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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the
- ------- Securities Exchange Act of 1934. (Fee Required)
For the Fiscal Year ended: December 31, 1995
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- ------ Exchange Act of 1934.
For the Transition Period From to
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Commission File Number: 0-9160
INTEK DIVERSIFIED CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 04-2450145
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
970 West 190th Street, Suite 720, Torrance, California 90502
- ------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 366-7335
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value
---------------------------
(Title of Each Class)
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of March 27, 1996, the aggregate market value of voting stock held by
nonaffiliates was approximately $51,484,710. The number of shares outstanding of
the Registrant's Common Stock was 10,958,278 as of March 27, 1996.
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Documents Incorporated by Reference: None.
This Report includes a total of 35 pages, excluding Exhibits. The Exhibit index
appears on page 36.
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INTEK DIVERSIFIED CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .12
Item 4. Submission of Matters to a Vote of Security Holders. . . . .12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . .13
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . .14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . .14
Item 8. Financial Statements and Supplementary Data. . . . . . . . .19
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . .19
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . .20
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . .21
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . .26
Item 13. Certain Relationships and Related Transactions . . . . . . .30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . .32
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PART I
ITEM 1. BUSINESS
GENERAL
INTEK Diversified Corporation ("INTEK" or the "Company") was incorporated
in 1969. On September 23, 1994, INTEK acquired the business of Simrom, Inc.
("Simrom"), an Ohio corporation, whose principal assets were certain rights
relating to licenses granted by the Federal Communications Commission (the
"FCC") for the 220 megahertz to 222 megahertz ("220 MHz") narrowband spectrum
through a business combination (the "Merger") involving the merger of Simrom
into a newly formed subsidiary of INTEK (the "Acquisition Subsidiary").
Subsequent to the Merger, the Acquisition Subsidiary changed its name to Roamer
One, Inc. ("Roamer One") and the Company refocused its business to a development
stage enterprise engaged in developing, constructing and managing a specialized
mobile radio ("Specialized Mobile Radio" or "SMR") network in the United States
utilizing the recently licensed 220 MHz narrowband spectrum from that of
fabricating and selling plastic products primarily from injection and
compression molding of various plastic resins to customers in the electronics,
aerospace and commercial aircraft markets (the "Plastics Business"). See
"Cautionary Statement for Purposes of the Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995."
The Company has one principal subsidiary, Roamer One, and three
insignificant subsidiaries, Olympic Plastics Company, Inc. ("Olympic"), IMCX,
Inc. and IDC, Inc.
SUBSIDIARIES
ROAMER ONE, INC.
Roamer One is a manager of SMR systems through its contracts with
certain holders of 220 MHz local licenses. A proposed SMR Network will be built
with equipment designed to operate on very narrow, 5 kilohertz ("KHz"),
bandwidths linking these SMR systems together (the "Roamer One Network"). The
evolution of narrowband technology is a result of the efforts of the Federal
Communications Commission ("FCC") to achieve spectrum efficiency for all types
of broadcast service. The 220 MHz spectrum was allocated to explore further the
development of narrowband equipment in a "virgin" spectrum (I.E. virtually free
of existing licensees or authorized users). In 1991, the FCC adopted rules and
permitted license applications to be filed for SMR systems and other private
land-mobile communication systems in the 220 MHz spectrum. In 1993,
approximately 3,300, five channel, trunked licenses were awarded to licensees.
Roamer One has contracts with certain holders of 220 MHz local
licenses covering approximately 2,125 channels. Roamer One has classified such
contracts as: Category I, Category II, or Category III Agreements.
Under the Category I Agreements, each of the licensees (which are, in
some instances, directors of the Company) have entered into an "Exclusive
Management Agreement and Right of First Refusal" ("Management Agreement"). Each
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licensee under a Category I Agreement also has entered into an Option to
Purchase Agreement (the "Option Agreement") providing Roamer One with the
exclusive right to purchase the constructed 220 MHz SMR system, together with
the 220 MHz FCC license. Under the Option Agreement, Roamer One is required to
fund all capital costs and operating expenses. The purchase under the Option
Agreement may be exercised by Roamer One at any time after construction by
Roamer One of the 220 MHz SMR system is completed.
Under Category II Agreements, each of the licensees has entered into a
Management Agreement which permits Roamer One to earn and retain a percentage of
the gross subscriber revenues. Each of the licensees also has entered into an
Option Agreement, however, the option may be exercised only after a prescribed
period of operation. Roamer One is required to finance the building of the 220
MHz SMR system and contribute operating capital until such time as the system is
profitable. The purchase price of the 220 MHz SMR system, together with the 220
MHz license, is computed using a multiple of earnings at the time of purchase.
Under the Category III Agreements, each of the licensees has entered
into a Management Agreement which provides that Roamer One will manage the 220
MHz SMR system for a fee based upon a percentage of subscriber revenues earned
from the operation of the SMR system. Under a Category III Agreement, Roamer One
has no option to purchase such 220 MHz SMR system but does have a right of first
refusal to purchase the SMR system in the event that an acceptable offer to buy
such system is submitted to the licensee by a third party. The licensees under
Category III Agreements are obligated to provide the funds for the system
construction and operating costs.
At December 31, 1995, the Company had 425 Management Agreements for a
total of 2,125 channels. Roamer One will provide services related to managed SMR
systems that include:
1. System design and construction
2. Market demographics
3. Advertising
4. Subscriber acquisition and loading
5. Dealer network establishment
6. Subscriber billing and tracking
7. Budget administration
8. System management, maintenance and repair
The FCC has allocated nationwide channels for licensing. Of this
allocation, the FCC has issued licenses for four commercial systems, one of
which is now subject to further administrative litigation. The remaining two
commercial licenses and the non-commercial licenses have yet to be issued by the
FCC pending resolution of regulatory matters involving the applicants. Roamer
One does not have agreements related to licenses for nationwide channels.
TECHNOLOGY. Roamer One has a supply arrangement with Simmonds Capital
Limited ("SCL"), formerly known as Simmonds Communications Ltd. SCL installs
large, integrated systems and has the technological expertise to insure that the
systems network properly. Roamer One purchases all base station equipment and
installation labor from SCL and SCL is responsible for the turn-key
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construction of each of the sites as directed by Roamer One and, ultimately, the
licensee of each system. See "Certain Relationships and Related Transactions."
The current manufacturers of 220 MHz transceiver equipment from whom
SCL obtains its base station repeater equipment are SEA, Inc. of Mountlake
Terrace, Washington and Securicor's Linear Modulation Technology, Ltd.
("Securicor LMT"), located in England. Equipment from these and certain other
vendors may not be available in time to allow the completed construction of all
220 MHz SMR systems subject to Management Agreements with Roamer One prior to
the FCC amended deadline. Roamer One has placed orders with SCL for the
equipment which Roamer One requires to construct 241 systems. Included in this
order is equipment required by Category III licensees, for which Roamer One will
earn an incremental profit upon delivery and invoicing to the licensee. During
1995, Roamer One purchased $9,298,000 of radio equipment and installation
services from SCL. As of December 31, 1995, Roamer One had an accounts payable
balance of $2,452,000. On February 29, 1996, the Company made a payment to SCL
in the amount of $2,300,000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Due to the recognition of the Roamer One name in the marketplace, the
Company negotiated for the purchase of mobile radios bearing the Roamer One logo
from Securicor LMT and the receipt, warehousing and distribution of such Roamer
One mobile radios by Midland International Corporation ("MIC") of Kansas City,
Missouri, a wholly-owned subsidiary of SCL. See "Certain Relationships and
Related Transactions."
SMR USERS; ROAMER ONE SERVICES. The largest segment of SMR users today
use trunked channels with traditional, push-to-talk, voice radios. Subscribers
consist mainly of service companies such as contractors, plumbers, electricians,
roofers, maintenance personnel and other operators of fleets of vehicles. In
addition, a large segment consists of couriers, limousine services and other
transportation companies. Utility companies, package handlers, fire and
paramedic vehicles and other public safety concerns are typical SMR users who
may own or lease entire systems in a local area. The SMR spectrum is used
because a form of voice communication from a dispatch location, or base station
location is required for a fleet of vehicles. The Roamer One radio offers these
customers dispatch group calling capability and privacy since the operator has
the capability to contact each radio individually or a group of radios at the
same time.
The Roamer One radios are similar in appearance to the traditional SMR
radios currently in use by dispatch customers such as taxi cabs, trucking firms
and construction companies. The microphone can be equipped with a key pad that
provides for telephone interconnect dialing and other numeric functions
permitted within the feature set of the equipment. The speaker can either be
contained within the radio or mounted separately in another location for better
sound quality. The Roamer One radios require a 12 volt DC power supply and draw
from 400 milli-amps to 1.25 amps.
Portable radios have now been type accepted by the FCC and are on the
market. Securicor LMT has forecasted that its portable radio will be available
by the end of 1996. The other major development area is data transmission and
devices. Securicor LMT is capable of a 14.4 kilobit per second (kbps)
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transmission rate and can send data over its existing radio, via a standard
RS232 pin plug on the chassis at 1200 band. SEA is working on enhancements to
its bit rate, which is currently well below those products of Securicor LMT.
Due to the 5 KHz bandwidth in the 220 MHz spectrum, compared to 25 KHz
bandwidth in the 800 MHz spectrum, high speed data transmissions are a far more
efficient use of the narrowband spectrum than other applications such as mobile
telephone service. Roamer One does not intend to compete with cellular or
personal communications systems ("PCS") operators. Roamer One's initial
marketing effort is directed toward traditional dispatch users. Data
communication is expected to be a longer term product which has not been fully
realized with current equipment offerings. Examples of available data
communications equipment include global positioning system receivers mounted on
a vehicle to determine location and to monitor fuel consumption, speed, engine
performance, two way messaging, credit card reading for wireless authorizations,
and remote control of any application or function (lights, valves, doors,
switches, etc.) A key element to the deployment of data services is the
development by original equipment manufacturer ("OEM") vendors of integrated
devices not requiring a separate radio for transmission. The current offerings
of data terminals require connection to a radio to facilitate messaging. Roamer
One can provide no assurances that OEM vendors will develop these integrated
data devices, applications or integrated application software, that
manufacturers will be able to provide any or all of such data communication
devices economically, or that consumers will desire such services in the future.
ADVANTAGES OF LINEAR MODULATION AT 220 MHZ. The advantages of linear
modulation at 220 MHz, which management of Roamer One believes creates a
competitive advantage over other applications, are:
1. The signal propagation characteristics at 220 MHz are superior to
those at higher frequencies, including 800 MHz and 900 MHz. The
signal is less susceptible to loss due to trees, rain, variable
terrain and buildings.
2. The signaling protocol being used in the Securicor LMT
equipment has been proven in many other installations to be
stable with large numbers of subscribers while continuing to
provide an excellent quality of service. The techniques
being employed in competing digital compression systems are
yet to be perfected.
3. The protocol being used by the Securicor LMT equipment is
substantially similar to equipment currently utilized in Europe
which has proven to be a effective means to "network" multiple
sites and multiple channels. The protocol will be a distinct
advantage over other SMR analog logic trunked radio ("LTR")
operators as Roamer One rolls out its plan to create a national
network of systems.
4. The Securicor LMT systems allow for the assignment of an
electronic site address and a unique identity number for
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the mobile radio. These features will allow for the control of,
and the accounting for, each subscriber on the service.
Traditional LTR operators are unable to police their systems and
account for the number of subscribers. As a consequence, LTR
operators are unable to bill appropriately for their services
because they have no method of accurately determining how many
subscribers there are on each of the licensee's systems. Roamer
One will be able to charge accurately for usage of its managed
systems. Additionally, the assignment of unique identity numbers
will provide for the subscribers to contact other subscribers
individually and with privacy instead of communicating through a
shared group of mobile codes.
COMPETITION. Roamer One believes that it will be able to provide
services that are competitive with certain services provided by SMR operators in
the 800 MHz and 900 MHz frequencies and other existing and future wireless
communication providers of dispatch and data communications services, including
the emerging personal communication services ("PCS"). Roamer One does not expect
to compete directly with cellular carriers, paging companies or providers of
one-way PCS communications, although to some extent services provided by Roamer
One and by these other carriers will be substitutes for each other.
The SMR operators in the 800 MHz spectrum are expending large sums of
money to build-out digitally enhanced mobile networks to provide an integrated
package of services, including mobile telephone service, dispatch, and data
communications services. The technology in use is sometimes generally referred
to as Enhanced Specialized Mobile Radio ("ESMR"). A consolidation of 800 MHz
licenses and operators has been underway for some time by publicly traded, well-
capitalized, companies. During 1995, ESMR service has been implemented in
selected major cities in the United States. The technology employed has been
developed in large part by Motorola, but is still unproved commercially.
Due to the high level of capital expenditures being made by 800 MHz
system operators, the reportedly better transmission quality of the digital
networks to the traditional analog SMR channels, and the claim that the new
integrated package of services is a more effective and comprehensive
communications product, it is expected that a premium will be charged for the
service over the rates currently charged to dispatch users of analog systems. As
a result, Roamer One believes this will provide an opportunity for it to attract
a significant number of dispatch customers to the Roamer One Network who are not
interested in paying the higher premiums for an ESMR service. Current users of
800 MHz SMR service also will be required to purchase new digital mobile radio
equipment to continue use of the SMR system once a conversion has been made to
ESMR. Roamer One believes that a window of opportunity exists to offer these
displaced users a more economical alternative for fleet communications.
There are, however, several factors which may impact negatively Roamer
One's ability to attract 800 MHz customers to its 220 MHz SMR service:
1. Many 800 MHz system operators own channels in the 900 MHz
spectrum in the same market in which they are converting
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their 800 MHz SMR to an ESMR. As a result, they are able to load
those existing clients who do not desire ESMR on the analog 900
MHz system. This migration still requires the purchase of new
mobile radio equipment, however, the 900 MHz equipment is priced
below levels of the 220 MHz equipment.
2. The conversion to ESMR involves in most cases the use of a
technique known as time divisional multiple access ("TDMA"). TDMA
provides up to six times the number of channels and may allow the
operator to eventually lower its basic subscriber rates as a
function of capacities and economies of scale.
3. The 800 MHz SMR operators are able to offer subscribers a mature
radio product that has progressed through the commercial
development stages. The Roamer One radio has not progressed
through such commercial development stages. The volume of sales
related to the 800 MHz radios has resulted in significantly lower
prices compared to the price of the Roamer One radio. Also, the
800 MHz operators and service providers are generally well
established and better able to withstand the efforts of a
competing product offering, such as that of Roamer One through
subsidizing the air time or mobile radio costs beyond the level
at which Roamer One may be able to compete.
4. Other SMR operators have already begun a consolidation with a
goal of achieving a nationwide network. Because these operators
have had clients and systems in operation for a considerably
longer period than that of Roamer One, they have a competitive
advantage in completing their respective networks and maintaining
a significant percentage of their existing subscriber base.
The FCC has commenced a competitive bidding schedule for licenses in
the recently allocated PCS market. To date, the FCC has issued national and
regional narrow band PCS licenses and certain broad band PCS licenses. The FCC
is now auctioning other broad band PCS licenses and has indicated that in the
future it intends to auction additional narrow band and broad band PCS licenses.
PCS is described to be the next generation in personal wireless communications
and will provide for digital voice, data, paging, messaging and dispatch
operations all transmitted with low power, lightweight, portable hand-held
units.
The FCC has commenced a competitive bidding process for licenses in
900 MHz frequencies intended for use by SMR service providers and paying
companies. An additional geographic area-based allocation of 220 MHz SMR
licenses is scheduled for auction during the fourth quarter of 1996. All of
these licensees are potential competitors for Roamer One in its quest for new
subscribers.
In addition to PCS, there are a host of other services that could
eventually compete with the 220 MHz SMR operators and Roamer One due to the
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movement that the FCC is taking towards a "level playing field" or
"regulatory parity." Services such as interactive video data service or wireless
cable may be allowed to offer dispatch services under the FCC proposed rule
making. This regulatory parity, however, is a corresponding benefit to Roamer
One as 220 MHz operators will be allowed to offer fixed point transmissions,
paging, messaging and other services previously garnered by licensees of a
differing spectrum.
SITE LEASES. As of December 31, 1995, Roamer One had entered into 101
site leases to permit installation, operation, and maintenance of
transmission/reception equipment facilities in connection with the 220 MHz SMR
systems. These leases generally have a five-year term, with three consecutive
five-year extension periods upon the mutual agreement of the parties. As of
December 31, 1995, Roamer One paid $780,500 in 1995 site lease fees. As of
December 31, 1995, total future minimum lease payments for the Category I and
Category II site leases, which are contractual obligations of Roamer One, are as
follows:
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1996 $837,220
1997 781,021
1998 674,960
1999 620,978
2000 283,972
Thereafter -
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$3,198,151
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EMPLOYEES AND OFFICES. The Company has 10 employees operating from its
offices located at 970 West 190th Street, Suite 720, Torrance, California. In
addition, the Company has a national sales manager based in Texas and a regional
sales manager based in New York.
REGULATION BY THE FCC. SMR operators, just as radio and television
stations, are subject to the jurisdiction of the FCC under the Communications
Act of 1934, as amended, (the "Communications Act") which empowers the FCC,
among other things, to issue, renew, revoke, and modify licenses (usage rights
to frequencies), to approve the assignment or transfer of control of licenses,
to regulate the apparatus used by stations, to designate areas served by
particular stations or operators, to assign frequencies, to adopt such
regulations as may be necessary to carry out the provisions of the
Communications Act and to impose penalties for violations of such regulations.
The FCC's policy considerations, as well as technical limitations and
interference standards, determine the number of persons or entities that can be
granted licenses.
Because Roamer One's business is regulated by the FCC, its business
affairs (and those of its actual and potential competitors) are always subject
to changes in FCC rules and policies. Such changes can increase the level of
competition, the cost of regulatory compliance, the methods in which the Company
manages its systems, the difficulty in obtaining or keeping licenses, or other
facets of the Company's regulatory environment. Further, each FCC proceeding
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which might affect the Company is subject to reconsideration, appellate review,
and FCC modification from time-to-time.
The FCC requires that licensees maintain de jure and de facto control
of their radio systems at all times. This requirement is applicable to the 220
MHz licensees which Roamer One seeks to manage and acquire. A licensee's failure
to maintain control can result in an FCC investigation or hearing, imposition of
monetary forfeitures, or revocation of the license. Although certain guidelines
have been adopted, the FCC has yet to establish a firm rule to determine if a
licensee has given control to a manager, either under the terms of the agreement
or as result of the course of dealing between the licensee and the manager.
Although non-nationwide 220 MHz licenses originally were granted with
a "construction period" of eight (8) months following the date of issuance, the
construction period was extended three times, most recently by the FCC Second
Report and Order in PR Docket No. 89-552 and GN Docket No. 93-252. The current
construction deadline is March 11, 1996 for all non-nationwide 220 MHz licensees
that elect to construct base stations at currently authorized locations, and at
least until August 15, 1996, for all licensees granted authority to modify
licenses to relocate base stations. The August deadline is applicable only to
licensees who file with the FCC (a) on or before March 11, 1996, a Letter of
Intention to modify their location, and (b) on or before May 1, 1996, a valid
application to modify their authorizations by relocating their stations to a
different location. Pursuant to the Management Agreements, the Company on behalf
of licensees has prepared approximately 280 Letters of Intention which were
subseqently filed. The Company currently is assessing available site locations
and presently intends to assist its licensees in preparing applications for
modifications to the site locations for substantially all the unconstructed
systems relating to licenses for which it holds Management Agreements.
Under the FCC's rules, any failure to construct a 220 MHz system on or
before its construction deadline and to notify the FCC thereof results in
automatic cancellation of the license for any unconstructed frequencies. Any
systems constructed at an alternate site prior to January 26, 1996 pursuant to
Special Temporary Authority ("STA") granted by the FCC are considered having met
the construction deadline and will be granted a permanent modification to the
license regardless of the compliance to the rules as contained in the FCC Second
Report and Order. These STA sites must be constructed, however, within the
technical rules for 220MHz systems as outlined by the FCC. The Company believes
the systems subject to Management Agreements which have been constructed
pursuant to the STA meet the technical parameters as defined by the FCC and,
therefore, the Company expects that each of the systems that were constructed as
of March 11, 1996 will be granted a permanent license. There are no assurances,
however, that the FCC will not reverse its position on the grant of permanent
licenses or in some other manner deny authorization to operate such sites as
alternate sites.
The Company will have until at least August 15, 1996 (with the
possibility of slight extensions depending on the date a modification is
granted) to construct each system for which a modification is obtained from the
FCC. There are no assurances that the Company will be successful in gaining a
grant of site modification on behalf of all licenses for which an application is
made. The Company will continue to assess site locations, market indicators and
its financial resources in deciding whether to construct a system. No assurance
can
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be made that the Company will be able to complete the construction of all
systems for which a modification is granted by the end of the extended
construction period or that it will have the financial resources to do so. In
the event a system for which a modification to the license was granted by the
FCC is not built by the construction deadline, the license would be forfeited
and the Company would lose all of its rights and benefits under its Management
Agreement with respect to such license.
Under FCC regulations, 220 MHz base-station transmitters must be
operated at a maximum power level and antenna height in accordance with a
prescribed formula published by the FCC. The system operations are protected
from interference from other co-channel reuse of the same frequency to the 38dbu
V/m service contour. The signal strength of the 38dbu V/m as promulgated by a
base station operating at the prescribed power level affords a predicted
coverage radius of approximately 45 kilometers (28 miles). According to the
rules relating to modification contained in the FCC Second Report and Order and
in the original rules under which the licenses were allocated, no co-channel
reuse generally will be permitted within 120 kilometers (approximately 75
miles).
Licensees whose sites are located near the Canadian border are subject
to the same rules and have the same opportunity to modify site locations, except
that the construction period of one year does not become effective until such
time as a treaty is signed between Canada and the United States regarding the
use of the 220MHz frequencies that cross borders. If the Company decides to
construct such systems prior to a treaty between Canada and the United States,
there can be no assurance that a treaty will ultimately be negotiated and
ultimately adopted or that the Company will be able to retain its rights and
benefits afforded by the Management Agreement relating to such licenses in the
event a treaty is not negotiated.
Although current technology imposes capacity limitations on each 220
MHz channel, there is no regulatory limit on the maximum number of mobile units
that SMR operators may serve on their systems. The FCC has not established
loading requirements for 220 MHz channels.
Licenses are generally granted for a five-year term, subject to
compliance with FCC rules. Licenses may be renewed for additional five-year
terms upon demonstrating compliance with FCC rules and provision of adequate
service to the public. All SMR licenses may be revoked for cause after notice
and opportunity for hearing.
FOREIGN OWNERSHIP. The Communications Act restricts foreign investment
in and ownership of FCC licensees which are classified as common carriers,
including CMRS providers. This restriction is not applicable to non-licensee
managers of communications systems, such as the role initially contemplated by
Roamer One. The FCC generally has no regulatory authority over non-licensee
managers.
Among other things, foreign citizens, corporations and partnerships
may not own more than 20% of a common carrier or CMRS licensee directly or more
than 25% of the parent of a common carrier or CMRS licensee. Foreign nationals
may not serve as officers or members of a common carrier or CMRS licensee's
board
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of directors, but officers and up to one-fourth of the board of a common carrier
or CMRS licensee's parent may be non-US citizens. In the case of parent
corporations, the FCC can determine that this limitation can be exceeded in
specific cases where consistent with the public interest. Although certain FCC
precedent supports such a waiver in the case of citizens of Canada or Great
Britain having interests in the parent companies of common carriers or CMRS
licensees, no assurance can be given that the Company would be able to receive
such a favorable determination if required. At present, Roamer One is not a CMRS
licensee and therefore the FCC has no regulatory authority over the ownership
structure of Roamer One or INTEK.
TARIFFS. Common carriers, including CMRS providers, are subject to the
tariff requirements of Title II of the Communications Act for interstate
communications services. Pursuant to its statutory authority under the 1993
Budget Act, the FCC exercised its authority to forebear from enforcing the
tariff requirements against CMRS licensees. The FCC did retain its statutory
authority over CMRS rates and to permit users to recover unlawful charges.
Additionally, in May 1994, the FCC initiated a proceeding to determine if it
should forebear from other aspects of its Title II authority. That proceeding is
continuing. The Company cannot provide any assurance that such regulation or
forbearance will not adversely affect its business plan.
USER FEES. The 1993 Budget Act adopted a schedule of user fees for
virtually all FCC licensees. This schedule provides for an annual fee of $16 per
license for 220 MHz SMR licenses. The 1993 Budget Act also specifies a mechanism
by which this user fee will increase over time, although there was no increase
for the 1995 fiscal year. In contrast, the user fee for certain other CMRS
licensees for fiscal year 1995 was raised to $0.15 per two-way radio.
Additionally, Congress also has been presented with proposals to increase its
FCC user fees substantially for a variety of purposes. No assurance can be given
that 220 MHz user fees will be maintained at or near their present levels, or
that any such increases will not be so high as to affect the profitability of
220 MHz system.
OLYMPIC PLASTICS, INC.
Olympic was engaged in the Plastics Business but ceased all operations
of its Plastics Business on or about March 31, 1995. Olympic sold the productive
assets and inventory of its compression molding, electrostatic discharge,
aerospace product lines and custom molding operations. Olympic continues to own
land and a building located at 5800 West Jefferson Boulevard, Los Angeles,
California. See "Property."
IMCX CORPORATION
On June 7, 1985, the Company acquired all the issued and outstanding
stock of IMCS Corporation ("IMCS"), a California manufacturer of electrostatic
simulation and testing systems. On August 12, 1993 the Company incorporated IMCX
Corporation ("IMCX") in California for the purposes of holding patents and other
Page 10
<PAGE>
assets and liabilities previously owned by IMCS. On August 12, 1993 IMCS was
sold to Advanced Technology Inc.
HISTORY OF THE COMPANY
In 1973, the Company acquired Olympic. In 1982, the Company founded
IDC International Corporation ("IDC") for the purpose of engaging in
international ore trade. IDC ceased all international ore trading activity in
February 1987 and is presently inactive. In June 1984, the Company acquired all
the issued and outstanding stock of Bengal, Inc. ("Bengal"), a manufacturer and
distributor of anti-static and conductive resins. Olympic and Bengal merged in
December 31, 1985. On June 7, 1985, the Company acquired all the issued and
outstanding stock of IMCS Corporation ("IMCS"), a California manufacturer of
electrostatic simulation and testing systems. On August 12, 1993 the Company
incorporated IMCX Corporation ("IMCX") in California for the purposes of holding
patents and other assets and liabilities previously owned by IMCS. On August 12,
1993, IMCS was sold to Advanced Technology Inc.
On February 3, 1994, the Company entered into a letter of intent with
SCL and Roamer One Holdings, Inc. ("ROH") to acquire the radio carrier business
of a joint venture, Simrom, a company formed by SCL and ROH. On April 12, 1994
the Company incorporated Romnet, Inc. ("Romnet"), a wholly-owned subsidiary, for
the purpose of effecting the acquisition of Simrom. On April 20, 1994, the
Company, Romnet, and Simrom executed an Agreement and Plan of Merger (the
"Merger Agreement") whereby Simrom would transfer all of its capital stock to
Romnet in exchange for 6,000,000 shares of the Company's Common Stock. On
September 23, 1994 the shareholders of all parties approved the Merger, which
became effective on that date. The Merger Agreement provided for (1) the merger
of Simrom into Romnet, with Romnet as the surviving corporation and (2) the
conversion, at the effective time of the Merger, of each of the issued and
outstanding shares of Common Stock, without par value, of Simrom (consisting of
10,000 shares) into the right to receive, subject to certain possible subsequent
adjustments, 600 shares of Common Stock, par value $0.01 per share (the "Common
Stock") of the Company. The Merger was accounted for as a reverse acquisition
because subsequent to the Merger, SCL and ROH, the former shareholders of Simrom
(sixty percent (60%) of the total outstanding voting stock of Simrom was held by
ROH and the remaining forty percent (40%) was held by SCL), held a majority of
the Common Stock of the Company.
Pursuant to the Merger Agreement, 3,000,000 shares of Common Stock
were delivered to Simrom's stockholders immediately after the Merger became
effective. All certificates representing the remaining Merger consideration, an
additional 3,000,000 shares of Common Stock (the "Consideration"), would be held
in escrow pending the build-out of one hundred (100) licenses subject to Option
Agreements, or, alternatively, fifty (50) licenses subject to Option Agreements
and one hundred (100) licenses subject to Management Agreements. As of December
31, 1995, the Company completed construction of 100 systems subject to Option
Agreements and 67 systems subject to Management Agreements. Accordingly, the
escrow agent released all certificates representing the remaining consideration
to the shareholders of Simrom in January, 1996.
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<PAGE>
IDC INTERNATIONAL CORPORATION
IDC International Corporation ceased all business activity in 1987 and
is presently inactive.
ITEM 2. PROPERTIES
The Company, Roamer One, Olympic, IMCX, and IDC operate from 3,372 square
feet of leased office space at 970 West 190th Street, Suite 720, Torrance,
California 90502. The lease was entered into on February 15, 1995 and has a term
of five years.
Olympic owns, in fee, land and a building (the "Property") located at 5800
West Jefferson Boulevard, Los Angeles, California. The building consists of a
one-story masonry building with approximately 66,750 square feet of
manufacturing and office space on 89,214 square feet of land. On March 22, 1996,
the Company executed a Standard Offer, Agreement and Escrow Instructions for
Purchase of Real Estate ("Property Purchase Agreement") for the sale of the
Property. The Property is encumbered by a deed of trust in favor of MeesPierson
ICS Limited. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation -- Liquidity and Capital Resources."
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Company's Common Stock trades on the NASDAQ Small-Cap Market (NASDAQ)
under the symbol IDCC. The following table sets forth the high and low bid
quotations and the trade price in the NASDAQ market as reported by the NASDAQ
system for each quarter during the two years ended December 31, 1995 and 1994.
These NASDAQ market quotations reflect interdealer prices, without retail mark-
up, mark-down, or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
TRADE PRICE BID
----------------------- ----------------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1995
First Quarter $ 4-7/8 $ 2-1/8 $ 4-1/2 $ 1-7/8
Second Quarter 10-3/4 3-7/8 10-3/8 3-3/4
Third Quarter 12-1/4 5-1/2 11-5/8 6-1/4
Fourth Quarter 8-5/8 5-7/8 8-1/8 5-7/8
1994
First Quarter $ 3-5/8 $ 7/16 $ 3-1/2 $ 3/8
Second Quarter 5-3/8 2-9/16 5 2-9/16
Third Quarter 5-1/8 2-13/16 4-7/8 2-3/4
Fourth Quarter 5-1/4 2-5/8 5 2-5/8
</TABLE>
The number of common shareholders of record was approximately 1,831 on
March 27, 1996. The latest reported sales price for the Company's Common Stock
on the NASDAQ exchange of March 27, 1996 was $8.375.
The Company has never paid a cash dividend and has no present intention to
pay any cash dividends on its Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
As previously stated, the Company is now a development stage enterprise,
and has redirected its efforts and resources to the development of an SMR mobile
radio network in the United States. The following selected financial data
represents information relevant to the future business of the Company.
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
INCEPTION
(FEB. 4, 1994)
THROUGH
-----------------------------
YEAR ENDED
DEC. 31, 1995 DEC. 31, 1994 DEC. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Statement of Operations Data
Net Sales $ 3,547 $ 329 $ 3,876
Net Loss (2,837) (939) (3,776)
Net Loss per Share $ (0.30) $ (0.22) $ (0.52)
DEC. 31, 1995 DEC. 31, 1994
------------- -------------
Balance Sheet Data
Working Capital $ 844 $ 3,216
Total Assets 12,534 9,263
Shareholders' Equity $ 7,934 $ 3,265
</TABLE>
No cash dividends have ever been paid by the Company.
The above schedule should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results
of operations of the Company for the year ended December 31, 1995 and the year
ended December 31, 1994. Similarly, the management discussion for the year
ended December 31, 1994 covers only the period from the February 4, 1994
inception of Roamer One to December 31, 1994. The following should be read in
connection with the consolidated financial statements and related notes
appearing elsewhere in this report. Historical results of operations,
percentage relationships and any trends that may be inferred therefrom are not
necessarily indicative of the operating results of any future period. See
"Cautionary Statement for Purposes of the Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995."
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<PAGE>
1995 RESULTS OF OPERATIONS - YEAR COMPARED TO PRIOR YEAR
Through its wholly-owned subsidiary, Roamer One, INTEK is
constructing, and plans to operate an SMR network in the United States utilizing
certain rights and benefits accorded it by licensees in the newly allocated 220
MHz narrowband spectrum. Roamer One's business has been conducted by INTEK
since a September 23, 1994 reverse merger with INTEK. Consequently, the
management discussion for the year ended December 31, 1994 covers only the
period from the February 4, 1994 inception of Roamer One to December 31, 1994
and does not include a comparative discussion for prior periods. See "Business-
- -Subsidiaries--Olympic."
NET SALES. As of December 31, 1995, the Company completed construction
of 100 systems subject to Option Agreements and 67 systems subject to Management
Agreements for a total of 167 systems. This is an increase of 146 systems over
the 21 systems that were constructed as of December 31, 1994. During 1995,
billing to licensees for site equipment, construction and installation resulted
in equipment sales of $3,547,000 compared to $329,000 in 1994.
COST OF GOODS. Cost of goods sold as a percentage of net equipment
sales was 91.7% in 1995, compared to 88.8% in 1994. The 2.9% increase was
generally caused by the requirement to complete installation within the FCC
deadlines. Field installation technicians had to travel to installation sites in
the order that tower leases and equipment became available, which did not allow
for the most efficient use of their time. Some installation sites were impacted
by the harsh winter weather, making installation difficult and costly, and
certain metropolitan areas required field upgrades of selected components and
on-site tuning of systems to eliminate the effects of interference.
SITE EXPENSES. Site expenses are primarily tower lease, telephone
(for modem access), and insurance. For 1995, site expenses were $469,000, up
from $86,000 in 1994. The increased expenses were required to support the
additional 146 systems that were constructed in 1995.
SELLING EXPENSES. Selling expenses are primarily salaries, travel and
preparation of promotional material. The selling expenses for 1995 were
$183,000. The Company incurred no such expense in 1994 as few sites had been
constructed.
GENERAL ADMINISTRATIVE EXPENSES. General administrative expenses are
primarily salaries, consulting and management fees, legal and audit and merger
expenses. These expenses rose from $857,000 in 1994 to $2,866,000 in 1995 due to
the development of the infrastructure to support the management of the systems,
together with the efforts to raise capital and the efforts toward the planned
merger, that was ultimately terminated, of the Midland Business owned by SCL
which operates as a distribution and value added reseller of LMR products for
the professional LMR market and as a systems integrator for LMR networks.
General administrative expenses in 1994 resulted from a much lower level of
business activity that included the cost of compliance reporting and the Merger,
but included minimal cost related to management of the SMR systems. Consulting,
management and directors' fees increased by $620,000 over 1994 fees.
Accounting, audit and legal expenses increased by $445,000 over 1994 expenses
and non-recurring expenses from merger activities increased by $283,000 of 1994
expenses.
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<PAGE>
OPERATING PROFIT (LOSS). In 1995, the operating loss was $3,225,000
up from $906,000 in 1994, due to start-up and development costs and the fact
that subscribers have not yet been sought for the Company's services. The
Company offset some of this loss in 1995 with a gain from sale of assets of
$1,204,000 related to the disposal of the Olympic Plastics business.
