SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
(x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
-------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-1665
EXTECH CORPORATION
(Name of small business issuer in its charter)
Delaware 36-2476480
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
90 Merrick Avenue, East Meadow, New York 11554
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 794-6300
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
none
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 .
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB.( )
State issuer's revenues for its most recent fiscal year: $1,082,038
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: $1,064,668 as of March 21, 1997
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes ___ No ___.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,591,367 shares
outstanding as of March 21, 1997
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
(i) International Airport Hotel
EXTECH Corporation (the "Company" or "EXTECH"), through a wholly-owned
subsidiary, IAH, Inc. ("IAH"), operates the International Airport Hotel in San
Juan, Puerto Rico (the "Hotel"). The Hotel is located on the site of the San
Juan International Airport (the "Airport") and occupies the third and fifth
floors of the main terminal building. In addition to its 57 guest rooms, the
Hotel has a lobby area. The Hotel caters generally to commercial and tourist
travelers in transit. IAH also operates a video game room on the terminal level
of the Airport. Reference is also made to Item 6 hereof for additional
information regarding the Hotel.
The Hotel is marketed through brochures, local advertising and in-airport
advertising. Its operations are highly seasonal, with the disproportionate share
of its revenues being generated during the first several months of the calendar
year. Approximately 27% of the total room sales for the Hotel for 1996 were
attributable to one customer.
The Hotel is the only hotel actually located on the site of the Airport. As
such, it has little direct competition for the tourist trade or commercial
travelers seeking only sleeping accommodations at the Airport. The Puerto Rico
Ports Authority (the "Ports Authority"), the owner of the Hotel, had authorized
the construction of an additional hotel in the parking lot of the Airport;
however, the Ports Authority has advised IAH that it has abandoned its plan to
construct such hotel and instead has determined to upgrade and expand the Hotel.
No assurance can be given, however, that an additional hotel or hotels will not
be developed at the site of, or near, the Airport, in which case IAH could
encounter significant competition with respect to the operations of the Hotel.
On July 22, 1988, IAH entered into a Lease Agreement with the Ports
Authority pursuant to which the Ports Authority granted IAH a lease to operate
the Hotel for five years until June 30, 1993, plus, at the option of IAH, an
additional five year term to end June 30, 1998 (subject to agreement as to the
rental amount payable, which the parties agreed to negotiate in good faith).
In 1992, in accordance with the Lease Agreement, IAH exercised its right
for a five year extension of its lease. At the time, the Ports Authority was
uncertain as to whether it wished to build a new hotel in the parking lot of the
Airport or upgrade the existing Hotel (located in the Airport terminal) and,
therefore, requested that IAH accept an 18 month extension of the then existing
term. IAH agreed to an 18 month extension and signed a supplemental lease
agreement with the Ports Authority in May 1992 extending the lease term to
December 31, 1995. IAH is of the belief that, pursuant to the supplemental lease
agreement, it retained the option to continue the lease for a period of five
years to December 31, 2000.
<PAGE>
In July 1993, the Assistant Director of Operations of the Ports Authority
forwarded to IAH a letter containing the terms of a proposed ten year lease
extension which IAH approved, signed and returned to the Ports Authority.
Although the letter setting forth the terms of the extension agreement with IAH
does not make the Ports Authority's approval conditional upon the approval of
its Board of Directors, the Ports Authority has taken such position and, since
Board of Directors approval was not obtained, the Ports Authority takes the
position that the extension is not in effect. IAH is of the belief that a ten
year agreement has been entered into between IAH and the Ports Authority
pursuant to the foregoing or that, alternatively, it exercised its right to
extend the term of the lease to December 31, 2000.
Based upon IAH's refusal to acknowledge that, effective January 1, 1996, it
occupied the Hotel on a month-to-month basis, in February 1996, the Ports
Authority requested that IAH vacate, surrender and deliver the premises by
February 29, 1996. Following the receipt of such request, IAH brought an action
in the Superior Court of San Juan, Puerto Rico for declaratory judgment and
possessory injunction against the Ports Authority with respect to the Hotel. The
action seeks a declaratory judgment that, among other alternatives, IAH
exercised an option with respect to its lease for the Hotel for an extension of
the term of five years commencing on January 1, 1996 or that the Ports Authority
executed a new lease agreement for a ten year period commencing on such date.
(ii) Pipe Harness Clamp
The Company holds a patent for a specialized clamping device (the "Pipe
Harness Clamp") designed to connect principally underground pipe lines of
similar and dissimilar materials. In July 1991, the Company and an unrelated
third party (the "Licensee") entered into a License and Royalty Agreement (the
"License Agreement") pursuant to which the Licensee was granted the exclusive
right to manufacture, use, market and sell (either directly or on the Licensee's
behalf) the Pipe Harness Clamp.
The License Agreement provides that, among other matters, the Licensee will
pay royalty payments for the license of the Pipe Harness Clamp in an amount
equal to 5% of Net Sales (as defined in the License Agreement) of the Pipe
Harness Clamp until such time as the aggregate amount of the royalty payments
total $1,000,000 and thereafter an amount equal to 2.5% of Net Sales of the Pipe
Harness Clamp (the "Net Sales Royalty"). The License Agreement also provides
that the Licensee will pay a percentage of royalty payments that are payable to
the Licensee pursuant to a certain License and Technical Assistance Agreement
(the "Technical Assistance Agreement"). The Company is to receive, for each
twelve month period that the Technical Assistance Agreement is in effect, 23.68%
of all amounts in excess of $100,000 received by the Licensee in accordance with
the terms of the Technical Assistance Agreement (the "Technical Assistance
Royalty"), the aggregate of which payments to the Company shall not exceed
$1,480,000. Since inception of the License Agreement, the Company had received
an aggregate of approximately $179,891 in Technical Assistance Royalty payments
pursuant to the License Agreement (of which approximately $109,891 was accrued
during 1996), but had received no Net Sales Royalty payments. No assurances can
be given regarding the commercial marketability of the Pipe Harness Clamp.
2
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(iii) Robeson Industries Corp.
In February 1993, EXTECH entered into a Subscription and Stock Purchase
Agreement (the "Subscription Agreement") with Robeson Industries Corp.
("Robeson") pursuant to which the Company agreed to purchase from Robeson,
subject to the conditions set forth therein, (i) approximately 15% of the issued
and outstanding shares of capital stock of Robeson and (ii) all of the
outstanding shares of capital stock of Robeson's wholly-owned Hong Kong
subsidiary, Robeson Industries Hong Kong Ltd. ("Hong Kong") (the "Hong Kong
Shares").
In May 1993, the Company advised Robeson that it was terminating the
Subscription Agreement due to the nonfulfillment of certain of the conditions to
the obligation of EXTECH to consummate the transactions contemplated thereby.
The Company also made demand upon Robeson for repayment of the principal amount
of $320,000 loaned by the Company during 1992 and 1993, together with interest
thereon, as well as reimbursement of expenses incurred by the Company in
connection with the Subscription Agreement.
Subsequently, in May 1993, Robeson filed a petition for bankruptcy under
Chapter 11 of the Bankruptcy Act with the United States Bankruptcy Court for the
District of New Jersey (the "Court"). In September 1993, the Company filed a
proof of claim in such proceeding as a secured creditor to recover the
approximate amount of $534,000.
