BUFFTON CORP, 10-K/A, 1997-01-28

BUFFTON CORP
10-K/A, 1997-01-28
ELECTRONIC COMPONENTS, NEC

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934

For the fiscal year ended September 30, 1996

___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from _______ to ________

Commission file number 1-9822

BUFFTON CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware 75-1732794
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)

226 Bailey Avenue, Suite 101
Fort Worth, Texas 76107
(Address of principal executive office) (Zip Code)
(817) 332-4761
Registrant's Telephone Number, Including Area Code:

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common stock, $.05 par value American Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___

State the aggregate market value of the voting stock held by non-affiliates of
the registrant.

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 10, 1996 was $15,131,909.

The number of shares outstanding of the registrant's common stock, $.05 par
value, as of December 10, 1996 was 6,543,528.

Documents Incorporated By Reference

Portions of the following documents are incorporated by reference into the
indicated part or parts of this report:

Definitive proxy statement of the registrant relating to the 1997
Stockholders' meeting filed with the Commission pursuant to Regulation
14A - Parts I and III.

1
<PAGE>

BUFFTON CORPORATION

1996 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
- ------ ----
<S> <C> <C>
Item 1. Business................................................... 3
Item 2. Properties................................................. 6
Item 3. Legal Proceedings.......................................... 7
Item 4. Submission of Matters to a Vote of Security Holders........ 7

PART II
- -------

Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters........................................ 8
Item 6. Selected Financial Data.................................... 9
Item 7. Management's Discussion and Analysis of Operations
and Financial Condition.................................... 10
Item 8. Financial Statements and Supplementary Data................ 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 16

PART III
- --------

Item 10. Directors and Executive Officers of the Registrant......... 17
Item 11. Executive Compensation..................................... 20
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................. 24
Item 13. Certain Relationships and Related Transactions............. 26

PART IV
- -------

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K................................................ 27

Signatures ........................................................... 29
</TABLE>

2
<PAGE>

PART I
------

ITEM 1 - BUSINESS
- -----------------

GENERAL DEVELOPMENT OF BUSINESS
- -------------------------------

Buffton Corporation (the registrant and Company) is a Delaware corporation and
was incorporated on December 17, 1980.

The Company is principally engaged in the manufacture of filter surge
suppressors and power distribution systems and the operation of food and
beverage and lodging establishments. See Financial Information About Industry
Segments, page 4.

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities in New Orleans, Louisiana (Bourbon Street Hospitality)
of ECA in exchange for the Company's outstanding note receivable from and equity
interest in ECA approximating $2,641,000 as well as 600,000 shares of its common
stock and $159,000 in cash. The market value of the 600,000 shares was $824,000
at the date of the acquisition. Bourbon Street Hospitality originally consisted
of operations located at 701 Bourbon Street, 735 Bourbon Street and 441 Bourbon
Street and American Food Classics, Inc. (AFC) and are included in BFX
Hospitality Group, Inc. (Hospitality Group). During 1994, the Company closed 735
Bourbon Street. During 1996 the Company sold the operations located at 441
Bourbon Street.

In addition to the above described transactions with ECA, the Company had a note
receivable from ECA at January 1, 1994 aggregating $400,000 and advances of
$320,000. The Company also had an option to purchase the stock of AFC from ECA
at the greater of fair market value, to be determined by an independent
appraisal, or $300,000. The Company exercised its option January 1, 1994 and
exchanged its note receivable from and advances to ECA for the stock of AFC. The
note receivable and advances approximated the fair market value of the AFC stock
at the date of exchange. AFC operates Lucile's, A Stateside Bistro, located in
Fort Worth, Texas. After the January 1, 1994 transactions, the Company no longer
held an interest in ECA.

Effective February 28, 1994, Contex Electronics, Inc. (Contex), a wholly owned
subsidiary of the Company, sold all of the operating assets and liabilities of
MoldCon, Inc. (MoldCon) and Tri-Tec Engineering Corporation (Tri-Tec), two of
its wholly owned subsidiaries. The sales price for the assets was $9,277,000 in
cash plus the assumption of certain liabilities by the buyer. The net proceeds
from the disposition were used to reduce bank debt approximately $5,000,000 and
for short-term investments. During June 1994, Contex shut down its remaining
cable assembly plant in Vestal, New York and sold certain inventory, customer
contracts and certain machinery and equipment to The JPM Company. The remaining
assets, primarily trade accounts receivable, were liquidated.

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The Company.
Mr. Sarno purchased virtually all of the assets of Flo Control for $3,100,000 in
cash and assumed $800,000 of Flo Control's liabilities. As a condition of the
sale, Mr. Sarno agreed to purchase Flo Control's 95% ownership interest in the
Florida Realty Joint Venture for $150,000 in cash and assume the non-recourse
mortgage approximating $2.3 million. In connection with these transactions, Flo
Control's secondary containment product line was sold to Mr. Pat Hopkins, an
unrelated third party, for a $500,000 note. The note is secured by the assets

3
<PAGE>

sold and the personal guaranty of an unrelated third party individual. As a
result of the above transactions, the Company recognized a loss on disposal of
$2,314,000, net of income tax benefit, during fiscal 1995. The sale of Flo
Control was accounted for as a discontinued operation. The cash proceeds from
the sale were used to reduce the Company's outstanding debt with its lender. In
addition, the sale of Flo Control's 95% interest in the Florida Realty Joint
Venture eliminated the ongoing monthly expense of the Flo Control lease.

In 1995 the Company established Buffton Realty Ventures, a commercial real
estate operation, to engage in acquiring properties offering unique
opportunities for profit. During August 1995, the Company acquired 100 Main
Street, a commercial office building located in Fort Worth, Texas. The property,
approximately 44,000 square feet, is 100% occupied with two tenants under lease.
Lease rentals are $438,000 annually. The total cost of the property was
approximately $1,650,000.

Effective January 1, 1996, the Company entered into an agreement to purchase the
assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept with Central and
South American influences located in Houston, Texas, for $589,000 in cash and
375,000 shares of the Company's common stock. Additionally, the Company issued
76,500 shares of its common stock for commissions incurred in connection with
the acquisition which resulted in increased acquisition costs of $153,000.
Excess of purchase price over fair value of net tangible assets acquired,
recorded as Goodwill, approximates $1,300,000 and is being amortized on a
straight line basis over 15 years. Effective January 1, 1996, the Company also
entered into an agreement to purchase the assets and assume certain liabilities
of the Stockyards Hotel, located in Fort Worth, Texas, for $500,000 in cash,
450,000 shares of the Company's common stock and the refinancing of a $1,600,000
bank term loan. Under this agreement, the Company has guaranteed, until March
15, 1997, a sales price of $2.05 per share for any of this stock that may be
sold. At September 30, 1996, no liability had been incurred under the guarantee
agreement. These acquisitions were accounted for under purchase accounting and
are included in the Company's Results of Operations beginning on the
acquisitions' effective date of January 1, 1996.

Unaudited proforma results from continuing operations, as if the acquisitions
had occurred at the beginning of each respective period, are as follows:

<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------
1996 1995
------------------- -------------------
(In thousands, except per share amounts)
<S> <C> <C>
Revenues............................... $25,973 $21,670
Net income from continuing operations.. 1,437 1,389
Primary income per average common share .22 .22
Fully diluted income per common share.. .21 .22
</TABLE>

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
- ---------------------------------------------

The Company's operations are conducted primarily in the United States by two
principal business segments. Electronic Products involves the manufacture of
filter surge suppressors and power distribution systems. Hospitality Group
includesinvolves the operation of food and beverage establishments, a
hotel and commercial real estate. Information concerning the Company's industry
segments is included in Note 11 of the Consolidated Financial Statements.

4
<PAGE>

NARRATIVE DESCRIPTION OF BUSINESS
- ---------------------------------

The Company's subsidiaries have separate marketing, manufacturing, engineering
and administrative staffs.

ELECTRONIC PRODUCTS:

CURRENT TECHNOLOGY, INC. (CURRENT TECHNOLOGY)

Current Technology was acquired January 1, 1989. Current Technology designs,
manufactures and markets electronic filter/surge suppression products (TVSS),
power supply/power conversion products and custom power distribution systems.
The TVSS products are designed to reduce the adverse effects of electrical
disturbances on sensitive solid state electronics such as computer-based
systems, point-of-sale systems, medical imaging equipment (MRI/CAT), robotics,
telecommunication equipment, industrial control systems and other applications.
These products are sold nationally through well-defined channels of
distribution, utilizing the services of independent sales representatives with
specific geographic responsibility. Current Technology also relies upon the
services of a select group of international distributors in a limited number of
foreign markets. The primary markets served are the medical, factory automation,
data processing/office automation and telecommunication industries.

HOSPITALITY GROUP:

BFX HOSPITALITY GROUP, INC. (HOSPITALITY GROUP)

The Hospitality Group owns and operates food and beverage facilities in Fort
Worth, Texas (Lucile's), Houston, Texas, (Cabo) and New Orleans, Louisiana,
(Cat's Meow) as well as a hotel in Fort Worth (Stockyards Hotel). Lucile's, A
Stateside Bistro, opened in April, 1993 and offers a variety of menu items
centered around classic American dishes. Cabo, The Original "Mix Mex" Grill,
opened in December 1994 offers Mexican food with Central and South American
influences and has a distinctive and colorful "diner look" decor. Cat's Meow
offers highly produced, high energy karoake and includes talented MC's and DJ's.
In addition, the Company established Buffton Realty Ventures in 1995.

SOURCES AND AVAILABILITY OF RAW MATERIAL
- ----------------------------------------

During 1996, raw parts and part assemblies required in the Electronic Products
segment were plentiful. Under present conditions, an adequate supply of these
materials should be available. No long-term contracts are in effect, thus, the
Company has maximum flexibility to purchase advantageously according to its
volume needs.

COMPETITION
- -----------

Both industry segments of the Company are in highly competitive markets. There
are numerous manufacturers of filter/surge suppressors and power distribution
systems which compete with the Company's operations. There are many food and
beverage and lodging establishments located in the same geographical area as the
Company's operations which compete for the same customer base. Many of the
competitors of each of the segments have resources greater than the Company.

PATENTS AND LICENSES
- --------------------

The Company owns patents covering certain technology applying to its surge
suppressors and power distribution systems and trademarks relating to certain of
its hospitality group operations. There are no other patents, trademarks,
franchises or concessions which are materially significant.

5
<PAGE>

ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS
- ------------------------------------------------

See Item 7 - Management's Discussion and Analysis of Operations and Financial
Condition - "Liquidity and Capital Resources".

SEASONAL ASPECTS OF THE BUSINESS
- --------------------------------

The Company's two operating segments are not materially impacted by seasonality.

BACKLOG
- -------

The Company's Electronic Products backlog at September 30, 1996 was $5,290,000.
Substantially all backlog orders have estimated shipment dates within the fiscal
year ending September 30, 1997.

EMPLOYEES
- ---------

The Company and its subsidiaries employed approximately 208 full-time and 83
part-time employees as of September 30, 1996, none of which were represented by
unions. Relations with employees are satisfactory.

ITEM 2 - PROPERTIES
- -------------------

GENERAL
- -------

The Company and its subsidiaries have facilities with remaining primary lease
terms ranging from one to five years at annual rentals of approximately
$533,000. All leases provide for one or more renewal terms. All premises are in
good condition, adequate and appropriate for the operations presently being
conducted by both of the Company's business segments. The manufacturing location
in Irving, Texas is not operating at maximum capacity and, therefore, management
believes that no expansion of its existing facility will be required in the next
year.
The Company owns a manufacturing facility located in Vestal, New York. The
127,000 square foot facility is situated on approximately 14 acres. In
conjunction with the 1991 sale of National Pipe Company, the buyer, LCP National
Plastics, Inc. signed a ten year lease agreement with the Company and is
presently occupying sixty percent of the facility. Annual rental for this lease
is approximately $310,000 plus real estate taxes and insurance. The Company is
actively seeking a lessee for the remainder of the facility.

ELECTRONIC PRODUCTS
- -------------------

Current Technology leases its headquarters and manufacturing operations space.
This facility located in Irving, Texas consists of approximately 43,000 square
feet of space.

HOSPITALITY GROUP
- -----------------

The Hospitality Group leases the facility in New Orleans, Louisiana for its
entertainment operations. The facility has 5,400 square feet. The operation's
restaurant in Fort Worth, Texas leases approximately 5,000 square feet of space,
while the operation's restaurant in Houston, Texas leases approximately 3,000
square feet of space.

The real estate for the hotel located in Fort Worth, Texas is owned.

6
<PAGE>

During August 1995, the Company, through Buffton Realty Ventures, acquired 100
Main Street, a commercial office building located in Fort Worth, Texas. The
property, approximately 44,000 square feet, is 100% occupied with two tenants
under lease. Lease rentals are $438,000 annually.

CORPORATE OFFICES
- -----------------

The Company leases approximately 3,500 square feet of space at 226 Bailey Avenue
in Fort Worth, Texas for its corporate headquarters.

ITEM 3 - LEGAL PROCEEDINGS
- --------------------------

The Company is a party to various legal actions which are in the aggregate
immaterial, and due to the nature of the Company's business, it could be a party
in other legal or administrative proceedings arising in the ordinary course of
business. While occasional adverse settlements or resolutions may occur and
negatively impact earnings in the year of settlement, it is the opinion of
management that their ultimate resolution will not have a materially adverse
effect on the Company's financial position.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------

No matters were submitted for a vote to security holders during the fourth
quarter of the fiscal year ended September 30, 1996.

7
<PAGE>

PART II
-------

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
- --------------------------------------------------------------------------
MATTERS
-------

The Company's common stock is traded on the American Stock Exchange, under the
common stock ticker symbol "BFX". The quarterly trading range of common stock
follows:

<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
---- ---
<S> <C> <C>
October 1 - December 31................. $2.31 $1.50
January 1 - March 31.................... 2.38 1.75
April 1 - June 30....................... 2.38 1.75
July 1 - September 30................... 2.50 1.56

FISCAL 1995 HIGH LOW
---- ---
October 1 - December 31................. $1.81 $1.31
January 1 - March 31.................... 1.87 1.06
April 1 - June 30....................... 1.81 1.38
July 1 - September 30................... 2.44 1.38
</TABLE>

The number of named stockholders of common stock as of September 30, 1996 was
approximately 1,550 as recorded by the transfer agent and registrar.

There are no restrictions on declaration or payment of dividends; however, no
dividends have been paid on common stock to date. The Company intends to
maintain a policy of retaining earnings for use in the development of the
business.

Continental Stock Transfer & Trust Company, 2 Broadway, New York, N.Y. 10004, is
the transfer agent and registrar for the Company's common stock.

8
<PAGE>

ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------

<TABLE>
<CAPTION>
September 30,
------------------------------------------------------
FOR THE YEAR ENDED 1996 1995 1994 1993 1992
- ------------------ -------- -------- --------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $25,175 $19,187 $30,432 35,879 $33,449
======= ======= ======= ====== =======

Income (loss) from continuing operations (a)..... $ 1,394 $ 1,304 $ 2,002 398 $(1,551)
Income (loss) from discontinued operation........ - (2,513) (94) (134) (3,402)
------- ------- ------- ------ -------

Net income (loss)................................ $ 1,394 $(1,209) $ 1,908 264 $(4,953)
======= ======= ======= ====== =======

Primary income (loss) per average common share:
Continuing operations.......................... $ .22 $ .24 $ .39 .09 $ (.35)
Discontinued operation......................... - (.46) (.02) (.03) (.76)
------- ------- ------- ------ -------

Net income (loss).............................. $ .22 $ (.22) $ .37 .06 $ (1.11)
======= ======= ======= ====== =======

Fully diluted income (loss) per common share:
Continuing operations.......................... $ .21 $ .24 $ .39 .09 $ (.35)
Discontinued operation......................... - (.46) (.02) (.03) (.76)
------- ------- ------- ------ -------

Net income (loss).............................. $ .21 $ (.22) $ .37 .06 $ (1.11)
======= ======= ======= ====== =======

AT YEAR END
- -----------

Working capital.................................. $ 3,743 $ 2,824 $ 7,149 8,126 $ 8,910
Current assets................................... 6,917 5,429 11,125 16,636 16,336
Total assets..................................... 23,164 17,224 25,070 31,168 30,644
Long-term debt................................... 2,493 - 5,507 9,855 10,198
Total liabilities................................ 5,671 2,605 9,813 18,643 18,516
Stockholders' equity............................. 17,493 14,619 15,257 12,525 12,128
Current ratio.................................... 2.18 2.08 2.80 1.95 2.20
Book value per share............................. 2.60 2.57 2.89 2.68 2.67
Total liabilities to equity ratio................ .32 .18 .64 1.49 1.53
</TABLE>

(a) Income from continuing operations in 1994 includes a net gain of $1,050,000
on the sale of the cable assembly plants in West Springfield, Massachusetts
and Gardena, California.