INTEREST EXPENSE. Interest expense, included in other income
(expense), was $209,000 during 1995, up from $41,000 in 1994. 1995 interest
expense increased due to the $2,500,000 loan from Quest Capital Corporation.
See "Liquidity and Capital Resources." The 1995 financing cost of $635,000 was
in the form of Common Stock that was issued to Quest Capital Corporation for
extensions of the promissory note originally due from December 1994 but extended
to December 1995.
NET LOSS. The net loss was $2,837,000 in 1995, compared to $939,000
in 1994.
1994 RESULTS OF OPERATIONS
NET SALES. As of December 31, 1994, the Company completed
construction of 21 systems pursuant to its Management Agreements. During 1994,
billing to licensees for site equipment, construction and installation resulted
in equipment sales of $329,000.
COST OF GOODS. Cost of goods sold as a percentage of net equipment
sales was 88.8% in 1994.
SITE EXPENSES. Site expenses are primarily tower lease, telephone
(for modem access), and insurance. For 1994, site expenses were $86,000.
GENERAL ADMINISTRATIVE EXPENSES. General administrative expenses are
primarily salaries, consulting and management fees, legal and audit and merger
expenses. General administrative expenses were $857,000 in 1994
INTEREST EXPENSE. Interest expense, included in other income
(expense), was $41,000 in 1994.
OPERATING PROFIT (LOSS). Net loss from continuing operations in 1994
was $939,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash is selling shares of its Common
Stock, borrowing against the Company's assets, selling the assets relating to
the Plastics Business and obtaining vendor financing.
Additional capital will be required to complete the build-out of the
Roamer One Network of 220 MHz SMR systems and to fund the administrative costs
of the Company prior to its generation of recurrent revenues on a consistent
basis. The Company has invested the majority of its capital in the equipment
necessary to build out those sites for which it holds an option to purchase. In
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<PAGE>
the event that the Company is unable to secure equipment or other financing, the
number of built-out systems will be reduced in relation to the available
funding. Thus, the Company may be unable to build out some of the licenses
before they expire. However, the Company believes that it has already built the
sites most critical to its future success and that it now has completed enough
sites to support its planned operations.
BORROWINGS. In November, 1994, the Company borrowed from Quest
Capital Corporation ("Quest"), formerly known as Noramco Mining Corporation,
$2,500,000 (the "Loan") bearing interest at the rate of twelve percent (12%) per
annum. The Loan was originally due in installments of $1,000,000 on December 30,
1994 and $1,500,000 on March 31, 1995. Quest agreed to extend the term of the
Loan until the earlier of December 15, 1995, the sale of the Property or the
closing of any equity financing by INTEK, in exchange for 162,000 shares of
Common Stock of INTEK. The cost of $635,000 for the shares was amortized over
the 1995 extension period. On December 29, 1995, Quest agreed to convert the
Loan, through an offering pursuant to Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), into 336,842 shares of Common Stock of
INTEK and to release its liens in the collateral and guarantees.
On February 29, 1996, the Company raised $2,500,000 through the
issuance of a Senior Secured Debenture ("Debenture") to MeesPierson ICS Limited
("MeesPierson"), a United Kingdom limited liability company. INTEK also issued
50,000 shares of its Common Stock under Regulation S of the Securities Act to
MeesPierson as a closing fee for its investment banking services and paid an
agent fee of $25,000 to Octagon Capital Canada Corporation. See "Certain
Relationships and Related Transactions." The Debenture matures in six months
and bears interest based on the Bank of America Prime Rate. The Debenture is
secured by perfected liens against the Property and the equipment related to 15
Category I licenses.
On March 21, 1996, the Company executed a letter agreement with Global
Emerging Markets, LTD regarding the placement of up to $6 million of
subordinated notes and warrants to qualified purchasers pursuant to Regulation S
under the Securities Act. No assurance can be made that such offering will
occur.
EQUITY SALES. On June 30, 1995, the Company issued 947,042 shares of
Common Stock of INTEK to Securicor LMT in payment of invoices then outstanding
totaling $4,000,000. The shares were issued pursuant to the Financing Agreement
entered into between the companies on April 20, 1995.
On December 4, 1995, the Company sold 170,000 shares of the Company's
Common Stock and a warrant to acquire additional shares of Common Stock of INTEK
under Regulation S of the Securities Act. The sale generated $1,020,000 at a
discounted rate. On February 29, the warrant was exercised for 36,645 shares of
Common Stock of INTEK at $0.01 per share.
On January 12, 1996, the Company sold 201,000 shares of the Company's
Common Stock pursuant to an offering under Regulation S of the Securities Act.
The sale generated $849,342 net of fees and broker commissions.
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<PAGE>
SALES OF ASSETS. The Company is pursuing the sale of the Property.
The sale price is $2,200,000. The Property has a net book value of $1,555,000.
On March 22, 1996, the Company executed the Property Purchase Agreement for the
sale of the Property and escrow was opened. If the Company is successful in
selling the Property (which Property is encumbered by a lien in favor of
MeesPierson in the amount of $2,500,000), the Debenture to MeesPierson will be
repaid, in part, with all the proceeds of such sale. While the Property
Purchase Agreement contemplates the closing on the sale to occur on or before
June 4, 1996, a number of conditions exist, such as the buyer's obtaining
financing, an updated appraisal and a satisfactory environmental report, no
assurance can be made that the conditions will be satisfied and the Property
sold in the near term.
During the first half of 1995, the Company entered into agreements to
sell the machinery, equipment and inventory of the Plastics Business to four
separate buyers. As of December 31, 1995, the Company completed four sales
totaling $4,022,407 for equipment and inventory. The Company received cash of
$3,868,560 and a note in the remaining principal amount of $153,847 bearing
interest at the rate of ten percent (10%) per annum with monthly principal and
interest payments and a maturity date of July, 1998. The first three payments
under this note were interest only. Of the proceeds from these sales, $263,000
was applied against a note payable secured by Olympic's assets, $900,000 was
repaid to Quest under the Loan and the remainder was used for working capital.
VENDOR FINANCING. The Company also is pursuing vendor financing for
equipment purchases for the build-out of the systems for the Roamer Network.
MERGER WITH SCL AND SECURICOR
On March 7, 1996, INTEK, SCL and Securicor Group plc ("Securicor")
signed a letter of intent ("Letter of Intent") regarding a proposed combination
of certain of their wireless communication businesses and related technology.
The transaction would combine INTEK's Roamer One air time services business with
the United States LMR business of Midland International Corporation ("Midland"),
a wholly-owned subsidiary of SCL, and the wireless technology and manufacturing
operations of Securicor Radiocoms Limited ("SRL"), a wholly-owned subsidiary of
Securicor. If the proposed transactions are consummated, INTEK will become an
integrated wireless company providing air time services, product development,
distribution and manufacturing for the LMR market. The completion of the
proposed transactions is subject to the completion of due diligence reviews by
the parties, the negotiation and execution of definitive documentation and
customary other closing conditions, including the receipt of regulatory and
third party approvals and consents and the approval of INTEK's stockholders to
the transactions and the issuance of its Common Stock. The parties expect the
transactions to close during the second quarter of 1996. The previously
announced proposed acquisition of the LMR Midland Business has been terminated
by mutual agreement of SCL and INTEK.
Under the terms of the Letter of Intent, INTEK will purchase a license
from Midland for the use of the Midland trademark in the United States for the
LMR market in exchange for approximately 2.5 million shares of Common Stock of
INTEK. In addition, INTEK will purchase for cash from Midland certain
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<PAGE>
assets which are used in the business. SCL will retain the international
operations of Midland and the SCL Systems business which operates as a systems
integrator for wide area communications networks. SCL would provide certain
management services to INTEK for the support of the Midland two-way radio
business in the United States. The Letter of Intent also provides that INTEK
will acquire all of the shares of SRL in exchange for approximately 25 million
shares of Common Stock of INTEK. The SRL business includes the linear
modulation radio technology, a manufacturing facility in Bath, England, a
network of wireless dealers and resellers in the United Kingdom, a SMR network
in England, a wireless systems integration business, and all of Securicor's
convertible preferred shares in E.F. Johnson, a manufacturer of wireless
communications equipment in Waseca, Minnesota. INTEK has retained the
investment banking firm FAHNESTOCK & Co., Inc. to provide financial advisory
services to INTEK including an opinion as to the fairness, from a financial
point of view, to the stockholders of INTEK of the terms of the proposed
transactions. FAHNESTOCK & Co. will be paid a cash fee for its services.
EFFECTS OF INFLATION
The Company was not affected in any material respect by inflation
during fiscal 1995 or 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Item 8 are
set forth at the pages indicated in Item 14 (a)(1) and (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of December 31, 1995.
DIRECTOR
NAME AGE POSITIONS WITH THE COMPANY SINCE
- -------------------------- ---- -------------------------- --------
Nicholas R. Wilson 51 Chairman of the Board 1994
Vincent P. Paul (Deceased) Vice Chairman of the Board 1984
John G. Simmonds 44 Chief Executive Officer 1994
and Director
Harry Dunstan 44 President, Chief Operating 1994
Officer and Director
Peter A. Heinke 37 Chief Financial Officer, 1994
Treasurer and Director
Steven L. Wasserman 42 Secretary and Director 1994
David Neibert 40 Director 1994
Christopher Branston 50 Director 1994
Nicholas R. Wilson became the Chairman of the Board of the Company on
September 23, 1994. Mr. Wilson is the President of Roamer One Holdings, Inc., a
holding company which owns approximately 31.5% of the outstanding shares of
Common Stock of the Company, and since 1990, the Chairman of the Board of
Opportunities Associates, Inc., a real estate development company. From 1990 to
1994, Mr. Wilson was the President of Roamer Corporation of America, a
corporation engaged in the short-term rental of portable cellular telephones.
Mr. Wilson is also President of Roamer Communications Network, which was
responsible for providing engineering services to a large number of 220 MHz
licensees during 1990 and 1991.
Vincent Paul became the Vice-Chairman of the Company on September 23, 1994.
Mr. Paul was the President and Chairman of the Board of Directors of the Company
from June 1992 to September 1994. Mr. Paul died on January 31, 1996 after a
lengthy battle with cancer. A successor to fill the Board vacancy has not been
selected.
John G. Simmonds became the Chief Executive Officer of the Company on
September 23, 1994. Since 1990, Mr. Simmonds has been the Chairman of the Board
of Directors, President and Chief Executive Officer of Simmonds Capital Limited,
a diversified electronics company and since 1990, the Chairman of the Board of
Directors and Chief Executive Officer of Kustom Electronics Inc., a manufacturer
of equipment for wireless data transmission. Since October, 1995, Mr. Simmonds
has been the Chairman of the Board of Ventel, Inc., a Canadian corporation
listed on the Vancouver Stock Exchange and Montreal Exchange. In January 1995,
Mr. Simmonds was appointed to the Board of Directors of American Digital
Corporation, a publicly traded company in the LMR business. Mr. Simmonds was
Executive Vice President and a director of Glenayre Electronics, Ltd., a
wireless communications business, from 1988-1990. He was formerly a director
(1977-1990) and Vice
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<PAGE>
President (1968-1990) of A.C. Simmonds & Sons Limited., an electronics
distributor.
Harry Dunstan is a Professional Engineer who became the President and Chief
Operating Officer of the Company on September 23, 1994. Since 1991, Mr. Dunstan
has been a Director of Simmonds Capital Limited and Kustom Electronics Inc. At
SCL and its affiliates, he has held various executive offices from time to time,
including being President of SCL, Inc. During 1989-1991, Mr. Dunstan was the
Vice President of Technology and Systems for Glenayre Electronics, a wireless
communications company. Prior to 1989, Mr. Dunstan was President of RMS and
Signalcom, both of which are LMR communications companies.
Peter Heinke became the Chief Financial Officer and Treasurer of the
Company on September 23, 1994. Mr. Heinke was the Chief Financial Officer of
Simmonds Communications Limited (1993-1995). He was formerly self-employed as a
financial consultant (1990-1992) and the Treasurer/Controller of Trac Industries
Inc. (1986-1990).
Steven L. Wasserman became Secretary and a director of the Company on
September 23, 1994. Mr. Wasserman is a member of the Company's Audit Committee
and the Stock Option Committee. Mr. Wasserman is an attorney and a partner of
the law firm of Kohrman Jackson & Krantz, Cleveland, Ohio. He is a director of
Roamer One Holdings, Inc. Mr. Wasserman was a vice-president of the law
corporation of Honohan, Harwood, Chernett & Wasserman, Cleveland, Ohio, from
September 1983 until September 1, 1994.
David Neibert became a director of the Company on September 23, 1994. Mr.
Neibert is the President and a director of Roamer One, Inc. Mr. Neibert is a
director and was the President (1992-1994) of Roamer One Holdings, Inc. and was
the President of Master Marine Incorporated D.B.A. Seamark Marine Electronics
(1987-1992). Mr. Neibert is also a director of the American Mobile
Telecommunications Association and serves as the Chairman of its 220 MHz
Council.
Christopher Branston became a director of the Company on September 23,
1994. Mr. Branston is also a member of the Company's Stock Option Committee.
Mr. Branston has been qualified and practicing as a Solicitor in the United
Kingdom since 1971. Since October, 1987, Mr. Branston has been practicing on
his own, and since September 1994, a consultant to the United Kingdom law firm
of Rogers & Burton.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth as of December 31, 1995 all compensation
paid by the Company to the Company's Chief Executive Officer and the other
executive officers of the Company whose total annual salary and bonus exceeds
$100,000 (the "Named Executive Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
CAPACITY IN WHICH CASH UNDERLYING
NAME COMPENSATION RECEIVED COMPENSATION OPTIONS
- --------------- --------------------- ------------ -------
<S> <C> <C> <C>
Nicholas Wilson Chairman of the Board,
1995 $ 158,750
1994 $ 20,000 40,000
1993 $ 0
John Simmonds Chief Executive Officer
INTEK Diversified Corporation
1995 $ 0(1)
1994 $ 0 40,000
1993 $ 0
Vincent P. Paul Vice Chairman of the Board,
INTEK Diversified Corporation
1995 $ 200,000
1994 $ 200,000 40,000
1993 $ 200,000
David Neibert President, Roamer One
Director INTEK Diversified
Corporation
1995 $ 131,000
1994 $ 80,000 40,000
1993 $ 0
</TABLE>
(1) Mr. Simmonds did receive compensation as a director of INTEK. See
"Executive Compensation -- Director Compensation."
INCENTIVE STOCK OPTION PLANS
1988 PLAN
In 1988, the shareholders of the Company approved the 1988 Key Employee
Incentive Stock Option Plan (the "1988 Plan"). The 1988 Plan is intended to
qualify as an "incentive stock option plan" within the meaning of Section 422A
of the Internal Revenue Code of 1954, as amended.
The 1988 Plan provides that, subject to adjustment as described below,
500,000 shares of the Company's Common Stock will be reserved for issuance upon
the exercise of options to be granted. The stock options are exercisable over a
period determined by the Stock Option Committee, but no longer than ten years
after the date they are granted. The options are to be exercisable at a price
equal to the fair market value (average of the closing per share bid and asked
price of the Company's Common Stock on the date an option is granted) or 110% of
fair market value for persons who have in excess of a 10% voting interest in all
classes of the Company's stock prior to the date of grant. The dollar amount of
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<PAGE>
options issued under the 1988 Plan in any calendar year is limited to $100,000
per person in value plus any unused limit carry-over.
The 1988 Plan provides that the number of shares subject to the 1988 Plan,
the outstanding options and their exercise prices are to be appropriately
adjusted for mergers, consolidations, recapitalizations, stock dividends, stock
splits, or combinations of shares.
The 1988 Plan is administered by a Stock Option Committee consisting of not
less than three members appointed by the Board of Directors. The Stock Option
Committee has the authority to designate participants and to determine the terms
and provisions of each option agreement and interpret and amend the Plan. The
Board of Directors, upon recommendation of the Stock Option Committee, may
terminate, amend or modify the 1988 Plan, except that the following actions may
not be taken without the approval of the Company's stockholders: (1) increase in
the number of shares of the Company's Common Stock available under the Plan
(except for the adjustments referred to above); or (2) alteration in the method
of determining the exercise price of options granted under the Plan.
The persons eligible to receive options under the 1988 Plan are all
officers or other key employees of the Company and its subsidiaries (as defined
in the Plan). There have been no material amendments to the 1988 Plan since its
inception.
1994 PLAN
The Company adopted the 1994 Stock Option Plan (the "1994 Plan") which
provides for the granting of options for up to an aggregate 600,000 shares of
the Company's Common Stock to key employees, officers or consultants of the
Company. On July 5, 1995, the 1994 Plan was approved by the stockholders of
INTEK. The options granted under the 1994 Plan shall be exercisable at a price
equal to or exceeding the market value per share on the date an option is
granted. The dollar amount of options issued under the Plan in any calendar year
is limited to 60,000 shares of Common Stock per person. The 1994 Plan provides
for the administration of such plan by a committee of not less than two members
of the Board of Directors of the Company.
The 1994 Plan provides that the number of shares subject to the 1994 Plan,
the outstanding options and exercise prices therefor, shall be adjusted in the
event of a stock dividend, stock split, recapitalization, reorganization, merger
or other event that causes a change in the capital structure of the Company.
No further awards may be granted under the 1994 Plan after the passage of
ten (10) years from the date first approved by the stockholders of the Company.
Further, any amendment that increases the aggregate number of shares of Common
Stock covered by the 1994 Plan or otherwise causes the Plan to cease to satisfy
any applicable condition of Rule 16b-3 under the Securities Exchange Act of 1934
is subject to approval of the stockholders of the Company.
1994 DIRECTORS PLAN
In September, 1994, the Board of Directors of the Company adopted the 1994
Directors Stock Option Plan (the "1994 Director Plan") which provides for the
Page 23
<PAGE>
granting of options of up to 300,000 shares of the Company's Common Stock to
members of the Board of Directors of the Company. On July 5, 1995, the 1994
Director Plan was approved by the stockholders of the Company. The 1994
Directors Plan provides that options granted under such plan will be exercisable
at a price equal to or exceeding the market value per share on the date the
option is granted.
OPTIONS IN THE LAST FISCAL YEAR
The Company did not grant any options to any of the Named Executive
Officers in 1995.
Options for 57,500 shares of Common Stock of INTEK were exercised under the
1988 Key Employee Plan during 1995 and 7,500 options were terminated, leaving no
outstanding options under this plan as of December 31, 1995. Options for 40,000
shares of Common Stock of INTEK were exercised under the 1994 Stock Option Plan
and options were issued to 4 non-executive officer employees for a total of
72,000 shares at an exercise price of $5.875 per share. As of December 31, 1995,
options for 412,000 shares were outstanding under the 1994 Stock Option Plan. No
options under the 1994 Directors Plan were exercised in 1995.
SEP-IRA PLAN
Olympic adopted a Simplified Employees Pension Individual Retirement
Account Plan ("SEP-IRA") in 1979. The plan is one by which Olympic may
contribute up to 15% of a salaried employee's annual remuneration to any
qualified SEP-IRA account of the employees' choice. The annual contribution, if
any, is solely at the discretion of the Board of Directors and is not based on
profits, sales or any other operational measure. No contribution was made to the
SEP-IRA for the year ended December 31, 1995.
EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS
Pursuant to an oral consulting agreement between Roamer One Holdings, Inc.
("ROH") and the Company, the Company paid $10,000 per month to ROH and ROH made
available the services of Nicholas R. Wilson, the Chairman of the Board, to the
Company. This arrangement was terminated on June 30, 1995. The Company entered
into a Consulting Agreement with Nicholas R. Wilson on July 1, 1995. The
consulting period is 3 years commencing on July 1, 1995 and terminating June 30,
1998. Total annual compensation is $120,000, paid in monthly installments of
$10,000. Mr. Wilson is not entitled to participate in any retirement, bonus,
insurance or other employee benefit plan maintained by the Company for the
benefit of its employees.
Roamer One entered into an Employment Agreement with David Neibert,
President of Roamer One on July 1, 1995. The employment period is 3 years
commencing on July 1, 1995 and terminating June 30, 1998. Salary begins at
$150,000 and increases by 7% at each anniversary date of the employment period.
Mr. Neibert will receive a one-time bonus in an amount equal to 10% of gross
subscriber billings of the Company in the first month that gross subscriber
billings exceed $250,000.
Page 24
<PAGE>
Pursuant to a management agreement dated September 23, 1994, the Company
paid an annual management fee of $200,000 to Peter Paul Corporation, Inc., an
affiliate of Anglo York Industries, Inc., a stockholder of the Company. Peter
Paul Corporation, Inc., made the services of Mr. Vincent Paul, Vice Chairman of
the Board of Directors, available to the Company without additional
compensation. The management agreement terminated on January 31, 1996 upon the
death of Mr. Paul.
DIRECTOR COMPENSATION
All directors (except Vincent Paul) are paid an annual director's fee of
$4,000 plus $500 for each board meeting, special committee meeting or audit
committee meeting. The annual maximum fee per director is $10,000. The directors
fees for 1995 were:
UNPAID FEES
ACCRUED AS OF
DIRECTORS NAME FEES EARNED FEES PAID IN 1995 12/31/95
- -------------- ----------- ----------------- -------------
Nicholas Wilson $10,000 $7,500 $2,500
Vincent Paul 0 0 0
John Simmonds $9,500 $7,000 $2,500
Harry Dunstan $9,000 $7,000 $2,000
Peter Heinke $8,500 $6,500 $2,000
Steven Wasserman $10,000 $7,000 $3,000
David Neibert $10,000 $8,500 $1,500
Christopher Branston $10,000 $8,000 $2,000
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
GENERALLY. Under Section 16(a) of the Exchange Act, the Company's
directors, executive officers and any persons holding ten percent or more of the
Common Stock are required to report their ownership of Common Stock of the
Company and any changes in that ownership to the Securities and Exchange
Commission (the "SEC") and to furnish the Company with copies of such reports.
Specific due dates for these reports have been established and the Company is
required to report any failure to file on a timely basis by such persons.
SECTION 16(A) REPORTING DELINQUENCIES. Based solely upon a review of
copies of reports filed with the Securities and Exchange Commission during the
fiscal year ended December 31, 1995, except for Vincent Paul who filed one late
report involving two transactions, Anglo York Industries, Inc. which filed two
late reports involving two transactions and SCL which filed one late report
involving one transaction, all persons subject to the reporting requirements of
Section 16(a) filed all required reports on a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS.
The Company has no compensation committee. Compensation decisions for the
executive officers (other than grants of options which are determined by the
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Stock Option Committee consisting of Messrs. Branston and Wasserman) are made by
the Board of Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the information regarding the beneficial
ownership of the Company's Common Stock as of March 10, 1996, by (i) each person
known by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock and (ii) each Director of the Company, and (iii) all
Directors and Officers as a group. Unless otherwise noted, the persons named in
the table have sole voting and investment power with respect to all shares of
the Company's Common Stock shown as beneficially owned by them.
Page 26
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
COMMON STOCK &
AMOUNT AND NATURE OF STOCK OPTIONS
NAME AND ADDRESS BENEFICIAL OWNERSHIP (11,440,278 SH.)1/
- ---------------- -------------------- ------------------
<S> <C> <C>
Roamer One Holdings, Inc. 3,400,000(2) 29.7%
1431 West 117th Street
Cleveland, OH 44107
Simmonds Capital Limited 3,210,850(3) 28.1%
5255 Yonge Street, #1050
Willowdale, Ontario, Canada
Anglo York Industries, Inc. 926,649(4) 8.0%
1050 McNicoll Avenue, Unit 13
Scarborough, Ontario
M1W 2L8 Canada
Octagon Investments Limited 829,000 7.2%
LaTourgabd House
Lomer Pollet
St. Peter Port,
Guernsey, Channel Islands GYI 4E A
Securicor International Limited 937,042 8.2%
Sutton Park House
15 Carshalton Road
Sutton, Surrey SM 1 4LD
United Kingdom
Nicholas R. Wilson 3,440,000(5) 30.1%
13700 Tahiti Way, Suite 154
Marina del Rey, CA 90291
Harry Dunstan 45,000(6) 0.4%(4)
RR #2
Caledon East, Ontario
Canada
John Simmonds 57,500(7) 0.5%
44 Old Yonge Street
North York, Ontario, Canada
M2P 1P7
Peter Heinke 50,000(8) 0.4%
RR #1 Clarksburg
Ontario, Canada NOH 1JO
Steven L. Wasserman 40,000(9) 0.3%
2800 Belgrave Road
Pepper Pike, Ohio 44124
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<PAGE>
David Neibert 40,455(10) 0.4%
23275 Lenora Drive
Woodland Hills, CA 91367
Christopher Branston 40,000(11) 0.3%
14 Willow Avenue
Barnes, London
SW13OLT England
All officers and directors
as a group (7 persons) 3,712,955 32.5%
</TABLE>
(1) Includes 10,958,278 shares of Common Stock outstanding at March 15, 1996,
and options for 362,000 shares under the 1994 Stock Option Plan and 120,000
shares under the 1994 Directors Stock Option Plan which the holder has the
right to acquire within 60 days of March 31, 1996 by the exercise of vested
stock options.
(2) On June 16, 1995, ROH entered into an option agreement (the "SCL Option")
with SCL pursuant to which SCL paid ROH $1,800,000 for an option to
purchase up to 1,800,000 shares of Common Stock at a purchase price of
$1.50 per share. The option may be exercised, in whole or in part, for a
period of five years. ROH also entered into a pledge agreement granting to
SCL a security interest in the shares subject to the option and depositing
certificates representing the shares with R-M Trust Company as agent for
SCL. Under the pledge agreement, ROH has the right to exercise any and all
voting and other consensual rights pertaining to ROH's pledged shares. ROH
is a private company controlled by Nicholas R. Wilson, Chairman of the
Board of the Company. Messrs. Neibert and Wasserman are also shareholders
of ROH. On March 1, 1996, SCL exercised options to acquire 200,000 shares
of Common Stock from ROH.
(3) On September 30, 1994, SCL granted an option (at an option price of
$800,000) to Murray Sinclair of Toronto, Canada, to purchase 800,000 shares
of Common Stock at $1.50 per share, and granted an option (at an option
price of $200,000) to Choi & Choi HK Limited of London, England, to
purchase 200,000 shares of Common Stock at $1.50 per share. Each option is
exercisable, partially or in whole, at any time (subject to applicable
regulatory or tax restrictions), for a period of five years. On May 1,
1995, Choi & Choi HK Limited exercised the options granted to it by SCL and
a portion of 600,000 additional options which have been assigned to it by
Mr. Murray Sinclair to acquire 400,000 shares of Common Stock.
On March 24, 1995, SCL purchased 45,000 shares of Common Stock at $4.25 per
share from certain of SCL's employees, including certain officers and
directors of the Company, and SCL has agreed, under the Employee Option
Agreement dated as of April 7, 1995, to permit each employee from whom
shares were purchased to repurchase the same number of such shares at $4.25
per share until March 31, 1997 subject to SCL's right to cancel these
options upon 90 days' written notice.
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<PAGE>
On June 16, 1995, SCL entered into an option agreement with ROH pursuant to
which SCL paid ROH $1,800,000 for an option to purchase up to 1,800,000
shares of Common Stock at a purchase price of $1.50 per share. The option
may be exercised, in whole or in part, for a period of five years. On
March 1, 1996, SCL exercised options to acquire 200,000 shares of Common
Stock of INTEK.
(4) Anglo York Industries, Inc. ("Anglo York") is a wholly-owned subsidiary of
Anglo York Industries, Limited, an Ontario corporation ("Anglo Limited").
The outstanding voting securities of Anglo Limited are beneficially owned
in equal amounts by three children of Vincent P. Paul who have obtained
majority and by one child who is a minor and whose interest is held in
Trust. Nancy A. Paul, the wife of Vincent Paul, is the Trustee of such
Trust and may be deemed to beneficially own the shares of the Company's
Common Stock beneficially owned by their minor child. Mrs. Paul disclaims
beneficial ownership of the shares of the Company's Common Stock
beneficially owned by any of their adult children. Mr. Paul died on January
31, 1996. Anglo York has pledged 1,000,049 shares of the Company's Common
Stock to the Royal Bank of Canada and 220,000 shares in the aggregate to
Swiss Bank Corporation (Canada) to secure certain indebtedness of Anglo
York. Accordingly, the Royal Bank of Canada and the Swiss Bank Corporation
(Canada) may be deemed to be the respective beneficial owners of such
shares. All of the shares pledged to Swiss Bank Corporation (Canada) were
sold as of February 29, 1996. Of the 1,000,049 shares of INTEK pledged to
Royal Bank of Canada, 80,000 shares were sold as of March 5, 1996.
(5) Mr. Wilson controls ROH which beneficially owns 3,600,000 shares of the
Company's Common Stock. Pursuant to the 1994 Plan, Mr. Wilson has an
option to acquire 40,000 shares of Common Stock of the Company at an
exercise price of $3.75 per share.
(6) On March 24, 1995, Mr. Dunstan sold 5,000 shares of Common Stock to SCL at
$4.25 per share and SCL granted to Mr. Dunstan an option to purchase the
same number of shares at $4.25 per share until March 31, 1997, subject to
SCL's right to cancel such option upon 90 days' written notice. Pursuant
to the 1994 Plan, Mr. Dunstan has an option to acquire 40,000 shares of
Common Stock of the Company at an exercise price of $3.75 per share.
(7) On March 24, 1995, Mr. Simmonds sold 16,150 shares of Common Stock to SCL
at $4.25 per share and SCL granted Mr. Simmonds an option to purchase the
same number of shares at $4.25 per share until March 31, 1997, subject to
SCL's right to cancel such option upon 90 days' written notice. Pursuant
to the 1994 Plan, Mr. Simmonds has an option to acquire 40,000 shares of
Common Stock of the Company at an exercise price of $3.75 per share.
(8) On March 24, 1995, Mr. Heinke sold 10,000 shares of Common Stock to SCL at
$4.25 per share and SCL granted Mr. Heinke an option to purchase the same
number of shares at $4.25 per share until March 31, 1997, subject to SCL's
right to cancel such option upon 90 days' written notice. Pursuant to the
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<PAGE>
1994 Plan, Mr. Heinke has an option to acquire 40,000 shares of Common
Stock of the Company at an exercise price of $3.75 per share.
(9) Pursuant to the 1994 Director Plan, Mr. Wasserman has an option to acquire
40,000 shares of Common Stock of the Company at an exercise price of $3.75
per share.
(10) Pursuant to the 1994 Plan, Mr. Neibert has an option to acquire 40,000
shares of Common Stock of the Company at an exercise price of $3.75 per
share.
(11) Pursuant to the 1994 Director Plan, Mr. Branston has an option to
acquire 40,000 shares of Common Stock of the Company at an exercise
price of $3.75 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a management agreement dated September 23, 1994, the Company
paid an annual management fee of $200,000 to Peter Paul Corporation, Inc., an
affiliate of Anglo York Industries, Inc., a stockholder of the Company. Peter
Paul Corporation, Inc., made the services of Mr. Vincent Paul, Vice Chairman of
the Board of Directors, available to the Company without additional
compensation. The management agreement terminated on January 31, 1996 upon the
death of Mr. Paul. For the years ended December 31, 1995 and 1994, the Company
paid management fees of $200,000 and $200,000 respectively to Peter Paul
Corporation, Inc.
In November 1994, the Company borrowed $2,500,000 evidenced by a short-term
promissory note, bearing 12% interest, from Quest Capital Corporation ("Quest").
The loan was secured by a first mortgage on the Property and a guaranty by SCL.
Quest was issued a total of 262,000 shares of INTEK Common Stock as a loan
commitment fee and compensation for two extensions to the maturity date. During
the second quarter of 1995, the Company reduced the principal balance to
$1,600,000 and on December 29, 1995 the Company issued 336,842 shares of INTEK
Common Stock to Quest as payment in full of the principal then due.
Roamer One, Inc. borrowed $150,000 from SCL evidenced by a short-term, non-
interest bearing note in October, 1994 and repaid the obligation in November,
1994.
Pursuant to an oral consulting agreement between ROH and the Company, the
Company paid $10,000 per month to ROH and ROH made available the services of
Nicholas R. Wilson, Chairman of the Board of Directors of INTEK, to the Company.
This arrangement was terminated on June 30, 1995. The Company entered into a
Consulting Agreement with Nicholas R. Wilson on July 1, 1995. The consulting
period is 3 years commencing on July 1, 1995 and terminating June 30, 1998.
Total annual compensation is $120,000, paid in monthly installments of $10,000.
Mr. Wilson is not entitled to participate in any retirement, bonus, insurance or
other employee benefit plan maintained by the Company for the benefit of its
employees. For the year ended December 31, 1995, the Company incurred $100,000
and paid $90,000 to Mr. Wilson. In addition, the Company paid $30,000 to Mr.
Wilson that had been accrued as of December 31, 1994.
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<PAGE>
Pursuant to an oral management agreement between SCL and the Company, the
Company pays SCL $10,000 per month and SCL makes available the services of John
G. Simmonds, Harry Dunstan and Peter A. Heinke to the Company. For the year
ended December 31, 1995, the Company incurred $100,000 and paid $90,000 to SCL
pursuant to this agreement. In addition, the Company paid $30,000 to SCL that
had been accrued as of December 31, 1994.
Pursuant to an oral consulting agreement between Simmonds Mercantile and
Management Inc. ("SMM"), a company controlled by SCL, the Company pays SMM
$8,000 per month for consulting services. For the year ended December 31, 1995,
the Company incurred $112,000 and paid $104,000 to SMM pursuant to this
agreement.
On April 18, 1995, Roamer One and Midland International Corporation
("MIC"), a wholly-owned subsidiary of SCL, entered into a Memorandum of
Understanding granting MIC exclusive sales and distribution rights for all
Roamer One private branded 220 MHz radio product in the United States. MIC will
be paid a commission on sales of such radios. Roamer One also entered into an
agreement with Securicor LMT, whereby Securicor LMT will supply Securicor radios
bearing the Roamer One logo.
Pursuant to a Financing Agreement and related agreements between the
Company, Roamer One, SCL and Securicor LMT, Securicor LMT has delivered
approximately $4,000,000 worth of base station equipment and mobile radios in
exchange for 937,042 shares of the Company's Common Stock to Securicor
International Limited. Pursuant to the Financing Agreement, such shares were
issued at a share price of $4.26875. The Financing Agreement provides that
approximately $3.9 million in additional equipment will be financed by Securicor
LMT over a period of 12 months upon the delivery of letters of credit by INTEK
to Securicor LMT. As of December 31, 1995, Roamer One had purchased $968,000
worth of equipment.
The Company and SCL have an arrangement whereby Roamer One, Inc. purchases
equipment and installation services from SCL. During the twelve months ended
December 31, 1995, Roamer One, Inc. purchased $9,298,209 of radio equipment and
installation services from SCL. Previous accounts payable for equipment totaled
$1,212,300. Roamer One made payments to SCL totaling $7,941,802 leaving a
balance of $2,568,707 as of December 31, 1995. On February 29, 1996, Roamer One
made a payment to SCL in the amount of $2,300,000.
On September 23, 1994, the Company and SCL, ROH, Anglo York Industries,
Inc. and Harold Davis (collectively referred to as the "Holders") entered into a
Registration Rights Agreement to provide the Holders with certain demand and
"piggy-back" registration rights with respect to the Company's Common Stock
owned by the Holders. ROH is a stockholder of the Company holding approximately
31.5% of the Company's Common Stock. Anglo York Industries, Inc. is a
stockholder of the Company holding approximately 8.0% of the Company's Common
Stock. Mr. Davis was an executive vice president and treasurer of the Company
until September 23, 1994.
