PARCEL 4: Lot 1, Assessors Plat no. 21, according to the plat
thereof as recorded in liber 13, page 38 of Plats, Macomb County
Records.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of September 18, 1995
(the "Agreement"), by and among KENSINGTON LAMP COMPANY, a
Pennsylvania corporation ("Seller"), ACTION INDUSTRIES, INC., a
Pennsylvania corporation ( Action"), KENSINGTON COLLECTION, INC.,
a Pennsylvania corporation ("Purchaser"), Walter Tymoczko (the
Manager"), Robert Thomas ( RT"), and Thomas McDowell ( TM").
This Agreement sets forth the terms and conditions upon which
Seller will sell to Purchaser, and Purchaser will purchase from
Seller, certain of the properties and assets and certain of the
rights, claims and contracts of Seller's business (the "Business"),
and Purchaser will assume certain liabilities of the Business, all
upon the terms and subject to the conditions set forth in this
Agreement.
In consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained
herein, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I -- TRANSFER OF ASSETS AND LIABILITIES
1.01 Purchase of Assets.
(a) Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Section 1.04 hereof),
Seller shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from
Seller, all of Seller's right, title and interest in and to those
tangible personal properties and assets located at Seller s
Youngwood, Pennsylvania facility and at such other locations as are
described herein or in the Schedules and Annexes hereto, together
with the following rights, claims and contracts of Seller
(together, the "Purchased Assets"), all as used in the Business
(except to the extent excluded under Section 1.01(b) hereof),
including but not limited to:
(1) subject to any required consents, all of Seller's
right, title and interest as lessee in, to and under that certain
real property lease dated February 8, 1994, as amended on May 1,
1994, between Seller and Millstein Industries (the "Real Property
Lease"), with respect to certain real property and improvements
thereon located in Youngwood, Pennsylvania (the "Leased Real
Property");
(2) those patents, applications for patents, patent
disclosures docketed, inventions, improvements, proprietary
processes and formulae, trademarks, trademark applications, trade
names and copyrights owned by Seller, and all proprietary,
technical and other information and intellectual property and all
licenses, franchises, permits, authorizations, agreements and
arrangements and other rights to use the foregoing, whether
patentable or unpatentable, of Seller, all as set forth on Schedule
1.01(a)(2) attached hereto (the "Intellectual Property");
(3) the machinery, equipment, vehicles, furniture, molds
and tools owned by Seller, including all attachments and parts
thereof (the "Equipment"), including the items described on
Schedule 1.01(a)(3);
(4) all permits, authorizations and licenses of Seller
required or necessary for the lawful operation of the Business (the
"Permits"), including those Permits described on Schedule
1.01(a)(4), to the extent transferable to Purchaser;
(5) subject to any required consents, all contracts,
agreements, purchase and sale orders, bids, proposals and other
commitments or obligations which were entered into or incurred in
the ordinary conduct of the Business, including those described on
Schedule 1.01(a)(5) attached hereto (the "Contracts");
(6) the supplies, spare parts, hardware, accessories and
other tangible personal property (the "Personal Property"),
including that Personal Property described on Schedule 1.01(a)(6)
attached hereto, but not including the Equipment;
(7) except as specifically provided in Section 1.01(b)
hereof, all production data, equipment maintenance data, copies of
accounting records related to the Trade Accounts and Vacation
Liabilities (as such terms are defined below); sales and sales
promotional data; advertising materials; sales and credit records;
customer lists; cost and pricing information; supplier lists;
business plans; reference catalogs; blueprints; drawings; lamp part
mold drawings; lamp drawings; lamp catalog sheets, photos,
brochures, folders and catalogs; lamp catalog sheet artwork and
film (located in Cheswick, PA, Youngwood, PA and Hong Kong); lamp
package artwork and film (located in Cheswick, PA, Youngwood, PA,
and Hong Kong); maps and geological reports (together, the
"Records");
(8) all rights under express or implied warranties from
suppliers of the Business (the "Warranties") except to the extent
related to Nonassumed Liabilities and Nonpurchased Assets (as
defined below);
(9) (i) all inventory (consisting of raw materials, work
in process and finished goods) as of the taking of such inventory
as described in Section 1.03(a)(2) hereof (the Inventory"); (ii)
those packaging labels stored at the Carnegie, Pennsylvania
packaging plant used by Seller (the Labels"); (iii) all inventory
which is received by Purchaser after the Closing Date and has been
paid for in full by Seller or Action prior to the Closing Date
pursuant to any letter of credit outstanding as of the Closing Date
(the Letter of Credit Inventory A"); (iv) all inventory which is
received by Purchaser after the Closing Date and is paid in full by
Seller or Action on or after the Closing Date pursuant to a Letter
of Credit outstanding as of the Closing Date (the "Letter of Credit
Inventory B"; and, together with the Letter of Credit Inventory A,
the "Letter of Credit Inventory"); and (v) all supplies of Seller
(the Supplies"), including that Inventory and those Supplies and
Labels reflected on the Current Balance Sheet; and
(10) all deposits and other prepaid items (the
"Deposits") including those described on Schedule 1.01(a)(10).
(b) Notwithstanding anything to the contrary herein, and
subject to the provisions of Section 4.02 hereof, Seller shall
retain and Purchaser shall not hereby acquire the following assets
(the "Nonpurchased Assets"):
(1) all cash, bank accounts, equity or debt securities,
recoverable local, state or federal income, sales and/or real
estate taxes, bonds, intercompany accounts, deposits (other than
the Deposits), judgments or any other interests in pending
litigation to which Seller is a party;
(2) any accounts/notes receivable or unbilled contract
receivables of Seller, including those reflected on the Current
Balance Sheet (other than those accounts receivable described in
Section 1.01(a)(9) hereof;
(3) Seller's financial records, which shall include,
without limitation, the general ledgers, books of original entry,
excluding those that are necessary for the ongoing conduct of the
Business as set forth in Section 1.01(a)(7) hereof;
(4) those goods which have been sold by Action and
returned by Action s customers and/or distributors, which are
located at Seller s Youngwood facility;
(5) the corporate minute books and stock ledgers of
Seller; and
(6) any insurance policies related to the Purchased
Assets or the Business.