Pursuant to a Plan of Reorganization of Robeson (the "Plan") approved by
the Court, in September 1994, in consideration of the $320,000 in loans made by
the Company to Robeson and other recoverable expenses, the reorganized Robeson
issued to the Company a promissory note (the "Note") in the principal amount of
$385,000. The Note provided for the payment of interest at the rate of 8% per
annum and the repayment of principal in 48 consecutive monthly installments of
varying amounts. Pursuant to the Plan, payment of the Note was secured by a
pledge of the Hong Kong Shares. In addition, pursuant to the Plan, the Company
received a nominal minority equity interest in Robeson.
The first three payments under the Note were received by the Company in
October, November and December 1994. Effective January 1995, Robeson ceased
making payments under the Note. In March 1995, the Company demanded full payment
of the Note, foreclosed its security interest with respect to the Hong Kong
Shares and purchased such shares at an auction sale.
In September 1995, the Company agreed to cancel the Note in consideration
for the issuance by Robeson of a new promissory note in the principal amount of
$125,000 (the "New Note"). The New Note provides for interest at the rate of 8%
per annum and is payable in 27 consecutive monthly installments of $5,000. The
Company has received monthly installments sporadically under the New Note, but
not on a current basis.
3
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(iv) Phone America International, Inc.
In February 1996, the Company announced that it had entered into a
non-binding letter of intent to acquire Phone America International, Inc.
("Phone America"), an interexchange telecommunications carrier engaged in the
design, development and marketing of prepaid telephone calling cards and other
telephone products.
Concurrently with the execution of the letter of intent, the Company loaned
$50,000 to Transcends Telecom Corporation ("Transcends"), a wholly-owned
subsidiary of Phone America, for working capital purposes. The note evidencing
the loan was payable on or after August 26, 1996 upon 30 days notice. Payment of
the principal amount of the note, together with interest at the rate of 10% per
annum, was secured by a pledge of certain shares of Phone America Common Stock
as well as by a lien on accounts receivable of Transcends.
Subsequent to February 1996, the Company decided not to consummate the
foregoing transaction due to Phone America's excessive funding requirements.
Thereafter, in November 1996, following the discontinuance of operations by
Transcends and Phone America, Transcends defaulted on its note and the Company
foreclosed on its security interest in Transcend's accounts receivable. The
Company obtained a peaceful surrender of the accounts receivable and has
commenced collection proceedings against the account debtors. However, no
assurances can be given regarding the satisfaction of the full amount due to the
Company under the note.
(v) Other Business Opportunities
During 1996 and 1997, the Company explored a number of business
opportunities in connection with the acquisition and/or operation of sports
franchises and negotiated acquisition agreements in connection therewith.
Although no transactions have been consummated to date, the Company is
continuing to investigate opportunities in this industry.
(vi) General
The Company was incorporated in the State of Delaware on August 25, 1961.
The Company's principal executive offices are located at 90 Merrick Avenue, East
Meadow, New York 11554, and its telephone number at such office is (516)
794-6300.
4
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(b) Business of Issuer
(i) International Airport Hotel
Reference is made to Items 1(a)(i) and 2 hereof.
(ii) Pipe Harness Clamp
Reference is made to Item 1(a)(ii) hereof.
(iii) Other Business Opportunities
Reference is made to Item 1(a)(v) hereof.
(iv) Number of Employees
As of December 31, 1996, the Company and its subsidiaries employed 17
persons.
ITEM 2. DESCRIPTION OF PROPERTY
The executive offices of the Company are located at 90 Merrick Avenue, East
Meadow, New York where approximately 200 square feet of space are occupied on a
month-to-month basis at a monthly rental of $500.
The Hotel is leased by IAH from the Ports Authority. The annual rental
obligation for the Hotel equals the greater of $169,400 or 20% of annual gross
revenues, as defined. Total rent expense under the lease amounted to $189,610
for 1996 as compared to $191,335 for 1995.
Reference is made to Item 1(a)(i) hereof for a discussion of certain
pending litigation with regard to IAH's lease rights in the Hotel.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Item 1(a)(i) hereof for a discussion of certain
pending litigation with regard to the Hotel.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
The Company's Common Stock is traded in the over-the-counter market on the
National Association of Securities Dealers' Bulletin Board under the symbol
"EXTH". The following table sets forth, for the periods indicated, the high and
low bid prices for the Company's Common Stock as reported by the National
Quotation Bureau, Inc.:
1996 Calendar Year High Low
First Quarter $1/4 $1/16
Second Quarter 7/16 1/4
Third Quarter 7/16 3/8
Fourth Quarter 3/8 3/8
1995 Calendar Year High Low
First Quarter $1/8 $1/16
Second Quarter 1/8 1/8
Third Quarter 1/8 1/16
Fourth Quarter 1/16 1/16
The above quotations reflect interdealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
(b) Holders
As of March 21, 1997, there were 3,060 record holders of the Company's
Common Stock.
(c) Dividends
The Company has neither declared nor paid any cash dividends on its Common
Stock during its two most recent fiscal years and the Board of Directors does
not contemplate the payment of dividends in the foreseeable future. Any
decisions as to the future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Board of
Directors deems relevant.
(d) Recent Sales of Unregistered Securities
Reference is made to Item 12 hereof for discussion of a private placement
of Common Stock of the Company made pursuant to Section 4(2) of the Securities
Act of 1933, as amended.
6
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations:
In 1996, the Company had total revenues of $1,118,647 and a net loss of
$5,099 as compared to revenues of $1,024,057 and a net profit of $51,229 for
1995.
Room rental and other departmental revenue for the Hotel decreased by
$13,016 (1.32%) during 1996. The net profit for the Hotel, on a "stand-alone"
basis, was $109,322 in 1996 as compared to $144,351 in 1995.
Interest income increased by $16,929 from 1995 to 1996 due to the receipt
of $800,000 in funds from the private placement of Common Stock discussed under
"Liquidity and Capital Resources".
Royalty income earned during 1996 with respect to the Pipe Harness Clamp
was $109,891 as compared to $19,214 in 1995 (see Item 1(a)(ii)).
In 1996, the Company incurred costs and expenses of $1,119,090 as compared
to $967,152 in 1995, representing an increase of $151,938. The increase was
attributable primarily to an increase of $162,079 in corporate and sundry costs
and expenses arising from the professional fees incurred in connection with,
among other things, the Company's investigation and negotiation of other
business opportunities (see Item 1(a)(v)) and an increase in the salary of an
executive officer of the Company, which increase was granted in view of the
greater amount of effort required to be expended by him in connection with the
aforementioned investigation and negotiation of business opportunities.
Reference is made to Item 1(a)(i) hereof for a discussion of a certain
litigation with the Ports Authority with regard to the Hotel.
Liquidity and Capital Resources:
As of December 31, 1996, the Company had $1,318,121 in cash and cash
equivalents as compared to $644,956 in 1995, representing an increase of
$673,165. Such increase was primarily the result of an $800,000 equity
investment made during 1996 by the President and Chairman of the Board of the
Company and another investor (see Items 5 and 12 hereof).
7
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As of December 31, 1996, the Company had a working capital surplus of
$1,299,647 and had no material commitments for capital expenditures.
Reference is made to Items 1(a)(iii) and (iv) hereof for a discussion of
the status of a certain note in the principal amount of $125,000 issued by
Robeson to the Company in September 1995 and a certain note in the principal
amount of $50,000 issued by Transcends to the Company in February 1996.
Reference is also made to Item 1(a)(i) hereof for a discussion of certain
litigation with the Ports Authority with regard to the Hotel.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by this Item 7 are included in this
Annual Report on Form 10-KSB following Item 13 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants due to disagreements on accounting and
financial disclosure during the twenty-four month period ended December 31,
1996.