Kohrman Jackson & Krantz, a Cleveland, Ohio, law firm of which Steven L.
Wasserman is a partner, performs legal services for the Company and its
subsidiaries. Mr. Wasserman is a member of the Company's Board of Directors. The
law firm received fees of $162,097 in 1995 and $8,856 in 1994 from INTEK.
Page 31
<PAGE>
Mr. Wasserman was formerly a principal with the law firm of Honohan, Harwood,
Chernett & Wasserman, which received fees of $23,722 in 1994 from INTEK.
In connection with the issuance of the Debenture to MeesPierson by the
Company on February 29, 1996, the Company paid Octagon Capital Canada
Corporation, a 7.2% stockholder in the Company an agency fee of $25,000. See
"Management's Discussion and Analysis of Financial Condition -- Merger with SCL
and Securicor."
On March 7, 1996, INTEK, SCL and Securicor signed a Letter of Intent
regarding a proposed combination of certain of their wireless communication
businesses and related technology. Under the terms of the Letter of Intent,
INTEK will purchase a license from Midland for the use of the Midland trademark
in the United States for the LMR market in exchange for approximately 2.5
million shares of Common Stock of INTEK. In addition, INTEK will purchase for
cash from Midland certain assets which are used in the business. The Letter of
Intent also provides that INTEK will acquire all of the shares of SRL in
exchange for approximately 25 million shares of Common Stock of INTEK. See
"Management's Discussion and Analysis of Financial Condition -- Merger with SCL
and Securicor."
The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those which
the Company would be able to obtain from unrelated parties; (2) for bona fide
business purposes; and (3) approved by a majority of the disinterested and non-
employee directors.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
Page
(1) The following financial statements are included in this Annual
Report:
Report of Independent Public Accountants F-1
Consolidated Balance Sheets - December 31, 1995 and
1994 F-2, F-3
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1995, 1994 and 1993 F-4, F-5
Consolidated Statements of Operations for the year
ended December 31, 1995, the period from inception
(February 4, 1994) through December 31, 1994, and the
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<PAGE>
period from inception (February 4, 1994) through
December 31, 1995. F-6
Consolidated Statements of Cash Flows for the year
ended December 31, 1995, the period from inception
(February 4, 1994) through December 31, 1994, and
the period from inception (February 4, 1994) through
December 31, 1995. F-7, F-8
Consolidated Statements of Operations (Pre-reverse
merger) for the period from January 1, 1994 through
September 23, 1994 and for the year ended December
31, 1993. F-9
Consolidated Statements of Cash Flows (Pre-reverse
merger) for the period from January 1, 1994 through
September 23, 1994 and for the year ended December
31, 1993. F-10, F-11
Notes to Consolidated Financial Statements F-12-F-28
(B) REPORTS ON FORM 8-K
The Registrant filed one report on Form 8-K during the last quarter of
1995. The report, filed on November 21, 1995, related to the second amendment to
the Purchase Agreement between the Company and SCL. The principal purpose of the
second amendment was to reduce the amount of debt to be assumed by the Company
in the acquisition and to provide for the Company to issue a class of preferred
shares in exchange for the reduction of debt. The report was filed pursuant to
Item 5 of Form 8-K.
(C) EXHIBITS
See Index to Exhibits at Page 36 of this Annual Report on Form 10-K for a
list of Exhibits filed with this Annual Report.
Items 10.5, 10.11, and 10.12 constitute a compensatory plan or arrangement.
Page 33
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company has decided to take advantage of the new "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). In that connection, this annual report on Form 10-K includes forward
looking statements concerning the Company. The forward looking statements are
made pursuant to the Reform Act. There are many factors that could cause the
events in such forward looking statements to not occur, including general or
specific economic conditions, the ability and willingness of LMR users to
subscribe for services provided by the Company, the perceived absolute or
relative overall value of these products by the purchasers, including the
features, quality and price in comparison to other competitive products, the
level of availability of products and substitutes and the ability and
willingness of purchasers to acquire newer or more advanced models, and pricing,
purchasing, financing, operational, advertising and promotional decisions by
intermediaries in the distribution channels which could affect the supply of or
end-user demands for the Company's products, the amount and rate of growth and
the Company's selling, general and administrative expenses, difficulties in
obtaining materials, supplies and equipment for building out SMR systems,
difficulties or delays in the development, production, testing and marketing of
products including, but not limited to, failure to ship new products and
technologies when anticipated, the failure of customers to accept these products
or technologies when planned, any defects in products, any failure of economies
to development when planned, the acquisition of fixed assets and other assets,
including inventories and receivables, the making or incurring of any
expenditures, the effects of and changes in trade, monetary and fiscal policies,
laws and regulations, other activities of governments, agencies and similar
organizations and social and economic conditions, such as trade restrictions or
prohibitions, inflation and monetary fluctuations, import and other charges or
taxes, the ability or inability of the Company to obtain or hedge against,
foreign currency, foreign exchange rates and fluctuations in the those rates,
intergovernmental disputes as well as actions affecting frequency, use and
availability, spectrum authorizations and licensing, the costs and other effects
of legal and administrative cases and proceedings (whether civil or criminal),
settlements and investigations, claims and changes in those items, developments
or assertions by or against the Company relating to intellectual property
rights, adaptions of new, or changes in, accounting policies and practices in
the applications of such policies and practices and the effects of changes
within the Company's organization or in compensation benefit plans, any
activities of parties with which the Company has an agreement or understanding,
including any issues affecting any investment or joint venture in which the
Company has an investment, and the amount, type and cost of financing which the
Company has, and any changes to that financing.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 26, 1996.
INTEK DIVERSIFIED CORPORATION
By: /s/Steven L. Wasserman
--------------------------
Steven L. Wasserman
Secretary and Director
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:
SIGNATURES TITLE DATE
- -------------------------- --------------------- --------------
/s/Nicholas R. Wilson Chairman of the Board March 26, 1996
- --------------------------
Nicholas R. Wilson
Vincent P. Paul (Deceased) Vice Chairman
- --------------------------
/s/John G. Simmonds Chief Executive March 26, 1996
- -------------------------- Officer and Director
John G. Simmonds
/s/John H. Dunstan President Chief March 26, 1996
- -------------------------- Operating Officer
John H. Dunstan and Director
/s/Peter A. Heinke Chief Financial March 26, 1996
- -------------------------- Officer, Treasurer
Peter A. Heinke and Director
/s/Steven L. Wasserman Secretary and Director March 26, 1996
- --------------------------
Steven L. Wasserman
/s/David W. Neibert Director March 26, 1996
- --------------------------
David W. Neibert
/s/Christopher N. Branston Director March 21, 1996
- --------------------------
Christopher N. Branston
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<PAGE>
INDEX TO EXHIBITS
Exhibit No. Page No.
- ----------- --------
3.1(i) Articles of Incorporation of INTEK Diversified
Corporation (the "Registrant"). *
3.1(ii) By-Laws of the Registrant. *
4.1 Senior Secured Debenture Purchase Agreement dated
as of February 27, 1996 by and between the Registrant
and MeesPierson ICS Limited. +
4.2 Registration Rights Agreement between Noramco Mining
Corporation and the Registrant dated September 23,
1994 between the Registrant and Roamer One, Inc.,
Simmonds Communications Ltd., Anglo York Industries,
Inc. and Harold H. Davis. *
10.1 Registration Rights Agreement dated February 9, 1995 among
Quest Capital Corporation and the Registrant relating to
the grant of the registration rights. *
10.2 1985 INTEK Diversified Corporation Key Employee Incentive
Stock Option Plan (adopted by Registrant as its 1988 Key
Employee Incentive Stock Option Plan). *
10.3 1994 Stock Option Plan *
10.4 1994 Directors Stock Option **
10.5 Management Agreement between the Registrant and Peter
Paul Corporation Inc. dated September 23, 1994. *
10.6 Sales Agreement dated February 13, 1995 between Arvan, Inc.
and Olympic Plastics Company, Inc. ("Olympic"). *
10.7 Asset Purchase Agreement dated as of February 9, 1995 by and
among Olympic, the Registrant and Intermetro Industries
Corporation. *
Page 36
<PAGE>
10.8 Asset Purchase Agreement and Escrow Instructions dated
April 3, 1995 between Nylon Molding Corporation and Olympic. *
10.9 Office Lease between Nissan Real Estate Corporation U.S.A.
and Roamer One, Inc. dated February 15, 1995. *
10.10 Employment Agreement dated July 1, 1995 by and between
Roamer One, Inc. and David Neibert. +
10.11 Consulting Agreement dated July 1, 1995 by and
between Nicholas R. Wilson and the Registrant. +
10.12 Equipment Sale Agreement dated April 20, 1995 among
Linear Modulation Technology Limited, Simmonds
Communications Limited and Roamer One, Inc. ***
10.13 Financing Agreement dated April 20, 1995 among
Linear Modulation Technology Limited, Roamer One,
Inc., INTEK Diversified Corporation, Simmonds
Communications Limited and Roamer One Holdings, Inc. ***
10.14 Guaranty dated April 20, 1995 by the Registrant ***
10.15 Assignment Agreement dated April 20, 1995 among
Simmonds Communications Limited, Roamer One, Inc.,
the Registrant and Linear Modulation Technology Limited. ***
10.16 Security Agreement dated April 20, 1995 among Simmonds
Communications Limited and Roamer One, Inc. ***
10.17 Secured Promissory Note dated April 20, 1995 by Roamer
One, Inc. payable to the order of Simmonds Communications
Limited. ***
10.18 Letter Agreement dated April 17, 1995 between
Olympic Plastics Co., Inc. and Industrial Assets, Inc. ***
10.19 Memorandum of Understanding by and between Roamer One,
Inc. and Midland International Corporation. ***
Page 37
<PAGE>
10.20 Amendment to Loan Agreement dated as of February 9, 1995
between Quest Capital Corporation and the Registrant. ****
10.21 Agreement dated as of February 9, 1995 between Quest Capital
Corporation and the Registrant. ****
10.23 Asset Purchase Agreement between Brookline Minerals Inc. and
Orvilliers Resources Ltd. dated as of August 24, 1995. ****
10.24 Escrow Agreement between Simmonds Communications Ltd.,
Sendeck Travel, Limited and the Registrant dated
September 20, 1995. ****
10.25 Management Services Agreement dated as of August 24, 1995
between the Registrant and Brookline Minerals Inc. ****
10.26 Management Services Agreement dated as of August 24, 1995
among Brookline Minerals Inc., Simmonds Communications Ltd.
and Midland International Corporation. ****
10.27 Share Purchase Agreement dated as of August 24, 1995
among Brookline Minerals Inc., Simmonds Communications Ltd.,
the Registrant and Sendeck Travel, Limited. ****
10.28 Standard Offer Agreement and Escrow Instructions for Purchase
of Real Estate dated March 21, 1996 between Missak Azirian
and Olympic Plastics, Inc. +
11 Statement re computation of per share earnings. *****
12 Statement re computation of ratios. *****
21 Subsidiaries *
24 Consent of Arthur Andersen LLP +
27 Financial Data Schedule +
+ Included in this Report.
* This exhibit is contained in the Registrant's Annual Report on Form 10K for
the year ended December 31, 1994, filed with the Commission on
Page 38
<PAGE>
April 17, 1995 (Commission File No. 0-9160), and incorporated herein by
reference.
** This exhibit is contained in the Registrant's Proxy Statement filed with
the Commission on June 26, 1995 (Commission File No. 0-9160) and
incorporated herein by reference.
*** This exhibit is contained in the Registrant's quarterly report on
Form 10Q for the quarterly period ended March 31, 1995, filed with
the Commission May 15, 1995 (Commission File No. 0-9160), and
incorporated herein by reference.
**** This exhibit is contained in the Registrant's quarterly report on
Form 10Q for the quarterly period ended September 30, 1995, filed
with the Commission November 13, 1995 (Commission File No. 0-9160),
and incorporated herein by reference.
***** Not Required
Page 39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of INTEK Diversified Corporation:
We have audited the accompanying consolidated balance sheets of INTEK
Diversified Corporation (a Delaware corporation in the development stage) and
subsidiaries as of December 31, 1995 and 1994 (Post-Reverse Merger - See Note
1), and the related consolidated statements of operations, shareholders' equity
and cash flows for the year ended December 31, 1995, for the periods from
February 4, 1994 through December 31, 1994 (Post-Reverse Merger, consisting of
the statements of operations and cash flows of Roamer One, Inc., predecessor
corporation in the continuing business of INTEK Diversified Corporation and
subsidiaries for the period from inception (February 4, 1994) through September
23, 1994 (Pre-Reverse Merger), audited by us, and the statements of operations
and cash flows of INTEK Diversified Corporation and subsidiaries for the period
from September 24, 1994 through December 31, 1994 (Post-Reverse Merger), also
audited by us), for the period from January 1, 1994 through September 23, 1994
(Pre-Reverse Merger) and for the year ended December 31, 1993 (Pre-Reverse
Merger). We have also audited the statements of operations and cash flows of
INTEK Diversified Corporation and subsidiaries for the period from inception
(February 4, 1994) through December 31, 1995 (Post Reverse Merger, consisting of
the statements of operations and cash flows of Roamer One, Inc. and INTEK
Diversified Corporation and subsidiaries as described above). 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 audits 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 INTEK Diversified Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the periods indicated above in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 22, 1996
F-1
<PAGE>
INTEK DIVERSIFIED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(Thousands)
ASSETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 678 $ 1,557
Accounts receivable, net
of allowance for
doubtful accounts of $60
in 1995 and $35 in 1994 1,199 922
Notes receivable 54 68
Inventories of equipment 1,248 1,127
Prepaid expenses and
other current assets 77 483
Assets held for sale 1,555 4,334
-------- --------
Total current assets 4,811 8,491
-------- --------
PROPERTY AND EQUIPMENT, AT COST 7,535 794
Less-accumulated depreciation (37) (22)
-------- --------
7,498 772
-------- --------
NOTE RECEIVABLE 100 -
-------- --------
INVESTMENT IN JOINT VENTURE AND OTHER ASSETS 125 -
-------- --------
TOTAL ASSETS $ 12,534 $ 9,263
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
F-2
<PAGE>
INTEK DIVERSIFIED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 1995 and 1994
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 301 $ 718
Accrued liabilities 870 270
Related party payable 2,452 1,292
Notes payable - 2,992
Licensee deposits 344 3
-------- --------
Total current liabilities 3,967 5,275
-------- --------
DEFERRED INCOME TAXES 633 723
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value
Authorized - 20,000,000 shares
Issued - 11,086,215 in 1995,
9,382,831 in 1994 111 94
Capital in excess of par value 12,369 4,880
Treasury stock, at cost - 465,582
shares in 1995 and 1994 (770) (770)
Deficit accumulated during the
development stage (3,776) (939)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 7,934 3,265
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,534 $ 9,263
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated balance sheets
F-3
<PAGE>
INTEK DIVERSIFIED CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands, except shares)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
DEFICIT
CAPITAL ACCUMULATED TOTAL
COMMON STOCK IN EXCESS DURING THE SHARE-
------------------- OF PAR TREASURY DEVELOPMENT HOLDERS'
SHARES AMOUNT VALUE STOCK STAGE EQUITY
---------- ------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, 12/31/92 3,282,831 $ 33 $ 1,187 $ (770) $ 4,304 $ 4,754
Net loss - - - - (737) (737)
---------- ------- --------- -------- ----------- ---------
BALANCE, 12/31/93 3,282,831 33 1,187 (770) 3,567 4,017
Net loss prior to
September 23, 1994
reverse merger - - - - (678) (678)
---------- ------- --------- -------- ----------- ---------
BALANCE, 9/23/9
(before reverse
merger) 2,889 3,282,831 33 1,187 (770) 3,339
Acquisition of
Roamer One through
reverse merger
(Note 1) (3,668) 6,000,000 60 3,269 - (339)
---------- ------- --------- -------- ----------- ---------
BALANCE, 9/24/94
(after reverse
merger) 9,282,831 (779) 93 4,456 (770) 3,000
Shares issued for
services on 11/22/94
at $4.25 per share 100,000 1 424 - - 425
Net loss-subsequent
to September 23,
1994 reverse merger - - - - (160) (160)
---------- ------- --------- -------- ----------- ---------
BALANCE, 12/31/94 9,382,831 94 4,880 (770) (939) 3,265
Shares issued in
connection with
financing:
F-4
<PAGE>
for fees on
5/17/95 at
$3.92 per share 40,000 1 156 - - 157
for settlement of
accounts payable
on 7/28/95 at
$4.27 per share 937,042 9 3,991 - - 4,000
for fees on
9/14/95 at
$3.92 per share 122,000 1 477 - - 478
for cash on
11/30/95 at
$6.00 per share 170,000 2 1,018 - - 1,020
conversion of
debt to equity
on 12/29/95 at
$4.75 per share 336,842 3 1,597 - - 1,600
Exercise of stock
options 97,500 1 250 - - 251
Net loss - - - - (2,837) (2,837)
---------- ------- --------- -------- ----------- ---------
BALANCE, 12/31/95 11,086,215 $ 111 $ 12,369 $ (770) $ (3,776) $ 7,934
---------- ------- --------- -------- ----------- ---------
---------- ------- --------- -------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-5
<PAGE>
INTEK DIVERSIFIED CORPORATION
(Roamer One, Inc. Prior to September 23, 1994 Reverse Merger)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands, except share and per share amounts)
For the year ended December 31, 1995, for the period from inception
(February 4, 1994) through December 31, 1994 and for the period from inception
(February 4, 1994) through December 31, 1995
<TABLE>
<CAPTION>
Inception (February 4, 1994)
Through December 31,
--------------------------
1995 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 3,547 $ 329 $ 3,876
Cost of goods sold 3,254 292 3,546
-------- -------- --------
Gross profit 293 37 330
Operating expenses:
Site 469 86 555
Selling 183 - 183
General administrative 2,866 857 3,723
------- -------- --------
Operating loss (3,225) (906) (4,131)
Other income (expense):
Gain on sale of assets
held for sale 1,204 - 1,204
Interest (209) (41) (250)
Financing costs (635) - (635)
Other 28 8 36
-------- -------- --------
Net loss $(2,837) $ (939) $(3,776)
-------- -------- --------
-------- -------- --------
Net loss per share $ (0.22) $ (0.30) $ (0.52)
-------- -------- --------
-------- -------- --------
Weighted average number
of shares outstanding 9,558,982 4,341,449 7,218,159
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-6
<PAGE>
INTEK DIVERSIFIED CORPORATION
(Roamer One, Inc. Prior to September 23, 1994 Reverse Merger)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
For the year ended December 31, 1995, for the period from inception
(February 4, 1994) through December 31, 1994 and for the period from inception
(February 4, 1994) through December 31, 1995
<TABLE>
<CAPTION>
Inception (February 4, 1994)
Through December 31,
----------------------------
1995 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net loss $(2,837) $ (939) $(3,776)
-------- -------- --------
Adjustments to reconcile
net loss to net cash
used in operating activities:
Financing costs 635 - 635
Management fees - 425 425
Depreciation and amortization 14 48 62
Loss (gain) on sale of
assets held for sale (1,204) - (1,204)
Changes in assets and
liabilities:
Decrease (increase) in:
Accounts receivable (277) (214) (491)
Notes receivable 68 - 68
Inventories (121) (1,127) (1,248)
Prepaid expenses and
other current assets 406 (366) 40
Increase (decrease) in:
Accounts payable (417) 352 (65)
Licensee deposits 341 3 344
Accrued liabilities 600 132 732
Deferred income taxes (90) - (90)
-------- -------- --------
Total Adjustments (45) (747) (792)
-------- -------- --------
Net cash used in operating
activities (2,882) (1,686) (4,568)
F-7
<PAGE>
Cash Flows From Investing
Activities:
Capital expenditures (2,740) (795) (3,535)
Equity acquired in reverse
merger - 3,228 3,228
Net change in assets
acquired in reverse merger - (3,739) (3,739)
Proceeds, net of note rec-
eivable, from sale of assets
held for sale 3,868 - 3,868
Investment in joint venture (125) - (125)
Change in working capital
of discontinued operations (39) - (39)
-------- -------- --------
Net cash provided by (used
in) investing activities 964 (1,306) (342)
Cash Flows From Financing
Activities:
Issuance of common stock 1,278 75 1,346
Loan proceeds - 2,500 2,500
Principal payments
on borrowings (1,392) - (1,392)
Related party borrowings 1,160 1,293 2,453
-------- -------- --------
Net cash provided by
financing activities 1,039 3,868 4,907
-------- -------- --------
Net increase (decrease)
in cash and cash equivalents (879) 876 (3)
Cash and cash equivalents
at beginning of period 1,557 427 427
Cash and equivalents
acquired in reverse merger - 254 254
-------- -------- --------
Cash and cash equivalents
at end of period $ 678 $ 1,557 $ 678
-------- -------- --------
-------- -------- --------
Supplemental disclosures of
cash flow information:
Cash paid for interest $ 227 $ 42 $ 87
Cash paid for income taxes $ - $ 2 $ 5
Non-cash transactions
(see Note 2b)
</TABLE>
The accompanying notes are an integral part of these consolidated statements
F-8
<PAGE>
INTEK DIVERSIFIED CORPORATION
(Pre-Reverse Merger - See Note 1)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands, except share and per share amounts)
For the period from January 1, 1994 through September 23, 1994 and
for the year ended December 31, 1993
<TABLE>
<CAPTION>
The Period
From January 1,
1994 through Year Ended
September 23, December 31,
1994 1993
-------- --------
<S> <C> <C>
Net sales $ 5,202 $ 5,302
Cost of goods sold 4,683 4,738
-------- --------
Gross profit 519 564
Selling, general and administrative expenses 1,171 1,323
-------- --------
Operating loss (652) (759)
Other income (expense):
Interest (51) (87)
Other, net 25 135
Royalty income - 14
-------- --------
Loss from continuing operations (678) (697)
-------- --------
Discontinued operations:
Loss from discontinued operations - (52)
Gain on disposal of subsidiary - 12
-------- --------
Net loss from discontinued operations - (40)
-------- --------
Net loss $ (678) $ (737)
-------- --------
-------- --------
Per Share Data:
Continuing Operations $ (0.24) $ (0.25)
Discontinued Operations - 0.01
-------- --------
Net loss per share $ (0.24) $ (0.26)
-------- --------
-------- --------
Weighted average number of shares
outstanding 2,817,249 2,817,249
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
The accompanying notes are an integral part of these consolidated statements
F-10
<PAGE>
INTEK DIVERSIFIED CORPORATION
(Pre-Reverse Merger - See Note 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
For the period from January 1, 1994 through September 23, 1994 and
for the year ended December 31, 1993
<TABLE>
<CAPTION>
The Period
From January 1,
1994 through Year Ended
September 23, December 31,
1994 1993
--------------- ------------
<S> <C> <C>
Cash Flows From
Operating Activities:
Net loss $ (679) $ (697)
--------- ---------
Adjustments to reconcile
net loss to net cash
provided by operating activities:
Depreciation and amortization 418 592
Provision for losses on accounts
receivable 31 -
Gain on sale of fixed assets - (13)
Changes in assets and
liabilities:
Decrease (increase) in:
Accounts receivable, net 14 232
Income tax refund receivable - 166
Inventories 160 (137)
Prepaid expenses and
other current assets - 1
Increase (decrease) in:
Accounts payable 165 (3)
Deferred income taxes (6) 6
--------- ---------
Total Adjustments 782 844
--------- ---------
Net cash provided by operating activities 103 147
</TABLE>
F-11
<PAGE>
Cash Flows From Investing
Activities:
Capital expenditures (21) (237)
Proceeds from sale of
discontinued operations - 75
Proceeds from sale of fixed assets - 13
Proceeds on notes receivable 75 23
--------- ---------
Net cash provided by (used in )
investing activities 54 (126)
Cash Flows From Financing
Activities:
Principal payments
on borrowings (134) (162)
--------- ----------
Net cash used in
financing activities (134) (162)
--------- ---------
Net increase (decrease)
in cash and cash equivalents 23 (141)
Cash and cash equivalents
at beginning of period 231 372
--------- ---------
Cash and cash equivalents
at end of period $ 254 $ 231
--------- ---------
--------- ---------
Supplemental disclosure of
cash flow information
Cash paid for interest $ 52 $ 87
Cash paid for income taxes $ 2 $ 5
Non-cash transactions (see Note 2b)
The accompanying notes are an integral part of these consolidated statements
F-12
<PAGE>
INTEK DIVERSIFIED CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(1) BUSINESS AND SIGNIFICANT RISKS
a. DEVELOPMENT STAGE ENTERPRISE
INTEK Diversified Corporation (INTEK or the Company) was incorporated in
1969 and had been primarily engaged in the business of molding, fabricating and
selling plastic products through its wholly owned subsidiary, Olympic Plastics
Corporation (Olympic Plastics).
On September 23, 1994, a newly formed, wholly-owned subsidiary of INTEK,
Romnet, Inc., a Delaware corporation, acquired all of the issued and outstanding
stock of Simrom, Inc. ("Simrom"), an Ohio corporation in exchange for 6,000,000
shares of INTEK common stock. Effective September 23, 1994, Simrom merged with
and into Romnet, Inc. (the "Merger"). After the merger of Simrom into Romnet,
Inc., the surviving corporation changed its name to Roamer One, Inc. ("Roamer
One") and redirected the focus of the Company and its resources to the
development of the Roamer One business and the telecommunications industry and
to discontinue and divest the operations of Olympic Plastics. Since the former
shareholders of Roamer One retained more than a 50 percent controlling interest
in the surviving company (INTEK), the business combination was treated as a
reverse merger for accounting purposes. Roamer One's principal assets were
certain rights relating to licenses granted by the FCC for the 220 MHz to 222
MHz ("220 MHz") narrowband spectrum. Pursuant to the merger, Roamer One's net
deficit equity of $338,637 was transferred to INTEK. Pro forma combined
operating results of the merged companies are not presented since INTEK's former
business is treated as if it were a divested operation.
Through its wholly-owned subsidiary, Roamer One, the Company is now a
development stage enterprise and is constructing, and plans to operate, a
Specialized Mobile Radio ("SMR") network in the United States utilizing certain
rights and benefits afforded it by licensees in the newly allocated 220 MHz
spectrum. Roamer One's business has been conducted by the Company since
September 23, 1994 when the Merger became effective.
Contracts between Roamer One and certain holders of 220 MHz licensees have
been classified by Roamer One as either: Category I, Category II, or Category
III Agreements. Under the Category I Agreements, each of the licensees (which
are, in some instances, directors of the Company) have entered into an
"Exclusive Management Agreement and Right of First Refusal" (the "Management
Agreement"). The Management Agreement permits Roamer One to retain 100% of the
subscriber revenues until such time as $200,000 is earned from system operation,
after which time the licensee receives 10% of the gross subscriber revenues.
Each licensee under a Category I Agreement also has entered into an Option to
Purchase Agreement (the "Option Agreement") providing Roamer One with the
exclusive right to purchase the constructed 220 MHz SMR system, together with
the 220 MHz
F-13
<PAGE>
license. Under the Option Agreement, Roamer One is required to fund all capital
costs and operating expenses. The purchase under the Option Agreement may be
exercised by Roamer One at any time after construction by Roamer One of the 220
MHz SMR system is completed.
Under Category II Agreements, each of the licensees has entered into a
Management Agreement which permits Roamer One to earn and retain a percentage of
the gross subscriber revenues. Each of the licensees also has entered into an
Option Agreement. However, the option may be exercised only after a prescribed
period of operation. Roamer One is required to finance the building of the 220
MHz SMR system and contribute operating capital until such time as the system is
profitable. The purchase price of the 220 MHz SMR system, together with the 220
MHz license, is computed using a multiple of earnings at the time of purchase.
Under the Category III Agreements, each of the licensees has entered into a
management agreement providing that Roamer One will manage the 220 MHz SMR
system for a fee based upon a percentage of subscriber revenues earned from
system operation. Under a Category III Agreement, Roamer One has no option to
purchase such 220 MHz SMR system but does have a right of first refusal to
purchase the system in the event an acceptable offer to buy such system is
submitted to the licensee by a third party. The licensees under Category III
Agreements are obligated to provide the funds for the system construction and
operating costs.
While 167 systems have been constructed by Roamer One as of December 31,
1995, the number of subscribers to the service is insignificant and the
Company's proposed marketing strategy has not yet been implemented. The focus of
the Company has been directed to the construction of as many systems as possible
by the Federal Communication Commission's (the "FCC") deadline date. On January
26, 1996, the FCC adopted a SECOND REPORT AND ORDER in PR Docket No. 89-552 and
GN Docket No. 93-252 that extended the construction deadline to March 11, 1996
for all non-nationwide 220 MHz licenses that elect to construct their base
station at their currently authorized location, and to August 15, 1996 for all
licensees granted authority to modify their licenses to relocate their base
stations. The FCC has granted licensees until May 1, 1996 to submit applications
for permanent modifications to site locations. Systems that have been completed
are being used for testing of the Company's billing system software, signal
coverage, and system performance. Subscriber loading is anticipated to begin in
selected markets during the first quarter of 1996. No assurances can be made
that Roamer One will ultimately complete all of the sites which are currently
subject to its management agreements or that it will obtain subscribers for
completed sites. In particular, certain vendors who will supply equipment needed
to construct these systems may not be able to supply the equipment in time to
allow the completed construction of all systems prior to August 15, 1996. In
addition, Roamer One must raise a significant amount of capital to complete and
operate the systems it must finance. No significant revenues are expected to be
generated from the operation of these systems prior to the second quarter of
1996.
The Company can make no assurances that it will be able to achieve the
level of financing that would be required to complete the construction of the
remaining 74 systems Roamer One has on order, or to fund the administrative
costs
F-14
<PAGE>
of Roamer One.
b. LICENSEE UNDER FCC AUTHORITY
The construction, licensing, operation, sale, management, ownership, and
acquisition of 220 MHz licenses are regulated by the FCC. The Company's actions
with respect to 220 MHz systems which it owns or manages may be delayed by the
time required to obtain FCC approval or consent for certain actions, or such
approval or consent may be denied or withheld. FCC requirements also may impose
certain costs or requirements upon the Company which it would not bear in the
absence of regulation.
Because the Company's business is regulated by the FCC, its business
affairs (and those of its actual and potential competitors) are always subject
to changes in FCC rules and policies. Such changes, which generally follow
extensive FCC consideration, can increase the level of competition, the cost of
regulatory compliance, the methods in which the Company manages its systems, the
difficulty in obtaining or keeping licenses, standards for products and services
or other facets of the Company's regulatory environment. Further, each FCC
proceeding which might affect the Company is subject to reconsideration,
appellate review, and FCC modification from time-to-time.
To the extent that the Company or the licensee does not construct or
operate any 220 MHz system in compliance with applicable FCC requirements, the
Company or the licensee of such system could be subject to increased regulatory
requirements, formal or informal FCC investigations, loss or cancellation of
licenses which it may in the future acquire, imposition of monetary forfeitures,
or disqualification from holding further FCC licenses. Such risks could arise
from the Company's failure to meet FCC construction deadlines, the licensee's
failure to maintain ultimate control over its system, or the level and type of
alien ownership and control in either the Company or licensee.
The FCC requires that licensees maintain de jure and de facto control of
their radio systems at all times. This requirement is applicable to the 220 MHz
licenses which the Company seeks to operate as a result of management agreements
entered into between the Company and various licensees. A failure to maintain
control can result in an FCC investigation or hearing, imposition of monetary
forfeitures, or revocation of a license. Although management agreements are
common in the SMR industry, the FCC has not issued any guidelines specifically
applicable to 220 MHz management agreements and has not considered or passed on
the compliance of the Company's management agreements with general FCC
guidelines or policies. No assurance can be given that the Company's management
agreements or course of conduct in acquiring rights to the 220 MHz systems will
be found to comply with such FCC requirements.
c. SITE CONSTRUCTION DEADLINE
If the systems for the licenses that are subject to the Company's purchase
option and management agreements are not constructed within the period required
by the FCC, such licenses will be returned to the FCC. The construction deadline
as set by the FCC of December 31, 1995 was amended in late 1995 to February 2,
F-15
<PAGE>
1996. On January 26, 1996, the FCC adopted a SECOND REPORT AND ORDER in PR
Docket No. 89-552 and GN Docket No. 93-252 that extended the construction
deadline to March 11, 1996 for all non-nationwide 220 MHz licenses that elect to
construct their base station at their currently authorized location, and to
August 15, 1996 for all licensees granted authority to modify their licenses to
relocate their base stations. There is currently a case pending before the U.S.
Court of Appeals, D.C. Circuit, filed by another 220 MHz service provider, which
challenges the FCC's denial of its request to provide multiple-market service on
a single system, and a request for an extension of its construction deadline.
There is no assurance that this appeal, if successful, will impact the deadline
for construction previously announced by the FCC for licenses in which the
Company has an interest.
The Company has built out 167 systems prior to December 31, 1995. The
Company can offer no assurances that all or most of the remaining 74 licenses
will be built out by the FCC construction deadline or that an extension to the
FCC construction deadline can be obtained.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of INTEK (from
September 23, 1994 through December 31, 1994) and its wholly-owned subsidiaries
Roamer One (from February 4, 1994 (inception) through December 31, 1994), IMCX
Corporation ("IMCX"), and IDC International Corporation ("IDC") with Olympic
Plastics Company, Inc. ("Olympic") assets reported as Assets Held for Sale. The
results of operations of Olympic have been excluded from continuing results of
operations after September 23, 1994. The operating assets of IMCS were sold by
the Company on August 12, 1993 and thus revenues have been restated to exclude
IMCS from continuing operations. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Although the operations of Roamer One were combined with those of the
Company for a period of seven days prior to September 30, 1994 pursuant to the
Merger, the Consolidated Statements of Operations do not include the operations
of Roamer One during this period as such operations did not involve significant
revenues or expenses.
b. CASH FLOW STATEMENT
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
The following summarizes the supplemental disclosure of non-cash investing
and financing activities:
During 1995, the Company exchanged 162,000 shares of its common stock for
certain loan extension fees valued at $635,000 (equating to $3.92 per share) and
937,042 shares of its common stock for equipment purchased from Securicor valued
F-16
<PAGE>
at $4,000,000 (equating to $4.27 per share). The values attributed to the common
stock were the approximate fair market values on the dates of issuance.
On September 23, 1994, the Company exchanged 6,000,000 shares of its common
stock for 100 percent of the common stock of Simrom, Inc., in the Merger which
was accounted for as a reverse merger (See Note 1). Accordingly, the assets and
liabilities of INTEK at September 23, 1994 are assumed to have been acquired by
Roamer One.
On November 22, 1994, the Company issued 100,000 shares of its common stock
in exchange for certain management services valued at $425,000 (equating to
$4.25 per share), which was the approximate fair market value at the date of
issuance.
