<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
( ) 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: 0-8410
WYANT CORPORATION
-----------------
(Exact name of registrant as specified in its charter
New York 11-2236837
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Readington Road, Somerville, New Jersey 08876
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-707-1800
------------
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
- --------------------------------------
Common Stock, par value $.01 per share
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
<PAGE> 2
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. ( )
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of March 17, 1999, was $2,456,745.
As of March 17, 1999, there were 2,273,817 shares of common stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Exhibits identified in Item 14(a) 3.
2. The 1999 Proxy Statement identified in Items 10, 11, 12 and 13.
ii
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I.
1. Business.................................................................. 1
2. Properties................................................................ 6
3. Legal Proceedings......................................................... 8
4. Submission of Matters to a Vote of Security Holders....................... 8
PART II.
5. Market for Registrant's Common Equity and Related Stockholder Matters.... 8
6. Selected Financial Data.................................................. 10
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................ 11
7A. Quantitative and Qualitative Disclosures about Market Risk............... 18
8. Financial Statements and Supplementary Data.............................. 18
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 18
PART III.
10. Directors and Executive Officers of the Registrant...................... 19
11. Executive Compensation.................................................. 19
12. Security Ownership of Certain Beneficial Owners and Management.......... 19
13. Certain Relationships and Related Transactions.......................... 19
PART IV.
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......... 19
</TABLE>
iii
<PAGE> 4
PART 1
ITEM 1. BUSINESS
A. GENERAL
Wyant Corporation (formerly Hosposable Products, Inc.), a New York
corporation incorporated in 1971 (hereinafter "Wyant"), has three wholly-owned
subsidiaries, Bridgewater Manufacturing Corp., a New Jersey corporation
("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation ("IFC") and Wood
Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian corporation ("Wood
Wyant"). Through its Wyant Health Care Division (the "Division" or "Wyant
Health Care Division"), it manufactures and distributes adult incontinent
products, including disposable underpads and adult briefs. IFC manufactures and
distributes disposable wipers and sanitary paper products and systems. Wyant
Health Care and IFC products are sold primarily in domestic markets. Wood Wyant
manufactures and distributes sanitation products and systems to commercial and
institutional markets in Canada. (The "Company" is used herein to make general
references, without distinction among Wyant, Wyant Health Care Division,
Bridgewater, IFC and Wood Wyant).
SALE OF WYANT HEALTH CARE DIVISION
On February 23, 1999, Wyant's Board of Directors, pursuant to an Asset Purchase
Agreement (the "Asset Purchase Agreement") dated as of such date, approved the
sale of its Wyant Health Care Division to Paper-Pak Products, Inc. ("PaperPak")
of LaVerne, California, for total consideration of approximately $15,500,000
including the assumption of certain debt of $3,500,000. The transaction is
subject to PaperPak's completion of financing, customary regulatory approvals
and the approval of Wyant shareholders and is expected to close during the
second quarter of 1999.
WOOD WYANT
Wood Wyant is a manufacturer and national distributor, in Canada, of a
broad range of industrial and institutional sanitation products, including paper
hand towels, bathroom tissue, related sanitary paper products, janitorial
chemicals, waste receptacles and cleaning equipment and systems. Wood Wyant is
the only dedicated national distributor of a full line of sanitary paper
products, janitorial chemicals and equipment, and sanitation supplies to
institutional markets in Canada. Wood Wyant, headquartered in Montreal, employs
approximately 440 people and operates a paper converting plant and two chemical
manufacturing facilities in Ontario and British Columbia. Wood Wyant services
some 20,000 customers through a direct sales organization supported by customer
service centers located across Canada.
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacture of janitorial chemicals. Base paper is converted into paper
hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering,
Ontario. Specialized machinery in this plant cuts, folds or winds the paper
into finished products that are packaged and placed in shipping containers.
Wood Wyant develops and manufactures janitorial chemicals from raw
materials produced by major base chemical suppliers. The chemicals are blended
in large tanks and packed into shipping containers for sale by Wood Wyant's
distribution network.
Wood Wyant's distribution operations are conducted primarily from leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate.
In 1998, the Company, through Wood Wyant, acquired several businesses
engaged in the distribution of sanitation products and manufacture of janitorial
chemicals. See the notes to the Company's consolidated financial statements for
information with respect to these acquisitions, including selected unaudited pro
forma information.
1
<PAGE> 5
WYANT HEALTH CARE DIVISION
The majority of the sales of the Wyant Health Care Division's branded
products are to distributors for eventual use by hospitals, nursing homes and
other health care institutions, and to government agencies. Disposable underpads
and adult briefs are the Division's principal products. Their end-use is for
protection against incontinence. A portion of the Division's revenue is derived
through the sale of finished products as private label brands for major
customers. The Division's airlaid fabrics (Airlay(TM)) are used as
components of wiping products manufactured by IFC, and also are sold in roll
good form to converters and manufacturers who produce a wide range of health
care, consumer and industrial products.
In late 1996 the Division purchased a high speed adult brief converting
line. Both branded and private label adult briefs were introduced in 1997 to
further expand the Division's line of incontinent care products in this growth
market.
The Division's products are manufactured on a number of continuous
production lines that automatically assemble the various layers of product
materials, bond them with various fixative means, cut the materials to specific
lengths and fold, count, stack and bag/box the completed products. During 1998,
the Division produced the vast majority of its products with its own equipment,
at leased facilities in Fresno, California and at its principal manufacturing
facility in Branchburg, New Jersey purchased by Wyant in December 1993. The
Division's products are sold by a direct sales organization supported by a
customer service department located at the Branchburg facility.
IFC
IFC's operations are conducted at a newly established location in
Brownsville, Tennessee. IFC's manufacturing operations include the conversion
of various materials into wiping products. Specialized machinery cuts, folds or
winds various materials into finished products which are packaged and placed
into shipping containers. IFC's products are sold to some 683 distributors and
brokers located in 44 states by a direct sales organization and independent
brokers supported by customer service located at the Brownsville facility.
B. INDUSTRY SEGMENTS
The Company operates in three industry segments, including the health care
products segment. The assets, revenues and income before taxes of the two
continuing segments are shown in the "Notes to Consolidated Financial
Statements" (Part IV, Item 14).
C. SUPPLY OF RAW MATERIALS
The Company purchases raw materials necessary for the manufacture of its
products from several unaffiliated suppliers. These raw materials are readily
available from numerous sources. The Company is not dependent upon any one
major source of supply, and is not limited by any supply contracts.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue annually
at market prices. This supplier provides 100% of the Company's requirements for
these products.
D. MARKETING AND SALES
WOOD WYANT
Wood Wyant's products are sold by a field sales organization of
approximately 110. Sales (other than inter-company transactions with IFC) are
made primarily to end users, with a minor percentage made to distributors.
2
<PAGE> 6
STRATEGY AND MARKETING
Wood Wyant's marketing strategy was established in the fall of 1994
following an extensive study of its sales organization by Wood Wyant and
Canada's leading sales and marketing consulting group. This study, which was
undertaken over a period of several months, led to the corporate strategy of
building a business with superior return based upon a consultative approach of
developing comprehensive cost effective solutions to customers' sanitation
needs. In pursuing this strategy, Wood Wyant's primary focus was on washroom
and floor care programs within the health care, education, industrial and office
channels of distribution. This strategy has required increased investment in
sales training activities to increase product knowledge and improve sales and
account management capabilities. In addition, a broad cross-section of
managers participated under the direction of a task force in the development of
a strategic sales plan designed to ensure growth consistent with Wood Wyant's
objective.
Wood Wyant's direction in marketing calls for profitable growth based upon
a consultative selling approach where skilled and highly trained account
managers provide customers with cost effective solutions to sanitation problems.
Wood Wyant's marketing activities are consolidated in Montreal and have been
strengthened. The marketing group of Wood Wyant is responsible for the
strategic direction and growth and development of Wyant's various product
lines.
SERVICE AND LOGISTICS
Wood Wyant operates fourteen full service customer service centers located
strategically across Canada in Dartmouth (Halifax), Lachine (Montreal), Hull
(Ottawa), Pickering (Toronto), Sudbury, Sault Ste-Marie, Thunder Bay, Winnipeg,
Edmonton, Castlegar, Kelowna and Vancouver (3). Responsibility for logistics is
centralized to provide greater control over essential operations of the business
in the areas of forecasting, production planning, inventory control and
management and purchasing. Service level standards are established and
performance is monitored on a continuous basis. Wood Wyant maintains a policy
of next day delivery of all core stocking products from its major service
centers. Such deliveries are made via courier companies, transportation
companies, local cartage or company - operated vehicles in selected locations.
As a result of these service levels and short lead times for replenishment,
there are no material backlogs.
Wood Wyant's principal customer channels are in the health care and
education (including schools, universities and colleges) segments, but also
include industrial entities and distributors. Most of its customers are located
in Canada, with customers in the United States accounting for less than 8% of
sales, including sales to IFC. Wood Wyant has no single customer that accounts
for more than 1% of sales, except for IFC, which accounts for 6.5% of sales.
WYANT HEALTH CARE DIVISION
The Division's products are sold by 13 salaried sales and marketing
personnel and by several independent sales organizations that work on a
commission basis.
Most of the Division's sales (other than inter-company transactions with
IFC) are made to distributors that, in turn, sell the Company's products to
institutional users such as hospitals and nursing homes, and to industrial
users. Other sales are made to private labellers that sell to retail
individual/chain stores. The retail chains usually sell the products under
private label.
3
<PAGE> 7
The following table shows, for the years indicated, percentage information
in respect of the Division's net sales.
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Major Distributors....................... 10.5 12.4 11.1
Other Distributors....................... 34.7 19.9 21.0
Government Agencies...................... 1.0 1.1 0.8
Private Label............................ 18.4 28.9 28.7
Converters (airlaid/nonwoven fabrics).... 7.0* 5.2* 7.7*
Industrial Wiping Products (IFC)......... 28.4 32.5 30.7
</TABLE>
* Does not include inter-company sales of $2,474,815, $2,498,939 and
$1,542,772, in 1998, 1997 and 1996, respectively, to IFC.
At December 31, 1998 the Division had a backlog of firm orders of
approximately $2,120,000, compared to $1,460,000 at December 31, 1997. These
firm orders will be filled during the first quarter of 1999.
IFC
IFC's products are sold by 8 salaried sales personnel and by several
independent sales organizations that are paid on a commission basis.
IFC's sales are made primarily to distributors that resell IFC's products
to institutional users such as manufacturers, utilities, nursing homes and
restaurants.
E. COMPETITION
WOOD WYANT
Wood Wyant competes in the sanitary paper and janitorial product markets
across Canada. The Canadian market for sanitary paper and sanitation products
is fragmented and is served by over 200 distribution companies that compete
directly with Wood Wyant on a regional basis and that tend to be small to medium
sized. Only two companies compete on a national basis, with Wood Wyant being
the only national full line distributor focused solely on the institutional
sanitation market. Recently, the North American sanitation distribution
industry has been experiencing a period of consolidation. Wood Wyant
participated in this consolidation process through the acquisition of four
distributors in Canada during the second quarter of 1998. Wood Wyant will
continue to seek out acquisition opportunities which meet its investment
criteria.
Wood Wyant's distribution capabilities are enhanced by its vertical
integration as a converter of paper products and a manufacturer of a complete
line of sanitation chemicals. Wood Wyant's size also permits it to take full
advantage of the benefits of bulk pricing and volume discounts offered by its
suppliers. However, Wood Wyant's ability to compete successfully is dependent
upon its ability to make timely delivery of quality products at competitive
prices. With respect to sanitary paper products, Wood Wyant is not fully
integrated and competes with fully integrated sanitary paper producers that have
substantial financial resources and significant market share relative to Wood
Wyant; therefore, Wood Wyant's results of operations could be adversely affected
if such fully integrated producers attempt to significantly increase market
share.
4
<PAGE> 8
WYANT HEALTH CARE DIVISION
The industry in which the Division competes is highly competitive. Among
the competitors are such firms as Kendall, PaperPak (the proposed buyer of the
Division) and others with substantially greater resources than the Company's,
as well as many firms comparable to the Division in "size" and the primary
businesses of which are directly competitive. Although the Division is a
leading manufacturer of underpads, it is not a significant factor in the overall
adult incontinent market.
The Division's ability to compete successfully is dependent upon its
ability to make timely deliveries of value added products of a quality similar
to or higher than that of its competitors and at competitive prices.
IFC
IFC competes with major paper mills and smaller converters of towel, tissue
and disposable wiping products. The major mill category of competition includes
such companies as Kimberly Clark, Fort James and Wisconsin Tissue. The smaller
converters are multiple in number and are more regional in their market
approach.
In order to compete successfully, IFC must supply its customers with
quality products at competitive prices. Customer service and sales support
programs are necessary to insure that IFC is regarded as a valuable partner by
its customers.
F. EMPLOYEES/UNION CONTRACTS
WOOD WYANT
Wood Wyant currently has approximately 440 employees, including
approximately 320 salaried employees and 120 hourly employees. Wood Wyant's
hourly workers are covered under four separate collective bargaining agreements,
the largest of which covers 80 workers at Wood Wyant's Pickering plant and
expires on October 25, 1999. Wood Wyant has never had a work stoppage in its
history, nor has it had any other material labor problems.
WYANT HEALTH CARE DIVISION
The Division has 187 employees, of whom 145 are employed in New Jersey,
and 42 are employed in Fresno, California.
The Division is party to collective bargaining agreements with the
International Production Service & Sales Employees Union that serves its New
Jersey factory-labor employees. The agreements expire in 2001. The Division
considers its relations with its employees to be satisfactory, and no labor
disputes are anticipated, nor have any affected operations negatively to date.
IFC
IFC employs 62 personnel at its facility in Brownsville, Tennessee.
Employees are not unionized.
5
<PAGE> 9
G. PATENTS AND TRADEMARKS
The Company is the owner of 36 patents and 167 trademarks.
Of the patents, 35 apply to the Sanitation Products segment and relate to
dispensers used with the Company's paper and chemicals products. The remaining
patent is for "Tuckables(R)" underpads manufactured by the Health Care Products
segment. The Company is not able to assess any economic advantage particularly
attributable to any of the above patents.
The trademarks relate primarily to the Sanitation Products segment (134
trademarks), with 19 applicable to the Health Care Products segment and 14 to
the Wiping Products segment. These trademarks are used to protect the
identification of individual products, but the Company is unable to assess any
economic advantage particularly attributable to any of them. Moreover, there is
no assurance that trademark rights are enforceable as a mere consequence of
trademark registration.
H. ENVIRONMENTAL
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased.
The Company has entered into a flat fee contract with its environmental
consultants for $11,750 for the delineation investigation. Upon determination
of the contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
ITEM 2. PROPERTIES
WOOD WYANT
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacturing of janitorial chemicals. Base paper is converted into
paper hand towels and bathroom tissue at a plant owned by Wood Wyant in
Pickering (Toronto), Ontario. Specialized machinery in this plant cuts, folds
or winds the paper into finished products that are packaged and placed in
shipping containers. The Pickering plant occupies approximately 149,500 square
feet. For the year ended December 31, 1998, production at Pickering totalled
approximately 1,808,000 cases, which represents approximately 66% of capacity.
6
<PAGE> 10
Wood Wyant develops and blends janitorial chemicals from raw materials
produced by major base chemical suppliers. The chemicals are blended in large
tanks and packed into shipping containers for sale by the Wood Wyant
distribution network. Wood Wyant operates two chemical plants which are located
in rented facilities in Scarborough (Toronto), Ontario and Abbotsford
(Vancouver), British Columbia. For the year ended December 31, 1998, total
production at these plants reached approximately 2,857,000 liters (49% of
capacity).
Wood Wyant's distribution operations are conducted through leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate. The location of the leased facilities, including square footage and
lease expiration dates, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Area in Year of
Square Feet Expiration
MANUFACTURING
Pickering (Toronto), Ontario (1)............... 78,200 --
Scarborough (Toronto), Ontario................. 22,700 2001
Abbotsford, B.C................................ 4,500 month to month
DISTRIBUTION
Dartmouth (Halifax), Nova Scotia............... 12,100 2003
Lachine (Montreal), Quebec..................... 91,700 2004
Hull (Ottawa), Quebec (2)...................... 7,800 month to month
Pickering (Toronto), Ontario (1)............... 71,300 --
Sudbury, Ontario............................... 12,000 2003
Sault Ste-Marie, Ontario....................... 8,100 2003
Thunder Bay, Ontario........................... 4,200 2003
Winnipeg, Manitoba............................. 12,000 2001
Edmonton, Alberta.............................. 14,000 2000
Burnaby (Vancouver), B.C. ..................... 10,400 2000
Coquitlam (Vancouver), B.C. ................... 25,000 2000
Vancouver, B.C. ............................... 8,000 2000
<FN>
(1) Wood Wyant owns this 149,500 sq. ft. facility.
(2) A new lease for a term of 5 years is currently being finalized.
</TABLE>
</FN>
WYANT HEALTH CARE DIVISION
Since May 31, 1994 the Division has conducted all New Jersey operations at
its Branchburg, New Jersey location. This facility accommodates manufacturing
operations, warehousing and administrative activities in a 111,640 square foot
building. This facility will be sold to PaperPak pursuant to the Asset Purchase
Agreement if the transaction is consummated.
The Division leases approximately 80,000 square feet, used for
manufacturing and warehousing, in a building at 95 Santa Fe Avenue, Fresno,
California, from Len-Sid Realty Co. Leonard Schramm, a former President of the
Company is a partner in Len-Sid Realty Co. The terms of the lease agreement,
including $110,116 as annual rent, are comparable to terms that might be
obtainable from an unaffiliated lessor of like property in the immediate
vicinity of the Fresno warehouse. The lease term is for six months, but
terminable on 90 days' notice (essentially, because the landowner, The Atchison,
Topeka and Santa Fe Railroad, has the right to terminate Len-Sid Realty Co.'s
"possession" on 90 days' notice).
IFC
During November 1997, IFC relocated its manufacturing operations from
leased premises in Jackson, Tennessee to a leased facility in Brownsville,
Tennessee. The lease for this 100,000 square foot facility will expire on
December 31, 2004. IFC has the option to extend the term by three years to
December 31, 2007.
7
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be a party to legal proceedings
incidental to its business. At present, there are no legal proceedings that are
material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No event that would be described in response to this item has occurred.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock is traded on the Nasdaq National Market System under the
symbol "WYNT". On May 21, 1998, the Company effected a four-for-three stock
split of the Common Stock (the "Stock Split") in the form of a stock dividend to
holders of record on April 28, 1998. The following table sets forth the
quarterly high and low bid prices per share for the Common Stock for the periods
indicated, as reported by the Nasdaq National Market System. The prices for the
period prior to May 21, 1998 have been retroactively adjusted to reflect the
Stock Split. These prices represent prices by dealers, do not include retail
markups, markdowns or commissions and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997
1st Quarter 4.312 3.375
2nd Quarter 3.937 3.187
3rd Quarter 4.875 2.625
4th Quarter 5.250 4.125
1998
1st Quarter 7.406 4.594
2nd Quarter 6.750 5.188
3rd Quarter 5.750 3.250
4th Quarter 4.500 3.250
</TABLE>
As of the Record Date, there were 2,273,817 shares of Common Stock
outstanding and approximately 800 record holders of Common Stock.
Wyant has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. Wyant's ability
to pay dividends is subject to Wyant's income, receipt of cash flow from
subsidiaries in the form of dividends or similar distributions, financial
condition, capital needs and restrictions contained in various credit
agreements.
On January 19, 1999, Wyant received notification from the Nasdaq National
Market that Wyant's request for an oral hearing to consider the continued
listing of the Common Stock on the Nasdaq National Market System had been
granted. The hearing was held before a panel authorized by Nasdaq's Board of
Governors (the "Panel") on February 25, 1999 in Washington, D.C.
8
<PAGE> 12
Wyant had previously received notification from the Nasdaq National Market
that it intended to delist the Common Stock from the Nasdaq National Market
System due to Wyant's failure to maintain compliance with one of the Nasdaq
National Market's listing maintenance standards (the market value of public
float requirement of $5 million).
Until the Panel makes a decision, the Common Stock will remain listed on
the Nasdaq National Market System. Wyant intends to continue to explore other
listing alternatives pending a decision by the Panel, such as trading on
Nasdaq's SmallCap Market or on another appropriate trading exchange or market.
There can be no assurance as to when a decision will be reached by the Panel or
that such a decision will be favorable to Wyant. An unfavorable decision could
result in the delisting of the Company's common stock from the Nasdaq National
Market System. The Company has been informed by the Nasdaq National Market that
it currently satisfies the continued listing requirements of the Nasdaq SmallCap
Market and, assuming an unfavorable decision from the Panel, the Company expects
to list its common stock on the Nasdaq SmallCap Market subject to customary
administrative requirements relating to the listing.
