SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(MARK ONE)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-6856
ANDAL CORP.
(Exact name of registrant as specified in its charter)
New York 13-2571394
(State or other jurisdiction of incorporation or organization)(I. R. S.
employer ID no.)
909 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 376-5545
Securities registered pursuant to section 12(b) of the Act:
None
(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock, $1.00 par value None
5 1/2% Convertible Subordinated Debentures due 1997 None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Non-affiliates of the Registrant hold approximately 36% of the
Registrant's common stock. There is currently no established trading market
for such stock. See Item 5 within.
As of December 29, 1995, the number of outstanding shares of Registrant's
Common Stock was 329,859 shares.<PAGE>
PART I
Item 1. Business
GENERAL
Andal Corp. (the "Company" or "Andal"), through its Multi-Arc Inc.
subsidiary ("Multi-Arc"), is engaged in surface enhancement which is the
utilization of advanced technologies to apply thin-film coatings of various
metals, metal compounds, and other substances to base materials to enhance
their hardness, wear and corrosion resistance, lubricity, and appearance.
Multi-Arc owns and operates seven coating centers in the United States, one in
Canada, and one in England, and has royalty or equity interests or to which it
licenses technology in 25 coating centers in Europe, Japan, India, Korea,
Taiwan, Singapore, People's Republic of China, Brazil, and Argentina. These
centers offer coating services on a fee basis to manufacturers and end-users
of industrial tools, components, and other products. Multi-Arc also engages
in the design, manufacture, assembly, and sale of proprietary coating
equipment systems to manufacturers and large volume end-users of tools,
consumer products, and other products that benefit from surface enhancement,
as well as to its own joint venture coating centers. See Note 20 of the Notes
to Consolidated Financial Statements included elsewhere in this Report for
certain segment information, including revenues, operating profit (loss) and
identifiable assets, and other information about foreign operations of the
Company for each of the three years in the period ending September 30, 1995.
UBC Option
The Company, through a wholly-owned subsidiary, UBC Virginia Corp. ("UBC
Corp."), owns an option (the "Option") to purchase a parcel of real estate
(the "UBC Property") located on 61st Street and First Avenue in New York City,
which Option has been carried on the books of the Company at nil value for
many years. The Option grants the Company the right to purchase the UBC
Property for approximately $3 million in cash and is exercisable only after
the death of the later to die of two of the principals of the corporation that
granted the Option. The Option expires 91 (ninety-one) days after the Company
has been given formal notice of such death by the Optionor (the "Option
Notice"). The Company was given formal notice of such death on September 22,
1995. The Company does not have the $3 million of cash that is required to
exercise the Option, and it does not believe it will be able to raise such a
sum through borrowings from unrelated parties or through the sale of assets
other than the Option. However, under the terms of the loan described below,
the Company is obligated to exercise the Option. Accordingly, on October 13,
1995 the Company gave the Optionor formal notice of its election to exercise
the Option; and the parties have agreed that the transaction must be closed on
or before February 27, 1996.
The capital stock of UBC Corp. was pledged as security for a $5 million
loan, hereafter referred to as the "UBC Loan," made to the Company in 1990 by
Alan N. Cohen, President and a Director of the Company, Paul Milstein, who was
then a Director of the Company, and Frankhill Associates, a limited
partnership of which Andrew J. Frankel, Chairman of the Board and a Director
of the Company, is a general partner (collectively, in such capacity, the "UBC
Lenders").
As of September 30, 1995, the principal balance of the loan, after
adjustment for a restructuring which occurred in 1992, is $5,571,285 which is
due and payable on the earlier of March 31, 1997, or the day after certain
other indebtedness to shareholders of the Company, including the individuals
mentioned above, has been paid in full.
The capital stock of UBC Corp. also serves as security (second lien) for
a $2,043,000 loan (hereafter referred to as the "Fleet Assignee Loan")
outstanding as of September 30, 1995 ($1,793,000 as of December 29, 1995)
between the Company and certain of its directors and a stockholder who was
formerly a director.
The Company's failure to pay the $3 million purchase price for the UBC
Property will result in an event of default under the UBC Loan, which will
give the UBC Lenders the right to exercise the Option on the Company's behalf
and to declare the loan immediately due and payable, including all sums
advanced by the UBC Lenders in exercising the Option. In addition, the UBC
Lenders will have all of the remedies available to them under applicable law
for secured lenders, including, without limitation, the public or private sale
of the UBC Property acquired by exercise of the Option. Default under the UBC
Loan will also result in default under the Fleet Assignee Loan.
Until January 1995, the Company had been under contract to sell the
Option to an unrelated real estate developer, who had contracted to purchase
the Option in 1984. The developer was unable to obtain financing to
consummate the purchase; and, as a result, the Company terminated the
contract. Upon termination of the contract, the Company has attempted to sell
the Option to various other parties. In addition, after the Company received
the Option Notice from the Optionor, the Company made contact with several
brokers, which brokers have not been able to identify a buyer. To date, the
Company has not received a bona fide offer from a third party for the Option.