8
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers
The following table sets forth the positions and offices presently held
with the Company by each Director and executive officer, his age and the year
from which such person's service on the Company's Board of Directors dates:
Positions and Offices Director
Name Age held with the Company Since
---- --- --------------------- -----
Jay M. Haft 61 Chairman of the Board 1989
Morton L. Certilman 65 President and Director 1989
Leon Lapidus 52 Director 1989
Brian K. Ziegler 42 Secretary and Treasurer --
Jay M. Haft has served as the Company's Chairman of the Board since October
1989. Mr. Haft has been engaged in the practice of law for more than the past
five years and serves as counsel to Parker Duryee Rosoff & Haft. He was
previously a senior corporate partner of such firm (1989-1994). Mr. Haft is a
strategic and financial consultant for growth stage companies. He is active in
international corporate finance, mergers and acquisitions, as well as in the
representation of emerging growth companies. He has actively participated in
strategic planning and fund raising for many high-tech companies, leading edge
medical technology companies and technical product, service and marketing
companies. Mr. Haft is a Managing General Partner of Venture Capital Associates,
Ltd. and Gen Am "1" Venture Fund, a domestic and an international venture
capital fund, respectively. Mr. Haft is also a Director of numerous public and
private corporations, including Robotic Vision Systems, Inc., Noise Cancellation
Technologies, Inc., Encore Medial Corporation, Viragen, Inc., PC Service Source,
Inc., DUSA Pharmaceuticals, Inc., Oryx Technology Corp. and Jenna Lane, Inc.,
all of whose securities are traded in the over- the-counter market, and serves
as Chairman of the Board of Noise Cancellation Technologies, Inc., and Jenna
Lane, Inc. Mr. Haft is a member of the Florida Commission for Government
Accountability to the People, Co-President of the Dade Venue of the Miami Ballet
and a Director of the Concert Association of Florida. Mr. Haft received B.A. and
L.L.B. degrees from Yale University.
9
<PAGE>
Morton L. Certilman has served as the Company's President since October
1989. Mr. Certilman has been engaged in the practice of law for more than the
past five years and is a member of the law firm of Certilman Balin Adler &
Hyman, LLP. Mr. Certilman is Chairman of the Long Island Regional Planning
Board, the Northrop/Grumman Master Planning Council and a Director of the Long
Island Association, the New Long Island Partnership and the Long Island Sports
Commission. Mr. Certilman has lectured extensively before bar associations,
builders' institutes, title companies, real estate institutes, banking and law
school seminars, The Practicing Law Institute, The Institute of Real Estate
Management and at annual conventions of such organizations as the National
Association of Home Builders, the Community Associations Institute and the
National Association of Corporate Real Estate Executives. He is a member of the
faculty of the American Law Institute/American Bar Association, as well as the
Institute on Condominium and Cluster Developments of the University of Miami Law
Center. Mr. Certilman has written various articles in the condominium field, is
the author of the New York State Bar Association Condominium Cassette and the
Condominium portion of the State Bar Association book on "Real Property Titles",
and is the editor of the New York Land Report. Mr. Certilman is a member of the
Advisory Board of First American Title Insurance Company of New York and the
American College of Real Estate Lawyers. Mr. Certilman received an L.L.B.
degree, cum laude, from Brooklyn Law School.
Leon Lapidus has been the President of the Mibro Group, a privately held
importer, packager and distributor of hardware, for more than the past five
years. Mr. Lapidus received a B.A. degree from Hunter College and an M.B.A.
degree from the Bernard M. Baruch College of the City of New York. Mr. Lapidus
is the brother-in-law of Mr. Haft.
Brian K. Ziegler has been engaged in the practice of law for more than the
past five years and is a member of the law firm of Certilman Balin Adler &
Hyman, LLP. Mr. Ziegler received a B.S. degree, cum laude, from the Wharton
School of the University of Pennsylvania, and a J.D. degree and an L.L.M. degree
in Taxation from the University of Miami. Mr. Ziegler is the son- in-law of Mr.
Certilman.
Each Director will hold office until the next Annual Meeting of
Stockholders and until his successor is elected and qualified, or until his
earlier resignation or removal. Each executive officer will hold office until
the next regular meeting of the Board of Directors following the next Annual
Meeting of Stockholders and until his successor is elected or appointed and
qualified, or until his earlier resignation or removal.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, based solely on a review of the copies of Forms
3 and 4 furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to the Company's officers,
Directors and 10% stockholders were complied with, except that Brian K. Ziegler,
Treasurer and Secretary of the Company, inadvertently failed on a timely basis
to file a Form 5 for a certain gift transaction. This was Mr. Ziegler's first
late filing in connection with Section 16(a) filing requirements.
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ITEM 10. EXECUTIVE COMPENSATION
(a) Summary Compensation Table
The following table sets forth certain information concerning the
compensation of Morton L. Certilman, President of the Company, for the fiscal
years ended December 31, 1994, 1995 and 1996. No other person who served as an
executive officer of the Company as of December 31, 1996 had a total salary and
bonus for the year then ended in excess of $100,000.
Annual
Compensation
Name and Principal All Other
Position Year Salary Compensation
Morton L. Certilman, 1996 $101,250 -0-*
President 1995 $50,000 -0-*
1994 $40,000 -0-*
____________
* Excludes fees payable during 1994, 1995 and 1996 by the Company to
Certilman Balin Adler & Hyman, LLP, a law firm of which Mr. Certilman
is a member.
(b) Option Grants
No grants of stock options were made to Mr. Certilman during the fiscal
year ended December 31, 1996.
(c) Aggregated Option Exercises and Fiscal Year-End Option Value
Mr. Certilman did not exercise any options during the year ended December
31, 1996 and held no options as of such date.
(d) Long-Term Incentive Plan Awards
No awards were made to Mr. Certilman during the fiscal year ended December
31, 1996 under any long-term incentive plan.
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(e) Compensation of Directors
Each Director is entitled to receive a $500 fee for each Directors' meeting
he attends. In addition, Directors are reimbursed for travel expenses incurred
in connection with attendance at such meetings.
(f) Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
Not applicable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 27, 1997
regarding the beneficial ownership of the Company's shares of Common Stock by
(i) each person who is known by the Company to beneficially own or exercise
voting or dispositive control over more than 5% of the Company's Common Stock,
(ii) each present Director and (iii) all of the Company's present executive
officers and Directors as a group:
Approximate
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned of Class
Morton L. Certilman............ 2,611,893(1)(2)(3) 46.7%
The Financial Center
at Mitchel Field
90 Merrick Avenue
East Meadow, New York
Adam R. Lieberman.................. 1,800,000(2)(4) 32.2%
125 Baylis Road
Melville, New York
Jay M. Haft.................... 910,393(1)(5) 16.3%
201 S. Biscayne Blvd.
Suite 3000
Miami, Florida
Leon Lapidus................... 20,000 *
111 Sinnott Road
Scarborough Ontario
M1L 4S6 Canada
All executive officers
and Directors as a group
(4 persons).................... 3,587,286(3)(5)(6) 64.2%
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* Less than 1%.
