SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
---------- ---------------------
Commission File Number: 1-5673
.............................RANGER INDUSTRIES, INC.............................
(Exact name of small business issuer as specified in its charter)
Connecticut 06-0768904
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Regency Drive
.........................Bloomfield, Connecticut 06002.........................
(Address of principal executive offices)
..................................(860) 726-1208................................
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date (August 12, 1998): 5,288,644 shares
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
744073.3
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONDENSED BALANCE SHEETS
June 30, 1998 and December 31, 1997
-------
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 752,973 $ 784,800
Prepaid expenses 7,744 -
Bad debt recovery receivable 1,892 -
Income tax receivable 946 3,446
----------- ---------
Total assets $ 763,555 $ 788,246
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other liabilities $ 26,248 $ 19,918
Accrued interest payable - 16,337
Note payable to Pure Group, Inc. - 196,477
Other amounts owed to Pure Group, Inc. - 265,303
----------- ---------
Total liabilities 26,248 498,035
----------- ---------
Stockholders' equity:
Common stock 47,886 40,000
Capital in excess of par value 1,460,729 985,000
Retained deficit (771,308) (734,789)
----------- ---------
Total stockholders' equity 737,307 290,211
----------- ---------
Total liabilities and stockholders' equity $ 763,555 $ 788,246
=========== =========
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements.
744073.3
2
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the quarters ended June 30, 1998 and 1997
(Unaudited)
-------
1998 1997
---- ----
Net sales $ - $ -
---------- ----------
Operating costs and expenses:
Administrative expenses 12,163 35,801
Legal and settlement expenses 10,554 73,400
Other income and expenses:
Interest income 9,126 -
---------- ----------
Loss before income taxes (13,591) (109,201)
---------- ----------
Provision for income taxes 2,100 8,000
---------- ----------
Net comprehensive loss (15,691) (117,201)
---------- ----------
Basic loss per share (.01) $ (.03)
========== ==========
Weighted average common stock outstanding 4,788,644 4,000,000
========== =========
The accompanying notes are an integral part
of the condensed financial statements.
744073.3
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<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the six months ended June 30, 1998 and 1997
(Unaudited)
-------
1998 1997
---- ----
Net sales $ - $ -
----------- ----------
Operating costs and expenses:
Administrative expenses 22,425 61,225
Legal and settlement expenses 22,384 97,000
Other income and expenses:
Interest expense (5,498) -
Interest income 18,388 7
---------- ----------
Loss before income taxes (31,919) (158,218)
---------- ----------
Provision for income taxes 4,600 8,000
---------- ----------
Net comprehensive loss (36,519) (166,218)
---------- ----------
Basic loss per share $ (.01) $ (.04)
=========== ==========
Weighted average common stock outstanding 4,492,358 4,000,000
========= ==========
The accompanying notes are an integral part
of the condensed financial statements.
744073.3
4
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONDENSED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
(Unaudited)
-------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net comprehensive loss $(36,519) $(166,218)
-------- ---------
Adjustments to reconcile net comprehensive loss to net cash
used in operating activities:
Interest expense settled in shares of Ranger stock 5,498 -
Changes in assets and liabilities:
Receivables 608 2,931
Prepaid expenses (7,744) (16,456)
Accounts payable, accrued liabilities and interest payable 6,330 137,878
-------- ---------
Total adjustments 4,692 124,353
-------- ---------
Net cash used in operating activities (31,827) (41,865)
-------- ---------
Cash and cash equivalents at beginning of period 784,800 43,009
-------- ---------
Cash and cash equivalents at end of period $752,973 $ 1,144
======== =========
Noncash transactions:
Common stock issued in exchange for the cancellation
of amount owed to PGI $483,616 $ -
======== =========
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements.