9
<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
- -------------------------------------------------------------------------
CONDITION
---------

GENERAL INFORMATION

At September 30, 1996, the Company consists of operations in two principal
segments as discussed in Part I, Item 1 - Business. During the years ended
September 30, 1995 and 1996, the Company entered into acquisition and
disposition transactions as follows:

Effective January 1, 1996, the Company entered into agreements to purchase the
assets of Cabo Tacobar One, Ltd. (Cabo), located in Houston, Texas and to
purchase the assets and assume certain liabilities related to the Stockyards
Hotel (SYH), located in Fort Worth, Texas. See Liquidity and Capital Resources
in this section and Note 2 of Notes to Consolidated Financial Statements for
details of the acquisitions.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Certain matters discussed herein are forward-looking statements about the
business, financial condition and prospects of the Company. The actual results
could differ materially from those indicated by such forward-looking statements
because of various risks and uncertainties. Such risks and uncertainties may
include, but are not limited to regional and national economic conditions,
changes in customer demand for products offered by the Company, and other
matters that may adversely affect the availability of products and pricing,
state and federal regulatory environment, possible future acquisitions or
dispositions, amendments to the Record of Decision issued by the Environmental
Protection Agency (see Liquidity and Capital Resources) and other risks
indicated in the Company's previous filings with the Securities and Exchange
Commission. The Company cannot control these risks and uncertainties, and in
many cases, cannot predict the risks and uncertainties that could cause its
actual results to differ materially from those indicated by the forward-looking
statements.

10
<PAGE>

RESULTS OF CONTINUING OPERATIONS

1996 VERSUS 1995

Consolidated net revenues in 1996 increased 31% compared to 1995. Electronic
Products revenues increased 31%. This increase was primarily due to sales to a
customer for power distribution modules incorporating surge suppression for
integration into the customer's sorter equipment. Management expects sales
levels in fiscal 1997 for this customer to remain constant or slightly increase
over 1996 levels. Hospitality group revenues increased 36% in 1996 compared to
1995 due to the inclusion of the results of operations of Cabo and SYH effective
January 1, 1996. Revenues for the hospitality group are expected to increase in
fiscal 1997 as Cabo and SYH will contribute a full twelve months of operations
versus nine months in fiscal 1996. Additionally, a second Cabo location and a
destination food and beverage restaurant at SYH is expected to open during the
third quarter of fiscal 1997. The expected increases in hospitality group
revenues will be partially offset by the sale of 441 Bourbon Street in fiscal
1996.

Consolidated total costs and expenses during 1996 increased 28% compared to
1995. Consolidated costs of sales increased 43% during 1996 compared to the
prior year. As a percent of related revenue, these costs were 33% during 1996
versus 31% a year earlier. Electronic products cost of sales during 1996 periods
increased 54% compared to 1995. These costs as a percent of revenue were 40% in
1996 compared to 34% in 1995. The increase in absolute dollars was due to
increased sales and the increase in costs as a percent of revenue is due to a
greater percentage of sales of products related to sorter equipment in 1996,
which have a lower gross margin than the power siftor line. Cost of sales
related to the Hospitality Division during 1996 periods increased 18%. This
increase is due to the inclusion of the results of operations of Cabo and SYH
effective January 1, 1996.

Consolidated selling, general and administrative expenses for 1996 increased 19%
compared to 1995. The absolute dollar increase in these expenses is due to
increased sales levels incurred during 1996. Electronic products selling,
general and administrative expenses for 1996 increased 3% compared to 1995 due
to an increase in commissions and certain other costs directly correlated to an
increase in revenues. The expenses associated with the Hospitality Division for
1996 periods increased 47% compared to 1995. This increase is due to the
inclusion of the results of operations of Cabo and SYH effective January 1,
1996.

Consolidated depreciation and amortization expense increased 33% during 1996
compared to 1995, primarily as a result of the previously discussed acquisition
of Cabo and SYH as well as the purchase of a commercial office building in late
fiscal 1995. The increase in interest expense to $235,000 for 1996 from $124,000
in 1995 is primarily due to the refinancing of a $1,600,000 bank term loan
assumed in connection with the acquisition of SYH and the borrowing of
$1,200,000 in March 1996 from an insurance company, secured by a deed of trust
on a commercial office building located in Fort Worth, Texas.

During 1996, the Company reported income from continuing operations before
income taxes of $2,205,000 compared to $1,273,000 in 1995. Operating profit
associated with the Company's power surge suppressor operation increased 58%
over the 1995 level. The Hospitality Group reported operating income of $149,000
in 1996 compared to $244,000 in 1995. Operating income for the Hospitality Group
was hindered by the poor operating results of 441 Bourbon Street which was sold
in July 1996 at a price approximating net book value.

Income tax rate on pre-tax income from continuing operations was 36.8% in 1996
compared to a benefit of (2.4%) in 1995. The 1995 rate is substantially lower
than the federal statutory rate of 34% as a result of favorable state tax
developments that resulted in the reversal of certain state tax reserves
approximating $255,000 and the recognition of certain federal tax benefits
aggregating $314,000.

11
<PAGE>

1995 VERSUS 1994

Consolidated net revenues in 1995 decreased 37% compared to 1994. Electronic
Products revenues declined 52% during 1995 compared to 1994. The Electronic
Products revenues in 1994 were impacted by the sale of the cable assembly plants
in West Springfield, Massachusetts and Gardena, California effective February
28, 1994 and the shut down of the cable assembly plant in Vestal, New York in
June of 1994. Revenue for the three plants in 1994 was $14,019,000. The
Company's power surge suppressor manufacturing operations revenues increased 10%
during 1995 compared to 1994. This operation's revenues increased due to the
sale of new products, in the power siftor line securing, a large contract for
shipment of power supply products. This operation's revenues increased primarily
due to the sale of products in the power siftor line. Sales in the power siftor
line increased due to improved product acceptance in the market place.
Hospitality Group revenues increased 33% in 1995 compared to 1994. These
revenues increased primarily due to inclusion for a full year in 1995 compared
to nine months in 1994.

Consolidated total costs and expenses for 1995 decreased 39% compared to the
prior year. Consolidated costs of sales declined 66% during 1995 compared to
1994. As a percent of revenues these costs were 31% in 1995 versus 56% in 1994.
Electronic Products costs of sales declined 74% during 1995 versus 1994. The
decline in the Electronic Products costs of sales in 1995 resulted primarily
from the sale of the previously discussed cable assembly plants effective
February 28, 1994 and the shut down of the Vestal, New York plant in June 1994.
Costs of sales in the power surge suppressor operation decreased 9% during 1995
compared to 1994. Gross profit as a percentage of revenue in this operation was
66% in 1995 compared to 60% in 1994. Product mix which consisted primarily of
power siftor sales improved the overall gross profit. ratio. Hospitality Group's
cost of sales increased 30% in 1995 compared to 1994 partially due to inclusion
for a full year in 1995 compared to nine months in 1994 and a higher volume of
sales.

Consolidated selling, general and administrative expenses increased 3% during
1995 compared to 1994. Electronic Products selling, general and administrative
expenses declined 18% during 1995 compared to the prior year. The decline during
1995 was primarily associated with the sale of the two cable assembly plants and
the shut down of the Vestal, New York plant as previously discussed. Selling,
general and administrative expenses associated with the Company's power surge
suppressor operation increased 15% during 1995 compared to 1994. This increase
was primarily attributable to an increase in commissions and certain other costs
directly correlated to the increase in revenues and an increase in costs
associated with the growth in this operation's work force during the year ended
September 30, 1995. Selling, general and administrative expenses of the
Hospitality Group increased 22% primarily due to inclusion for a full year in
1995 compared to nine months in 1994 partially offset by the closing of 735
Bourbon Street. Unallocated corporate expense increased 42% due to higher
director fees and bonuses paid to various management employees.

Consolidated depreciation and amortization expense decreased 20% during 1995
compared to 1994, primarily as a result of the previously discussed sale and
shut down of the Company's cable assembly plants.

Consolidated interest expense declined 61% in 1995 versus the prior year
primarily due to the Company's ability to repay a substantial portion of the
debt with its lender using the proceeds from the sale of Flo Control. In
addition, the Company was able to eliminate the Florida Realty Joint Venture
(FRJV) debt as a result of the sale of Flo Control's 95% interest in the FRJV,
thereby further reducing consolidated interest expense for 1995. At September
30, 1995, the Company had no bank debt outstanding.

During 1995, the Company reported income from continuing operations before
income taxes of $1,273,000 compared to $2,235,000 in 1994. The 1994 income
included a net gain of $1,050,000 on the sale of the cable assembly plants in
West Springfield, Massachusetts and Gardena, California. Therefore, the
Company's operating income from continuing operations before income taxes,
exclusive of the gain on the sale of assets, was $1,185,000 in 1994. Operating
profit associated with the Company's power surge suppressor operation increased
55% over the 1994 level. The Hospitality Group reported operating income of
$244,000 in 1995 compared to a loss of

12
<PAGE>

$202,000 in 1994. Operating income for the Hospitality Group was bolstered by
the closing of 735 Bourbon Street during 1994 which had been operating at a
loss.

Income tax rate on pre-tax income from continuing operations was a benefit of
(2.4%) in 1995. The 1995 rate is substantially lower than the federal statutory
rate of 34% as a result of favorable state tax developments that resulted in the
reversal of certain state tax reserves approximating $255,000. In addition, the
Company's improved profitability from continuing operations allowed for the
recognition of certain federal tax benefits aggregating $314,000. These benefits
had been reserved for the valuation allowance in 1994 due to their uncertainty
of utilization.

The sale of Flo Control in 1995 resulted in a loss from discontinued operation
of $2,513,000, net of income tax benefit. The loss consists of a loss from
operations of $199,000, net of income tax benefit and a loss on disposal of
$2,314,000, net of income tax benefit.

IMPACT OF INFLATION

From October 1993 to September 1996, inflation did not have a material impact on
the Company's operations.

LIQUIDITY AND CAPITAL RESOURCES

During March 1992, the United States Environmental Protection Agency (EPA),
issued a Record of Decision (ROD) with respect to the Company's Superfund Site
in Vestal, New York. An Administrative Order for Remedial Design and Remedial
Action was issued on October 1, 1992. The ROD requires the Company to construct
a water treatment facility at the site and to pump contaminated ground water
from bedrock and overburden extraction wells for 15 to 30 years until
remediation goals were met. In December 1992, the Company's environmental
consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the
EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP
was submitted to the EPA on October 21, 1993. During February 1994, the Company
received comments from the EPA with respect to the revised RDWP and the
Company's environmental consultants submitted a response. The EPA approved the
revised RDWP in October 1994. On November 14, 1994, engineering design and
related fieldwork was begun in order to meet the specifications of the revised
RDWP.

During fiscal 1996 and 1995, $238,000 and $430,000, respectively, were incurred
for work related to the engineering design. These costs were capitalized when
incurred because the remedy would prevent further environmental contamination
with respect to the contaminated ground water being pumped from the extraction
wells and improve the property compared with its condition when acquired by the
Company. Due to concerns about the correctness of the remedy provided for in the
ROD, additional fieldwork was performed and in June 1995, an RDWP Addendum was
prepared and submitted to the EPA. The Company received comments from the EPA
regarding this Addendum, and the Company's environmental consultants submitted a
response shortly thereafter.

On August 24, 1995, the Company and its legal and environmental consultants met
with officials of the EPA and agreed on additional fieldwork deemed necessary by
the EPA to support the Company's position regarding the RDWP Addendum. At this
meeting, officials of the EPA agreed the remedy needed to be modified and that
certain requirements under the existing ROD needed to be eliminated or reduced
in scope. However, the EPA has not approved any changes to the remedy and
amended the ROD.

13
<PAGE>

remedy indicate initial costs of approximately $800,000 to $900,000, and ongoing
maintenance costs of approximately $200,000 to $250,000 in the aggregate. The
costs would be incurred over a one to two year period after the ROD is amended
with the ongoing maintenance costs being incurred over a five year period after
initial cost completion. If the EPA amends the ROD and adopts the revised
remediation treatment, the Company would, at the date of amendment, expense the
estimated future costs of implementing this alternative as well as all prior
costs incurred, approximating $668,000 through September 30, 1996, associated
with the implementation of the original ROD. On July 16, 1996, the Company and
its legal and environmental representatives met with the EPA to review the EPA's
written response to the revised remedy presented in December 1995. As a result
of this meeting, a review of a more cost efficient remedy is being discussed
with the EPA. The EPA now estimates that a revised ROD can be issued by early
1997.

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the non-recourse mortgage approximating $2.3
million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note is secured by the assets sold and the personal
guaranty of an unrelated third party individual. As a result of the above
transactions, the Company recognized a loss on disposal of $2,314,000, net of
income tax benefit, during fiscal 1995. The sale of Flo Control was accounted
for as a discontinued operation. The cash proceeds from the sale were used to
reduce the Company's outstanding debt with its lender. In addition, the sale of
Flo Control's 95% interest in the Florida Realty Joint Venture eliminated the
ongoing monthly expense of the Flo Control lease.

The Company established Buffton Realty Ventures, a commercial real estate
operation, to engage in acquiring properties offering unique opportunities for
profit. During August 1995, the Company acquired 100 Main Street, a commercial
office building located in Fort Worth, Texas. The property is 100% occupied with
two tenants under lease through August 2000. Lease rentals are $438,000
annually. The purchase price for the property was approximately $1,650,000 and
was funded with cash held by the Company. No pro forma financial information is
presented due to immateriality.

Effective January 1, 1996, the Company entered into an agreement to purchase the
assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept with Central and
South American influences located in Houston, Texas, for $589,000 in cash and
375,000 shares of the Company's common stock (with an estimated fair market
value of $656,000). Additionally, the Company issued 76,500 shares of its common
stock for commissions incurred in connection with the acquisition which resulted
in increased acquisition costs of $153,000. Excess of purchase price over fair
value of net tangible assets acquired, recorded as Goodwill, approximates
$1,300,000 and is being amortized on a straight line basis over 15 years.
Effective January 1, 1996, the Company also entered into an agreement to
purchase the assets and assume certain liabilities of the Stockyards Hotel,
located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the
Company's common stock (with an estimated fair market value of $788,000) and the
refinancing of a $1,600,000 bank term loan. Under this agreement, the Company
has guaranteed, until March 15, 1997, a sales price of $2.05 per share for any
of this stock that may be sold. At September 30, 1996, no liability had been
incurred under the guarantee agreement. These acquisitions were accounted for
under purchase accounting and are included in the Company's Results of
Operations beginning on the acquisitions' effective date of January 1, 1996. In
fiscal 1997, the Company currently plans to open a second Cabo unit in downtown
Houston and to develop a destination food and beverage operation at the SYH at
an estimated total cost of approximately $1 million.

14
<PAGE>

Unaudited proforma results from continuing operations, as if the acquisitions
had occurred at the beginning of each respective period, are as follows:

<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1996 1995
---- ----
(In thousand, except per share amounts)
<S> <C> <C>
Revenues................................. $25,973 $21,670
Net income from continuing operations.... 1,437 1,389
Primary income per average common share.. .22 .22
Fully diluted income per common share.... .21 .22
</TABLE>

In March 1996, one of the Company's subsidiaries entered into a one year
financing agreement with a bank to replace its existing line of credit. The
commitment consists of a $2,000,000 revolving line of credit, all of which was
available for borrowing at September 30, 1996, and is secured by the accounts
receivable and inventory of the subsidiary. The loan provides for interest to be
paid monthly at a floating rate equal to the established prime rate.