(1) Messrs. Certilman and Haft have previously filed a Schedule 13D and
amendments thereto under the Securities Exchange Act of 1934, as
amended, with respect to their respective equity interests in the
Company. In view of their intention to consult with each other with
respect to the acquisition, voting and disposition of their respective
shares, Messrs. Certilman and Haft may be deemed a group. Accordingly,
the group of Messrs. Certilman and Haft beneficially owns 3,522,286
shares of Common Stock. Such amount represents approximately 63.0% of
the outstanding shares of Common Stock of the Company. However, each of
Messrs. Certilman and Haft independently makes his own decisions with
respect to the acquisition, voting and disposition of the shares of
Common Stock directly owned by him. Further, neither Mr. Certilman nor
Mr. Haft has any economic interest in the shares of Common Stock
directly owned by the other.
(2) Pursuant to a certain Amended and Restated Voting Trust Agreement,
dated as of December 30, 1996, between Sterling Foster Holding Corp.
("SFHC") and Mr. Certilman, as voting trustee (the "Voting Trust
Agreement"), SFHC transferred voting control over all 1,800,000 shares
of Common Stock of the Company it presently owns to Mr. Certilman
during the three year term of the Voting Trust Agreement.
(3) Includes 1,800,000 shares held by Mr. Certilman pursuant to the Voting
Trust Agreement and 360,000 shares held in a retirement trust for his
benefit.
(4) The shares are registered in the name of SFHC; Mr. Lieberman is the
beneficial owner of these shares by reason of his position as President
and sole stockholder of SFHC.
(5) Includes 12,500 shares held in a retirement trust for the benefit of
Mr. Haft.
(6) Includes 5,000 shares held in a retirement trust for the benefit of an
executive officer and 20,000 shares held by such executive officer's
wife. Such executive officer disclaims beneficial ownership of the
shares owned by his wife.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a certain Subscription Agreement, dated June 3, 1996, by and
between the Company, Mr. Certilman, Mr. Haft, and SFHC, the Company issued
3,200,000 shares of Common Stock at a price of $0.25 per share (the "Offering")
for a total subscription price of $800,000. Of such amount, $450,000 was paid by
SFHC for the purchase of 1,800,000 shares and $175,000 was paid by each of Mr.
Haft and Mr. Certilman for the purchase of 700,000 shares each. The proceeds of
the Offering were intended to be used in connection with the business
opportunities described in Item 1(a)(v) hereof.
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Certilman Balin Adler & Hyman, LLP, a law firm of which Mr. Certilman is a
member, serves as counsel to the Company. It is presently anticipated that such
firm will continue to represent the Company and/or its affiliates and will
receive fees for its services at rates and in amounts not greater than would be
paid to unrelated law firms performing similar services.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- ------ ----------------------
3(a) Certificate of Incorporation, as amended(1)
3(b) By-laws, as amended(2)
9 Amended and Restated Voting Trust Agreement, dated December 30, 1996,
among Sterling Foster Holding Corp. and Morton L. Certilman, as voting
trustee.
10(a) Agreement, dated July 22, 1988, between the Ports Authority and IAH(1)
10(b) Resolution of Board of Directors of Ports Authority, dated August 10,
1994, regarding rental obligation of the Hotel(3)
10(c) Amended and Restated 1990 Stock Option Plan(1)
10(d) License and Royalty Agreement, dated July 1991, among the Company,
IFTI Capital Appreciation Management Corporation, and NPS Products,
Inc.(4)
10(e) Subscription Agreement, dated as of June 3, 1996, between Mr.
Certilman, Mr. Haft, SFHC and the Company (5)
21 Subsidiaries of the Registrant(4)
27 Financial Data Schedule.
__________
(1) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1993 and incorporated
herein by reference.
(2) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1989 and incorporated
herein by reference.
(3) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994 and incorporated
herein by reference.
(4) Denotes document filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991 and incorporated herein
by reference.
(5) Denotes document filed as an exhibit to the Company's Current Report on
Form 8-K for an event dated June 3, 1996 and incorporated herein by
reference.
14
<PAGE>
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the last quarter of
the fiscal year ended December 31, 1996.
15
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
REPORT ON AUDITS OF
CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1996
<PAGE>
INDEX
Page
Independent auditors' report F-2
Consolidated balance sheet F-3
Consolidated statements of operations F-4
Consolidated statement of stockholders' equity F-5
Consolidated statements of cash flows F-6
Notes to consolidated financial statements F-7 - F-10
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
EXTECH CORPORATION
East Meadow, New York
We have audited the accompanying consolidated balance sheet of EXTECH
CORPORATION and Subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the two-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EXTECH CORPORATION
and Subsidiaries as of December 31, 1996 and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1996 in conformity with generally accepted accounting principles.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
February 25, 1997
F-2
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $1,318,121
Accounts receivable, net of allowance for doubtful
accounts of approximately $500 50,591
Notes receivable, net of allowance for doubtful accounts
of approximately $48,000 (Note 4) 81,856
Inventories 6,400
Prepaid expenses and other current assets 122,479
-------
Total current assets 1,579,447
PROPERTY AND EQUIPMENT, net (Note 3) 153,595
OPERATING EQUIPMENT, net 9,529
$1,742,571
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,974
Accrued expenses (Notes 5 and 6) 123,626
Debentures payable (Note 7) 154,200
-------
Total current liabilities 279,800
MINORITY INTEREST 560
COMMITMENT AND CONTINGENCY (Note 10)
STOCKHOLDERS' EQUITY: (Note 11)
Common stock, $.01 par value; authorized 10,000,000 shares;
issued and outstanding 5,591,367 shares 55,914
Capital in excess of par 5,264,950
Deficit (3,858,653)
----------
1,462,211
$1,742,571
==========
See notes to consolidated financial statements
F-3
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
December 31,
------------
1996 1995
---- ----
REVENUES: (Note 13)
Rooms $ 936,976 $ 924,381
Other operating departments 32,958 58,569
Interest, net 38,822 21,893
Royalty income 109,891 19,214
------- ------
Total revenues 1,118,647 1,024,057
--------- ---------
COSTS AND EXPENSES:
Administrative and general 124,697 111,234
Bad debt (recovery) (21,174) 5,195
Corporate and sundry (Note 8) 352,225 190,146
Departmental 380,711 381,192
Depreciation and amortization 51,544 51,901
Energy costs 14,285 16,701
Lease rentals (Note 10) 189,610 191,335
Property operation and maintenance 26,605 18,761
Real estate and personal property taxes 587 687
------- -------
Total costs and expenses 1,119,090 967,152
--------- -------
(LOSS) INCOME BEFORE INCOME TAXES (443) 56,905
INCOME TAXES (Note 9) 4,656 5,676
----- -----
NET (LOSS) INCOME $ (5,099) $ 51,229
====== ======
(LOSS) INCOME PER COMMON SHARE (Note 12) $ (.001) $.02
===== ====
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING (Note 12) 4,236,176 2,391,367
========= =========
See notes to consolidated financial statements
F-4
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital
Common Stock in Excess
Shares Amount of Par Deficit Total
------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 2,391,367 $ 23,914 $4,496,950 $(3,904,783) $ 616,081
Net income for the year - - - 51,229 51,229
--------- ------ --------- --------- -------
Balance, December 31, 1995 2,391,367 23,914 4,496,950 (3,853,554) 667,310
Issuance of stock 3,200,000 32,000 768,000 - 800,000
Net loss for the year - - - (5,099) (5,099)
--------- ------ --------- --------- -------
Balance, December 31, 1996 5,591,367 $ 55,914 $5,264,950 $(3,858,653) $1,462,211
========= ====== ========= ========= =========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ....................... $ (5,099) $ 51,229
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 51,544 51,901
Bad debts (20,948) 5,195
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 1,830 (1,048)
Inventories 790 4,514
Prepaid expenses and other assets (115,592) 36,544
Increase (decrease) in liabilities:
Accounts payable (1,582) (632)
Accrued expenses (15,875) 2,484
------- -----
Net cash (used in) provided by operating activities (104,932) 150,187
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (175) (4,425)
Notes receivable - net (21,728) 16,835
------- ------
Net cash (used in) provided by investing activities (21,903) 12,410
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 800,000 -
------- -------
Net cash provided by financing activities 800,000 -
------- -------
Net increase in cash and cash equivalents 673,165 162,597
Cash and cash equivalents, beginning of year 644,956 482,359
------- -------
Cash and cash equivalents, end of year $1,318,121 $644,956
========= =======
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
EXTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. Summary of Significant Accounting Policies:
a. Description of business
The Company's operations are within one industry as lodging sales and
related revenues accounted for substantially all revenues during the two-year
period ended December 31, 1996.