9
<PAGE> 13
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------- -------
Unaudited
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales....................................... $67,124 $63,560 $62,591 $60,539 $59,456
Cost of sales............................... 43,218 39,691 38,152 37,035 38,167
Gross profit................................ 23,906 23,869 24,439 23,504 21,289
------- ------- ------- ------- -------
Selling, general and administration
expenses.................................. 21,358 21,125 21,325 20,814 22,125
Amortization................................ 508 429 505 584 653
Non-recurring items......................... -- -- 550 1,808 61
Interest expense............................ 1,158 745 511 742 724
Other income (expense)...................... (244) (230) (185) 191 265
------- ------- ------- ------- -------
22,780 22,069 22,706 24,139 23,828
Income (loss) from continuing
operations before income taxes
and extraordinary gain...................... 1,126 1,800 1,733 (635) (2,539)
Income tax expense (benefit)................ 572 801 796 (460) (625)
------- ------- ------- ------- -------
Income (loss) from continuing operations
before extraordinary gain................... 554 999 937 (175) (1,914)
Income (loss) from discontinued
operations, net of income taxes............. 1,021 (581) (793) 269 1,210
------- ------- ------- ------- -------
Income (loss) before extraordinary gain..... 1,575 418 144 94 (704)
Extraordinary gain, net of income taxes..... -- 92 -- -- --
------- ------- ------- ------- -------
Net income (loss)........................... 1,575 510 144 94 (704)
Dividends and accretion of mandatorily
redeemable preferred shares................. 360 191 -- -- --
------- ------- ------- ------- -------
Net income (loss) attributable to
common shares............................... $ 1,215 $ 319 $ 144 $ 94 $ (704)
======= ======= ======= ======= =======
Per common share
Basic
Income (loss) from continuing operations
before extraordinary gain................. $ 0.06 $ 0.22 $ 0.26 $(0.05) $ (0.53)
Discontinued operations................... $ 0.28 $(0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)......................... $ 0.34 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Diluted
Income (loss) from continuing operations
before extraordinary gain................. $ 0.06 $ 0.22 $ 0.26 $(0.05) $ (0.53)
Discontinued operations................... $ 0.27 $(0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)......................... $ 0.33 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Weighted average number of common
shares outstanding.......................... 3,606,247 3,597,125 3,589,884 3,589,884 3,589,124
</TABLE>
<TABLE>
<CAPTION>
At December 31
--------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ -------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital of continuing operations..... $ 1,822 $ 82 $ 3,217 $ 8,410 $ 6,783
Total assets................................. 42,540 37,156 37,593 38,441 39,586
Long-term obligations (excluding
current maturities)........................ 3,888 1,998 6,259 5,945 7,718
Redeemable preferred shares.................. 5,990 4,930 2,268 2,268 2,268
Cash Dividends declared per common share..... -- -- -- -- --
</TABLE>
Note: Data for the years 1994 to 1997 inclusive have been restated to reflect
the discontinued operations presentation and the stock split which
occurred in 1998.
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<PAGE> 14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and accompanying notes (See Item 14). As indicated
previously, pursuant to the Asset Purchase Agreement, Wyant has agreed to sell
the Division and substantially all of its operating assets to PaperPak.
Accordingly, such consolidated financial statements, as well as the discussion
below and analysis of financial condition and operations, reflect the
consummation of this transaction by showing the health care business as
"discontinued operations" for income statement purposes and as "assets held for
divestiture" for balance sheet purposes.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1998 COMPARED TO
YEAR ENDED DECEMBER 31, 1997
SALES: Sales of continuing operations for the year ended December 31,
1998 increased by $3,564,434 or 5.6% to $67,124,137 from the total of
$63,559,703 in the year ended December 31, 1997, after eliminating inter-segment
sales of $4,083,590 in 1998 and of $4,074,080 in 1997.
Sales of the sanitation products segment were $54,490,900 in 1998, up by
$1,956,172 or 3.7% over the 1997 sales of $52,534,728. This increase resulted
from additional sales from the businesses acquired in the second quarter of
1998, which more than offset a reduction in selling prices of paper products and
the adverse effect of a weaker Canadian dollar translation rate.
Sales of the wiping products segment increased by $1,617,772 or 10.7% to
$16,716,827 in 1998, from $15,099,055 in 1997. The increase resulted primarily
from higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: Gross profit of the sanitation products
segment for 1998 was $21,041,150 or 38.6% of sales, compared with $21,169,065 or
40.3% of sales in 1997. The lower margin primarily reflected the continuing
competitive pricing environment for paper products, together with slightly
reduced margins for chemicals and sanitation products.
Gross profit of the wiping products segment in 1998 amounted to $2,864,521
or 17.1% of sales, compared with $2,699,437 or 17.9% of sales in 1997. The
reduced margin resulted from increased sales of paper products, which generate
relatively lower margins than most of the segment's other product lines.
SELLING EXPENSES: Selling expenses for 1998 amounted to $12,658,838, an
increase of $727,358 or 6.1% over the 1997 level of $11,931,480. Expenses of
the sanitation products segment in 1998 at $10,438,946 were $573,953 or 5.8%
higher than the 1997 amount of $9,864,993. The increase resulted primarily from
the added expenses of the acquired businesses, which more than offset the
favorable impact of the weaker Canadian dollar translation rate. In the wiping
products segment, selling expenses in 1998 were $2,219,892, an increase of
$153,405 or 7.4% over the 1997 total of $2,066,487, due principally to higher
outward freight costs resulting from the higher level of sales ($119,934).
GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1998 were $8,699,535, a reduction of $494,408 or 5.4% compared with the 1997
expenses of $9,193,943. Expenses of the sanitation products segment for 1998
were $7,811,599, compared with $8,288,049 in 1997. The decrease of $476,450 or
5.7% from 1997 resulted from savings derived primarily from lower staffing
levels and the consolidation of warehousing activities at a Company-owned
facility which, together with the favorable impact of the weaker Canadian dollar
translation rate, more than offset the expenses added from the businesses
acquired during the second quarter of 1998 and the special charge of $464,286
incurred in the third quarter of the year for the rationalization of Wood
Wyant's operations following the acquisition of those businesses.
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<PAGE> 15
Expenses of the wiping products segment for 1998 were $572,936, an increase of
$114,542 or 25.0% over the 1997 level of $458,394. This resulted primarily from
a $50,000 increase to the allowance for doubtful accounts which was required due
to slower collection of accounts receivable, together with higher staffing
costs. Corporate charges in 1998 were $315,000, a decrease of $132,500 compared
with the total of $447,500 in 1997, which included $206,500 of professional fees
associated with the purchase of the Canadian sanitation products business in
March 1997.
AMORTIZATION: Amortization amounted to $507,540 in 1998, an increase of
$78,729 over the 1997 level of $428,811, due to the additional amortization from
the acquired businesses and from the goodwill resulting from their purchase.
INTEREST EXPENSE: Interest expense amounted to $1,158,249 in 1998, an
increase of $413,160 over the 1997 expense of $745,089. The increase resulted
from higher borrowing costs in the United States ($290,450), together with an
increase in Canada of $122,710 which resulted from the financing of the
businesses acquired during 1998. Interest expense in the United States for 1998
includes approximately $632,000 of interest on the loan from Congress Financial
Corporation. This loan will be repaid from the proceeds from the sale of the
discontinued health care operations and consequently the interest expense will
be reduced accordingly from the time of the transaction.
OTHER INCOME: Other income amounted to $244,067 in 1998, up from $230,790
in 1997.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before income taxes and extraordinary
gain amounted to $1,125,576 in 1998, a reduction of $674,393 from the 1997 level
of $1,799,969. The sanitation products and wiping products segments decreased
by $414,468 and $149,059 respectively, while corporate expenses were $110,866
higher in 1998. The results for 1998 include the special charge of $464,286
incurred in the third quarter for the rationalization of Wood Wyant's operations
following the acquisitions in the second quarter of the year.
INCOME TAXES: Income tax expense at $572,000 was $228,597 lower in 1998
than the expense of $800,597 in 1997, reflecting the reduced level of pre-tax
income in 1998.
DISCONTINUED OPERATIONS: The discontinued health care operations generated
after-tax income from operations of $1,021,602 or $0.28 per common share in
1998, compared with an after-tax loss of $580,874 or ($0.16) per common share in
1997. The improvement in 1998 was primarily a result of a 16.4% increase in
sales, due to the higher sales of Symphony(R) and private label adult
incontinent briefs, which were introduced during the first half of 1997 and of
higher margins, at 20% of sales compared with 16% of sales in 1997, due to
manufacturing efficiencies and increased sales activity. In addition, general
and administration expenses were lower than in 1997, when a non-recurring charge
of $427,000 for severance costs and professional fees was incurred.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of certain
term debt.
NET INCOME: Net income for 1998 amounted to $1,575,178, an improvement of
$1,064,722 over the 1997 income of $510,456. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.34 per common share in 1998, compared with $0.09 per common share
in 1997.
Results of Operations for Year Ended December 31, 1997 Compared to Year Ended
December 31, 1996
SALES: Sales of continuing operations for the year ended December 31, 1997
increased by $968,996 or 1.55% to $63,559,703 from the level of $62,590,707 in
the year 1996, after eliminating inter-segment sales, which increased to
$4,074,080 in 1997 from $2,299,634 in 1996.
12
<PAGE> 16
Sales of the sanitation products segment were $52,534,728 in 1997, down by
$351,618 or 0.7% from the 1996 sales of $52,886,346. This reduction resulted
from the negative impact of a weaker Canadian dollar translation rate and lower
selling prices for paper products, partially offset by higher sales volume of
paper products and increased sales of sanitation products and equipment.
Sales of the wiping products segment increased by $3,095,060 or 25.8% to
$15,099,055 in 1997, from $12,003,995 in 1996. This improvement was the result
of significantly higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: The sanitation products segment realized
gross profit of $21,169,065 or 40.3% of sales in 1997, compared with $21,991,889
or 41.6% of sales in 1996. The margin reduction was primarily caused by the
competitive pricing environment for paper products in 1997.
Gross profit of the wiping products segment was $2,699,437 or 17.9% of
sales in 1997. In 1996 gross profit amounted to $2,447,344 or 20.4% of sales.
The lower margin was the result of the significant increase in sales of paper
products, which generate lower margins than the segment's other product lines.
SELLING EXPENSES: Selling expenses for 1997 totalled $11,931,480, a
reduction of $84,284 from the 1996 level of $12,015,764. Expenses of the
sanitation products segment for 1997 at $9,864,993 were $468,691 lower than the
1996 amount of $10,333,684. The reduction was due primarily to lower staffing
levels in 1997 and the favorable impact of the weaker Canadian dollar
translation rate, together with lower marketing and promotion expenses than in
1996, when a new product catalogue was produced. In the wiping products segment,
1997 expenses were $2,066,487, an increase of $384,407 or 22.9% over the 1996
expenses of $1,682,080. This increase resulted primarily from higher outward
freight costs associated with the increased sales activity ($180,660) and
related selling expense increases.
GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1997 at $9,193,943 were $114,895 lower than the 1996 total of $9,308,838.
In the sanitation products segment, expenses declined by $463,916 in 1997 to
$8,288,049, compared with $8,751,965 in 1996. The reduction resulted primarily
from lower staffing levels in 1997 and the favorable impact of the weaker
Canadian dollar translation rate. During 1997, the Company transferred its
Ontario Distribution Center from a leased facility in Scarborough, Ontario to
the company-owned facility at Pickering, Ontario. The Company provided
approximately $238,000 at December 31, 1997 for future costs related to the
sublease of the Scarborough facility. In the wiping products segment, 1997
expenses amounted to $458,394, an increase of $33,521 over the 1996 expenses of
$424,873, due primarily to higher staffing costs. Corporate charges were
$447,500 in 1997, compared with $132,000 in 1996. The increase of $315,500 was
primarily a result of professional fees of $206,500 related to the Wood Wyant
acquisition in March 1997, together with increased insurance costs.
AMORTIZATION: Amortization amounted to $428,811 in 1997, a reduction of
$76,534 from the 1996 level due to the relatively low level of capital spending
in 1997.
NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for
expenses incurred in relation to the Wood Wyant acquisition.
INTEREST EXPENSE: Interest expense totalled $745,089 for 1997, an increase
of $233,836 over the 1996 expense of $511,253, as the additional interest costs
related to the debt used to finance the Wood Wyant acquisition more than offset
the favorable impact of lower interest rates in 1997.
OTHER INCOME: Other income for 1997 of $230,790 was $46,154 higher than in
1996. The increase resulted from foreign exchange gains in Canada.
13
<PAGE> 17
INCOME FROM CONTINUING OPERATIONS BEFORE INCOMES TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before tax and extraordinary gain
totalled $1,799,969 in 1997, an improvement of $67,105 over the 1996 amount of
$1,732,864. The sanitation products segment improved by $326,224, while the
wiping products segment declined by $171,424. Corporate expenses increased by
$86,695 in 1997.
INCOME TAXES: Income tax expense increased by $4,604 in 1997 to $800,597,
reflecting primarily the higher pre-tax income in 1997.
DISCONTINUED OPERATIONS: The discontinued health care operations incurred
an after-tax loss from operations of $580,874 or $(0.16) per common share in
1997, compared with an after-tax loss of $792,481 or $(0.22) per common share in
1996. The reduction in after-tax loss resulted from higher margins in 1997 due
to cost reductions and improved operating efficiencies, together with general
and administration expenses which were lower in 1997 as a result of cost
reduction programs, despite the inclusion of a non-recurring charge of $427,000
in 1997 for severance costs and professional fees.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of certain
term debt.
NET INCOME: Net income for 1997 amounted to $510,456, an improvement of
$366,066 over the 1996 income of $144,390. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.09 per common share in 1997, compared with $0.04 per common share
in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources of the Company's United States operations
(IFC Disposables) and Canadian operations (Wood Wyant) are discussed separately,
as each is self-financing and has separate banking facilities.
CANADIAN OPERATIONS
Cash utilized during 1998 amounted to $941,045. Cash generated from
operations, net of a working capital increase of $167,032, amounted to
$1,912,769. The higher working capital resulted primarily from decreases in
accounts payable ($428,079) and income taxes payable ($595,130) which, together
with an increase in prepaid expenses ($176,753), more than offset a reduction in
accounts receivable of $1,098,925. The lower receivables resulted from the
return to more normal levels following a postal strike in Canada in late - 1997,
together with the impact of a weaker Canadian dollar translation rate. The
reduction in payables was primarily due to the weaker Canadian dollar
translation rate. The decrease in income taxes payable resulted from the
payment of 1997 income tax liabilities and a higher level of instalment payments
in 1998. Capital expenditures amounted to $679,331 in 1998. Repayments of
long-term debt during the year totalled $1,001,944, while an amount of $197,671
was borrowed from an existing facility to finance certain of the capital
expenditures. In addition, $550,122 of outstanding Class A Preferred shares
were redeemed in January 1998 and dividends of $190,955 have been paid on the
Class A and Class B Preferred shares.
During the second quarter of 1998, Wood Wyant acquired four businesses for
total consideration of $5,715,034. These acquisitions were financed by term
bank loans, under which an amount of $3,525,440 was drawn down, and by the issue
of 283,111 Class F Preferred shares of Wood Wyant with a fair value of
$1,861,876. On June 25, 1998 the Company increased its secured revolving line
of credit from Cdn. $6,000,000 to Cdn. $7,500,000 ($4,891,411) and on March 10,
1999 increased it by an additional Cdn. $2,000,000 to Cdn. $9,500,000
($6,195,787). These increases were required to assist in refinancing the
operating cash requirements of the newly-acquired companies and to meet
increased working capital requirements. At December 31, 1998, approximately
$1,190,000 was available under the Cdn. $7,500,000 facility. In addition,
approximately $721,000 was available to finance future capital expenditures
under a revolving credit facility of $1,956,564 (Cdn. $3,000,000).
14
<PAGE> 18
Management believes that future operating cash flows and the unused balance
available under existing credit facilities will be sufficient to meet its
ongoing operating cash requirements, to repay the term debt and redeem the
Preferred shares as they become due and to meet cash requirements for capital
asset additions.
U.S. OPERATIONS
Cash of $2,524,213 was utilized by continuing operations in the United
States during 1998. Working capital increased $344,847, primarily due to higher
inventories ($509,741) and lower payables ($234,987), partially offset by an
increase of $347,435 in income taxes payable. The higher inventory levels were
at IFC and resulted primarily from a build-up of inventories to counter
temporary raw material supply shortages. Capital expenditures of continuing
operations in 1998 amounted to $174,361. A total of $1,642,028 of the committed
revolving credit facility with Congress Financial Corporation was repaid during
1998.
Management believes that future operating cash flows and unused balance
available under the existing credit facility will be sufficient to enable the
Company to meet its ongoing operating cash requirements and to finance capital
assets additions until the sale of the Wyant Health Care Division and to meet
its ongoing cash requirements if the sale of the Wyant Health Care Division is
not consummated. Thereafter, following the repayment of the balance outstanding
under the secured line of credit with Congress Financial Corporation,
management believes that future operating cash flows and excess cash on hand
will be sufficient to meet operating cash requirements and to finance capital
asset additions.
DISCONTINUED OPERATIONS
On February 23, 1999, the Board of Directors approved the sale of the
Company's Wyant Health Care Division, subject to completion of buyer financing,
customary regulatory approvals and the approval of the Company's shareholders,
for cash on closing of $11,500,000 and $550,000 which will be held in escrow for
twenty-four months. These cash proceeds are subject to adjustment on closing,
which is expected to occur in the second quarter of 1999. Results of operations
between the measurement date of December 17, 1998 and the closing date are
expected to contribute positively to the Company's overall results. Cash
received on closing will be utilized to pay off the balance under the secured
line of credit with Congress Financial Corporation ($4,238,720 as at December
31, 1998), pay the withdrawal liability and income taxes generated by the
transaction, and temporarily to reduce other outstanding debt.
SIGNIFICANT FACTORS AND KNOWN TRENDS WITH REGARD TO DISCONTINUED OPERATIONS
PENSION PLAN
Certain employees of the Wyant Health Care Division are members of a
multi-employer defined benefit Pension Plan (the "Plan" or "Pension Plan"). The
Company was informed by the Pension Plan administrators that the Plan had failed
to meet minimum legal funding requirements and that the Company's pro-rata share
of the minimum funding deficiency was $370,000. The Plan has applied to the IRS
for a waiver from the minimum funding requirements and awaits a response. If
the waiver is obtained, the employers contributing to the Plan would be required
to fund and charge to earnings the funding deficiency, and corresponding
interest charges, over a 15 year period. If the waiver is not obtained, an
excise tax may be imposed on the Plan and such excise tax could be as much as
100% of the funding deficiency.
The sale of the Wyant Health Care Division will trigger a withdrawal
liability as PaperPak, the acquirer of the Division, will not assume the
Company's obligation under the Plan. This withdrawal liability will be funded
through the proceeds from the sale of the Division. In addition to the
withdrawal liability, the Plan may also seek to collect the Division's pro-rata
share of the funding deficiency discussed above. After taking into account these
Pension Plan liabilities, the Company estimates that it will realize a gain on
the sale of the Division.
AIRLAY II MACHINE
In 1992, the Division purchased a machine ("Airlay II") for the production
of airlaid products. During 1993, the machine was redesigned for commercial use.
Although Airlay II was installed in the Branchburg, New Jersey manufacturing
facility in the fourth quarter of 1994, only a small quantity of commercially
acceptable product has been manufactured to date. During the second quarter of
1998, a complete engineering evaluation of the machine was performed.
15
<PAGE> 19
The Division implemented the majority of the recommended changes included
in the engineering evaluation. In December 1998 the Division developed a
business plan that included, as an objective, full commercial operation of
Airlay II by the end of 1999.
Airlay II is part of the assets of the Division that Wyant has agreed to
sell to PaperPak. As of December 31, 1998 the net book value of Airlay II was
approximately $2.2 million. In the event that the sale of the Division is not
consummated, there can be no assurance that Airlay II will achieve full
commercial operation or produce saleable product for the Division. Accordingly,
failure to achieve full commercial operation in the near future could result in
a significant write-down of the Company's investment in Airlay II, which
write-down would have a material adverse effect on the results of operations of
the Company.
Environmental
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased.
The Company has entered into a flat fee contract with its environmental
consultants for $11,750 for the delineation investigation. Upon determination
of the contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
Backlog, Impact of Inflation, Seasonality
The Company attempts to maintain sufficient inventory levels for all
products to allow shipment against most orders for wiping products within a one
week period and next day for core stocking items of the Company's sanitation
products. To some extent, however, certain components must be inventoried
further in advance of actual orders to ensure availability. For the most part,
purchases are based upon quarterly requirements as projected after calculating
sales indications from the sales and marketing departments.