744073.3
5
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
----------
1. Organization:
In July 1988, Ranger Industries, Inc. (the "Registrant" or the "Company",
and then known as Coleco Industries, Inc.) filed a voluntary petition in
United States Bankruptcy Court under Chapter 11 of the Federal Bankruptcy
Code. Effective February 28, 1990, the bankruptcy court approved a plan
of reorganization (the "Plan"), pursuant to which all then outstanding
debt and equity securities of the Registrant were canceled, and 4,000,000
shares of the Registrant's new $0.01 par value common stock (the "Common
Stock") were distributed to the unsecured creditors. On the Effective
Date of the Plan, the Registrant retained $950,000 in cash for working
capital purposes and was expected to engage in the business of acquiring
income producing properties or businesses.
The Plan provided for the creation of a Reorganization Trust in order to
liquidate the Registrant's remaining assets (other than the $950,000 in
cash retained by the Registrant) and effectuate distributions thereof to
the Registrant's creditors. The Reorganization Trust completed the
distribution of its assets in May 1996 and was terminated by order of the
bankruptcy court on August 27, 1996.
The Plan also provided for the creation of a Product Liability Trust in
order to settle certain personal injury claims (including claims arising
thereafter) against the Registrant. The Product Liability Trust continues
to process and liquidate certain product liability claims. Pursuant to
the terms of the Product Liability Trust Agreement, residual funds, if
any, will revert to the Registrant, as grantor of the trust, upon the
earlier of (a) February 28, 2020, or (b) approval by the bankruptcy court
of earlier termination of the Product Liability Trust.
2. Change In Control:
Following the conclusion of a hostile proxy contest (the "Proxy
Contest"), initiated by Pure Group, Inc. ("PGI") during the second
quarter of 1997, the Company's former directors resigned from the Board
of Directors effective July 29, 1997, and new directors were elected. The
terms under which this change in control took place are outlined in a
settlement agreement dated July 29, 1997 between PGI, the Company and the
Company's former directors (the "Settlement Agreement"). Under the terms
of the Settlement Agreement, and as set forth in a demand promissory note
dated July 29, 1997, PGI loaned the Company $196,477 to pay its then
outstanding obligations. The note required the Company to pay interest to
PGI at two percentage points above the prime rate (8.5% at December 31,
1997). Additionally, PGI loaned the Company $251,780 to cover costs
incurred in connection with the Proxy Contest, including the costs of
holding the 1997 annual meeting and $13,523 for working capital purposes.
These additional loans of $265,303 were subject to the same terms
outlined in the demand promissory note. Also, see Note 6.
744073.3
6
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
----------
3. Management's Representation:
The accompanying condensed financial statements should be read in
conjunction with the Notes to Financial Statements and Management's
Discussion and Analysis of Financial Condition and results of operations
included in the Company's 1997 Annual Report filed on Form 10-KSB and in
this Form 10-QSB report.
In the opinion of management, all adjustments necessary for a fair
presentation of the results for the interim periods have been made.
4. Income Taxes:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in
the financial statements or income tax returns. Under this method,
deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. In addition, deferred tax assets are
subject to a valuation allowance to reduce them to net realizable value.
As discussed in Note 1, the assets and liabilities of the Company, except
for $950,000 retained for working capital purposes, were transferred to
the Reorganization and Product Liability Trusts, respectively, effective
February 28, 1990, in accordance with the Plan. Although the matter is
not free from doubt, these Trusts have been treated as grantor trusts.
Accordingly, taxable income or loss associated with the disposition of
assets and the settlement of liabilities by the Trusts are reflected on
the federal income tax return of Ranger Industries, Inc., although such
assets and liabilities are not presented in these financial statements
(also see Note 5).
Tax expense or benefit is attributable to state minimum taxes and Federal
alternative minimum tax.