b. Principles of consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and a 90% owned inactive subsidiary. All
intercompany transactions and balances have been eliminated.
c. Inventories
Inventories, consisting of merchandise and supplies, are stated at the
lower of cost or market. Cost is determined on a first-in, first-out basis.
d. Property and equipment
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the related
assets. Leasehold improvements are being amortized using the straight-line
method over the remaining term of the lease.
e. Concentration of credit risk
The Company invests its excess cash in deposits and money market
accounts with major financial institutions. The Company has not experienced
losses related to these investments.
f. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less, as well
as bank money market accounts, to be cash equivalents.
g. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period Actual results could differ from those estimates.
2. Supplementary Information - Statement of Cash Flows:
Cash paid for income taxes was $7,141 and $5,452 during the years ended
December 31, 1996 and 1995, respectively.
F-7
<PAGE>
3. Property and Equipment:
At December 31, 1996, property and equipment consists of the following:
Furniture, fixtures and equipment $360,360
Leasehold improvements 134,384
-------
494,744
Less accumulated depreciation and amortization 341,149
-------
$153,595
=======
4. Notes Receivable:
a. During the period December 1992 to March 1993, the Company entered
into various loans with Robeson Industries Corp. ("Robeson") (an unrelated third
party) in the aggregate amount of $320,000. The notes were secured by a pledge
of all of the issued and outstanding shares of Robeson Industries Hong Kong Ltd.
("Robeson Hong Kong"). In May 1993, Robeson filed a petition for bankruptcy
under Chapter 11 of the Bankruptcy Act. In September 1993, the Company filed a
proof of claim in such proceeding as a secured creditor to recover such
advances, related accrued interest and other costs.
In September 1994, pursuant to a Plan of Reorganization (the "Plan"),
Robeson issued to the Company a promissory note (the "Note") in the principal
amount of $385,000. The Note provided for the payment of interest at the rate of
8% per annum and the repayment of principal in 48 consecutive monthly
installments. Such installments were to cover an aggregate of 5% of the
principal amount of the Note during the initial six months, an additional 7.5%
thereof during the following six months, an additional 37.5% thereof during the
following 12 months, an additional 25% thereof during the following 12 months
and the final 25% thereof during the last 12 months of the Note. The Note was
secured by all the outstanding shares of capital stock of Robeson's wholly-owned
Hong Kong subsidiary. In addition, pursuant to the Plan, the Company received a
nominal minority equity interest in Robeson.
The first three payments under the Note were received by the Company
in October, November and December 1994. Effective January 1995, Robeson ceased
making payments under the Note. In March 1995, the Company demanded full payment
of the Note, foreclosed its security interest with respect to the Hong Kong
stock and purchased such shares at an auction sale. In September 1995, the
Company agreed to cancel the Note in consideration for the issuance by Robeson
of a new promissory note in the principal amount of $125,000 (the "New Note").
The New Note provides for interest at the rate of 8% per annum and is payable in
27 consecutive monthly installments of $5,000.
b. In February 1996, the Company signed a letter of intent to acquire
Phone America International, Inc. ("Phone America"), an interexchange
telecommunications carrier engaged in the design, development and marketing of
prepaid telephone calling cards and other telephone products. Additionally, the
Company advanced $50,000 to Transcends Telecom Corporation ("Transcends"), a
wholly-owned subsidiary of Phone America, and entered into a Loan and Security
Agreement. Subsequent to February 1996, the Company decided not to pursue this
acquisition. Thereafter, in November 1996, Transcends defaulted on its note and
the Company foreclosed on its security interest in Transcend's accounts
receivable. The Company obtained a peaceful surrender of the accounts receivable
and has commenced collection proceedings against the account debtor.
F-8
<PAGE>
5. Accrued Expenses:
At December 31, 1996, accrued expenses consists of the following:
Rent $ 63,965
Professional fees 14,200
Payroll and related costs 15,836
Deferred compensation (Note 6) 14,100
Room tax 7,082
Other 8,443
-----
$123,626
========
6. Deferred Compensation:
The Company has an agreement to pay special compensation to certain
employees who at the date of retirement have accumulated 20 years of
uninterrupted service. Maximum amount payable per employee is $3,000. At the
effective date, there were seven employees covered by this plan, four of them
with 15 years of accumulated service. The accrual is being done pro-ratably from
the inception of the plan to the date each employee is eligible for benefits. At
December 31, 1996, there was $14,100 shown as accrued expenses payable.
7. Debentures Payable:
In 1971, the Company, pursuant to a plan of arrangement, issued a series
of debentures which matured in 1977. As of December 31, 1996, $154,200 of these
debentures have not been presented for payment. Accordingly, this balance has
been included as a current liability in the accompanying consolidated balance
sheet. Interest has not been accrued on the remaining debentures payable. In
addition, no interest or other charges have been accrued with regard to any
escheat obligation of the Company.
8. Related Party Transaction:
During the years ended December 31, 1996 and 1995, the Company leased its
corporate office facility from a partnership of which a stockholder/officer is a
member. Rent expense amounted to $6,000 for each of the years ended December 31,
1996 and 1995.
9. Income Taxes:
The 1996 and 1995 income of IAH, Inc., a wholly-owned subsidiary has been
calculated excluding the loss of EXTECH, as it is separately taxed under the
laws of Puerto Rico. A provision of $4,656 and $5,676, respectively, has been
made for this tax liability.
For federal income taxes, the Company has a net operating loss
carryforward of approximately $613,000 available to offset future taxable income
and approximately $1,500,000 of capital loss carryforwards available to offset
future capital gains. In addition, the Company has general business tax credit
carryforwards available to reduce future income taxes of approximately $33,000.
If not utilized, these credits are scheduled to expire in various amounts
through 2010. The Company incurred operating losses during the past four years
and losses are expected in the early subsequent periods. As a result, the
Company has not recorded a deferred tax asset in 1996 due to the fact that a
100% valuation allowance would be needed.
10. Commitment and Contingency:
IAH, Inc. leases the International Airport Hotel property pursuant to an
operating lease with the Puerto Rico Ports Authority ("Ports Authority"), which
expired in December 1995. IAH is of the belief that pursuant to a supplemental
lease agreement, it retained the option to continue the lease for a period of
five years to December 31, 2000. The lease agreement provides for the annual
rental payments to be equal to the greater of $169,400 or 20% of the annual
gross revenues, as defined, effective January 1, 1994. Total rent expense under
this lease amounted to $189,610 for 1996 and $191,335 for 1995.