The Company's products are not subject to significant seasonal influences.
Because its products are sold primarily to distributors throughout the
United States and to distributors and end-users in Canada, the Company is
affected by general economic conditions. Accordingly, any adverse change in the
economic climate may have an adverse impact on the Company's sales and financial
condition.
16
<PAGE> 20
YEAR 2000
The Year 2000 problem arises because many computer systems and software
products currently in use are coded to accept only two digit entries in the date
code field. Four digit entries will be required to identify 21st century dates.
Consequently, the use of software and computer systems that are not Year 2000
compliant could result in the disruption of operations. As a result, many
companies' computer systems and software may need to be upgraded or replaced to
conform with Year 2000 requirements.
In order to properly address the Year 2000 issue, the Company has appointed
the Vice President, Information Technology of Wood Wyant as Year 2000 Project
Director to direct a project team which will identify Year 2000 issues and
coordinate solutions. The project team is currently being assembled. Its role
will be to conduct Year 2000 readiness assessment audits at all of the Company's
facilities, encompassing all equipment and processes deemed important to the
facility's operation. Contingency plans will also be developed.
Wood Wyant has installed new applications software for which it has
obtained written confirmation from the vendor that it is Year 2000 compliant.
This software has become operational in the first quarter of 1999. The software
currently in use at IFC is not Year 2000 compliant and will be replaced by
hardware and applications software which will be Year 2000 compliant by
mid-1999. As an additional precaution, the technical infrastructure of all the
Company's businesses will be audited and tested to ensure Year 2000 compliance
under normal business conditions.
The total cost of purchasing and installing the new Wood Wyant software is
estimated to be $1,630,000 (Cdn. $2,500,000), and is being financed through
lease facilities established with the Bank of Nova Scotia. The cost to replace
computer hardware and applications software at IFC has not yet been determined
but is not expected to be material.
The Company is also preparing to issue Year 2000 compliance letters
requesting confirmation of suppliers' readiness and follow-up discussions will
take place for all business-critical suppliers. Major customers will also be
contacted to confirm their Year 2000 readiness.
To date, the Company has not incurred significant incremental costs in
order to comply with Year 2000 requirements and does not believe it will incur
significant incremental costs in the foreseeable future. However, there can be
no assurance that Year 2000 errors or defects will not be discovered in the
Company's software systems and, if errors or defects are discovered, there is no
assurance that this would not result in a material financial risk to the
Company.
In addition, the Company purchases goods and services from third party
vendors that may not be Year 2000 compliant. While the Company intends to
obtain confirmation of vendors' state of readiness, their failure to operate
properly with regard to Year 2000 requirements could require the Company to
incur material expenses to rectify the impact on the Company of such failure.
However, all of the Company's raw materials are widely available and the Company
is not dependent on any one supplier or group of suppliers.
The Company does not know the state of preparedness for Year 2000 issues of
all of its customers. However, no single customer exceeds 2% of consolidated
sales and therefore the risk the Company faces is broad based if many customers
are unable to use information systems necessary to place orders for Company
products.
The Company plans to achieve Year 2000 compliance by mid-1999.
17
<PAGE> 21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk principally in two areas, interest
rate risk and foreign currency exchange rate risk.
INTEREST RATE RISK
The Company's lines of credit and long-term debt are all at rates of
interest which fluctuate with changes to bank prime rates in either the United
States or Canada. Consequently, increases in interest rates could have an
adverse effect on the Company's future results.
FOREIGN CURRENCY EXCHANGE RATE RISK
The Company's results of operations are significantly dependent on, and
materially affected by, the results of operations of Wood Wyant and the
attendant business risks that are associated with the operation of Wood Wyant as
a going concern. These material risks include the following:
- - A significant portion of the Company's earnings, on a consolidated basis,
will come from Wood Wyant, a Canadian corporation. As a result, the
Company's results of operations and earnings may be adversely affected by
the fluctuation in the currency exchange rate between US and Canadian
dollars.
- - Since Wood Wyant conducts its business using Canadian dollars as its
operational currency, to the extent the Canadian dollar strengthens against
the US dollar, United States competitors in the institutional sanitation
business may become more active in the Canadian market. As a result, the
Company's results of operations and earnings may be adversely affected in
light of potential greater competition in times of a stronger Canadian
dollar.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On April 21, 1997, the firm of Arthur Andersen LLP (the "Former Auditors")
was notified that it was being dismissed as Wyant's independent certified public
accountants as of such date and that the firm of Ernst & Young LLP (the
"Auditors") had been engaged as of such date as Wyant's independent certified
public accountants. The decision to dismiss the Former Auditors and to engage
the Auditors was approved by the Board of Directors at the time.
The Former Auditors served as independent certified public accountants for
Wyant since 1990. The Report of Independent Public Accountants of the Former
Auditors on the consolidated financial statements of Wyant and subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 expressed an unqualified opinion. There were no
reportable events (as defined in Commission Regulation S-K, Item 304(a)(1)(v))
or disagreements with the Former Auditors on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
that were not resolved to the satisfaction of the Former Auditors during the
1995 and 1996 fiscal years and through April 21, 1997.
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<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information as required for this Item 10 is incorporated by reference from
the Company's definitive proxy statement for its Annual Meeting of Shareholders
(the "1999 Proxy Statement"), to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information as required in respect of this Item 11 is incorporated by
reference from the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as required in respect of this Item 12 is incorporated by
reference from the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information as required in respect of this Item 13 is incorporated by
reference from the 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following Financial Statements are included in Item 8.
Reports of Independent Auditors F-1
Consolidated Balance Sheet as at December 31, 1998 and 1997 F-3
Consolidated Statement of Operations for the years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-9
2. Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts. F-32
All other schedules are omitted because they are not applicable or not
required, or the applicable information is shown in the Consolidated Financial
Statements or in notes thereto.
19
<PAGE> 23
3. Exhibits
The following exhibits are filed herewith or incorporated by
reference as indicated. Exhibit numbers refer to Item 601 of
Regulation S-K.
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1 Asset Purchase Agreement dated as of February 23, 1999 between
Wyant Corporation and Paper-Pak Products, Inc. (incorporated by
reference from the Company's Current Report on Form 8-K dated
February 23, 1999).
3.1 Certificate of Incorporation and Amendments thereof (with the
exception of Exhibits 3.2 and 3.3 below) and By-Laws are
incorporated by reference. They were filed as exhibits with the
Company's February 2, 1984 and January 7, 1987 Registration
Statements and the Registrant's Proxy Statement filed May 30, 1990.
3.2 Certificate of Amendment of the Certificate of Incorporation dated
March 18, 1997 (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).
3.3 Certificate of Amendment of the Certificate of Incorporation dated
June 3, 1998 (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998).
9.1 Voting Trust Agreement dated March 14, 1997 among McCarthy
Tetrault, as depository, James A. Wyant, as voting trustee, and
3323986 Canada Inc. (incorporated by reference to Exhibit D of
Amendment No. 13 to Schedule 13D filed March 18, 1997).
9.2 Voting Trust Agreement dated March 18, 1997 among Wyant & Company
Inc., McCarthy Tetrault, as depository, James A. Wyant, as voting
trustee, 3287858 Canada Inc., and Derek Wyant Holdings Inc. (f/k/a
1186020 Ontario Limited) (incorporated by reference to Exhibit C of
Amendment No. 12 to Schedule 13D dated December 3, 1996 and filed
on December 13, 1996).
10.1 The 1991 Stock Option Plan filed with the Company's 1994 Proxy
Statement is incorporated by reference thereto.
10.2 The 1997 Stock Incentive Plan filed with the Company's Form S-8 on
March 19, 1997 is incorporated by reference thereto.
10.3 Loan and Security Agreement between Congress Financial Corporation
and Wyant Corporation, IFC Disposables, Inc. and Bridgewater
Manufacturing Corp. dated November 18, 1997 (incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.4 Credit facilities agreement between the Bank of Nova Scotia and
Wood Wyant Inc. dated June 22, 1998, together with amendments
thereto dated February 19, 1999 and March 10, 1999.
10.5 Employment Agreement dated November 11, 1996 between James A. Wyant
and Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.), as
amended (incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1997).
20
<PAGE> 24
Exhibit No. Description of Exhibit
- ----------- ----------------------
10.6 Addendum dated March 10, 1998 to the Employment Agreement
dated November 11, 1996, as amended, between James A. Wyant and
Wood Wyant Inc.
10.7 Retirement Arrangement Agreement dated June 27, 1994 between
Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and Donald C.
MacMartin (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.8 Employment Agreement dated January 1, 1999 between Donald C.
MacMartin and Wood Wyant Inc.
10.9 Employment Agreement dated January 1, 1999 between Marc
D'Amour and Wood Wyant Inc.
10.10 Letter of Agreement dated August 14, 1997 between Wyant Corporation
and Robert E. Briggs.
10.11 Indemnification Agreement dated March 11, 1999 between Wyant
Corporation and James A. Wyant.
16.1 Letters from Arthur Andersen LLP regarding change of certifying
independent accountants (incorporated by reference from the
Company's Current Report on Form 8-K dated April 21, 1997).
21.1 Subsidiaries.
(b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the quarter ended
December 31, 1998.
Shareholders may obtain a copy of any exhibit not filed herewith by writing
to Wyant Corporation, P.O. Box 8609, Somerville, New Jersey 08876.
21
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
WYANT CORPORATION
By: /s/ D.C. MacMartin
D.C. MacMartin
Chairman of the Board,
President and Chief Executive Officer,
(Principal Executive Officer)
Date: March 18, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ D.C. MacMartin Chairman of the Board, March 18, 1999
- --------------------- President and Chief Executive Officer
D.C. MacMartin (Principal Executive Officer)
/s/ J.A. Wyant Vice-Chairman of the Board and March 18, 1999
- --------------------- Corporate Secretary
J.A. Wyant
/s/ M. A. D'Amour Vice President, March 18, 1999
- --------------------- Chief Financial Officer and Treasurer
M.A. D'Amour (Principal Financial Officer and
Principal Accounting Officer)
/s/ R.E. Briggs Director and President, March 18, 1999
- --------------------- Wyant Health Care
R.E. Briggs
/s/ R. J. Charles Director March 18, 1999
- ---------------------
R. J. Charles
/s/ T.R.M. Davis Director March 18, 1999
- ---------------------
T.R.M. Davis
/s/ N.A. Gallopo Director March 18, 1999
- ---------------------
N.A. Gallopo
/s/J.B. Wight Director March 18, 1999
- ---------------------
J.B. Wight
</TABLE>
22
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Wyant Corporation [formerly Hosposable Products, Inc.]
We have audited the accompanying consolidated balance sheet of Wyant Corporation
[formerly Hosposable Products, Inc.] as at December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the two years then ended. Our audit also included the financial
statement schedule listed in the Index at 14(a). These financial statements and
the schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wyant Corporation
at December 31, 1998 and 1997, and the consolidated results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We previously audited and reported on the consolidated balance sheet and related
consolidated statements of income, stockholders' equity and cash flows of The
Canadian Operations of G.H. Wood + Wyant Inc. and Subsidiaries for the year
ended December 31, 1996, prior to their restatement for the 1997 transaction
more fully described in Note 3. The contribution of G.H. Wood + Wyant Inc. and
Subsidiaries to total assets, revenues and expenses represented 46.9%, 68.8% and
57.1% of the respective restated totals for 1996. Financial statements of the
other pooled company included in the 1996 restated consolidated statements were
audited and reported on separately by other auditors. We also have audited, as
to combination only, the accompanying consolidated statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1996, after
restatement for the 1997 pooling of interests; in our opinion, such consolidated
financial statements have been properly combined on the basis described in Note
3 to the consolidated financial statements.
Montreal, Canada,
February 16, 1999, except for Note 2
which is as at February 23, 1999. Ernst & Young LLP
F-1
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hosposable Products, Inc.:
We have audited the accompanying consolidated balance sheets of Hosposable
Products, Inc. (a New York corporation) and subsidiaries as of December 31,
1996, and 1995, and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hosposable Products, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
February 11, 1997 (except with respect
to matters discussed in Note 13 as to
which the date is March 18, 1997)
F-2
<PAGE> 28
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED BALANCE SHEET
As at December 31
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
[Restated]
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 59,985 156,131
Receivables [note 4] 10,215,812 9,298,779
Inventories [note 5] 8,576,960 6,161,254
Net assets held for divestiture [note 2] 9,203,356 9,981,183
Other 1,393,270 1,683,097
---------- ----------
TOTAL CURRENT ASSETS 29,449,383 27,280,444
========== ==========
Property, plant and equipment, net of
accumulated depreciation and
amortization of $11,474,155
[1997- $10,651,878] [notes 6 & 8] 8,593,460 8,798,204
Other assets [note 7] 4,496,821 1,077,229
---------- ----------
TOTAL ASSETS 42,539,664 37,155,877
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit [note 8] 4,092,128 2,204,719
Committed revolving credit facility [note 8] 4,238,720 5,880,748
Accounts payable 4,856,657 4,951,071
Accrued expenses 3,228,412 1,988,842
Income taxes payable 433,288 1,252,988
Current portion of long-term debt [note 8] 1,061,332 389,035
Current portion of preferred stock
of subsidiary [note 3] 513,204 550,084
---------- ----------
TOTAL CURRENT LIABILITIES 18,423,741 17,217,487
========== ==========
Long-term debt, excluding current portion [note 8] 3,887,593 1,998,152
Preferred stock of subsidiary [note 3] 5,477,072 4,379,527
Deferred income taxes [note 9] 2,076,416 1,780,726
Commitments [note 14]
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share,
authorized 6,000,000 shares;
issued and issuable 3,607,150
[3,604,817 in 1997] 27,053 27,037
Additional paid-in capital 6,821,825 6,806,867
Retained earnings 6,326,679 5,112,006
Cumulative translation adjustment (500,715) (165,925)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 42,539,664 37,155,877
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE> 29
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
$ $ $
[Restated] [Restated]
<S> <C> <C> <C>
NET SALES 67,124,137 63,559,703 62,590,707
COST OF SALES 43,218,466 39,691,201 38,151,474
---------- ---------- ----------
GROSS PROFIT 23,905,671 23,868,502 24,439,233
---------- ---------- ----------
EXPENSES
Selling 12,658,838 11,931,480 12,015,764
General and administration 8,699,535 9,193,943 9,308,838
Amortization 507,540 428,811 505,345
Non-recurring items [note 11] -- -- 549,805
Interest expense 1,158,249 745,089 511,253
Other income [note 12] (244,067) (230,790) (184,636)
---------- ---------- ----------
22,780,095 22,068,533 22,706,369
---------- ---------- ----------
Income from continuing operations before income
taxes and extraordinary gain 1,125,576 1,799,969 1,732,864
Income tax expense [note 9] 572,000 800,597 795,993
--------- --------- ---------
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Discontinued operations [note 2] -
Income (loss) from operations (net of income taxes
(recoveries) of $545,000, ($289,610) and
($488,358), respectively) 1,021,602 (580,874) (792,481)
--------- --------- ---------
Income before extraordinary gain 1,575,178 418,498 144,390
Extraordinary gain, net of income taxes [note 13] -- 91,958 --
--------- --------- ---------
NET INCOME 1,575,178 510,456 144,390
Dividends and accretion of mandatorily
redeemable preferred stock 360,505 191,746 --
--------- --------- ---------
NET INCOME ATTRIBUTABLE TO COMMON SHARES 1,214,673 318,710 144,390
--------- --------- ---------
Per common share [note 15]
BASIC
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.28 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.34 0.09 0.04
DILUTED
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.27 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.33 0.09 0.04
</TABLE>
See accompanying notes
F-4
<PAGE> 30
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
Year ended December 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
$ $ $
[Restated] [Restated]
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE
Balance at beginning of year 27,037 27,037 27,037
Stock issued for options exercised 16 - -
---------- ---------- ----------
BALANCE AT END OF YEAR 27,053 27,037 27,037
---------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 6,806,867 6,789,397 6,789,397
Stock issued for options exercised 14,958 - -
Gain on sale of treasury stock - 17,470 -
---------- ---------- ----------
BALANCE AT END OF YEAR 6,821,825 6,806,867 6,789,397
---------- ---------- ----------
RETAINED EARNINGS
Balance at beginning of year 5,112,006 4,999,823 5,390,064
Net income 1,575,178 510,456 144,390
Dividends declared by subsidiary (190,955) (125,746) -
Accretion on preferred shares of subsidiary (169,550) (66,000) -
Distribution to minority shareholders - (206,527) (534,631)
---------- ---------- ----------
BALANCE AT END OF YEAR 6,326,679 5,112,006 4,999,823
---------- ---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of year (165,925) 26,955 72,146
Foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
BALANCE AT END OF YEAR (500,715) (165,925) 26,955
---------- ---------- ----------
TREASURY STOCK
Balance at beginning of year - (31,530) (31,530)
Treasury stock sold, at cost - 31,530 -
---------- ---------- ----------
BALANCE AT END OF YEAR - - (31,530)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985 11,811,682
========== ========== ==========
COMPREHENSIVE INCOME
Net income 1,575,178 510,456 144,390
Other - foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
COMPREHENSIVE INCOME FOR YEAR 1,240,388 317,576 99,199
---------- ---------- ----------
</TABLE>
F-5
<PAGE> 31
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY [CONT'D]
Year ended December 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
[Restated] [Restated]
<S> <C> <C> <C>
COMMON SHARES
Number issued at beginning of year 2,271,484 2,271,484 2,271,484
Shares issued for options exercised 2,333 - -
--------- --------- ---------
NUMBER ISSUED AT END OF YEAR 2,273,817 2,271,484 2,271,484
--------- --------- ---------
TREASURY STOCK
Held at beginning of year - (14,933) (14,933)
Sold during the year - 14,933 -
--------- --------- ---------
HELD AT END OF YEAR - - (14,933)
--------- --------- ---------
COMMON SHARES ISSUED AND OUTSTANDING 2,273,817 2,271,484 2,256,551
COMMON SHARES ISSUABLE UPON CONVERSION
OF EXCHANGEABLE SHARES [NOTE 3] 1,333,333 1,333,333 1,333,333
--------- --------- ---------
COMMON SHARES ISSUED,
ISSUABLE AND OUTSTANDING 3,607,150 3,604,817 3,589,884
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE> 32
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- ---------- ----------
[Restated] [Restated]
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations 553,576 1,091,330 936,871
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 1,137,698 990,013 1,060,687
Loss (gain) on sale of fixed assets 11,792 (28,470) (122,810)
Deferred income tax expense (benefit) 72,000 (25,823) 814,027
Deferred pension costs (107,014) (92,177) (13,200)
Increase in deferred charges (49,480) (320,234) -
Decrease (increase) in working capital (511,879) 752,956 (73,888)
Decrease in other liabilities - - (100,000)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,106,693 2,367,595 2,501,687
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash
acquired [note 3] (3,853,158) - -
Capital expenditures (853,692) (1,313,246) (970,985)
Cash proceeds from sale of fixed assets 15,850 35,628 236,188
Sale of marketable securities - 446,812 1,488,783
Purchase of marketable securities - - (573,362)
Decrease in other assets 83,278 - -
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (4,607,722) (830,806) 180,624
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in committed revolving
credit facility (1,642,028) 5,880,748 -
Repayment of long-term debt (1,001,944) (7,820,959) (2,066,431)
Increase in long-term debt 3,723,111 5,122,507 2,233,353
Distribution to minority shareholders - (206,527) (534,631)
Issue of common shares 14,974 - -
Redemption of preferred shares (550,122) - -
Sale of treasury stock - 49,000 -
Dividends paid by subsidiary (190,955) (125,746) -
Increase (decrease) in bank indebtedness 1,376,683 911,368 (481,598)
Distribution to G.H. Wood + Wyant Inc.
shareholders [note 3] - (3,667,033) -
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,729,719 143,358 (849,307)
---------- ---------- ----------
Effect of exchange rate changes on cash (317,265) (185,637) (56,268)
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents from continuing operations (2,088,575) 1,494,510 1,776,736
Cash provided by (used for) discontinued operations 1,992,429 (2,909,004) (3,125,580)
---------- ---------- ----------
Net decrease in cash and cash equivalents (96,146) (1,414,494) (1,348,844)
Cash and cash equivalents, beginning of year 156,131 1,570,625 2,919,469
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR 59,985 156,131 1,570,625
========== ========== ==========
</TABLE>
F-7
<PAGE> 33
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
CASH FLOWS (CONT'D)
Year ended December 31
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
$ $ $
[Restated] [Restated]
<S> <C> <C> <C>
DECREASE (INCREASE) IN WORKING CAPITAL
Decrease in accounts receivable 976,667 338,451 376,263
Decrease (increase) in inventories (575,736) 852,005 732,898
Decrease (increase) in other current assets 593,683 29,537 (139,879)
Decrease in accounts payable and accrued liabilities (663,066) (1,439,298) (1,323,897)
Increase (decrease) in income taxes payable (843,427) 972,261 280,727
-------- ---------- ----------
(511,879) 752,956 (73,888)
======== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the year for
Interest 1,002,946 530,153 495,767
Income taxes 1,061,716 (216,376) (300,690)
--------- -------- -----------
</TABLE>
See accompanying notes
F-8
<PAGE> 34
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Wyant Corporation [formerly Hosposable Products, Inc.], a New York corporation
incorporated in 1971 [the "Corporation"], operates the following wholly owned
subsidiaries: IFC Disposables, Inc., a Tennessee corporation ["IFC"] and Wood
Wyant Inc., a Canadian corporation ["Wood Wyant]. IFC manufactures and
distributes disposable wipers and sanitary paper products and systems which are
sold primarily in domestic markets. Wood Wyant manufactures and distributes
sanitation products and systems to commercial and institutional markets in
Canada.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation
and its wholly owned subsidiaries, IFC and Wood Wyant [collectively, the
"Company"]. All significant intercompany balances and transactions have been
eliminated in consolidation.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
UTILIZATION 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 the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted average number of
shares outstanding during the period. Contingently issuable shares are
considered outstanding common shares and included in the calculation of basic
earnings per share only when there is no circumstance under which these shares
would not be issued.