In March 1996, the Company borrowed $1,200,000 from an insurance company. The
note is secured by a deed of trust on a commercial office building located in
Fort Worth, Texas. The note bears interest at 7.75%, payable in 119 monthly
installments of $9,852 with a final payment of $831,000 due April 1, 2006.

Effective July 1, 1996, the Company sold one of its entertainment facilities
located in New Orleans, Louisiana. The proceeds of $464,000, consisting of cash
and a note receivable for $350,000, approximated the net book value of the
assets that were sold.

During fiscal 1996, the Company purchased 183,350 shares of its common stock at
a cost of $356,000. The shares are recorded as Treasury Stock and will be
available for employee stock plans and other corporate requirements.

The Company invested $1,613,000 in machinery, equipment, furniture, fixtures,
and enhancements to existing property during 1996, as well as invested
$1,212,000 for Cabo and SYH.

The Company's operating activities provided cash of $3,653,000, reflecting
improved operations resulting from the disposition of Flo Control.

The Company believes that its current cash on hand ($1,659,000 at September 30,
1996), current borrowing availability and expected cash flow from operations, is
adequate to fund the Company's current operating needs and its projected growth
for Cabo and SYH during fiscal 1997.

ACCOUNTING CHANGES

IMPAIRMENT OF ASSETS

In March 1995, the Financial Accounting Standards Board issued FAS 121 on
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This statement requires companies to investigate potential
impairments of long-lived assets, certain identifiable intangibles, and
associated goodwill on an exception basis, when there is evidence that events or
changes in circumstances have made recovery of an asset's carrying value
unlikely. Upon adoption, where such circumstances exist, the Company will
evaluate the carrying amount of its long-lived assets and associated goodwill by
estimating future cash flows expected to result from the use of such assets and
their eventual disposition. If future cash flows (undiscounted and without
interest charges) are less than the carrying amount of the assets, an impairment
loss will be recorded. The impairment loss is to be measured as the amount by
which the carrying amount of the asset exceeds the fair value of the asset. The
Company is required to adopt this statement by October 1, 1996; however, such
adoption is not expected to have a material impact on the Company's results of
operations or financial condition.

15
<PAGE>

ACCOUNTING FOR STOCK-BASED COMPENSATION

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective October 1, 1996, the Company will adopt FAS 123
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting as prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Entities electing
to remain with the accounting in APB 25 must make proforma disclosures of net
income and earnings per share as if the fair value based method of accounting
defined in FAS 123 had been applied. The Company will continue to account for
stock-based employee compensation plans under the intrinsic method pursuant to
APB 25 and will make the disclosures in its footnotes as required by FAS 123.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------

The financial statements and supplementary data are included under item 14(a)(1)
and (2) of this report.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

No changes in accountants or disagreements with accountants on accounting and/or
financial disclosure have arisen.

16
<PAGE>

PART III
--------

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------

The following table reflects the name and age of each of the Directors,
including the name and age of each continuing Director, the positions and
offices with the Company currently held by each continuing Director, the period
of service as a Director of the Company, and the year in which such continuing
Directors' terms will expire.

<TABLE>
<CAPTION>
POSITION HELD TERM TO
DIRECTOR'S NAME AGE WITH THE COMPANY DIRECTOR SINCE EXPIRE
--------------- --- ---------------- -------------- ------
<S> <C> <C> <C> <C>
Bruno V. D'Agostino 54 Director December 1991 1998
John M. Edgar 53 Director September 1987 1998
Hampton Hodges 59 Director December 1980 1997
H.T. Hunnewell 70 Director January 1981 1999
Robert H. McLean 55 President, Chief January 1981 1998
Executive Officer,
Chairman of the
Board of Directors
Walter D. Rogers, Jr. 52 Director, President February 1995 1997
and Chief Executive
Officer of Current
Technology, Inc.
Russell J. Sarno 61 Director May 1984 1999
</TABLE>

The executive officers of the Company, their respective ages, positions held,
and tenure with the Company are as follows:

<TABLE>
<CAPTION>
OFFICER OF THE
NAME AGE POSITION HELD WITH THE COMPANY COMPANY SINCE
---- --- ------------------------------ -------------
<S> <C> <C> <C>
Robert H. McLean 55 President, Chief Executive 1985
Officer,
Chairman of the Board of
Directors
Robert Korman 49 Vice President, Treasurer, 1982
Chief
Financial Officer and
Secretary
Walter D. Rogers, Jr. 52 President of Current 1988
Technology, Inc.
</TABLE>

BUSINESS EXPERIENCE

The following is a brief summary of the business experience of each of the
Directors and Executive Officers for the past five years.

BRUNO V. D'AGOSTINO served from 1978 to 1987 as Senior Vice President of
Benjamin Thompson & Associates, a firm specializing in marketplace architecture.
In August 1987, Bruno D'Agostino became a founding partner of D'Agostino Izzo
Quirk Architects, and he continues to serve in that capacity, directing urban
design projects throughout the United States. Mr. D'Agostino received a B.A.
degree in Architecture from the University of Cincinnati in 1964, and a Masters
degree in Architecture and Urban Design from Harvard University in 1969.

17
<PAGE>

JOHN M. EDGAR has been engaged in the private practice of law in Kansas
City, Missouri since 1968. Mr. Edgar is currently the managing partner of the
Kansas City offices of the law firm of Bryan Cave LLP, and a member of such
firm's Management Committee. Mr. Edgar received a B.S. degree in Business
Administration and Accounting from the University of Kansas in 1965, and a J.D.
degree, with honors, from the University of Missouri at Kansas City in 1968.

HAMPTON HODGES serves as president of Cottonwood Properties, a commercial
real estate company located in Paris, Texas. Mr. Hodges received a Bachelor of
Science degree from the United States Military Academy at West Point in 1961.

H.T. HUNNEWELL serves as President of Twin Montana, Inc., an oil and gas
exploration and development company located in Graham, Texas. Prior to October
1991, Mr. Hunnewell was Vice President of Twin Montana, Inc. Mr. Hunnewell is
also a director of Pyramid Oil Company. Mr. Hunnewell received a B.S. degree in
Petroleum Engineering and a B.S. degree in Geology from Texas A&M University in
1950.

ROBERT KORMAN, a Certified Public Accountant, has served as Vice President,
Treasurer, and Chief Financial Officer of the Company since February 1989. Mr.
Korman served as the Treasurer of the Company from December 1982 ; to February
1989. Mr. Korman was elected as the Secretary of the Company February 1994.

ROBERT H. MCLEAN co-founded the Company in 1980 and has served as the
Chairman of the Board, President and Chief Executive Officer of the Company
since February 1989. Mr. McLean received a B.B.A. in Business Administration
from the University of Texas at Austin in 1963 and a L.L.B. from the University
of Texas School of Law in 1966.

WALTER D. ROGERS, JR. has served as President of Current Technology, Inc.
since May 1992. Mr. Rogers served as Executive Vice President of CTI from
October 1990 to May 1992 and served as Vice President of the Company between
March 1988 and October 1990. Mr. Rogers received a B.S. degree in Business
Administration and Accounting from the University of Alaska in 1972.

RUSSELL J. SARNO, since January 1, 1995, has served as President of Flo
Control, Inc., a California corporation and manufacturer of specialty fluid
control devices located in Burbank, California. For ten years prior to January
1, 1995, Mr. Sarno served as President of Flo Control, Inc., a Delaware
corporation and at the time, a wholly-owned subsidiary of the Company.

TERMS OF OFFICE; RELATIONSHIP

The officers of the Company are elected annually by the Board of Directors of
the Company at the Annual Meeting of Directors held immediately following each
Annual Meeting of Stockholders, or as soon thereafter as necessary and
convenient in order to fill vacancies of newly created offices. Each officer
holds office until his successor is duly elected and qualified or until his
death, resignation or removal, if earlier. Any officer or agent elected or
appointed by the Board of Directors of the Company may be removed by the Board
of Directors whenever, in its judgment, the best interests of the Company will
be served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.

There are no family relationships among the executive officers of the Company.
There are no arrangements or understandings between any officer and any other
person pursuant to which that officer was elected.

18
<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the American Stock Exchange.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal 1996 all
filing requirements were complied with by its officers, directors and greater
than ten-percent beneficial owners.

19
<PAGE>

ITEM 11 - EXECUTIVE COMPENSATION
--------------------------------

The following table sets forth the compensation paid or accrued by the
Company and its subsidiaries for services rendered during the last three
fiscal years to (i) the Company's Chief Executive Officer, and (ii) each of
the most highly compensated executive officers of the Company whose cash
compensation exceeds $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)

Name and Other Annual Restricted Options/ LTIP All Other
Principal Position Year Salary (1) Bonus (1) Compensation Stock Awards SAR'S Payouts Compensation
- ------------------ ---- ---------- --------- ------------ ------------ ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. McLean 1996 250,000 175,000 -- -- 200,000 -- 4,500 (2)
Chief Executive 1995 250,000 75,000 -- 140,650 (3) 300,000 -- 4,500 (2)
Officer 1994 250,000 225,000 -- -- -- -- 1,613 (2)

Robert Korman 1996 125,000 50,000 -- -- 10,000 -- 4,500 (2)
Chief Financial 1995 125,000 40,000 -- 13,750 (4) 100,000 -- 2,171 (2)
Officer 1994 125,000 80,000 -- -- -- -- 368 (2)

Walter D. Rogers Jr. 1996 175,000 100,000 -- -- 50,000 -- 4,500 (2)
President of Current 1995 148,333 90,000 -- 56,890 (5) 100,000 -- 4,150 (2)
Technology, Inc. 1994 135,833 60,000 -- -- -- -- 964 (2)
</TABLE>

(1) The amounts shown include cash and non-cash compensation earned and
received by executive officers as well as amounts earned but deferred
at the election of those officers.

(2) Contributions by the Company to it's 401(k) Profit Sharing Plan on
behalf of the named executive officer.

(3) Represents 50,000 shares of the Company's common stock issued in
February 1995 and 50,000 shares of the Company's common stock issued
in August 1995 to Mr. McLean. These shares are included in the
security ownership schedule included at Item 12.

(4) Represents 10,000 shares of the Company's common stock issued in
February 1995 to Mr. Korman. These shares are included in the security
ownership schedule included at Item 12.

(5) Represents 10,000 shares of the Company's common stock issued in
February 1995 and 30,000 shares of the Company's common stock issued
in August 1995 to Mr. Rogers. These shares are included in the
security ownership schedule included at Item 12.

20
<PAGE>

The following table sets forth the options granted during the last completed
fiscal year to (i) the Company's Chief Executive Officer, and (ii) each of the
most highly compensated executive officers whose cash compensation exceeds
$100,000.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/SAR'S VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE OF ANNUAL RATES OF
OPTIONS/SAR'S EMPLOYEES BASE PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE FOR OPTION TERM
(A) (B) (C) (D) (E) 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Robert H. McLean 200,000 62.50% 1.62 8/15/2001 89,515 197,805
Chief Executive Officer

Robert Korman 10,000 3.13% 1.94 9/6/2001 5,360 11,844
Chief Financial Officer

Walter D. Rogers Jr. 50,000 15.63% 1.94 9/6/2001 26,799 59,219
President of Current
Technology, Inc.
</TABLE>

OPTIONS EXERCISED

There were no stock options exercised by any named executive officer of the
Company during the last fiscal year.

EQUITY PARTICIPATION PLANS

In September 1989, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "1989 Plan") to afford key employees the opportunity to
purchase shares of the Company's common stock as a reward for past performance
and an incentive for future performance. Under the 1989 Plan, 500,000 shares of
the Company's stock may be issued. At February 3 and August 2, 1995, 450,000
options and 50,000 options, respectively, were granted to certain officers of
the Company at an exercise price of $1.50 per share which was the fair market
value at date of grant. The non-qualified options are fully vested and must be
exercised within five years of the date of grant. The options do not expire upon
termination of the officer's employment and may be transferred by will or by the
laws of descent and distribution. The options may be exchanged for options that
are substantially equivalent in number, percentage of ownership and price (as it
relates to book value) in each of the Company's subsidiaries.

21
<PAGE>

options that are substantially equivalent in number, percentage of ownership and
price (as it relates to book value) in each of the Company's subsidiaries.
Additionally, in September 1996, 40,000 options were granted under the 1996 Plan
to certain employees of the Company at an exercise price of $1.94 which was the
fair market value at date of grant. The term of the options is for six years and
become exercisable at a rate of 20% per year beginning one year after the date
of grant. The options terminate and become unexercisable upon termination of the
employee, unless such termination is without cause or is due to death or total
and permanent disability.

COMPENSATION OF DIRECTORS

For the 1996 fiscal year the outside members of the board of Directors were
issued shares of Common Stock in lieu of cash compensation for director's fees.
As a result, Mr. D'Agostino, Mr. Edgar, Mr. Hodges and Mr. Hunnewell, as non-
employee Directors, received 10,000 shares of the Company's Common Stock. The
Company reimburses the Directors for expenses in connection with meetings, and
otherwise does not incur any cash outlays with respect to Director expenses.

EMPLOYMENT AGREEMENTS

Mr. McLean has an Employment Agreement with the Company providing for an annual
salary of $250,000.00, a term of thirty-six (36) months beginning October 1,
1995 and contains a non-competition provision. This Employment Agreement has an
automatic renewal feature which operates to insure that the term of the
Employment Agreement is never less than twenty-four (24) months, nor more than
thirty-six (36) months. Mr. McLean also has a Change in Control Agreement, with
the same term as his Employment Agreement, which provides that if Mr. McLean's
employment with the Company is terminated within two years following a Change in
Control, unless such termination is because of his death or disability or by the
Company for cause, Mr. McLean shall be entitled to receive a lump sum payment
equal to three times his base amount as that term is defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), subject to reduction
in order to avoid the payment of an "excess parachute payment" as that term is
defined in Section 280G of the Code.

Mr. Rogers has an Employment Agreement with CTI providing for an annual salary
of $175,000.00, a term of thirty-six (36) months beginning June 1, 1995 and
contains a non-competition provision. This Employment Agreement has an automatic
renewal feature which operates to insure that the term of the Employment
Agreement is never less than twenty-four (24) months, nor more than thirty-six
(36) months. Mr. Rogers' Employment Agreement also provides that if Mr. Rogers'
employment with CTI is terminated within twenty-four (24) months after a Change
in Control, unless such termination is because of his death or disability or by
CTI for cause, Mr. Rogers shall be entitled to receive a lump sum payment equal
to three times his base amount as that term is defined in Section 280G of the
Code, subject to reduction in order to avoid the payment of an "excess parachute
payment" as that term is defined in Section 280G of the Code.

Mr. Korman has an Employment Agreement with the Company providing for an annual
salary of $125,000.00, with a term of twelve (12) months beginning August 1,
1995. This Employment Agreement has an automatic renewal feature which operates
to insure that the term of the Employment Agreement is always twelve (12)
months. Mr. Korman's Employment Agreement also has a Change in Control provision
which provides that if Mr. Korman's employment with the Company is terminated
within twenty-four (24) months following a Change in Control, unless such
termination is because of his death or disability, or by the Company for cause,
Mr. Korman shall be entitled to receive a lump sum payment equal to his salary
for the remaining balance of his employment term.

For purposes of the Employment Agreements and the Change in Control agreement
referred to immediately above, a "Change in Control" is defined as having
occurred upon any of the following events:

(i) the acquisition directly or indirectly, by any person (as such terms
are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended), other than the Company,

22
<PAGE>

any of its subsidiaries or any employee benefit plan maintained by Company
or any such subsidiary, of beneficial ownership of securities of Company
representing fifteen percent (15%) or more of the combined voting power of
Company's then outstanding securities (with the terms used herein and in
Sections 13(d) and/or 14(d) of the Securities Exchange Act of 1934, as
amended, having the meanings of such terms in such Sections);

(ii) if the stockholders of Company approve a merger of consolidation, a
sale or disposition of all or substantially all of Company's assets or a
plan of liquidation or dissolution of Company.