F-9
<PAGE>
10. Commitment and Contingency: (Cont'd)
Based upon IAH's refusal to acknowledge that, effective January 1, 1996,
it occupied the Hotel on a month-to-month basis, in February 1996, the Ports
Authority requested that IAH vacate, surrender and deliver the premises by
February 29, 1996. Following the receipt of such request, IAH brought an action
in the Superior Court of San Juan, Puerto Rico for declaratory judgment and
possessory injunction against the Ports Authority with respect to the Hotel. The
action seeks a declaratory judgment that, among other alternatives, IAH
exercised an option with respect to its lease for the Hotel for an extension of
the term of five years commencing on January 1, 1996 or that the Ports Authority
executed a new lease agreement for a ten year period commencing on such date.
11. Stockholders' Equity:
a. Stock options
The Company maintains a stock option plan which provides for the
granting of options to individuals rendering service to the Company to purchase
up to 300,000 shares of common stock of the Company. Such options may be either
incentive stock options or non-statutory stock options.
No options have been granted as of December 31, 1996.
b. Common shares reserved
Stock Option Plan 300,000
=======
12. (Loss) Income Per Share:
Net (loss) income per common share was computed using the weighted
average number of shares of common stock outstanding during each period
presented.
13. Major Customer:
Sales to a major customer approximated 27% and 15% of total room sales
for the years ended December 31, 1996 and 1995, respectively.
14. Fair Value of Financial Instruments:
The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash
and temporary cash investments, current receivables and payable and
certain other short-term financial instru ments approximate their fair
value.
The carrying amount and fair value of the Company's financial instruments
at December 31, 1996 are as follows:
Carrying Fair
Amount Value
------ -----
Cash and cash equivalents $1,318,121 $1,318,121
Accounts receivables 50,591 50,591
Notes receivable 81,856 81,856
Debentures payable 154,200 154,200
Other current liabilities 125,600 125,600
F-10
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXTECH CORPORATION
Dated: April 15, 1997 By: /s/ Morton L. Certilman
-----------------------
Morton L. Certilman,
President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signatures Capacity Date
---------- -------- ----
Chairman of the Board
/s/Jay M. Haft of Directors April 15, 1997
- ----------------------
Jay M. Haft
President and Director
(Principal Executive,
Financial and Accounting
/s/Morton L. Certilman Officer) April 15, 1997
- ----------------------
Morton L. Certilman
/s/ Leon Lapidus Director April 15, 1997
- ----------------
Leon Lapidus
<PAGE>
AMENDED AND RESTATED VOTING TRUST AGREEMENT (the "Agreement"),
dated as of December 30, 1996, by and between STERLING FOSTER HOLDING CORP., a
Delaware corporation ("SFHC"), and MORTON L. CERTILMAN, as voting trustee (the
"Trustee").
SFHC is the holder of shares of Common Stock, par value $.01
per share, of EXTECH CORPORATION, a Delaware corporation (the "Company"), and
owns the number of shares set forth after its signature at the end of this
Agreement.
In order to ensure the safe, competent and stable management
of the Company, SFHC desires to create an irrevocable voting trust by depositing
all of the shares of Common Stock it presently owns in the Company with the
Trustee and authorizing the same to vote all of the shares. The Trustee has
consented to act under this Agreement for the purposes herein provided.
In consideration of the mutual covenants hereinafter set forth
and other good and valuable consideration, the parties hereto hereby agree as
follows:
Agreement. Copies of this Agreement, and of all agreements
supplemental hereto or amendatory hereof, shall be filed in the registered
office of the Company in the State of Delaware located at 15 East North Street,
Dover, Delaware 19901, and in its principal office located at 90 Merrick Avenue,
East Meadow, New York 11554, and shall be open to the inspection of any
stockholder of the Company daily during business hours. Copies shall also be
filed in the office of the Trustee, at the address hereinbelow stated. All
Voting Trust Certificates issued as hereinafter provided shall be issued,
received, and held subject to all the terms of this Agreement. SFHC, being
entitled to receive a Voting Trust Certificate representing its shares of
<PAGE>
capital stock, and its respective transferees and assigns, upon accepting the
Voting Trust Certificate issued hereunder, shall be bound by the provisions of
this Agreement.
Transfer of Stock to Trustee.
SFHC shall deposit with the Trustee the certificates for all
of the shares of Common Stock of the Company presently owned by it (the
"Stock Certificates") which represent the number of shares set forth after its
signature at the end of this Agreement. SFHC may at any time deposit with
the Trustee additional certificates for shares of Common Stock of the
Company that it may hereafter acquire (the "Additional Certificates"), but
SFHC shall not be required to deposit Additional Certificates unless it so
elects, except that Additional Certificates representing shares acquired
due to the distribution of a stock dividend or split by the Company shall be
held by the Trustee in accordance with Section 4 hereof. All Stock Certificates
shall be endorsed, or accompanied by such instruments of transfer, as to
enable the Trustee to cause such certificates to be transferred into the
name of the Trustee, as hereinafter provided. Upon receipt by the Trustee of
the Stock Certificates or Additional Certificates and the transfer of the
same into the name of the Trustee, the Trustee shall hold the same subject to
the terms of this Agreement, and shall thereupon issue and deliver to SFHC
an Amended and Restated Voting Trust Certificate (the "Voting Trust
Certificate") for the shares so deposited in substantially the same form as is
attached hereto as Exhibit A.
All Stock Certificates and Additional Certificates transferred
and delivered to the Trustee shall be surrendered by the Trustee to the Company
and canceled, and new certificates therefor shall be issued to and held by the
Trustee in the name of "Morton L.
2
<PAGE>
Certilman as Voting Trustee U/A Dated December 30, 1996". The fact that each new
certificate is issued pursuant to this Agreement shall be stated in the stock
ledger of the Company.
The Trustee shall keep a list of all Stock Certificates or
Additional Certificates transferred hereunder which shall include the name and
address of SFHC and the number of shares that its transferred certificate
represents. In addition, the Trustee shall keep a record of each Voting
Trust Certificate issued hereunder which shall contain copies of such Voting
Trust Certificate issued and the name and address of SFHC and the number of
shares that each Voting Trust Certificate represents. Such list and record
shall be open to the inspection of SFHC at reasonable times at the offices
of the Trustee upon reasonable advance notification to the Trustee. The
Trustee shall cause a copy of each Voting Trust Certificate to be filed in the
books of the Company located in East Meadow, New York.
Rights of Trustee. The Trustee shall have the right to
exercise, in person or by his nominee or proxy, all stockholders' voting rights
and powers in respect of all shares deposited hereunder, and to take part in or
consent to any corporate or stockholders' action of any kind whatsoever. The
right to vote shall include the right to vote for the election of directors, and
in favor of or against any resolution or proposed action of any character
whatsoever, which may be presented at any meeting or require the consent of
stockholders of the Company. Without limiting such general right, it is
understood that such action may include the following, upon terms satisfactory
to the Trustee or to his nominees or proxies thereto appointed by him or them:
the mortgage, creation of a security interest in, or pledge of all or any part
of the property of the Company; the lease or sale of all or any part of the
property of the Company, for cash, securities,
3
<PAGE>
or other property; the dissolution of the Company; and the consolidation,
merger, reorganization or recapitalization of the Company.
Dividends.
In the event that the Company issues dividends and other
distributions, the Trustee shall accept and receive them. Upon receipt thereof,
the same shall be distributed to SFHC. In the event that the dividends are in
the form of share certificates having voting rights, the stock dividends
shall be held in trust hereunder and the Voting Trust Certificate shall be so
amended.