744073.3
7
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
--------
4. Income Taxes, Continued:
At June 30, 1998 and December 31, 1997, it was estimated that the Company
had adjusted tax net operating loss carryforwards and future deductions
of approximately $192 million after giving effect to the Plan and the
transactions contemplated thereby, which may be used to offset future
taxable income, subject to several limitations, and which begin to expire
in the year 2002. These amounts include the tax consequences of the
activity of the Reorganization and Product Liability Trusts, as well as
the activity of Ranger Industries, Inc. At June 30, 1998 and December 31,
1997, the Company had Alternative Minimum Tax (AMT) loss carryforwards of
approximately $168 million which will also begin to expire in the year
2002. The Company also had approximately $7.7 carryforwards at June 30,
1998 and December 31, 1997, respectively. At the current tax rates, the
taxable income equivalent of the credit carryforwards is approximately
$22.6 million.
Under current tax laws, the Internal Revenue Code provides for certain
limitations following an "ownership change". Accordingly, under the
confirmed Plan of Reorganization, the continued availability of the
Company's net operating loss carryforwards and other tax attributes may
be subject to substantial limitations (also see Note 5).
At June 30, 1998 and December 31, 1997, the only remaining book and tax
base differentials related to the claim settlement activities of the
Product Liability Trust. Additionally, any deferred tax asset recorded to
recognize the tax net operating loss carryforwards would be subject to a
full valuation allowance under the provisions of SFAS 109, due to the
uncertainty of the Company's ability to generate taxable income to
utilize the carryforwards. The Company's tax liabilities are attributable
to state minimum taxes and federal alternative minimum tax.
744073.3
8
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
-----------
5. Treasury Regulation:
On January 6, 1992, the Department of the Treasury promulgated new
Treasury Regulations. These regulations interpret Section 269 of the
Internal Revenue Code which permits the Internal Revenue Service to deny
corporations the ability to use tax benefits, such as net operating
losses ("NOLs") where control of the corporation was acquired for the
principal purpose of avoiding tax. The regulations provide that if a
corporation in a bankruptcy reorganization that qualifies for an
exemption from the general rule limiting the use of net operating loss
carryforwards does not carry on a significant amount of an active trade
or business during and subsequent to such bankruptcy reorganization, the
Internal Revenue Service will presume, absent a showing of strong
evidence to the contrary, that the principal purpose of the
reorganization was to evade or avoid Federal income tax and that Section
269 should apply. The regulations are only effective, by their terms,
with respect to acquisitions of control of corporations occurring after
August 14, 1990 and, accordingly, they do not apply to Ranger Industries,
Inc.
Despite the inapplicability of these regulations to Ranger, the issue of
essentially inactive reorganized companies with NOLs that survive
bankruptcy intact has now been firmly raised in the eyes of the Internal
Revenue Service. Accordingly, due to the Company's disposition of its
historic toy businesses to Hasbro and the Company's switch to a new
business of acquiring investments, it is possible that the Internal
Revenue Service may assert that the Company has not carried on a
significant trade or business during and subsequent to its
reorganization. If such an assertion is made and ultimately sustained,
then the Company would be unable to utilize its estimated $192 million of
net operating loss carryforwards. This could have a materially adverse
effect on the Company's ability to attract outside investors willing to
invest in the Company. Notwithstanding these regulations, there can be no
assurance that the Company will be able to attract sufficient outside
investment to allow it to continue to operate, once its current working
capital is depleted. The condensed financial statements do not include
any adjustments that might result from the resolution of these
uncertainties.
6. PGI Indebtedness:
On March 9, 1998, the Company issued 788,644 shares of its $.01 par value
common stock in exchange for the cancellation of the amount owed to PGI
as of February 10, 1998. The exchange value of $.6132/share was
determined using the weighted average of the closing prices of the
Company's common stock for the 30-day period prior to February 20, 1998,
the date of the agreement.
744073.3
9
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
--------
7. Related Party Transactions:
The Company had an Agreement with M.D. Sass Associates, Inc. ("SASS") of
which James B. Rubin is Senior Managing Director, under which SASS
provided accounting, administrative, financial, legal, secretarial and
other support services at the Company's request. The Company incurred
costs of $4,800 for these services for the quarter ended June 30, 1997.
In connection with the change in control described in Note 2, this
agreement was terminated. All amounts owed to SASS in connection with
this agreement were paid during the quarter ended September 30, 1997.