1.02 Assumption of Liabilities.
At the Closing, Purchaser shall assume only:
(a) the trade accounts payable of Seller for Inventory which
has been shipped to and received by Seller on or before the Closing
Date (the Trade Accounts");
(b) the obligation to reimburse Seller or Action for the
amounts paid by it to suppliers for the Letter of Credit Inventory
B, which amounts shall be paid in cash by Purchaser within fourteen
(14) days after Seller s notice thereof, which notice shall include
supporting documentation for such shipment and Seller s or Action's
payment therefor.
(c) all liabilities of Seller for accrued but unused vacation
and personal days of Seller s direct employees (the "Vacation
Liabilities");
(d) all liabilities under the Real Property Lease which arise
from and after the Closing Date; and
(e) all liabilities in connection with the Purchased Assets,
or invoices for inventory which is ordered by Seller prior to the
Closing Date but which invoices and inventory related thereto are
received by Purchaser after the Closing Date (other than invoices
received in connection with the Letter of Credit Inventory), which
arise from and after the Closing;
(together, the Assumed Liabilities"). Purchaser shall not assume,
and shall in no way be responsible for, any liabilities other than
the Assumed Liabilities.
1.03 Consideration.
(a) Upon the terms and subject to the conditions of this
Agreement, Purchaser will deliver or cause to be delivered to
Seller, in full payment for the aforesaid sale, conveyance,
assignment, transfer and delivery of the Purchased Assets, the
purchase price to be determined as follows (the "Purchase Price"):
(1) $174,072; plus
(2) $2,103,146.23, being the value of the Inventory and
Labels purchased by Purchaser hereunder on the Closing Date (as
defined in Section 1.04 below), valued at cost, as established by
an inventory conducted by the parties hereto immediately prior to
the Closing, which shall be satisfactory to such parties (for
purposes of conducting such inventory, the value of stored packing
materials included in shipments to Seller and the value of samples
received by Seller from suppliers and manufacturers shall not be
counted (unless and to the extent Seller has paid for such
materials and/or samples), but such materials and samples shall be
included in the Inventory sold hereunder); plus
(3) $77,791.49, being the amount paid by Seller or
Action for the Letter of Credit Inventory A; minus
(4) the value of the Trade Accounts in the amount of
$738,625.91, and Vacation Liabilities in the amount of $10,624.91,
as of the Closing Date, as determined by the parties hereto (as the
same shall be subsequently subject to adjustment as set forth in
Section 1.07 hereof).
(b) At the Closing, Purchaser shall pay Seller the Purchase
Price by delivery of a Promissory Note to Seller, in the principal
amount of the Purchase Price, and in substantially the form
attached hereto as Exhibit A (the Note").
1.04 The Closing.
The closing of the transactions contemplated by this Agreement
(the Closing") will be deemed to be effective at 12:01 a.m. on
September 18, 1995, and shall take place at the offices of Cohen &
Grigsby, P.C. The time and date on which the Closing is deemed to
be effective is herein referred to as the Closing Date."
1.05 Deliveries by Seller.
At the Closing, Seller will deliver or cause to be delivered
to Purchaser the following:
(a) a duly executed bill of sale with respect to the
Equipment, the Inventory, the Labels, the Letter of Credit
Inventory, the Supplies, the Personal Property and the Records;
(b) instruments of assignment with respect to the Real
Property Lease, the Permits, the Contracts, the Intellectual
Property, the Deposits and the Warranties;
(c) all such other endorsements, assignments and other
instruments as, in the reasonable opinion of Purchaser's counsel,
are necessary to vest in Purchaser title to the Purchased Assets to
be transferred to it pursuant to this Agreement, subject to the
Encumbrances described in Section 2.05, if any;
(d) a Non-Competition Agreement between Purchaser and both
Seller and Action, substantially in the form attached hereto as
Annex I (the "Action Non-Competition Agreement"), with regard to
the business currently being conducted by Seller;
(e) an Officer s Certificate certifying that the Articles of
Incorporation and all amendments thereto, Seller s Bylaws, and the
minutes of Seller s Board of Directors attached thereto are the
complete, true and correct articles, bylaws and minutes of Seller
as of the Closing Date;
(f) an Incumbency Certificate executed by the Secretary of
Seller certifying the incumbency of the officers executing all
closing documents on behalf of Seller; and
(g) an opinion of counsel to Seller substantially in the form
attached as Annex II hereto, with regard to the due incorporation
and good standing of Seller and due authority of Seller to complete
the transactions and execute all documents to be executed thereby,
all as contemplated herein.
1.06 Deliveries by Purchaser and the Manager.
At the Closing, Purchaser will deliver or cause to be
delivered to Seller the following;
(a) the Note and a Security Agreement in connection
therewith, substantially in the form attached hereto as Annex III
and Annex IV, respectively, duly executed by Purchaser;
(b) a duly executed Assumption Agreement and such other good
and sufficient instruments of assumption as shall be reasonably
necessary to vest in Purchaser as of the Closing Date the Assumed
Liabilities;
(c) a Non-Competition Agreement among Seller and Action and
both Purchaser and Manager, substantially in the form attached
hereto as Annex V (the "Purchaser Non-Competition Agreement"), with
regard to the promotional housewares business currently being
conducted by Action;
(d) an Officer s Certificate certifying that the Articles of
Incorporation and all amendments thereto, Purchaser s Bylaws, and
the minutes of Purchaser s Board of Directors attached thereto are
the complete, true and correct articles, bylaws and minutes of
Purchaser as of the Closing Date;
(e) an Incumbency Certificate executed by the Secretary of
Purchaser certifying the incumbency of the officers executing all
closing documents on behalf of Purchaser; and
(f) an opinion of counsel to Purchaser substantially in the
form attached as Annex VI hereto, with regard to the due
incorporation and good standing of Purchaser and due authority of
Purchaser to complete the transactions and execute all documents to
be executed thereby, all as contemplated herein.