In November, 1994, the Company obtained a $2,500,000 loan from Quest
Capital Corporation ("Quest"), formerly known as Noramco Mining Corporation, to
fund the initial costs of implementing Roamer One's construction program. During
the second quarter of 1995, the Company reduced the principal balance to
$1,600,000 and on December 29, 1995 the Company issued 336,842 shares (at a
value of $4.75 per share) of INTEK common stock to Quest as payment in full of
the principal then due (see Note 11).
c. INVENTORIES
Inventories are stated at the lower of cost or market and consist of
repeater site receive/transmit systems for sale to Category III licensees and
mobile radios for sale to subscribers.
d. PROPERTY AND EQUIPMENT, AT COST
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets which are ten years for site equipment and 5 years
for furniture, fixtures, office equipment, and computers. The Company's policy
is to begin depreciating repeater site equipment at such time as it begins to
generate subscriber revenues. Normal maintenance and repairs are charged to
expense as incurred. Expenditures which increase the useful lives of assets are
capitalized.
e. REVENUE RECOGNITION
Revenue is recognized for sales of equipment when delivered.
f. INCOME TAXES
The Company and its subsidiaries file consolidated Federal and combined
state income tax returns. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standard No. 109 "Accounting for Income
Taxes" (SFAS 109). SFAS 109 requires, among other things, the use of the
liability method in computing deferred income taxes.
The Company provides for deferred income taxes relating to timing
differences in the recognition of income and expense items (primarily relating
to depreciation, amortization and certain leases) for financial and tax
reporting
F-17
<PAGE>
purposes. Such amounts are measured using current tax laws and regulations in
accordance with the provisions of SFAS 109.
In accordance with SFAS No. 109, the Company has recorded valuation
allowances against the realization of its deferred tax assets. The valuation
allowance is based on management's estimates and analysis, which includes tax
laws which may limit the Company's ability to utilize its tax loss
carryforwards.
g. NET LOSS PER SHARE
The net loss per share for all periods shown is based upon the weighted
average number of shares outstanding for the periods. No common stock
equivalents are included in the calculation since they would have an anti-
dilutive effect.
h. RECLASSIFICATIONS
Certain amounts in the December 31, 1994 and 1993 Financial Statements have
been reclassified to conform with the current period presentation.
i. USE 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
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.
j. CONCENTRATIONS OF RISK
Accounts receivable are unsecured and the Company is at risk to the extent
such amounts become uncollectible. As of December 31, 1995, one customer
comprised 71% of accounts receivable.
The Company's equipment sales are to customers located primarily in the
United States. During 1995, the Company had sales to one customer (discussed
above) which represented approximately 90% of sales. During 1994, the same
customer represented 100% of sales.
The Company purchases a significant portion of its equipment from suppliers
located outside the United States. The Company believes that if these foreign
suppliers were no longer available, it would be able to obtain the equipment
from existing suppliers located within the United States. The Company believes
this would not have a severe impact on it financial position or results of
operations.
k. NEW PRONOUNCEMENTS
ADOPTION OF SFAS 121 - IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
F-18
<PAGE>
Assets to be Disposed Of" (the Statement). The Statement establishes
accounting standards for long-lived assets, certain identifiable intangibles
and goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles and goodwill related to those
assets to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. The Company will adopt the Statement in 1996.
The Company has not yet evaluated the impact of this Statement.
ADOPTION OF SFAS 123 - STOCK-BASED COMPENSATION
In November 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." The statement recommends changes in accounting for employee
stock-based compensation plans, and requires certain disclosures with respect to
these plans. The Statement's disclosures will be adopted by the Company
effective January 1, 1996.
(3) INVENTORIES
Inventories at December 31, 1995 and 1994 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Site installations $ 549 $ 1,127
Mobile radios 699 -
-------- --------
$ 1,248 $ 1,127
-------- --------
-------- --------
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Site equipment $ 7,283 $ 768
Furniture and fixtures 73 26
Computers 179 -
-------- --------
Total property and equipment, at cost 7,535 794
Less accumulated depreciation (37) (22)
-------- --------
Net property and equipment 7,498 $ 772
-------- --------
-------- --------
</TABLE>
(5) INCOME TAXES
There was no provision for income taxes for the twelve months ended
December 31, 1995 and 1994 except for the minimum state tax. Taxes included in
general and administrative expenses amounted to $3,200, $3,200, and $9,000 in
F-19
<PAGE>
1995, 1994 and 1993 respectively. The Company is expecting an "ordinary" loss
for the current fiscal year and this, combined with net operating loss
carryforwards from the previous years, are expected to offset any current tax
liability.
For 1993, the provision for income taxes consisted of a current state
provision of $2,000 and a deferred Federal provision of $7,000.
The reconciliation of the provision (benefit) for income taxes at December
31 to the amount computed at the Federal statutory rate is as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Benefit at the statutory rate $ (965) $ (319) $ (291)
State taxes, net of federal
tax benefit 3 3 2
Operating losses not currently
available for use 965 319 291
Other - - 7
------- ------- -------
$ 3 $ 3 $ 9
------- ------- -------
------- ------- -------
</TABLE>
The approximate tax effect of temporary differences which gave rise to
significant deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets (state and Federal):
Accrued liabilities $ 25 $ 36
Inventory reserve - 14
Allowance for doubtful accounts receivable 13 15
Building valuation allowance 173 -
Amortization of Roamer One startup costs 118 -
Operating loss carryforwards 956 856
-------- --------
1,285 921
Valuation allowance (1,285) (921)
-------- --------
$ - $ -
-------- --------
-------- --------
Deferred tax liabilities (state and Federal):
Depreciation $ (607) $ (607)
Other (26) (116)
-------- --------
$ (633) $ (723)
-------- --------
-------- --------
</TABLE>
In 1990, the State of California passed legislation which disallowed the
utilization of net operating loss carryforwards and carrybacks until 1993. At
December 31, 1995, the Company had net operating loss carryforwards available
for Federal and California income tax purposes of approximately $2,225,000, and
F-20
<PAGE>
$2,147,000, respectively. The net operating loss carryforwards expire in the
year 2008 and thereafter for Federal and 1997 and thereafter for State income
tax purposes.
(6) PENSION PLAN
One of the Company's subsidiaries has a Simplified Employees Pension
Individual Retirement Account Plan (the Plan). Annual contributions to the Plan
are at the discretion of the Board of Directors and cannot exceed 15 percent of
all employee's compensation. No contributions were made for 1995, 1994 or 1993.
(7) DIRECTOR COMPENSATION
On June 20, 1995, the Board of Directors approved a resolution stating that
directors will be compensated for services at the rate of $4,000 per year plus
$500 per meeting to a maximum of $10,000 per director, retroactive to January 1,
1995. For the twelve months ended December 31, 1995, the Company paid Directors
fees of $51,500 and has accrued $15,500 for unpaid directors fees.
(8) STOCK OPTION PLAN
In July 1985, the shareholders approved the "1985 INTEK Diversified
Corporation Key Employee Incentive Stock Option Plan" which provides for the
granting of options on up to 500,000 shares of the Company's common stock to key
employees. In 1988, the shareholders of the Company approved the 1988 "Key
Employee Incentive Stock Option Plan." The stock options are exercisable over a
period determined by the Stock Option Committee, but no longer than ten years
after the date they are granted.
The options are to be exercisable at a price equal to the "Fair Market
Value" (average of the closing per share bid and asked price of the Company's
Common Stock on the date an option is granted) or 110 percent of Fair Market
Value for persons who have in excess of a 10 percent voting interest in all
classes of the Company's stock prior to the date of grant. The dollar amount of
options issued under the Plan in any calendar year is limited to $100,000 per
person in value plus any unused limit carry-over.
In September 1994, the shareholders approved the "1994 Stock Option Plan"
which provides for the granting of options up to 600,000 shares of common stock
per person.
On June 23, 1995 the Company filed with the Securities and Exchange
Commission a registration statement on Form S-8 for the offering and sale by the
Company of up to 500,000 shares of the Company's common stock, par value $0.01
pursuant to stock options granted or to be granted under the 1988 INTEK
Diversified Corporation Key Employee Incentive Stock Option Plan.
At the Annual Meeting of Shareholders held on July 5, 1995, the
F-21
<PAGE>
shareholders voted to approve the 1994 Stock Option Plan which provides for the
granting of options of up to 600,000 shares of the Company's Common Stock. The
1994 Plan provides for the granting of "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and "nonqualified stock options", which are not intended to qualify
under any provision of the Code. Each grant shall specify the number of shares
of Common Stock to which it pertains; provided, however, that no optionee may be
granted stock options for more than 60,000 shares in any fiscal year of the
Company.
The shareholders also voted to approve the 1994 Directors' Stock Option
Plan (the "Directors' Plan") which provides for the granting of options of up to
300,000 shares of the Company's Common Stock. Under the terms of the Directors'
Plan, each member of the Stock Option Committee received an option to purchase
40,000 shares of Common Stock on September 24, 1994. All other members of the
Board received an option to purchase 40,000 shares of Common Stock under the
1994 Stock Option Plan. In addition, each director who was not a director on
September 23, 1994 will receive, on the date of his or her initial election as a
director, an option to purchase 20,000 shares of Common Stock. Options are
exercisable on the first anniversary of the date of grant, provided the optionee
remains a director on such anniversary. No person may receive an option pursuant
to the Directors' Plan more than once.
On August 2, 1995 the Company filed with the Securities and Exchange
Commission a registration statement on Form S-8 for the offering and sale by the
Company of up to 900,000 shares of the Company's common stock, par value $0.01
pursuant to stock options granted or to be granted under the INTEK Diversified
Corporation 1994 Stock Option Plan and the INTEK Diversified Corporation
Directors' 1994 Stock Option Plan.
A summary of the Company's Stock Option Plans is as follows:
<TABLE>
<CAPTION>
OPTION PRICE
1988 Plan SHARES PER SHARE
- --------- -------- ---------
<S> <C> <C>
Shares granted:
January 1, 1987 155,000 $ 1.75
Shares terminated (97,500) 1.75
Shares exercised in 1995 (57,500) 1.75
--------
Shares under option 0
--------
1994 Stock Option Plan
- ----------------------
Shares granted:
September 23, 1994 50,000 $ 2.75
September 23, 1994 330,000 3.75
December 20, 1995 72,000 5.875
Shares exercised in 1995 (40,000) 3.75
--------
Shares under option 412,000
F-22
<PAGE>
--------
1994 Directors' Stock Option Plan
- ---------------------------------
Shares granted:
September 23, 1994 120,000 $ 3.75
--------
Total shares under option 532,000
--------
--------
</TABLE>
As of December 31, 1995, options available for future grant were as follows:
<TABLE>
<S> <C>
1988 Plan 442,500
1994 Stock Option Plan 148,000
1994 Directors Plan 180,000
-------
770,500
-------
-------
</TABLE>
(9) Related Party Transactions
Pursuant to a management agreement dated September 23, 1994, the Company
paid an annual management fee of $200,000 to Peter Paul Corporation, Inc., an
affiliate of Anglo York Industries, Inc., a stockholder of the Company. Peter
Paul Corporation, Inc., made the services of Mr. Vincent Paul, Vice Chairman of
the Board of Directors, available to the Company without additional
compensation. The management agreement terminated on January 31, 1996 upon the
death of Mr. Paul. For the years ended December 31, 1995 and 1994, the Company
paid management fees of $200,004 and $200,000 respectively to Peter Paul
Corporation, Inc.
In November 1994, the Company borrowed $2,500,000 evidenced by a short-term
promissory note, bearing 12% interest, from Quest Capital Corporation ("Quest").
The loan was secured by a first mortgage on the property owned by Olympic and a
guaranty by Simmonds Capital Ltd ("SCL"), formerly known as Simmonds
Communications Ltd. Quest was issued a total of 262,000 shares of INTEK common
stock, at a weighted average price of $4.05 per share which was the fair market
value at the time, as a loan commitment fee and compensation for two extensions
to the maturity date. During the second quarter of 1995, the Company reduced the
principal balance to $1,600,000 and on December 29, 1995 the Company issued
336,842 shares of INTEK common stock to Quest as payment in full of the
principal. The shares were issued at $4.75 per share which was the fair market
value at the date of repayment of the debt.
Roamer One, Inc. borrowed $150,000 from SCL evidenced by a short-term,
non-interest bearing note in October, 1994 and repaid the obligation in
November, 1994.
For the year ended December 31, 1995, the Company incurred $100,000 and
paid $90,000 to Roamer One Holdings, Inc. ("ROH"), a stockholder of the Company
and a company controlled by Nicholas R. Wilson, Chairman of the Board of the
Company for the services of Mr. Nicholas Wilson. In addition, the Company paid
F-23
<PAGE>
$30,000 to ROH that had been accrued as of December 31, 1994.
For the year ended December 31, 1995, the Company incurred $100,000 and
paid $90,000 to SCL, a stockholder of the Company, for management services. In
addition, the Company paid $30,000 to SCL that had been accrued as of
December 31, 1994.
For the year ended December 31, 1995, the Company incurred $112,000 and
paid $104,000 to Simmonds Mercantile and Management Inc., a company controlled
by SCL, for consulting services.
On April 18, 1995, Roamer One and Midland International Corporation
("MIC"), a wholly-owned subsidiary of SCL, entered into a Memorandum of
Understanding granting MIC exclusive sales and distribution rights for all
Roamer One private branded 220 MHz radio product in the United States. MIC will
be paid a commission on sales of such radios. Roamer One also entered into an
agreement with Securicor, whereby Securicor will supply Securicor radios bearing
the Roamer One logo.
Pursuant to a Financing Agreement and related agreements between the
Company, Roamer One, SCL and Securicor, Securicor has delivered approximately
$4,000,000 worth of base station equipment and mobile radios in exchange for
937,042 shares of the Company's common stock to Securicor. Pursuant to the
Financing Agreement, such shares were issued at a share price of $4.26875. The
financing agreement calls for Roamer One to purchase approximately $3.9 million
in additional equipment over a 12 month period. As of December 31, 1995, Roamer
One had purchased $968,000.
The Company and SCL have an arrangement whereby Roamer One, Inc. purchases
equipment and installation services from SCL. During the twelve months ended
December 31, 1995, Roamer One, Inc. purchased $9,298,000 of radio equipment and
installation services from SCL. Previous accounts payable for equipment totaled
$1,212,000. Roamer One made payments to SCL totaling $8,058,000 leaving a
balance of $2,452,000 as of December 31, 1995.
On September 23, 1994, the Company and SCL, ROH, Anglo York Industries,
Inc. and Harold Davis (collectively referred to as the "Holders") entered into a
Registration Rights Agreement to provide the Holders with certain demand and
"piggy-back" registration rights with respect to the Company's Common Stock
owned by the Holders. ROH is a stockholder of the Company holding approximately
34.8% of the Company's Common Stock. Anglo York Industries, Inc. is a
stockholder of the Company holding approximately 10.5% of the Company's Common
Stock. Mr. Davis was an executive vice president and treasurer of the Company
until September 23, 1994.
Kohrman Jackson & Krantz, a Cleveland, Ohio, law firm of which Steven L.
Wasserman is a partner, performs legal services for the Company and its
subsidiaries. Mr. Wasserman is a member of the Company's Board of Directors. The
law firm received fees of $162,097 in 1995 and $8,856 in 1994 from INTEK.
Mr. Wasserman was formerly a principal with the law firm of Honohan, Harwood,
Chernett & Wasserman, which received fees of $23,722 in 1994 from INTEK.
F-24
<PAGE>
At December 31, 1995, Octagon Investments, Ltd had beneficial interest in
8% of the Company's outstanding common stock and stock options. On February 29,
1996, the Company borrowed $2,500,000 in debentures from Octagon. The loan is
due in six months and carries interest that is based on the Bank of America
Prime Rate. The loan is secured by the Olympic Plastics land and building and by
the equipment related to 15 Category I licenses. A closing fee was paid to
Octagon Limited of 50,000 shares of the Company's common stock under Regulation
S of the Securities Act of 1933 as amended. An agency fee of $25,000 cash was
paid to Octagon Capital Corp., Canada.
The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be (1) on terms at least as favorable as those which
the Company would be able to obtain from unrelated parties; (2) for bona fide
business purposes; and (3) approved by a majority of the disinterested and
non-employee directors.
(10) INVESTMENT IN JOINT VENTURE
In May 1995, INTEK contributed $125,000 for a 50% interest in SLW
Properties, Ltd., an Ohio limited liability company ("SLWLLC"). The assets of
SLWLLC consisted of twenty-five percent (25%) of the outstanding shares of
common stock of Pagers Plus Cellular, a California corporation ("PPC"), a
$250,000 secured promissory note issued by PPC to SLWLLC on May 9, 1995, a
security interest in certain assets of PPC, the right to appoint a director to
PPC's Board of Directors, and the right to assume PPC's rights under certain
management and joint venture agreements if PPC fails to repay the note by
November 11, 1995. On July 12, 1995, the members of SLWLLC assigned all of the
assets of SLWLLC to Brookline Capital Corp. "Brookline Capital", formerly known
as Brook SIG Corp.). Brookline Capital has been since renamed Ventel and is a
publicly traded company in Canada. Brookline Capital was formed for the purpose
of providing financing to various 220 MHz SMR management companies in the United
States. The Company and SCL were shareholders of Brookline Capital. On September
20, 1995, the Company sold its shares in Brookline Capital to Brookline
Minerals, Inc. In exchange for its shares in Brookline Capital, the Company will
receive certain shares of Brookline Minerals common stock pursuant to a formula
based on the number of SMR systems financed by Brookline Capital which should
increase its holdings and influence. SCL also exchanged certain assets and
Brookline Capital shares for shares of Brookline Minerals common stock pursuant
to the same formula. INTEK and SCL entered into separate management services
agreements with Brookline Minerals to provide certain management services and
technical expertise for the development and implementation of Brookline
Mineral's ongoing business strategy. Nicholas Wilson, a director of the Company,
is a director of Brookline Capital and Brookline Minerals, John Simmonds, a
director of the Company, is a director of Brookline Capital and Brookline
Minerals and the President of Brookline Capital and Steven L. Wasserman, a
director of the Company, is the Secretary of Brookline Minerals, which has been
renamed Ventel, Inc. is a publicly traded company in Canada. To date, INTEK has
received 50,000 shares of the common stock of Ventel.
F-25
<PAGE>
(11) NOTE PAYABLE
In November 1994, the Company borrowed $2,500,000 evidenced by a
short-term promissory note, bearing 12% interest, from Quest Capital Corporation
("Quest"). The loan was secured by a first mortgage on the property owned by
Olympic and a guaranty by Simmonds Capital Ltd ("SCL"), formerly known as
Simmonds Communications Ltd. Quest was issued a total of 162,000 shares of INTEK
common stock as a loan commitment fee and compensation for two extensions to the
maturity date. During the second quarter of 1995, the Company reduced the
principal balance to $1,600,000 and on December 29, 1995 the Company issued
336,842 shares of INTEK common stock to Quest as payment in full of the
principal.
(12) COMMITMENTS
As of December 31, 1995, Roamer One had entered into 101 site leases to
permit installation, operation, and maintenance of transmission/reception
equipment facilities in connection with the 220 MHz SMR systems. These leases
generally have a five-year term, with three consecutive five-year extension
periods upon the mutual agreement of the parties. As of December 31, 1995,
Roamer One had paid $780,500 in site lease fees pertaining to 1995. As of
December 31, 1995, Roamer One has entered into 73 site leases relating to
Category I Licensees; 28 site leases relating to Category II Licensees; and
arranged for its Category III licensees to enter into 58 site leases. As of
December 31, 1995, total future minimum lease payments for the Category I and
Category II site leases, which are contractual obligations of Roamer One, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 837,220
1997 781,021
1998 674,960
1999 620,978
2000 283,972
Thereafter -
----------
$3,198,151
----------
----------
</TABLE>
In November 1994, INTEK entered into a management services agreement with
Quest for corporate finance and corporate restructuring services. In
consideration for these services, INTEK paid $1,000 and issued 100,000 shares of
its common stock.
(13) MAJOR CUSTOMERS
Roamer One has commenced construction and management of 220 MHz Specialized
Mobile Radio systems pursuant to Management Agreements. Of these agreements, 161
obligate the licensee to provide the funds for system construction and operating
costs. During 1995 and 1994, billing for site equipment, construction and
F-26
<PAGE>
installation accounted for 100% of consolidated net sales. As of December 31,
1995, a total of 67 systems had been completely constructed for one customer,
VDC. During 1995, a total of 51 systems had been delivered and invoiced to VDC
at a gross profit of $270,000.
(14) DISCONTINUED OPERATIONS
On August 12, 1993, the Company sold to Advanced Technology, Inc., ("ATI"),
all of the issued and outstanding capital stock of its wholly owned subsidiary,
IMCS. At the time of the sale, IMCS owned office furnishings and equipment and a
Technical Information Agreement with American Telephone and Telegraph Company
dated January 1, 1991, pursuant to which IMCS received certain rights to
manufacture and sell electronic equipment. Prior to the sale, the Company had
transferred to a newly formed wholly owned subsidiary, IMCX, all other assets
and all liabilities of IMCS. In consideration for the sale of the capital stock
of IMCS, the Company received cash in the amount of $75,000 and a long-term
non-interest bearing note in the amount of $180,000. The note was completely
repaid by December 31, 1994. The gain on the sale from this transaction was
$11,552. Net sales for IMCS were $530,000 and $758,000 for the eight months
ended August 1993 and 1992 respectively and the net losses were $52,000 and
$170,000.
Subsequent to the Merger, the Company redirected its business from
fabricating and selling plastic products, primarily by injection and compression
molding of various plastic resins, to customers in the electronics aerospace and
commercial aircraft markets to the business of developing and managing a SMR
Network in the United States utilizing the recently licensed 220 MHz narrowband
spectrum. Consequently, during the first half of 1995, the Company entered into
agreements to sell its machinery, equipment and inventory to four separate
buyers.
As of December 31, 1995, the Company completed four sales totaling
$4,022,407 for equipment and inventory. The Company received cash of $3,605,560
and a note in the remaining principal amount of $153,847 bearing interest at the
rate of ten percent (10%) per annum with monthly principal and interest payments
and a maturity date of July, 1998. The first three payments under this note were
interest only.
Of the proceeds from these sales, $263,000 was applied against a note
payable secured by Olympic's assets, $900,000 was repaid to Quest under the Loan
and the remainder was used for working capital. Included in liabilities at
December 31, 1994 was a note payable balance of $492,000. This note was repaid
in full during 1995.
A summary of the assets held for sale is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Inventories $ - $704
F-27
<PAGE>
Property, Plant and Equipment, Net 1,555 3,493
Patent Rights - 137
-------- --------
Net Assets $1,555 $4,334
-------- --------
-------- --------
</TABLE>
(15) SALE OF SECURITIES
On December 4, 1995, the Company sold 170,000 shares and a warrant of the
Company's common stock outside the United States under Regulation S of the
Securities Act of 1933 as amended. The sale generated $1,020,000 at current
market rates. The warrant was exercised on February 29, 1996 for 36,645 shares
at a price of $0.01 per share.
(16) SUBSEQUENT EVENTS
a. FINANCINGS
On January 12, 1996, the Company sold 201,000 shares of the Company's
Common Stock outside the United States under Regulation S of the Securities Act
of 1933 as amended. The sale generated $849,342 at current market rates.
On February 29, 1996, the Company raised $2,500,000 through the issuance of
a Senior Secured Debenture to MeesPierson ICS Limited, a UK limited liability
company. INTEK also issued 50,000 shares of its common stock under Regulation S
of the Securities Act of 1933 as amended to MeesPierson as a closing fee for its
investment banking services and paid an agent fee of $25,000 to Octagon Capital
Canada Corporation. The debentures mature in six months and carry interest that
is based on the Bank of America Prime Rate. They are secured by perfected liens
against Olympic Plastics land and building and by the equipment related to 15
Category I licenses.
b. SALE OF THE BUILDING
On March 22, 1996, the Company entered into a Purchase Agreement and escrow
was opened for sale of the Olympic Plastics land and building. The sale price is
$2,200,000 and the property has a book value of $1,555,000. The building is
encumbered by a deed of trust in favor of MeesPierson ICS Limited. Escrow is
scheduled to close on or before June 4, 1996, subject to the buyer's ability to
obtain financing, and the results of updated appraisal, and environmental
reports.
c. PROPOSED MERGER
On March 7, 1996, INTEK, SCL and Securicor signed a Letter of Intent to
combine certain of their wireless communication businesses and related
technology. The transaction will combine INTEK's Roamer One air time services
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business with the United States land mobile radio business of Midland
International Corporation, a wholly owned subsidiary of SCL, and the narrowband
wireless technology and manufacturing operations of Securicor Radiocoms Limited
("SRL"), a wholly owned subsidiary of Securicor. As a result of the proposed
transaction, INTEK will become an integrated wireless company providing air time
services, product distribution and manufacturing for the Land Mobile Radio
market. The completion of the proposed transactions is subject to the completion
of due diligence reviews by the parties, the negotiation and execution of
definitive documentation and customary other closing conditions, including the
receipt of regulatory and third party approvals and consents and the approval of
INTEK's shareholders to the transactions and the issuance of its common stock.
The parties expect the transactions to close during the second quarter of 1996.
This new three way transaction replaces the previously announced proposed
acquisition of Midland, which has been terminated by mutual agreement of SCL and
INTEK. Under the terms of the Letter of Intent, INTEK will purchase a license
from Midland for the use of the Midland trademark in the United States for the
Land Mobile Radio market in exchange for approximately 2.5 million common shares
of INTEK. In addition, INTEK will purchase for cash from Midland certain assets
which are used in the business. SCL will retain the international operations of
Midland and the SCL Systems business which operates as a systems integrator for
wide area communications networks. It is contemplated that SCL will provide
certain management services to INTEK for the support of the Midland two-way
radio business in the United States. The Letter of Intent also provides that
INTEK will acquire all of the shares of SRL in exchange for approximately 25
million common shares of INTEK. The SRL business includes the Linear Modulated
radio technology, a manufacturing facility in Bath, England, a network of
wireless dealers and resellers in the United Kingdom, a Specialized Mobile Radio
network in England, a wireless systems integration business, and all of
Securicor's convertible preferred shares in E.F. Johnson, a manufacturer of
wireless communications equipment in Waseca, Minnesota. INTEK has retained the
investment banking firm FAHNESTOCK & Co., Inc. to provide financial advisory
services to INTEK including an opinion as to the fairness, from a financial
point of view, to the stockholders of INTEK of the terms of the proposed
acquisitions. FAHNESTOCK & Co. will be paid a cash fee for its services.
F-29
<PAGE>
INTEK DIVERSIFIED CORPORATION
Senior Secured Debenture Purchase Agreement
Dated as of February 27, 1996
<PAGE>
INTEK DIVERSIFIED CORPORATION
SENIOR SECURED DEBENTURE PURCHASE AGREEMENT
Dated as of February 27, 1996
INDEX
Page
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ARTICLE I
PURCHASE, SALE AND TERMS OF DEBENTURES
1.01. The Debentures.
1.02. Purchase and Sale of Debentures
(a) The Closing
(b) Use of Proceeds
1.03. Payments and Endorsements
1.04. Redemptions
(a) Required Redemptions
(b) Optional Redemptions With Premium
(c) Notice of Redemptions; Pro Rata Redemptions
1.05. Payment on Non-Business Days
1.06. Registration, etc.
1.07. Transfer and Exchange of Debentures
1.08. Replacement of Debentures
1.09. Closing Fee
1.10 Agent Fee
1.11. Representations by the Purchaser
ARTICLE II
CONDITIONS TO PURCHASER'S OBLIGATION
2.01. Representations and Warranties
2.02. Documentation at Closing
(a) Security Agreements
(b) Deed of Trust
(c) Charter, etc.
(d) Legal Opinion
(e) Secretary's Certificate
(f) Compliance Certificate
<PAGE>
(g) Appraisals, etc.
(h) Payment of Expenses
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01. Organization and Standing
3.02. Corporate Action
3.03. Governmental Approvals
3.04. Litigation
3.05. Compliance with Other Instruments
3.06. Federal Reserve Regulations
3.07. Title to Assets, Patents
3.08. Financial Information
3.09. Taxes
3.10. ERISA
3.11. Security Interest
3.12. Regulation S
3.13. Securities Act
3.14. Disclosure
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. Affirmative Covenants of the Company Other
Than Reporting Requirements
(a) Punctual Payment
(b) Payment of Taxes
(c) Maintenance of Insurance
(d) Preservation of Corporate Existence
(e) Compliance with Laws
(f) Visitation Rights
(g) Maintenance of Properties, etc.
(h) Compliance with ERISA
(j) Compliance with Security Agreements and Deed of Trust
4.02. Negative Covenants of the Company
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(a) Liens
(b) Mergers, Sale of Assets, etc.
(c) Distributions
(d) Maintenance of Ownership of Subsidiaries
4.03. Reporting Requirements
ARTICLE V
EVENTS OF DEFAULT
5.01. Events of Default
5.02. Annulment of Defaults
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01. Certain Defined Terms
6.02. Accounting Terms
ARTICLE VII
MISCELLANEOUS
7.01. No Waiver; Cumulative Remedies
7.02. Amendments, Waivers and Consents
7.03. Addresses for Notices, etc.
7.04. Costs, Expenses and Taxes
7.05. Binding Effect; Assignment
7.06. Survival of Representations and Warranties
7.07. Prior Agreements
7.08. Severability
7.09. Governing Law
7.10. Headings
7.11. Counterparts
7.12. Further Assurances
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EXHIBITS
1.01 Form of Senior Secured Debentures
2.02(a) Form of Security Agreement
2.02(b) Form of Deed of Trust
2.02(d) Matters to be Covered by Opinion Letter
3.01 Schedule of Subsidiaries
3.07 Schedule of Mortgages, Pledges, etc.
4.02 Mergers, Sale of Assets, etc.
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This Senior Secured Debenture Purchase Agreement (the "Agreement") is
entered into as of February 27, 1996 by and among Intek Diversified Corporation,
a Delaware corporation (the "Company") and MeesPierson ICS Limited, a limited
liability company organized under the laws of the United Kingdom (the
"Purchaser").
In consideration of their material covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF DEBENTURES
1.01. THE DEBENTURES. The Company has authorized the issuance and sale to
the Purchaser of the Company's Senior Secured Debentures, due August 31, 1996,
in the original principal amount of $2,500,000. The Senior Secured Debentures
shall be substantially in the form set forth in EXHIBIT 1.01 hereto and are
herein referred to individually as a "Debenture" and collectively as the
"Debentures", which terms shall also include any debentures or notes delivered
in exchange or replacement therefor.
1.02. PURCHASE AND SALE OF DEBENTURES.
(a) THE CLOSING. The Company agrees to issue and sell to the
Purchaser, and, subject to and in reliance upon the representations, warranties,
terms and conditions of this Agreement, the Purchaser agrees to purchase, the
Debentures for an aggregate purchase price of $2,500,000. Such purchase and
sale shall take place at a closing (the "Closing") to be held at the office of
Octagon Capital Canada Corporation, 181 University Avenue, Suite 406, Toronto,
Ontario, Canada M5H 3M7 on February 28, 1996 at 1:00 P.M., or on such other date
and at such time and place as may be mutually agreed upon. At the Closing the
Company will initially issue one Debenture, payable to the order of the
Purchaser, in the principal amount of $2,500,000, against delivery to the
Company of a check or a receipt of a wire transfer in the amount of $2,500,000,
in payment of the full purchase price for the Debentures.
(b) USE OF PROCEEDS. The Company agrees to use the full proceeds
from the sale of the Debentures principally to pay accounts payable owed by the
Company to Simmonds Capital Limited and its subsidiaries.
1.03. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
premium, if any, on the Debentures, shall be made directly by check duly mailed
or delivered to the Purchaser at its address referred to in Section 7.03 hereof,
without any presentment or notation of payment, except that prior to any
transfer of any Debenture, the holder of record shall endorse on such Debenture
a record of the date to which interest has been paid and all payments made on
account of principal of such Debenture.
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1.04. REDEMPTIONS.
(a) REQUIRED REDEMPTIONS. On the stated or accelerated maturity
of the Debentures, the Company will pay the principal amount of the Debentures
then outstanding together with all accrued and unpaid interest then due thereon.
(b) OPTIONAL REDEMPTIONS. In addition to the redemptions of the
Debentures required under subsection 1.04(a), the Company may at any time and
from time to time, redeem the Debentures in whole or in part (in integral
multiples of $10,000) together with interest due on the amount so redeemed
through the date of redemption, without premium or penalty.
(c) NOTICE OF REDEMPTIONS; PRO RATA REDEMPTIONS. Notice of any
optional redemptions pursuant to subsections 1.04(b) shall be given to all
registered holders of the Debentures at least ten (10) business days prior to
the date of such redemption. Each redemption of Debentures pursuant to
subsections 1.04(a) or (b) shall be made so that the Debentures then held by
each holder shall be redeemed in a principal amount which shall bear the same
ratio to the total principal amount of Debentures being redeemed as the
principal amount of Debentures then held by such holder bears to the aggregate
principal amount of the Debentures then outstanding.
1.05. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall
be due on a Saturday, Sunday or a public holiday under the laws of the Province
of Ontario or State of California, such payment may be made on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of payment of interest due.
1.06. REGISTRATION, ETC. The Company shall maintain at its principal
office a register of the Debentures and shall record therein the names and
addresses of the registered holders of the Debentures, the address to which
notices are to be sent and the address to which payments are to be made as
designated by the registered holder if other than the address of the holder, and
the particulars of all transfers, exchanges and replacements of Debentures. No
transfer of a Debenture shall be valid unless made on such register for the
registered holder or his executors or administrators or his or their duly
appointed attorney, upon surrender therefor for exchange as hereinafter
provided, accompanied by an instrument in writing, in form and execution
reasonably satisfactory to the Company. Each Debenture issued hereunder,
whether originally or upon transfer, exchange or replacement of a Debenture or
Debentures, shall be registered on the date of execution thereof by the Company
and shall be dated the date to which interest has been paid on such Debentures
or Debenture. The registered holder of a Debenture shall be that Person
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<PAGE>
in whose name the Debenture has been so registered by the Company. A registered
holder shall be deemed the owner of a Debenture for all purposes of this
Agreement and, subject to the provisions hereof, shall be entitled to the
principal and interest evidenced by such Debenture free from all equities or
rights of setoff or counterclaim between the Company and the transferor of such
registered holder or any previous registered holder of such Debenture.
1.07. TRANSFER AND EXCHANGE OF DEBENTURES. The registered holder of any
Debenture or Debentures may, prior to maturity or prepayment thereof, surrender
such Debenture or Debentures at the principal office of the Company for transfer
or exchange. Within a reasonable time after notice to the Company from a
registered holder of its intention to make such exchange and without expense
(other than transfer taxes, if any) to such registered holder, the Company shall
issue in exchange therefor another Debenture or Debentures, in such
denominations as requested by the registered holder, for the same aggregate
principal amount as the unpaid principal amount of the Debenture or Debentures
so surrendered and having the same maturity and rate of interest, containing the
same provisions and subject to the same terms and conditions as the Debenture or
Debentures so surrendered. Each new Debenture shall be made payable to such
Person or Persons, or registered assigns, as the registered holder of such
surrendered Debenture or Debentures may designate, and such transfer or exchange
shall be made in such a manner that no gain or loss of principal or interest
shall result therefrom.
1.08. REPLACEMENT OF DEBENTURES. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Debenture and,
if requested in the case of any such loss, theft or destruction, upon delivery
of an indemnity bond or other agreement or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Debenture, the Company will issue a new Debenture, of like
tenor and amount and dated the date to which interest has been paid, in lieu of
such lost, stolen, destroyed or mutilated Debenture; PROVIDED, HOWEVER, if any
Debenture of which MeesPierson ICS Limited, its nominee, or any of its
affiliates is the registered holder is lost, stolen or destroyed, the affidavit
of the Chairman, President, Treasurer or any Assistant Treasurer of the
registered holder setting forth the circumstances with respect to such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Debenture in replacement of such
lost, stolen or destroyed Debenture other than the registered holder's written
agreement to indemnify the Company.