Effective August 1, 1990, Mr. Rubin, as Chief Executive Officer, was
entitled to an annual salary of $50,000, through the date of the change
in control (see Note 2). All fees for his services are included in
administrative expenses in the condensed financial statements. All
amounts owed to Mr. Rubin in connection with this agreement were paid
during the quarter ended September 30, 1997.
Also, see Notes 2 and 6.
744073.3
10
<PAGE>
PART I (cont'd)
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview. The Registrant emerged from a Chapter 11 bankruptcy
proceeding in 1990 with $950,000 in cash and no liabilities. In the years from
1990 through 1996, the Registrant's only material source of revenue was interest
on its cash, except that in the last quarter of 1996, the Registrant received a
distribution of approximately $75,000 from a trust (the "Reorganization Trust")
which was established in the bankruptcy proceeding to liquidate the Registrant's
assets and distribute the net proceeds to the claimants in the bankruptcy
proceeding. In the period from 1990 through 1996, the Registrant's expenses
always exceeded earnings. As of December 31, 1996, the Registrant had a retained
deficit of approximately $1,046,000, and, as of that date, had no business and
no material financial resources. Current management gained control of the
Registrant in a proxy contest that ended in the third quarter of 1997. In the
fourth quarter of 1997, the Registrant received approximately $800,000 from a
bankruptcy claim filed by the Registrant in 1983.
As a result of the receipt of $800,000 in the last quarter of 1997, the
Registrant now has sufficient liquidity to meet its current operating expenses
for the foreseeable future. The Registrant's cash on hand was approximately
$753,000 as of June 30, 1998, and the Registrant's projected cash operating
costs and expenses for the fiscal year ending December 31, 1998, are
approximately $100,000. Average annual operating expenses in the years 1994 -
1996 were approximately $174,000. Operating expenses in 1997 were substantially
higher than in the prior years because of the expenses incurred in connection
with the proxy contest.
Business Plans, Liquidity and Financial Resources. The Registrant's
financial resources at the present time, other than its cash on hand, are (i) a
remainder interest in the Product Liability Trust which would become payable to
the Registrant, if ever, in 2020, and (ii) the possible utility of net operating
loss carryforwards of approximately $192 million as of June 30, 1998. See Note
4, Income Taxes, in the Condensed Financial Statements (unaudited) included in
Part I of this Report.
Product Liability Trust. The Product Liability Trust processes and
liquidates product liability claims asserted and makes distributions to holders
of settled or adjudicated claims. The trust contained assets of approximately
$12 million as of June 30, 1998. Under the terms of the Product Liability Trust,
the residual funds, if any, remaining after distribution of all Trust assets to
pay product liability claims and expenses would be distributed to the Registrant
on February 28, 2020. The bankruptcy court is authorized to permit an earlier
payout in its discretion, and the Registrant may apply to the bankruptcy court
seeking early termination of the Trust. The Registrant does not expect to
consider making such an application until claims against the Trust are settled.
744073.3
11
<PAGE>
NOL'S. The NOL's have sheltered the Registrant's modest interest income
and the income of the Product Liability Trust. The income of the Product
Liability Trust, if any, continues to be taxable to the Registrant. As more
fully discussed in the Notes to the Financial Statements, the continuing
availability of the NOL's is uncertain.
Employment Agreement for Chief Executive Officer. The Company's only
executive officer, Mr. Morton E. Handel, has served without compensation since
he took office in the third quarter of 1997. Because of the Company's lack of
income or cash flow, and because of the need to conserve the Company's limited
cash resources, Mr. Handel has offered to continue his service as the Company's
executive officer without receiving any regular cash salary. As more fully set
forth in Item 2 of Part II, in the third quarter of 1998, the Company entered
into a five-year employment agreement with Mr. Handel, under which he has
received 500,000 shares of the Company's Common Stock (of which 400,000 shares
are subject to forfeiture hereafter in certain circumstances) and certain cash
payments if and when the Company receives cash distributions from the Products
Liability Trust. The fair market value of the Employment Shares as of August 4,
1998, will be an expense to the Registrant over the five year term of the
employment agreement.