(iii) the election during any period of twenty-four (24) months or less of
a member or members of Company's Board without the approval of the election
or nomination for election of such new member or members by a majority of
the members of the Board who were members at the beginning of the period,
or members of the Board thereafter recommended to succeed such original
members (or their successors hereunder) by a majority of the members of the
Board who were members at the beginning of the period (or their successors
hereunder); or

(iv) any person (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) other than Company, any of its
subsidiaries or any employee benefit plan maintained by Company or any such
subsidiary, makes a tender or exchange offer for any shares of Company's
outstanding voting securities at any point in time, pursuant to which any
such shares are purchased.

Unless, the Continuing Board of Directors of Company (as hereinafter defined)
determines that the happening of any of the foregoing events in a particular
case should not be deemed a Change in Control. The "Continuing Board of
Directors of Company" shall mean (i) the members of Company's Board of Directors
in office immediately prior to the Change in Control, excluding any who initiate
a Change in Control or are affiliated with one who initiates a Change in
Control, and (ii) any subsequent director who may be selected, nominated or
approved by a majority of the other Continuing Board of Directors of
Company.

23
<PAGE>

ITEM 12 -SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------

The following table sets forth information as of January 20, 1997, regarding the
beneficial ownership (as defined by the SEC) of Common Stock by (i) each person
known by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) each director of the Company; (iii) each executive officer of the
Company named in the Executive Compensation Table (see "Executive
Compensation"); and (iv) all directors and executive officers of the Company as
a group. Except as otherwise noted, each named beneficial owner has sole voting
and investment power with respect to the shares owned.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner (1) Beneficial Ownership (2) Percent of
----------------------- ------------------------ ----------
Class
-----
<S> <C> <C>
Steel Partners II, L.P. 655,000 9.81
750 Lexington Avenue 27th Floor
New York, NY 10022

Robert H. McLean 619,831 (3) 8.63 (4)

James Hillyer 565,000 (5) 8.21 (6)
3350 McCue, #2103
Houston, TX 77056

Alphi Fund, L.P. 384,200 5.75
155 Pfingsten Rd, Suite 360
Deerfield, IL 60015

John M. Edgar 15,040 0.23

Hampton Hodges 48,000 0.72

H.T. Hunnewell 123,151 1.84

Russell J. Sarno 22,614 0.34

Bruno V. D'Agostino 55,000 0.82

Robert Korman 122,354 (7) 1.80 (8)

Walter D. Rogers, Jr. 202,225 (9) 2.96 (10)

All current Directors and Officers 1,208,215 (11) 16.24 (12)
as a group (9 in number)
</TABLE>

(1) Unless otherwise indicated, the address of the security holders named above
is: 226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107-1220.

24
<PAGE>

(2) Shares are deemed to be "beneficially owned" by a person if such person,
directly or indirectly, has or shares (i) the voting power thereof,
including the power to vote or to direct the voting of such shares, or (ii)
the investment power with respect thereto, including the power to dispose
or direct the disposition of such shares. In addition, a person is deemed
to beneficially own any shares as to which such person has the right to
acquire beneficial ownership within 60 days. The number of shares shown
represents sole voting and investment power except as otherwise indicated
in the footnotes below.

(3) This figure includes 100,000 shares owned of record by Mr. McLean, 500,000
shares covered by currently exercisable stock options owned by Mr. McLean,
4,831 shares owned by the Company's Employee Stock Ownership Plan which are
voted by Mr. McLean pursuant to such plan and 15,000 shares held in a trust
of which Mr. McLean is the trustee.

(4) This percentage is calculated including the 500,000 shares covered by the
stock options owned by Mr. McLean.

(5) This figure includes 15,000 shares of Common Stock owned directly by Mr.
Hillyer, 350,000 shares of Common Stock owned beneficially by Mr. Hillyer
through Bermuda Trust (Cook Islands) Limited, as trustee of the Hillyer
Family Trust, and 200,000 shares of Common Stock issuable to Mr. Hillyer
Pursuant to non-qualified stock options which are currently exercisable.

(6) This percentage is calculated including the 200,000 shared covered by the
stock options owned by Mr. Hillyer.

(7) This figure includes 110,000 shares issuable to Mr. Korman pursuant to non-
qualified stock options which are currently exercisable. This figure also
includes 2,354 shares which are owned by the Employee Stock Ownership Plan
and are voted by Mr. Korman pursuant to the plan.

(8) This percentage is calculated including the 110,000 shares covered by the
stock options owned by Mr. Korman.

(9) This figure includes 150,000 shares issuable to Mr. Rogers pursuant to non-
qualified stock options which are currently exercisable. This figure also
includes 2,125 shares which are owned by the Employee Stock Ownership Plan
and are voted by Mr. Rogers pursuant to the plan.

(10) This percentage is calculated including the 150,000 shares covered by the
stock options owned by Mr. Rogers.

(11) This figure includes the 760,000 shares of the Company's common stock
issuable pursuant to the non-qualified stock options described in notes 4,
8 and 10 hereinabove.

(12) This percentage is calculated including the 760,000 shares of the Company's
common stock issuable pursuant to the non-qualified stock options described
in notes 3, 7 and 9 hereinabove, and all percentages are rounded to the
nearest one-hundredth of a percent.

25
<PAGE>

No written or oral agreement or other arrangement exists between any of the
above-named individuals or companies and the Company regarding the manner
in which the shares of Common Stock owned by each will be voted on any
issue or policy affecting the Company.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

The law firm of Bryan Cave LLP provides certain legal services to the Company.
John M. Edgar, a director of the Company, is a managing partner of Bryan Cave
LLP.

26
<PAGE>

PART IV
-------

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

(a) The following documents are filed as a part of this report:

1. Financial Statements - The financial statements listed in the
--------------------
"Index to Consolidated Financial Statements and Financial
Statement Schedule" described at F-1.

2. Financial Statement Schedule - The financial statement schedule
----------------------------
listed in the "Index to Consolidated Financial Statements and
Financial Statement Schedule" described at F-1.

3. Exhibits - Refer to (c) below.
--------

(b) Reports on Form 8-K.
--------------------

Report dated November 15, 1995 reporting changes to the Company's
Rights Agreement

3.1 Certificate of Incorporation (Exhibit 3.1 to Form S-1
Registration Statement No. 2-71057 and incorporated herein by
reference).

3.2 By-laws (Exhibit 3.2 to Form S-1 Registration Statement No. 2-
71057 and incorporated herein by reference).

3.3 Certificate of Amendment to the Certificate of Incorporation
Creating Classified Board of Directors, eliminating a
Stockholder's right to call a special meeting, and adopting a
fair price supermajority provision dated February 21, 1989
(Exhibit 4.4 to Form 10-Q for the quarter ended March 31, 1989
and incorporated herein by reference).

3.4 Restated by-laws of Buffton Corporation dated February 21, 1989
(Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 1989
and incorporated herein by reference).

3.5 Restated by-laws of Buffton Corporation dated January 31,
1996.

4 Rights Agreement (Exhibit 1 to Form 8-K dated June 23, 1988 and
incorporated herein by reference).

10 Asset Purchase Agreement dated January 19, 1996 incorporated
herein by reference to Form 8-K dated January 19, 1996.

27
<PAGE>

10.1 Agreement for Sale of Assets from Flo Control, Inc. dated as of
January 20, 1995, by and among Buffton Corporation, a Delaware
corporation, Flo Control, Inc., a Delaware corporation
("Seller") and F.C. Acquisition, Inc., a California corporation
("Buyer") incorporated herein by reference to Form 8-K dated
January 20, 1995.

10.2 Agreement for sale of Florida Realty Joint Venture interests
from Flo Control, Inc., dated January 20, 1995 by and among
Buffton Corporation, a Delaware corporation, Flo Control, Inc. a
Delaware corporation, ("Seller") and F.L.C. Property
Acquisition, Inc., a California corporation ("Buyer")
incorporated herein by reference to Form 8-K dated January 20,
1995.

10.3 Agreement for Sale of Secondary Containment Assets from Flo
Control, Inc., dated January 20, 1995, by and among Buffton
Corporation, a Delaware corporation, Flo Control, Inc., a
Delaware corporation ("Seller") and Patrick Hopkins and Flo-Safe
Systems, Inc. a Wisconsin corporation ("Buyer") incorporated
herein by reference to Form 8-K dated January 20, 1995.

10.4 Second Amendment to Accounts Financing Agreement dated January
20, 1995 by and among Congress Financial Corporation, Current
Technology, Inc., Electro-Mech, Inc., and Flo Control, Inc.
incorporated herein by reference to Form 8-K dated January 20,
1995.

10.5 Second Amended and Restated Revolving Credit Note incorporated
herein by reference to Form 8-K dated January 20, 1995.

10.6 Rights Amendment Agreement dated November 15, 1995 incorporated
herein by reference to Form 8-K dated November 15, 1995.

11 Statement of Computation of Earnings Per Share

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule

28
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BUFFTON CORPORATION Date
-------------------

By: /s/ Robert H. McLean January 28, 1997
-------------------------------------------- -------------------
Robert H. McLean, President and
Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacity and on the dates indicated.

/s/ Robert H. McLean January 28, 1997
-------------------------------------------- --------------------
Robert H. McLean, President and Chief
Executive Officer; Chairman of the
Board of Directors (Principal
Executive Officer)

/s/ Robert Korman January 28, 1997
-------------------------------------------- --------------------
Robert Korman, Vice President and
Chief Financial Officer

/s/ Bruno D'Agostino January 28, 1997
-------------------------------------------- --------------------
Bruno D'Agostino, Director

/s/ John M. Edgar January 28, 1997
-------------------------------------------- --------------------
John M. Edgar, Director

/s/ Hampton Hodges January 28, 1997
-------------------------------------------- --------------------
Hampton Hodges, Director

/s/ H.T. Hunnewell January 28, 1997
-------------------------------------------- --------------------
H.T. Hunnewell, Director

/s/ Walter D. Rogers, Jr. January 28, 1997
-------------------------------------------- --------------------
Walter D. Rogers, Jr., Director

/s/ Russell J. Sarno January 28, 1997
-------------------------------------------- --------------------
Russell J. Sarno, Director

29
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
- --------------------------------- ----
<S> <C>
Report of Independent Accountants F-2

Consolidated Statements of Operations F-3

Consolidated Balance Sheets F-4

Consolidated Statements of Cash Flow F-5

Consolidated Statements of Changes in Stockholders' Equity F-6

Notes to Consolidated Financial Statements F-7

FINANCIAL STATEMENT SCHEDULE:
- ----------------------------

Schedule IX - Valuation and Qualifying Accounts F-20
</TABLE>

Schedules other than the ones listed above have been omitted since they are
either not required, not applicable, or the required information is shown in the
financial statements or related notes.

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Buffton Corporation

In our opinion, the consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the financial
position of Buffton Corporation and its subsidiaries at September 30, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Fort Worth, Texas
November 15, 1996

F-2
<PAGE>

BUFFTON CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Years Ended September 30,
-------------------------------------
1996 1995 1994
---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net revenues................................................. $25,175 $19,187 $30,432
Net gain on sale of certain operating assets................. - - 1,050
------- ------- -------
25,175 19,187 31,482
------- ------- -------
Costs and expenses:
Cost of goods sold (exclusive of depreciation)............. 8,402 5,890 17,080
Selling, general and administrative........................ 13,052 10,939 10,649
Depreciation and amortization.............................. 1,281 961 1,202
Interest................................................... 235 124 316
------- ------- -------

Total costs and expenses................................... 22,970 17,914 29,247
------- ------- -------

Income from continuing operations before income taxes........ 2,205 1,273 2,235
Income tax provision (benefit)............................... 811 (31) 233
------- ------- -------
Income from continuing operations............................ 1,394 1,304 2,002
------- ------- -------

Discontinued operation:
Loss from operations, net of income tax benefits of
$107,000 and $49,000, respectively........................ - (199) (94)
Loss on disposal, net of income tax benefit
of $754,000................................................ - (2,314) -
------- ------- -------

Loss from discontinued operation........................... - (2,513) (94)
------- ------- -------

Net income (loss)............................................ $ 1,394 $(1,209) $ 1,908
======= ======= =======

Primary income (loss) per average common share:
Continuing operations...................................... $ .22 $ .24 $ .39
Discontinued operation..................................... - (.46) (.02)
------- ------- -------
Net income (loss).......................................... $ .22 $ (.22) $ .37
======= ======= =======

Weighted average common shares outstanding................. 6,441 5,465 5,120
======= ======= =======

Fully diluted income (loss) per common share:
Continuing operations...................................... $ .21 $ .24 $ .39
Discontinued operation..................................... - (.46) (.02)
------- ------- -------
Net income (loss).......................................... $ .21 $ (.22) $ .37
======= ======= =======

Fully diluted common shares outstanding.................... 6,649 5,465 5,120
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

BUFFTON CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
ASSETS

September 30,
--------------------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 1,659 $ 7
Accounts receivable, less allowance for doubtful accounts of
$35,000 and $75,000, respectively..................................... 3,370 2,893
Inventories............................................................ 1,396 2,031
Prepaid and other current assets....................................... 492 498
------- -------

Total current assets.................................................. 6,917 5,429

Property, plant and equipment, net...................................... 9,631 5,467

Patents, net of accumulated amortization of $1,529,000
and $1,358,000, respectively.......................................... 1,451 1,617
Goodwill, net of amortization of $845,000 and $666,000, respectively.... 4,120 3,503
Deferred income taxes................................................... - 590
Long-term notes receivable.............................................. 540 350
Other assets, net....................................................... 505 268
------- -------
$23,164 $17,224
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...................................... $ 187 $ -
Accounts payable....................................................... 1,152 1,001
Accrued liabilities.................................................... 1,524 1,368
Income taxes........................................................... 311 236
------- -------
Total current liabilities............................................. 3,174 2,605

Long-term debt.......................................................... 2,493 -
Deferred income taxes................................................... 4 -

Stockholders' equity:
Preferred stock $.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding...................................... - -
Common stock $.05 par value; 30,000,000 shares authorized;
outstanding shares 6,726,878 and 5,685,378, respectively.............. 337 284
Additional paid-in capital............................................. 14,354 12,571
Retained earnings...................................................... 3,158 1,764
Treasury stock, at cost, 183,350 shares................................ (356) -
------- -------
17,493 14,619
Commitments and contingencies (Note 2 and 12)...........................
------- -------
$23,164 $17,224
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

BUFFTON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
For the Years Ended September 30,
------------------------------------
1996 1995 1994
----------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................ $ 1,394 $(1,209) $ 1,908
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation............................................... 704 594 1,424
Amortization............................................... 577 564 662
Deferred income taxes...................................... 594 (920) 102
Bad debt provision......................................... 40 (84) (3)
Net (gain) loss on sale of assets.......................... - 3,068 (1,050)
Issuance of common stock in payment for services........... 139 571 -
Change in components of current assets and liabilities
(exclusive of acquisitions and dispositions):
Accounts receivable....................................... (662) (1,137) (269)
Inventories............................................... 639 (958) (387)
Prepaid and other......................................... - (536) 80
Accounts payable.......................................... 34 191 (438)
Accrued liabilities....................................... 119 (297) (2,238)
Income taxes payable...................................... 75 (18) 152
------- ------- -------
Net cash provided by (used for) operating activities.......... 3,653 (171) (57)
------- ------- -------

Cash flows from investing activities:
Additions to property, plant and equipment................... (1,613) (1,337) (1,257)
Proceeds from sale of operating assets....................... 100 3,750 9,461
Acquisitions................................................. (1,212) (1,653) (159)
Additions to other assets.................................... - (55) -
------- ------- -------

Net cash provided by (used for) investing activities.......... (2,725) 705 8,045
------- ------- -------

Cash flows from financing activities:
Additions to debt............................................ 1,200 - 600
Repayments of debt........................................... (120) (3,723) (5,842)
Treasury stock purchases..................................... (356) - -
------- ------- -------

Net cash provided by (used for) financing activities.......... 724 (3,723) (5,242)
------- ------- -------

Net increase (decrease) in cash............................... 1,652 (3,189) 2,746

Cash at beginning of year..................................... 7 3,196 450
------- ------- -------

Cash at end of year........................................... $ 1,659 $ 7 $ 3,196
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

BUFFTON CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Years Ended September 30, 1996, 1995, and 1994

<TABLE>
<CAPTION>
Additional
Common Paid-in Treasury Retained
Stock Capital Stock Earnings Total
------ ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>

Balance at September 30, 1993........... $ 234 $11,226 $ - $ 1,065 $12,525

Issuance of 600,000 shares of $.05 par
value common stock for acquisition..... 30 794 - - 824

Net income.............................. - - - 1,908 1,908
------ ------- ------- -------- -------

Balance at September 30, 1994........... 264 12,020 - 2,973 15,257

Issuance of 407,356 shares of $.05 par
value common stock for payment of
services............................... 20 551 - - 571

Net loss................................ - - - (1,209) (1,209)
------ ------- ------- -------- -------

Balance at September 30, 1995........... 284 12,571 - 1,764 14,619

Issuance of 951,500 shares of $.05 par
value common stock for acquisitions.... 48 1,649 - - 1,697

Issuance of 90,000 shares of $.05 par
value common stock for services........ 5 134 - - 139

Purchase of 183,350 shares of $.05
par value common stock.................. - - (356) - (356)

Net income.............................. - - - 1,394 1,394
------ ------- ------- -------- -------

Balance at September 30, 1996........... $ 337 $14,354 $ (356) $ 3,158 $17,493
====== ======= ======= ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

BUFFTON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Buffton Corporation (the Company) is principally engaged in the manufacture of
filter surge suppressors and power distribution systems and the operation of
food and beverage and lodging establishments. These consolidated financial
statements include all of the assets, liabilities, revenues, and costs and
expenses of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

For purposes of the Consolidated Statements of Cash Flow, cash and cash
equivalents consist of cash in banks and cash investments in immediately
available interest bearing accounts.