1.09. CLOSING FEE. At the Closing, the Company shall issue and deliver to
the Purchaser, as a closing fee in connection with the purchase by the Purchaser
of the Debentures, a certificate or certificates in the name of the Purchaser
(or the nominee of the Purchaser) for 50,000 shares of the Common Stock, $.01
par value of the Company (the "Shares") issued pursuant to Regulation S.
3
<PAGE>
1.10. AGENT FEE. At the Closing, the Company shall pay to Octagon Capital
Canada Corporation, as agent for the Purchaser, an agent fee of US$ 25,000.
1.11. REPRESENTATIONS BY THE PURCHASER. The Purchaser represents to the
Company as follows:
(a) The Purchaser is not a "U.S. Person" as defined by Rule 902 of
Regulation S, was not organized under the laws of any U.S. jurisdiction, and
was not formed for the purpose of investing in securities not registered
under the Securities Act;
(b) At the time the buy order for this transaction was originated,
the Purchaser was outside the United States;
(c) Purchaser is qualified to purchase the Shares under the laws
of its residence;
(d) None of the Purchaser, its affiliates or any person acting on
behalf of the Purchaser or any such affiliate has engaged, or will engage, in
any Directed Selling Efforts (as defined in Rule 902 of Regulation S) with
respect to the Shares;
(e) The Purchaser is not acquiring the Shares for the account or
benefit of a U.S. Person, will not offer, distribute, resell or transfer any
particular Shares in the United States, or to a U.S. Person, or for the
account or benefit of a U.S. Person prior to the end of the forty (40) day
period commencing on the date of the Closing (the "Restricted Period"). All
subsequent offers and sales of the Shares will be made (a) outside the United
States in compliance with Rule 903 or Rule 904 of Regulation S, (b) pursuant
to registration of the Shares under the Securities Act, or (c) pursuant to an
exemption from such registration, in each case in compliance with all
applicable federal or state securities acts or laws in the United States.
The Purchaser understands the conditions of the exemption from registration
afforded by Section 4(1) of the Securities Act and acknowledges that there
can be no assurance that it will be able to rely on such exemption;
(f) The Purchaser understands that the Company has no obligation
or intention to register the Shares under any federal or state securities law
in the United States. The Purchaser further understands that the Shares are
being offered and issued to it in reliance on specific provisions of the
United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations
4
<PAGE>
of the Purchaser set forth herein in order to determine the applicability of
such provisions;
(g) This Agreement has been duly authorized, validly executed, and
delivered on behalf of the Purchaser and is a valid and binding agreement
enforceable against the Purchaser in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(h) The execution and delivery of this Agreement and the
performance by the Purchaser of its obligations hereunder (i) do not violate
or contravene, or constitute a default or require the consent of any party
(other than the Purchaser) under, any instrument or agreement governing the
Purchaser or to which the Purchaser is a party or by which any of its assets
are bound and, (ii) do not violate or contravene any law, regulation or order
by which the Purchaser or any of its assets are bound;
(i) Any offering documents received by the Purchaser include
statements to the effect that the Shares have not been registered under the
Securities Act and may not be offered or sold in the United States, or to a
U.S. Person, or for the account or benefit of a U.S. Person during the
Restricted Period;
(j) The Purchaser is not acquiring the Shares as a result of, or
subsequent to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or general meeting. The
Purchaser understands that acquisition of the Shares is speculative and
involves risks, including but not limited to, those described in the offering
documents; and
(k) In the event of resale of the Shares during the Restricted
Period, the Purchaser shall provide a written confirmation or other written
notice to any distributor, dealer or person receiving a selling concession,
fee or other remuneration in respect of the Shares stating that such
purchaser is subject to the same restrictions on offers and sales that apply
to the Purchaser, and shall require that any such purchaser shall provide
such written confirmation or other notice upon resale of the Shares during
the Restricted Period.
ARTICLE II
CONDITIONS TO PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Debentures at
the Closing is subject to the following conditions:
5
<PAGE>
2.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in Article III hereof shall be true on the
date of the Closing.
2.02. DOCUMENTATION AT CLOSING. The Purchaser shall have received prior
to or at the Closing all of the following, each in form and substance
satisfactory to the Purchaser and its special counsel:
(a) SECURITY AGREEMENTS. A Security Agreement, in substantially the
form attached as EXHIBIT 2.02(A) (the "Security Agreement"), and all related
financing statements and other similar instruments and documents, shall have
been executed and delivered to the Purchaser by a duly authorized officer of
each of the Company and Roamer One, Inc., a Delaware corporation and a
Subsidiary of the Company ("Roamer One").
(b) DEED OF TRUST. A Deed of Trust, in the form attached as
EXHIBIT 2.02(B) (the "Deed of Trust"), shall have been executed and delivered to
the Purchaser by a duly authorized officer of Olympic Plastics Company, Inc., a
California corporation and a Subsidiary of the Company ("Olympic Plastics").
(c) CHARTER, ETC. A certified copy of all charter documents of the
Company; a certified copy of the resolutions of the Board of Directors and, to
the extent required, the stockholders of the Company, Roamer One and Olympic
Plastics evidencing approval of this Agreement, the Security Agreements, the
Deed of Trust, the Debentures, the Shares and other matters contemplated hereby;
a certified copy of the By-laws of the Company; and certified copies of all
documents evidencing other necessary corporate or other action and governmental
approvals, if any, with respect to this Agreement, the Security Agreements, the
Deed of Trust, the Debentures and the Shares.
(d) LEGAL OPINION. A favorable opinion of Kohrman, Jackson & Krantz,
counsel for the Company, as to matters set forth in EXHIBIT 2.02(D), and as to
such other matters as the Purchaser, or its special counsel, may reasonably
request.
(e) SECRETARY'S CERTIFICATE. A certificate of the Secretary or an
Assistant Secretary of the Company, Roamer One and Olympic Plastics which shall
certify the names of the officers of the Company or such Subsidiary, authorized
to sign this Agreement, the Security Agreements, the Deed of Trust, the
Debentures, the Shares and the other documents or certificates to be delivered
pursuant to this Agreement by the Company, or any of its officers, together with
the true signatures of such officers. The Purchaser may conclusively rely on
such certificates until it shall receive a further certificate of the Secretary
or an Assistant Secretary of the Company or such Subsidiary
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<PAGE>
cancelling or amending the prior certificate and submitting the signatures of
the officers named in such further certificate.
(f) COMPLIANCE CERTIFICATE. A certificate from a duly authorized
officer of the Company stating that the representations and warranties of the
Company contained in Article III hereof and otherwise made by the Company in
writing in connection with the transactions contemplated hereby are true and
correct and that no condition or event has occurred or is continuing or will
result from execution and delivery of this Agreement or the Debentures which
constitute an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
(g) APPRAISALS, ETC. Such appraisals, valuations and other
information regarding the assets of the Company as may reasonably be requested
by the Purchaser.
(h) PAYMENT OF EXPENSES. Payment for the costs, expenses, stamp
taxes, if any, and filing fees identified in Section 7.04 as to which the
Purchaser gives the Company notice prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
3.01. ORGANIZATION AND STANDING. Each of the Company, Roamer One and
Olympic Plastics is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction in which it was organized and has
all requisite corporate power and authority for the ownership and operation of
its properties and for the carrying on of its business as now conducted and as
now proposed to be conducted. Each of the Company, Roamer One and Olympic
Plastics is duly licensed or qualified and in good standing as a foreign
corporation authorized to do business in any jurisdictions wherein the character
of the property owned or leased, or the nature of the activities conducted by
it, makes such licensing or qualification necessary. Except as set forth in
EXHIBIT 3.01, The Company has no Subsidiaries.
3.02. CORPORATE ACTION. Each of the Company, Roamer One and Olympic
Plastics has all necessary corporate power and has taken all corporate action
required to make all the provisions of this Agreement, the Security Agreements,
the Debentures, the Shares and any other agreements and instruments executed in
connection herewith and therewith the valid and enforceable obligations they
purport to be. The issuance of the Debentures and the Shares is not subject to
preemptive or other similar statutory or contractual rights and will not
conflict with any provisions of any agreement or instrument to which the Company
is a party or by which it is bound.
7
<PAGE>
3.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by each of the Company, Roamer One and
Olympic Plastics of, or for the performance by it of its obligations under, this
Agreement, the Security Agreements, the Deed of Trust, the Debentures or the
Shares.
3.04. LITIGATION. There is no litigation or governmental proceeding or
investigation pending or, to the best of the knowledge of the Company,
threatened against any of the Company, Roamer One or Olympic Plastics affecting
any of their respective properties or assets where such litigation, proceeding
or investigation, either individually or in the aggregate, would have a material
adverse effect on the Company or such Subsidiary, respectively, nor, to the best
of the knowledge of the Company, has there occurred any event on the basis of
which any such litigation, proceeding or investigation might properly be
instituted. Neither the Company, Roamer One nor Olympic Plastics is in default
with respect to any order, writ, injunction, decree, ruling or decision of any
court, commission, board or other government agency affecting it. There are no
actions or proceedings pending or threatened which might result, either in any
case or in the aggregate, in any material adverse change in the business,
operations, affairs or condition of any of the Company, Roamer One or Olympic
Plastics or in any of their respective properties or assets, or which might call
into question the validity of this Agreement, the Security Agreements, the Deed
of Trust, the Debentures, the Shares or any action taken or to be taken pursuant
hereto or thereto.
3.05. COMPLIANCE WITH OTHER INSTRUMENTS. Each of the Company, Roamer One
and Olympic Plastics is in compliance in all respects with the terms and
provisions of this Agreement and of its charter and by-laws and in all material
respects with the terms and provisions of the mortgages, indentures, leases,
agreements and other instruments and of all judgments, decrees, governmental
orders, statutes, rules and regulations by which it is bound or to which its
properties or assets are subject. Neither the execution and delivery of this
Agreement, the Security Agreements, the Deed of Trust, the Debentures or the
Shares, nor the consummation of any transactions contemplated hereby or thereby,
has constituted or resulted in or will constitute or result in a default or
violation of any term or provision in any of the foregoing documents or
instruments.
3.06. FEDERAL RESERVE REGULATIONS. The Company is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of the Debentures will be
used to purchase or carry any margin
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security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
3.07. TITLE TO ASSETS, PATENTS. Except as is set forth in EXHIBIT 3.07,
each of the Company, Roamer One and Olympic Plastics has good and clear record
and marketable title in fee to such of its fixed assets as are real property,
and good and merchantable title to all of its other assets, now carried on its
books including those reflected in the most recent consolidated balance sheet of
the Company, or acquired since the date of such balance sheet (except personal
property disposed of since said date in the ordinary course of business) free of
any mortgages, pledges, charges, liens, security interests or other
encumbrances. The Company enjoys peaceful and undisturbed possession under all
leases under which it is operating, and all said leases are valid and subsisting
and in full force and effect. Neither the Company, Roamer One nor Olympic
Plastics owns any patents, patent rights, licenses, permits, trade secrets,
trademarks (except for "Roamer One" trademark owned by Roamer One), trademark
rights, trade names or trade name rights or franchises or copyrights, and no
such intellectual property rights are used in the conduct of its business as now
operated and as now proposed to be operated; and the conduct of its business as
now operated and as now proposed to be operated does not and will not conflict
with valid patents, patent rights, licenses, permits, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions and intellectual property rights of others
3.08. FINANCIAL INFORMATION. The Company has previously delivered to the
Purchaser copies of its consolidated financial statements (i) for the year ended
December 31, 1994, certified by the Company's auditors and (ii) for the twelve-
month period ended December 31, 1995, being unaudited and subject to year-end
adjustments consisting of normal recurring items which will not be material in
the aggregate. Such financial statements present fairly the financial position
of the Company and the Subsidiaries as at the dates thereof and its results of
operations for the periods covered thereby and have been prepared in accordance
with generally accepted accounting principles consistently applied. Neither the
Company nor any Subsidiary has any liability contingent or otherwise not
disclosed in such financial statements or in the notes thereto that could,
together with all such other liabilities, materially affect the financial
condition of the Company and the Subsidiaries. Since the date of such unaudited
financial statements, (i) there has been no adverse change in the business,
assets or condition, financial or otherwise, operations or prospects, of the
Company and its Subsidiaries; (ii) neither the business, condition, operations
or prospects of the Company and the Subsidiaries, taken as a whole, nor any of
their respective properties or assets has been adversely affected as a result of
any legislative or regulatory change, any revocation or change in any franchise,
license or right to do business, or any other event or occurrence, whether or
not insured against; and (iii) the Company has not made any distribution on its
capital stock.
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3.09. TAXES. Each of the Company, Roamer One and Olympic Plastics has
accurately prepared and timely filed all federal, state and other tax returns
required by law to be filed by it, and all taxes shown to be due and all
additional assessments have been paid or provision made therefor. Neither the
Company, Roamer One nor Olympic Plastics knows of no additional assessments or
adjustments pending or threatened against it for any period, nor of any basis
for any such assessment or adjustment.
3.10. ERISA. No employee benefit plan established or maintained, or to
which contributions have been made, by any of the Company, Roamer One or Olympic
Plastics, which is subject to part 3 of Subtitle B of Title I of The Employee
Retirement Income Security Act of 1974, as amended ("ERISA") had an accumulated
funding deficiency (as such term is defined in Section 302 of ERISA) as of the
last day of the most recent fiscal year of such plan ended prior to the date
hereof, and no material liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any such plan by any of the Company, Roamer
One or Olympic Plastics.
3.11. SECURITY INTEREST. The security interest granted to the Purchaser
in the Security Agreements has been duly perfected to the extent that such
security interest may be perfected by filing UCC-1 financing statements in
California, New York, North Carolina and Ohio.
3.12. REGULATION S. With respect to the Shares :
(a) The Company is a "Domestic Issuer" and a "Reporting Issuer", as
such terms are defined by Rule 902 of Regulation S. The Company has
registered its common stock pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the
date hereof is in full compliance with all reporting requirements of either
Section 13(a) or 15(d) of the Exchange Act, and Seller's common stock
currently trades on the NASDAQ Small-Cap Market;
(b) The Company, any affiliate of the Company, and any person
acting on behalf of the Company or any such affiliate (i) have not engaged in
any Directed Selling Efforts with respect to the Shares, (ii) have complied
with the offering restrictions requirements of Regulation S and (iii) have
complied with all other applicable requirements of Regulation S and state law;
(c) No offer of the Shares was made by the Company to a person in
the United States;
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(d) The transactions contemplated by this Agreement (i) have not
been pre-arranged with a purchaser who is in the United States or is a U.S.
Person and (ii) are not part of a plan or scheme to evade the registration
provisions of the Securities Act.
(e) The Shares will be, following the completion of the Restricted
Period, freely transferable, listed and eligible for trading on the NASDAQ
Small-Cap Market; and
(f) The Shares (i) are free and clear of any security interests,
liens, claims or other encumbrances; (ii) have been duly and validly
authorized and on the Closing Date will be duly and validly issued, fully
paid and nonassessable; (iii) will not have been, individually and
collectively, issued or sold in violation of any preemptive or other similar
rights of the holders of any securities of the Company; and (iv) will not
subject the holders thereof to personal liability by reason of being such
holders.
3.13. SECURITIES ACT. Neither the Company nor anyone acting on its behalf
has offered any of the Debentures or solicited any offers to purchase or made
any attempt by preliminary conversation or negotiations to dispose of the
Debentures to any Person other than the Purchaser. Neither the Company nor
anyone acting on its behalf has offered or will offer to sell the Debentures to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, so as to bring
the issuance and sale of the Debentures under the registration provisions of the
Securities Act.
3.14. DISCLOSURE. Neither this Agreement, the Security Agreements, the
Deed of Trust, the Debentures nor any other agreement, document, certificate or
written statement furnished to the Purchaser or its special counsel by or on
behalf of the Company, Roamer One or Olympic Plastics in connection with the
transactions contemplated hereby or thereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact within
the special knowledge of any of the Company, Roamer One or Olympic Plastics or
any of their respective executive officers which has not been disclosed herein
or in writing by them to the Purchaser and which materially adversely affects,
or in the future in their opinion may, insofar as they can now foresee,
materially adversely affect the business, properties, assets or condition,
financial or otherwise, of the Company and its Subsidiaries.
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ARTICLE IV
COVENANTS OF THE COMPANY
4.01. AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, as long as any of the Debentures are
outstanding, it will perform and observe the following covenants and provisions
and will cause each Subsidiary to perform and observe such of the following
covenants and provisions as are applicable to such Subsidiary:
(a) PUNCTUAL PAYMENT. Pay the principal of and interest on each of
the Debentures at the times and place and in the manner provided in the
Debentures and herein.
(b) PAYMENT OF TAXES. Pay and discharge, and cause each Subsidiary
to pay and discharge, all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Company or any Subsidiary, provided that neither the Company
nor the Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or Subsidiary concerned shall have set aside on its
books adequate reserves with respect thereto.
(c) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates, but in any
event in amounts sufficient to prevent the Company or such Subsidiary from
becoming a co-insurer.
(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties; PROVIDED, HOWEVER, that nothing herein contained shall
prevent any merger, consolidation or transfer of assets permitted by subsection
4.02(b). Preserve and maintain, and cause each Subsidiary to preserve and
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maintain, all licenses and other rights to use patents, processes, licenses,
trademarks, trade names, inventions, intellectual property rights or copyrights
owned or possessed by it and necessary to the conduct of its business.
(e) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could materially adversely
affect its business or condition, financial or other.
(f) VISITATION RIGHTS. At any reasonable time and from time to time,
and upon prior notice, permit the Purchaser or any agents or representatives
thereof, to examine and make copies of and extracts from the records and books
of account of, and visit and inspect the properties of, the Company and any
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
any Subsidiary with any of their officers or directors and independent
accountants.
(g) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause
each Subsidiary to maintain and preserve, all of its properties, necessary or
useful in the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted.
(h) COMPLIANCE WITH ERISA. Comply, and cause each Subsidiary to
comply, with all minimum funding requirements applicable to any pension or other
employee benefit or employee contribution plans which are subject to ERISA or to
the Internal Revenue Code of 1986, as amended (the "Code"), and comply, and
cause each Subsidiary to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any Subsidiary
will permit any event or condition to exist which could permit any such plan to
be terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.
(i) COMPLIANCE WITH SECURITY AGREEMENTS AND DEED OF TRUST. Comply at
all times with all of the terms and conditions of the Security Agreements and
the Deed of Trust.
4.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Debentures are outstanding, it will comply with and observe the
following covenants and provisions, and will cause each Subsidiary to comply
with and observe such of the following covenants and provisions as are
applicable to such Subsidiary, and will not:
(a) LIENS. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature, upon or with respect to any of its
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properties, now owned or hereinafter acquired, or assign or otherwise convey any
right to receive income, except that the foregoing restrictions shall not apply
to mortgages, deeds of trust, pledges, liens, security interests or other
charges or encumbrances:
(i) for taxes, assessments or governmental charges or levies
on property of the Company or any Subsidiary if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings;
(ii) imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business;
(iii) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(iv) securing the performance of bids, tenders, contracts
(other than for the repayment of borrowed money), statutory obligations and
surety bonds;
(v) in the nature of zoning restrictions, easements and rights
or restrictions of record on the use of real property which do not
materially detract from its value or impair its use;
(vi) arising by operation of law in favor of the owner or
sublessor of leased premises and confined to the property rented;
(vii) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however, that
no execution or levy has been made;
(viii) described in EXHIBIT 3.07, provided that no such lien is
extended to cover other or different property of the Company or any
Subsidiary;
(ix) now or hereafter granted to the Purchaser pursuant to the
Security Agreements;
(x) arising out of a purchase money mortgage or security
interest on personal property to secure the purchase price of such property
(or to secure Indebtedness incurred solely for the purpose of financing the
acquisition of any such
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property), provided that such purchase money mortgage or security interest
does not extend to any other or different property of the Company or any
Subsidiary; or
(xi) granted or imposed after the date hereof which are, by
operation of law or pursuant to a subordination, intercreditor or similar
agreement, junior and subordinate in all respects to the security interest
granted to the Purchaser pursuant to the Security Agreements.
(b) MERGERS, SALE OF ASSETS, ETC. Except as set forth in
EXHIBIT 4.02, merge or consolidate with, or sell, assign, lease or otherwise
dispose of or voluntarily part with the control of (whether in one transaction
or in a series of transactions) a material portion of its assets (whether now
owned or hereinafter acquired) or sell, assign or otherwise dispose of (whether
in one transaction or in a series of transactions) any of its accounts
receivable (whether now in existence or hereinafter created) at a discount or
with recourse, to, any Person, or permit any Subsidiary to do any of the
foregoing, except for sales or other dispositions of inventory and equipment in
the ordinary course of business and except that (1) any Subsidiary may merge
into or consolidate with or transfer assets to any other Subsidiary, (2) any
Subsidiary may merge into or transfer assets to the Company, and (3) the Company
may merge any Person into it or otherwise acquire such Person as long as the
Company is the surviving entity, such merger or acquisition does not result in
the violation of any of the provisions of this Agreement and no such violation
exists at the time of such merger or acquisition, and, provided that such merger
or acquisition does not result in the issuance (in one or more transactions) of
shares of the voting stock of the Company representing in the aggregate more
than twenty percent (20%) of the total outstanding voting stock of the Company,
on a fully diluted basis, immediately following the issuance thereof.
(c) DISTRIBUTIONS. Declare or pay any dividends, purchase, redeem,
retire, or otherwise acquire for value any of its capital stock (or rights,
options or warrants to purchase such shares) now or hereafter outstanding,
return any capital to its stockholders as such, or make any distribution of
assets to its stockholders as such, or permit any Subsidiary to do any of the
foregoing (such transactions being hereinafter referred to as "Distributions"),
EXCEPT that the Subsidiaries may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Company; AND,
EXCEPT that nothing herein contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any
dividend consisting of shares of any class of capital stock to the holders
of shares of such class of capital stock,
(ii) redeeming any stock of a deceased stockholder out of
insurance held by the Company on that stockholder's life, or
(iii) redeeming the stock of a current stockholder out of the
proceeds from the sale after the date hereof of additional shares of the
Company's Common Stock,
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if in the case of any such transaction there does not exist at the time of such
Distribution an Event of Default or an event which, but for the requirement that
notice be given or time elapse or both, would constitute an Event of Default and
provided that such Distribution can be made in compliance with the other terms
of this Agreement.
(d) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell or otherwise
dispose of any shares of capital stock of any Subsidiary, except to the Company
or another Subsidiary, or permit any Subsidiary to issue, sell or otherwise
dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except to the Company or another Subsidiary, PROVIDED, HOWEVER, that
nothing herein contained shall prevent any merger, consolidation or transfer of
assets permitted by subsection 4.02(b).
4.03. REPORTING REQUIREMENTS. The Company will furnish to each registered
holder of any Debenture.
(a) as soon as possible and in any event within five (5) business
days after the occurrence of each Event of Default or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default,
the statement of the chief financial officer of the Company setting forth
details of such Event of Default or event and the action which the Company
proposes to take with respect thereto;
(b) as soon as available and in any event within forty-five (45) days
after the end of each of the first three quarters of each fiscal year of the
Company, a copy of the Company's Form 10-Q with respect to such quarter as filed
with the Securities and Exchange Commission ;
(c) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the Company's
Form 10-K for such fiscal year as filed with the Securities and Exchange
Commission;
(d) at the time of delivery of each quarterly and annual statement, a
certificate, executed by the chief financial officer, stating that such officer
has caused this Agreement and the Debentures to be reviewed and has no knowledge
of any default by the Company or any Subsidiary in the performance or observance
of any of the provisions of this Agreement or the Debentures or, if such officer
or accountant has such knowledge, specifying such default and the nature
thereof;
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(e) promptly upon receipt thereof, any written report submitted to
the Company by independent public accountants in connection with an annual or
interim audit of the books of the Company and its Subsidiaries made by such
accountants;
(f) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
Company or any Subsidiary of the type described in Section 3.04; and
(g) promptly after sending, making available, or filing the same,
such reports and financial statements as the Company or any Subsidiary shall
send or make available to the stockholders of the Company or the Securities and
Exchange Commission and such other information respecting the business,
properties or the condition or operations, financial or otherwise, of the
Company or any of its Subsidiaries as the Purchaser may from time to time
reasonably request.
ARTICLE V
EVENTS OF DEFAULT
5.01. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Company shall fail to pay any installment of principal of any
of the Debentures when due; or
(b) Any representation or warranty made by the Company or any
Subsidiary in this Agreement, the Security Agreements, the Deed of Trust, the
Debentures or by the Company or any Subsidiary (or any officers of the Company
or any Subsidiary) in any certificate, instrument or written statement
contemplated by or made or delivered pursuant to or in connection with this
Agreement, shall prove to have been incorrect when made in any material respect;
or
(c) The Company shall default for ten (10) days in the performance of
any covenant contained in Section 4.02; or
(d) The Company or any Subsidiary shall fail to perform or observe
any other term, covenant or agreement contained in this Agreement, the Security
Agreements, the Deed of Trust or the Debentures on its part to be performed or
observed and any such failure remains unremedied for thirty (30) days after
written notice thereof shall have been given to the Company by any registered
holder of the Debentures; or
(e) The Company or any Subsidiary shall fail to pay any Indebtedness
for borrowed money (other than as evidenced by the Debentures) owing by the
Company or
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such Subsidiary (as the case may be), or any interest or premium thereon, when
due (or, if permitted by the terms of the relevant document, within any
applicable grace period), whether such Indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise, or shall fail to perform any term, covenant or agreement on its part
to be performed under any agreement or instrument (other than this Agreement or
the Debentures) evidencing or securing or relating to any Indebtedness owing by
the Company or any Subsidiary, as the case may be, when required to be performed
(or, if permitted by the terms of the relevant document, within any applicable
grace period), if the effect of such failure to pay or perform is to accelerate,
or to permit the holder or holders of such Indebtedness, or the trustee or
trustees under any such agreement or instrument to accelerate, the maturity of
such Indebtedness, unless such failure to pay or perform shall be waived by the
holder or holders of such Indebtedness or such trustee or trustees; or
(f) The Company or any Subsidiary shall be involved in financial
difficulties as evidenced (i) by its admitting in writing its inability to pay
its debts generally as they become due; (ii) by its commencement of a voluntary
case under Title 11 of the United States Code as from time to time in effect, or
by its authorizing, by appropriate proceedings of its Board of Directors or
other governing body, the commencement of such a voluntary case; (iii) by its
filing an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition; (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property; or (vii) by its making an assignment for
the benefit of, or entering into a composition with, its creditors, or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or
(g) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company or any Subsidiary and such judgment, writ, or similar process shall
not be released, vacated or fully bonded within sixty (60) days after its issue
or levy;
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then, and in any such event, the Purchaser or any other holder of the Debentures
may, by notice to the Company, declare the entire unpaid principal amount of the
Debentures, all interest accrued and unpaid thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Debentures, all such accrued interest and all such amounts shall become and be
forthwith due and payable (unless there shall have occurred an Event of Default
under subsection 5.01(f) in which case all such amounts shall automatically
become due and payable), without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived by the Company.
5.02. ANNULMENT OF DEFAULTS. Section 5.01 is subject to the condition
that, if at any time after the principal of any of the Debentures shall have
become due and payable, and before any judgment or decree for the payment of the
moneys so due, or any thereof, shall have been entered, all arrears of interest
upon all the Debentures and all other sums payable under the Debentures and
under this Agreement (except the principal of the Debentures which by such
declaration shall have become payable) shall have been duly paid, and every
other default and Event of Default shall have been made good or cured, then and
in every such case the holders of seventy-five percent (75%) or more in
principal amount of all Debentures then outstanding may, by written instrument
filed with the Company, rescind and annul such declaration and its consequences;
but no such rescission or annulment shall extend to or affect any subsequent
default or Event of Default or impair any right consequent thereon.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Agreement" means this Senior Secured Debenture Purchase Agreement as from
time to time amended and in effect between the parties.
"Closing" shall have the meaning assigned to that term in Section 1.02(a).
"Code" shall have the meaning assigned to that term in Section 4.01(h).
"Company" means and shall include Intek Diversified Corporation, a Delaware
corporation and its successors and assigns.
"Debentures" shall have the meaning assigned to that term in Section 1.01.
"Distribution" shall have the meaning assigned to that term in Section
4.02(c).
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"ERISA" shall have the meaning assigned to that term in Section 3.10.
"Events of Default" shall have the meaning assigned to that term in
Section 5.01.
"Exchange Act" shall have the meaning assigned to that term in
Section 1.11.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities, but in
any event including, without limitation, liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including, without
limitation, (i) all guaranties, endorsements and other contingent obligations,
in respect of Indebtedness of others, whether or not the same are or should be
so reflected in said balance sheet, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable United
States Statements of Financial Accounting Standards, determined in accordance
with applicable United States Statements of Financial Accounting Standards.
"Olympic Plastics" means and shall include Olympic Plastics Company, Inc.,
a California corporation, and its successors and assigns.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Purchaser" means and shall include not only Octagon Investments Limited
but also any other holder or holders of any of the Debentures.
"Regulation S" means Regulation S promulgated by the Securities and
Exchange Commission pursuant to the Securities Act, or any successor rule or
regulation, as in effect at the time.
"Restricted Period" shall have the meaning assigned to that term in
Section 1.11.
"Roamer One" means and shall include Roamer One, Inc., a Delaware
corporation, and its successors and assigns.
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"Securities Act" means the Securities Act of 1933 or any similar Federal
statute, and the rules and regulations of the Securities and Exchange Commission
(or of any other Federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.
"Shares" shall have that meaning assigned to that term in Section 1.09.
"Subsidiary" or "Subsidiaries" means any corporation or trust of which the
Company and/or any of its other Subsidiaries (as herein defined) directly or
indirectly owns at the time all of the outstanding shares of every class of such
corporation or trust other than directors' qualifying shares.
"U.S. Person" shall have the meaning assigned to that term in Section 1.11.
6.02. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with United States generally accepted
accounting principles consistent with those applied in preparation of the
financial statements attached hereto as EXHIBIT 3.08, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with such principles.
ARTICLE VII
MISCELLANEOUS
7.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
the Purchaser, or any other holder of the Debentures in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
7.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement
the Debentures to the contrary notwithstanding, changes in or additions to this
Agreement may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived, if the Company (i) shall obtain
consent thereto in writing from the holder or holders of at least seventy-five
percent (75%) in principal amount of all Debentures then outstanding, and (ii)
shall, in each case, deliver copies of such consent in writing to any holders
who did not execute the same; PROVIDED that no such consent shall be effective
to reduce or to postpone the date fixed for the payment of the principal
(including any required redemption) or interest payable on any Debenture,
without the consent of the holder thereof, or to reduce the percentage of the
Debentures the consent of the holders of which is required under this Section.
Any waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall
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be effective only in the specific instance and for the specific purpose for
which given. Written notice of any waiver or consent effected under this
subsection shall promptly be delivered by the Company to any holders who did not
execute the same.
7.03. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and
other communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telegraphed or delivered to the
applicable party at the addresses indicated below:
If to the Company:
Intek Diversified Corporation
970 West 190th Street, Suite 720
Torrance, CA 90502
Attention: David Neibert
If to the Purchaser:
MeesPierson ICS Limited
Camomile Court
23 Camomile Street
London, United Kingdom EC3 A7PP
Attention: Stephen Grimwood
with a copy to:
Octagon Capital Canada Corporation
181 University Avenue, Suite 406
Toronto, Ontario Canada M5H 3M7
Attention: Paul D. Davis
If to any other holder of the Debentures: at such holder's address for
notice as set forth in the register maintained by the Company, or, as to each of
the foregoing, at such other address as shall be designated by such Person in a
written notice to the other party complying as to delivery with the terms of
this Section. All such notices, requests, demands and other communications
shall, when mailed or telegraphed, respectively, be effective when deposited in
the mails or delivered to the telegraph company, respectively, addressed as
aforesaid.
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7.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all
costs and expenses of the Purchaser in connection with the preparation,
execution and delivery of this Agreement, the Security Agreements, the Deed of
Trust, the Debentures, the Shares and other instruments and documents to be
delivered hereunder, including the reasonable fees and out-of-pocket expenses of
Messrs. Testa, Hurwitz & Thibeault, special counsel for the Purchaser, with
respect thereto, as well as the reasonable fees and out-of-pocket expenses of
legal counsel, independent public accountants and other outside experts
reasonably retained by the Purchaser in connection with the amendment or
enforcement of this Agreement, the Security Agreements, the Deed of Trust, the
Debentures, the Shares and other instruments and documents to be delivered
hereunder or thereunder. In addition, the Company shall pay any and all stamp
and other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Security Agreements, the Deed of
Trust, the Debentures, the Shares and the other instruments and documents to be
delivered hereunder or thereunder and agrees to save the Purchaser harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and filing fees.
7.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Purchaser.
7.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement, the Debentures, or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof and the making of the loans.
7.07. PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.08. SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
7.09. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware.
7.10. HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
7.11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
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7.12. FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Security Agreements, the Deed of Trust and the
Debentures.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
INTEK DIVERSIFIED CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
MEESPIERSON ICS LIMITED
By___________________________________
Name: ______________________________
Title: _____________________________
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26
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EXHIBIT 1.01
INTEK DIVERSIFIED CORPORATION
SENIOR SECURED DEBENTURE
$2,500,000 February 28, 1996
For value received, Intek Diversified Corporation, a Delaware corporation
(the "Company"), hereby promises (i) to pay MeesPierson ICS Limited or
registered assigns (hereinafter referred to as the "Payee"), on or before
August 31, 1996 (the "Maturity Date"), the principal sum of Two Million Five
Hundred Thousand Dollars ($2,500,000) or such part thereof as then remains
unpaid and (ii) to pay interest from the date hereof on the whole amount of said
principal sum remaining from time to time unpaid at the rate of ten and one-half
percent (10.5%) per annum, such interest to be payable on the Maturity Date.
Principal and interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Payee or
at such other place as the legal holder may designate from time to time in
writing to the Company. Interest shall be computed on the basis of a 360-day
year and a 30-day month.
This Debenture is issued pursuant to and is entitled to the benefits of a
certain Senior Secured Debenture Purchase Agreement, dated as of February 27,
1996, between the Company and MeesPierson ICS Limited (as the same may be
amended from time to time, hereinafter referred to as the "Agreement"), and each
holder of this Debenture, by his acceptance hereof, agrees to be bound by the
provisions of the Agreement, including, without limitation, that in case of an
Event of Default, as defined in the Agreement, the principal of this Debenture
may become or may be declared due and payable in the manner and with the effect
provided in the Agreement.
As further provided in the Agreement, upon surrender of this Debenture for
transfer or exchange, a new Debenture or new Debentures of the same tenor dated
the date to which interest has been paid on the surrender Debenture and in an
aggregate principal amount equal to the unpaid principal amount of the Debenture
so surrendered will be issued to, and registered in the name of, the transferee
or transferees. The Company may treat the person in whose name this Debenture
is registered as the owner hereof for the purpose of receiving payment and for
all other purposes.