Changes in Financial Condition. The Registrant's financial condition is
set forth in the Balance Sheets as of June 30, 1998 and December 31, 1997. The
changes in financial condition between the two dates resulted mainly from the
exchange of debt owed to a shareholder which is an affiliate of a director of
the Registrant for the Registrant's issuance to such shareholder of 788,644
shares of its Common Stock.
Interest income (net of interest expense) in the quarter ended June 30,
1998 ("Second Quarter '98") was approximately $9,000, compared to none for the
quarter ended June 30, 1997 ("Second Quarter '97"), because of the interest
earned on the $800,000 bankruptcy distribution received in the fourth quarter of
1997. Interest expense for the balance of 1998 is expected to be immaterial. Net
comprehensive loss for the Second Quarter '98 was approximately ($16,000),
compared to approximately ($117,000) in the Second Quarter '97, principally
because of current management's success in reducing operating costs, and the
non-recurrence of expenses in connection with the 1997 proxy contest.
Interest income (net of interest expense) in the six months ended June
30, 1998 ("First Half '98") was approximately $13,000, compared to none for the
six months ended June 30, 1997 ("First Half '97"), because of the interest
earned on the $800,000 bankruptcy distribution received in the fourth quarter of
1997 and the elimination of interest expense by the exchange in March 1998 of
debt owed to a shareholder for shares of common stock. Net comprehensive loss
for the First Half '98 was approximately ($37,000), compared to approximately
($166,000) in the First Half '97, principally because of current management's
success in reducing operating costs, and the non-recurrence of expenses incurred
in connection with the 1997 proxy contest.
744073.3
12
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
Effective August 4, 1998, the Registrant entered into a 5-year
employment agreement (the "Employment Agreement") with Mr. Morton E. Handel, its
chief executive officer, and pursuant thereto, issued 500,000 shares (the
"Employment Shares") of Common Stock to Mr. Handel. The Employment Shares have
not been registered under the Securities Act of 1933, as amended (the "Act"),
based upon an exemption from such registration requirements in Section 4(2) of
the Act. The Registrant received no cash consideration for the issuance of the
Employment Shares.
Only 100,000 (the "Vested Shares") of the Employment Shares are
indefeasibly vested in Mr. Handel at this time. The balance of the Employment
Shares become indefeasibly vested in tranches of 100,000 per year on the first
through fourth anniversaries of the Employment Agreement, or in full upon the
earlier occurrence of certain contingencies specified in the Employment
Agreement. Under the terms of the Employment Agreement, Mr. Handel will receive
no cash compensation except upon the occurrence of certain contingencies
specified in the Employment Agreement. A copy of the Employment Agreement is
filed herewith as Exhibit 10.2.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.2 Employment agreement dated August 4, 1998, between
the Registrant and Mr. Morton E. Handel.
Exhibit 27. Financial Data Schedule for Second Quarter of 1998.
(b) Reports on Form 8-K: None.
744073.3
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Ranger Industries, Inc., the Registrant
Date: August 12, 1998 By: /s/ Morton E. Handel
----------------------------------------------------
Morton E. Handel, President, Chief Executive Officer
and Acting Chief Financial Officer
744073.3
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of August 4,
1998, is entered into between Ranger Industries, Inc., a Connecticut corporation
(the "Company"), and Morton E. Handel ("Executive").
Recitals
The Company wishes to employ Executive and Executive wishes to be
employed by the Company, on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. Employment Duties. During the Term (as defined in paragraph 2
below), the Company will employ Executive as its Chief Executive Officer and
President. Executive will devote the appropriate time and attention to the
performance of his duties under this Agreement. Executive initially shall have
the duties, rights and responsibilities normally associated with his position
with the Company, together with such other reasonable duties relating to the
operation of the business of the Company and its affiliates as may be assigned
to him from time to time by the Board of Directors of the Company (the "Board")
or may otherwise be provided for in the Company's Bylaws. If the Company shall
so request, Executive shall become and shall, at any time during the term of
this Agreement as the Company shall so request, act as a director of the Company
and/or as an officer and/or director of any of the subsidiaries of the Company
as they may now exist or may be established by the Company in the future without
any compensation other than that provided for in paragraph 3.