1.07 Purchase Price Adjustment.
(a) Within 30 days following the Closing Date, Seller shall
conduct a review of the value of the Trade Accounts and Vacation
Liabilities as of the Closing Date (the Adjusted Assumed
Liabilities") at its own cost and expense and prepare and deliver
to Purchaser a statement thereof (the Assumed Liabilities
Statement"). Unless Purchaser, within 30 days after delivery to
Purchaser of the Assumed Liabilities Statement, notifies Seller in
writing that it objects to the Assumed Liabilities Statement or the
calculation of the Adjusted Assumed Liabilities, and specifies the
basis for such objection, such Assumed Liabilities Statement and
calculation of the Adjusted Assumed Liabilities shall become final
and binding upon the parties for purposes of this Agreement. If
Purchaser and Seller are unable to resolve such objections within
thirty (30) days after any such notification has been given, the
dispute shall be submitted to a public accounting firm mutually
agreed upon by Purchaser and Seller and paid for by Purchaser.
Such accounting firm shall make a final and binding determination
as to the matter or matters in dispute. Purchaser and Seller agree
to cooperate with each other and with each other's authorized
representatives in order to resolve any and all matters in dispute
as soon as practicable.
(b) The difference, if any, between the value of the Trade
Accounts and Vacation Liabilities determined by the parties at the
Closing (the Unadjusted Assumed Liabilities") and the Adjusted
Assumed Liabilities shall be an adjustment to the Purchase Price.
If the Adjusted Assumed Liabilities are greater than the Unadjusted
Assumed Liabilities, such difference shall be paid immediately by
Seller to Purchaser by applying the same as a prepayment under the
Note. If the Adjusted Assumed Liabilities are less than the
Unadjusted Assumed Liabilities, such difference shall be added to
the outstanding principal balance of the Note.
(c) Within 30 days following the Closing Date, Seller shall
conduct an inventory of the value of the Labels as of the Closing
Date (the Adjusted Labels Valuation") at its own cost and expense
and prepare and deliver to Purchaser a statement thereof (the
Adjusted Labels Valuation Statement"). Unless Purchaser, within
30 days after delivery to Purchaser of the Adjusted Labels
Valuation Statement, notifies Seller in writing that it objects to
the Adjusted Labels Valuation Statement or the calculation of the
Adjusted Labels Valuation, and specifies the basis for such
objection, such Adjusted Labels Valuation Statement and calculation
of the Adjusted Labels Valuation shall become final and binding
upon the parties for purposes of this Agreement. If Purchaser and
Seller are unable to resolve such objections within thirty (30)
days after any such notification has been given, the dispute shall
be submitted to arbitration in Pittsburgh, Pennsylvania. Such
arbitrator(s) shall make a final and binding determination as to
the matter or matters in dispute. Purchaser and Seller agree to
cooperate with each other and with each other's authorized
representatives in order to resolve any and all matters in dispute
as soon as practicable.
(d) The difference, if any, between the value of the Labels
determined by the parties at the Closing (the Unadjusted Labels
Valuation") and the Adjusted Labels Valuation shall be an
adjustment to the Purchase Price. If the Adjusted Labels Valuation
is less than the Unadjusted Labels Valuation, such difference shall
be paid immediately by Seller to Purchaser by applying the same as
a prepayment under the Note. If the Adjusted Labels Valuation is
greater than the Unadjusted Labels Valuation, such difference shall
be added to the outstanding principal balance of the Note.
1.08 Allocation of Purchase Price.
Purchaser and Seller shall mutually determine an allocation of
the Purchase Price among the Purchased Assets, using the allocation
method required by Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder.
Seller and Purchaser each agree to report the federal, state and
local income and other tax consequences of the transactions
contemplated herein, and in particular to report the information
required by Code Section 1060(b), in a manner consistent with such
allocation and will not take any position inconsistent therewith
upon examination of any tax return, in any refund claim, in any
litigation, investigation or otherwise.
1.09 Disclaimer of Certain Warranties.
PURCHASER HEREBY AGREES THAT THE PURCHASED ASSETS SHALL BE SO
CONVEYED AS IS, WHERE IS," WITHOUT ANY REPRESENTATIONS OR
WARRANTIES WITH RESPECT THERETO OTHER THAN THE REPRESENTATIONS AND
WARRANTIES SPECIFICALLY SET FORTH HEREIN. SELLER HEREBY DISCLAIMS
ANY AND ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY AND ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.01 Corporate Organization.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Pennsylvania. Seller has full corporate power and authority to
carry on the Business as now being conducted.
2.02 Articles and By-Laws.
The copies of the Articles of Incorporation and By-Laws of
Seller which have heretofore been furnished by Seller to Purchaser
are true and correct and complete copies thereof and include all
amendments to the date hereof.
2.03 Authorization.
Seller has full corporate power and authority to execute and
deliver this Agreement and, to the extent it is a party thereto,
the documents to be delivered at the Closing pursuant to Section
1.05 hereof (collectively, the "Seller Agreements") and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Seller Agreements
by Seller and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action of Seller and no other corporate action
or proceeding on the part of Seller is necessary to authorize the
execution and delivery by Seller of this Agreement or the Seller
Agreements or the consummation by Seller of the transactions
contemplated hereby or thereby. This Agreement has been, and the
Seller Agreements on the Closing Date will be, duly executed and
delivered by Seller and this Agreement is, and on the Closing Date
each of the Seller Agreements will be, legal, valid and binding
obligations of Seller, enforceable against it in accordance with
their terms, subject to applicable laws affecting creditors' rights
generally and subject, as to enforceability, to general principles
of equity, regardless of whether applied in a proceeding at law or
in equity.
2.04 No Violations; No Consents or Approvals Required.
Except as set forth in Schedule 2.04, neither the execution
and delivery of this Agreement or the Seller Agreements nor the
consummation of the transactions contemplated hereby or thereby
will:
(a) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Seller;
(b) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable
to the Business or by which any of the Purchased Assets are bound
or affected; or
(c) conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination or cancellation of, or accelerate the performance
required by or maturity of, or result in the creation of any
security interest, lien, charge of encumbrance on any of the
Purchased Assets pursuant to any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, permit,
license, franchise, lease, contract, or other instrument or
obligation to which Seller is a party except, in the case of (b)
and (c) above, for such conflicts, violations, breaches, defaults,
terminations, cancellations and accelerations which in the
aggregate will not have a material adverse effect on the Business
and, in the case of (c) above, such liens, charges or encumbrances
permitted by Section 2.05 hereof.
Except as set forth in Schedule 2.04, no notice, declaration,
report or other filing or registration with, and no waiver,
consent, approval or authorization of, any governmental or
regulatory authority or instrumentality or any other person is
required to be submitted, made or obtained by Seller in connection
with the execution, delivery or performance of this Agreement or
the Seller Agreements and the consummation of the transactions
contemplated hereby or thereby.