Diluted earnings per share are calculated taking into consideration the effect
of the potential exercise of stock options and of the exchangeable Class F
preferred shares.
F-9
<PAGE> 35
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost is
determined on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization of property, plant and equipment in the Wiping Products segment is
provided utilizing the straight-line method over the estimated useful lives of
the respective assets ranging from 5 to 30 years; in the Sanitation Products
segment, the declining balance method is used, with rates ranging from 5% to 20%
per year. Leasehold improvements are amortized on a straight-line basis over
the term of the related leases or the estimated useful life, whichever is
shorter. Patents and trademarks are amortized on a straight-line basis over
periods from 5 to 17 years.
GOODWILL
Goodwill is amortized on a straight-line basis over periods not exceeding
40 years. The Company periodically reviews goodwill for possible impairment,
which would be recognized if a permanent decline in value has occurred.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ["SFAS"] No.123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Company has chosen to continue to account for stock-based compensation
awards to employees and directors using the intrinsic value method prescribed in
Accounting Principles Board Opinion ["APB"] No.25, "Accounting for Stock Issued
to Employees," and related Interpretations. Accordingly, compensation cost for
stock options awarded to employees and directors is measured as the excess, if
any, of the quoted market price of the Corporation's stock at the date of grant
over the amount an employee or director must pay to acquire the stock.
As required, the Company has adopted SFAS No.123 to account for stock-based
compensation awards to outside consultants and affiliates. Accordingly,
compensation costs for stock option awards to outside consultants and affiliates
are measured at the date of grant based on the fair value of the award using the
Black-Scholes option pricing model.
F-10
<PAGE> 36
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INCOME TAXES
The Company files a consolidated federal income tax return for its United States
companies. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. Deferred income taxes
result primarily from differences between financial and tax reporting of
depreciation.
FOREIGN CURRENCY TRANSLATION
The Corporation translates the accounts of its foreign subsidiary, Wood Wyant,
such that the assets and liabilities of the subsidiary are translated into U.S.
dollars at rates of exchange prevailing at the year-end. Exchange gains and
losses arising from these translations are deferred and included as a separate
component of stockholders' equity on the consolidated balance sheet ["Cumulative
Translation Adjustment"]. Revenue and expense items are translated at average
rates of exchange prevailing during the year.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires all derivatives to
be recorded on the balance sheet at fair value and provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. The Company is studying the application of this new standard
but has not yet determined its impact. As required, the Company will adopt this
statement upon its applicable effective date in fiscal 2000.
2. DISCONTINUED OPERATIONS
On December 17, 1998, the Board of Directors authorized management to pursue
the sale of the Company's Wyant Health Care Division ("Division"). On February
23, 1999 the Board approved the sale of the Division, subject to completion of
buyer financing, customary regulatory approvals and the approval of the
Company's shareholders. Consequently, the results of the Division have been
reported in these financial statements as discontinued operations.
F-11
<PAGE> 37
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
2. DISCONTINUED OPERATIONS [CONT'D]
The Company will receive cash of $11,500,000 on closing and $550,000 will be
held in escrow for twenty four months, subject to adjustment on closing.
The operating results of the Division are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- ---------- ----------
<S> <C> <C> <C>
Net sales 36,462,815 31,324,702 31,829,712
Income (loss) before income taxes 1,566,602 (870,484) (1,240,839)
---------- ---------- ----------
</TABLE>
The net assets of the Division are as follows:
<TABLE>
<CAPTION>
1997 1996
$ $
---------- ----------
<S> <C> <C>
Current assets 5,785,245 6,146,234
Property, plant and equipment 9,787,618 10,520,611
Other assets 215,928 332,913
Current liabilities (3,428,034) (3,468,706)
Long-term liabilities (3,157,401) (3,549,869)
---------- ----------
Net assets of discontinued operations 9,203,356 9,981,183
========== ==========
</TABLE>
The Company expects the sale of the Division to close in the second quarter of
1999. At the date of disposal, the Company expects to record a small gain.
Included in the Company's estimated gain are the estimated costs to satisfy the
Division's obligation with respect to a defined benefit multi-employer pension
plan which covers certain of the Division's employees.
3. ACQUISITIONS
[a] On April 30, 1998, the Company, through its wholly-owned Canadian
subsidiary, Wood Wyant Inc., acquired all of the issued and outstanding shares
of H.A. Perigord Company Limited, a distributor of sanitation products. On June
26, 1998, Wood Wyant Inc. acquired all of the issued and outstanding shares of
Professional Sanitation Products Ltd., a distributor of sanitation products.
The total consideration for these acquisitions amounted to $3,070,806, which was
comprised of cash of $2,107,645 and 146,666 Class F Preferred shares of Wood
Wyant Inc.
F-12
<PAGE> 38
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
On June 30, 1998, Wood Wyant acquired all of the issued and outstanding shares
of four related businesses based in British Columbia for $2,644,228, comprised
of cash of $1,760,696 and 136,445 Class F Preferred shares of Wood Wyant Inc.
The companies acquired are Midway Supply Ltd., Purnel Distributors Ltd. and
Midway Purnel Sanitary Supply Ltd., all of which are distributors of sanitation
products, and Fraser Valley Industrial Chemicals Inc., a manufacturer of
janitorial chemicals.
The significant conditions of the Class F Preferred shares of Wood Wyant Inc.
are:
Prior to July 1, 2000 and subject to the priorities of the other classes of
preferred stock of Wood Wyant Inc., the shares:
1) are exchangeable for Wyant Corporation common stock on a share for share
basis and are entitled to dividends equivalent on a per share basis, to any
dividends paid on Wyant Corporation common stock; and
2) have a liquidation preference per share of one share of Wyant
Corporation common stock.
Holders of the shares have an option, which may be exercised between July 1,
2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in five
equal annual instalments at a price of Cdn $11.250028 ($7.3371) per share plus
any accrued and unpaid dividends. If the redemption option is exercised,
dividends of 3.5% per annum will be payable commencing July 1, 2000.
Each of the above acquisitions has been accounted for under the purchase method
and the results of operations accordingly are included in the consolidated
statement of operations from the respective dates of acquisition. The purchase
prices have been allocated to assets acquired and liabilities assumed based on
fair market value at the dates of acquisitions, as follows:
<TABLE>
<CAPTION>
<S> <C>
Working capital, other than cash $1,618,307
Property, plant and equipment 386,518
Other assets 60,975
Goodwill 3,831,153
Long-term liabilities (177,491)
Deferred income taxes (4,428)
</TABLE>
The excess of purchase price over the fair values of the net assets acquired was
$3,831,153 and has been recorded as goodwill, which is being amortized on a
straight-line basis over 40 years.
F-13
<PAGE> 39
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The following unaudited pro forma information gives effect to the transactions
as if they had occurred at January 1, 1998. This pro forma information does
not necessarily reflect the results of operations that would have been achieved
if the acquisitions had been consummated as of that time.
<TABLE>
<CAPTION>
1998
$
----------
<S> <C>
Net sales 73,391,486
Income from continuing operations 529,740
Net income 1,551,342
Per common share
Income from continuing operations 0.03
Net income 0.31
</TABLE>
[b] On March 18, 1997 the Corporation, through a wholly owned subsidiary,
Wood Wyant Inc., purchased the Canadian operations of G.H. Wood + Wyant Inc. for
[i] cash consideration of Cdn $5,000,000 [US$3,667,033], [ii] a promissory note
["the Note"] in the amount of Cdn $4,068,951 [US $2,961,606] having a fair value
of US $2,798,794, [iii] 3,800,000 shares of Class B Preferred Stock of Wood
Wyant Inc. having a liquidation preference of Cdn $3,800,000 [US $2,765,849] and
a fair value of US $2,267,900, and [iv] 1,333,333 shares of Class E Preferred
Stock of Wood Wyant Inc. having a liquidation preference per share of one share
of Wyant Corporation Common Stock. The fair value of Class E Preferred shares
at March 18, 1997 was US $5,000,000. These Class E Preferred shares are
recorded at par value of $10,000 in Wyant Corporation Common Stock and
$4,990,000 in additional paid-in capital. Each Class E Preferred share is
exchangeable by the holder at any time for one share of Wyant Corporation Common
Stock.
The transaction represents a combination of entities under common control and
has been accounted for in a manner similar to a pooling of interests.
Accordingly, the comparative figures in these financial statements have been
restated to retroactively reflect the financial information of the combined
entities. The excess of the fair value of the consideration paid of US
$13,733,727 over the book value of the net assets acquired of US $8,638,875 [Cdn
$11,868,951] is considered a deemed dividend for accounting purposes, which
reduces the additional paid-in capital by US $5,094,852. The Note, which
yielded interest at 6% per annum, was exchanged on August 29, 1997 for shares of
Class A Preferred Stock of Wood Wyant Inc. on the basis of one share for each
Cdn $1.00 of unpaid principal amount of the Note.
F-14
<PAGE> 40
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The Class A and B Preferred shares entitle holders to fixed cumulative
preferential dividends at the rate of 4% and 3.999999%, respectively, of their
redemption price of $1.00 Cdn per share and are mandatorily redeemable in ten
consecutive annual tranches, each equal to 10% of their combined redemption
value, commencing on January 3, 1998. No Class B Preferred shares shall be
redeemed until all Class A Preferred shares have been redeemed. The Class E
Preferred shares entitle holders to receive dividends on a pro-rata basis
equivalent to dividends declared to the Corporation's common stockholders.
Included in the consolidated statement of operations for the three years ended
December 31, 1998 are the following results of the previously separate companies
for periods prior to the transaction date.
<TABLE>
<CAPTION>
CANADIAN
OPERATIONS OF
G.H. WOOD + HOSPOSABLE
WYANT INC. PRODUCTS, INC. CONSOLIDATED
$ $ $
------------ -------------- ------------
<S> <C> <C> <C>
UNAUDITED
1997
Revenue from external customers 12,287,019 9,842,579 22,129,598
Inter Company revenues 726,293 116,675 842,968
Net income (loss) 474,869 (651,354) (176,485)
---------- ---------- ----------
UNAUDITED
1996
Revenue from external customers 50,835,445 42,009,735 92,845,180
Inter Company revenues 2,050,901 283,898 2,334,799
Net income (loss) 1,199,580 (1,055,190) 144,390
---------- ---------- ----------
</TABLE>
4. RECEIVABLES
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
<S> <C> <C>
Trade 9,882,672 8,838,881
Less allowance for doubtful accounts 405,424 323,759
---------- ----------
9,477,248 8,515,122
Other 738,564 783,657
---------- ----------
10,215,812 9,298,779
========== ==========
</TABLE>
F-15
<PAGE> 41
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
5. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Raw materials 2,065,073 1,716,534
Finished goods 6,511,887 4,444,720
--------- ---------
8,576,960 6,161,254
========= =========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION NET BOOK
COST AND AMORTIZATION VALUE
$ $ $
---------- ---------------- ---------
<S> <C> <C> <C>
1998
Land 584,410 -- 584,410
Buildings and improvements 3,232,031 1,248,044 1,983,987
Machinery and equipment 9,522,060 5,421,294 4,100,766
Computer equipment 1,901,811 1,651,201 250,610
Furniture, fixtures and equipment 2,896,169 2,323,532 572,637
Leasehold improvements 876,931 493,494 383,437
Patents and trademarks 1,054,203 336,590 717,613
---------- ---------- ---------
20,067,615 11,474,155 8,593,460
========== ========== =========
1997
Land 626,408 -- 626,408
Buildings and improvements 3,358,486 1,231,300 2,127,186
Machinery and equipment 9,654,271 5,392,597 4,261,674
Computer equipment 1,567,487 1,385,706 181,781
Furniture, fixtures and equipment 2,301,585 1,960,191 341,394
Leasehold improvements 871,973 387,910 484,063
Patents and trademarks 1,069,872 294,174 775,698
---------- ---------- ---------
19,450,082 10,651,878 8,798,204
========== ========== =========
</TABLE>
Depreciation and amortization expense amounted to $851,873, $785,093 and
$942,688 in 1998, 1997 and 1996, respectively.
F-16
<PAGE> 42
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
7. OTHER ASSETS
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Goodwill, at cost 4,481,761 916,925
Accumulated amortization 785,168 654,946
--------- ---------
Net book value 3,696,593 261,979
Deferred pension costs 551,882 484,586
Deferred financing charges 248,346 330,664
--------- ---------
4,496,821 1,077,229
========= =========
</TABLE>
Amortization expense amounted to $179,978, $135,351 and $137,416 in 1998, 1997
and 1996, respectively.
8. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
WOOD WYANT INC.
Term loan repayable in monthly instalments of
Cdn $20,476 plus interest at the prime rate in
Canada plus 0.75% [prime at December 31,
1998 - 6.75%] maturing October 1, 2001. Principal
amount Cdn $1,692,856 [December 31, 1997 -
Cdn. $1,938,571] 1,104,060 1,355,170
Revolving credit facility - Cdn. $1,401,125
[December 31, 1997 - Cdn $1,476,300] 913,797 1,032,017
Term loan repayable in monthly instalments of
Cdn $35,000 plus interest at the prime rate in Canada
plus 0.75%, maturing April 30, 2003 [principal amount
Cdn. $1,820,000] 1,186,982 --
Term loan repayable in monthly instalments of
Cdn $49,523 plus interest at the prime rate in
Canada plus 0.75%, maturing June 30, 2003 [principal
amount Cdn $2,674,207] 1,744,086 --
--------- ---------
4,948,925 2,387,187
Current portion 1,061,332 389,035
--------- ---------
3,887,593 1,998,152
========= =========
</TABLE>
F-17
<PAGE> 43
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The exchange rate used at December 31, 1998 to translate the long-term debt
denominated in Canadian dollars was Cdn $1.5333 = US $1.00 [December 31, 1997 -
Cdn $1.4305 = US $1.00].
Principal payments of long-term debt over the next five years are as follows:
<TABLE>
<CAPTION>
$
<S> <C>
1999 1,061,332
2000 1,495,965
2001 1,445,056
2002 661,499
2003 285,073
</TABLE>
In September 1997, Wood Wyant obtained a collateralized revolving credit
facility in the amount of Cdn $3,000,000 with the Bank of Nova Scotia which
expires on September 30, 2000 and bears interest at prime plus 0.75%. This
facility was utilized on September 30, 1997 to repay two existing term loans
totalling Cdn $1,554,000 and in March 1998 to finance equipment purchases of Cdn
$282,749. These amounts are being repaid by monthly instalments of Cdn $30,612.
The balance is available to finance future equipment purchases. Maximum
availability under the facility reduces monthly by Cdn $50,000. Unused
availability at December 31, 1998 was Cdn $848,876.
LINES OF CREDIT
On November 18, 1997, the Corporation obtained a committed revolving credit
facility with Congress Financial Corporation ["Congress"] in the amount of
$13,000,000 which expires on November 18, 2000 and bears interest at prime plus
1% [prime rate at December 31, 1998 - 7.75%].
The maximum amount that the Corporation may borrow at any time is determined by
the sum of:
i. Amounts based on advance formulas applicable to the book value of
accounts receivable and inventories of the Corporation
and IFC ["Tranche A"]
and
ii. Advance formulas applicable to the November 1997 appraised values of
property, plant and equipment to a maximum of $5,500,000 less the amounts
required to guarantee amounts outstanding under New Jersey Economic
Development Authority bonds ($3,560,000 at December 31, 1998), which are
included under `Net Assets Held for Divestiture' ["Tranche B"].
Maximum availability under Tranche B reduces monthly by $76,388.
F-18
<PAGE> 44
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The facility is collateralized by substantially all of the assets of the
Corporation and IFC, tangible and intangible, except for the Corporation's
investment in the shares of Wood Wyant. Unused availability at December 31,
1998 was approximately $2,841,000. Amounts outstanding under the line of credit
are classified as a current liability due to the inclusion in the loan agreement
of a subjective acceleration clause and a lock box arrangement. The agreement
also contains a minimum adjusted net worth requirement.
Wood Wyant has available a collateralized revolving line of credit in Canada in
the amount of Cdn $7,500,000 with the Bank of Nova Scotia which is subject to
periodic review and which bears interest at the prime rate [6.75% at December
31, 1998]. This line of credit and the term loans of Wood Wyant are
collateralized by a general assignment of book debts of Wood Wyant, a pledge of
inventory under Section 427 of the Bank Act, a hypothec in the amount of Cdn
$30,000,000 on all movable property and a general security agreement.
9. INCOME TAXES
Details of the income tax provision are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
-------- -------- --------
<S> <C> <C> <C>
CURRENT
Federal (324,132) (210,559) (179,144)
State 46,132 10,291 3,929
Foreign 778,000 945,482 223,673
-------- -------- --------
500,000 745,214 48,458
======== ======== ========
DEFERRED
Federal (45,000) (26,413) 110,775
State -- -- (95,098)
Foreign 117,000 81,796 731,858
-------- -------- --------
72,000 55,383 747,535
-------- -------- --------
INCOME TAX PROVISION 572,000 800,597 795,993
======== ======== ========
</TABLE>
F-19
<PAGE> 45
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
9. INCOME TAXES [CONT'D]
The reported income tax provision differs from the amount computed by applying
the Federal tax rate to income before income taxes. The reasons for this
difference and the related tax effects are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Expected Federal tax rate 34.0% 34.0% 34.0%
Expected tax provision 382,696 611,990 589,174
State income tax 46,132 18,219 3,996
Foreign tax rate differences 146,403 66,408 84,464
Non-deductible expenses 65,000 25,377 46,110
Other (68,231) 78,603 72,249
--------- --------- ---------
REPORTED INCOME TAX PROVISION 572,000 800,597 795,993
========= ========= =========
</TABLE>
Deferred income taxes result principally from temporary differences in the
recognition of certain revenue and expense items for financial and tax reporting
purposes. Significant components of the Company's deferred tax assets and
liabilities as at December 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Deferred tax assets
Reserves and allowances 272,760 236,000
Goodwill 151,784 137,474
Other 177,839 151,821
--------- ---------
TOTAL DEFERRED TAX ASSETS 602,383 525,295
Deferred tax liabilities
Book and tax differences on property,
plant and equipment 1,855,109 1,572,601
Pension 221,307 194,689
Other -- 13,436
--------- ---------
TOTAL DEFERRED TAX LIABILITIES 2,076,416 1,780,726
--------- ---------
NET DEFERRED INCOME TAX LIABILITY 1,474,033 1,255,431
========= =========
</TABLE>
Income before taxes attributable to all foreign operations was $2,066,867,
$2,481,335 and $2,155,111 in each of fiscal 1998, 1997 and 1996, respectively.
F-20
<PAGE> 46
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS
The Corporation has two stock option plans, the 1997 Stock Incentive Plan [the
"1997 Plan"] and the 1991 Stock Option Plan [the "1991 Plan"]. The Company
accounts for options granted to employees and directors under these plans using
APB No.25, under which no compensation cost has been recognized for stock
options granted. Had compensation cost for these stock options been determined
consistent with SFAS No.123, the Company's pro forma earnings per share would
have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
$ $ $
--------- ------- -------
Net income (loss) available to common
stockholders
As reported 1,214,673 318,710 144,390
Pro forma 745,270 (248,852) (273,691)
Earnings (loss) per share
Basic
As reported 0.34 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
Diluted
As reported 0.33 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. Additional awards in future years are anticipated.