2. Term. The term of Executive's employment under this Agreement (the
"Term") will begin on the date of this Agreement and will continue, subject to
the termination provisions set forth in paragraph 5 below, until the fifth
anniversary of the date hereof; provided that, commencing on the fifth
anniversary of the date hereof and on each anniversary thereafter, the Term
shall automatically be extended for one year unless either the Company or
Executive gives written notice of non-extension to the other at least 90 days
prior to the expiration of the Term.
3. Compensation.
a. Restricted Stock. As base compensation, in lieu of cash, Executive
shall be issued 500,000 shares of the Company's common stock (the "Restricted
Stock"), one-fifth of which shall be immediately vested and non- forfeitable as
of the date of this Agreement and the balance of which shall vest and become
non-forfeitable in equal installments on the first, second, third and fourth
anniversaries of the date of this Agreement. Notwithstanding the foregoing, the
shares of Restricted Stock shall, to the extent they remain unvested, vest in
full upon (i) Executive's termination of Executive's employment for any reason,
other than termination for Cause or voluntary termination by Executive in breach
of this Agreement, (ii) the termination of the product liability trust to which
the Company is a beneficiary as described in the Company's Form 10-KSB for the
year ended December 31, 1998 (the "Product Liability Trust") or the receipt by
the Company of a significant distribution from the Product Liability Trust or
(iii) a Sale Event. Upon termination of Executive's employment for Cause or as a
result of voluntary termination by Executive in breach of this Agreement,
Executive shall forfeit all unvested shares of Restricted Stock. For purposes of
this Agreement, a Sale Event is deemed to occur if (i) any entity, person or
group (other than the Company or an affiliate of the Company or any savings,
pension or other benefit plan for the benefit of employees of the Company)
acquires shares of the Company's common stock in a transaction or series of
transactions that results in such entity, person or group directly or indirectly
owning fifty (50%) percent or more of the outstanding common stock of the
Company, (ii) there are elected or appointed, within a twelve (12) month period,
persons to the Board who are not Board members at the beginning of such twelve
(12) month period, whose election or appointment was not approved by a majority
of those persons who were Board members at the beginning of such period, and
which newly elected or appointed Board members shall constitute a majority of
the Board or (iii) the Company sells all or substantially all of its assets to
any other person, or merges or consolidates with any other person or effects any
other similar reorganization, if as a result of such merger, reorganization or
consolidation the persons who immediately prior thereto owned fifty (50%)
percent or more of the outstanding common stock of the Company cease to own
securities representing more than 50% of the aggregate voting power and 50% of
the common equity of the surviving entity. Executive shall have the right to
receive and retain all dividends and other distributions in respect of the
shares of Restricted Stock and to vote the shares of Restricted Stock, whether
or not vested. Any security of the Company distributed in respect of any
Restricted Stock which is not vested, shall vest and become non-forfeitable at
the same time as such shares of Restricted Stock vest and become non-forfeitable
and shall be subject to forfeiture at the same time, if any, as such shares of
Restricted Stock.
b. Bonus. In addition to the Restricted Stock, the Company shall pay to
Executive as a bonus an amount equal to fifteen (15%) percent of the gross
amount of any and all amounts received by the Company from the Product Liability
Trust. At Executive's advance election, each such bonus shall be paid in a lump
sum within fifteen (15) days after the Company's receipt
2
744073.3
<PAGE>
of the corresponding amount from the Product Liability Trust or in nearly equal
installments over a period not to exceed three (3) years.