Subject to the provisions of paragraph 4(a), the Trustee, in
lieu of receiving cash dividends upon the capital stock of the Company and
paying the same to SFHC pursuant to the provisions of this Agreement, may
instruct the Company in writing to pay such dividends directly to SFHC. Upon
such instructions being given by the Trustee to the Company, and until
revoked by the Trustee, all liability of the Trustee with respect to such
dividends shall cease. The Trustee may at any time revoke such instructions
and by written notice to the Company direct it to make dividend payments to the
Trustee.
Subscription Rights. In case any stock or other securities of
the Company are offered for subscription to SFHC, the Trustee, following receipt
of notice of such offer, shall mail a copy thereof to SFHC. Upon receipt by the
Trustee, at least five (5) days prior to the last day fixed by the Company for
subscription and payment, of a request from SFHC to subscribe in its behalf,
accompanied with the sum of money required to pay for such stock or securities
(not in excess of the amount subject to subscription in respect of the shares
represented by the Voting Trust Certificate held by SFHC), the Trustee shall
make such subscription and payment and, upon
4
<PAGE>
receiving from the Company the certificates for shares or securities so
subscribed for, shall issue to SFHC a Voting Trust Certificate in respect
thereof if the same be stock having general voting powers, but if the same be
securities other than stock having general voting powers, the Trustee shall
either mail or deliver such securities to SFHC or instruct the Company to make
delivery directly to SFHC.
Dissolution of the Company. In the event of the dissolution or
total or partial liquidation of the Company, whether voluntary or involuntary,
the Trustee shall receive the funds, securities, rights, or property to which
SFHC is entitled, and shall distribute the same to SFHC. Alternatively, the
Trustee may, in his discretion, deposit such funds, securities, rights, or
property with any bank or trust company with authority and instructions to
distribute the same as above provided, and upon such deposit all further
obligations or liabilities of the Trustee in respect of such funds, securities,
rights, or property so deposited shall cease.
Reorganization of Company. In the event that the Company is
merged into or consolidated with another corporation, or all or substantially
all of the assets of the Company are transferred to another corporation, then,
in connection with such transfer, the term "Company" for all purposes of this
Agreement shall mean and include any such successor corporation. The Trustee
shall receive and hold under this Agreement any stock of such successor
corporation received on account of the ownership, as Trustee hereunder, of the
stock held hereunder prior to such merger, consolidation, and transfer. Each
Voting Trust Certificate issued and outstanding under this Agreement at the time
of such merger, consolidation, or transfer may remain outstanding, or the
Trustee may, in his sole discretion, substitute for each Voting Trust
Certificate a new Voting Trust Certificate in appropriate form.
5
<PAGE>
Trustee's Liability. The Trustee shall not be personally
liable as stockholder, trustee or otherwise for any action taken by him or by
his agents, except for his own individual actions or omissions which constitute
willful misconduct. In no event shall the Trustee's failure to act or vote be
deemed misconduct hereunder. In addition, the Trustee shall not be required to
furnish a bond or security for the discharge of his duties hereunder.
Compensation and Reimbursement of Trustee. The Trustee shall
serve without compensation hereunder. The Trustee shall have the right, at his
expense, to incur and pay reasonable expenses and charges to employ and pay such
agents, attorneys and counsel as he may deem necessary and proper for carrying
this Agreement into effect. In the event dividends or other funds or property
are received by the Trustee on the stock deposited hereunder, the Trustee may
deduct such expenses and charges therefrom. Nothing herein contained shall
disqualify the Trustee, or incapacitate him from serving the Company or any of
its subsidiaries as an officer or director, or in any other capacity, and in any
such capacity, from receiving compensation.
Transfer of Voting Trust Certificates.
(a) Any Voting Trust Certificate to be issued hereunder has
not been registered under the Securities Act of 1933, as amended (the "Act"),
and may not be sold, transferred, pledged, hypothecated or otherwise disposed of
in the absence of either an effective registration statement for such
certificates under the Act or an opinion of Company counsel that such
registration is not required. Each Voting Trust Certificate shall bear a legend
setting forth the foregoing restrictions. It shall be an express prerequisite to
the transfer of any Voting Trust Certificate that the transferee shall first
agree in writing to be bound by all of the terms and conditions of this
Agreement. The Voting Trust Certificates shall be transferable on the books
6
<PAGE>
of the Company at the executive offices of the Company located in East Meadow,
New York, by the registered holder thereof, either in person or by attorney
thereto duly authorized, and the Trustee may treat the registered holder as the
owner thereof for all purposes whatsoever.
(b) The transfer of the Voting Trust Certificate is also
restricted pursuant to the terms and conditions of a certain letter agreement of
even date by and among SFHC, the Trustee and the Company.
Replacement of Voting Trust Certificates. In the event that a
Voting Trust Certificate is lost, stolen, mutilated, or destroyed, the Trustee,
in his discretion, may issue a duplicate of such certificate upon receipt of
each of the following: (a) evidence of such fact satisfactory to him; (b)
indemnity satisfactory to him; (c) the existing certificate, if mutilated; and
(d) his reasonable fees and expenses in connection with the issuance of a new
certificate. The Trustee shall not be required to recognize any transfer of a
Voting Trust Certificate not made in accordance with the provisions hereof,
unless the person claiming such ownership shall have produced indicia of title
satisfactory to the Trustee, and shall in addition deposit with the Trustee an
indemnity satisfactory to him.
Successor Trustee. In the event of the death of the Trustee,
then his legal representative shall act as substitute Trustee (the "Successor
Trustee") for the limited purpose of complying with the provisions of paragraph
13 below.
Termination.
This Agreement shall terminate, and the Trustee shall
be relieved of all liability and responsibility hereunder, upon the
earlier of the third anniversary of the date hereof or the death of the
Trustee.
7
<PAGE>
Upon the termination of this Agreement, the Voting Trust
Certificates shall cease to have any effect, and SFHC shall have no further
rights under this Agreement other than to receive certificates for stock of
the Company and any theretofore undistributed dividends.
Within thirty (30) days after the termination of this
Agreement, the Trustee or Successor Trustee shall deliver to SFHC, upon the
surrender of the Voting Trust Certificates properly endorsed (such delivery to
be made in each case at the offices of the Trustee), stock certificates for
the number of shares of stock of the Company represented thereby.
As an alternative to the procedure set forth in paragraph
13(c) above, at any time within thirty (30) days after the termination of
this Agreement, the Trustee or Successor Trustee may deposit with the
Company stock certificates representing the number of shares of stock
represented by the Voting Trust Certificates then outstanding, with
authority in writing to the Company to deliver such stock certificates in
exchange for the Voting Trust Certificates representing a like number of
shares of stock of the Company, and upon such deposit all further liability
of the Trustee or Successor Trustee for the delivery of such stock certificates
and the delivery or payment of dividends upon surrender of the Voting Trust
Certificate shall cease, and the Trustee or Successor Trustee shall not be
required to take any further action hereunder.
Notices.
Any notice to be given to the Trustee hereunder shall be
sufficiently given if sent by certified mail, postage prepaid, return receipt
requested, to the Trustee at 90 Merrick Avenue, East Meadow, New York 11554,
or at such other address as the Trustee may from time to time designate by
written notice given to SFHC.
8
<PAGE>
Any notice to be given to SFHC shall be sufficiently given if
sent by certified mail, postage prepaid, return receipt requested, to the
address of SFHC appearing on the records maintained by the Trustee. Every
notice so given shall be effective whether or not actually received, and such
notice shall for all purposes be deemed to have been given on the date of
mailing thereof.