This Debenture is secured by and entitled to the benefits of (i) a
certain Security Agreement (as that term is defined in the Agreement), dated
February 27, 1996, from the Company to MeesPierson ICS Limited, (ii) a certain
Security Agreement, dated February 27, 1996, from Roamer One, Inc., a
Delaware corporation and a Subsidiary (as that term is defined in the
Agreement) of the Company, to MeesPierson ICS Limited, and (iii) a Deed of
Trust (as that term is defined in the Agreement) of Olympic Plastics
<PAGE>
Company, Inc., a California corporation and a Subsidiary of the Company, to
MeesPierson ICS Limited.
In case any payment herein provided for shall not be paid when due, the
Company promises to pay all cost of collection, including all reasonable
attorney's fees.
This Debenture shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
The Company and all endorsers and guarantors of this Debenture herein waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Debenture.
INTEK DIVERSIFIED CORPORATION
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Attest:
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
EXHIBIT 2.02(A)
INTEK DIVERSIFIED CORPORATION
SECURITY AGREEMENT
Security Agreement, dated as of February 27, 1996, made by Intek
Diversified Corporation, a Delaware corporation (the "Company") in favor of
MeesPierson ICS Limited (the "Secured Party").
RECITALS
Pursuant to the Senior Secured Debenture Purchase Agreement of even date
herewith (as amended, supplemented or otherwise modified from time to time (the
"Purchase Agreement"), between the Company and the Secured Party, the Secured
Party has agreed to purchase the Debentures (as defined in the Agreement) from
the Company, upon the terms and subject to the conditions set forth therein. It
is a condition precedent to the obligation of the Secured Party to purchase the
Debentures from the Company pursuant to the Agreement that the Company shall
has executed and delivered this Security Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Secured Party to purchase the Debentures
pursuant to the Agreement, the Company hereby agrees with the Secured Party as
follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which are
defined in the Agreement and used herein are so used as so defined; the
following terms which are defined in the Uniform Commercial Code in effect on
the date hereof are used herein as therein defined: Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory and Proceeds; and the following terms shall has the following
meanings:
"Code" means the Uniform Commercial Code as from time to time in
effect.
"Collateral" shall has the meaning assigned to it in Section 2
of this Security Agreement.
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"Intellectual Property Rights" means all rights of the Company
in, to or with respect to any intellectual property now or hereafter owned,
possessed or acquired by or on behalf of the Company, including without
limitation patents, letters patent, patent applications, trademarks, service
marks, trade names and copyrights and any applications therefor or
registrations, recordings, divisions, continuations, continuations-in-part,
renewals, reissues or extensions thereof, including those patents, copyrights
and/or trademarks, and applications therefor, set forth on SCHEDULE I hereto.
"Obligations" means the unpaid principal amount of, and
interest on, the Debentures and all other obligations and liabilities of the
Company to the Secured Party, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Agreement, the Debentures or
this Security Agreement and any other document executed and delivered in
connection therewith or herewith and each other obligation and liability,
whether direct or indirect, absolute or contingent, due or to become due, or now
or hereafter existing, of the Company to the Secured Party, whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all reasonable fees and disbursements
of counsel to the Secured Party) or otherwise, but excluding any such
obligations of the Company to the Secured Party arising through the purchase by
or assignment to the Secured Party of the Company's obligations to third
parties.
"Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
2. GRANT OF SECURITY INTEREST. As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Secured Party a security interest in all of the following property
now owned or at any time hereafter acquired by the Company or in which the
Company now has or at any time in the future may acquire any right, title or
interest (collectively, the "Collateral"): (i) Accounts; (ii) Chattel Paper;
(iii) Documents; (iv) Equipment; (v) Fixtures, (vi) General Intangibles; (vii)
Goods; (viii) Instruments; (ix) Intellectual Property Rights; (x) Inventory;
(xi) insurance claims and proceeds; (xii) books and records, computer programs,
databases and other computer materials of the Company pertaining to any and all
of the foregoing; and (xiii) to the extent not otherwise included, Proceeds and
products of any and all of the foregoing.
3. RIGHTS OF SECURED PARTY; LIMITATIONS ON SECURED PARTY'S
OBLIGATIONS.
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(a) COMPANY REMAINS LIABLE UNDER ACCOUNTS. Anything herein
to the contrary notwithstanding, the Company shall remain responsible with
respect to each of the Accounts, to observe and perform all the conditions and
obligations to be observed and performed by it thereunder in accordance with the
terms of any agreement giving rise to each such Account. The Secured Party
shall not has any obligation or liability under any Account (or any agreement
giving rise thereto) by reason of or arising out of this Security Agreement or
the receipt by the Secured Party of any payment relating to such Account
pursuant hereto, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of the Company under or pursuant to any Account
(or any agreement giving rise thereto), to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may has
been assigned to it or to which it may be entitled at any time or times.
(b) NOTICE TO ACCOUNT DEBTORS. Upon the request of the
Secured Party at any time after the occurrence and during the continuance of an
Event of Default, the Company shall notify account debtors on the Accounts that
the Accounts has been collaterally assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party. In
accordance with the Secured Party's customary practices, the Secured Party may
in its own name or in the name of the Company communicate with account debtors
on the Accounts to verify with them to its satisfaction the existence, amount
and terms of any Accounts.
(c) COLLECTIONS ON ACCOUNTS. The Company shall has the
sole right to collect the Accounts, except that after the occurrence and
during the continuance of an Event of Default, the Secured Party may curtail
or terminate said right and collect the Accounts as the secured party
hereunder. All Proceeds constituting collections of Accounts shall be
applied in the manner set forth in the Agreement. If required by the Secured
Party at any time after the occurrence and during the continuance of an Event
of Default, any payments of Accounts, when collected by the Company, shall be
forthwith (and, in any event, within two Business Days) deposited by the
Company in the exact form received, duly endorsed by the Company to the
Secured Party if required, in a special collateral account maintained by the
Secured Party, subject to withdrawal by the Secured Party only, as
hereinafter provided, and, until so turned over, shall be held by the Company
in trust for the Secured Party, segregated from other funds of the Company.
If an Event of Default shall has occurred and be continuing, at any time at
the Secured Party's election, the Secured Party shall apply all or any part
of the funds on deposit in said special collateral account on account of the
Obligations as set forth in the Agreement, and any part of such funds which
the Secured Party elect not so to apply and
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<PAGE>
deems not required as collateral security for the Obligations shall be paid over
from time to time by the Secured Party to the Company or to whomsoever may be
lawfully entitled to receive the same. Upon the occurrence and during the
continuance of an Event of Default, at the Secured Party's request, the Company
shall deliver to the Secured Party all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
accounts, including, without limitation, all original orders, invoices and
shipping receipts, or copies thereof if such originals are not available.
(d) TITLE TO COLLATERAL. The Company represents and
warrants to the Secured Party that it has good title to all of the Collateral,
free and clear of all liens and security interests, in favor of any person or
entity other than the Secured Party.
4. COVENANTS. The Company covenants and agrees with the Secured
Party that, from and after the date of this Security Agreement until the
Obligations are paid in full:
(a) FURTHER DOCUMENTATION: PLEDGE OF INSTRUMENTS AND
CHATTEL PAPER. At any time and from time to time, upon the written request
of the Secured Party, and at the sole expense of the Company, the Company
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with respect
to the security interests and liens created hereby. The Company also hereby
authorizes the Secured Party to file any such financing or continuation
statement without the signature of the Company to the extent permitted by
applicable law. A carbon, photographic or other reproduction of this
Security Agreement shall be sufficient as a financing statement for filing in
any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel
Paper, such Instrument or Chattel Paper shall be immediately delivered to the
Secured Party, to be held as Collateral pursuant to this Security Agreement.
(b) INDEMNIFICATION. The Company agrees to pay, and to save
the Secured Party harmless from, any and all liabilities, reasonable costs and
expenses (including, without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any law, rule, regulation or order of any court,
arbitrator or governmental entity, jurisdiction or authority applicable to any
of
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the Collateral or (iii) in connection with any of the transactions contemplated
by the Agreement or this Security Agreement. In any suit, proceeding or action
brought by the Secured Party under any Account for any sum owing thereunder, or
to enforce any provisions of any Account, the Company will save, indemnify and
keep the Secured Party harmless from and against all loss, damage or reasonable
expense suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Company of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Company. The
foregoing indemnification shall not apply to any liabilities, costs, or expenses
resulting directly from the negligence or willful misconduct or bad faith of the
Secured Party or the Secured Party' failure to exercise reasonable care with
respect to the Collateral in its possession as set forth in Section 8 hereof
(c) MAINTENANCE OF RECORDS. The Company will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including without limitation, a record of all payments received and
all credits granted with respect to the Accounts. For the Secured Party's
further security, the Company hereby grants to the Secured Party a security
interest in all of the Company's books and records pertaining to the Collateral,
and upon the occurrence and during the continuance of an Event of Default, the
Company shall turn over any such books and records to the Secured Party or to
its representatives during normal business hours at the request of the Secured
Party.
(d) RIGHT OF INSPECTION. The Secured Party shall at all
times has full and free access during normal business hours, and upon
reasonable prior notice, to all the books of record and account of the
Company, and the Secured Party or its representatives may examine the same,
take extracts therefrom and make photocopies thereof. To the extent
permitted by law, the Secured Party and its representatives shall at all
times also has the right during normal business hours, and upon reasonable
prior notice, to enter into and upon any premises where any of the Inventory
or Equipment is located for the purpose of inspecting the same or otherwise
protecting its interests therein.
(e) COMPLIANCE WITH LAWS, ETC. The Company will comply in
all material respects with all laws, rules, regulations and orders of any
court, arbitrator or governmental entity, jurisdiction or authority
applicable to the Collateral or any part thereof or to the operation of the
Company's business except where the failure to so comply would not has a
material adverse effect on the Company's business or financial condition;
provided, however, that the Company may contest any such law, rule,
regulation or order in any reasonable manner which shall not adversely affect
the Secured Party's rights or the priority of its liens on the Collateral.
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<PAGE>
(f) PAYMENT OF OBLIGATIONS. The Company will pay promptly when due
all material taxes, assessments and governmental charges or levies imposed upon
the Collateral or in respect of its income or profits therefrom, as well as all
material claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if (i) the validity thereof is being contested in
good faith by appropriate proceedings, (ii) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (iii) such charge is adequately reserved against on the
Company's books in accordance with GAAP.
(g) LIMITATION ON LIENS ON COLLATERAL. The Company will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien, security interest, pledge,
mortgage, deed of trust, levy, attachment, claim or other charge or encumbrance
on or to the Collateral, other than Permitted Liens, and will defend the right,
title and interest of the Secured Party in and to any of the Collateral against
the claims and demands of all persons or entities whatsoever.
(h) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Company will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, except for sales or other dispositions of Collateral
permitted by the Agreement.
(i) LIMITATIONS ON DISCOUNTS, COMPROMISES, EXTENSIONS OF ACCOUNTS.
Other than in the ordinary course of business as generally conducted by the
Company, the Company will not grant any extension of the time of payment of any
of the Accounts, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partially, any person or entity liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(j) MAINTENANCE OF EQUIPMENT. The Company will maintain each item of
Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose, except as otherwise
expressly permitted by the Agreement.
(k) MAINTENANCE OF INSURANCE. The Company will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Secured Party and (ii)
insuring the Company and the Secured Party against liability for personal injury
and property damage relating to such Inventory and Equipment, such policies to
be in such form and amounts and having such
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coverage as may be reasonably satisfactory to the Secured Party, with losses
payable to the Company and the Secured Party as its respective interests may
appear. All such insurance shall (i) provide that no termination, cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 20 days after receipt by the Secured Party of written
notice thereof, (ii) name the Secured Party as an additional insured and/or loss
payee as its interests appear and (iii) be reasonably satisfactory in all other
respect to the Secured Party. From time to time upon the request of the Secured
Party, the Company shall deliver to the Secured Party copies of insurance
policies, certificates or binders as the Secured Party may from time to time
reasonably request.
(l) FURTHER IDENTIFICATION OF COLLATERAL. The Company will furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may reasonably request,
all in reasonable detail.
5. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Company hereby irrevocably constitutes and appoints
the Secured Party and any officer thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company or in its
own name, from time to time in the Secured Party's discretion, for the purpose
of carrying out the terms of this Security Agreement, without notice to or
assent by the Company, to do the following:
(i) at any time when any Event of Default shall has occurred
and is continuing, in the name of the Company or its own name,
or otherwise, to take possession of and endorse and collect
any checks, drafts, Debentures, acceptances or other instruments
for the payment of moneys due under any Account, Instrument
or with respect to any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by the
Secured Party for the purpose of collecting any and all such
moneys due under any Account, Instrument or with respect to
any other Collateral whenever payable;
(ii) at any time when an Event of Default shall has occurred
and is continuing, to pay or discharge taxes and liens levied
or placed on or threatened against the Collateral, to effect
any repairs or any insurance called for
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the terms of this Security Agreement and to pay all or any part
of the premiums therefor and the costs thereof;
(iii) Upon the occurrence and during the continuance of any
Event of Default, (A) to direct any party liable for any
payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly
to the Secured Party or as the Secured Party shall direct;
(B) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due
or to become due at any time in respect of or arising out
of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the
collateral; (D) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against
the Company with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action, or proceeding described
in clause (E) above and, in connection therewith, to give such
discharges or releases as the Secured Party may deem
appropriate; and (G) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes,
and to do, at the Secured Party's option and the Company's
expense, at any time, or from time to time, all acts and things
which the Secured Party deem necessary to protect, preserve
or realize upon the Collateral and the Secured Party's liens
thereon and to effect the intent of this Security Agreement,
all as fully and effectively as the Company might do; and
(iv) at any time when an Event of Default shall has occurred
and is continuing, to take any and all appropriate action and
to execute any and all instruments
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which may be necessary or desirable to accomplish the purposes
of this Security Agreement.
This power of attorney is a power coupled with an interest and shall be
irrevocable.
(b) OTHER POWERS. The Company also authorizes the Secured Party, at
any time and from time to time, to execute, in connection with the sales
provided for in Section 7 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
(c) NO DUTY ON SECURED PARTY'S PART. The powers conferred on the
Secured Party hereunder are solely to protect the Secured Party's interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Secured Party shall be accountable only for amounts that they
actually receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be responsible to the
Company for any act or failure to act hereunder, except for its own gross
negligence or willful misconduct, provided that the Secured Party shall be
required to exercise reasonable care at all times with respect to Collateral in
its possession as set forth in Section 8 hereof.
6. PERFORMANCE BY SECURED PARTY OF COMPANY'S OBLIGATIONS. If the Company
fails to perform or comply with any of its agreements contained herein and the
Secured Party, as provided for by the terms of this Security Agreement, shall
themselves perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of the Secured Party incurred in
connection with such performance or compliance, together with interest thereon
at a rate per annum equal to the Prime Rate plus 5%, shall be payable by the
Company to the Secured Party on demand and shall constitute Obligations secured
hereby.
7. REMEDIES. If an Event of Default shall occur and be continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing, the Secured Party, without demand of performance or other demand,
presentment, protest, or notice of any kind (except any notice required by law
referred to below) to or upon the Company or any other person or entity (all and
each of which are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or
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office of the Secured Party or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Secured Party
shall has the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
nay part of the Collateral so sold, free of any right or equity or redemption in
the Company. The Company further agrees, at the Secured Party's request, to
assemble the Collateral and make it available to the Secured Party at places
which the Secured Party shall reasonably select, whether at the Company's
premises or elsewhere, provided that such place shall be reasonably convenient
to the Company. The Secured Party shall promptly apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Party hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as set forth
in the Agreement, and the Secured Party shall account for the surplus, if any,
to the Company. To the extend permitted by applicable law, the Company waives
all claims, damages and demands it may acquire against the Secured Party arising
out of the exercise by the Secured Party of any of its rights hereunder,
provided that such release shall not apply to any claim, damage or demand
resulting directly from the gross negligence, willful misconduct or bad faith of
the Secured Party, or the Secured Party's obligation to exercise reasonable care
with respect to Collateral in its possession as set forth in Section 8 hereof.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least ten days before such sale or other disposition. The Company shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Obligations and the reasonable fees
and disbursements of any attorneys employed by the Secured Party to collect such
deficiency.
8. LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL. The
Secured Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to exercise reasonable care and deal with it in the
same manner as the Secured Party deal with similar property for its own account.
Neither the secured Party nor any of its directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Company or otherwise.
9. APPOINTMENT OF AGENT. Texas Commerce Secured Party, National
Association hereby appoints and authorizes State Street Secured Party and Trust
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Company to act as its agent hereunder and under the Agreement and Secured
Guaranty and authorizes the agent to take such action on behalf of Texas
Commerce Secured Party National Association to effect and consummate the
provisions of this Security Agreement, including, but not limited to the
execution of instruments relating hereto; employment of attorneys, accountants
and other professionals and agents and attorneys-in-fact necessary to enforce
the rights and remedies of State Street Secured Party and Trust Company and
Texas Commerce Secured Party National hereunder; and to take all actions
reasonably necessary to carry out the rights and obligations of State Street
Secured Party and Trust Company, Texas Commerce Secured Party National
Association hereunder.
10. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
11. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. PARAGRAPH HEADINGS. The paragraph headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 13 hereof), delay,
indulgence, omission or otherwise be deemed to has waived any right or remedy
hereunder or to has acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise has on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
14. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the terms or
provisions of this Security Agreement may be waived, amended, supplemented or
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otherwise modified except by a written instrument executed by the Company and
the Secured Party, provided that any provision of this Security Agreement may be
waived by the Secured Party in a written letter or agreement executed by the
Secured Party or by telex or facsimile transmission from the Secured Party.
This Security Agreement shall be binding upon the successors and assigns of the
Company and shall inure to the benefit of the Secured Party and its successors
and assigns.
15. GOVERNING LAW. This Security Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed and delivered in favor of the Secured Party as of the date first
above written.
INTEK DIVERSIFIED CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
MEESPIERSON ICS LIMITED
By: ________________________________
Name: ______________________________
Title: _____________________________
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EXHIBIT 2.02 (A)
ROAMER ONE, INC.
SECURITY AGREEMENT
Security Agreement, dated as of February 27, 1996, made by Roamer One,
Inc., a Delaware corporation (the "Company") in favor of MeesPierson ICS Limited
(the "Secured Party").
RECITALS
Pursuant to the Senior Secured Debenture Purchase Agreement of even date
herewith (as amended, supplemented or otherwise modified from time to time (the
"Purchase Agreement"), between Intek Diversified Corporation, a Delaware
corporation and the parent corporation of the Company ("Intek"), and the Secured
Party, the Secured Party has agreed to purchase the Debentures (as defined in
the Agreement) from Intek, upon the terms and subject to the conditions set
forth therein. It is a condition precedent to the obligation of the Secured
Party to purchase the Debentures from Intek pursuant to the Agreement that the
Company shall has executed and delivered this Security Agreement to the Secured
Party.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Secured Party to purchase the Debentures
pursuant to the Agreement, the Company hereby agrees with the Secured Party as
follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which are
defined in the Agreement and used herein are so used as so defined; the
following terms which are defined in the Uniform Commercial Code in effect on
the date hereof are used herein as therein defined: Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory and Proceeds; and the following terms shall has the following
meanings:
"Code" means the Uniform Commercial Code as from time to time in
effect.
"Collateral" shall has the meaning assigned to it in Section 2 of this
Security Agreement.
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"Intellectual Property Rights" means all rights of the Company in, to
or with respect to any intellectual property now or hereafter owned, possessed
or acquired by or on behalf of the Company, including without limitation
patents, letters patent, patent applications, trademarks, service marks, trade
names and copyrights and any applications therefor or registrations, recordings,
divisions, continuations, continuations-in-part, renewals, reissues or
extensions thereof, including those patents, copyrights and/or trademarks, and
applications therefor, set forth on SCHEDULE I hereto.
"Obligations" means the unpaid principal amount of, and interest on,
the Debentures and all other obligations and liabilities of Intek or the Company
to the Secured Party, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Agreement, the Debentures or this Security
Agreement and any other document executed and delivered in connection therewith
or herewith and each other obligation and liability, whether direct or indirect,
absolute or contingent, due or to become due, or now or hereafter existing, of
Intek or the Company to the Secured Party, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to the Secured Party) or otherwise, but excluding any such obligations of the
Company to the Secured Party arising through the purchase by or assignment to
the Secured Party of obligations of Intek or the Company to third parties.
"Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, the Company hereby grants to the
Secured Party a security interest in all of the following property now owned or
at any time hereafter acquired by the Company or in which the Company now has or
at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"): (i) Accounts, (ii) Chattel Paper; (iii)
Documents; (iv) Equipment; (v) Fixtures, (vi) General Intangibles; (vii) Goods;
(viii) Instruments; (ix) Intellectual Property Rights; (x) Inventory; (xi)
insurance claims and proceeds; (xii) books and records, computer programs,
databases and other computer materials of the Company pertaining to any and all
of the foregoing; and (xiii) to the extent not otherwise included, Proceeds and
products of any and all of the foregoing.
3. RIGHTS OF SECURED PARTY; LIMITATIONS ON SECURED PARTY'S OBLIGATIONS.
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(a) COMPANY REMAINS LIABLE UNDER ACCOUNTS. Anything herein to the
contrary notwithstanding, the Company shall remain responsible with respect to
each of the Accounts, to observe and perform all the conditions and obligations
to be observed and performed by it thereunder in accordance with the terms of
any agreement giving rise to each such Account. The Secured Party shall not has
any obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the receipt
by the Secured Party of any payment relating to such Account pursuant hereto,
nor shall the Secured Party be obligated in any manner to perform any of the
obligations of the Company under or pursuant to any Account (or any agreement
giving rise thereto), to make any payment, to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may has been assigned
to it or to which it may be entitled at any time or times.
(b) NOTICE TO ACCOUNT DEBTORS. Upon the request of the Secured Party
at any time after the occurrence and during the continuance of an Event of
Default, the Company shall notify account debtors on the Accounts that the
Accounts has been collaterally assigned to the Secured Party and that payments
in respect thereof shall be made directly to the Secured Party. In accordance
with the Secured Party's customary practices, the Secured Party may in its own
name or in the name of the Company communicate with account debtors on the
Accounts to verify with them to its satisfaction the existence, amount and terms
of any Accounts.
(c) COLLECTIONS ON ACCOUNTS. The Company shall has the sole right to
collect the Accounts, except that after the occurrence and during the
continuance of an Event of Default, the Secured Party may curtail or terminate
said right and collect the Accounts as the secured party hereunder. All
Proceeds constituting collections of Accounts shall be applied in the manner set
forth in the Agreement. If required by the Secured Party at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Accounts, when collected by the Company, shall be forthwith (and, in any event,
within two Business Days) deposited by the Company in the exact form received,
duly endorsed by the Company to the Secured Party if required, in a special
collateral account maintained by the Secured Party, subject to withdrawal by the
Secured Party only, as hereinafter provided, and, until so turned over, shall be
held by the Company in trust for the Secured Party, segregated from other funds
of the Company. If an Event of Default shall has occurred and be continuing, at
any time at the Secured Party's election, the Secured Party shall apply all or
any part of the funds on deposit in said special collateral account on account
of the Obligations as set forth in the Agreement, and any part of such funds
which the Secured Party elect not so to apply and
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deems not required as collateral security for the Obligations shall be paid over
from time to time by the Secured Party to the Company or to whomsoever may be
lawfully entitled to receive the same. Upon the occurrence and during the
continuance of an Event of Default, at the Secured Party's request, the Company
shall deliver to the Secured Party all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
accounts, including, without limitation, all original orders, invoices and
shipping receipts, or copies thereof if such originals are not available.
(d) TITLE TO COLLATERAL. The Company represents and warrants to the
Secured Party that it has good title to all of the Collateral, free and clear of
all liens and security interests, in favor of any person or entity other than
the Secured Party.
4. COVENANTS. The Company covenants and agrees with the Secured Party
that, from and after the date of this Security Agreement until the Obligations
are paid in full:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS AND CHATTEL PAPER.
At any time and from time to time, upon the written request of the Secured
Party, and at the sole expense of the Company, the Company will promptly and
duly execute and deliver such further instruments and documents and take such
further action as the Secured Party may reasonably request for the purpose of
obtaining or preserving the full benefits of this Security Agreement and of the
rights and powers herein granted, including, without limitation, the filing of
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests and liens
created hereby. The Company also hereby authorizes the Secured Party to file
any such financing or continuation statement without the signature of the
Company to the extent permitted by applicable law. A carbon, photographic or
other reproduction of this Security Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Secured Party, duly endorsed in a manner
satisfactory to the Secured Party, to be held as Collateral pursuant to this
Security Agreement.
(b) INDEMNIFICATION. The Company agrees to pay, and to save the
Secured Party harmless from, any and all liabilities, reasonable costs and
expenses (including, without limitation, reasonable legal fees and expenses) (i)
with respect to, or resulting form, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any law, rule, regulation or order of any court,
arbitrator or governmental entity, jurisdiction or authority applicable to any
of
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the Collateral or (iii) in connection with any of the transactions contemplated
by the Agreement or this Security Agreement. In any suit, proceeding or action
brought by the Secured Party under any Account for any sum owing thereunder, or
to enforce any provisions of any Account, the Company will save, indemnify and
keep the Secured Party harmless from and against all loss, damage or reasonable
expense suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Company of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Company. The
foregoing indemnification shall not apply to any liabilities, costs, or expenses
resulting directly from the negligence or willful misconduct or bad faith of the
Secured Party or the Secured Party's failure to exercise reasonable care with
respect to the Collateral in its possession as set forth in Section 8 hereof.
(c) MAINTENANCE OF RECORDS. The Company will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral,
including without limitation, a record of all payments received and all credits
granted with respect to the Accounts. For the Secured Party's further security,
the Company hereby grants to the Secured Party a security interest in all of the
Company's books and records pertaining to the Collateral, and upon the
occurrence and during the continuance of an Event of Default, the Company shall
turn over any such books and records to the Secured Party or to its
representatives during normal business hours at the request of the Secured
Party.
(d) RIGHTS OF INSPECTION. The Secured Party shall at all times has
full and free access during normal business hours, and upon reasonable prior
notice, to all the books or record and account of the Company, and the Secured
Party or its representatives may examine the same, take extracts therefrom and
make photocopies thereof. To the extent permitted by law, the Secured Party and
its representatives shall at all times also has the right during normal business
hours, and upon reasonable prior notice, to enter into and upon any premises
where any of the Inventory or Equipment is located for the purpose of inspecting
the same or otherwise protecting its interests therein.
(e) COMPLIANCE WITH LAWS, ETC. The Company will comply in all
material respects with all laws, rules regulations and orders of any court,
arbitrator or governmental entity, jurisdiction or authority applicable to the
Collateral or any part thereof or to the operation of the Company's business
except where the failure to so comply would not has a material adverse effect on
the Company's business or financial condition; provided, however, that the
Company may contest any such law, rule, regulation or order in any reasonable
manner which shall not adversely affect the Secured Party's rights or the
priority of its liens on the Collateral.
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(f) PAYMENT OF OBLIGATIONS. The Company will pay promptly when due
all material taxes, assessments and governmental charges or levies imposed upon
the Collateral or in respect of its income or profits therefrom, as well as all
material claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if (i) the validity thereof is being contested in
good faith by appropriate proceedings, (ii) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (iii) such charge is adequately reserved against on the
Company's books in accordance with GAAP.
(g) LIMITATION ON LIENS ON COLLATERAL. The Company will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien, security interest, pledge,
mortgage, deed of trust, levy, attachment, claim or other charge or encumbrance
on or to the Collateral, other than Permitted Liens, and will defend the right,
title and interest of the Secured Party in and to any of the Collateral against
the claims and demands of all persons or entities whatsoever.
(h) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Company will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, except for sales or other dispositions of Collateral
permitted by the Agreement.
(i) LIMITATIONS ON DISCOUNTS, COMPROMISES, EXTENSIONS OF ACCOUNTS.
Other than in the ordinary course of business as generally conducted by the
Company, the Company will not grant any extension of the time of payment of any
of the Accounts, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partially, any person or entity
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.
(j) MAINTENANCE OF EQUIPMENT. The Company will maintain each item
of Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose, except as otherwise
expressly permitted by the Agreement.
(k) MAINTENANCE OF INSURANCE. The Company will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Secured Party and (ii)
insuring the Company and the Secured Party against liability for personal injury
and property damage relating to such Inventory and Equipment, such policies to
be in such form and amounts and having such
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coverage as may be reasonably satisfactory to the Secured Party, with losses
payable to the Company and the Secured Party as its respective interests may
appear. All such insurance shall (i) provide that no termination, cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 20 days after receipt by the Secured Party of written
notice thereof, (ii) name the Secured Party as an additional insured and/or loss
payee as its interests appear and (iii) be reasonably satisfactory in all other
respect to the Secured Party. From time to time upon the request of the
Secured Party, the Company shall deliver to the Secured Party copies of
insurance policies, certificates or binders as the Secured Party may from
time to time reasonably request.
(l) FURTHER IDENTIFICATION OF COLLATERAL. The Company will furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request, all in
reasonable detail.
(m) NO IMPAIRMENT. The provisions of this Security Agreement shall
remain in full force and effect notwithstanding (i) any modification of the
Debentures or the Purchase Agreement whether material or otherwise; (ii) the
Secured Party's waiver of or failure to enforce any of the terms, covenants or
conditions contained herein or in the Debentures or the Purchase Agreement, or
in any modification hereof or thereof; or (iii) any release or subordination of
any real or personal property now or hereafter held by the Secured Party as
security for the performance of the Debentures.
5. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Company hereby irrevocably constitutes and appoints
the Secured Party and any officer thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company or in its
own name, from time to time in the Secured Party's discretion, for the purpose
of carrying out the terms of this Security Agreement, without notice to or
assent by the Company, to do the following:
(i) at any time when any Event of Default shall
has occurred and is continuing, in the name of the Company
or its own name, or otherwise, to take possession of and
endorse and collect any checks, drafts, Debentures,
acceptances or other instruments for the payment of moneys
due under any Account, Instrument or with respect to any
other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the
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Secured Party for the purpose of collecting any and all such
moneys due under any Account, Instrument or with respect to
any other Collateral whenever payable;
(ii) at an time when an Event of Default shall has
occurred and is continuing, to pay or discharge taxes and
liens levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called
for the terms of the Security Agreement and to pay all or
any part of the premiums therefor and the costs thereof;
(iii) Upon the occurrence and during the
continuance of any Event of Default, (A) to direct any party
liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due
thereunder directly to the Secured Party or as the Secured
Party shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and
endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other
documents in connection with any of the collateral; (D) to
commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any
other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against the
Company with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection therewith,
to give such discharges or releases as the Secured Party
may deem appropriate; and (G) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as
though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and
the Company's expense, at any time, or from time to time,
all acts and things which the Secured Party deem necessary
to protect, preserve or realize upon the Collateral and the
Secured
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Party's liens thereon and to effect the intent of this
Security Agreement, all as fully and effectively as the
Company might do; and
(iv) at any time when an Event of Default shall has
occurred and is continuing, to take any and all
appropriate action and to execute any and all instruments
which may be necessary or desirable to accomplish the
purposes of this Security Agreement.
This power of attorney is a power coupled with an interest and shall be
irrevocable.
(b) OTHER POWERS. The Company also authorizes the Secured
Party, at any time and from time to time, to execute, in connection with the
sales provided for in Section 7 hereof, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the Collateral.
(c) NO DUTY ON SECURED PARTY'S PART. The powers conferred on
the Secured Party hereunder are solely to protect the Secured Party's
interests in the Collateral and shall not impose any duty upon it to exercise
any such powers. The Secured Party shall be accountable only for amounts
that they actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to the Company for any act or failure to act hereunder, except
for its own gross negligence or willful misconduct, provided that the Secured
Party shall be required to exercise reasonable care at all times with respect
to Collateral in its possession as set forth in Section 8 hereof.
6. PERFORMANCE BY SECURED PARTY OF COMPANY'S OBLIGATIONS. If the
Company fails to perform or comply with any of its agreements contained
herein and the Secured Party, as provided for by the terms of this Security
Agreement, shall themselves perform or comply, or otherwise cause performance
or compliance, with such agreement, the reasonable expenses of the Secured
Party incurred in connection with such performance or compliance, together
with interest thereon at a rate per annum equal to the Prime Rate plus 5%,
shall be payable by the Company to the Secured Party on demand and shall
constitute Obligations secured hereby.
7. REMEDIES. If an Event of Default shall occur and be
continuing, the Secured Party may exercise, in addition to all other rights
and remedies granted to it in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations,
all rights and remedies of a secured party under the Code. Without limiting
the generality of the foregoing, the Secured Party, without demand of
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performance or other demand, presentment, protest, or notice of any kind
(except any notice required by law referred to below) to or upon the Company
or any other person or entity (all and each of which, along with any and all
suretyship defenses now or hereafter available to the Company, are hereby
waived), may in such circumstances forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may forthwith
sell, lease, assign, give option or options to purchase, or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of
the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Secured Party or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Secured Party shall has the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity or redemption in the Company. The Company
further agrees, at the Secured Party's request, to assemble the Collateral
and make it available to the Secured Party at places which the Secured Party
shall reasonably select, whether at the Company's premises or elsewhere,
provided that such place shall be reasonably convenient to the Company. The
Secured Party shall promptly apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Secured Party hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the
payment in whole or in part of the Obligations, in such order as set forth in
the Agreement, and the Secured Party shall account for the surplus, if any,
to the Company. To the extent permitted by applicable law, the Company waives
all claims, damages and demands it may acquire against the Secured Party
arising out of the exercise by the Secured Party of any of its rights
hereunder, provided that such release shall not apply to any claim, damage or
demand resulting directly from the gross negligence, willful misconduct or
bad faith of the Secured Party, or the Secured Party's obligation to exercise
reasonable care with respect to Collateral in its possession set forth in
Section 8 hereof. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least ten days before such sale or other disposition.
The Company shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay the
Obligations and the reasonable fees and disbursements of any attorneys
employed by the Secured Party to collect such deficiency.
8. LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL. The
Secured Party's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section
9-207 of the Code or otherwise, shall be to exercise reasonable care and deal
with it in the same manner as the Secured Party deal
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<PAGE>
with similar property for its own account. Neither the Secured Party nor any
of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Company or otherwise.
9. APPOINTMENT OF AGENT. Texas Commerce Secured Party, National
Association hereby appoints and authorizes State Street Secured Party and
Trust Company to act as its agent hereunder and under the Agreement and
Secured Guaranty and authorizes the agent to take such action on behalf of
Texas Commerce Secured Party National Association to effect and consummate
the provisions of this Security Agreement, including, but not limited to the
execution of instruments relating hereto; employment of attorneys,
accountants and other professionals and agents and attorneys-in-fact
necessary to enforce the rights and remedies of State Street Secured Party
and Trust Company and Texas Commerce Secured Party National hereunder; and to
take all actions reasonably necessary to carry out the rights and obligations
of State Street Secured Party and Trust Company, Texas Commerce Secured Party
National Association hereunder.
10. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
11. SEVERABILITY. Any provision of this Security Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
12. PARAGRAPH HEADINGS. The paragraph headings used in this
Security Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
13. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not
by any act (except by a written instrument pursuant to Section 13 hereof),
delay, indulgence, omission or otherwise be deemed to has waived any right or
remedy hereunder or to has acquiesced in any Default or Event of Default or
in any breach of any of the terms and conditions hereof. No failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A
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<PAGE>
waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise has on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
14. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the
terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Company and the Secured Party, provided that any provision of this
Security Agreement may be waived by the Secured Party in a written letter or
agreement executed by the Secured Party or by telex or facsimile transmission
from the Secured Party. This Security Agreement shall be binding upon the
successors and assigns of the Company and shall inure to the benefit of the
Secured Party and its successors and assigns.