4. Business Expenses. The Company will pay or reimburse Executive for
all business-related expenses reasonably incurred by Executive in the course of
his performance of duties under this Agreement, subject to reasonable
substantiation by Executive.
5. Termination of Employment.
a. Death and Disability. Executive's employment under this Agreement
will terminate immediately upon his death and upon 30 days' prior written notice
given by the Company in the event Executive is determined to be "permanently
disabled" (as defined below).
b. For Cause. The Company may only terminate Executive's employment
under this Agreement for "Cause". "Cause" means either (A) a material breach by
Executive of any material provisions of this Agreement; (B) action by Executive
constituting willful misconduct or gross negligence in connection with
performing his duties hereunder; (C) an act of fraud, misappropriation of funds
or embezzlement or conduct intended to cause material injury to the Company by
Executive in connection with his employment hereunder; or (D) Executive is
convicted of, pleads guilty to or confesses to any felony. The Company may
terminate Executive's employment for Cause only by providing Executive written
notice of termination, which notice will describe in detail the basis of such
termination. If the grounds alleged to constitute Cause are of the type
described in clauses (A) or (B) of the definition of "Cause" above, that notice
will become effective on the 30th day after Executive's receipt thereof unless
Executive cures the alleged violation or other circumstance which was the basis
of such termination within such 30-day notice period.
6. Benefits upon Termination.
a. Termination with Cause or Resignation. Upon termination of
Executive's employment by the Company for Cause or by Executive's voluntary
resignation in breach of this Agreement, the Company will remain obligated to
pay Executive only the unpaid portion of his bonus and benefits (including the
value of any untaken vacation time to the extent Executive has, during the year
in which such termination occurs, taken less vacation time than permitted to him
hereunder), to the extent accrued through the effective date of termination. Any
amount due under this subparagraph will be payable within 30 days after the date
of termination, unless a later date has been selected by Executive.
b. No Mitigation. Executive will not be required to mitigate the amount
of any payment provided for in this paragraph 6 by seeking other employment or
otherwise, nor will the amount of any payment or benefit provided for in this
paragraph 6 be reduced by any
3
744073.3
<PAGE>
compensation earned by him as the result of employment by another employer or by
retirement benefits after the date of termination, or otherwise.
c. Payment of Additional Taxes. In the event that any accelerated
vesting of the Executive's rights with respect to stock options, restricted
stock (including the shares of Restricted Stock) or any other benefit or
compensation results in the imposition of an excise tax payable by the Executive
under Section 4999 of the Internal Revenue Code, or any successor or other
provision with respect to "excess parachute payments" within the meaning of
Section 280G(b) of the Internal Revenue Code, the Company shall make a cash
payment to the Executive in the amount of such taxes and shall also make a cash
payment to the Executive in an amount equal to the total of federal, state and
local income and excise taxes for which the Executive may be liable on account
of the cash payments made under this section.
7. Indemnification. To the full extent permitted by applicable law,
Executive shall be indemnified and held harmless by the Company against any and
all judgments, penalties, fines, amounts paid in settlement, and
3
744073.3
<PAGE>
other reasonable expenses (including, without limitation, reasonable attorneys'
fees and disbursements) actually incurred by Executive in connection with any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative, investigative or other) for any action or omission in
his capacity as a director, officer or employee of the Company. Indemnification
under this paragraph 8 shall be in addition to, and not in substitution of, any
other indemnification by the Company of its officers and directors. Expenses
incurred by Executive in defending an action, suit or proceeding for which he
claims the right to be indemnified pursuant to this paragraph 8 shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding upon the Company's receipt of (x) a written affirmation by Executive
of his good faith belief that the standard of conduct necessary for his
indemnification hereunder and under the provisions of applicable law of the
State of Connecticut, has been met and (y) a written undertaking by or on behalf
of Executive to repay the amount advanced if it shall ultimately be determined
that Executive engaged in conduct which precludes indemnification under the
provisions of applicable law of the State of Connecticut. Such written
undertaking in clause (y) shall be accepted by the Company without security
therefor and without reference to the financial ability of Executive to make
repayment thereunder. The Company shall use commercially reasonable efforts to
maintain in effect for the Term of this Agreement a directors' and officers'
liability insurance policy, with a policy limit of at least $10,000,000, subject
to customary exclusions, with respect to claims made against officers and
directors of the Company; provided, however, the Company shall be relieved of
this obligation to maintain directors' and officers' liability insurance if, in
the good faith judgment of the Company, it cannot be obtained at a reasonable
cost.