2.05 Title to Properties and Related Matters.
(a) Upon consummation of the transactions contemplated by
this Agreement, Purchaser will become the legal and beneficial
owner of the Purchased Assets, free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements,
required consents, encumbrances or charges of any kind.
("Encumbrances"), except for:
(1) those Encumbrances set out in Schedule 2.05(a);
(2) any law, ordinance or governmental regulation set
out in Schedule 2.05(a) (including, but not limited to building and
zoning ordinances) restricting or regulating or prohibiting the
occupancy, use or enjoyment of the Leased Real Property (or any
portion thereof) or regulating the character, dimensions or
location of any improvement now or hereafter erected on the Leased
Real Property or prohibiting a separation in ownership or a
reduction in the dimension of area of the Leased Real Property, or
the effect of any violation of any such law, ordinance or
governmental regulation which is not now and will not on the
Closing Date, either singly or in the aggregate, interfere in any
material way with the present or any intended use of any such real
estate, or substantially decrease its value; or
(3) liens placed upon the Purchased Assets by the
Manager without the consent or actual knowledge of Action.
(b) The Real Property Lease now is, and on the Closing Date
will be, valid and binding and in full force and effect, and is not
now, and on the Closing Date will not be, in default as to the
payment of rent or otherwise. A true and correct and complete copy
of the Real Property Lease has heretofore been delivered by Seller
to Purchaser.
2.06 Litigation.
Except (i) as set forth in Schedule 2.06, and (ii) for claims,
actions, suits, proceedings or investigations with respect to
Environmental Laws (as defined in Section 2.07(b)), to the actual
knowledge of Seller there are no claims, actions, suits,
proceedings or investigations by or before any court or
governmental or other regulatory or administrative agency,
instrumentality or authority pending or threatened by or against or
affecting the Leased Real Property or the Business, except for such
claims, actions, suits, proceedings or investigations which in the
aggregate will not have a material adverse affect on the Business.
2.07 Environmental Compliance.
(a) Except as set forth on Schedule 2.07, to the best actual
knowledge of Seller: (i) there are no conditions existing currently
on the Leased Real Property which were created prior to September
1991, and would be likely to subject Seller or Purchaser to
damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or assertions thereof, or which require or are
likely to require cleanup, removal, remedial action or other
response pursuant to Environmental Laws by Seller; (ii) Seller is
not a party to any litigation or administrative proceedings, nor so
far as is actually known by Seller is any litigation or
administrative proceeding threatened against it which asserts or
alleges that Seller has violated or is violating Environmental Laws
with respect to the Leased Real Property or that Seller is required
to clean up, remove or take remedial or other responsive action
with respect to the Leased Real Property due to the disposal,
depositing, discharge, leaking or other release of any hazardous
substances or materials; (iii) neither the Leased Real Property nor
Seller is subject to any judgment, decree, order or citation
affecting the Leased Real Property and related to or arising out of
Environmental Laws, and Seller has not been named or listed as a
potentially responsible party by any governmental body or agency in
a matter affecting the Leased Real Property and arising under any
Environmental Laws; (iv) prior to September 1991, Seller has
obtained all permits, licenses or approvals required under
applicable Environmental Laws which are necessary for the use,
development, occupancy, operation and conduct of the Business at
the Leased Real Property; and (v) prior to September 1991, all use,
generation, manufacturing, release, discharge, storage, deposit,
treatment, recycling or disposal of any materials on, under or at
the Leased Real Property or transported to or from the Leased Real
Property (or tanks or other facilities thereon containing such
materials) were being conducted in accordance withEnvironmental
Laws including without limitation those requiring cleanup, removal
or any other remedial action.
(b) For purposes of this Agreement, the term "Environmental
Laws" shall mean any federal, state or local statute, ordinance,
rule, regulation, order, consent decree or common law doctrine,
judgment, injunction and lawfully imposed requirements issued,
promulgated or entered thereunder relating to pollution or
protection of the environment, including laws relating to
reclamation of land and waterways and laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface
or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
2.08 Taxes.
Seller has timely and properly filed all federal, state, local
and foreign tax returns and reports and forms which it is or has
been required to file, either on its own behalf or on behalf of its
employees or other persons or entities, including but not limited
to income, profits, franchise, sales, use, occupation, property,
excise, ad valorem and payroll (including employee taxes withheld),
all such returns and reports and forms being true and correct and
complete in all respects, and has paid all taxes, including
penalties and interest, if any, which have become due pursuant to
such returns or reports or forms or pursuant to assessments
received by Seller.
2.09 No Undisclosed Information.
Except as disclosed herein and/or as actually known by
Purchaser or the Manager, including the Schedules and Exhibits
hereto, Seller has no actual knowledge of any matter involving
Seller which might have a material adverse effect on Seller or
which is necessary for a full understanding of the financial
condition and operations of Seller. Neither this Agreement nor any
document, certificate or statement furnished or to be furnished to
Purchaser by or on behalf of Seller in connection with the
transactions provided for herein contains or will contain any
untrue statement of a material fact or omits or will omit to state
a material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and the Manager hereby each represents and warrants
to Seller as follows:
3.01 Corporate Organization.
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Pennsylvania.
3.02 Authorization.
Purchaser has full corporate power and authority to execute
and deliver this Agreement and the documents to be delivered at the
Closing pursuant to Section 1.06 hereof (collectively, the
"Purchaser Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement and the Purchaser Agreements by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
action and no other corporate action or proceeding on the part of
Purchaser is necessary to authorize the execution and deliver by
Purchaser of this Agreement or the Purchaser Agreements or the
consummation by Purchaser of the transactions contemplated hereby
or thereby. This Agreement has been, and the Purchaser Agreements
on the Closing Date will be, duly executed and delivered by
Purchaser and this Agreement is, and on the Closing Date each of
the Purchaser Agreements will be, legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in
accordance with their terms, subject to applicable laws affecting
creditors' rights generally and subject, as to enforceability, to
general principles of equity, regardless of whether applied in a
proceeding at law or in equity.