The UBC Lenders have expressed an interest in acquiring the UBC Property
in satisfaction of the amount outstanding on the UBC Loan. In that event, the
Company would no longer be obligated with respect to the $3 million purchase
price obligation due on the UBC Option exercise.
The Board of Directors of the Company met on October 5, 1995 to discuss
the difficulties entailed in the Company's exercise of the Option, including
the Company's lack of cash flow, diminished borrowing power, debt structure,
and difficulties in raising funds through a private placement of Multi-Arc's
common stock and subordinated debentures (see "Sale of Minority Interest in
Multi-Arc Inc." included elsewhere in this Report). After discussion, the
Board members who are not UBC Lenders (Messrs. Flood and Glickman) authorized
the officers of the Company to engage an independent appraiser to conduct an
appraisal of the UBC Property, following which such Board members would seek
to negotiate a transaction with the UBC Lenders taking into account, in
addition to the appraisal, all material circumstances relating to the UBC
Property, including, without limitation, the inability of the Company to raise
sufficient funds required to exercise the Option, the time constraints within
which the Company must exercise the Option, and the consequent probability
that, without a sale to a related party, the Option will expire worthless.
On November 21, 1995, the Company received a report from the independent
appraiser it had retained which concluded that the range for the market value
of the UBC Property was between $9.9 million and $11.9 million (before
deducting the $3 million that would have to be paid to exercise the Option),
depending on the ultimate cost of complying with zoning restrictions and other
costs that would be incurred in the development of the UBC Property. The
appraiser's conclusion was based on a number of assumptions, including the
assumption that a sale would occur after a reasonable exposure in a
competitive market under all conditions requisite for a fair sale, with the
buyer and seller acting prudently, knowledgeably, for self-interest, and not
under undue duress.
The members of the Company's Board of Directors who are not UBC Lenders
and the UBC Lenders are each considering the results of the appraisal. The
Company expects that formal negotiations between the Company and the UBC
Lenders will commence in early January 1996.
Sale of Minority Interest in Multi-Arc Inc.
In December 1994, Andal sold, for $500,000, approximately 2-1/2% of the
common stock of Multi-Arc to Multi-Arc's management; and Multi-Arc issued
$500,000 of convertible subordinated debentures (convertible into
approximately 2% of Multi-Arc common stock) to such management, the proceeds
of which were remitted to Andal as a return of capital. Both the sale of the
common stock and the issuance of the debentures were funded through
non-recourse loans of $1 million made to the management by Multi-Arc utilizing
Multi-Arc's revolving credit facility with First Fidelity Bank. Because of
the non-recourse nature of the loans, the gain of approximately $396,000 on
the sale of the Multi-Arc common stock to its management has been deferred
until such time as the management loans are repaid.
In June and September 1995, Andal sold, for $1,010,000, approximately
4.9% of the common stock of Multi-Arc to certain foreign licensees and other
investors; and Multi-Arc sold to such licensees and other investors $1,010,000
of convertible subordinated debentures (convertible into approximately 3.8% of
Multi-Arc common stock), the cash proceeds of which were remitted to Andal as
a return of capital. These debentures bear interest at 6% and are payable on
December 15, 2004. Approximately $450,000 of the proceeds of the common stock
sold, and $450,000 principal amount of the debentures sold are evidenced by a
promissory note which requires monthly principal payments over three years,
plus interest at 6% per annum. An additional $153,000 of common stock and
$153,000 principal amount of the debentures were sold on open account. The
gain on these sales of Multi-Arc common stock was $800,000, of which $452,000
was deferred and will be recognized as the amounts are collected.
The Company had agreed, in principal, to a total $3.5 million in stock
sales and $3.5 million of Multi-Arc debenture issuances to its foreign
licensees and other investors. However, the offer was not fully subscribed;
and the unsubscribed portion of the offer has been withdrawn.
Other
In November 1994, Multi-Arc India Ltd. ("India") completed an initial
public offering and was listed on the Bombay Stock Exchange which reduced the
Company's interest in India from 40% to 21%. Andal recorded a pretax gain of
$85,000 as a result of this transaction.
On June 30, 1995, an appeals tribunal dismissed a claim against the
Company by a local taxing authority for income taxes relating to certain of
its discontinued operations. Income from discontinued operations for the year
ended September 30, 1995 includes the reversal of a reserve for income taxes,
plus accrued interest, in the aggregate amount of $996,000.
In September 1995, the Company refinanced the debt of its subsidiary,
Multi-Arc (UK) Ltd., with First Fidelity Bank N. A. The new credit
facilities consist of a five-year term loan in the principal amount of Pounds
Sterling1,500,000 repayable in quarterly installments of Pounds Sterling54,000
commencing in December 1995 and a final installment of Pounds Sterling474,000
due in September 2000. Proceeds of the term loan were used to repay
outstanding indebtedness to Siemens Financial Services and the Bank of
Scotland, to advance an inter-corporate loan to Multi-Arc Inc., and for
acquisition of new equipment. In addition to the term loan, First Fidelity
has extended a Pounds Sterling250,000 overdraft facility for working capital
purposes.