15. GOVERNING LAW. This Security Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the State of
Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security
Agreement to be duly executed and delivered in favor of the Secured
Party as of the date first above written.
ROAMER ONE, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
MEESPIERSON ICS LIMITED
By: ________________________________
Name: ______________________________
Title: _____________________________
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
1st day of July, 1995, by and between ROAMER ONE, INC., a Delaware corporation
(hereinafter referred to as "Employer"), and DAVID NEIBERT (hereinafter referred
to as "Employee").
WHEREAS, Employer wishes to continue to employ Employee and Employee
wishes to continue to be employed by Employer pursuant to the terms of this
Employment Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt of and
sufficiency of which consideration is mutually acknowledged by the parties, it
is agreed:
1. EMPLOYMENT. Employer hereby employs Employee and Employee agrees
to be employed by Employer as President of Employer, for a period of three (3)
years, commencing on July 1, 1995, and terminating on June 30, 1998 (hereinafter
referred to as the "Employment Period").
2. COMPENSATION. During the Employment Period, Employee shall
receive as compensation:
(a) Salary commencing August 15, 1995, at the annual rate of
$150,000, payable not less frequently than semi-monthly, which salary shall be
increased by an amount equal to 7% of the current salary at each anniversary
date of the beginning of the Employment Period;
(b) Major medical insurance covering Employee, his wife and
dependents, payable by Employer, and the right to participate in all other
corporate employee benefit programs offered to employees by Employer;
(c) Annual paid vacation of three weeks which may not be
carried over to the next calendar year; any unused vacation time remaining at
the end of a calendar year may be exchanged by Employee for cash in an amount
equal to Employee's base salary for the unused vacation time;
(d) In the event that Employee is required by Employer to
relocate from the Southern California area, Employer shall reimburse Employee
for his actual
<PAGE>
moving expenses and shall pay the cost of housing in the new location for a
maximum of six months in the event that Employee is unable to sell his residence
in Southern California for a reasonably acceptable price before the end of such
period; and
(e) Within sixty (60) days after the end of the first month in
which Employer's gross revenues from subscriber billings equal or exceed
$250,000, Employee shall be paid a one-time bonus in an amount equal to ten
percent (10 %) of such gross revenues of Employer for that month.
3. DUTIES. During the Employment Period, Employee shall perform the
duties of President and chief operating officer of Employer, and the Board of
Directors of Employer shall be entitled to establish the business hours,
conditions of employment, job assignments, duties and responsibilities of
Employee hereunder which shall be consistent with his position as President, and
to modify the foregoing from time to time. Employee shall devote all of his
business efforts to Employer.
4. EXPENSES. Employer shall reimburse Employee for all reasonable
and necessary business expenses incurred by Employee on behalf of Employer
during the Employment Period.
5. DEATH OF EMPLOYEE. If Employee should die during the Employment
Period, Employer shall continue to pay compensation to Employee's wife (or if at
the time of Employee's decease Employee has no wife, then to his beneficiaries)
for a period of ninety days at the rate of compensation earned by Employee
immediately prior to his death. Any unpaid amount of the bonus which Employee
is to receive under paragraph 2 shall be paid to Employee's wife or
beneficiaries.
6. DISABILITY OF EMPLOYEE.
(a) In the event that Employee shall become mentally or
physically disabled (as hereinafter defined) during the Employment Period,
Employer shall continue to pay compensation to Employee, at the rate of
compensation earned by Employee immediately prior to his disability, for a
period of six months after the onset of such disability. If, at the end of such
period, Employee shall continue to be so disabled Employer may elect, upon ten
days prior written notice, to discontinue payments of
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<PAGE>
compensation. Employer shall have no further duties or obligations hereunder.
Any unpaid amount of the bonus which Employee is to receive under paragraph 2
shall be paid to his wife or beneficiaries.
(b) If Employee, within six months after he had initially
become mentally or physically disabled, shall recover from such mental or
physical disability so as to be able to again perform the duties required of him
hereunder, he shall be entitled to return to work. Upon such return to work,
all of the terms and conditions hereof shall be reinstituted and shall continue
in full force and effect as if no such disability had occurred. However, if
following such return to work, Employee shall once again become mentally or
physically disabled so as to be unable to perform the duties required of him
hereunder, and such disability shall continue for a period of ninety consecutive
days, Employer may, upon ten days prior written notice, terminate this
Agreement. Upon such termination, Employer shall have no further obligations to
Employee hereunder.
(c) For purposes of this paragraph 6, Employee shall become
"mentally or physically disabled" if (i) Employee has been declared legally
incompetent by a final court decree, (ii) Employee receives disability insurance
benefits from any disability income insurance policy maintained by Employer for
a period of six (6) consecutive months, or (iii) the Board shall find, on the
basis of medical evidence satisfactory to the Board, that as a result of a
mental or physical condition Employee is unable to perform his normal duties of
employment hereunder or is prevented from engaging in the same level of
performance as he engaged in prior to the onset of such condition, and that such
disability is likely to continue for a substantial period of time. Such
decision of the Board shall be referred to hereinafter as a "Disability
Determination."
(d) The date on which the disability will be deemed to have
occurred shall be the day after Employee last performed the services for the
Company which are required of him pursuant to this Agreement, which performance
of services was discontinued because of the condition which gave rise to the
court decree of legal
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<PAGE>
incompetence, the payment of disability insurance benefit, or the Disability
Determination, whichever is applicable.
(e) In the event that Employee disagrees with the Disability
Determination, Employee shall be entitled to request that the Board reconsider
its decision. Such request shall be in writing, shall be delivered within
thirty (30) days of the date on which the Board advised Employee of the
Disability Determination, and shall be supported by medical evidence from a
physician selected and paid for by Employee. If the Board does not grant
Employee's request for reconsideration, Employee may advise the Board, in
writing within thirty (30) days, of his desire to appeal. At that time, a
physician selected by the Board and the physician who supported Employee's
request for reconsideration shall choose a third consulting physician to decide
the dispute. Such physician (hereinafter, the "Arbitrator") must be
board-certified in the specialty most closely related to the nature of the
disability alleged to exist. The expenses of the Arbitrator shall be borne
equally by Employer and Employee. The decision of the Arbitrator shall be final
and binding and shall be conclusive on the issue of the disability of the
Employee (or lack thereof).
7. TERMINATION.
(a) TERMINATION FOR CAUSE. Employer may terminate Employee's
employment hereunder at any time for cause, which shall be deemed to include but
not be limited to the following:
(i) Employee's engaging in fraud, misappropriation of
funds, embezzlement or like conduct committed against Employer.
(ii) Employee's conviction of a felony.
(iii)Employee's material violation of a generally
recognized policy of Employer.
(iv) Employee's material violation of any provision of
this Agreement.
In the event of such a termination for cause, Employer shall have no further
obligation to Employee pursuant to this Agreement after the date of termination.
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<PAGE>
(b) TERMINATION WITHOUT CAUSE. Employer may elect to
terminate Employee's employment for any reason other than for cause (pursuant to
subparagraph (a) above) prior to the expiration of the Employment Period. For
purposes of this subparagraph (b), the bankruptcy of Employer will constitute
termination of Employee without cause. In the event of a termination without
cause, Employer shall be obligated (i) to pay the greater of (A) the base
salary set forth in paragraph 2(a) above throughout the balance of the
Employment Period or (B) $125,000, (ii) to pay to Employee any bonus earned but
not yet paid on the date of termination and (iii) to continue Employee's medical
insurance benefits at Employer's expense for a period of one year following such
termination. The amounts to be paid to Employee pursuant to this subparagraph
are intended by the parties to be in settlement of any and all claims of
Employee arising out of or related to Employee's employment with Employer,
including, without limitation, the termination of such employment, any express
or implied employment agreement, this Agreement, or the breach thereof
(collectively, "Employment Claims"). In consideration of such payment, Employee
hereby releases and waives any and all Employment Claims against Employer, and
covenants not to sue Employer in connection with any Employment Claim. In
further consideration for such release and waiver, it is agreed that Employee
shall not be required to mitigate damages, by seeking other employment or
otherwise, and Employer shall not be entitled to set off against amounts payable
to Employee pursuant to this subparagraph any amounts earned by Employee from
other employment during the balance of the Employment Period.
(c) TERMINATION BY EMPLOYEE FOR GOOD REASON. Emloyee may
terminate his employment with the Employer upon not less than ninety (90) days
advance written notice for "Good Reason." Upon the effective date of any such
termination all rights, obligations and duties of the parties hereunder shall
immediately cease, except for Employee's obligations under Section 9 hereof. For
purposes of this Agreement, the Employee will have "Good Reason" if (i) the
Board of Directors of Employer shall fail to reelect, or shall remove Employee
from the office of President of
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<PAGE>
Employer, (ii) the Board of Employer shall make a significant negative
change in the nature or scope of the authorities, powers, functions or duties of
Employee hereunder, (iii) Employer shall fail to pay when due any compensation
provided for in this Agreement and such failure is not corrected within ten days
after notice thereof to Employer by Employee, or (iv) any pattern of harassment
done with the approval of the Board of Directors of Employer which impedes
Employee in the exercise of his authorities, powers, functions or duties,
hereunder in the manner in which they would normally be exercised by a
President. If Employee elects to terminate his employment For Good Reason
hereunder, Employer shall pay to Employee the severance payment provided in
subparagraph (b) of this Section 7.
8. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. As a material
inducement to Employer to enter into this Agreement, Employee represents and
warrants as follows:
(a) Neither Employee, nor any member of Employee's immediate
family, nor any entity in which Employee has a substantial interest (i) has any
direct or indirect ownership interest in any entity with which Employer or any
affiliate of Employer has a business relationship or which competes with
Employer or any affiliate of Employer, except that the ownership of 1% or less
of any class of securities of a publicly held corporation shall not constitute a
breach of this representation and warranty, and (ii) is, and will not become
during the term of this Agreement, directly or indirectly, interested in any
material contract with Employer or any affiliate of Employer (other than this
Agreement).
(b) Neither Employee's execution of this Agreement nor
Employee's employment by Employer hereunder will breach any agreement or
covenant entered into by Employee that is currently in effect.
9. COVENANTS AGAINST COMPETITION. Employee recognizes and
acknowledges that (i) the principal business of Employer is the construction and
operation of a specialized mobile radio network in the 220 megahertz spectrum
(the "Company Business"); and (ii) the work of the Employee for the Employer has
brought
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<PAGE>
the Employee and will continue to bring him into close contact with many
confidential affairs not readily available to the public. Accordingly, the
Employee covenants and agrees that:
(a) NON-COMPETE. During the Employment Period and for one
year following the termination of Employee's employment for cause hereunder (the
"Restricted Period"), Employee shall not, directly or indirectly, both in the
United States and with respect to any customer serviced by Employer during the
Restricted Period, compete with Employer in any manner, on behalf of himself or
any other person, firm, business, corporation or other entity (each such other
person, firm, business or other entity being referred to hereinafter as a
"Person"), including, without limitation, that he shall not (i) engage in the
Company Business for his own account; (ii) except for employment of Employee by
Employer or an affiliate of Employer, enter the employ of, or render any
services to, any Person engaged in the Company Business; (iii) become interested
in any Person engaged in the Company Business as an owner, partner, shareholder,
officer, director, licensor, licensee, principal, agent, employee, trustee,
consultant or in any other relationship or capacity; provided, however, that
Employee may own, directly or indirectly, solely as an investment, securities of
any corporation which are traded on any national securities exchange if he (A)
is not a controlling person of, or a member of a group which controls, such
corporation, or (B) does not, directly or indirectly, own 1% or more of any
class of securities of such corporation; or (iv) request or instigate any
account or customer of Employer to withdraw, diminish, curtail or cancel any of
its business with Employer. In the event of Employee's breach of any provision
of this paragraph 9, the running of the Restricted Period shall be automatically
tolled (i.e., no part of the Restricted Period shall expire) from and after the
date of the first such breach.
(b) CONFIDENTIAL INFORMATION. Employee recognizes and
acknowledges that confidential information, including, without limitation,
information, knowledge or data (i) of a technical nature such as but not limited
to methods, know-how, formulae, compositions, processes, discoveries, machines,
inventions, products, product
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<PAGE>
specifications, computer programs and similar items or research projects; (ii)
of a business nature such as but not limited to information about cost,
purchasing, profits, market, sales or customers, including lists of customers,
and the financial condition of Employer; (iii) pertaining to future developments
such as but not limited to research and development or future marketing or
merchandising, and trade secrets of Employer; and (iv) all other matters which
Employer treats as confidential (the items described above being referred to
collectively hereinafter as "Confidential Information"), are valuable, special
and unique assets of Employer. During and after the Restricted Period, Employee
shall keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others except in connection with the business and affairs
of Employer, any and all Confidential Information learned by Employee before or
after the date of this Agreement, and shall not disclose such Confidential
Information to anyone outside of Employer either during or after employment by
Employer, except as required in the course of performing duties of his
employment with Employer, without the express written consent of Employer or as
required by law.
(c) PROPERTY OF EMPLOYER. Employee agrees to deliver promptly
to the Employer all drawings, blueprints, manuals, letters, notes, notebooks,
reports, sketches, formulae, computer programs and files, memoranda, customer
lists and all other materials relating in any way to the Company Business and in
any way obtained by Employee during the period of his employment with the
Employer which are in his possession or under his control, and all copies
thereof, (i) upon termination of Employee's employment with Employer, or (ii) at
any other time at Employer's request. Employee further agrees he will not make
or retain any copies of any of the foregoing and will so represent to Employer
upon termination of his employment.
(d) EMPLOYEES OF THE EMPLOYER. During the Restricted Period,
Employee shall not, directly or indirectly, solicit or encourage to leave the
employment of Employer or its affiliates any employee of Employer or its
affiliates.
(e) CONSULTANTS OF THE EMPLOYER. During the Restricted
Period, Employee shall not, directly or indirectly, solicit or encourage to
cease to work with
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<PAGE>
Employer or its affiliates any consultant then under contract or under contract
within the prior year with Employer or its affiliates.
10. RIGHTS AND REMEDIES UPON BREACH. Both parties recognize that the
services to be rendered under this Agreement by Employee are special, unique and
of extraordinary character. If Employee breaches, or threatens to commit a
breach of, any of the provisions of paragraph 9 (the "Restrictive Covenants"),
then Employer shall have the following rights and remedies, each of which shall
be independent of the other and severally enforceable, and all of which rights
and remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to Employer under law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Employer and that money
damages will not provide adequate remedy to Employer. As to the covenants
contained in paragraph 9, specific performance shall be for a period of time
equal to the unexpired portion of the Restricted Period, giving full effect to
the tolling provision of paragraph 9, and beginning on the earlier of the date
on which the court's order becomes final and non-appealable, and the date on
which all appeals have been exhausted.
(b) ACCOUNTING. The right and remedy to require Employee to
account for and pay over to Employer all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by it as the result of any transactions constituting a breach of any of
the Restrictive Covenants, and Employee shall account for and pay over such
Benefits to the Employer.
(c) SEVERABILITY OF COVENANTS. If any court determines that
any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the invalid portions.
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<PAGE>
(d) BLUE-PENCILLING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
scope, duration and/or geographical area covered by such provision, such court
shall have the power to reduce the scope, duration or area of such provision
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
11. LIMITATIONS ON AUTHORITY. Notwithstanding anything else
herein contained, Employee, without the consent and direction of the Board of
Directors of Employer, may not on behalf of Employer:
(a) Borrow or loan money, except as required by his duties in
the ordinary course of business.
(b) Assign, transfer, pledge, compromise, or release any
claims or debts of Employer, except in the ordinary course of business.
(c) Make, execute or deliver any assignment for the benefit of
creditors, any bond, confession of judgment, chattel mortgage, deed,
guaranty, indemnity bond, contract to sell or contract of sale of any of
the assets of Employer.
(d) Lease or mortgage with respect to any of Employer's
corporate real property or any interest therein, or enter into any such
contract for such purposes, except in the ordinary course of business.
(e) Pledge or hypothecate or in any manner whatsoever transfer
any interest in the assets of Employer.
(f) Materially change or alter Employer's present lines of
business.
(g) Employ accounting or legal professional services for
Employer.
(h) Do any act outside of the normal course of business which
could have a materially adverse effect on the business and/or financial
condition of Employer.
Any violation of the terms of this paragraph shall be deemed to be a material
violation of a provision of this Agreement.
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<PAGE>
12. INDEMNIFICATION. Employer shall indemnify Employee (and his
legal representatives or other successors) to the extent permitted by law and
Employee shall be entitled to the protection of any insurance policies which
Employer may elect to maintain generally for the benefit of its directors or
officers against all costs, charges and expenses whatsoever incurred or
sustained by Employee in connection with any action, suit or proceeding to which
he may be made a party by reason of his being or having been an employee,
director or officer of Employer or any other corporation that he served in any
such capacity at the request of Employer.
13. NON-ASSIGNMENT. This Agreement is a personal services contract
and it is expressly agreed that the rights and interests of Employee and
Employer hereunder may not be sold, transferred, assigned, pledged or
hypothecated; provided, however, that Employer may assign its rights and
obligations hereunder to a wholly-owned subsidiary of Employer, whether
presently existing or formed after the date hereof.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto, their heirs, representatives and successors.
15. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
16. EFFECT OF CAPTIONS. The captions in this Agreement are included
for convenience only and shall not in any way effect the interpretation or
construction of any provision hereof.
17. REMEDIES CUMULATIVE; NO WAIVER. All remedies specified herein or
otherwise available shall be cumulative and in addition to any and every other
remedy provided hereunder or now or hereafter available. No waiver or failure
(intentional or unintentional) to act with respect to any breach or default
hereunder
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<PAGE>
shall be deemed to be a waiver with respect to any subsequent breach or default,
whether of a similar or different nature.
18. NOTICES. All notices, requests, demands or other communications
hereunder shall be sent by registered or certified mail to:
To Employer: Roamer One, Inc.
970 West 190th Street, Suite 720
Torrance, CA 90502
Copy to: Steven L. Wasserman, Esq.
Kohrman Jackson & Krantz
20th Floor, One Cleveland Center
Cleveland, OH 44114
To Employee: David Neibert
23275 Leonora Drive
Woodland Hills, CA 91367
19. GOVERNING LAW; JURISDICTION: LIMITATIONS ON FILING ACTIONS. This
Agreement shall be governed by and construed in accordance with the substantive
law of the State of Delaware. The parties agree that any claim arising out of
or related to this Agreement, or the breach hereof, must be filed within six (6)
months after the date of the alleged breach, and in any event within six months
after the date of termination of Employee's employment, that any claim which is
not filed within such six month period is waived, and that any statute of
limitations to the contrary is hereby waived.
20. ACKNOWLEDGMENT. Employee acknowledges that: (i) he has carefully
read all of the terms of this Agreement, and that such terms have been fully
explained to him; (ii) he understands the consequences of each and every term of
this Agreement; (iii) he has had sufficient time and an opportunity to consult
with his own legal advisor prior to signing this Agreement, and that Employer
has encouraged him to seek legal counsel prior to signing this Agreement; (iv)
he had other employment opportunities at the time he entered into this
Agreement; (v) he specifically understands that by signing this Agreement he is
giving up certain rights he may have otherwise
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<PAGE>
had, and that he is agreeing to limit his freedom to engage in certain
employment during and after the termination of this Agreement, and (vi) the
limitations to his right to compete contained in this Agreement represent
reasonable limitations as to scope, duration and geographical area, and that
such limitations are reasonably related to protection which the Employer
reasonably requires.
21. WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, and
this Agreement may be amended or supplemented at any time. No such waiver,
amendment or supplement shall be effective unless in a writing which makes
reference to this Section 21 and is signed by the party or parties sought to be
bound thereby.
22. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between Employer and Employee and supersedes all prior
agreements and understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the
date first hereinabove mentioned.
ROAMER ONE, INC.
By:
----------------------------------------------
"Employer"
-------------------------------------------------
David Neibert
"Employee"
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<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made as of the 1st day of
July, 1995, by and between NICHOLAS R. WILSON ("Consultant") and INTEK
DIVERSIFIED CORPORATION, a Delaware corporation ("Company").
W I T N E S S E T H:
WHEREAS, Consultant has served as Chairman of Company and has intimate
knowledge of Company's operations and the wireless communications business in
general; and
WHEREAS, Company desires to retain Consultant as a consultant in connection
with the construction and development of its specialized mobile radio ("SMR")
network.
NOW, THEREFORE, in consideration of their mutual promises set forth below,
Company and Consultant hereby agree as follows:
1. CONSULTING SERVICES BY CONSULTANT. Consultant will provide consulting
services for Company for a three-year period commencing on the date hereof,
subject to earlier termination as herein provided. Consultant's consulting
services shall include (a) provision of appropriate assistance to Company in
connection with the development and management of its SMR network by Company;
(b) provision of strategic planning assistance to Company, including, without
limitation, assistance relating to the acquisition of new SMR and other wireless
communications businesses for Company; and (c) provision of such other
consulting services to Company as may, from time to time, be determined by
mutual agreement of Company and Consultant.
<PAGE>
2. TIME. Consultant will devote adequate time to the performance of the
consulting services specified in Section 1 above to fulfill his obligations
under this Agreement.
3. COMPENSATION. As compensation for the consulting services and
promises to Company hereunder, Company will pay to Consultant total annual
compensation of $120,000. Such compensation will be paid in equal monthly
installments of $10,000, commencing July 1, 1995. Consultant will not be
entitled to participate in any retirement, bonus, insurance or other employee
benefit plan maintained by Company for the benefit of its employees.
4. PAYMENT OF EXPENSES. Company will reimburse Consultant for reasonable
and ordinary business expenses incurred by him in the performance of consulting
services pursuant to this Agreement, provided that Consultant shall keep such
records and shall render to Company such accounts covering such expenses as
Company shall reasonably require.
5. INDEPENDENT CONTRACTOR. Consultant shall not be an employee of
Company but will at all times be an independent contractor.
6. NONCOMPETITION. During the period of one year after the date of this
Agreement, Consultant will not, without the written consent of the Chief
Executive Officer of Company, directly or indirectly, own, manage, be employed
by, participate in or be in any way connected with the ownership, management or
operation of any business which at any time shall compete with Company, directly
or indirectly, in the development and management of SMR networks or distribution
of products manufactured, assembled, sold
2
<PAGE>
or distributed by Company as of the date of this Agreement, or any products
which are logical extensions, on a manufacturing, assembly or technological
basis, of any such products. The parties agree that in the event of a breach of
this Section 6, the remedy at law would be inadequate and Company may obtain
injunctive relief.
7. CONFIDENTIALITY. Consultant agrees that at all times during the term
of this Agreement and thereafter that he shall hold in strictest confidence, and
shall not use, except for the benefit of Company, or disclose to any person,
firm or corporation without prior written consent of the Chief Executive Office
of the Company, any trade secrets, confidential knowledge, data or other
proprietary information relating to products, processes, know-how, designs,
formulas, developmental or experimental work, computer programs, data bases,
customer lists, business plans, manufacturing specifications, financial
information or other subject matter pertaining to any business of the Company or
its subsidiaries or any of its customers, consultants or licensees.
8. TERMINATION OF AGREEMENT. This Agreement will terminate upon
Consultant's death or his incapacity. Company shall pay any compensation owed
to Consultant hereunder at the time of such death or incapacity to Consultant's
legal representative or guardian. This Agreement may also be terminated at the
option of the Company, effective after 60 days' prior written notice to
Consultant, in the event that Securicor Communications Limited, an English
limited company, or one of its subsidiaries, acquires, directly or indirectly,
the authority to vote 51% or more of the outstanding shares of voting capital
stock of the Company. After the date of such termination, the Company shall
have no further obligations to Consultant under this Agreement.
3
<PAGE>
9. GOVERNING LAW. The validity, enforceability, interpretation and
performance of this Agreement will be determined in accordance with the laws of
the State of Delaware applicable to contracts made and to be performed wholly
within that State.
10. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to its subject matter and supersedes all
negotiations, prior discussions, agreements, arrangements and understandings,
written or oral, relating to the subject matter of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered as of the day and year first above written.
INTEK DIVERSIFIED CORPORATION
By:___________________________
Harry Dunstan, President
______________________________
Nicholas R. Wilson
4
<PAGE>
STANDARD OFFER, AGREEMENT AND ESCROW
INSTRUCTIONS FOR PURCHASE OF REAL ESTATE
(NON-RESIDENTIAL)
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
March 21, 1996
(Date for Reference Purposes)
1. BUYER.
1.1 Missak Azirian and/or Assignee (the "Buyer") hereby offers to purchase
real property, hereinafter described, from the owner thereof (the "Seller")
(collectively, the "Parties" or individually, a "Party"), through an escrow (the
"Escrow") to close on June 4, 1996 (the "Expected Closing Date") to be held by
Commerce Escrow Company (the "Escrow Holder") whose address is 1545 Wilshire
Boulevard, Suite 600, Los Angeles, CA 90017, Phone No.(213) 484-0855, Facsimile
No. (213) 484-0417 upon the terms and conditions set forth in this agreement
(the "Agreement"). Buyer shall have the right to assign Buyer's rights
hereunder, but any such assignment shall not relieve Buyer of Buyer's
obligations herein unless the Seller expressly releases Buyer.
1.2 The term "Date of Agreement" as used herein shall be the date when by
execution and delivery (as defined in paragraph 20.2) of this document or a
subsequent counter-offer thereto, Buyer and Seller have reached agreement in
writing whereby Seller agrees to sell, and Buyer agrees to purchase the Property
upon terms accepted by both Parties.
2. PROPERTY.
2.1 The real property (the "Property") that is the subject of this offer
consists of (insert a brief physical description) an approximate 66,750 square
foot M-1 zoned industrial building is located in the City of Los Angeles, County
of Los Angeles, State of California, is commonly known by the street address of
5800 West Jefferson Boulevard and is legally described as: TO BE FURNISHED
THROUGH ESCROW.
2.2 If the legal description of the Property is not complete or is
inaccurate, this Agreement shall not be invalid and the legal description shall
be completed or corrected to meet the requirements of Continental Lawyers Title
Company (the "Title Company"), which Title Company shall issue the title policy
hereinafter described.
2.3 The Property includes, at no additional cost to Buyer, the permanent
improvements thereon, including those items which the law of the state in which
the Property is located provides is part of the Property, as well as the
following items, if any, owned by Seller and presently located in the Property:
electrical distribution systems (power panels, buss ducting, conduits,
disconnects, lighting fixtures), telephone distribution systems (lines, jacks
and connections), space heaters, air conditioning equipment, air lines, fire
sprinkler systems, security systems, carpets, window coverings, wall coverings,
and ____________________________________________________________________________
________________________________________________________________________________
_____________________________________________ (collectively, the "Improvements).
2.4 If the Property is located in the State of California, the Broker(s)
is/are required under the Alquist-Priolo Special Studies Zones Act, to disclose
to a prospective purchaser of real property whether the property being purchased
is located within a delineated special studies zone (a zone that encompasses a
potentially or recently active trace of an earthquake fault that is deemed by
the State Geologist to be sufficiently active and well defined enough to
constitute a potential hazard to structures from surface faulting or fault
(creep)). If the Property is located within such a special studies zone, its
development may require a geologic report from a state registered geologist. In
accordance with such law, the Broker(s) hereby inform(s) Buyer that the Property
/X/ (a) is not within such a special studies zone,
/ / (b) is within such a special studies zone.
2.5 If (1) the Property is located in the State of California, (2) the
Improvements were construed prior to 1975, and (3) the Improvements include
structures with (i) pre-cast (E.G., tilt-up) concrete or reinforced masonry
walls together with wood frame floors or roofs or (ii) unreinforced masonry
walls, California law requires that Seller or Seller's Broker provide Buyer with
a copy of The Commercial Property Owner's Guide to Earthquake Safety (the
"Booklet") published by the California Seismic Safety Commission. Seller and
Seller's Broker hereby inform Buyer that the Property:
/X/ (a) meets the foregoing requirements, and Seller and Seller's
Broker are required to provide Buyer with a copy of the Booklet,
Seller or Seller's Broker shall, within five (5) business days of the
Date of Agreement, deliver to Buyer a copy of the Booklet and a
completed "Commercial Property Earthquake Weakness Disclosure Report"
contained in the Booklet duly executed by Seller. Within five (5)
business days of Buyer's receipt of said Disclosure Report, Buyer
shall deliver a duly countersigned copy of the same to Escrow Holder,
with a copy to Seller and Seller's Broker. Escrow Holder is hereby
instructed that the Escrow shall not close unless and until Escrow
Holder has received the Disclosure Report duly signed by both Seller
and Buyer.
/ / (b) does not meet the foregoing requirements requiring the
delivery of the Booklet.
3. PURCHASE PRICE
3.1 The purchase price (the "Purchase Price") to be paid by Buyer to
Seller for the Property shall be $2,200,000.00, payable as follows:
(a) Cash down payment, including the $400,000.00
Deposit as defined in paragraph 4.3 (or
if an all cash transaction, the
Purchase Price):
(STRIKE
IF NOT (b) Amount of "New Loan" as defined in $1,800,000.00
APPLICABLE) paragraph 5.1, if any:
(STRIKE (c) [DELETED.]
IF NOT
APPLICABLE) (d) [DELETED.]
-------------
Total Purchase Price: $2,200,000.00
-------------
-------------
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3.2 If an Existing Deed of Trust permits the beneficiary thereof to
require payment of a transfer fee as a condition to the transfer of the Property
subject to such Existing Deed of Trust, Buyer agrees to pay transfer fees and
costs of up to one and one-half percent (1 1/2 %) of the unpaid principal
balance of the applicable Existing Note.
4. DEPOSITS.
4.1 [DELETED.]
4.2 Within five (5) business days after the Day of Agreement, Buyer shall
deposit with Escrow Holder the sum of $50,000.00 to be applied to the Purchase
Price at the Closing.
4.3 The funds deposited with Escrow Holder by or on behalf of Buyer under
paragraphs 4.1 and 4.2, above (collectively the "Deposit"), shall be deposited
by Escrow Holder in such State or Federally chartered bank as Buyer may select
and in such interest-bearing account or accounts as Escrow Holder or Broker(s)
deem appropriate and consistent with the timing requirements of this
transaction. The interest therefrom shall accrue to the benefit of Buyer, who
hereby acknowledges that there may be penalties or interest forfeitures if the
applicable instrument is redeemed prior to its specified maturity.
Buyer's Federal Income Tax Identification Number is ______________________.
5. FINANCING CONTINGENCY. (STRIKE IF NOT APPLICABLE.)
5.1 This offer is contingent upon Buyer obtaining from an insurance
company, bank, savings and loan association or other financial institution or
from any correspondent or agent thereof, a commitment to lend to Buyer a sum not
less than $1,800,000.00 at a fixed interest rate not to exceed 8.75 % per annum,
payable in equal monthly installments, including interest, amortized over a
period of not less than 20 years and all due in not less than 20 years, or at a
variable interest rate commencing at an interest rate not to exceed 7.5 % per
annum, amortized over a period of not less than 20 years and all due in not less
than 20 years, and in either case, with loan fees not to exceed 2 % of the
amount of the new loan (the "New Loan"). The New Loan shall be secured by a
first deed of trust upon the Property and shall be upon the following additional
terms and conditions: __________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
and upon such other terms and conditions as are usually required by such lender.
5.2 Buyer hereby agrees to diligently pursue obtaining the New Loan, if
Buyer shall fail to notify its Broker, Escrow Holder and Seller, in writing
within 30 days following the Date of Agreement, that the New Loan has not been
obtained, it shall be conclusively presumed that Buyer has either obtained said
New Loan or has waived this New Loan contingency.
5.3 If, after due diligence, Buyer shall notify its Broker, Escrow Holder
and Seller, in writing, within the time specified in Paragraph 5.2 hereof, that
Buyer has not obtained said New Loan, this Agreement shall be terminated, and
Buyer shall be entitled to the prompt return of Buyer's Deposit and any other
funds deposited by or for Buyer with Escrow Holder or Seller, plus any interest
earned thereon, less only Escrow Holder and Title Company cancellation fees and
costs, which Buyer shall pay.
6. PURCHASE MONEY NOTE. (STRIKE IF NOT APPLICABLE.)
6.1 [DELETED.]
7. REAL ESTATE BROKERS.
7.1 The following real estate broker(s) (collectively, the "Brokers") and
brokerage relationships exist in this transaction and are consented to by the
parties (check applicable boxes):
/X/ Daum Commercial R.E. Services represents Seller exclusively ("Seller's
Broker")
/X/ Missak Azirian Realty represents Buyer exclusively ("Buyer's
Broker"); or
/ / _________________________________________________ __ represents both
Seller and Buyer ("Dual Agency"). (Also see Paragraph 26.)
(the "Broker(s)"), all such named Broker(s) being the procuring cause(s) of this
Agreement. See paragraph 26 for Disclosures Regarding the Nature of a Real
Estate Agency Relationship. Buyer shall use the services of Buyer's Broker
exclusively in connection with any and all negotiations and offers with respect
to the property described in paragraph 2.1 for a period of one year from the
date above.
7.2 Buyer and Seller each represent and warrant to the other that
he/she/it has had no dealings with any person, firm, broker or finder in
connection with the negotiation of this Agreement and/or the consummation of the
purchase and sale contemplated herein, other than the Broker(s) named in
paragraph 7.1, and no broker or other person, firm or entity, other than said
Broker(s) is/are entitled to any commission or finder's fee in connection with
this transaction as the result of any dealings or acts of such party. Buyer and
Seller do each hereby agree to indemnify, defend, protect and hold the other
harmless from and against any costs, expenses or liability for compensation,
commission or charges which may be claimed by any broker, finder or other
similar party, other than said named Broker(s) by reason of any dealings or act
of the indemnifying Party.
8. ESCROW AND CLOSING.
8.1 Upon acceptance hereof by Seller, this Agreement, including any
counter-offers incorporated herein by the Parties, shall constitute not only the
agreement of purchase and sale between Buyer and Seller, but also instructions
to Escrow Holder for the consummation of the Agreement through the Escrow,
Escrow Holder shall not prepare any further escrow instructions restating or
amending this Agreement unless specifically so instructed by the Parties of a
Broker herein.
8.2 Escrow Holder is hereby authorized and instructed to conduct the
Escrow in accordance with this Agreement, applicable law, custom and practice of
the community in which Escrow Holder is located, including any reporting
requirements of the Internal Revenue Code. In the event of a conflict between
the law of the state where the Property is located and the law of the state
where the Escrow Holder is located, the law of the state where the Property is
located shall prevail.
8.3 Subject to satisfaction of the contingencies herein described, Escrow
Holder shall close this escrow (the "Closing") by recording the grant deed and
other documents required to be recorded and by disbursing the funds and
documents in accordance with this Agreement.
8.4 If this transaction is terminated for non-satisfaction and non-waiver
of a Buyer's Contingency, as defined in paragraph 9.4, then neither of the
Parties shall thereafter have any liability to the other under this Agreement,
except to the extent of the breach of any affirmative covenant or warranty in
this Agreement that may have been involved. In the event of such termination,
Buyer shall be promptly refunded all funds deposited by or on behalf of Buyer
with a Broker, Escrow Holder or Seller, less only Title Company and Escrow
Holder cancellation fees and costs, all of which shall be Buyer's obligation.