3.03 No Violations; No Consents or Approvals Required.
Neither the execution and delivery of this Agreement or the
Purchaser Agreements nor the consummation of the transactions
contemplated hereby or thereby will (i) conflict with or violate
any provision of the Certificate of Incorporation or By-Laws of
Purchaser, (ii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable
to Purchaser or by which any of its properties or assets are bound
or affected or (iii) conflict with or result in any breach of or
constitute a default (or an event which will notice or lapse of
time or both would become a default) under, or give to others any
rights or termination or cancellation of, or accelerate the
performance required by or maturity of, or result in the creation
of, any security interest, lien, charge or encumbrance on any of
its assets or properties pursuant to any of the terms, conditions
or provisions of, any note, bond, mortgage, indenture, permit,
license, franchise agreement, lease, contract, or other instrument
or obligation to which Purchaser is a party or by which Purchaser
or any of its properties or assets is bound or affected, except, in
the case of (ii) and (iii) above, for such conflicts, violations,
breaches, defaults, terminations, cancellations and accelerations
which in the aggregate will not have a material adverse effect on
the ability of Purchaser to consummate the transactions
contemplated by this Agreement and the Purchaser Agreements. No
notice, declaration, report or other filing or registration with,
and no waiver, consent, approval or authorization of, any
governmental or regulatory authority or instrumentality or any
other person is required to be submitted, made or obtained by
Purchaser in connection with the execution, delivery or performance
of this Agreement or the Purchaser Agreements and the consummation
of the transactions contemplated hereby or thereby.
3.04 Environmental Compliance.
(a) To the best actual knowledge of Purchaser and the
Manager: (i) there are no conditions existing currently on the
Leased Real Property, which were created on or after September
1991, and would be likely to subject Seller or Purchaser to
damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or assertions thereof, or which require or are
likely to require cleanup, removal, remedial action or other
response pursuant to Environmental Laws by Seller; (ii) Seller is
not a party to any litigation or administrative proceedings, nor so
far as is actually known by Purchaser and Manager is any litigation
or administrative proceeding threatened against Seller which
asserts or alleges that Seller has violated or is violating
Environmental Laws with respect to the Leased Real Property or that
Seller is required to clean up, remove or take remedial or other
responsive action with respect to the Leased Real Property due to
the disposal, depositing, discharge, leaking or other release of
any hazardous substances or materials; (iii) neither the Leased
Real Property nor Seller is subject to any judgment, decree, order
or citation affecting the Leased Real Property and related to or
arising out of Environmental Laws, and Seller has not been named or
listed as a potentially responsible party by any governmental body
or agency in a matter affecting the Leased Real Property and
arising under any Environmental Laws; (iv) from and after September
1991, Seller has obtained all permits, licenses or approvals
required under applicable Environmental Laws which are necessary
for the use, development, occupancy, operation and conduct of the
Business at the Leased Real Property; and (v) from and after
September 1991, all use, generation, manufacturing, release,
discharge, storage, deposit, treatment, recycling or disposal of
any materials on, under or at the Leased Real Property or
transported to or from the Leased Real Property (or tanks or other
facilities thereon containing such materials) have been conducted
in ccordance with Environmental Laws including without limitation
those requiring cleanup, removal or any other remedial action.
3.05 No Undisclosed Information.
Except as disclosed herein, including the Schedules and
Exhibits hereto, neither Purchaser nor the Manager has any actual
knowledge of any matter involving Seller which might have a
material adverse effect on Seller or which is necessary for a full
understanding of the financial condition and operations of Seller,
other than those matters previously disclosed or actually known to
Action and/or the Treasurer and/or the immediate past Chairman of
Seller. Neither this Agreement nor any document, certificate or
statement furnished or to be furnished to Seller by or on behalf of
Purchaser in connection with the transactions provided for herein
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading.
3.06 Absence of Certain Changes or Events.
To the best of Purchaser s and the Manager s actual knowledge,
and except for those matters previously disclosed or actually known
to Action and/or the Treasurer and/or immediate past Chairman of
Seller, since March 31, 1995, there has not been (i) any
transaction outside the ordinary course of business of Seller
(including without limitation any transactions with respect to the
Inventory and the Letter of Credit Inventory outside the ordinary
course of business of Seller or inconsistent with Seller s past
practices); (ii) any increase in the rate or terms of compensation
payable or to become payable by Seller to its employees, except
increases occurring the ordinary course of business consistent with
past practices; (iii) any change in the terms of any bonus,
insurance, pension, or other employee benefit plan, payment or
arrangement made to, for or with any such employees, except changes
occurring in the ordinary course of business consistent with past
practices; (iv) any entry into any agreement, commitment or
transaction by Seller which is material to Seller, except for
agreements, commitments or transactions in the ordinary course of
business.
ARTICLE IV -- COVENANTS
4.01 Conduct of the Business Subsequent to the Closing and
Personal Guarantees.
(a) Purchaser and the Manager each hereby covenants that from
and after the Closing Date Purchaser shall pay all Assumed
Liabilities in a commercially reasonable and timely manner, and
otherwise as required by the provisions of Section 1.02(b), it
being contemplated that Purchaser will attempt to negotiate payment
terms with some of the suppliers related to Trade Accounts, with
any set-off, defense or counterclaim reasonably made by Purchaser;
provided that Purchaser shall indemnify Seller and Action against
any and all damages incurred by Seller or Action by reason of any
delay in payment, and any such set-offs, defenses or counterclaims.
Neither Seller, the Manager nor Purchaser shall take any action
that would render any such party incapable of performing their
respective covenants set forth above.
(b) The Manager, TM and RT (together, the Guarantors")
jointly and severally guaranty and become surety for the payment by
Purchaser of the Trade Accounts, other than the Special Trade
Accounts (as defined below), and in furtherance thereof hereby
personally indemnify and hold Seller and Action harmless from and
against any liabilities, damages, claims, costs, and expenses
(including without limitation reasonable attorneys fees) and
obligations that Seller and/or Action may at any time suffer or
incur as a result of any failure of Purchaser (i) to pay, perform
and discharge the Trade Accounts (other than the Special Trade
Accounts) and (ii) to promptly indemnify Seller and Action as
required in Section 4.01(a) above; provided, however, that in no
event shall the total liabilities of the Guarantors pursuant to
this Section 4.01(b) in the aggregate exceed $200,000. As used
herein, the term Special Trade Accounts" shall mean the Trade
Accounts described as Excluded Accounts" on Schedule 4.01(b) hereto
and any Trade Accounts which are not listed as Included Accounts"
on such Schedule. Nothing set forth in this Section 4.01(b) shall
be deemed to except, or shall have the effect of exempting, the
Special Trade Accounts from the obligation of Purchaser set forth
in Section 4.01(a) above. The obligations of the Guarantors under
this Section 4.01(b) shall be absolute and unconditional and shall
be performed without set-off, counterclaim, demand or defense.