During 1997 and 1991, the stockholders of the Company approved the adoption of
the 1997 Plan and the 1991 Plan, respectively. Each plan authorizes the
granting of stock options [either non-qualified stock options or incentive stock
options], the exercise of which would allow up to an aggregate of 400,000 shares
of the Company's common stock under the 1997 Plan and 333,333 shares under the
1991 Plan, to be acquired by the holders of the stock options. The 1997 Plan
also permits the granting of other types of stock-based awards.
Under the 1997 and 1991 Plans, non-qualified stock options have been granted to
directors, employees and consultants for terms of up to ten years at exercise
prices of not less than 100% of the fair market value of the shares at the date
of grant, exercisable in whole or in part at stated times from the date of grant
to up to two years thereafter. At December 31, 1998, options to purchase
319,351 shares and 165,340 shares of common stock were exercisable with respect
to the 1997 Plan and the 1991 Plan, respectively. Option activity during 1998,
1997 and 1996 is summarized as follows:
F-21
<PAGE> 47
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
$
<S> <C> <C>
1998
OUTSTANDING, BEGINNING OF YEAR 592,048 4.53
Granted 25,335 5.29
Exercised (2,333) 4.19
Expired (33,334) 4.50
Canceled / surrendered (44,340) 4.79
------- ----
OUTSTANDING, END OF YEAR 537,376 4.55
------- -----
EXERCISABLE, END OF YEAR 484,691 4.57
======= ====
Weighted average fair value of options granted 2.34
1997
OUTSTANDING, BEGINNING OF YEAR 332,048 5.41
Granted 416,000 4.01
Canceled / surrendered (156,000) 5.00
-------- ----
OUTSTANDING, END OF YEAR 592,048 4.53
------- ----
EXERCISABLE, END OF YEAR 342,667 4.66
======= ====
Weighted average fair value of options granted 1.69
1996
OUTSTANDING, BEGINNING OF YEAR 141,381 5.28
Granted 250,667 5.59
Expired (21,333) 4.33
Canceled / surrendered (38,667) 5.44
------- ----
OUTSTANDING, END OF YEAR 332,048 5.41
------- ----
EXERCISABLE, END OF YEAR 216,000 5.32
======= ====
Weighted average fair value of options granted 2.51
</TABLE>
F-22
<PAGE> 48
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
The fair value of options at date of grant was estimated using the Black-Scholes
pricing model with the following weighted average assumptions.
<TABLE>
<CAPTION>
1998 1997
% %
----- -----
<S> <C> <C>
Expected life [years] 5.00 5.00
Risk-free interest rates 5.15 6.22
Volatility 41.20 37.60
Dividend yield 0.00 0.00
----- -----
</TABLE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------- -------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF AT REMAINING AVERAGE DECEMBER 31, AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE 1998 EXERCISE
PRICES 1998 LIFE PRICE PRICE
- ------------- ------- ---------- ----- ------- -----
<S> <C> <C> <C> <C> <C>
$3.00 - $4.50 346,701 8.32 years $4.01 304,683 $3.99
$4.51 - $5.81 190,675 7.12 years $5.52 180,008 $5.54
- ------------- ------- ---------- ----- ------- -----
</TABLE>
All comparative data have been restated to reflect the four-for-three stock
split effected in the form of a stock dividend, which was announced on
March 27, 1998 and paid on May 21, 1998.
11. NON-RECURRING ITEMS
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---- ---- ----
<S> <C> <C> <C>
Acquisition costs -- -- 549,805
------ ------ -------
-- -- 549,805
====== ====== =======
</TABLE>
ACQUISITION COSTS
During 1996, the Company incurred $549,805 for professional services in
connection with the acquisition described in note 3.
F-23
<PAGE> 49
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
12. OTHER INCOME
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- ----------- ---------
<S> <C> <C> <C>
Interest income 2,492 7,323 11,553
Gain on disposal of assets -- 28,470 122,810
Cash discounts and other 241,575 194,997 50,273
---------- ----------- ---------
244,067 230,790 184,636
========== =========== =========
</TABLE>
13. EXTRAORDINARY GAIN
In 1997, the Company realized a net gain of $139,330 [$91,958 net of income tax]
as a result of the refinancing of certain term debt.
14. COMMITMENTS
The Company occupies manufacturing, warehousing and office facilities under
operating leases which expire at various dates to December 31, 2004. Future
minimum rental commitments relating to continuing operations are as follows:
<TABLE>
<CAPTION>
$
----------
<S> <C>
1999 1,137,841
2000 1,007,522
2001 696,673
2002 599,775
2003 542,239
Thereafter 209,523
----------
</TABLE>
Aggregate rental expense of continuing operations amounted to $1,078,283 [net of
sublease income of $177,821] $1,480,409 [net of sublease income of $124,893] and
$1,242,186 [net of sublease income of $140,000 and $100,000 previously provided
for [note 11]] for the years ended December 31, 1998, 1997 and 1996,
respectively.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue annually
at market prices. This supplier provides 100% of the Company's requirements for
these products.
F-24
<PAGE> 50
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
14. COMMITMENTS [CONT'D]
In September 1997, the Company entered into a lease agreement for a maximum
amount of Cdn $2,000,000 for computer equipment. The equipment leases under
this agreement will be for a maximum term of five years and will be based on
either a floating rate of bank prime plus 0.75%, or a fixed rate of the leasing
company's base rate at the commencement date of each lease plus 1.75%. As at
December 31, 1998, an amount of Cdn $1,716,732 had been committed under this
agreement.
A financial institution has registered a moveable second-ranking hypothec in the
amount of $650,000 on the Company's book debts as collateral for letters of
guarantee that it may issue from time to time in favour of customers to
guarantee the Company's performance under certain contracts. As at December 31,
1998 there were no letters of guarantee outstanding.
15. EARNINGS PER SHARE
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Numerator
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Preferred stock dividends and accretion 360,505 191,746 --
--------- --------- ---------
Numerator for basic earnings per share -
income from continuing operations available
to common stockholders before extraordinary
gain 193,071 807,626 936,871
Accretion on convertible preferred shares 61,542 -- --
--------- --------- ---------
Numerator for diluted earnings per share -
income from continuing operations available
to common stockholders before extraordinary
gain 254,613 807,626 936,871
--------- --------- ---------
Denominator
Denominator for basic earnings per share -
weighted-average shares issued, issuable
and outstanding 3,606,247 3,597,125 3,589,884
Effect of dilutive securities
Convertible preferred shares 165,147 -- --
Stock options 62,867 6,668 4,080
--------- --------- ---------
Denominator for diluted earnings per share -
adjusted weighted-average shares 3,834,261 3,603,793 3,593,964
========= ========= =========
Basic earnings per share from continuing
operations before extraordinary gain 0.06 0.22 0.26
========= ========= =========
Diluted earnings per share from continuing
operations before extraordinary gain 0.06(1) 0.22 0.26
========= ========= =========
</TABLE>
F-25
<PAGE> 51
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
15. EARNINGS PER SHARE [CONT'D]
(1) For purposes of calculating diluted earnings per share from continuing
operations before extraordinary gain for 1998, the effect of the
convertible preferred shares has not been considered, as its effect is
anti-dilutive.
Options to purchase 209,000 shares of common stock at exercise prices ranging
from $5.06 to $5.81 per share were outstanding during 1998 but were not included
in the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common stock and,
therefore, the effect would be anti-dilutive.
The number of shares and earnings per share for 1997 and 1996 have been restated
to reflect a four-for-three stock split effected in the form of a stock
dividend, which was announced on March 27, 1998 and paid on May 21, 1998.
16. PENSION PLANS
The Company maintains a defined benefit final average pension plan which covers
certain of its Canadian employees. The periodic cost of pension benefits is
determined using the projected benefit method prorated on service. The pension
plan is administered by a major Canadian financial institution. At December 31,
1998, the Company had made or accrued for all required contributions.
Net periodic pension expense (income) in 1998, 1997 and 1996 included the
following components:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
-------- --------- --------
<S> <C> <C> <C>
Current service cost 170,745 161,731 182,605
Interest cost on projected benefit obligations 270,711 272,176 274,861
Expected return on plan assets (457,566) (442,936) (409,358)
Net amortization and deferral (87,024) (84,875) (61,308)
--------- --------- ---------
Net periodic pension expense (income) (103,134) (93,904) (13,200)
========= ========= =========
</TABLE>
The assumptions used in the Company's plan at December 31, 1998, 1997 and 1996
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
% % %
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.5 7.5 7.5
Expected long-term rate of return on assets 7.5 7.5 7.5
</TABLE>
F-26
<PAGE> 52
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The changes to the projected benefit obligation and the amount of pension assets
were as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
---- ----
<S> <C> <C>
BENEFIT OBLIGATION
Balance at January 1 3,649,283 3,532,540
Current service cost 262,959 262,135
Interest cost 270,711 272,176
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (250,791) (156,733)
--------- ---------
BALANCE AT DECEMBER 31 3,587,100 3,649,283
========= =========
PENSION PLAN ASSETS
Balance at January 1 6,417,616 6,088,428
Contributions 92,214 100,405
Return on pension plan assets 525,177 764,013
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (439,113) (274,395)
--------- ---------
BALANCE AT DECEMBER 31 6,250,832 6,417,616
========= =========
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit plan at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
$ $
---- ----
<S> <C> <C>
Actuarial present value of
Vested benefit obligation 2,626,296 2,648,165
Non-vested benefit obligation -- --
--------- ---------
Accumulated benefit obligation 2,626,296 2,648,165
Additional benefits based on salary projection 960,804 1,001,118
--------- ---------
Projected benefit obligation 3,587,100 3,649,283
Plan assets at fair market value
[primarily listed stocks and bonds] 6,250,832 6,417,616
--------- ---------
Plan assets in excess of projected benefit obligation 2,663,732 2,768,333
Unrecognized net asset at transition (39,457) (46,976)
Unrecognized net gain (2,431,814) (2,647,746)
Unrecognized prior service cost 359,421 410,975
--------- ---------
PENSION ASSET INCLUDED IN THE CONSOLIDATED
BALANCE SHEET 551,882 484,586
========= =========
</TABLE>
F-27
<PAGE> 53
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The Company has a pension plan under Section 401(k) of the Internal Revenue Code
for certain of its US employees. Under the terms of the 401(k) plan, the
Company makes a matching contribution of up to 6% of each eligible employee's
earned wages, to a maximum of $1,000 per employee per year. Under this plan
employees may also contribute up to 15% of their earned wages. The Company
makes monthly contributions to the plan whereby $18,998 was paid in 1998,
$25,139 in 1997 and $21,968 in 1996.
The Company has a non-contributory defined contribution pension plan for certain
of its Canadian employees. Under the terms of the plan, the Company contributed
3% of each eligible employee's earned wages. The Company made monthly
contributions to the plan whereby $15,061 was paid in 1997 and $62,527 was paid
in 1996. In March 1997 the Company ceased to contribute to this plan and
instead contributed the 3% of each eligible employee's earned wages to a group
retirement savings plan. The monthly contributions made to this plan in 1998
amounted to $66,851 [ 1997 - $54,993].
17. FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK
The Company's policy with respect to foreign currency exposure is to manage its
financial exposure to certain foreign exchange fluctuations with the objective
of neutralizing some of the impact of foreign currency exchange movements. To
achieve this objective, the Company enters into foreign exchange forward
contracts to hedge certain non-local-currency payables. The Company enters into
foreign exchange forward contracts with a major Canadian chartered bank, and
therefore does not anticipate non-performance by its counterparty. The amount
of the exposure on account of any non-performance is restricted to the
unrealized gains in such contracts. As at December 31, 1998, the Company had no
significant foreign exchange forward contracts outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
FOR certain of the Company's financial instruments, including cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
other accrued charges, the carrying amounts approximate the fair value due to
their short maturities. The carrying value of long-term debt and preferred
stock approximates the fair value.
F-28
<PAGE> 54
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
The Company's reportable segments are strategic business units that offer
different products. They are managed separately because each business requires
different technology and marketing services and has a different customer base.
The Company conducts business in two operating segments: Sanitation Products
and Wiping Products. The Sanitation Products segment manufactures and
distributes sanitary paper products, cleaning and maintenance chemicals,
sanitation products, electro-mechanical and maintenance systems. The Wiping
Products segment manufactures and distributes disposable wiping products and
sanitary paper products and systems.
The Company evaluates performance based on profit or loss from operations before
income taxes not including non-recurring gains and losses.
The Company accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices.
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
SEGMENT INFORMATION $ $ $ $
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
1998
Revenues from external customers 50,787,121 16,337,016 67,124,137
Intersegment revenues 3,703,779 379,811 4,083,590
Interest revenue 2,343 149 2,492
Interest expense 478,799 47,084 632,366 1,158,249
Depreciation and amortization of
property, plant and equipment and
goodwill 833,287 196,984 1,030,271
Segment income (loss) before taxes 2,066,867 6,075 (947,366) 1,125,576
Segment assets [1] 28,239,472 6,948,348 1,906,218 33,336,308
Expenditures for segment property,
plant and equipment and goodwill 4,510,484 127,361 4,637,845
---------- ----------- ---------- -----------
</TABLE>
F-29
<PAGE> 55
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
$ $ $ $
----------- ----------- --------- ----------
<S> <C> <C> <C> <C>
SEGMENT INFORMATION
1997
Revenues from external customers 48,847,534 14,712,169 63,559,703
Intersegment revenues 3,687,194 386,886 4,074,080
Interest revenue -- 7,323 7,323
Interest expense 356,089 -- 389,000 745,089
Depreciation and amortization of
property, plant and equipment
and goodwill 748,985 190,876 939,861
Segment income (loss) before taxes 2,481,335 155,134 (836,500) 1,799,969
Segment assets [1] 21,884,327 6,289,975 2,009,049 27,174,694
Expenditures for segment property,
plant and equipment and goodwill 991,126 273,834 1,264,960
---------- ---------- --------- ----------
1996
Revenues from external customers 50,835,445 11,755,262 62,590,707
Intersegment revenues 2,050,901 248,733 2,299,634
Interest revenue -- 11,553 11,553
Interest expense 444,253 -- 67,000 511,253
Depreciation and amortization of
property, plant and equipment
and goodwill 856,990 180,863 1,037,853
Segment income (loss) before taxes 2,155,111 326,558 (748,805) 1,732,864
Expenditures for segment property,
plant and equipment and goodwill 894,743 40,251 934,994
---------- ---------- ---------- ----------
</TABLE>
F-30
<PAGE> 56
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
<S> <C> <C>
PROPERTY, PLANT
AND EQUIPMENT
GEOGRAPHIC INFORMATION REVENUES[2] AND GOODWILL
$ % $
1998
United States 16,397,707 24.4 1,017,172
Canada 50,092,840 74.6 11,272,881
Other foreign countries 633,590 1.0 --
---------- ----- ----------
67,124,137 100.0 12,290,053
========== ===== ==========
1997
United States 14,598,461 23.0 1,039,795
Canada 48,521,689 76.3 8,020,388
Other foreign countries 439,553 0.7 --
---------- ----- ----------
63,559,703 100.0 9,060,183
========== ===== ==========
1996
United States 11,878,609 19.0 956,837
Canada 50,615,592 80.9 8,146,876
Other foreign countries 96,506 0.1 --
---------- ---- ----------
62,590,707 100.0 9,103,713
========== ===== ==========
<FN>
Notes
[1] Inter segment eliminations at December 31 were $3,757,730 and
$3,008,657 in 1998 and 1997 respectively.
[2] Revenues are attributed to countries based on location of customers.
</TABLE>
</FN>
F-31
<PAGE> 57
WYANT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND COMPANIES AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) ACQUIRED OF YEAR
----------- ---------- ---------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
Year ended December 31 -
1998 $323,759 $119,788 $ 64,335 $26,212 $405,424
1997 $325,276 $116,923 $118,440 -- $323,759
1996 $594,489 $(66,826) $202,387 -- $325,276
<FN>
- -----------------------------------------------------
(1) Represents amounts written off, net of recoveries
</FN>
</TABLE>
F-32
<PAGE> 1
EXHIBIT 10.4
<PAGE> 2
SCOTIABANK {logo}
THE BANK OF NOVA SCOTIA
Commercial Banking Centre and Main Branch
Tour Scotia, 1002 Sherbrooke Street West, Montreal (Quebec) H3A 3L6
Tel.: (514) 499-5432
June 22, 1998
Wood Wyant Inc.
1475 - 32nd Avenue
Lachine (Quebec)
H8T 3J1
Dear Sirs:
We are pleased to confirm that, subject to acceptance by you, the Bank of Nova
Scotia (the "Bank") will make available to WOOD WYANT INC. (the "Borrower")
credit facilities on the terms and conditions set out in the attached Terms and
Conditions Sheet in Schedule "A".
If the arrangements set out in this letter, and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on June
30, 1998, after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by the Bank to
the Borrower.
Yours very truly,
_______________________ ______________________
I. Langlois F. Camirand
Sr Account Manager Vice-President &
Manager
The arrangements set out above and in the attached Terms and Conditions Sheet
and Schedule "A" (collectively the "Commitment Letter") are hereby acknowledged
and accepted by:
WOOD WYANT INC.
M. D'AMOUR
By:_______________________
B.L. DAVIES
By:________________________
June 25, 1998
Date:______________________
<PAGE> 3
Page 1
TERMS & CONDITIONS
CREDIT NUMBER: 01 AUTHORIZED AMOUNT; $7,500,000
TYPE
Operating
PURPOSE
General operating purposes and to assist in refinancing the operating
lines of the acquisitions in B.C. and Quebec, presently provided by the
Bank ($700,000), the Bank of Montreal ($200,000) and the National Bank of
Canada ($200,000).
CURRENCY
Canadian dollars.
AVAILMENT
The Borrower may avail the credit by way of direct advances evidenced by
Agreement re Operating Credit Line and/or Banker's Acceptances in
multiples of $100,000, (subject to a minimum availment amount of
$200,000), and having terms of maturity of 30 to 180 days without grace
and/or Letters of Credit payable at sight with expiry dates of credits not
to exceed 365 days from date of issuance, and/or Standby Letters of Credit
and/or Letters of Guarantee (with each availment subject to completion of
an Application and Agreement for Standby Letters of Credit/Letter of
Guarantee in a form satisfactory to the Bank).
INTEREST RATE/FEES
(Canadian dollars) The Bank's Prime Lending Rate from time to time with
interest payable monthly.
(Bankers' Acceptances) The Bank's Commercial Bankers' Acceptance Fee,
(subject to revision at any time), subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
The application fee or fees charged by the Bank for Letters of Credit.
Standby Letters of Credit and/or Letters of Guarantee as agreed between
the Borrower and the Bank from time to time.
REPAYMENT
Advances are repayable on demand.
SPECIFIC CONDITIONS
Until all debts and liabilities under the Credit have been discharged in
full, the following conditions will apply in respect of the Credit:
Operating lines available to the newly acquired companies in B.C. and
Quebec are to be repaid in full and cancelled.
<PAGE> 4
Page 2
CREDIT NUMBER: 02 AUTHORIZED AMOUNT: $1,815,714
TYPE
Non-Revolving
PURPOSE
To assist in financing a property located in Pickering.
CURRENCY
Canadian dollars
AVAILMENT
The Borrower has availed the credit by way of Direct Advances evidenced by
Demand Promissory Notes.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
REPAYMENT
The advance is repayable in equal monthly instalments of principal
($20,476.20) with balance of principal and interest then outstanding due
October 1, 2001. The term of the loan is 4 years and the amortization is
8 years.
CREDIT NUMBER: 03 AUTHORIZED AMOUNT: $3,000,000
TYPE
Reducing Revolving
PURPOSE
To consolidate two Non-Revolving loans of $1,100,000 and $580,000 and to
assist in financing future equipment purchases.
CURRENCY
Canadian dollars
AVAILMENT
The Burrower may avail the credit by way of direct advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars in
multiples of $100,000, (subject to a minimum availment amount of $200,000)
and having terms of maturity of 30 to 180 days without grace.
<PAGE> 5
Page 3
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
The Bank's Commercial Bankers' Acceptance Fee. (subject to revision at any
time), plus 3/4% per annum, subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
DRAWDOWN
Advances are limited to invoices and invoiced amounts satisfactory to the
Bank.
REPAYMENT
Availability is defined as the sum of approved advances less scheduled
reductions.
The authorized amount, and availability, are reduced by scheduled
reductions, i.e. 23 monthly reductions and/or repayments of principal
($50,000) commencing by October 31, 1998, plus one final reduction and/or
repayment of the principal and interest then outstanding due by September
30, 2000. The term of the loan is 21/2 years and the amortization 51/2
years.
CREDIT NUMBER: 04 AUTHORIZED AMOUNT: $2,500,000
TYPE
Equipment Financing - Revolving Line (Scotia Leasing)
PURPOSE
To assist in financing computer hardware, software and related
implementation costs.
CURRENCY
Canadian dollars
AVAILMENT
Lease Agreement with appropriate supporting documentation.