INVENTORIES

Inventories are stated at the lower of cost (first in, first out) or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and depreciated by the
straight-line method over estimated useful lives of three to forty years.

Maintenance and repairs are charged to income as incurred. The Company
capitalizes renewals and betterments which significantly enhance the value or
extend the useful life of an asset. Upon the sale or retirement of depreciable
assets, the cost and related accumulated depreciation are removed from the
accounts, and the resulting gain or loss is credited to or charged against
income.

INTANGIBLES

Patents are carried at the Company's cost as determined at acquisition and are
being amortized on a straight-line basis over their remaining legal lives.

Goodwill represents the excess of cost over net assets acquired and is being
amortized on a straight line basis over fifteen years. Annually, the Company
evaluates the carrying value of goodwill by reviewing estimated recoverability
from future operations of the associated assets to which it relates.
Recoverability is assessed based upon future cash flows (undiscounted and
without interest charges) to be generated by related assets. Impairments are
recognized to the extent that the carrying value of goodwill exceeds such
estimated future cash flows.

F-7
<PAGE>

IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued FAS 121 on
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." This statement requires companies to investigate potential
impairments of long-lived assets, certain identifiable intangibles, and
associated goodwill on an exception basis, when there is evidence that events or
changes in circumstances have made recovery of an asset's carrying value
unlikely. Upon adoption, where such circumstances exist, the Company will
evaluate the carrying amount of the related long-lived assets by estimating
future cash flows expected to result from the use of such assets and their
eventual disposition. If future cash flows (undiscounted and without interest
charges) are less than the carrying amount of the assets, an impairment loss
will be recorded. The impairment loss is to be measured as the amount by which
the carrying amount of the asset exceeds the fair value of the asset. The
Company is required to adopt this statement on October 1, 1996; however, such
adoption is not expected to have a material impact on the Company's results of
operations or financial condition.

ACCOUNTING FOR STOCK-BASED COMPENSATION

In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective October 1, 1996, the Company will adopt FAS 123
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting as prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Entities
electing to remain with the accounting in APB 25 must make proforma disclosures
of net income and earnings per share as if the fair value based method of
accounting defined in FAS 123 had been applied. The Company will continue to
account for stock-based employee compensation plans under the intrinsic method
pursuant to APB 25 and will make the disclosures in its footnotes as required by
FAS 123.

INCOME TAXES

The Company records deferred income taxes under the asset and liability method,
which requires recognition of deferred tax assets and liabilities for expected
future tax consequences of temporary differences between the book and tax basis
of assets and liabilities and other tax attributes, including tax loss and
credit carryforwards. The Company provides a valuation allowance for the amount
of tax assets not expected to be realized.

ADVERTISING COST

The Company's advertising expenditures are expensed in the period the
advertising first occurs. Advertising expense for fiscal years ended September
30, 1996, 1995 and 1994 approximated was $185,000, $215,000 and $249,000,
respectively.

NET INCOME (LOSS) PER SHARE

Primary net income (loss) per share has been computed on the basis of the
weighted average number of common shares outstanding; the effect of outstanding
stock options is immaterial for purposes of calculating primary net income
(loss) per share for 1996, 1995 and 1994. Fully diluted net income (loss) per
share for fiscal 1996 includes an additional 208,000 shares relating to
outstanding stock options calculated using the treasury stock method. The
effect of outstanding stock options was immaterial for purposes of calculating
fully diluted net income (loss) per share for 1995 and 1994.

F-8
<PAGE>

PERVASIVENESS OF 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 related revenues and
expenses, and disclosure of gain and loss contingencies at the date of the
financial statements. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain prior years' amounts have been reclassified to conform with the 1996
presentation.

NOTE 2 - ACQUISITIONS AND DISPOSITIONS

Effective January 1, 1994, the Company entered into a purchase and sale
agreement with Entertainment Centers of America, Inc. (ECA) to acquire certain
entertainment facilities located in the New Orleans, Louisiana operations
(Bourbon Street Hospitality) of ECA in exchange for the Company's outstanding
note receivable from and equity interest in ECA approximating $2,641,000 as well
as 600,000 shares of its common stock and $159,000 in cash. The market value of
the 600,000 shares was $824,000 at the date of the acquisition. The assets
acquired consisted of cash, inventory, leasehold interests and improvements,
sound, light, video and bar equipment and certain other assets, including
prepaids. Liabilities assumed by a subsidiary of the Company consisted of trade
accounts payable, other accrued liabilities in ordinary course of business and
debt outstanding at January 1, 1994. The total purchase price was $4,192,000
including liabilities assumed of $568,000.

In addition to the above described transactions with ECA, the Company had a note
receivable from ECA at January 1, 1994 aggregating $400,000 and advances of
$320,000. The Company also had an option to purchase the stock of AFC from ECA
at the greater of fair market value, to be determined by an independent
appraisal, or $300,000. The Company exercised its option January 1, 1994 and
exchanged its note receivable from and advances to ECA for the stock of AFC. The
note receivable and advances approximated the fair market value of the AFC stock
at the date of exchange. The total purchase price was $832,000 including
liabilities assumed of $112,000 consisting primarily of ordinary trade payables.
AFC operates an American Bistro restaurant, Lucile's, located in Fort Worth,
Texas. After the January 1, 1994 transactions, the Company no longer held an
interest in ECA.

The 1994 acquisitions were accounted for under purchase accounting and the
results of operations were consolidated beginning with the effective dates.
Excess of purchase price over fair value of net tangible assets acquired was
$4,113,000 at effective date of the acquisitions and is included in Goodwill in
the accompanying Consolidated Balance Sheet. Unaudited proforma results from
continuing operations as if the acquisitions had occurred at the beginning of
fiscal 1994, are as follows:

<TABLE>
<CAPTION>
Year Ended
September 30, 1994
-----------------------
(In thousand, except per share amounts)
<S> <C>
Revenues.................................. $42,882
Income (loss) from continuing operations.. 1,889
Income (loss) per average common share.... .37
</TABLE>

Bourbon Street Hospitality, originally consisting of 701 Bourbon Street, 735
Bourbon Street and 441 Bourbon Street, and American Food Classics, Inc. (AFC)
are included in BFX Hospitality Group, Inc. (Hospitality Group). During 1994,
the Company closed the 735 Bourbon Street facility. During 1996, the Company
sold the operations located at 441 Bourbon Street . The proceeds of $464,000,
consisting of cash and a note receivable of $350,000, approximated the book
value of the assets that were sold. There was no change to the carrying value of
assets that were not sold as they were transferred for use in the other Bourbon
Street Hospitality location.

F-9
<PAGE>

Effective February 28, 1994, Contex Electronics, Inc., a wholly owned subsidiary
of the Company, sold all of the operating assets and liabilities of MoldCon,
Inc. (MoldCon) and Tri-Tec Engineering Corporation (Tri-Tec), two of its wholly
owned subsidiaries. The sales price for the assets was $9,277,000 in cash plus
the assumption of certain liabilities by the buyer. The net proceeds from the
disposition were used to reduce bank debt approximating $5,000,000 and for
short-term investments. The assets sold consisted primarily of trade accounts
receivable, inventory, machinery, equipment and furniture and fixtures.
Liabilities assumed by the Buyer consisted of trade accounts payable and other
accrued liabilities in the ordinary course of business. The assets and
liabilities related to the manufacture of molded internal and external cable
assemblies and internal wiring harnesses. After deducting applicable selling
expenses, the Company reported a pretax gain of $1,050,000 on the sale. Revenue
and operating profit of the businesses sold were $10,243,000 and $146,000,
respectively, during fiscal 1994.

During June 1994, the Company shutdown its Contex cable assembly plant in
Vestal, New York and sold certain inventory, customer contracts and certain
machinery and equipment to The JPM Company. The remaining assets, primarily
trade accounts receivable, were liquidated.

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser
of these operations was Mr. Russell J. Sarno, President of Flo Control and a
board member of the Company. Mr. Sarno purchased virtually all of the assets of
Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash and assume the related non-recourse mortgage approximating
$2.3 million. In connection with these transactions, Flo Control's secondary
containment product line was sold to Mr. Pat Hopkins, an unrelated third party,
for a $500,000 note. The note bears interest at 8% per annum. Payments are due
semiannually and continue through December 31, 1999 in the amount of $50,000
plus earned interest. The note is secured by the assets sold and the personal
guaranty of an unrelated third party individual. As a result of the above
transactions, the Company recognized a loss on disposal of $2,314,000, net of
income tax benefit, during fiscal 1995. The sale of Flo Control was accounted
for as a discontinued operation. The cash proceeds from the sale were used to
reduce the company's outstanding debt with its lender. Revenues for Flo Control
were as follows (In thousands):

1995................ $ 2,435
1994................ 10,987
</TABLE>

Through its commercial real estate operation, Buffton Realty Ventures, the
Company acquired an office building located in Fort Worth, Texas during August
1995. The purchase price for the property was approximately $1,650,000.
Revenue generated from this property for fiscal 1996 approximated
$438,000.

At September 30, 1996, future minimum rentals for non-cancellable leases
associated with this building were as follows (in thousands):

F-10
<PAGE>

is being amortized on a straight line basis over 15 years. Effective January 1,
1996, the Company also entered into an agreement to purchase the assets and
assume certain liabilities of the Stockyards Hotel, located in Fort Worth,
Texas, for $500,000 in cash, 450,000 shares of the Company's common stock (with
an estimated fair market value of $788,000) and the refinancing of a $1,600,000
bank term loan. Under this agreement, the Company has guaranteed, until March
15, 1997, a sales price of $2.05 per share for any of this stock that may be
sold. At September 30, 1996, no liability had been incurred under the guarantee
agreement. These acquisitions were accounted for under purchase accounting and
are included in the Company's results of operations beginning on the
acquisitions' effective date of January 1, 1996.

Unaudited proforma results from continuing operations, as if the acquisitions
had occurred at the beginning of each respective period, are as follows:

<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1996 1995
------ ------
<S> <C> <C>
Revenues................................................................ $25,973 $21,670
Net income from continuing operations................................... 1,437 1,389
Primary income per average common share................................. .22 .22
Fully diluted income per common share................................... .21 .22
</TABLE>

NOTE 3 - INVENTORIES

The components of inventories are as follows:

<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Raw materials........................................................ $ 1,140 $ 1,450
Work in process...................................................... 86 323
Finished goods....................................................... 170 258
------- -------

Total inventories................................................. $ 1,396 $ 2,031
======= =======
</TABLE>

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Building and improvements............................................ $ 9,290 $ 5,377
Machinery and equipment.............................................. 568 394
Furniture and fixtures............................................... 1,724 1,233
------- -------

11,582 7,004
Less accumulated depreciation
and amortization.................................................... 2,626 2,062
------- -------
8,956 4,942
Land................................................................. 675 525
------- -------

Net property, plant and equipment................................. $ 9,631 $ 5,467
======= =======
</TABLE>

F-11
<PAGE>

NOTE 5 - LONG-TERM DEBT

In January, 1996, the Company refinanced a $1,600,000 bank term loan assumed in
the acquisition of the Stockyards Hotel which is secured by a deed of trust on
the hotel property. The note currently bears interest at the established prime
rate; however, this rate can increase, subject to certain financial ratios, to a
maximum of 1% above the prime rate. The note is payable in 59 monthly
installments of $13,350 plus accrued interest, with the balance due on January
19, 2001. At September 30, 1996, the balance owed on this debt was $1,493,000.

In March 1996, one of the Company's subsidiaries entered into a one year
financing agreement with a bank to replace its existing line of credit. The
commitment consists of a $2,000,000 revolving line of credit, all of which was
available for borrowing at September 30, 1996, and is secured by the accounts
receivable and inventory of the subsidiary. The terms of the finance agreement
provide for interest to be paid monthly at a floating rate equal to the
established prime rate. The agreement also provides for a commitment fee of
0.25% per annum of the unused portion of the facility.

The prime rate at September 30, 1996 was 8.25%.

At September 30, 1996, future principal payments on long-term debt are due as
follows:

<TABLE>
<CAPTION>
<S> <C>
1997................. $ 187
1998................. 189
1999................. 191
2000................. 194
2001 and thereafter.. 1,919
------
$2,680
======
</TABLE>

NOTE 6 - ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

<TABLE>
<CAPTION>
September 30
----------------
1996 1995
------ ------
(In thousands)
<S> <C> <C>
Accrued commissions................. $ 653 $ 537
Accrued payroll..................... 232 443
Accrued bonus....................... 270 158
Other............................... 369 230
------ ------
$1,524 $1,368
====== ======
</TABLE>

F-12
<PAGE>

NOTE 7 - INCOME TAXES

The provision (benefit) for income taxes includes the following:

<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Current:
Federal............................... $ 47 $ (72) $ -
State................................. 170 100 82
Deferred federal.............................. 594 (412) 641
Decrease in valuation allowance............... - (508) (539)
----- ------- -------
$ 811 $ (892) $ 184
===== ======= =======
</TABLE>

The income tax provision (benefit) is categorized as follows:

<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Continuing operations......................... $ 811 $ (31) $ 233
Discontinued operations....................... - (861) (49)
----- ------- ------
$ 811 $ (892) $ 184
===== ======= ======
</TABLE>

Deferred tax assets and liabilities are recognized for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities. Deferred tax liabilities and assets are comprised of the
following (in thousands):

<TABLE>
<CAPTION>
September 30,
------------------------
1996 1995
---- ----
<S> <C> <C>
Gross deferred tax liabilities
------------------------------
Depreciation $ 396 $ 357
Other - -
396 357
Gross deferred tax assets
-------------------------
Capital loss carryforwards 271 271
Alternative minimum tax credit
carryforwards 272 424
General business credit carryforwards 88 -
Consolidated operating loss carryforward - 413
Inventory costs 20 10
Bad debt reserves 12 26
Other - 74
------ -------
663 1,218
Valuation allowance (271) (271)
------ -------
392 947
------ -------
Deferred income tax (benefit) liability $ 4 $ (590)
====== =======
</TABLE>

As a result of the disposition of Flo Control (see Note 2) with its historical
losses and the improved profitability of the Company's continuing operations,
the Company reduced its valuation allowance by approximately $314,000 in 1995.