4.02 Access to Information.
(a) Prior to the Closing Date, Seller (i) will give Purchaser
and its respective authorized representatives reasonable access,
subject to such limitations or procedures as may be necessary to
protect the attorney-client privilege or the work product doctrine,
to the Real Property, to the Leased Real Property, to all offices
and other facilities, and to all books and records of the Business,
(ii) will permit Purchaser and all such persons to make such
inspections as they may reasonably request and (iii) will cause its
officers to furnish Purchaser and all such persons with such
financial and operating data and other information with respect to
the Purchased Assets and the Business as they may from time to time
reasonably request.
(b) For a period of at least 10 years following the Closing
Date, Purchaser will retain, at Purchaser's sole expense, the
books, records and other data of the Business transferred pursuant
to Section 1.01(a) hereof. During such period, Purchaser will
afford to Seller, its counsel and accountants, during normal
business hours, reasonable access to such books, records and other
data; provided, however, that before disposing of any such
materials it will first notify Seller and permit Seller, at its
sole expense, to remove such materials.
(c) Purchaser shall, at the request of Seller, (i) provide
reasonable assistance in the collection of information or documents
and (ii) use its best efforts to make Purchaser's employees
available when reasonably requested by Seller in connection with
claims or actions brought by or against third parties based upon
events or circumstances concerning Nonassumed Liabilities,
including as a witness or for depositions, provided that
Purchaser s business shall not be adversely disrupted thereby.
Seller shall reimburse Purchaser for all reasonable out-of-pocket
costs and expenses incurred by Purchaser in providing said
assistance.
(d) Seller shall, at the request of Purchaser, (i) provide
reasonable assistance in the collection of information or documents
and (ii) use its best efforts to make Seller's employees available
when reasonably requested by Purchaser in connection with claims or
actions brought by or against third parties based upon events or
circumstances concerning Assumed Liabilities, including as a
witness or for depositions, provided that Seller s business shall
not be adversely disrupted thereby. Purchaser shall reimburse
Seller for all reasonable out-of-pocket costs and expenses incurred
by Seller in providing said assistance.
(e) After the Closing Date, Seller agrees to make available
to Purchaser for inspection and copying at Purchaser's expense, at
reasonable times upon request therefor, any records and documents
relating to the Business and the Purchased Assets retained by
Seller which, at the time of such request, are in Seller's
possession or control. In addition, Seller agrees to make
available to Purchaser financial data and other information
retained by Seller relating to the Business and the Purchased
Assets, and will make available such former employees of the
business employed by Seller, as Purchaser shall from time to time
reasonably request, to permit Purchaser to prepare any tax returns
and in connection with any governmental examination of tax returns
relating to the Business or the Purchased Assets for period from
and after the Closing Date. Seller's reasonable expenses in
connection therewith shall be reimbursed by Purchaser.
4.03 Efforts to Consummate the Transaction.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto agrees to use its best efforts to take or
cause to be taken all actions and to do or cause to be done all
things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, the Seller Agreements
(including but not limited to the Employment Contracts and the Non-
Competition Agreement) and the Purchaser Agreements and shall use
its best efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
(b) In the event Purchaser or Seller, as the case may be, is
unable prior to the Closing, to obtain any consents, approvals,
waivers or other authorizations to transfer to Purchaser any Asset,
Purchaser and Seller will cooperate with each other in order to
obtain such consents, approvals, waivers or other authorizations at
the earliest practicable date. In each instance where such
consents, approvals, waivers or other authorization cannot be
obtained prior to the Closing, Seller shall use its best efforts to
enter into such alternative arrangements and agreements with
Purchaser as may be appropriate in order to permit Purchaser to
realize, receive and enjoy substantially similar rights and
benefits and to enable Purchaser to conduct operations of the
Business until the consents, approvals, waivers or other
authorizations are obtained. If, after the exercise of diligent
effort, any such consents, approvals, waivers or other
authorizations are not obtained, Seller agrees to cooperate with
Purchaser in any reasonable arrangements designed to provide, to
the extent reasonably practicable, for the benefit of Purchaser any
and all rights of Seller in and to such Asset.
4.04 Public Announcements.
Purchaser and Seller will consult with each other before
issuing any press release or otherwise making any public statements
with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be
required by law or any national securities exchange.
4.05 Waiver of Compliance with Bulk Transfer Requirements.
Except for Assumed Liabilities, Seller shall pay and discharge
as they become due all liabilities and obligations to creditors of
Seller entitled to assert, under any Bulk Transfer Act or Acts,
claims against Purchaser as the transferee of the assets of Seller,
and in consideration thereof Purchaser waives compliance by Seller
with the provisions of any such Act or Acts.
4.06 Collection of Accounts.
From and after the Closing Date, Purchaser shall cooperate
fully with Seller in Seller s collection of those items set forth
in Section 1.01(b)(2) hereof (the Accounts"). After the Closing
Date: (i) if any payments are made on any of the Accounts to
Purchaser, Purchaser shall promptly remit such payments to Seller,
and (ii) if any payments are made to Seller with respect to any
amounts due to Purchaser hereunder, including but not limited to
Purchaser s accounts receivable created by Purchaser after the
Closing Date, Seller shall promptly remit such payments to
Purchaser.
ARTICLE V -- CONDITIONS TO CLOSING
5.01 General Condition.
The obligations of each party hereto to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing that no order, statute,
rule, regulation, executive order, injunction, stay, decree or
restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental or
regulatory authority or instrumentality, and shall then be in
effect, that prohibits the consummation of the transactions
contemplated hereby.
5.02 Conditions to Obligations of Seller.
The obligations of Seller to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of the following conditions:
(a) Purchaser shall have performed in all material respects
its obligations required under this Agreement to be performed by it
at or prior to the Closing.