INTEREST RATE
FLOATING RATE OPTION
The base payment applicable to each contract will be set on the
commencement date of the contract based upon the Bank's Prime Lending Rate
plus 3/4% per annum, calculated and payable monthly. The total periodic
payment will be adjusted monthly with changes in the Bank's Prime Lending
Rate.
<PAGE> 6
Page 4
FIXED RATE OPTION
The payment applicable to each contract will be set on the commencement
date of the contract based on Scotia Leasing's Base Rate plus 1 3/4% per
annum, calculated and payable monthly.
DRAWDOWN
Each lease must not be less than $500,000.
The amount of financing shall not exceed 100% of the cost of the equipment,
software and related implementation costs being financed, exclusive of
relative taxes and the Borrower shall provide security deposits, advance
rentals and/or downpayments to reduce financing to this limit.
REPAYMENT
Leases are repayable in accordance with the terms and conditions of each
respective lease. The maximum term of any such lease shall not exceed 5
years. The total amortization of any such transaction shall not exceed 5
years.
At the end of the term to option, the lessee shall elect one of the
following options:
A. purchase the equipment for 35% of the original cost;
B. allow a third party to purchase the equipment for 35% of the original
cost;
C. rent the equipment for an additional term and revised rent payment to
be authorized by the Bank.
PREPAYMENT
No prepayments are permitted.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Lease Agreement(s) covering equipment leased/financed.
Scotia Leasing Progress Payment Agreement to cover interim funding.
Comprehensive General Liability insurance for a minimum of $2,000,000
per occurrence with the Bank recorded as an additional named insured.
All risks insurance covering the replacement value of the equipment
with the Bank recorded as loss payee and additional named insured.
Assignment Agreement granting a security interest in the respective
asset(s) and in the lease(s) together with notice and acknowledgement
from the Borrower.
<PAGE> 7
Page 5
Realty Owner's and/or Mortgagee's Waiver and Consent regarding
leased/financed equipment.
CREDIT NUMBER: 05 AUTHORIZED AMOUNT: 2,065,000
TYPE
Non-Revolving
PURPOSE
To assist in financing the acquisition of H.A. Perigord Company Limited.
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the credit by way of Direct Advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars in
multiples of $100,000 (subject to a minimum availment amount of $200,000),
and having terms of maturity of 30 to 180 days without grace.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
The Bank's Commercial Bankers' Acceptance Fee, (subject to revision at any
time), plus 3/4% per annum, subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
REPAYMENT
The advance is repayable in 59 equal monthly installments of principal
($35,000) which commence May 30, 1998, with a final payment of $35,000/the
balance of principal and interest then outstanding due April 30, 2003. The
term of the loan is 5 years and the amortization is 5 years.
PREPAYMENT
Prepayments are to be applied against installments of principal in the
inverse order of their maturities.
<PAGE> 8
Page 6
CREDIT NUMBER: 06 AUTHORIZED AMOUNT: $3,100,000
TYPE
Non-Revolving
PURPOSE
To assist in financing the acquisition of Midway Supply Ltd., Fraser
Valley Industrial Chemicals Inc., Midway Purnel Sanitary Supply Ltd.,
Purnel Distributors Ltd. and Professional Sanitation Products Ltd.
CURRENCY
Canadian dollars.
AVAILMENT
The Borrower may avail the credit by way of Direct Advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars in
multiples of $100,000 (subject to a minimum availment amount of $200,000),
and having terms of maturity of 30 to 180 days without grace.
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
The Bank's Commercial Bankers' Acceptance Fee, (subject to revision at any
time), plus 3/4% per annum, subject to a minimum fee of $200 per
transaction, payable at the time of each acceptance.
DRAWDOWN
The loan is to be fully drawn down by July 31, 1998.
Prior to any advances or availments under the Credit, the Borrower is to
provide the following documentation, as applicable, the content of which
will be found not to negatively impact on the credit arrangements between
the Borrower and the Bank:
Amalgamation of 430639 B.C. Ltd with Midway Supply Ltd. at closing.
A copy of the Purchase & Sale Agreement for the acquired companies.
A copy of the internally prepared due diligence report for the
acquired companies.
A copy of the tax due diligence report prepared by Ernst & Young for
the acquired companies.
Pro forma consolidated balance sheet of the Borrower including the
acquisitions.
Borrower's certificate confirming, in sufficient detail, that all
<PAGE> 9
Page 7
conditions are in compliance and will remain in compliance upon completion
of the acquisitions.
REPAYMENT
The advance is repayable in 59 equal monthly installments of principal
($51,667) commencing 30 days after drawdown, with a final payment of
$51,647/the balance of principal and interest then outstanding due in the
60th month. The term of the loan is 5 years and the amortization is 5
years.
PREPAYMENT
Prepayments are to be applied against installments of principal in the
inverse order of their maturities.
CREDIT NUMBER: 07 AUTHORIZED AMOUNT: $30,000
TYPE
Corporate Visa - Availment, interest rate and repayment as per Cardholder
Agreement.
OTHER FEES APPLICABLE TO ALL CREDITS
An Administration Fee of $1,000 is payable monthly.
A Commitment Fee of $15,000 is payable upon acceptance of this Commitment
Letter.
In addition to, and not in substitution for the obligations of the
Borrower and the rights of the Bank upon the occurrence of an event of
default herein, the Borromer shall pay to the Bank:
(a) a fee of $250 per month (or such higher amount as may be determined by
the Bank from time to time) for each month or part thereof during
which the Borrower is late in providing the Bank with financial or
other information required herein:
(b) a fee of $250 per month (or such higher amount as may be determined
by the Bank from time to time) for each month or part thereof during
which loan payments of principal, interest or other amounts are past
due: and
(c) a fee of $250 per month (or such higher amount as may be determined
by the Bank from time to time) for each month or part thereof during
which the Borrower is in default for any other term or condition
contained in this Commitment Letter or in any other agreement to
which the Borrower and the Bank are parties.
The imposition or collection of these fees does not constitute an express
or implied waiver by the Bank of any event of default or of any of the
terms or conditions of the lending arrangements, security or rights
arising from any default. Fees may be charged to the Borrower's deposit
account when incurred.
<PAGE> 10
Page 8
GENERAL SECURITY, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credits:
General Assignment of Book Debts for all applicable Provinces.
Security under Section 427 of the Bank Act with appropriate insurance
coverage assigned to the Bank.
A Movable Hypothec in the amount of $30,000,000 on all present and
future movable property with appropriate insurance coverage loss, if
any, payable to the Bank. Includes specific assignment of all patents
and trademarks.
General Security Agreement over all of the present and future
personal property and undertaking of the Borrower with replacement
cost fire insurance coverage and any other insurance coverage the
Bank may reasonably require, loss if any, payable to the Bank.
A collateral mortgage providing a first fixed charge in the amount of
$4,000,000 over 1725 McPherson Court. Pickering, Ontario with
replacement cost insurance coverage, loss, if any payable the Bank.
Guarantees and Postponement Agreements given by the following (with
corporate seals and resolutions as applicable) in the amounts shown:
NAME AMOUNT
H.A. Perigord Company Limited (a) Unlimited
Midway Supply Ltd. (a) Unlimited
Fraser Valley Industrial Chemicals Inc. (a) Unlimited
Midway Purnel Sanitary Supply Ltd. (a) Unlimited
Purnel Distributors Ltd. (a) Unlimited
Professional Sanitation Products Ltd. (b) Unlimited
a) Supported by:
General Security Agreement over all present and future personal
property with appropriate insurance coverage, loss if any, payable to
the Bank.
b) Supported by:
A movable hypothec in the amount of $1,000,000 on all present and
future movable property with appropriate insurance coverage, loss, if
any, payable to the Bank.
<PAGE> 11
Page 9
Agreement re Operating Credit Line.
Bankers' Acceptance Agreement.
Agreement for Commercial Letter of Credit.
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the following conditions will apply in respect of the Credits:
Operating loans, Bankers' Acceptances, Letters of Guarantee and
Standby Letters of Credit are not to exceed at any time the
"Borrowing Base" which is defined 75% of good quality accounts
receivable of the Borrower and the guarantors (excluding accounts
over 90 days, offsets, inter-company accounts, statutory liens and
amounts due from employees) less security interests or charges held
by other parties and specific payables which have or may have
priority over the Bank's security.
The Borrower's consolidated ratio of Debt (including deferred taxes)
to Tangible Net Worth (TNW) is not to exceed 2.50:1, improving to
2.25:1 by December 31, 1998. TNW is defined as the sum of share
capital including preferred shares, earned and contributed surplus
and postponed funds LESS (i) amounts due from officers/affiliates,
(ii) investments in affiliates, and (iii) intangible assets as
defined by the Bank.
The Borrower's consolidated Tangible Net Worth (TNW) is to be
maintained in excess of $10,000,000 at all times.
The Borrower's consolidated ratio of Current Assets to Current
Liabilities is to be maintained at all times at 1.25 or better.
The Borrower's consolidated ratio of Cash Flow to Debt Service as at
the end of each financial quarter calculated on a rolling four
quarter basis, is to be maintained at all times at 1.4:1 or better.
Cash Flow is defined as net income after taxes and before
extraordinary items, plus depreciation and amortization expense less
preferred share dividends paid and/or accrued during the period.
Debt Service is defined as the sum of all current maturities in the
subsequent year of long term debt, capital leases, preferred shares
and other obligations as defined by the Bank.
No redemption of preferred shares is permitted unless the Bank if in
receipt of an Officer's Certificate providing full details of the
redemption, and confirming that all terms and conditions stipulated
in this Commitment Letter or amendments thereto are met and will
continue to be met after the redemption. This certificate must be
provided 10 days prior to any redemption.
No change in ownership of the Borrower is permitted.
<PAGE> 12
Page 10
Additional terms and conditions in Schedule A are to apply.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the Borrower will provide the Bank with the following:
Annual Audited Consolidated Financial Statements of the Borrower and
Wyant Corporation, within 120 days of year end, duly signed.
Annual Prepared Financial Statements of each guarantor within 120
days of year end, duly signed.
Annual Projected Financial Statements of the Borrower and Wyant
Corporation within 120 days of year end.
Quarterly Consolidated Financial Statements of the Borrower and Wyant
Corporation within 45 days of period end.
Quarterly Compliance Certificate confirming, in sufficient detail,
that all conditions are in compliance and that no Events of Default
have occurred, within 45 days of period end.
A Borrowing Base monthly, to include information on inventory,
accounts receivable and accounts payable, within 30 days of period
end.
<PAGE> 13
Page 11
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
(In the event of a conflict, the terms and conditions of any lease
agreement supersede the terms and conditions in this Schedule A with regard
to such leases).
CALCULATION AND PAYMENT OF INTEREST
1. Interest on loans/advances made in Canadian dollars will be calculated on a
daily basis and payable monthly on the 22nd day of each month (unless
otherwise stipulated by the Bank). Interest shall be payable not in advance
on the basis of a calendar year for the actual number of days elapsed both
before and after demand of payment or default and/or judgment.
INTEREST ON OVERDUE INTEREST
2. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue, but
shall be compounded monthly and be payable on demand, both before and after
demand and judgment.
CALCULATION AND PAYMENT OF BANKERS' ACCEPTANCE FEE
3. The fee for the acceptance of each Bankers' Acceptance will be payable on
the face amount of each Bankers' Acceptance at the time of acceptance of
each draft calculated on the basis of a calendar year for the actual number
of days elapsed from and including the date of acceptance to the due date
of the draft.
INDEMNITY PROVISION
4. Applicable to (i) Revolving Term Credits with terms in excess of one year:
(ii) any credit where the right to draw down or obtain advances exceeds one
year; (iii) all U.S. dollar credits. If the introduction of, or any change
in, or in the interpretation of, or any change in its application to the
Borrower of, any law or regulation, or compliance with any guideline from
any central bank or other governmental authority (whether or not having the
force of law) has the effect of increasing the cost to the Bank of
performing its obligations hereunder or otherwise reducing its effective
return hereunder or on its capital allocated in support of the credit(s),
then upon demand from time to time the Borrower shall compensate the Bank
for such cost or reduction pursuant to a certificate reasonably prepared by
the Bank.
<PAGE> 14
Page 12
(a) PREPAYMENT WITHOUT FEE
In the event of the Borrower becoming liable for such costs, the
Borrower shall have the right to cancel without fee all or any
unutilized portion of the affected credit (other than any portion in
respect of which the Borrower has requested utilization of the credit
in which case cancellation may be effected upon indemnification of the
Bank for any costs incurred by the Bank thereby), and to prepay,
without fee the outstanding principal balance thereunder other than
the face amount of any document or instrument issued or accepted by
the Bank for the account of the Borrower, such as a Letter of Credit,
a Guarantee or a Bankers' Acceptance.
ENVIRONMENT
5. The Borrower agrees:
(a) to obey all applicable laws and requirements of any federal,
provincial, or any other governmental authority relating to the
environment and the operation of the business activities of the
Borrower;
(b) to allow the Bank access at all times to the business premises of the
Borrower to monitor and inspect all property and business activities
of the Borrower;
(c) to notify the Bank from time to time of any business activity
conducted by the Borrower which involves the use or handling of
hazardous materials or wastes or which increases the environmental
liability of the Borrower in any material manner;
(d) to notify the Bank of any proposed changed in the use or occupation of
the property of the Borrower prior to any change occurring;
(e) to provide the Bank with immediate written notice of any environmental
problem and any hazardous materials or substances which have an
adverse effect on the property, equipment, or business activities of
the Borrower and with any other environmental information requested by
the Bank from time to time.
(f) to conduct all environmental remedial activities which a commercially
reasonable person would perform in similar circumstances to meet its
environmental responsibilities and if the Borrower fails to do so, the
Bank may perform such activities; and
(g) to pay for any environmental investigations, assessments or remedial
activities with respect to any property of the Borrower that may be
performed for or by the Bank from time to time.
<PAGE> 15
Page 13
If the Borrower notifies the Bank of any specified activity or change
or provides the Bank with any information pursuant to subsections (c),
(d), or (e), or if the Bank receives any environmental information
from other sources, the Bank, in its sole discretion, may decide that
an adverse change in the environmental condition of the Borrower or
any of the property, equipment, or business activities of the Borrower
has occurred which decision will constitute, in the absence of
manifest error, conclusive evidence of the adverse change. Following
this decision being made by the Bank, the Bank shall notify the
Borrower of the Bank's decision concerning the adverse change.
If the Bank decides or is required to incur expenses in compliance or
to verify the Borrower's compliance with applicable environmental or
other regulations, the Borrower shall indemnify the Bank in respect of
such expenses, which will constitute further advances by the Bank to
the Borrower under this Agreement.
INITIAL DRAWDOWN
6. The right of the Borrower to obtain the initial drawdown under the
Credit(s) is subject to the condition precedent that there shall not have
been any material adverse changes in the financial condition or the
environmental condition of the Borrower, Wyant Corporation, or any
guarantor of the Borrower.
PERIODIC REVIEW
7. The obligation of the Bank to make further advances or other accommodation
available under any Credit(s) of the Borrower under which the indebtedness
or liability of the Borrower is payable on demand, is subject to periodic
review and to no adverse change occurring in the financial condition or the
environmental condition of the Borrower or any guarantor.
EVIDENCE OF INDEBTEDNESS
8. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this Credit,
repayments on account thereof and the indebtedness of the Borrower to the
Bank.
ACCELERATION
9. (a) All indebtedness and liability of the Borrower to the Bank payable on
demand, is repayable by the Borrower to the Bank at any time on
demand;
<PAGE> 16
Page 14
(b) All indebtedness and liability of the Borrower to the Bank not payable on
demand, shall, at the option of the Bank, become immediately due and
payable, the security held by the Bank shall immediately become
enforceable, and the obligation of the Bank to make further advances or
other accommodation available under the Credits shall terminate, if any
one of the following Events of Default occurs:
(i) the Borrower or any guarantor fails to make when due, whether on
demand or at a fixed payment date, by acceleration or otherwise,
any payment of interest, principal, fees, commissions or other
amounts payable to the Bank;
(ii) there is a breach by the Borrower or any guarantor of any other
term or condition contained in this Commitment Letter or in any
other agreement to which the Borrower and/or any guarantor and
the Bank are parties;
(iii) any default occurs under any security listed in this Commitment
Letter under the headings "Specific Security" or "General
Security" or under any other credit, loan or security agreement
to which the Borrower and/or any guarantor is a party;
(iv) any bankruptcy, re-organization, compromise, arrangement,
insolvency or liquidation proceedings or other proceedings for
the relief of debtors are instituted by or against the Borrower
or any guarantor and, if instituted against the Borrower or any
guarantor, are allowed against or consented to by the Borrower
or any guarantor or are not dismissed or stayed within 60 days
after such institution;
(v) a receiver is appointed over any property of the Borrower or any
guarantor or any judgement or order or any process of any court
becomes enforceable against the Borrower or any guarantor or any
property of the Borrower or any guarantor or any creditor takes
possession of any property of the Borrower or any guarantor;
(vi) any course of action is undertaken by the Borrower or any
guarantor or with respect to the Borrower or any guarantor which
would result in the Borrower's or guarantor's reorganization,
amalgamation or merger with another corporation or the transfer
of all or substantially all of the Borrower's or any guarantor's
assets;
(vii) any guarantee of indebtedness and liability under the Credit
Line is withdrawn, determined to be invalid or otherwise
rendered ineffective;
(viii) any adverse change occurs in the financial condition of the
Borrower or any guarantor.
(ix) any adverse change occurs in the environmental condition of:
(A) the Borrower or any guarantor of the Borrower; or
(B) any property, equipment, or business activities of the
Borrower or any guarantor of the Borrower.
<PAGE> 17
Page 15
COSTS
10. All costs, including legal and appraisal fees incurred by the Bank
relative to security and other documentation and the enforcement thereof,
shall be for the account of the Borrower and may be charged to the
Borrower's deposit account when submitted.
REQUEST FOR ENGLISH
11. This document and all related documents have been drafted in English at
the Borrower's request. Ce document et tous les documents y afferents ont
ete rediges en anglais a la demande de l'emprunteur.
<PAGE> 18
SCOTIABANK (logo)
THE BANK OF NOVA SCOTIA
1002 Sherbrooke Street West, Montreal, Quebec H3A 3L6
February 19, 1999
Wood Wyant Inc.
1475 - 32nd Avenue
Lachine, Quebec
H8T 3J1
Dear Sir:
The Bank of Nova Scotia (the "Bank") hereby refers to the Commitment
Letter from the Bank to Wood Wyant Inc. (the "Borrower") dated June 22, 1998
and accepted by the Borrower on June 25, 1998.
Subject to your acceptance hereunder, the Commitment Letter is hereby
amended as follows:
DELETE
CREDIT NUMBER: 04 AUTHORIZED AMOUNT: $2,500,000
Delete all headings under Credit number 04.
The liability outstanding under this Credit (i.e., $1,867,375.87 as at
February 1, 1999) will be transferred to the undernoted replacement Credit.
ADD
CREDIT NUMBER: 04 AUTHORIZED AMOUNT: $2,500,000
TYPE
Non-Revolving.
PURPOSE
To assist in financing computer hardware, software and related
implementation costs.
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars in
multiples of $500,000 and having terms of maturity of 30 to 180 days
without grace.
.../2
<PAGE> 19
-2-
INTEREST RATE/FEE
The Bank's Prime Lending Rate from time to time, plus 3/4% per annum with
interest payable monthly.
The Bank's Commercial Bankers' Acceptance Fee, (subject to revision at any
time), plus 3/4% per annum, subject to a minimum fee of $500 per availment,
payable at the time of each acceptance.
OTHER FEES
A Conversion Fee of $2,500 is payable upon acceptance of this commitment.
DRAWDOWN
The amount of financing shall not exceed 100% of the cost of the equipment,
software and related implementation costs being financed, exclusive of
relative taxes.
The loan is to be fully drawn down by March 15, 1999.
REPAYMENT
Advances are repayable in 59 equal monthly installments of principal
($41,667) commencing April 1999, with the balance of principal and interest
then outstanding due March 2004. The term of the loan is 5 years and the
amortization is 5 years.
PREPAYMENT
FLOATING RATE
Prepayment is permitted without penalty at any time in whole or in part.
Prepayments are to be applied against installments of principal in the
inverse order of their maturities.
BANKERS' ACCEPTANCES
No prepayments are permitted.
SPECIFIC SECURITY
A Movable Hypothec in the amount of $2,500,000 over specific equipment with
replacement cost insurance coverage, loss, if any, payable to the Bank.
<PAGE> 20
- 3 -
In all other respects, the Commitment Letter remains in full force and
effect unamended.
If the foregoing is satisfactory to you, please sign and return to us the
enclosed copy of this letter by the close of business on March 5, 1999.