F-13
<PAGE>

The Company has tax credits of approximately $360,000 which may be offset
against future income taxes payable. Additionally, the Company has a capital
loss carryforward of $797,000 which expires in 1997. The Company maintained its
valuation allowance associated with the capital loss carryforward since the
carryforward period is limited and its potential future use is restricted.

The Company's consolidated income tax expense (benefit) from continuing
operations differs from that amount calculated by applying the federal statutory
rate for the following reasons (in thousands):

<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate...... $ 750 $ 446 $ 782
State income taxes, net of
federal income tax benefit............................ 112 66 54
Adjustments to valuation allowance for
deferred tax assets................................... - (314) (539)
Reversal of income tax accrual......................... - (255) -
Other, net............................................. (51) 26 (64)
----- ---- -----
$ 811 $ (31) $ 233
===== ==== =====
</TABLE>

NOTE 8 - STOCKHOLDERS' EQUITY

STOCK OPTIONS

The Company currently maintains an Employee Incentive Stock Option Plan
(Employee Plan), which allows certain employees and officers of the Company,
other than officers serving on the Board of Directors to acquire or increase
their proprietary interest in the success of the Company and encourage such
individuals to remain in the employ of the Company. A total of 100,000 shares of
the Company's common stock can be issued under the Employee Plan. Stock options
issued are subject to certain terms and conditions. Options granted must be
exercised within ten years of the date of such grant or within five years, if an
option is granted to an employee who owns in excess of 10% of all outstanding
common stock of the Company. Generally options are not exercisable until the
employee has been continuously employed by the Company for one year. Options
terminate and become unexercisable upon the termination of the employee, unless
such termination is without cause or is due to death or total and permanent
disability. On August 2, 1995, and December 26, 1995, 80,000 and 20,000 options,
respectively, were granted to certain employees of the Company at an exercise
price of $1.50 per share which was the fair market value at date of grants. At
September 30, 1996, there were no shares available for grant; 20,000 options
were available at September 30, 1995.

In connection with the acquisition of Cabo, the Company granted 150,000 options
to purchase shares of its common stock to the seller under a nonqualified stock
option agreement. The options were granted at an exercise price of $2.00 per
share, which was the fair market value at date of grant. The option agreement
terminates on December 31, 1996.

In September 1989, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "1989 Plan") to afford key employees the opportunity to
purchase shares of the Company's common stock as a reward for past performance
and an incentive for future performance. Under the 1989 Plan, 500,000 shares of
the Company's stock may be issued. At February 3 and August 2, 1995, 450,000
options and 50,000 options, respectively, were granted to certain officers of
the Company at an exercise price of $1.50 per share which was the fair market
value at date of grant. The non-qualified options are fully vested and must be
exercised within five years of the date of grant. The options do not terminate
upon termination of the officer's employment and may be transferred by will or
by the laws of descent and distribution. The options may be exchanged for
options that are substantially equivalent in number, percentage of ownership and
price (as it relates to book value) in each of the Company's subsidiaries. The
Plan was approved by the shareholders of the Company at the annual meeting on
February 26, 1991. At September 30, 1996 and 1995 there were no shares available
for grant.

F-14
<PAGE>

In August 1996, the Board of Directors adopted the Buffton Corporation Equity
Participation Plan (the "1996 Plan") to afford key employees the opportunity to
purchase shares of the Company's common stock as a reward for past performance
and an incentive for future performance. Under the 1996 Plan, 300,000 shares of
the Company's stock may be issued. In August and September, 1996, 260,000
options were granted to certain officers of the Company at an exercise price of
$1.62-$1.94 per share which was the fair market value at date of grant. The non-
qualified options are fully vested and must be exercised within five years of
the date of grant. The options do not terminate upon termination of the
officer's employment and may be transferred by will or by the laws of descent
and distribution. The options may be exchanged for options that are
substantially equivalent in number, percentage of ownership and price (as it
relates to book value) in each of the Company's subsidiaries. Additionally, in
September 1996, 40,000 options were granted under the 1996 Plan to certain
employees of the Company at an exercise price of $1.94 which was the fair market
value at date of grant. The term of the options is for six years and become
exercisable at a rate of 20% per year beginning one year after the date of
grant. The options terminate and become unexercisable upon termination of the
employee, unless such termination is without cause or is due to death or total
and permanent disability. The Plan was approved by the shareholders of the
Company at the annual meeting on February 26, 1991. At September 30, 1996 there
were no shares available for grant.

A summary of outstanding options are as follows:

<TABLE>
<CAPTION>
Number of Shares
-------------------------------------------------------------------
Incentive Other Non- 1989 Equity 1996 Equity
Stock Qualified Partici- Partici-
Options Options pation Plan pation Plan Total
--------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Options outstanding
September 30, 1994................... - - - - -

Issued............................... 80 - 500 - 580
--------- ---------- ----------- ----------- ---------

Options outstanding
September 30, 1995................... 80 - 500 - 580

Issued............................... 20 150 - 300 470
--------- ---------- ----------- ----------- ---------

Options outstanding
September 30, 1996................... 100 150 500 300 1,050
--------- ---------- ----------- ----------- ---------

Options currently exercisable
September 30, 1996................... 16 150 500 260 926
--------- ---------- ----------- ----------- ---------

Price range at
September 30, 1996................... 1.50 2.00 1.50 1.62-
1.94
</TABLE>

PREFERRED RIGHTS

On June 23, 1988, the Company declared a dividend of one Preferred Share
Purchase Right (the Right) on each outstanding share of common stock. Under
certain conditions, each Right may be exercised to purchase one one-hundredth
share of Series A Junior Participating Preferred Stock at a purchase price of
$28.50, subject to adjustment. The Rights may only be exercised 10 days after
public announcement that a third party has acquired or obtained the right to
acquire 20% or more of the Company's common stock or has commenced a tender
offer to acquire more than 30% of the Company's common stock. On November 15,
1995, the Company amended its Rights Agreement to provide for exercise of the
Rights 10 days after public announcement that a third party has acquired or
obtained the right to acquire 15% or more of the Company's common stock or has
commenced a tender offer to acquire more than 15% of the Company's common stock.
The Rights, which do not have voting rights, expire on July 5, 1998 and may be
redeemed by the Company at a price of $.01 per Right at any time prior to their
becoming exercisable.

F-15
<PAGE>

Once the Rights become exercisable should the Company be the surviving company
after certain transactions, each holder of a Right will thereafter have the
right, upon exercise, to receive common stock of the Company having a value of
two times the exercise price of the Right. However, Rights acquired by a person
or group acquiring 15%, as amended, or more of the Company's common stock prior
to such transaction will be null and void. Similarly, once the Rights become
exercisable, should the Company not be the surviving company after certain
transactions, each holder of a Right will thereafter have the right, upon
exercise, to receive common stock of the acquiring Company having a value equal
to two times the exercise price of the Right.

NOTE 9 - EMPLOYEE BENEFIT PLANS

The Company has established a Defined Contribution Plan ("the Plan") written in
conformity with Section 401(k) of the Internal Revenue Code covering all
employees subject to certain eligibility requirements. Under the Plan the
Company contributes a discretionary amount to a trust each year. The amounts
charged against income for the Company's contribution for the years ended
September 30, 1996, 1995 and 1994 were $71,000, $65,000, and $60,000,
respectively.

NOTE 10 - RELATED PARTY TRANSACTIONS

By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, headquartered in Burbank, California. The purchaser of these operations
was Mr. Russell J. Sarno, President of Flo Control and a board member of the
Company. Mr. Sarno purchased virtually all of the assets of Flo Control for
$3,100,000 in cash and assumed $800,000 of Flo Control's liabilities. As a
condition of the sale, Mr. Sarno agreed to purchase Flo Control's 95% ownership
interest in the Florida Realty Joint Venture for $150,000 in cash and assume the
related non-recourse mortgage approximating $2.3 million.

NOTE 11 - BUSINESS SEGMENTS

The Company's operations are conducted primarily in the United States by two
principal business segments. Electronic Products involves the manufacture of
electronic filter surge suppressors and power distribution systems. Hospitality
Group involves the operation of food and beverage establishments and commercial
real estate. See Note 2 for information regarding the 1995 sale of Flo Control
representing the Plastic Products segment and the 1994 sale of two cable
assembly plants and the shutdown of one cable assembly plant included in the
Electronic Products segment. The following table, adjusted to reflect the
discontinuance of the Company's Plastic Products segment, sets forth certain
information regarding the Company's operations in its two segments (in
thousands):

<TABLE>
<CAPTION>
Nonoperating
Gains,
Interest and
Unallocated
Electronic Hospitality Corporate
Year Products Group Expense Total
---- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net Sales (b).............................. 1996 $ 15,788 $ 9,027 $ 360 $ 25,175
1995 12,056 6,623 331 19,010
1994 25,056 4,979 346 30,381

Depreciation and amortization.............. 1996 312 845 124 1,281
1995 293 550 118 961
1994 618 443 141 1,202

Operating profit (loss).................... 1996 3,754 149 (1,698) 2,205
1995 2,414 244 (1,385) 1,273
1994 2,179 (227) 283(c) 2,235
</TABLE>

F-16
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Capital expenditures........................... 1996 158 4,430 140 4,728
1995 274 1,873 679 2,826
1994 433 30 82 545

Identifiable assets (a)........................ 1996 6,225 13,285 3,654 23,164
1995 6,731 6,362 4,131 17,224
1994 7,707 4,949 2,528 15,184
</TABLE>

(a) Identifiable assets for 1994 excludes $9,886,000 relating to Flo Control,
representing the Plastic Products segment, that was sold during 1995.
(b) The Electronic Products segment had one customer that accounted for 15.2%
of consolidated net sales in 1996.
(c) In 1994, operating loss was reduced by $1,050,000 representing gain on sale
of assets and $217,000 representing settlement of litigation.

Operating profit (loss), before income taxes, for each segment is the difference
between operating revenues and operating costs and expenses attributable to the
segment, and does not include nonoperating revenues and gains, general corporate
expenses (unallocated general and administrative), interest expense or income
taxes. Intersegment transactions have been eliminated in the preceding table.
The difference between net sales for all segments and net revenue reported in
the statements of operations is comprised of miscellaneous income recorded
during the years.

Corporate operating loss (income) includes the following:

<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Interest expense............................ $ 235 $ 124 $ 316
Other unallocated corporate expenses........ 1,463 1,261 668
Settlement of litigation.................... - - (217)
Gain on sale of assets...................... - - (1,050)
------- ------- --------
$ 1,698 $ 1,385 $ (283)
======= ======= ========
</TABLE>

General corporate assets are principally fixed assets.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company has various leases for real property and equipment. In addition to
rental payments, certain leases provide that the Company pay taxes, insurance
and other operating expenses applicable to the leased property. Rental expense
under operating leases for the years ended September 30, 1996, 1995 and 1994 was
$795,000, $645,000, and $1,197,000, respectively.

At September 30, 1996, future minimum payments for non-cancellable operating
leases for facilities and equipment with terms in excess of one year were as
follows (in thousands):

<TABLE>
<S> <C>
1997................................ $ 476
1998................................ 408
1999................................ 408
2000................................ 305
2001 and beyond..................... 1,284
-------
$ 2,881
=======
</TABLE>

F-17
<PAGE>

prepared and submitted a Remedial Design Work Plan (RDWP) to the EPA. The EPA
issued comments on the RDWP on October 1, 1993, and a revised RDWP was submitted
to the EPA on October 21, 1993. During February 1994, the Company received
comments from the EPA with respect to the revised RDWP and the Company's
environmental consultants submitted a response. The EPA approved the revised
RDWP in October 1994. On November 14, 1994, engineering design and related
fieldwork was begun in order to meet the specifications of the revised RDWP.

Additional fieldwork provided for in the RDWP Addendum has been conducted at the
site and resulted in the formulation of a revised remedy. On December 19, 1995,
the Company and its legal and environmental consultants presented to the EPA the
RDWP Addendum and the recommended changes to the ROD in the form of a revised
remedy. The revised remedy was favorably received by the EPA is currently being
reviewed. The revised remedy would eliminate certain requirements of the
existing ROD and would primarily include removing and treating contaminated
soil, significantly reducing the time period for remediation. Initial estimates
of the revised remedy indicate initial costs of approximately $800,000 to
$900,000, and ongoing maintenance costs of approximately $200,000 to $250,000 in
the aggregate. The costs would be incurred over a one to two year period after
the ROD is amended with the ongoing maintenance costs being incurred over a five
year period after initial cost completion. If the EPA amends the ROD and adopts
the revised remediation treatment, the Company would, at the date of amendment,
expense the estimated future costs of implementing this alternative as well as
all prior costs incurred, approximating $668,000 through September 30, 1996,
associated with the implementation of the original ROD. On July 16, 1996, the
Company and its legal and environmental representatives met with the EPA to
review the EPA's written response to the revised remedy presented in December
1995. The EPA now estimates that a revised ROD can be issued by early 1997.

NOTE 13 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

SUPPLEMENTAL SCHEDULE OF CASH PAYMENTS:

<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Cash paid for:
Interest....................... $ 231 $ 249 $ 902
Income taxes................... 44 58 20
</TABLE>

F-18
<PAGE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the year ended September 30, 1994, the Company acquired the operating
assets and certain liabilities of the New Orleans operations of ECA effective
January 1, 1994. In connection with the acquisition, cash was paid as follows
(in thousands):

<TABLE>
<S> <C>
Estimated fair value of assets acquired (including
purchased goodwill) $4,192
Less:
Note receivable and equity interest exchanged (2,641)
Liabilities assumed (568)
Market value of stock issued (824)
------

Cash paid $ 159
------
</TABLE>

During the year ended September 30, 1994, the Company acquired all of the
outstanding capital stock of AFC effective January 1, 1994. In connection with
the acquisition, cash was paid as follows (Iin thousands):

<TABLE>
<S> <C>
Estimated fair value of assets acquired (including
purchased goodwill) $ 832
Less:
Note receivable and advances exchanged (720)
Liabilities assumed (112)
------

Cash paid $ -
------
</TABLE>

Effective January 1, 1995, the Company disposed of the Florida Realty Joint
Venture in conjunction with the sale of Flo Control (see Note 2) and the
purchaser assumed the related $2.3 million mortgage.

During the years ended September 30, 1996 and 1995, the Company issued 90,000
and 407,356 shares, respectively, of common stock to key employees and certain
officers and directors as payment for services and bonuses. The Company
recognized $139,000 and $571,000, respectively, as compensation related to the
issuance of the shares which amount represented fair market value at date of
issuance.

During the year ended September 30, 1996, the Company acquired the operating
assets of Cabo and acquired the assets and assumed certain liabilities of the
Stockyards Hotel. In connection with the acquisitions, the cash was paid as
follows:

<TABLE>
<S> <C>
Noncash investing and financing activities
Fair value of assets acquired
(including purchased goodwill) $ 4,759
Liabilities assumed (1,754)
Stock issued (1,698)
-------
Cash paid 1,307

Less: cash acquired (95)
-------
Net cash paid for acquisitions $ 1,212
=======
</TABLE>

F-19
<PAGE>

SCHEDULE IX
-----------

BUFFTON CORPORATION
-------------------

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Balance Charged to Charged to Balance
at beginning costs and other at end
Description of period expenses accounts Deductions of period
- ------------------------------ ------------ ---------- ---------- ---------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Reserve for estimated losses
on accounts receivable - trade:

September 30, 1996 $ 75 $ (25) $ - $ (15) $ 35

September 30, 1995 150 84 (159)(a) - 75

September 30, 1994 (a) 153 240 - (243) 150
</TABLE>

(a) Includes amounts associated with Flo Control (see Note 2).