(b) The representations and warranties of Purchaser contained
herein shall be true and correct in all material respects at and as
of the Closing Date as if made at and as of such time except to the
extent that a different time is specifically stated in such
representations and warranties.
(c) Seller shall have received the Purchase Price and the
documents referred to in Section 1.06 hereof.
5.03 Conditions to Obligation of Purchaser.
The obligation of Purchaser to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of the following conditions:
(a) Seller shall have performed in all material respects its
obligations required under this Agreement to be performed by it at
or prior to the Closing.
(b) The representations and warranties of Seller contained
herein shall be true and correct in all material respects at and as
of the Closing Date as if made at and as of such time except to the
extent that a different time is specifically stated in such
representations and warranties.
(c) Purchaser shall have received the documents referred to
in Section 1.05 hereof.
ARTICLE VI -- TERMINATION, AMENDMENT AND WAIVER
6.01 Termination.
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual consent of Purchaser and Seller;
(b) By Purchaser if any of the conditions set forth in
Section 5.01 or 5.03 hereof become incapable of satisfaction; or
(c) By Seller if any of the conditions set forth in Section
5.01 or 5.02 hereof became incapable of satisfaction.
Except for Section 7.01 and for liability for breaches of this
Agreement, upon the termination of this Agreement pursuant to this
Section 6.01, this Agreement shall forthwith become null and void.
6.02 Amendment.
This Agreement may be amended by the parties hereto at any
time. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
6.03 Waiver.
Any party hereto may (i) extend the time for the performance
of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto, or (iii) waive compliance with any of the agreements, or
satisfaction of any of the conditions, contained herein. Any
agreement on the party of the party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed by such party.
ARTICLE VII -- INDEMNIFICATION
7.01 Survival of Representations and Warranties.
(a) All representations, warranties and covenants made by
Seller and by Purchaser and the Manager shall survive the Closing
hereunder for a period of three (3) years following the Closing
Date, and any claim with respect to the inaccuracy of any such
representation or warranty must be made during such three-year
period. The representations, warranties or covenants contained
herein shall not be deemed to be waived or otherwise affected by
any investigation at any time made by or on behalf of any party
hereto.
(b) For the purposes of this Article VII, the term "Purchaser
Group" shall include Purchaser and any director, officer or
employee thereof, and the term "Seller Group" shall include Seller
and any of its subsidiaries and any director, officer or employee
thereof.
(c) Notwithstanding anything to the contrary herein (except
as provided in Section 4.01(b) hereof), (i) the Manager shall not
in any event be personally liable to Seller, Action or any other
party for any inaccuracy in or breach or nonfulfillment in any
material respect of any representation, warranty, covenant or
agreement of the Manager contained in this Agreement or any other
document executed by Purchaser as contemplated herein, and (ii) any
indemnification rights of any party set forth herein may not be
directly or indirectly enforced against the Manager, RT or TM.
7.02 Agreement to Indemnify.
(a) Subject to the limitations hereinafter set forth, from
and after the Closing, Seller and Action each jointly and severally
agrees to indemnify, defend and hold harmless the Purchaser Group
from and against any and all demands, claims, losses, damages,
costs and expenses, including without limitation interest, costs,
penalties and reasonable attorneys' fees (collectively, "Damages"),
asserted against, resulting to, imposed upon or incurred or
suffered by any member of the Purchaser Group as a result of or
arising from (i) the Nonassumed Liabilities; and (ii) any
inaccuracy in or breach or nonfulfillment in any material respect
of any representation, warranty, covenant or agreement of Seller
contained in this Agreement.
(b) Subject to the limitations hereinafter set forth,
Purchaser agrees to indemnify, defend and hold harmless the Seller
Group from and against any and all Damages, asserted against,
resulting to, imposed upon or incurred or suffered by any member of
the Seller Group as a result of or arising from (i) the Assumed
Liabilities; and (ii) any inaccuracy in or breach or
nonfulfillment in any material respect of any representation,
warranty, covenant or agreement of Purchaser and/or the Manager
contained in this Agreement or the Note.
(c) For purposes of this Article VII, all Damages shall be
computed net of (i) any actual income tax benefit resulting
therefrom to the indemnified party, (ii) any insurance coverage
with respect thereto, and (iii) any amounts recovered from any
third parties based on claims the indemnified party has against
such third parties which reduce the Damages that would otherwise be
sustained; provided, however, that, in all cases, the timing of the
receipt or realization of insurance proceeds or income tax benefits
or recoveries from third parties shall be taken into account in
determining the amount of reduction of Damages. Each indemnified
party agrees to use its best efforts to pursue any claims or rights
it may have against any third party which would reduce the amount
of Damages otherwise incurred by such indemnified party.
7.03 Procedure for Indemnification.
(a) In the event that any indemnified party receives written
notice of the commencement of any action or proceeding, the
assertion of any claim by a third party or the imposition of any
penalty or assessment for which indemnity may be sought pursuant to
this Article VII (a "Third Party Claim"), and such indemnified
party shall promptly provide the indemnifying party with notice of
such action, proceeding, claim, penalty or assessment, and such
indemnifying party shall, upon receipt of such notice, be entitled
to participate in or, at the indemnifying party's option, assume
the defense, appeal or settlement of such action, proceeding,
claim, penalty or assessment with respect to which such indemnity
has been invoked with counsel of its choosing, and such indemnified
party will fully cooperate with the indemnifying party in
connection therewith; provided that such indemnified party shall be
entitled to employ one counsel to represent such indemnified party
if, in such indemnified party's reasonable judgment, a conflict of
interest between the indemnifying party and the indemnified party
exists in respect of such claim and in that event the reasonable
fees and expenses of such separate counsel shall be paid by the
indemnifying party. In the event that the indemnifying party fails
to assume the defense, appeal or settlement of such action,
proceeding, claim, penalty or assessment within 20 days after
receipt of notice thereof from such indemnified party, such
indemnified party shall have the right to undertake the defense or
appeal of or settle or compromise such action, proceeding, claim,
penalty or assessment on behalf of and for the account and risk of
the indemnifying party. The indemnifying party shall not settle or
compromise any such action, proceeding, claim, penalty or
assessment without such indemnified party's prior written consent,
unless the terms of such settlement or compromise release such
indemnified party from any and all liability with respect to such
Claim.