Yours truly,
J. Kaleel F. Camirand
Account Manager Vice-President
& Centre Manager
ACCEPTED BY:
WOOD WYANT INC.
_______________________________________
Name
By: GILLES BONIN CLAUDIO SPINA
_______________________________________
Title
Date: February 24, 1999
_______________________________________
<PAGE> 21
SCOTIABANK (logo)
THE BANK OF NOVA SCOTIA
Commercial Banking Centre and Main Branch
Tour Scotia, 1002 Sherbrooke Street West, Montreal (Quebec) H3A 3L6
Tel.: (514) 499-5432
February 19, 1999
WOOD WYANT INC.
1475 - 32nd Avenue
Lachine (Quebec)
H8T 3J1
Attention: Mr. Brian Davies
Controller
Dear Mr. Davies:
We refer to our June 22, 1998 Commitment Letter addressed to and accepted by
you on June 25, 1998 (the "COMMITMENT LETTER") and hereby confirm our agreement
with you that such COMMITMENT LETTER is, effective December 31, 1998, amended
as follows:
1. The second paragraph under the heading "GENERAL CONDITIONS" (on page 9 of
the COMMITMENT LETTER) is hereby replaced by the following:
"The Borrower's consolidated ratio of debt (including deferred taxes) to
Tangible Net worth (TNW) is not to exceed 2.50:1, improving to 2.30:1 by
December 31, 1998. TNW is defined as the sum of share capital including
preferred shares, earned and contributed surplus and postponed funds LESS
(i) amounts due from officers/affiliates, (ii) investments on affiliates,
and (iii) intangible assets as defined by the Bank"; and,
2. The fourth paragraph under the same "GENERAL CONDITIONS" heading of the
COMMITMENT LETTER is hereby replaced by the following:
"The Borrower's consolidated ratio of Current Assets to Current Liabilities
is to be maintained at all times at 1.20:1 or better."
All other terms, conditions and contents of the COMMITMENT LETTER shall remain
in full force and effect.
/s/ Joanne Kaleel /s/ Jean Maucieri
_________________________ _________________________
Joanne Kaleel Jean Maucieri
Account Manager Assistant General Manager and
Deputy Manager
<PAGE> 22
2
The changes in the Borrower's consolidated ratio of debt to Tangible Net Worth
and in the Borrower's consolidated ratio of Current Assets to Current
Liabilities set out above are hereby acknowledged and accepted by:
Wood Wyant Inc.:
By: CLAUDIO SPINA
_______________________
By: GILLES BONIN
_______________________
Date: Feb. 22, 1999
_____________________
<PAGE> 23
SCOTIABANK (logo)
THE BANK OF NOVA SCOTIA
Commercial Banking Centre and Main Branch
Tour Scotia, 1002 Sherbrooke Street West, Montreal (Quebec) H3A 3L6
Tel.: (514) 499-5432
March 10, 1999
WOOD WYANT INC.
1475 - 32nd Avenue
Lachine (Quebec)
H8T 3J1
Dear Sir:
The Bank of Nova Scotia (the "Bank") hereby refers to the Commitment Letter from
the Bank to Wood Wyant Inc. (the "Borrower") dated June 22, 1998 and accepted by
the Borrower on June 25, 1998.
Subject to your acceptance hereunder, the Commitment Letter is hereby amended
as follows:
ADD
CREDIT NUMBER: 9 AUTHORIZED AMOUNT: $2,000,000.
TYPE
Overrun until May 31, 1999.
PURPOSE
General operating purposes.
CURRENCY
Canadian dollars.
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Agreement re Operating Credit Line.
<PAGE> 24
INTEREST RATE/FEE
The Bank's Prime Lending Rate from time to time with interest payable
monthly.
FEES
A Processing Fee of $5,000 is payable upon acceptance of this commitment.
REPAYMENT
Advances are repayable on demand.
In all other respects, the Commitment Letter remains in full force and effect
unamended.
If the foregoing is satisfactory to you, please sign and return to us the
enclosed copy of this letter by the close of business on March 15, 1999.
Yours truly,
/s/ N. Grillas /s/ R.J. Lavigne
- ------------------------ --------------------------
N. Grillas R.J. Lavigne
Senior Account Manager Assistant General Manager - Credit
ACCEPTED
WOOD WYANT INC.
- ------------------------
Name
By: M. D'AMOUR
- ------------------------
Title: Vice President
B.L. DAVIES
- ------------------------
Title: Controller
Date: March 11, 1999
<PAGE> 1
EXHIBIT 10.6
<PAGE> 2
THIS ADDENDUM dated as of March 10, 1998 to the Employment Agreement entered
into as of November 11, 1996, as amended as of January 1, 1997.
BETWEEN: JAMES A. WYANT, business executive
resident and domiciled in the
Province of Quebec
(the "Senior Executive")
AND: WOOD WYANT INC., a corporation
incorporated under the Canada
Business Corporations Act,
formerly known as 3290441 Canada Inc.
(the "Corporation")
WHEREAS the Senior Executive entered into an employment agreement with G.H. Wood
+ Wyant Inc. ("GHWW") as of November 11, 1996, as amended as of January 1, 1997
(the "Senior Executive Employment Agreement"), conditional upon the closing of
the transaction contemplated in the asset purchase agreement dated as of
November 11, 1996 among Wyant Corporation (formerly known as Hosposable
Products, Inc.) ("Wyant"), the Corporation and GHWW whereby GHWW agreed to
sell all of its business and substantially all of its assets to the Corporation
(the "Hosposable Transaction").
WHEREAS pursuant to completion of the Hosposable Transaction on March 18, 1997,
the Corporation assumed the obligations of GHWW under the Senior Executive
Employment Agreement;
WHEREAS the Senior Executive and the Corporation have agreed to amend the Senior
Executive Employment Agreement in the manner herein set forth;
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. SECTION 6 -- BONUS COMPENSATION of the Senior Executive Employment
Agreement is hereby amended, effective January 1, 1998, as follows:
"6. BONUS COMPENSATION
Effective January 1, 1998, in addition to the compensation
described in Sections 4.1 and 4.2 above, the Senior Executive
shall be entitled to receive bonus compensation annually for each
year of the remainder of the Initial Term and for each Renewal
Term of his
<PAGE> 3
-2-
employment with the Corporation. Bonus compensation will be determined as
a percentage of the base salary of the Senior Executive for the relevant year
based on (i) the actual consolidated net earnings before tax of Wyant ("Wyant's
Results") compared with the budgeted consolidated net earnings before tax of
Wyant ("Wyant's Budgeted Results") and (ii) the actual consolidated net
earnings before tax of the Corporation ("Corporation's Results") compared with
the budgeted consolidated net earnings before tax of the Corporation
("Corporation's Budgeted Results") in accordance with the following formula:
<TABLE>
<CAPTION>
6.1 Bonus Entitlement based on Consolidated
Net Earnings Before Tax of Wyant
--------------------------------
WYANT'S RESULTS AS A BONUS ENTITLEMENT AS
PERCENTAGE OF WYANT'S A PERCENTAGE OF
BUDGETED RESULTS BASE SALARY
--------------------- --------------------
<C> <C>
<100% 0%
100% to <105% 7.50%
105% to <110% 8.75%
110% to <115% 10.00%
115% to <120% 11.25%
120% to <125% 12.50%
125% to <130% 13.75%
130% or more 15.00%
6.2 Bonus Entitlement based on Consolidated
Net Earnings Before Tax of the Corporation
------------------------------------------
CORPORATION'S RESULTS AS A BONUS ENTITLEMENT AS
PERCENTAGE OF CORPORATION'S A PERCENTAGE OF
BUDGETED RESULTS BASE SALARY
--------------------- --------------------
<C> <C>
<100% 0%
100% to <105% 2.50%
105% to <110% 3.75%
110% to <115% 5.00%
115% to <120% 6.25%
120% to <125% 7.50%
125% to <130% 8.75%
130% or more 10.00%
</TABLE>
<PAGE> 4
-3-
6.3 Wyant's Budgeted Results and Corporation's Budgeted Results
-----------------------------------------------------------
"Wyant's Budgeted Results" means the budgeted consolidated net
earnings before tax of Wyant approved by Wyant's board of
directors, as the same may be amended by Wyant from time to time
for purposes of calculating bonus compensation payable to other
officers of Wyant to take into account significant acquisitions
or divestitures which would materially affect Wyant's
performance.
"Corporation's Budgeted Results" means the budgeted consolidated
net earnings before tax of the Corporation approved by the
Corporation's board of directors, as the same may be amended
from time to time by the Corporation for purposes of calculating
bonus compensation payable to other officers of the Corporation
to take into account significant acquisitions or divestitures
which would materially affect the Corporation "performance".
2. Save as amended by Section 1 hereof, the Senior Executive Employment
Agreement is unamended.
3. The Senior Executive Agreement is incorporated by reference into this
Agreement and the Senior Executive Employment Agreement as so amended
constitutes the entire agreement of the Parties hereto with respect
to the subject matter hereof.
4. The Parties have requested that this Agreement be drawn up in the
English language. Les parties aux presentes ont demande que cette
entente soit redigee en anglais.
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the date
first above written.
-----------------------------------
JAMES A. WYANT
WOOD WYANT INC.
Per: ------------------------------
Donald C. MacMartin, President
<PAGE> 1
EXHIBIT 10.8
<PAGE> 2
THIS EMPLOYMENT AGREEMENT entered into as of January 1, 1999
BETWEEN: DONALD C. MACMARTIN, Executive, residing at
417 Roslyn Avenue, Westmount, Quebec, H3Y 2T6
(hereinafter referred to as the "Executive")
AND: WOOD WYANT INC., a corporation incorporated
under the Canada Business Corporations Act
(hereinafter referred to as the "Corporation")
WHEREAS the Corporation desires to continue to employ the Executive, and
the Executive desires to continue such employment, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties, intending legally to be bound, hereby agree as follows:
1. EMPLOYMENT
The Corporation hereby continues the employment of the Executive as the
Chairman of the Board, President and Chief Executive Officer of the Corporation
commencing January 1, 1999 (the "Employment Date").
2. DUTIES OF THE EXECUTIVE
The Executive shall devote his full time and attention to, and use his
best efforts to promote, the business and affairs of the Corporation and shall
perform duties and have such responsibilities as are customarily performed and
enjoyed by persons employed in comparable positions, subject, however, to the
direction and control of the board of directors of the Corporation.
3. TERM
3.1 The initial term of the employment of the Executive pursuant to this
Agreement shall be a 3 year fixed term (the "Initial Term"), beginning
on the Employment Date;
3.2 The Executive shall be entitled to terminate this Agreement any time
by giving prior written notice of three (3) months;
<PAGE> 3
-2-
3.3 The term of employment of the Executive pursuant to this Agreement shall be
automatically renewed for 1 year (a "Renewal Term") upon the expiry of the
Initial Term and on each anniversary of the Employment Date thereafter,
unless the Corporation gives notice of intention not to renew:
(i) in the case of the Initial Term, 6 months prior to the expiry of the
Initial Term;
(ii) in the case of a Renewal Term, 3 months prior to the expiry of such
Renewal Term.
3.4 Notwithstanding the foregoing, this Agreement shall terminate immediately
in the event of:
(i) the termination of the employment of the Executive by the Corporation
with Cause;
(ii) the Permanent Disability (as hereinafter defined) of the Executive;
(iii) the death of the Executive;
(iv) the dismissal of the Executive without Cause by the Corporation
during the Initial Term or a Renewal Term; or
(v) the resignation of the Executive in connection with a Change in
Control of Wyant Corporation in the 3 months following such Change in
Control due to (a) a significant reduction in his duties and
responsibilities, (b) a significant reduction in base salary or (c) a
relocation to a city which the Executive does not accept;
provided that, in the case of termination due to an event described in
paragraph 3.4(iv) or 3.4(v), the obligation of the Corporation to pay the
amounts set out in Section 5.1 and to provide the benefits set out in
Section 10 shall survive such termination.
4. SALARY
4.1 The Corporation agrees to pay the Executive for the services rendered
by him as Chairman of the Board, President and Chief Executive Officer
of the Corporation in accordance with this Agreement, and the
Executive agrees to accept as compensation a base salary at the annual
rate of $410,000 in lawful money of
<PAGE> 4
-3-
Canada, payable in equal bi-weekly instalments, less deductions and
withholdings in accordance with the Corporation's usual payroll
policies and applicable laws.
4.2 The base salary for each year of the term of this Agreement after the
first year shall be subject to annual review and adjustment by the
board of directors of the Corporation.
5. SEVERANCE
5.1 Notwithstanding Sections 3.1 and 3.3, the Executive shall be entitled
to receive, as severance compensation, for a period of 18 months
following:
(i) the dismissal of the Executive without Cause by the Corporation
during the Initial Term or a Renewal Term;
(ii) the resignation of the Executive in connection with a Change in
Control of Wyant Corporation in the 3 months following such
Change in Control due to (a) a significant reduction in his
duties and responsibilities, (b) a significant reduction in base
salary or (c) a relocation to a city which the Executive does
not accept; or
(iii) the non-renewal of the employment of the Executive following a
notice by the Corporation of its intention not to renew such
employment in accordance with Section 3.3;
the payment of an amount equal to his base salary immediately prior to
such termination payable in equal by-weekly instalments, less
deductions and withholdings as well as any medical benefits to which
the Executive was entitled immediately prior to such termination.
6. BONUS COMPENSATION
In addition to the compensation described in Section 4.1 and Section 4.2
above, the Executive shall be entitled to bonus compensation on an annual basis
at the discretion of the board of directors of the Corporation.
7. BENEFITS AND EXPENSES
7.1 The Executive shall, during the Initial Term and Renewal Terms of this
Agreement, be entitled to all such employment benefits as may, from
time to time, be made generally available to senior management
employees of the Corporation.
<PAGE> 5
- 4 -
7.2 Upon presentation of appropriate vouchers in accordance with the
Corporation's policies and practices, the Executive shall be
reimbursed for all reasonable expenses which are incurred by him in
the performance of his duties hereunder.
8. VEHICLE
The Corporation shall supply the Executive with a leased vehicle in
accordance with the Corporation's Executive Car Policy.
9. VACATIONS
The Executive shall be entitled to the greater of 4 weeks' paid vacation
or the number of weeks of paid vacation under the Corporation's vacation policy
per twelve month period ending April 30 during the Initial Term and any Renewal
Term. Unused vacations shall lapse at the end of each such twelve month period
and shall not carry over to any subsequent year. The vacations shall be taken
at times agreeable with the Corporation and consistent with the Executive's
duties. No payment shall be made to the Executive for vacation days which are
not taken.
10. CONTINUATION OF CERTAIN BENEFITS
Notwithstanding the termination of this Agreement for any reason other
than termination for Cause:
10.1 for the purposes of calculating the annual pension of the Executive
in accordance with Section 5.1 of the retirement arrangement made as
of June 27, 1994, as amended, between the Executive and the
Corporation attached hereto as Exhibit A (the "Retirement
Arrangement"), the Credited Service (as defined in the Retirement
Arrangement of the Executive) shall extend to December 31, 2003;
10.2 for the purposes of calculating any other retirement benefits to
which the Executive was entitled immediately prior to such
termination, the Executive shall be credited with service to
December 31, 2003;
10.3 the Corporation shall continue to make available to the Executive all
benefits referred to in Section 7.1 (excluding long term disability
benefits) and the use of a leased vehicle for the 18 month period
following such termination.
11. COVENANT NOT TO COMPETE
11.1 The Executive hereby covenants and agrees that he shall not, within
North America:
<PAGE> 6
- 5 -
(i) directly or indirectly engage in, or have any interest in
(either individually, or as a joint venturer, partner,
member of any firm, officer, director, stockholder, lender,
financial or other consultant or employee of any person,
firm, joint venture, partnership or corporation, or
otherwise) any person, firm, corporation or business that
engages in a business which is competitive, directly or
indirectly, with the business of the Corporation;
(ii) divert or attempt to divert or take advantage of any
business or opportunities of any type whatsoever which are
directly or indirectly competitive with the business of the
Corporation;
(iii) solicit or attempt to solicit any existing or future
customer or clients which use the services of or provide
services to the Corporation, except where such solicitation
or attempted solicitation concerns business activities
which are not directly competitive with the business of the
Corporation; or
(iv) solicit or induce or attempt to solicit or induce any
employee of the Corporation to leave or terminate such
employment;
(collectively, the "Covenant Not to Compete"), for a period
commencing on the Employment Date and terminating:
11.1.1 in the case of termination without Cause, on the later of
(i) 18 months following the termination of this Agreement,
and (ii) December 31, 2003; or
11.1.2 in the case of termination for Cause, on the later of (i)
18 months following the termination of this Agreement and
(ii) December 31, 2003.
11.2 The Executive confirms that the restrictive provisions of the Covenant
Not To Compete are reasonable and that a breach thereof will cause
the Corporation irreparable harm, and the Executive agrees that the
Corporation shall be entitled to equitable relief, including remedies
of injunction and specific performance, with respect to any breach
or attempted breach of the Covenant Not To Compete.
12. CERTAIN DEFINED TERMS
For purposes of this Agreement the following terms and phrases shall have
the following meanings:
<PAGE> 7
- 6 -
12.1 "Permanent Disability" shall means the inability of the Executive to
perform substantially all his duties and responsibilities to the
Corporation by reason of a physical or mental disability or infirmity
for either:
(i) a continuous period of nine months, or
(ii) 270 days during any consecutive twelve month period.
The date of such Permanent Disability shall be, in the case of clause
(i) above, the last day of such nine month period or in the case of
clause (ii) above, such date as determined in good faith by the board
of directors of the Corporation.
12.2 "Cause" shall mean:
(i) conviction of a crime involving the misappropriation of funds or
property of the Corporation or otherwise constituting a felony
under applicable law, or the entering of a plea of guilty or
nolo contendere in respect of the same; or
(ii) a determination by a majority of the members of the board of
directors of the Corporation that the Executive has neglected
his duties hereunder after written notice thereof from the
Corporation and failure to correct any alleged deficiency (as
determined by a majority of the members of the board of
directors of the Corporation) in 60 days; for such purposes, the
board of directors of the Corporation will be deemed not to
include a member who is a Related Party to the Executive;
(iii) a unanimous determination by the members of the board of
directors of the Corporation, other than the Executive, which
determination shall be final, binding and conclusive, that the
Executive has committed an act involving dishonesty or gross
negligence, or any other act which in the reasonable judgment of
such members of the board of directors of the Corporation could
materially harm the business reputation of the Corporation in
the community.
12.3 "Related Party" shall mean with respect to any person who is an
individual, a child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of that
person, including adoptive relationships.
12.4 "Change in Control" shall mean (i) the sale to a third party of
substantially all of the assets of Wyant Corporation on a
consolidated basis (provided that the sale of
<PAGE> 8
- 7 -
the assets of Wyant Health Care shall not be considered a Change in
Control for the purposes of this Agreement), (ii) a successful
takeover bid by a third party resulting in such third party holding a
majority of the outstanding voting shares of Wyant Corporation, or
(iii) the merger or amalgamation or Wyant Corporation with any other
entity such that all of the shareholders of Wyant Corporation
immediately prior to such merger or amalgamation cease, after giving
effect thereto, to hold the majority of voting shares of the resulting
merged or amalgamated corporation.
13. NOTICE
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given upon receipt of: hand delivery;
certified or registered mail, return receipt requested; or telecopy transmission
with confirmation of receipt:
13.1 If to the Corporation, to:
Wood Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
ATTENTION: VICE-CHAIRMAN
Telecopier: (514) 636-8935
Telephone: (514) 636-9926
with a copy to:
Wyant Corporation
100 Readington Road
Somerville, New Jersey 08876
ATTENTION: CHAIRMAN, COMPENSATION COMMITTEE
Telecopier: (908) 707-1549
Telephone: (908) 707-1800
<PAGE> 9
- 8 -
13.2 If to the Executive, to:
Wood Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
ATTENTION: DONALD C. MACMARTIN
Telecopier: (514) 636-8935
Telephone: (514) 636-9926
14. MISCELLANEOUS PROVISIONS
14.1 WITHHOLDING. The Corporation shall entitled to withhold the amount, if
any, of all taxed or other amounts which in accordance with the
applicable laws of any jurisdiction are required to be withheld by an
employer with respect to any amount paid to the Executive hereunder.
The Corporation, in its sole and absolute discretion, acting
reasonably, shall make all determinations as to whether it is
obligated to withhold any taxed or other amounts hereunder and the
amount thereof.
14.2 NO ASSIGNMENT. The Executive shall not, and shall not have any right
to, sell, assign, transfer or pledge any rights under this Agreement
by operation of law or otherwise.
14.3 SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be severed and enforced to the extent possible or
modified in such a way as to make it enforceable, and the invalidity,
illegality or unenforceability thereof shall not affect the validity,
legality or enforceability of the remaining provisions of this
Agreement.