F-20
<PAGE>

BUFFTON CORPORATION
-------------------

1996 FORM 10-K

EXHIBIT INDEX

EXHIBITS Page
- -------- ----

3.1 Certificate of Incorporation (Exhibit 3.1 to Form S-1 Registration
Statement No. 2-71057 and incorporated herein by reference).

3.2 By-laws (Exhibit 3.2 to Form S-1 Registration Statement No. 2-71057
and incorporated herein by reference).

3.3 Certificate of Amendment to the Certificate of Incorporation Creating
Classified Board of Directors, eliminating a Stockholder's right to
call a special meeting, and adopting a fair price supermajority
provision dated February 21, 1989 (Exhibit 4.4 to Form 10-Q for the
quarter ended March 31, 1989 and incorporated herein by reference).

3.4 Restated by-laws of Buffton Corporation dated February 21, 1989
(Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference).

3.5 Restated by-laws of Buffton Corporation dated January 31, 1996.

4 Rights Agreement (Exhibit 1 to Form 8-K dated June 23, 1988 and
incorporated herein by reference).

10 Asset Purchase Agreement dated January 19, 1996 incorporated herein by
reference to Form 8-K dated January 19, 1996.

10.1 Agreement for Sale of Assets from Flo Control, Inc. dated as of
January 20, 1995, by and among Buffton Corporation, a Delaware
corporation, Flo Control, Inc., a Delaware corporation ("Seller") and
F.C. Acquisition, Inc., a California corporation ("Buyer")
incorporated herein by reference to Form 8-K dated January 20, 1995.
<PAGE>

10.2 Agreement for sale of Florida Realty Joint Venture interests from Flo
Control, Inc., dated January 20, 1995 by and among Buffton
Corporation, a Delaware corporation, Flo Control, Inc. a Delaware
corporation, ("Seller") and F.L.C. Property Acquisition, Inc., a
California corporation ("Buyer") incorporated herein by reference to
Form 8-K dated January 20, 1995.

10.3 Agreement for Sale of Secondary Containment Assets from Flo Control,
Inc., dated January 20, 1995, by and among Buffton Corporation, a
Delaware corporation, Flo Control, Inc., a Delaware corporation
("Seller") and Patrick Hopkins and Flo-Safe Systems, Inc. a Wisconsin
corporation ("Buyer") incorporated herein by reference to Form 8-K
dated January 20, 1995.

10.4 Second Amendment to Accounts Financing Agreement dated January 20,
1995 by and among Congress Financial Corporation, Current Technology,
Inc., Electro-Mech, Inc., and Flo Control, Inc. incorporated herein by
reference to Form 8-K dated January 20, 1995.

10.5 Second Amended and Restated Revolving Credit Note incorporated herein
by reference to Form 8-K dated January 20, 1995.

10.6 Rights Amendment Agreement dated November 15, 1995 incorporated herein
by reference to Form 8-K dated November 15, 1995.

11 Statement of Computation of Earnings Per Share

21 Subsidiaries of the Company

23 Consent of Independent Accountants

27 Financial Data Schedule

<PAGE>

EXHIBIT 3.5

RESTATED
BYLAWS

BUFFTON CORPORATION

JANUARY 31, 1996
__________________________________________________

ARTICLE I
---------

MEETINGS OF STOCKHOLDERS
------------------------

Section 1.1 Annual Meetings.
---------------

(a) The annual meeting of stockholders shall be held for the
election of directors and for the transaction of such other business as properly
may come before such meeting at such date, time and place, within or without the
State of Delaware, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting.

(b) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be transacted by
the stockholders may be made at an annual meeting of stockholders (i) pursuant
to the Corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 1.1, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 1.1.

(c) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of Section
1.1(b), the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such business must be a proper matter for
stockholder action under the General Corporation Law of the State of Delaware.
To be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 120 days nor more
than 180 days prior to the first anniversary of the date of the Corporation's
proxy statement released to stockholders in connection with the previous year's
annual meeting of stockholders or as otherwise provided in such proxy statement;
provided, however, that in the event that the date of the annual meeting is more
than 30 days prior to or more than 60 days after the anniversary date of the
preceding year's annual meeting of stockholders, notice by the stockholder to be
timely must be so delivered a reasonable time before

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<PAGE>

the proxy materials are prepared and distributed to stockholders. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of such business, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (A) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (B) the class and number of shares of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner.

(d) Only persons nominated in accordance with the procedures set
forth in this Section 1.1 shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section 1.1. The chairman of the meeting shall determine whether a
nomination or any business proposed to be transacted by the stockholders has
been properly brought before the meeting and, if any proposed nomination or
business has not been properly brought before the meeting, the chairman shall
declare that such proposed business or nomination shall not be presented for
stockholder action at the meeting.

(e) Nothing in this Section 1.1 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 1.2 Special Meetings. Special meetings of the stockholders of
----------------
the Corporation may be called only by the Chairman of the Board of Directors or
the President or the Board of Directors pursuant to a resolution adopted by the
entire Board of Directors. Notwithstanding any other provision of the
Corporation's Certificate of Incorporation, Bylaws or any provision of law which
might otherwise permit a lesser vote or no vote, the affirmative vote of the
holders of at least 80% of the then outstanding shares of each class of stock of
the Corporation having voting power for the election of directors shall be
required to alter, amend or repeal this Section 1.2.

Section 1.3 Notice of Meeting. Written notice, signed by the Chairman
-----------------
of the Board, the President, any Vice President, the Secretary or any Assistant
Secretary, of every meeting of stockholders stating the purpose or purposes for
which the meeting is called, and the date and time when, and the place where, it
is to be held shall be delivered either personally or by mail, to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the meeting, except as otherwise provided by
statute. If mailed, such notice shall be directed to a stockholder at his
address as it shall appear on the stock books of the Corporation, unless he

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<PAGE>

shall have filed with the Secretary a written request that notices intended for
him be mailed to some other address, in which case it shall be mailed to the
address designated in such request.

Section 1.4 Quorum. The presence at any meeting, in person or by proxy,
------
of the holders of record of a majority of the shares then issued and outstanding
and entitled to vote shall be necessary and sufficient to constitute a quorum
for the transaction of business, except where provided otherwise by statute.

Section 1.5 Adjournments. In the absence of a quorum, a majority in
------------
interest of the stockholders entitled to vote, present in person or by proxy,
or, if no stockholder entitled to vote is present in person or by proxy, any
officer entitled to preside or act as secretary of such meeting, may adjourn the
meeting from time to time until a quorum shall be present.

Section 1.6 Voting. Directors shall be chosen by a plurality of the
------
votes cast at the election, and, except where otherwise provided by statute, all
other questions shall be determined by a majority of the votes cast on such
question.

Section 1.7 Proxies. Any stockholder entitled to vote may vote by
-------
proxy, provided that the instrument authorizing such proxy to act shall have
been executed in writing (which shall include telegraphing or cabling) by the
stockholder himself or by his duly authorized attorney.

Section 1.8 Judges of Election. The Board of Directors may appoint
------------------
judges of election to serve at any election of directors and at balloting on any
other matter that may properly come before a meeting of stockholders. If no such
appointment shall be made, or if any of the judges so appointed shall fail to
attend, or refuse or be unable to serve, then such appointment may be made by
the presiding officer at the meeting.

Section 1.9 Stock List. The officer who has charge of the stock ledger
----------
of the Corporation shall prepare and make, at least 10 days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.

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<PAGE>

ARTICLE II
----------

BOARD OF DIRECTORS
------------------

Section 2.1 Number. The number of directors shall not be less than
------
three. The number of directors shall be fixed from time to time exclusively by a
vote of a majority of the Board of Directors, except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of the Preferred Stock.

Section 2.2 Election and Term of Office. The Board of Directors shall be
---------------------------
divided into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible. At the annual meeting of stockholders to be
held in 1989, Class I directors shall be elected for a term expiring at the
annual meeting of stockholders to be held in 1990, Class II directors shall be
elected for a term expiring at the annual meeting of stockholders to be held in
1991, and Class III directors shall be elected for a term expiring at the annual
meeting of stockholders to be held in 1992, with each director to hold office
until his successor is elected and qualified. At each annual meeting of
stockholders subsequent to 1989, the successors of the class of directors whose
term expires at that annual meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders to be held in the third year
following the year of their election. The election of directors need not be by
written ballot unless so provided elsewhere by these Bylaws. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director. Any newly created or eliminated directorship
resulting from an increase or decrease in the Board of Directors shall be
apportioned by the Board of Directors among the three classes of directors so as
to maintain such classes as nearly equal as possible.

Section 2.3 Vacancies and Additional Directorships. Except as otherwise
--------------------------------------
provided for or fixed by or pursuant to the provisions of Article IV of the
Corporation's Certificate of Incorporation relating to the rights of the holders
of the Preferred Stock, newly created directorships resulting from any increase
in the number of directors and any vacancies on the Board of Directors resulting
from death, resignation, removal or other cause shall be filled only by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
director. Any director elected in accordance with the preceding sentence of
this Section 2.3 shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified.

Section 2.4 Removal. Except as otherwise provided for or fixed by or
-------
pursuant to the provisions of Article IV of the Corporation's Certificate of
Incorporation relating to the rights of the holders of the Preferred Stock, any
director may be removed from office only for cause and only by the affirmative
vote of the holders of 80% of the then outstanding shares of each class of stock
of the Corporation having voting power for the election of directors.

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<PAGE>

Section 2.5 Amendment or Repeal. Notwithstanding any provisions of the
-------------------
Corporation's Certificate of Incorporation, Bylaws or any other provision of law
which might otherwise permit a lesser vote or no vote, the affirmative vote of
the holders of at least 80% of the then outstanding shares of each class of
stock of the Corporation having voting power for the election of directors shall
be required to alter, amend or repeal Sections 2.1, 2.2, 2.3 and 2.4 hereof,
except as otherwise provided for or fixed by or pursuant to the provisions of
Article IV of the Corporation's Certificate of Incorporation relating to the
rights of the holders of the Preferred Stock.

Section 2.6 Meetings. A meeting of the Board of Directors shall be
--------
held for organization, for the election of officers and for the transaction of
such other business as may properly come before the meeting, within thirty
(30) days after each annual election of directors.

The Board of Directors by resolution may provide for the holding of regular
meetings and may fix the times and places at which such meetings shall be held.
Notice of regular meetings shall not be required to be given, provided that
whenever the time or place of regular meetings shall be fixed or changed, notice
of such action shall be mailed promptly to each director who shall not have been
present at the meeting at which such action was taken, addressed to him at his
residence or usual place of business.

Special meetings of the Board of Directors may be called by one-third (1/3)
of the directors then in office or by the Chairman of the Board or the
President. Except as otherwise required by statute, notice of each special
meeting shall be mailed to each director, addressed to him at his residence or
usual place of business, or shall be sent to him at such place by telegram,
radio or cable, or telephoned or delivered to him personally, not later than two
(2) days before the day on which the meeting is to be held. Such notice shall
state the time and place of such meeting, but unless otherwise required by
statute, the Certificate of Incorporation of the Corporation or these Bylaws,
need not state the purposes thereof.

Notice of any meeting need not be given to any director who shall attend
such meeting in person or who shall waive notice thereof, before or after such
meeting, in writing or by telegram, radio or cable.

Section 2.7 Quorum. A majority of the total number of members of the
------
Board of Directors as constituted from time to time, but not less than two,
shall be necessary and sufficient to constitute a quorum for the transaction of
business, except that when the Board consists of one director pursuant to
Section 2.1, then the one director shall constitute a quorum. In the absence of
a quorum, a majority of those present at the time and place of any meeting may
adjourn the meeting from time to time until a quorum shall be present and the
meeting may be held as adjourned without further notice or waiver. A majority
of those present at any meeting at which a quorum is present may decide any
question brought before such meeting, except as otherwise provided by law, the
Certificate of Incorporation or by these Bylaws.

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<PAGE>

Section 2.8 Resignation of Directors. Any director may resign at any
------------------------
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President, any Vice President or the Secretary. Any
such resignation shall take effect at the time specified therein or, if no time
be specified, upon receipt thereof by the Board of Directors or one of the above
named officers; and, unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

Section 2.9 Participation in Meeting. At any meeting of the Board of
------------------------
Directors, or of any Committee designated by the Board of Directors, a director
or committee member may participate in a meeting of such board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting in this manner shall constitute presence in person at
such meeting.

Section 2.10 Compensation of Directors. Directors shall receive such
-------------------------
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance at meetings, with expenses, if any, as the
Board of Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.

ARTICLE III
-----------

COMMITTEES OF THE BOARD
-----------------------

Section 3.1 Designation, Power. Alternate Members and Term of Office.
--------------------------------------------------------
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of two or
more of the directors of the Corporation. Any such committee, to the extent
provided in such resolution, shall have and may exercise the power of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. The Board may designate one or more directors as alternate
members of any committee, who, in the order specified by the Board, may replace
any absent or disqualified member at any meeting of the committee. If at a
meeting of any committee one or more of the members thereof should be absent or
disqualified, and if either the Board of Directors has not so designated any
alternate member or members, or the number of absent or disqualified members
exceeds the number of alternate members who are present at such meeting, then
the member or members of such committee (including alternates) present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member. The term of office of the
members of each committee shall be fixed from time to time by the Board, subject
to these Bylaws; provided, however, that any committee member who ceases to be a
--------
member of the Board shall ipso facto cease to be a committee

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<PAGE>

member. Each committee shall appoint a secretary, who may be the Secretary of
the Corporation or any Assistant Secretary thereof.

Section 3.2 Meetings, Notices and Records. Each committee may provide
-----------------------------
for the holding of regular meetings, with or without notice, and may fix the
time and place at which such meetings shall be held. Special meetings of each
committee shall be held upon call by or at the direction of its chairman, or, if
there is no chairman, by or at the direction of any two of its members, at the
time and place specified in the respective notices or waivers of notice thereof.
Notice of each special meeting of a committee shall be mailed to each member of
such committee, addressed to him at his residence or usual place of business, at
least two days before the day on which the meeting is to be held, or shall be
sent by telegram, radio or cable, addressed to him at such place, or telephoned
or delivered to him personally, not later than the day before the day on which
the meeting is to be held. Notice of any meeting of a committee need not be
given to any member thereof who shall attend the meeting in person or who shall
waive notice thereof by telegram, radio, cable or other writing. Notice of any
adjourned meeting need not be given. Each committee shall keep a record of its
proceedings.

Section 3.3 Quorum and Manner of Acting. At each meeting of any
---------------------------
committee the presence of a majority, but not less than two, of its members then
in office shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the members present at any
meeting at which a quorum is present shall be the act of such committee; in the
absence of a quorum, a majority of the members present at the time and place of
any meeting may adjourn the meeting from time to time until a quorum is present.
Subject to the foregoing and other provisions of these Bylaws and except as
otherwise determined by the Board of Directors, each committee may make rules
for the conduct of its business. Any determination made in writing and signed
by all the members of such committee shall be as effective as if made by such
committee at a meeting.

Section 3.4 Resignations. Any member of a committee may resign at any
------------
time by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation.
Unless otherwise specified in such notice, such resignation shall take effect
upon receipt thereof by the Board or any such officer.

Section 3.5 Removal. Any member of any committee may be removed at any
-------
time by the Board of Directors with or without cause.

Section 3.6 Vacancies. If any vacancy shall occur in any committee by
---------
reason of death, resignation, disqualification, removal or otherwise, the
remaining members of such committee, though less than a quorum, shall continue
to act until such vacancy is filled by the Board of Directors.

Section 3.7 Compensation. Committee members shall receive such
------------
reasonable compensation for their services as such, whether in the form of
salary or a fixed fee for attendance

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<PAGE>

at meetings, with expenses, if any, as the Board of Directors may from time to
time determine. Nothing herein contained shall be construed to preclude any
committee member from serving the Corporation in any other capacity and
receiving compensation therefor.

ARTICLE IV
----------

OFFICERS
--------

Section 4.1 Number. The officers of the Corporation shall be a
------
President, one or more Vice Presidents, a Secretary, a Treasurer and, if the
Board of Directors so determines, a Chairman of the Board, and such other
officers as may be appointed in accordance with the provisions of Section 4.3.