Any notice to be given to the Company hereunder shall be
sufficiently given if mailed in the above manner to the Company at its principal
executive offices.
Amendment or Modification Agreement. SFHC and the Trustee may
modify or amend this Agreement only by written agreement between them. Copies
of any modifications of amendments must be filed in the registered office
of the Company in the State of Delaware, in the books of the Company and in the
records of the Trustee to be effective.
Entire Agreement. This Agreement contains the entire agreement
between the parties. Any oral or written representations, agreements,
understandings and/or statements not contained herein shall be of no force and
effect.
Gender. The use herein of (a) any gender includes all others
and (b) the singular number includes the plural and vice-versa, whenever the
context so requires.
Governing Law. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of Delaware, without giving
effect to principles of conflicts of law.
Binding Effect. Subject to any provision of this Agreement
that may prohibit or curtail assignment of any rights hereunder, this Agreement
shall bind and inure to the benefit of the respective heirs, assigns, personal
representatives, and successors of the parties hereto.
9
<PAGE>
Severability. If any term, provision, covenant or condition of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Execution in Counterparts. This Agreement may be executed in
counterparts and each shall be deemed to be an original.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement to evidence their respective acceptance of the irrevocable voting
trust created hereby, as of the day and year first above written.
Number of
Shares
STERLING FOSTER HOLDING CORP.
By: /s/ 1,800,000
Adam Lieberman, President
TRUSTEE
/s/
Morton L. Certilman
10
<PAGE>
EXHIBIT A
The transferability of this Amended and Restated Voting Trust
Certificate is restricted by the terms of the Amended and Restated Voting Trust
Agreement and Transfer Restriction Agreement (each as defined below).
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH CERTIFICATE UNDER SAID ACT OR (B) AN OPINION OF
COMPANY COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
No. Shares
AMENDED AND RESTATED
VOTING TRUST CERTIFICATE
EXTECH CORPORATION
Incorporated under the laws of the State of Delaware
This Amended and Restated Voting Trust Certificate (the
"Voting Trust Certificate") certifies that Sterling Foster Holding Corp.
("SFHC"), or its registered assigns, is entitled to all of the benefits arising
from the deposit with Morton L. Certilman, as Voting Trustee (the "Trustee"),
under the Amended and Restated Voting Trust Agreement of certificates evidencing
____ shares of Common Stock, par value $.01 per share, of EXTECH Corporation, a
Delaware corporation (the "Company"), as provided in the Amended and Restated
Voting Trust Agreement and subject to the terms thereof.
Subject to the terms of the Amended and Restated Voting Trust
Agreement, the registered holder hereof is entitled to receive payment equal to
the amount of cash dividends, if any, received by the Trustee upon the number of
shares of capital stock of the Company in respect of which this certificate is
issued. Dividends received by the Trustee in Common Stock or other stock of the
Company having general voting powers shall be payable in Voting Trust
Certificates, in form similar hereto. Until the Trustee shall have delivered the
stock held under the Amended and Restated Voting Trust Agreement to the holder
of the Voting Trust Certificate, or to the Company, as specified in the Amended
and Restated Voting Trust Agreement, the Trustee shall possess and shall be
entitled to exercise all rights and powers of an owner of such stock, as
specified in the Amended and Restated Voting Trust Agreement, including the
right to vote thereon for every purpose, it being expressly stipulated that
no voting right passes to the holder hereof under this certificate or any
agreement, expressed or implied.
<PAGE>
This certificate is issued, received, and held under, and the
rights of the holder hereof are subject to, the terms of each of that certain
Amended and Restated Voting Trust Agreement, dated as of December 30, 1996, by
and among SFHC and the Trustee (the "Voting Trust Agreement") and that certain
letter agreement, dated as of December 30, 1996, by and among the Company, the
Trustee and SFHC, restricting the transfer or disposition by SFHC of this
certificate (the "Transfer Restriction Agreement"). Copies of each of the Voting
Trust Agreement and Transfer Restriction Agreement, and of every agreement
amending or supplementing each of the same, are on file in the principal office
of the Company in East Meadow, New York and in the registered office of the
Company in the State of Delaware, and shall be open to the inspection of any
stockholder of the Company, daily during business hours. The holder of this
certificate, by acceptance hereof, assents and is bound by all the provisions of
each of the Voting Trust Agreement and Transfer Restriction Agreement as if such
Voting Trust Agreement and Transfer Restriction Agreement had been originally
signed by it.
In the event of the dissolution or total or partial
liquidation of the Company, subject to the terms of the Voting Trust Agreement,
the funds, securities, rights or property received by the Trustee in respect to
the stock deposited under the Voting Trust Agreement shall be distributed to the
registered holder hereof.
In the event that any dividend or distribution other than in
cash or stock of the Company having general voting powers is received by the
Trustee, subject to the terms of the Voting Trust Agreement, the Trustee shall
distribute the same to the registered holder hereof as provided in the Voting
Trust Agreement.
Stock certificates for the number of shares of capital stock
then represented by this certificate, and any undistributed dividends shall be
due and deliverable hereunder upon the termination of the Voting Trust Agreement
upon and subject to the terms provided therein.
The Voting Trust Agreement shall continue in full force and
effect unless and until terminated as provided therein.
This certificate is transferable on the books of the Company
at its office in East Meadow, New York or elsewhere as designated by the
Trustee, by the holder hereof, either in person or by attorney duly authorized,
in accordance with the provisions set forth in the Voting Trust Agreement and
Transfer Restriction Agreement and on surrender of this certificate properly
endorsed. The holder hereof agrees that delivery of this certificate, duly
endorsed by the holder hereof, shall vest title hereto and all rights hereunder
in the transferee; provided, however, that the Trustee may treat the registered
holder hereof as the absolute owner hereof and all rights and interests
represented hereby for all purposes whatsoever, and the Trustee shall not be
bound or affected by any notice to the contrary; provided, however, that no
delivery of stock certificates hereunder, or the proceeds thereof, shall be made
without surrender hereof properly endorsed; and provided further that the
Trustee need not recognize or give effect to any transfer of this
<PAGE>
certificate made in violation of the terms of the Voting Trust Agreement or the
Transfer Restriction Agreement.
This certificate shall not be valid for any purpose until duly
executed by the Trustee.
The term "Trustee" as used herein means the Trustee or any
Successor Trustee acting under the Voting Trust Agreement.
IN WITNESS WHEREOF, the Trustee has duly executed this
certificate as of this 30th day of December, 1996.
Morton L. Certilman, Trustee
K:\WPDOC\CORP\EXTECH\AGREEMEN\VOTINTRU.AGR
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,318,121
<SECURITIES> 0
<RECEIVABLES> 180,447
<ALLOWANCES> 48,500
<INVENTORY> 6,400
<CURRENT-ASSETS> 1,579,447
<PP&E> 153,595
<DEPRECIATION> 51,544
<TOTAL-ASSETS> 1,742,571
<CURRENT-LIABILITIES> 279,800
<BONDS> 0
0
0
<COMMON> 55,914
<OTHER-SE> 1,462,211
<TOTAL-LIABILITY-AND-EQUITY> 1,742,571
<SALES> 0
<TOTAL-REVENUES> 1,118,647
<CGS> 0
<TOTAL-COSTS> 1,119,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (443)
<INCOME-TAX> 4,656
<INCOME-CONTINUING> (5,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,099)
<EPS-PRIMARY> (.001)
<EPS-DILUTED> 0
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