8. Arbitration. The parties hereto will endeavor to resolve in good
faith any controversy, disagreement or claim arising between them, whether as to
the interpretation, performance or operation of this Agreement or any rights or
obligations hereunder. If they are unable to do so, any such controversy,
disagreement or claim will be submitted to binding
4
744073.3
<PAGE>
arbitration, for final resolution without appeal, by either party giving written
notice to the other of the existence of a dispute which it desires to have
arbitrated. The arbitration will be conducted in New York, New York by one
arbitrator and will be held in accordance with the rules of the American
Arbitration Association. The decision and award of the arbitrator must be in
writing and will be final and binding upon the parties hereto. Judgment upon the
award may be entered in any court having jurisdiction thereof, or application
may be made to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be. The expenses of arbitration will be borne in
accordance with the determination of the arbitrator with respect thereto.
9. Miscellaneous.
a. Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
b. The provisions of this Agreement are severable and if any one or
more provisions may be determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction will remain binding and
enforceable.
c. The rights and obligations of the Company under this Agreement inure to the
benefit of, and will be binding on, the Company and its successors and permitted
assigns, and the rights and obligations (other than obligations to perform
services) of Executive under this Agreement will inure to the benefit of, and
will be binding upon, Executive and his heirs, personal representatives and
permitted assigns; provided, however, Executive shall not be entitled to assign
or delegate any of his rights and obligations under this Agreement without the
prior written consent of the Company; provided, further, that the Company shall
not have the right to assign or delegate any of its rights or obligations under
this Agreement except to a corporation, partnership or other business entity
that is, directly or indirectly, controlled by the Company.
d. Any notice to be given under this Agreement will be personally
delivered in writing or will have been deemed duly given when received after it
is posted in the United States mail, postage prepaid, registered or certified,
return receipt requested, and if mailed to the Company, will be addressed to its
principal place of business, attention: Secretary, and if mailed to Executive,
will be addressed to him at his home address last known on the records of the
Company or at such other address or addresses as either the Company or Executive
may hereafter designate in writing to the other.
5
744073.3
<PAGE>
e. The failure of either party to enforce any provision or provisions
of this Agreement will not in any way be construed as a waiver of any such
provision or provisions as to any future violations thereof, nor prevent that
party thereafter from enforcing each and every other provision of this
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy will not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
f. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO CONFLICTS OF LAWS.
g. Captions and paragraph headings used herein are for convenience and
are not a part of this Agreement and will not be used in construing it.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
RANGER INDUSTRIES, INC.
By: /s/ John Turitzin
--------------------------------------
Name: John Turitzin
Title: Secretary
/s/ Morton E. Handel
--------------------------------------
Morton E. Handel
6
744073.3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary
financial information extracted
from the Balance Sheet and
Statement of Operations and
Comprehensive Loss and is qualified
in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000021610
<NAME> RANGER INDUSTRIES, INC.
<S> <C>
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<PERIOD-TYPE> 6-mos
<CASH> 752,973
<SECURITIES> 0
<RECEIVABLES> 2,838
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 763,555
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 763,555
<CURRENT-LIABILITIES> 26,248
<BONDS> 0
0
0
<COMMON> 47,886
<OTHER-SE> 689,421
<TOTAL-LIABILITY-AND-EQUITY> 763,555
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 44,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,890)
<INCOME-PRETAX> (31,919)
<INCOME-TAX> 4,600
<INCOME-CONTINUING> (36,519)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,519)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