Section 4.2 Election, Term of Office and Qualifications. Each officer
-------------------------------------------
(except such officers as may be appointed in accordance with the provisions of
Section 4.3) shall be elected by the Board of Directors. Each officer (whether
elected at the first meeting of the Board of Directors after the annual meeting
of stockholders or to fill a vacancy or otherwise) shall hold his office until
the first meeting of the Board of Directors after the next annual meeting of
stockholders and until his successor shall have been elected, or until his
death, or until he shall have resigned in the manner provided in Section 4.4 or
shall have been removed in the manner provided in Section 4.5.

Section 4.3 Subordinate Officers and Agents. The Board of Directors
-------------------------------
from time to time may appoint other officers or agents (including one or more
Assistant Vice Presidents, one or more Assistant Secretaries and one or more
Assistant Treasurers), to hold office for such period, have such authority and
perform such duties as are provided in these Bylaws or as may be provided in the
resolutions appointing them. The Board of Directors may delegate to any officer
or agent the power to appoint any such subordinate officers or agents and to
prescribe their respective terms of office, authorities and duties.

Section 4.4 Resignations. Any officers may resign at any time by giving
------------
written notice of such resignation to the Board of Directors, the President, a
Vice President or the Secretary. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt thereof by the Board of
Directors or any such officer.

Section 4.5 Removal. Any officer specifically designated in Section 4.1
-------
may be removed at any time, either with or without cause, at any meeting of the
Board of Directors by the vote of a majority of all the directors then in
office. Any officer or agent appointed in accordance with the provisions of
Section 4.3 may be removed, either with or without cause, by the Board of
Directors at any meeting, by the vote of a majority of the directors at such
meeting, or by any superior officer or agent upon whom such power of removal
shall have been conferred by the Board of Directors.

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<PAGE>

Section 4.6 Vacancies. A vacancy in any office by reason of death,
---------
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed by these Bylaws for
regular election or appointment to such office.

Section 4.7 Chief Executive Officer. The Chief Executive Officer of the
-----------------------
Corporation shall be either the Chairman of the Board or the President, as the
Board of Directors shall determine. Subject to the direction of the Board of
Directors, he shall have general charge of business, affairs and property of the
Corporation and general supervision over its officers and agents. As such Chief
Executive Officer, if present, he shall preside at all meetings of stockholders
and he shall see that all orders and resolutions of the Board of Directors are
carried into effect. He may sign, with any other officer thereunto duly
authorized, certificates of stock of the Corporation, the issuance of which
shall have been duly authorized (the signature to which may be a facsimile
signature), and may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts, agreements or other instruments duly authorized by
the Board of Directors except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent. From time to time he shall report to the Board of Directors all matters
within his knowledge which the interest of the Corporation may require to be
brought to their attention. He shall also perform such other duties as are given
to him by these Bylaws or as from time to time may be assigned to him by the
Board of Directors.

Section 4.8 The Chairman of the Board. The Chairman of the Board, if
-------------------------
one is appointed, shall preside at all meetings of the directors and shall have
such other powers and duties as shall be prescribed by the Board of Directors.
The Chairman of the Board shall be a member, ex officio, of all committees
appointed by the Board.

Section 4.9 The President. The President, in the absence of the
-------------
Chairman of the Board, shall perform the duties and exercise the powers of the
Chairman of the Board; he shall have such power as may be by statute exclusively
conferred upon the President and he shall have such other powers and duties as
shall be prescribed by the Board of Directors. The President shall be a member,
ex officio, of all committees appointed by the Board.

Section 4.10 The Vice Presidents. At the request of the President or in
-------------------
his absence or disability, the Vice President designated by the President (or in
the absence of such designation, the Vice President designated by the Board of
Directors) shall perform all duties of the President and, when so acting, shall
have all the powers of and be subject to all restrictions upon the President.
Any Vice President may also sign, with any other officer thereunto duly
authorized, certificates of stock of the Corporation, the issuance of which
shall have been duly authorized (the signature to which may be a facsimile
signature), and may sign and execute in the name of the Corporation deeds,
mortgages, bonds and other instruments duly authorized by the Board of
Directors, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent.
Each Vice President shall perform such other duties as are given to him by these
Bylaws or as from time to time may be assigned to him by the Board of Directors
or the Chief Executive Officer.

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<PAGE>

Section 4.11 The Secretary. The Secretary shall
-------------

(a) record all the proceedings of the meetings of the
stockholders, the Board of Directors, and any committees in a book or books
to be kept for that purpose;

(b) cause all notices to be duly given in accordance with the
provisions of these Bylaws and as required by statute;

(c) whenever any committee shall be appointed in pursuance of a
resolution of the Board of Directors, furnish the chairman of such
committee with a copy of such resolution;

(d) be custodian of the records and of the seal of the
Corporation, and cause such seal to be affixed to all certificates
representing stock of the Corporation prior to the issuance thereof and to
all instruments, the execution of which on behalf of the Corporation under
its seal shall have been duly authorized;

(e) see that the lists, books, reports, statements, certificates
and other documents and records required by statute are properly kept and
filed;

(f) have charge of the stock and transfer books of the
Corporation, and exhibit such stock book at all reasonable times to such
persons as are entitled by statute to have access thereto;

(g) sign (unless the Treasurer or an Assistant Secretary or an
Assistant Treasurer shall sign) certificates representing stock of the
Corporation, the issuance of which shall have been duly authorized (the
signature to which may be a facsimile signature); and

(h) in general, perform all duties incident to the office of
Secretary and such other duties as are given to him by these Bylaws or as
from time to time may be assigned to him by the Board of Directors or the
Chief Executive Officer.

Section 4.12 Assistant Secretaries. At the request of the Secretary or
---------------------
in his absence or disability, the Assistant Secretary designated by him (or in
the absence of such designation, the Assistant Secretary designated by the Board
of Directors or the Chief Executive Officer) shall perform all the duties of the
Secretary, and, when so acting, shall have all the powers of and be subject to
all restrictions upon the Secretary. The Assistant Secretaries shall perform
such other duties as from time to time may be assigned to them respectively by
the Board of Directors, the Chief Executive Officer or the Secretary.

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<PAGE>

Section 4.13 The Treasurer. The Treasurer shall
-------------

(a) have charge of and supervision over and be responsible for
the funds, securities, receipts and disbursements of the Corporation;

(b) cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accor dance with Section 5.3 of these
Bylaws or to be otherwise dealt with in such manner as the Board of
Directors may direct;

(c) cause the funds of the Corporation to be disbursed by checks
or drafts upon the authorized depositaries of the Corporation, and cause to
be taken and preserved proper vouchers for all moneys disbursed;

(d) render to the Board of Directors or the Chief Executive
Officer, whenever requested, a statement of the financial condition of the
Corporation and of all his transactions as Treasurer;

(e) cause to be kept at the Corporation's principal office
correct books of account of all its business and transactions and such
duplicate books of account as he shall determine and upon application cause
such books or duplicates thereof to be exhibited to any director;

(f) be empowered, from time to time, to require from the
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation;

(g) sign (unless the Secretary or an Assistant Secretary or an
Assistant Treasurer shall sign) certificates representing stock of the
Corporation the issuance of which shall have been duly authorized (the
signature to which may be a facsimile signature); and

(h) in general, perform all duties incident to the office of
Treasurer and such other duties as are given to him by these Bylaws or as
from time to time may be assigned to him by the Board of Directors or the
Chief Executive Officer.

Section 4.14 Assistant Treasurers. At the request of the Treasurer or in
--------------------
his absence or disability, the Assistant Treasurer designated by him (or in the
absence of such designation, the Assistant Treasurer designated by the Board of
Directors or the Chief Executive Officer) shall perform all the duties of the
Treasurer, and, when so acting, shall have all the powers and be subject to all
restrictions upon the Treasurer. The Assistant Treasurers shall perform such
other duties as

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<PAGE>

from time to time may be assigned to them respectively by the Board of
Directors, the Chief Executive Officer or the Treasurer.

Section 4.15 Salaries. The salaries of the officers of the Corporation
--------
shall be fixed from time to time by the Board of Directors, except that the
Board of Directors may delegate to any person the power to fix the salaries or
other compensation of any officers or agents appointed in accordance with the
provisions of Section 4.3. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Corporation.

Section 4.16 Surety Bonds. If the Board of Directors shall so require,
------------
any officer or agent of the Corporation shall execute to the Corporation a bond
in such sum and with such surety or sureties as the Board of Directors may
direct, conditioned upon the faithful discharge of his duties, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.

ARTICLE V
---------

EXECUTION OF INSTRUMENT AND
DEPOSIT OF CORPORATE FUNDS
--------------------------

Section 5.1 Execution of Instruments Generally. The Chief Executive
----------------------------------
Officer, Chairman of the Board, President, any Vice President, the Secretary or
the Treasure, subject to the approval of the Board of Directors, may enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation. The Board of Directors may authorize any officer or officers,
or agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation, and such authorization
may be general or confined to specific instances.

Section 5.2 Borrowing. No loans or advances shall be obtained by or
---------
contracted for, by or on behalf of the Corporation and no negotiate paper shall
be issued in its name, unless and except as authorized by the Board of
Directors. Such authorization may be general or confined to specific instances.
Any officer or agent of the Corporation thereunto so authorized may obtain loans
and advances for the Corporation, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other evidences of indebtedness
of the Corporation. Any officer or agent of the Corporation thereunto so
authorized may pledge, hypothecate or transfer as security for the payment of
any and all loans, advances, indebtedness and liabilities of the Corporation,
any and all stocks, bonds, other securities and other personal property at any
time held by the Corporation, and to that end may endorse, assign and deliver
the same and do every act and thing necessary or proper in connection therewith.

Section 5.3 Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or

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<PAGE>

other depositaries as the Board of Directors may select, and as may be selected
by any officer or officers or agent or agents authorized so to do by the Board
of Directors. Endorsements for deposit to the Corporation in any of its duly
authorized depositaries shall be made in such manner as the Board of Directors
from time to time may determine.

Section 5.4 Checks. Drafts. etc. All checks, drafts or other orders for
-------------------
the payment of money, and all notes or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers or
agent or agents of the Corporation, and in such manner, as from time to time
shall be determined by the Board of Directors.

Section 5.5 Proxies. Proxies to vote with respect to shares of stock of
-------
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
Chief Executive Officer or by any other person or persons thereunto authorized
by the Board of Directors.

ARTICLE VI
----------

RECORD DATES
------------

Section 6.1 In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. Only those
stockholders of record on the date so fixed shall be entitled to any of the
foregoing rights, notwithstanding the transfer of any such stock on the books of
the Corporation after any such record date fixed by the Board of Directors.

ARTICLE VII
-----------

CORPORATE SEAL
--------------

Section 7.1 The corporate seal shall be circular in form and shall bear
the name of the Corporation and words and figures denoting its organization
under the laws of the State of Delaware and the year thereof and otherwise shall
be in such form as shall be approved from time to time by the Board of
Directors.

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<PAGE>

ARTICLE VIII
------------

AMENDMENTS
----------

Section 8.1 Except as otherwise provided in Sections 1.2 and 2.5 hereof,
the Bylaws of the Corporation may be amended, altered or repealed, and new
Bylaws may be made by the affirma tive vote of the holders of record of a
majority of the outstanding shares of stock of the Corporation entitled to vote
cast at any annual or special meeting, or by the affirmative vote of a majority
of the directors cast at any regular or special meeting at which a quorum is
present.

ARTICLE IX
----------

INDEMNIFICATION
---------------

Section 9.1 The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.

Section 9.2 The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation except that no indemnification shall be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the

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<PAGE>

circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

Section 9.3 To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 9.1 or 9.2 or in defense
of any claim, issue or matter therein, he shall be indemnified against expense
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

Section 9.4 Any indemnification under subsections 9.1 or 9.2 (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections 9.1 and 9.2. Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by stockholders.

Section 9.5 Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of any undertaking
by or on behalf of the director, officer, employee or agent to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Article.

Section 9.6 The indemnification and advancement of expenses provided by
or granted pursuant to the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.

Section 9.7 The Corporation shall have power but may not be required to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.

Section 9.8 The indemnification and advancement of expenses provided by
or granted pursuant to this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.

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<PAGE>

ARTICLE X
---------

BUSINESS OPPORTUNITY
--------------------

Section 10.1 All business opportunities within areas of interest
determined from time to time by the Board of Directors, as evidenced by
resolutions appearing in the Corporation's minutes, which come to the attention
of the officers, directors and other members of management of the Corporation,
either individually or in their corporate capacity, shall be disclosed promptly
to the Corporation and made available to it. The Board of Directors may accept
or reject any business opportunity. Until such time as the Board of Directors
has designated an area of interest by resolution appearing in the Corporation's
minutes, the officers, directors and other members of management of the
Corporation are free to engage in any undesignated areas of interest on their
own and shall be free to continue a business existing prior to the time that
such area of interest is designated by the Corporation.

ARTICLE XI
----------

FISCAL YEAR
-----------

Section 11.1 The fiscal year may be changed from time to time by
resolution of the Board of Directors. Until a resolution of the directors is
adopted fixing the fiscal year, the fiscal year of the Corporation shall end on
September 30 of each year.

ATTEST:

/s/ Robert Korman
- --------------------------------
Secretary

-16-

<PAGE>

EXHIBIT 11

BUFFTON CORPORATION

STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Years Ended September 30, 1996, 1995 and 1994
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Primary Earnings per Share
- --------------------------

Income from continuing operation.................... $1,394 $ 1,304 $1,908
Loss from discontinued operation.................... - (2,513) -
------ ------- ------
Net income (loss)................................... $1,394 $(1,209) $1,908
====== ======= ======

Weighted average shares outstanding (a)............. 6,441 5,465 5,120
====== ======= ======

Income from continuing operation per average
common share...................................... $ .22 $ .24 $ .37
Loss from discontinued operation per average
common share...................................... - (.46) -
------ ------- ------
Net income (loss) per average common share.......... $ .22 $ (.22) $ .37
====== ======= ======

Fully Diluted Earnings per Share
- --------------------------------

Weighted average shares outstanding................. 6,441 5,465 5,120
Adjustment to reflect assumed exercise of
stock options at beginning of the period.......... 208 - -
------ ------- ------

Weighted average shares outstanding, as
adjusted........................................... 6,649 5,465 5,120
====== ======= ======

Fully diluted income from continuing operation...... $ .21 $ .24 $ .37
Fully diluted loss from discontinued operation...... - (.46) -
------ ------- ------
Fully diluted net income (loss)..................... $ .21 $ (.22) $ .37
====== ======= ======
</TABLE>

(a) Calculation of assumed exercise stock options as common stock equivalent
shares had an immaterial effect and are excluded from weighted average
shares outstanding.

<PAGE>

BUFFTON CORPORATION
-------------------

EXHIBIT 21

The following schedule lists the subsidiaries of Buffton Corporation as of
September 30, 1996:

<TABLE>
<CAPTION>
Corporate Name Organization Ownership Percent
- -------------- ------------ -----------------
<S> <C> <C>
Buffton Corporation Delaware Parent
Summatronix, Inc. Delaware 100
Current Technology, Inc. Delaware 100
BFX Hospitality Group, Inc. Nevada 100
Main Street Realty, Inc. Nevada 100
American Food Classics, Inc. Nevada 100
Lucile's Stateside Bistro-Texas, Inc. Texas 100
BFX-LA, Inc. Louisiana 100
Cat's Meow, Inc. Louisiana 100
St. Louis & Bourbon E. C., Inc. Louisiana 100
Cabo-Shepherd, Inc. Texas 100
Cabo-Travis, Inc. Texas 100
Boutique Inns, Inc. Nevada 100
Stockyards Hotel, Inc. Texas 100
</TABLE>

<PAGE>

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-59585, 33-
62993, 333-01295, 333-00803 and 333-00247) of Buffton Corporation of our report
dated November 15, 1996 appearing on page F-2 of this Form 10-K.

/s/ Price Waterhouse LLP

PRICE WATERHOUSE LLP

Fort Worth, Texas

January 28, 1997