14.4 SUCCESSORS. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of all of the
parties hereto, and their legal representatives, heirs, successors and
assigns, except as expressly herein otherwise provided.
14.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec.
14.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be original, but all of which shall constitute one and the
same instrument.
<PAGE> 10
-9-
14.7 PRONOUNS AND HEADINGS. As used herein, all pronouns shall include
the masculine, feminine, neuter, singular and plural thereof
wherever the context and facts require such construction. The
headings, titles and subtitles herein are inserted for convenience
of reference only and are to be ignored in any construction of the
provisions hereof.
14.8 AMENDMENTS. This Agreement can be amended in any respect upon the
written agreement of all of the parties hereto.
14.9 JURISDICTION. Any judicial proceeding brought against any of the
parties to this Agreement with respect to any dispute arising out of
this Agreement or any matter related hereto may be brought in the
courts of the Province of Quebec, and by execution and delivery of
this Agreement, each of the parties to this Agreement accepts for
himself or itself the exclusive jurisdiction in the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement.
14.10 LANGUAGE CLAUSE. The parties hereto have requested and hereby
confirm their request that this agreement and all notices relating
thereto be drafted in the English language. Les parties aux
presentes ont demande et par les presentes confirment leur demande
que le present contrat et tout avis y afferent soient rediges en
anglais.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
__________________________________________
DONALD C. MACMARTIN
WOOD WYANT INC.
Per: J.A. WYANT
--------------------------------------
<PAGE> 1
EXHIBIT 10.9
<PAGE> 2
THIS EMPLOYMENT AGREEMENT entered into as of January 1, 1999
BETWEEN: MARC D'AMOUR, resident and domiciled at
2653 Rowel Drive, St-Lazare, Quebec, J7T 2A1
(hereinafter referred to as the "Executive")
AND: WOOD WYANT INC., a corporation incorporated
under the Canada Business Corporations Act
(hereinafter referred to as the "Corporation")
WHEREAS the Corporation desires to continue to employ the Executive,and the
Executive desires to continue such employment, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties, intending legally to be bound, hereby agree as follows:
1. EMPLOYMENT
The Corporation hereby continues the employment of the Executive as the
Vice President, Finance and Chief Financial Officer of the Corporation
commencing January 1, 1999 (the "Employment Date").
2. DUTIES OF THE EXECUTIVE
The Executive shall devote his full time and attention to, and use his
best efforts to promote, the business and affairs of the Corporation and shall
perform duties and have such responsibilities as are customarily performed and
enjoyed by persons employed in comparable positions, subject, however, to the
direction and control of the board of directors of the Corporation.
3. TERM
3.1 The initial term of the employment of the Executive pursuant to this
Agreement shall be a 3 year fixed term (the "Initial Term"), beginning
on the Employment Date;
3.2 The Executive shall be entitled to terminate this Agreement any time
by giving prior written notice of three (3) months;
<PAGE> 3
3.3 The term of employment of the Executive pursuant to this Agreement
shall be automatically renewed for 1 year (a "Renewal Term") upon the
expiry of the Initial Term and on each anniversary of the Employment
Date thereafter, unless the Corporation gives notice of intention not
to renew:
(i) in the case of the Initial Term, 6 months prior to the expiry of
the Initial Term:
(ii) in the case of a Renewal Term, 3 months prior to the expiry of
such Renewal Term.
3.4 Notwithstanding the foregoing, this Agreement shall terminate
immediately in the event of:
(i) the termination of the employment of the Executive by the
Corporation with Cause;
(ii) the Permanent Disability (as hereinafter defined) of the
Executive;
(iii) the death of the Executive;
(iv) the dismissal of the Executive without Cause by the Corporation
during the Initial Term or a Renewal Term; or
(v) the resignation of the Executive in connection with a Change in
Control of Wyant Corporation in the 3 months following such
Change in Control due to (a) a significant reduction in his
duties and responsibilities, (b) a significant reduction in base
salary or (c) a relocation to a city which the Executive does
not accept;
provided that, in the case of termination due to an event described in
paragraph 3.4(iv) or 3.4(v), the obligation of the Corporation to pay
the amounts set out in Section 5.1 and Section 5.2 and to provide the
benefits set out in Section 10 shall survive such termination.
4. SALARY
4.1 The Corporation agrees to pay the Executive for the services rendered
by him as Vice President, Finance and Chief Financial Officer of the
Corporation in accordance with this Agreement, and the Executive
agrees to accept as compensation a base salary at the annual rate of
$195,000 in lawful money of
<PAGE> 4
-3-
Canada, payable in equal bi-weekly instalments, less deductions and
withholdings in accordance with the Corporation's usual payroll
policies and applicable laws.
4.2 The base salary for each year of the term of this Agreement after the
first year shall be subject to annual review and adjustment by the
board of directors of the Corporation.
5. SEVERANCE
5.1 Notwithstanding Sections 3.1 and 3.3, the Executive shall be entitled
to receive, as severance compensation, for a period of 12 months
following:
(i) the dismissal of the Executive without Cause by the Corporation
during the Initial Term or a Renewal Term:
(ii) the resignation of the Executive in connection with a Change in
Control of Wyant Corporation in the 3 months following such
Change in Control due to (a) a significant reduction in his
duties and responsibilities, (b) a significant reduction in base
salary or (c) a relocation to a city which the Executive does
not accept; or
(iii) the non-renewal of the employment of the Executive following a
notice by the Corporation of its intention not to renew such
employment in accordance with Section 3.3;
the payment of an amount equal to his base salary immediately prior to
such termination payable in equal bi-weekly instalments, less
deductions and withholdings.
5.2 The period of 12 months referred to in Section 5.1 will be increased
to:
(i) 15 months upon the Executive attaining ten years of employment
with the Corporation from the date of first employment with the
Corporation; and
(ii) 18 months upon the Executive attaining fifteen years of
employment with the Corporation from the date of first
employment with the Corporation.
6. BONUS COMPENSATION
In addition to the compensation described in Section 4.1 and Section 4.2
above, the Executive shall be entitled to bonus compensation on an annual basis
at the discretion of the board of directors of the Corporation.
<PAGE> 5
- 4 -
7. BENEFITS AND EXPENSES
7.1 The Executive shall, during the Initial Term and Renewal Terms of
this Agreement, be entitled to all such employment benefits as may,
from time to time, be made generally available to senior management
employees of the Corporation.
7.2 Upon presentation of appropriate vouchers in accordance with the
Corporation's policies and practices, the Executive shall be
reimbursed for all reasonable expenses which are incurred by him in
the performance of his duties hereunder.
8. VEHICLE
The Corporation shall supply the Executive with a leased vehicle in
accordance with the Corporation's Executive Car Policy.
9. VACATIONS
The Executive shall be entitled to the greater of 4 weeks' paid vacation
or the number of weeks of paid vacation under the Corporation's vacation policy
per twelve month period ending April 30 during the Initial Term and any Renewal
Term. Unused vacations shall lapse at the end of each such twelve month period
and shall not carry over to any subsequent year. The vacations shall be taken
at times agreeable with the Corporation and consistent with the Executive's
duties. No payment shall be made to the Executive for vacation days which are
not taken.
10. CONTINUATION OF CERTAIN BENEFITS
Notwithstanding the termination of this Agreement for any reason other
than termination for Cause:
10.1 The Executive shall be recognized as having an additional 12 months
credited service following such termination for purposes of the
Corporation's pension plan and, to the extent the Corporation is
required to do so under the terms of the Corporation's pension plan,
the Corporation shall continue to make contributions in respect of
the Executive to the Corporation's pension plan for the 12 month
period following such termination;
10.2 The Corporation shall continue to make available to the Executive all
benefits referred to in Section 7.1 (excluding long term disability
benefits) and the use of a leased vehicle, for the 12 month period
following such termination; and
<PAGE> 6
- 5 -
10.3 The period of 12 months referred to in Sections 10.1 and 10.2 shall be
increased to:
(i) 15 months upon the Executive attaining ten years of employment
with the Corporation from the date of first employment with the
Corporation; and
(ii) 18 months upon the Executive attaining fifteen years of
employment with the Corporation from the date of first employment
with the Corporation.
11. COVENANT NOT TO COMPETE
11.1 The Executive hereby covenants and agrees that he shall not, within
North America:
(i) directly or indirectly engage in, or have any interest in (either
individually, or as a joint venturer, partner, member of any
firm, officer, director, stockholder, lender, financial or other
consultant or employee of any person, firm, joint venture,
partnership or corporation, or otherwise) any person, firm,
corporation or business that engages in a business which is
competitive, directly or indirectly, with the business of the
Corporation;
(ii) divert or attempt to divert or take advantage of any business or
opportunities of any type whatsoever which are directly or
indirectly competitive with the business of the Corporation;
(iii) solicit or attempt to solicit any existing or future customer or
clients which use the services of or provide services to the
Corporation, except where such solicitation or attempted
solicitation concerns business activities which are not directly
competitive with the business of the Corporation; or
(iv) solicit or induce or attempt to solicit or induce any employee of
the Corporation to leave or terminate such employment;
(collectively, the "Covenant Not To Compete"), for a period commencing
on the Employment Date and terminating:
11.1.1 in the case of termination without Cause, 18 months following the
termination of this Agreement, or
11.1.2 in the case of termination for Cause, 18 months following the
termination of this Agreement.
<PAGE> 7
- 6 -
11.2 The Executive confirms that the restrictive provisions of the Covenant
Not To Compete are reasonable and that a breach thereof will cause the
Corporation irreparable harm, and the Executive agrees that the
Corporation shall be entitled to equitable relief, including remedies
of injunction and specific performance, with respect to any breach or
attempted breach of the Covenant Not To Compete.
12. CERTAIN DEFINED TERMS
For purposes of this Agreement the following terms and phrases shall have
the following meanings:
12.1 "Permanent Disability" shall mean the inability of the Executive to
perform substantially all his duties and responsibilities to the
Corporation by reason of a physical or mental disability or infirmity
for either:
(i) a continuous period of nine months, or
(ii) 270 days during any consecutive twelve month period.
The date of such Permanent Disability shall be, in the case of clause
(i) above, the last day of such nine months period or in the case of
clause (ii) above, such date as determined in good faith by the board
of directors of the Corporation.
12.2 "Cause" shall mean:
(i) conviction of a crime involving the misappropriation of funds or
property of the Corporation or otherwise constituting a felony
under applicable law, or the entering of a plea of guilty or nolo
contendere in respect of the same; or
(ii) a determination by a majority of the members of the board of
directors of the Corporation that the Executive has neglected his
duties hereunder after written notice thereof from the
Corporation and failure to correct any alleged deficiency (as
determined by a majority of the members of the board of directors
of the Corporation) in 60 days; for such purposes, the board of
directors of the Corporation will be deemed not to include a
member who is a Related Party to the Executive;
(iii) a unanimous determination by the members of the board of
directors of the Corporation, other than the Executive, which
determination shall be final, binding and conclusive, that the
Executive has committed an act involving dishonesty or gross
negligence, or any other act which in the reasonable
<PAGE> 8
-7-
judgment of such members of the board of directors of the
Corporation could materially harm the business reputation of the
Corporation in the community.
12.3 "Related Party" shall mean with respect to any person who is
an individual, a child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or
sister-in-law of that person, including adoptive relationships.
12.4 "Change in Control" shall mean (i) the sale to a third party
of substantially all of the assets of Wyant Corporation on a
consolidated basis (provided that the sale of the assets of Wyant
Health Care shall all not be considered a Change in Control for
the purposes of this Agreement), (ii) a successful takeover bid
by a third party resulting in such third party holding a majority
of the outstanding voting shares of Wyant Corporation, or (iii)
the merger or amalgamation of Wyant Corporation with any other
entity such that all of the shareholders of Wyant Corporation
immediately prior to such merger or amalgamation cease, after
giving effect thereto, to hold the majority of voting shares of
the resulting merged or amalgamated corporation.
13. NOTICE
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given upon receipt of: hand delivery;
certified or registered mail, return receipt requested; or telecopy transmission
with confirmation of receipt:
13.1 If to the Corporation, to:
Wood Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
ATTENTION: PRESIDENT
Telecopier: (514) 636-8935
Telephone: (514) 636-9926
<PAGE> 9
-8-
with a copy to:
Wyant Corporation
100 Readington Road
Sommerville, New Jersey 08876
ATTENTION: CHAIRMAN, COMPENSATION COMMITTEE
Telecopier: (908) 707-1549
Telephone: (908) 707-1800
13.2 If to the Executive, to:
Wood Wyant Inc.
1475 32nd Avenue
Lachine, Quebec H8T 3J1
ATTENTION: MARC D'AMOUR
Telecopier: (514) 636-8935
Telephone: (514) 636-9926
14. MISCELLANEOUS PROVISIONS
14.1 WITHHOLDING. The Corporation shall be entitled to withhold the amount,
if any, of all taxes or other amounts which in accordance with the
applicable laws of any jurisdiction are required to be withheld by an
employer with respect to any amount paid to the Executive hereunder.
The Corporation, in its sole and abosolute discretion, acting
reasonably, shall make all determinations as to whether it is
obligated to withhold any taxes or other amounts hereunder and the
amount thereof.
14.2 NO ASSIGNMENT. The Executive shall not, and shall not have any right
to, sell, assign, transfer or pledge any rights under this Agreement
by operation of law or otherwise.
14.3 SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be severed and enforced to the extent possible or
modified in such a way as to make it enforceable, and the invalidity,
illegality or unenforceability thereof shall not affect the validity,
legality or enforceability of the remaining provisions of this
Agreement.
<PAGE> 10
-9-
14.4 SUCCESSORS. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of all of the
parties hereto, and their legal representatives, heirs, successors
and assigns, except as expressly herein otherwise provided.
14.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec.
14.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be original, but all of which shall constitute one and
the same instrument.
14.7 PRONOUNS AND HEADINGS. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof wherever the
context and facts require such construction. The headings, titles and
subtitles herein are inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof.
14.8 AMENDMENTS. This Agreement can be amended in any respect upon the
written agreement of all of the parties hereto.
14.9 JURISDICTION. Any judicial proceeding brought against any of the
parties to this Agreement with respect to any dispute arising out of
this Agreement or any matter related hereto may be brought in the
courts of the Province of Quebec, and by execution and delivery of
this Agreement, each of the parties to this Agreement accepts for
himself or itself the exclusive jurisdiction in the aforesaid courts,
and irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement.
14.10 LANGUAGE CLAUSE. The parties hereto have requested and hereby confirm
their request that this agreement and all notices relating thereto be
drafted in the English language. Les parties aux presentes confirment
leur demande que le present contrat et tout avis y afferent soient
rediges en anglais.
<PAGE> 11
- 10 -
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
MARC D'AMOUR
WOOD WYANT INC.
Per: D.C. MACMARTIN
------------------------
<PAGE> 1
EXHIBIT 10.10
<PAGE> 2
WYANT CORPORATION (logo)
August 14, 1997.
PERSONAL AND CONFIDENTIAL
Mr. Robert E. Briggs,
President,
Wyant Health Care,
100 Readington Road,
Somerville, N.J. 08876
U.S.A.
Dear Bob,
This letter will constitute our agreement that (1) if any time during the
three months following a sale of all or substantially all of the assets of the
Wyant Health Care Division you are terminated without cause by the buyer of
such assets or (2) if at the time of such sale you decline any offer of
employment made to you by such buyer, Wyant Corporation will pay you for
services rendered in an amount equal to one year's salary based on your salary
level then in effect, such payment to be made on the last day of your
employment with the Wyant Health Care Division or such buyer as the case may be.
Nothwithstanding the above, no payment shall be due to you if you resign
following acceptance of any such offer of employment by such buyer, die or
become disabled or are terminated for cause by such buyer.
Yours sincerely,
WYANT CORPORATION
Donald C. MacMartin,
Chairman and Chief
Executive Officer.
<PAGE> 1
EXHIBIT 10.11
<PAGE> 2
EXECUTION COPY
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made this eleventh
day of March, 1999, between Wyant Corporation (the "Corporation"), a New York
corporation, and James A. Wyant ("Indemnitee").
WHEREAS, Wyant & Company Inc., controlled by Indemnitee, holds 420,920 shares
of common stock of the Corporation.
WHEREAS, pursuant to two agreements, the first of which is dated as of March
18, 1997, among Wyant & Company, Inc., 3287858 Canada Inc., and Derek Wyant
Holdings Inc. (the "First Voting Trust") and the second of which is dated as of
March 14, 1997 and which holds the shares of 3323986 Canada, Inc. (the "Second
Voting Trust"), Indemnitee has the right to vote 1,304,253 shares of common
stock of the Corporation.
WHEREAS, the Corporation has requested that Indemnitee, as the majority
shareholder of the Corporation, vote all of the shares which he has the right
to vote in favor of the Asset Purchase Agreement between the Corporation and
Paper-Pak Products, Inc. ("Paper-Pak"), dated February 23, 1999 (subject to any
fiduciary obligation on the part of Indemnitee) and the transactions
contemplated thereby (the "Sale"). Indemnitee is willing to so vote but only so
long as the Corporation enters into this Agreement.
WHEREAS, each party hereto has the good faith belief that consummation of the
sale is in the best interests of the Corporation and its shareholders.
NOW, THEREFORE, in consideration of Indemnitee's willingness to agree to
vote and to vote in favor of the sale in that Paper-Pak has insisted that the
agreement of the Indemnitee to vote shares as provided for herein is a
condition precedent to Paper-Pak agreeing to the sale (the "Indemnified
Service"), the Corporation and Indemnitee agree as follows:
1. The Corporation shall to the maximum extent permitted by law assume
liability for, and indemnify, protect and hold harmless, Indemnitee,
from and against any and all liabilities, obligations, damages,
costs, expenses and disbursements (including reasonable legal fees
and costs, expenses and disbursements) of whatsoever kind and nature,
which may be incurred by, imposed upon, or asserted against
Indemnitee in defending or responding to any claims, actions or
proceedings against Indemnitee in connection with the Indemnified
Service (collectively, "Claims").
2. Expenses (including attorneys' fees) incurred by Indemnitee in
defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by Indemnitee to repay such amount if
it shall ultimately be
1
<PAGE> 3
determined that Indemnitee is not entitled to be indemnified by the
Corporation as provided in this Agreement.
3. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Agreement shall not be deemed to be
exclusive of any other rights to which Indemnitee may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such
office.
4. This Agreement shall apply to any action or proceeding, wherever
brought, which arises out of acts or omissions relating to the
Indemnified Service, occurring before or after the date first written
above and whether Indemnitee is still a shareholder of the Corporation
or not.
5. The provisions of Sections 1 and 2 above are subject to the provisions
of Section 6 below.
6. The indemnity provided under this Agreement shall not be provided to
Indemnitee if a final non-appealable judgment determines that the
Claim arose due to the willful misconduct by Indemnitee. For purposes
hereof, the term "willful misconduct" shall mean that the Indemnitee's
acts were committed in bad faith or were the result of active and
deliberate dishonesty and, in either case, were material to the cause
of action so adjudicated.
7. Indemnitee's rights hereunder shall inure to the benefit of the heirs,
executors and administrators of Indemnitee and shall be binding on the
successors of the Corporation.
8. This Agreement shall be governed by the laws of the State of New York
without regard to the conflicts of laws principles thereof. Neither
party may assign its rights or obligations hereunder without the prior
written consent of the other party.
2
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WYANT CORPORATION
By:____________________________
Name: Donald C. MacMartin
Title: President, Chairman and Chief Executive Officer
____________________________________________
James A. Wyant, Indemnitee
3
<PAGE> 1
WYANT CORPORATION
EXHIBIT 21.1
SUBSIDIARIES
DECEMBER 31, 1998
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION
- ------------------ -----------------------------
Bridgewater Manufacturing Corp. New Jersey
IFC Disposables, Inc. Tennessee
Wood Wyant Inc. Canada
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT ON FORM 10-K FOR YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED
DECEMBER 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 59,985
<SECURITIES> 0
<RECEIVABLES> 10,215,812
<ALLOWANCES> 0
<INVENTORY> 8,576,960
<CURRENT-ASSETS> 29,449,383
<PP&E> 8,593,460
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,539,664
<CURRENT-LIABILITIES> 18,423,741
<BONDS> 3,887,593
5,477,072
0
<COMMON> 27,053
<OTHER-SE> 12,647,789
<TOTAL-LIABILITY-AND-EQUITY> 42,539,664
<SALES> 67,124,137
<TOTAL-REVENUES> 67,124,137
<CGS> 43,218,466
<TOTAL-COSTS> 65,084,379
<OTHER-EXPENSES> (244,067)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,158,249
<INCOME-PRETAX> 1,125,576
<INCOME-TAX> 572,000
<INCOME-CONTINUING> 553,576
<DISCONTINUED> 1,021,602
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,575,178
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.33
</TABLE>