8.5 The Closing shall occur on the Expected Closing Date, or as soon
thereafter as the Escrow is in condition for Closing; provided, however that if
the Closing does not occur by the Expected Closing Date and the Expected Closing
Date is not extended by mutual instructions of the Parties, a Party hereto not
then in default under this Agreement may notify the other Party, Escrow Holder,
and Broker(s), in writing that, unless the Closing occurs within five (5)
business days following said notice, the Escrow and this Agreement shall be
deemed terminated without further notice or instructions.
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<PAGE>
8.6 Should the Closing not occur during said five (5) day period, this
Agreement and Escrow shall be deemed terminated and Escrow Holder shall
forthwith return all monies and documents, less only Escrow Holder's reasonable
fees and expenses, to the Party who deposited them. Such Party shall indemnify
and hold Escrow Holder harmless in connection with such return. However, no
refunds or documents shall be returned to a party claimed by written notice to
Escrow Holder to be in default under this Agreement.
8.7 Except as otherwise provided herein, the termination of Escrow and
this Agreement and/or the return of deposited funds or documents shall not
relieve or release Buyer or Seller from any obligation to pay Escrow Holder's
fees or constitute a waiver, release or discharge of any breach or default that
has occurred in the performance of the obligations, agreements, covenants or
warranties contained herein.
8.8 If this Agreement terminates for any reason other than Seller's breach
or default, then at Seller's request, and as a condition to the return of
Buyer's deposit, Buyer shall within five (5) days after written request deliver
to Seller, at no charge, copies of all surveys, engineering studies, soil
reports, maps, master plans, feasibility studies and other similar items
prepared by or for Buyer that pertain to the Property.
9. CONTINGENCIES TO CLOSING.
9.1 The Closing of this transaction is contingent upon the satisfaction or
waiver of the following contingencies:
(a) DISCLOSURE. Buyer's receipt and written approval, within ten (10)
days after delivery to Buyer of a completed Property information Sheet (the
"Property Information Sheet"), concerning the Property, duly executed by or on
behalf of Seller in the form or equivalent to that published by the American
Industrial Real Estate Association (the "A.I.R."). Seller shall provide Buyer
with the Property Information Sheet within ten (10) days following the Date of
Agreement. See also paragraph 2.5 for possible additional disclosure and
contingency regarding a "Commercial Property Earthquake Weakness Disclosure
Report."
(b) PHYSICAL INSPECTION. Buyer's written approval, within ten (10)
days following the later of the Date of Agreement or receipt by Buyer of the
Property Information Sheet, of an inspection by Buyer, at Buyer's expense, of
the physical aspects of the Property.
(c) HAZARDOUS SUBSTANCE CONDITIONS REPORT. Buyer's written approval,
within thirty (30) days following the later of the Date of Agreement or receipt
by Buyer of the Property Information Sheet, of a Hazardous Substance Report
concerning the Property and relevant adjoining properties. Such report will be
obtained at Seller's discretion and expense. A "Hazardous Substance" for
purposes of this Agreement is defined as any substance whose nature and/or
quantity of existence, use, manufacture, disposal or effect, render it subject
to Federal, state or local regulation, investigation, remediation or removal as
potentially injurious to public health or welfare. A "Hazardous Substance
Condition" for purposes of this Agreement is defined as the existence on, under
or relevantly adjacent to the Property of a Hazardous Substance that would
require remediation and/or removal under applicable Federal, state or local law.
(d) DELETED.
(e) GOVERNMENTAL APPROVALS. Buyer's receipt, within fifteen (15) days
of the Date of Agreement, of all approvals and permits from governmental
agencies or departments which have or may have jurisdiction over the Property
which Buyer deems necessary or desirable in connection with its intended use of
the Property, including, but not limited to, permits and approvals required with
respect to zoning, planning, building and safety, fire, police, handicapped
access, transportation and environmental matters. Buyer's failure to deliver to
Escrow Holder and Seller written notice terminating this agreement prior to the
expiration of said fifteen (15) day period as a result of Buyer's failure to
obtain such approvals and permits shall be conclusively deemed to be Buyer's
waiver of this condition to Buyer's obligations under this Agreement.
(f) CONDITION OF TITLE. Buyer's written approval of a current
preliminary title report concerning the Property (the "PTR") issued by he Title
Company, as well as all documents (the "Underlying Documents") referred to in
the PTR, and the issuance by the Title Company of the title policy described in
10.1. Seller shall cause the PTR and all Underlying Documents to be delivered
to Buyer promptly after the Date of Agreement. Buyer's approval is to be given
within ten (10) days after receipt of said PTR and legible copies of all
Underlying Documents. The disapproval by Buyer of any monetary encumbrance,
which by the terms of this Agreement is not to remain against the Property after
the Closing, shall not be considered a failure of this condition, as Seller
shall have the obligation, at Seller's expense, to satisfy and remove such
disapproved monetary encumbrance at or before the Closing.
(g) SURVEY. Buyer's written approval, within thirty (30) days after
receipt of the PTR and Underlying Documents, of an ALTA title supplement based
upon a survey prepared to American Land Title Association (the "ALTA") standards
for an owner's policy by a licensed surveyor, showing the legal description and
boundary lines of the Property, any assessments of record, and any improvements,
poles, structures and things located within ten (10) feet either side of the
Property boundary lines. The Survey shall be prepared at Buyer's direction and
expense, If Buyer has obtained a survey and approved the ALTA title supplement,
Buyer shall elect within the period allowed for Buyer's approval of a survey to
have an ALTA extended coverage owner's form of title policy, in which event
Buyer shall pay any additional premium attributable thereto. Buyer shall
provide for a copy of the survey at Buyer's sole cost and expense.
(h) EXISTING LEASES AND TENANCY STATEMENTS. Buyer's written
approval, within ten (10) days after receipt of legible copies of all leases,
subleases or rental arrangements (collectively the "Existing Leases).
affecting the Property, and a statement (the "Tenancy Statement") in the
latest form or equivalent to that published by the A.I.R., executed by Seller
and each tenant and subtenant of the Property. Seller shall use its best
efforts to provide Buyer with said Existing Leases and Tenancy Statements
promptly after the Date of the Agreement. To be delivered vacant.
(i) OTHER AGREEMENTS. Buyer's written approval, within ten (10)
days after receipt, of a copy of any other agreements ("Other Agreements)
known to Seller that will affect the Property beyond the Closing. Seller
shall cause said copies to be delivered to Buyer promptly after the Date of
Agreement.
(j) FINANCING. If paragraph 5 hereof dealing with a financing
contingency has not been stricken, the satisfaction or wavier of such New
Loan contingency.
(k) FINANCING. DELETED.
(l) DESTRUCTION, DAMAGE OR LOSS. There shall not have occurred prior
to the Closing, a destruction of, or damage or loss to, the Property or any
portion thereof, from any causes whatsoever, which would cost more than
$10,000.00 to repair or cure. If the cost of repair or cure is $10,000.00 or
less, than $10,000.00 to repair or cure, to either terminate this transaction or
to purchase the Property notwithstanding such loss, but without deduction or
offset against the Purchase Price. If the cost to repair or cure is more than
$10,000.00 and Buyer does not elect to terminate this transaction, Buyer shall
be entitled to any insurance proceeds applicable to such loss. Unless otherwise
notified in writing by either Party or Broker, Escrow Holder shall assume no
destruction, damages, or loss costing more than $10,000.00 to repair or cure has
occurred prior to Closing.
(m) MATERIAL CHANGE. No Material Change, as hereinafter defined,
shall have occurred with respect to the Property that has not been approved in
writing by Buyer. For purposes of this Agreement, a Material Change" shall be a
change in the status of the use, occupancy, tenants, or condition of the
Property as reasonably expected by Buyer, that occurs after the date of this
offer and prior to the Closing. Buyer shall have ten (10) days following
receipt of written notice from any source of any such Material Change within
which to approve or disapprove same. Unless otherwise notified in writing by
either Party or Broker, Escrow Holder shall assume that no Material Change has
occur prior to the Closing.
(n) SELLER PERFORMANCE. The delivery of all documents and the due
performance of Seller of each and every undertaking and agreement to be
performed by Seller under this Agreement.
(o) BREACH OF WARRANTY. That each representation and warranty of
Seller herein be true and correct as of the Closing. Escrow Holder shall assume
that this condition has been satisfied unless notified to the contrary in
writing by Buyer or Broker(s) prior to the Closing.
(p) BROKER'S FEE. Payment at the Closing of such Broker's Fee as is
specified in this Agreement or later written instructions to Escrow Holder
executed by Seller and Broker(s), it is agreed by Buyer, Seller and Escrow
Holder that Broker(s) is/are a third party beneficiary of this
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Agreement insofar as the Broker's fee is concerned, and that no change shall be
made by Buyer, Seller or Escrow Holder with respect to the time of payment,
amount of payment, or the conditions to payment of the Broker's Fee specified in
this Agreement, without the written consent of Broker(s).
9.2 All of the contingencies specified in subparagraphs (a) through (p) of
paragraph 9.1 are for the benefit of, and may be waived by, Buyer, and may be
elsewhere herein referred to as "Buyer Contingencies."
9.3 If Buyer shall fail, within the applicable time specified, to approve
or disapprove in writing to Escrow Holder, Seller and the other Party's Broker,
any item, matter or document subject to Buyer's approval under the terms of this
Agreement, it shall be conclusively presumed that Buyer has approved such item,
matter or document. Buyer's conditional approval shall constitute a
disapproval, unless provision is made by the Seller within the time specified
therefor by the Buyer in the conditional approval or by this Agreement,
whichever is later, for the satisfaction of the condition imposed by the Buyer.
9.4 If any Buyer's Contingency is not satisfied or if Buyer disapproves
any matter subject to its approval within the time period applicable thereto
("Disapproved Item"), Seller shall have the right within ten (10) days following
the expiration of the time period applicable to such Buyer Contingency or
receipt of notice of Buyer's disapproval, as the case may be, to elect to cure
such Disapproved Item prior to the Expected Closing Date ("Seller's Election"),
Seller's failure to give to Buyer within said ten (10) day period, written
notice of Seller's commitment to cure such Disapproved Item. If Seller elects,
either by written notice or failure to give written notice, not to cure a
Disapproved Item, Buyer shall have the election within ten (10) days after
Seller's Election to either accept title to the Property subject to that
Disapproved Item or to terminate this transaction. Buyer's failure to alert
termination by written notice to Seller within said ten (10) day period shall
constitute Buyer's election to accept title to the Property subject to that
Disapproved Item without deduction or offset. Unless expressly provided
otherwise herein, Seller's right to cure shall not apply to Hazardous Substance
Conditions referenced in paragraph 9.1(c) or to the Financing Contingency set
forth in paragraph 5. Unless the parties mutually instruct otherwise, if the
time periods for the satisfaction of contingencies or for Seller's and Buyer's
said Elections would expire on a date after the Expected Closing Date, the
Expected Closing Date shall be deemed extended to coincide with the expiration
of three (3) business days following the expiration of: (a) the applicable
contingency period(s), (b) the period within which the Seller may elect to cure
the Disapproved Item, or (c) if Seller elects not to cure, the period within
which Buyer may elect to terminate this transaction, whichever is later.
9.5 Buyer understands and agrees that until such time as all Buyer's
Contingencies have been satisfied or waived, Seller and/or its agents may
solicit, entertain and/or accept backup offers to purchase the subject Property
in the event the transaction covered by this Agreement is not consummated.
9.6 As defined in subparagraph 9.1(c), Buyer and Seller acknowledge that
extensive local, state and Federal legislation establish broad liability upon
owners and/or users of real property for the investigation and remediation of a
Hazardous Substance Condition. The determination of the existence of a
Hazardous Substance Condition and the evaluation of the impact of such a
condition are highly technical and beyond the expertise of Broker(s). Buyer and
Seller acknowledge that they have been advised by Broker(s) to consult their own
technical and legal experts with respect to the possible Hazardous Substance
Condition aspects of this Property or adjoining properties, and Buyer and Seller
are not relying upon any investigation by or statement of Broker(s) with respect
thereto. Buyer and Seller hereby assumes all responsibility for the impact of
such Hazardous Substance Conditions upon their respective interests herein.
10. DOCUMENTS REQUIRED AT CLOSING:
10.1 Escrow Holder shall cause to be issued to Buyer a standard coverage
(or ALTA extended, if so elected under paragraph 9.1(f)) owner's form policy of
title insurance effective as of the Closing, issued by the Title Company in the
full amount of the Purchase Price, insuring title to the Property vested in
Buyer, subject only to the exceptions approved by Buyer. In the event there is
a Purchase Money Deed of Trust in this transaction, the policy of title
insurance shall be a joint protection policy insuring both Buyer and Seller.
*IMPORTANT: IN A PURCHASE OR EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE TO
OBTAIN TITLE INSURANCE IN CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE MAY BE
PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE PROPERTY
BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN ORDER TO
ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE ACQUIRING."
10.2 Seller shall deliver or cause to be delivered to Escrow Holder in time
for delivery to Buyer at the Closing, an original ink signed;
(a) Grant deed (or equivalent), duly executed and in recordable form,
conveying fee title to the Property to Buyer.
(b) If paragraph 3.1(c) has not been stricken, the Beneficiary
Statements concerning Existing Note(s).
(c) If applicable, the Existing Leases and Other Agreements together
with duly executed assignments thereof by Seller and Buyer. The assignment of
Existing Leases shall be on the most recent Assignment and Assumption of
Lessor's Interest in Lease form published by the A.I.R. or its equivalent.
(d) If applicable, the Tenancy Statements executed by Seller and the
Tenant(s) of the Property.
(e) An affidavit execute by Seller to the effect that Seller is not a
"foreign person" within the meaning of Internal Revenue Code Section 1445 or
successor statues. If Seller does not provide such affidavit in form reasonably
satisfactory to Buyer at least three (3) days prior to the Closing. Escrow
Holder shall at the Closing deduct from Seller's proceeds and remit to Internal
Revenue Service such sum as is required by applicable Federal law with respect
to purchases from foreign sellers.
10.3 Buyer shall deliver or cause to be delivered to Seller through
escrow:
(a) The cash portion of the Purchase Price and such additional sums as
are required of Buyer under this Agreement for prorations, expenses and
adjustments. The balance of the cash portion of the Purchase Price, including
Buyer's escrow charges and other cash charges, if any, shall be deposited by
Buyer with Escrow Holder, by cashier's check drawn upon a local major banking
institution, federal funds wire transfer, or any other method acceptable to
Escrow Holder as immediately collectable funds, no later than 11:00 o'clock A.M.
on the business day prior to the Expected Closing Date.
(b) If a Purchase Money Note and Purchase Money Deed of Trust are
called for by this Agreement, the duly executed originals of those documents,
the Purchase Money Deed of Trust being in recordable form, together with
evidence of fire insurance on the improvements in the amount of the full
replacement cost naming Seller as a mortgage loss payee, and a real estate tax
service contract (at Buyer's expense), assuring Seller of notice of the status
of payment of real property taxes during the life of the Purchase Money Note.
(c) The assumption portion of the Assignment and Assumption of
Lessor's Interest in Lease form specified in paragraph 10.2(c), above, duly
executed by Buyer with respect to the obligations of the Lessor accruing after
the Closing under Other Agreements.
(d) Assumptions duly executed by Buyer of the obligations of Seller
that accrue after Closing as to each Existing Lease.
(e) If applicable, a written assumption duly executed by Buyer of the
loan documents with respect to Existing Notes.
11. PRORATIONS, EXPENSES AND ADJUSTMENTS.
11.1 TAXES. Real property taxes payable by the owner of the Property shall
be prorated through Escrow as of the date of the Closing, based upon the latest
tax bill available. The Parties agree to prorate as of the Closing any taxes
assessed against the Property by supplemental bill levied by reason of events
occurring prior to the Closing. Payment shall be made promptly in cash upon
receipt of a copy of any such supplemental bill
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of the amount necessary to accomplish such proration. Seller shall pay and
discharge in full at or before the Closing the unpaid balance of any special
assessment bonds.
11.2 Insurances. If Buyer elects to take an assignment of the existing
casualty and/or liability insurance that is maintained by Seller, the current
premium therefor shall be prorated through Escrow as of the date of Closing.
11.3 RENTALS, INTEREST AND EXPENSES. Collected rentals, interest on
Existing Notes, utilities, and operating expenses shall be prorated as of the
date of Closing. The Parties agree to promptly adjust between themselves
outside of Escrow any rents received after the Closing.
11.4 SECURITY DEPOSIT. Security Deposits held by Seller shall be given to
Buyer by a credit to the cash required of Buyer at the Closing.
11.5 POST CLOSING MATTERS. Any item to be prorated that, it is not
determined at the Closing shall be promptly adjusted by the Parties by
appropriate cash payment outside of the Escrow wherein the amount due is
determined.
11.6 VARIATIONS IN EXISTING NOTE BALANCES. In the event that Buyer is
taking title to the Property subject to an Existing Deed of Trust(s), and in the
event that a Beneficiary Statement as to the applicable Existing Note(s)
discloses that the unpaid principal balance of such Existing Note(s) at the
Closing will be more or less than the amount set forth in paragraph 3.1(c)
hereof (the "Existing Note Variation"), then the Purchase Money Note(s) shall
be reduced or increased by an amount equal to such Existing Note Variation. If
there is to be no Purchase Money Note, the cash required at the Closing per
Paragraph 3.1(a) shall be reduced or increased by the amount of such Existing
Note Variation.
11.7 VARIATIONS IN NEW LOAN BALANCE. In the event Buyer is obtaining a New
Loan and in the event that the amount of the New Loan actually obtained is
greater than the amount set forth in Paragraph 5.1 hereof, the Purchase Money
Note, if one is called for in this transaction, shall be reduced by the excess
of the actual face amount of the New Loan over such amount as designated in
Paragraph 5.1 hereof.
11.8 ESCROW COSTS AND FEES. Buyer and Seller shall each pay one-half of
the Escrow Holder's charges and Seller shall pay the usual recording fees and
any required documentary transfer taxes. Seller shall pay the premium for a
standard coverage owner's or joint protection policy of title insurance.
12. REPRESENTATION AND WARRANTIES OF SELLER AND DISCLAIMER.
12.1 Seller's warranties and representations shall survive the Closing and
delivery of the deed, and, unless otherwise noted herein, are true, material and
relied upon by Buyer and Broker(s) in all respects, both as of the Date of the
Agreement, and as of the date of the Closing. Seller hereby makes the following
warranties and representations to Buyer and Broker(s).
(a) AUTHORITY OF SELLER. Seller is the owner of the Property and/or
has the full right, power and authority to sell, convey and transfer the
Property to Buyer as provided herein, and to perform Seller's obligations
hereunder.
(b) MAINTENANCE DURING ESCROW AND EQUIPMENT CONDITION AT CLOSING.
Except as otherwise provided in paragraph 9.1(1) hereof dealing with
destruction, damage or loss, Seller shall maintain the Property until the
Closing in its present condition, ordinary wear and tear expected. The heating,
ventilating, air conditioning, plumbing, elevators, loading doors and electrical
systems shall be in good operating order and condition at the time of Closing.
(c) HAZARDOUS SUBSTANCES/STORAGE TANKS. Seller will has no
knowledge, except as otherwise disclosed to Buyer in writing, of the existence
or prior existence on the Property of any Hazardous Substance (as defined in
paragraph 9.1(c)), nor of the existence or prior existence of any above or below
ground storage tank or tanks.
(d) COMPLIANCE. Seller has no knowledge of any aspect or condition
of the Property which violates applicable laws, rules, regulations, codes, or
covenants, conditions or restrictions, or of improvements or alterations made to
the Property without a permit where one was required, or of any unfulfilled
order or directive of any applicable governmental agency or casualty insurance
company that any work of investigation, remediation, repair, maintenance or
improvement is to be performed on the Property.
(e) CHANGES IN AGREEMENTS. Prior to the Closing, Seller will not
violate or modify, orally or in writing, any Exiting Lease or Other Agreement,
or create any new leases or other agreements affecting the Property, without
Buyer'';'s written approval, which approval will not be unreasonably withheld.
(f) POSSESSORY RIGHTS. Seller has no knowledge that anyone will, at
the Closing, have any right to possession of the Property, except as disclosed
by this Agreement or otherwise in writing to Buyer.
(g) MECHANICS' LIENS. There are no unsatisfied mechanic's lien
rights concerning the Property.
(h) ACTIONS, SUITS OR PROCEEDINGS. Seller has no knowledge of any
actions, suits or proceedings pending or threatened before any commission,
board, bureau, agency, instrumentality, arbitrator(s) court or tribunal that
would affect the Property or the right to occupy or utilize same.
(i) NOTICE OF CHANGES. Seller will promptly notify Buyer and
Buyer(s) in writing of any Material Change (as defined in paragraph 9.1(m))
affecting the Property that becomes known to Seller prior to the Closing.
(j) NO TENANT BANKRUPTCY PROCEEDINGS. Seller has no notice or
knowledge that any tenant of the Property is the subject of a bankruptcy or
insolvency proceeding.
(k) NO SELLER BANKRUPTCY PROCEEDINGS. Seller is not the subject of a
bankruptcy or insolvency proceeding.
12.2 Buyer hereby acknowledges that, except as otherwise stated in this
Agreement, Buyer is purchasing the Property in its existing condition and will,
by the time called for herein, make or have waived all inspections of the
Property Buyer believes are necessary to protect its own interest in, and its
contemplated use of, the Property. The Parties acknowledge that, except as
otherwise stated in this Agreement, no representations, inducements, promises,
agreements, assurances, oral or written, concerning the Property, or any aspect
of the Occupational Safety and Health Act, hazardous substance laws, or any
other act, ordinance or law, have been made by either Party or Broker, or relief
upon by either party hereto.
13. POSSESSION.
13.1 Possession of the Property shall be given to Buyer at the Closing.
14. BUYER'S ENTRY.
14.1 At any time during the Escrow period, Buyer, and its agents and
representatives, shall have the right at reasonable times and subject to rights
of tenants under Existing Leases, to enter upon the Property for the purpose of
making inspections and tests specified in this Agreement. Following any such
entry or work, unless otherwise directed in writing by Seller, Buyer shall
return the Property to the condition it was in prior to such entry or work
including the recompaction or removal of any disrupted soil or material as
Seller may reasonably direct. All such inspections and tests and any other work
conducted or materials furnished with respect to the Property by or for Buyer
shall be paid for by Buyer as and when due and Buyer shall indemnify, defend,
protect and hold harmless Seller and the Property of and from any and all
claims, liabilities, demands, losses, costs, expenses (including reasonable
attorney's fees), damages or recoveries, including those for injury to person or
property, arising out of or relating to any such work or materials or the acts
or omissions of Buyer, its agents or employees in connection therewith.
15. FURTHER DOCUMENTS AND ASSURANCES.
15.1 Buyer and Seller shall each, diligently and in good faith, undertake
all actions and procedures reasonably required to place the Escrow in condition
for Closing as and when required by this Agreement. Buyer and Seller agree to
provide all further information, and to execute and deliver all further
documents and instruments, reasonably required by Escrow Holder or the Title
Company.
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16. ATTORNEYS' FEES.
16.1 In the event of any litigation or arbitration between the Buyer,
Seller, and Broker(s), or any of them, concerning this transaction, the
prevailing party shall be entitled to reasonable attorney's fees and costs. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred in good faith.
17. PRIOR AGREEMENTS/AMENDMENTS.
17.1 The contract in effect as of the Date of Agreement supersedes any and
all prior agreements between Seller and Buyer regarding the Property.
17.2 Amendments to this Agreement are effective only if made in writing and
executed by Buyer and Seller.
18. BROKER'S RIGHTS.
18.1 If this sale shall not be consummated due to the default of either the
Buyer or Seller, the defaulting party shall be liable to and shall pay to
Broker(s) the commission that Broker(s) would have received had the sale been
consummated. This obligation of Buyer, if Buyer is the defaulting party, is in
addition to any obligation with respect to liquidated damages.
18.2 Upon the Closing, Broker(s) is/are authorized to publicize the facts
of this transaction.
19. NOTICES.
19.1 Whenever any Party hereto, Escrow Holder or Broker(s) herein shall
desire to give or serve any notice, demand, request approval or other
communication, each such communication shall be in writing and shall be
delivered personally, by messenger or by mail, postage prepaid, addressed as set
forth adjacent to that party's or Broker's signature on this Agreement or by
telecopy with receipt confirmed by telephone, Service of any such communication
shall be deemed made on the date of actual receipt at such address.
19.2 Any Party or Broker hereto may from time to time, by notice in writing
served upon the other Party as aforesaid, designate a different address to
which, or a different person or additional persons to whom, all communications
are thereafter to be made.
20. DURATION OF OFFER.
20.1 If this offer shall not be accepted by Seller on or before 5:00 p.m.
according to the time standard applicable to the city of Los Angeles on the date
of March 22, 1996, it shall be deemed automatically revoked.
20.2 The acceptance of this offer, or of any subsequent counter-offer
hereto, that creates an agreement between the Parties as described in
paragraph 1.2, shall be deemed made upon delivery to the other Party or either
Broker herein of a duly executed writing unconditionally accepting the last
outstanding offer or counter-offer.
21. DELETED
22. DELETED
22.1 DELETED
22.2 DELETED
22.3 DELETED
23. APPLICABLE LAW.
23.1 This Agreement shall be governed by, and paragraph 22.3 amended to
refer to, the laws of the state in which the Property is located.
24. TIME OF ESSENCE.
24.1 Time is of the essence of this Agreement.
25. COUNTERPARTS.
25.1 This Agreement may be executed by Buyer and Seller in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument. Escrow Holder, after verifying that the
counterparts are identical except for the signatures, is authorized and
instructed to combine the signed signature pages on one of the counterparts,
which shall then constitute the Agreement.
26. DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY RELATIONSHIP.
26.1 The Parties and Broker(s) agree that their relationship(s) shall be
governed by the principles set forth in California Civil Code, Section 2375, as
summarized in the following paragraph 26.2.
26.3 When entering into a discussion with a real estate agent regarding a
real estate transaction, a Buyer or Seller should from the outset understand
what type of agency relationship or representation it has with the agent or
agents in the transaction. Buyer and Seller acknowledge being advised by the
Broker(s) in this transaction, as follows:
(a) Seller's Agent. A Seller's agent under a listing agreement
with the Seller acts as the agent for the Seller only. A Seller's agent or
subagent has the following affirmative obligations: (1) To the Seller: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Seller, (2) To the Buyer and the Seller: a. Diligent exercise of reasonable
skill and care in performance of the agent's duties, b. A duty of honest and
fair dealing and good faith, c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.
(b) Buyer's Agent. A selling agent can, with a Buyer's consent,
agree to act as agent for the Buyer only. In these situations, the agent is not
the Seller's agent, even if by agreement the agent may receive compensation for
services rendered, either in full or in part from the Seller. An agent acting
only for a Buyer has the following affirmative obligations. (1) To the
Buyer: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Buyer, (2) To the Buyer and the Seller: a Diligent exercise of
reasonable skill and care in performance of the agent's duties, b. A duty of
honest and fair dealing and good faith, c. A duty to disclose all facts known
to the agent materially affecting the value or desirability of the property that
are not known to, or within the diligent attention and observation of, the
Parties. An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the affirmative
duties set forth above.
(c) Agent Representing Both Seller and Buyer. A real estate
agent, either acting directly or through one or more associate licenses, can
legally be the agent of both the Seller and the Buyer in a transaction, but only
with the knowledge and consent of both the Seller and the Buyer. (1) In a dual
agency situation, the agent has the following affirmative obligations to both
the Seller and the Buyer: a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Seller or the Buyer, b. Other
duties to the Seller and the Buyer as stated above in their respective
sections (a) and (b) of this paragraph 26.2. (2) In representing both Seller
and Buyer, the agent may not without the express permission of the respective
Party, disclose to the other Party that the Seller will accept a price less than
the listing price or that the Buyer will pay a price greater than the price
offered. (3) The above duties of the agent in a real estate transaction do not
relieve a Seller or Buyer from the responsibility to protect
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their own interests. Buyer and Seller should carefully real all agreements to
assure that they adequately express their understanding of the transaction. A
real estate agent is a person qualified to advise about real estate. If legal
or tax advise is desired, consult a competent professional.
(d) Further Disclosures. Throughout this transaction Buyer and
Seller may receive more than one disclosure, depending upon the number of agents
assisting in the transaction. Buyer and Seller should each read its contents
each time it is presented, considering the relationship between them and the
real estate agent in this transaction and that disclosure.
26.4 Confidential Information: Buyer and Seller agree to identify to
Broker(s) as "Confidential" any communication or information given Broker(s)
that is considered by such Party to be confidential.
27. ADDITIONAL PROVISIONS:
Additional provisions of this offer, if any, are as follows or are attached
hereto by an addendum consisting of paragraphs 27.1 through 27.5 (it will be
presumed no other provisions are included unless specified here.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
BUYER AND SELLER HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN AND ARE NOW ADVISED
BY THE BROKER(S) TO CONSULT AND RETAIN THEIR OWN EXPERTS TO ADVISE AND
REPRESENT THEM CONCERNING THE LEGAL AND INCOME TAX EFFECTS OF THIS AGREEMENT,
AS WELL AS THE CONDITION AND/OR LEGALITY OF THE PROPERTY. THE IMPROVEMENTS
AND EQUIPMENT THEREIN, THE SOIL THEREOF, THE CONDITION OF TITLE THERETO, THE
SURVEY THEREOF, THE ENVIRONMENTAL ASPECTS THEREOF, THE INTENDED AND/OR
PERMITTED USAGE THEREOF, THE EXISTENCE AND NATURE OF TENANCIES THEREIN, THE
OUTSTANDING OTHER AGREEMENTS. IF ANY, WITH RESPECT THERETO, AND THE EXISTING
OR CONTEMPLATED FINANCING THEREOF, AND THAT THE BROKER(S) IS/ARE NOT TO BE
RESPONSIBLE FOR PURSUING THE INVESTIGATION OF ANY SUCH MATTERS UNLESS
EXPRESSLY OTHERWISE AGREED TO IN WRITING BY BROKER(S) AND BUYER OR SELLER
THIS FORM IS NOT FOR USE IN CONNECTION
WITH THE SALE OF RESIDENTIAL PROPERTY.
IF THIS AGREEMENT HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE
BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS AGREEMENT OR THE
TRANSACTION INVOLVED HEREIN. THE UNDERSIGNED BUYER OFFERS AND AGREES TO BUY
AND PROPERTY ON THE TERMS AND CONDITIONS STATED AND ACKNOWLEDGES RECEIPT OF A
COPY HEREOF.
BROKER: BUYER:
Missak Azirian Realty Missak Azirian
By______________________ Date_________ By______________________ Date________
Name Printed:_________________________ Name Printed: Missak Azirian
Title:________________________________ Title:_______________________________
10459 W. Jefferson Boulevard 11524 Thurston Circle
______________________________________ _____________________________________
Address Address
Culver City, CA 90232 Los Angeles, CA 90049
______________________________________ _____________________________________
(310) 204-0996 (310) 559-2151 (310) 476-5639
_______________ ____________________ _______________ ____________________
Telephone Facsimile No. Telephone Facsimile No.
28. ACCEPTANCE.
28.1 Seller accepts the foregoing offer to purchase the Property and hereby
agrees to sell the Property to Buyer on the terms and conditions therein
specified.
28.2 Seller acknowledges that Broker(s) has/have been retained to locate a
Buyer and is/are the procuring cause of the purchase and sale of the Property
set forth in this Agreement. In consideration of real estate brokerage service
rendered by Broker(s), Seller agrees to pay Broker(s) a real estate brokerage
fee in a sum equal to Ref. 27.3 of the Purchase Price (the "Broker(s) Fee")
divided equally in such shares as said Broker(s) shall direct in writing. As is
provided in paragraph 9.1(p), this Agreement shall serve as an irrevocable
instruction to Escrow Holder to pay such brokerage fee to Broker(s) out of the
proceeds accruing to the account of Seller at the Closing.
28.3 Seller acknowledges receipt of a copy hereof and authorize the
Broker(s) to deliver a signed copy to Buyer.
NOTE: A PROPERTY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO BUYER BY
SELLER UNDER THIS AGREEMENT.
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BROKER: SELLER:
Daum Commercial Real Estate Services Olympic Plastic's Inc., a Subsidiary of
Intek Diversified Corporation
By____________________ Date_________ By_____________________ Date________
Name Printed: David Freitag Name Printed: Steven Wasserman
_______________________ _______________________
Title: Associate Vice President Title: Secretary/Counsel
______________________________ ______________________________
1375 West 9th Street, 20th Floor
123 S. Figueroa Street, #400 One Cleveland Center
____________________________________ _____________________________________
Address Address
Los Angeles, CA 90012 Cleveland, Ohio 44114
____________________________________ _____________________________________
(310) 626-9101 (213) 621-0903 (310) 736-7220 (216) 621-6536
_______________ __________________ _______________ ___________________
Telephone Facsimile No. Telephone Facsimile No.
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DAUM ADDENDUM
COMMERCIAL REAL ESTATE SERVICES
ADDENDUM TO STANDARD OFFER, AGREEMENT AND ESCROW
INSTRUCTIONS FOR PURCHASE OF REAL PROPERTY
FOR PROPERTY KNOWN AS 5800 WEST JEFFERSON BOULEVARD
LOS ANGELES, CALIFORNIA
DATED MARCH 21, 1996
27.1 LOAN CONTINGENCY:
This offer to purchase is subject to the following financial contingencies.
1. Approval of Buyer's credit seven (7) business days from acceptance
hereof.
2. Appraisal of the property by lender thirty (30) days from acceptance
hereof, Buyer shall provide Seller with a copy of the MAI Appraisal in
the event Buyer does not close the escrow.
3. Acceptable environmental report for lender's review and approval
including a remediation plan acceptable to the Lender.
27.2 Seller shall perform and pay for all clean up activities necessary to
correct any hazardous Substance Condition know to Seller or identified in
Seller's Hazardous Substance Conditions Report. Furthermore, if required
by lender, Seller shall holdback in escrow a sum equal to the cost
associated with said remediation as determined by Buyer's lender and
reasonable reserve.
All asbestos identified by Seller or Buyer's investigation shall be removed
by Buyer provided said items are required to be removed by governmental
ordinances or state mandated agencies.
27.3 BROKERAGE FEE:
Daum Commercial Real Estate Services shall receive a brokerage fee of
$55,000.00 payable upon close of escrow. Missak Azirian Realty shall waive
any claims for brokerage commissions.
27.4 Buyer shall have the right to have its environmental consultant review and
share in the data and test results obtained by Seller's environmental
consultant which shall be at Buyer's sole cost and expense. If Buyer's
environmental consultant recommends additional testing. Buyer may do so at
Buyer's sole cost and expense.
27.5 Seller represents that Seller's remediation work, if any, will not
interfere with Buyer's occupancy and use of the Premises after the close of
Escrow. If such work shall have a material effect on Buyer's occupancy and
use, closing of Escrow shall be deferred until such conditions no longer
exist.
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Exhibit 24
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report included in this Annual Report on Form 10-K of Intek Diversified
Corporation, into the Company's previously filed Registration Statement on Form
S-8 (File No. 033-60505) on June 23, 1995 and Registration Statement on Form S-8
(File No. 033-61529) filed on August 2, 1995. It should be noted that we have
not audited any financial statements of the Company subsequent to December 31,
1995 or performed any audit procedures subsequent to the date of our report.
/s/Arthur Andersen LLP
Los Angeles, California
March 28, 1996
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