(b) Any indemnifiable claim that is not a Third Party Claim
shall be asserted by written notice to the indemnifying party. If
the indemnifying party does not respond to such notice within 60
days, it shall have no further right to contest the validity of
such claim.
7.05 Remedies Exclusive.
Except for the provisions of the Note and the Security
Agreement, the remedies provided in this Article VII shall be
exclusive and shall preclude assertion by an indemnified party of
any other rights or the seeking of any and all other remedies
against an indemnifying party for claims based on this Agreement.
ARTICLE VIII -- MISCELLANEOUS
8.01 Expenses, Taxes and Closing Prorations.
(a) Except as otherwise provided herein, each party hereto
will pay all fees and expenses incurred by it in connection with
this Agreement and the consummation of the transactions
contemplated hereby.
(b) All excise, sales, use or transfer taxes, including real
estate transfer taxes, and any recording fees or taxes, or any
other such fees or taxes which are payable or arise as a result of
the execution of this Agreement or the transfer of Assets to
Purchaser pursuant to this Agreement shall be paid by Purchaser.
Further, Purchaser shall at Closing reimburse Seller for the
security deposit paid by Seller to the lessor under the Real
Property Lease in the amount of $12,000 and for the deposit for a
trade show reservation in the amount of $3,160. In the event that
all or any portion of either of such deposits is returned to Seller
by the parties holding the same, such amounts shall be immediately
paid by Seller to Purchaser.
(c) All utilities relating to the Leased Real Property and
rent payable under the lease with regard to the Leased Real
Property shall be prorated as of 12:01 a.m. on the Closing Date.
8.02 Further Assurances.
From time to time after the Closing and without further
consideration, Sellers, upon the request of Purchaser and at
Purchaser's expense, shall execute and deliver such documents and
instruments of conveyance and transfer as Purchaser may reasonably
request in order to consummate more effectively the purchase and
sale of the Purchased Assets as contemplated hereby and to best in
Purchaser title to the Purchased Assets transferred hereunder.
8.03 Notices.
Any notices or other communications required or permitted
hereunder or otherwise in connection herewith shall be in writing
and shall be deemed to have been duly given when delivered in
person or transmitted by facsimile transmission or on receipt after
dispatch by registered or certified mail, postage prepaid,
addressed, as follows:
If to Seller to:
Kensington Lamp Company
c/o Action Industries, Inc.
Action Industrial Park
460 Nixon Road
Cheswick, PA 15024
Telecopier: (412) 782-8606
Attn: Mr. Kenneth L. Campbell, Sr. V.P., Finance
If to Purchaser to:
Kensington Collection, Inc.
65 E. Hillis Street
Youngwood, PA 15697
Telecopier: (412) 925-9306
Attn: Mr. Walter Tymoczko, President
or such other address as the person to whom notice is to be given
has furnished in writing to the other parties. A notice of change
in address shall not be deemed to have been given until received by
the addressee.
8.04 Headings.
The descriptive headings of the several Articles and Sections
of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.05 Applicable Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof.
8.06 Assignment.
This Agreement and all the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this
Agreement nor any of the rights hereunder shall be assigned by any
of the parties hereto without the prior written consent of the
other parties; provided, that from and after the Closing Date
Seller may assign to Action or any of its affiliates all or part of
Seller s rights hereunder and/or the Note (but Seller may not
assign any of its liabilities or obligations described herein,
created hereunder or related hereto).
8.07 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.08 Entire Agreement.
This Agreement (including the documents and instruments
referred to herein) (a) constitute the entire agreement and
supersede all other prior agreements and understandings, both
written and oral, among the parties and (b) is not intended to
confer upon any person other than the parties hereto any rights or
remedies hereunder.
8.09 Severability.
In the event that any one or more of the provisions or parts
of a provision contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement or any other jurisdiction, but this Agreement shall be
reformed and construed in any such jurisdiction as if such invalid
or illegal or unenforceable provision or part of a provision had
never been contained herein and such provision or part shall be
reformed so that it would be valid, legal and enforceable to the
maximum extent permitted in such jurisdiction.
8.10 Brokers and Finders.
Neither Purchaser, the Manager or Seller nor its officers,
directors or employees has incurred any liability for any brokerage
fees, commissions, finders' fees or similar fees or expenses for
which they may be liable, except that Purchaser and Seller are each
independently liable for certain commissions and/or fees to J.T.R.
Capital in connection herewith.
[THE REST OF THIS PAGE INTENTIONALLY BLANK]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its duly authorized
officer, all as of the day and year first above written.
SELLER:
KENSINGTON LAMP COMPANY
By: K. L. CAMPBELL
Title: Treasurer
PURCHASER:
KENSINGTON COLLECTION, INC.
By: WALTER TYMOCZKO
Title:
ACTION INDUSTRIES, INC.
By: K. L. CAMPBELL
Title: Senior Vice President
MANAGER:
WALTER TYMOCZKO
Walter Tymoczko
ROBERT THOMAS
Robert Thomas
THOMAS MCDOWELL
Thomas McDowell
EXHIBIT 23
----------
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Action Industries, Inc.
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-48361 and 33-48362) pertaining to the
Stock Option Plan and Nonemployee Director Stock Option Plan of
Action Industries, Inc. and in the related Prospectuses of our
report dated September 14, 1995, with respect to the consolidated
financial statements and schedules of Action Industries, Inc.
included in the Annual Report (Form 10-K) for the year ended June
24, 1995.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 21, 1995
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-24-1995
<PERIOD-START> JUN-26-1994
<PERIOD-END> JUN-24-1995
<CASH> 567
<SECURITIES> 0
<RECEIVABLES> 9,908
<ALLOWANCES> 0
<INVENTORY> 18,133
<CURRENT-ASSETS> 29,719
<PP&E> 30,319
<DEPRECIATION> 22,355
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<CURRENT-LIABILITIES> 16,876
<BONDS> 7,854
<COMMON> 719
0
0
<OTHER-SE> 12,409
<TOTAL-LIABILITY-AND-EQUITY> 39,546
<SALES> 45,088
<TOTAL-REVENUES> 45,088
<CGS> 34,374
<TOTAL-COSTS> 46,835
<OTHER-EXPENSES> (674)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,834
<INCOME-PRETAX> (2,907)
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<INCOME-CONTINUING> (2,907)
<DISCONTINUED> (808)
<EXTRAORDINARY> 0
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