The Company currently owns 352,700 shares, or approximately 3% of the
outstanding Class A common stock of Integrated Brands Inc., formerly named
Steve's Homemade Ice Cream, Inc. ("Integrated"), a company which markets,
distributes, and sells a variety of branded frozen dessert products and
franchises ice cream parlors, dip shops, and family-style restaurants
throughout the United States and certain foreign countries.
The Company was incorporated in New York in 1966 and maintains its
principal executive offices at 909 Third Avenue, New York, New York 10022.
Its telephone number is (212) 376-5545.
SURFACE ENHANCEMENT
Surface enhancement is the exploitation of a variety of technological
processes to produce new or changed surface properties of materials by the
deposition of thin films only microns thick (a micron is one millionth of a
meter).
The electric arc technology utilized by Multi-Arc in its Physical Vapor
Deposition ("PVD") process (ION BONDR) was originally developed in the Soviet
Union, and Multi-Arc acquired a patent and know-how license from the former U.
S. S. R. in 1979. Multi-Arc also employs a Chemical Vapor Deposition ("CVD")
process.
Multi-Arc first introduced the ION BONDR process on a commercial basis in
the United States in 1981 and has continually improved and enhanced the
original technology. Initially, the principal application of the ION BONDR
process was the coating of metal cutting tools, such as drills, used in
metal-working industries to increase the useful life and productivity of such
tools. However, Multi-Arc has been successful in developing additional
commercial applications for its processes, including the coating of metal
forming tools, such as dies, molds and punches, jewelry, carbide inserts,
plastic injection molds and screws, and medical instruments and implants.
Multi-Arc has also effected improvements in CVD technology which it employs
for the coating of steel and carbide aterials.
Multi-Arc derives revenues from (i) the nine coating centers owned and
operated by Multi-Arc located in the United States, Canada, and England, and
the 5 coating centers in which it has varying royalty or equity interests or
to which it licenses technology located in Europe, Japan, India, Korea,
Taiwan, Singapore, People's Republic of China, Brazil, and Argentina, all of
which coating centers perform coating services on a fee basis; (ii) the
design, manufacture, assembly, and sale of proprietary coating equipment
systems to coating centers and to manufacturers of, and large volume end-users
of, tools and other industrial products, such as component parts requiring a
high degree of wear resistance; (iii) royalties paid by system purchasers for
licenses to use the coating technology which the systems employ; and (iv)
research and development contracts.
Sales and Marketing
Multi-Arc's coating systems and services are marketed throughout the
United States by its own sales personnel, through independent sales
representatives, and through the use of direct marketing catalogues and the
display of its products at trade shows. Sales personnel at each of the
coating centers are involved in marketing the services performed at such
centers.
Competition
There are several manufacturers in the United States, Europe, and Japan
which produce coating equipment utilizing a PVD process; and Multi-Arc
anticipates that additional PVD technologies will be developed as the surface
enhancement industry develops. Moreover, there are numerous manufacturers of
CVD equipment which compete with the CVD systems manufactured by Multi-Arc, as
well as with its PVD systems in certain applications. There are also several
technologies other than the PVD and CVD processes, some of which involve
surface enhancement, which are currently being used by numerous other firms to
extend the useful lives and productivity of metal-cutting tools and other
items.
Although there are several companies which operate coating centers in the
United States that utilize PVD or CVD technology, only one is a significant
national and international competitor of the Company. The Company also
competes with numerous coating centers in the United States that employ
technologies other than PVD and CVD.
The Company competes in the manufacture of coating systems primarily on
the basis of quality and technical innovation, as well as price. In the
operating of coating centers, quality, price, and service are the principal
competitive factors.
Backlog
The approximate dollar amount of Multi-Arc's backlog of coating systems,
ancillary equipment, and coating services orders at September 30, 1995 and
1994 was $390,000 and $1,707,000, respectively. The decline in backlog is due
to the timing of equipment sales. The Company believes that all of its
backlog orders at September 30, 1995 will be shipped within the Company's
current fiscal year.
Patents and Trademarks
Multi-Arc has been issued a number of patents. Although the Company
considers these patent rights to be significant, it believes that its
competitive position and its continued operations are more dependent on its
technical knowledge, its processes, and its research and development programs,
than on patent protection. The Company intends to continue to apply for
patent protection with respect to new inventions in order to protect its
competitive position. The Company has registered several trademarks, the
principal ones being "Multi-ArcR" and "ION BONDR". Although these trademarks
afford Multi-Arc a degree of recognition in the industry and are valuable
assets, the Company does not regard them as material to its overall business.
Research and Development
Multi-Arc is engaged in ongoing research and development in connection
with new and existing products. Research and development expenditures have
been expensed as incurred and amounted to $1,628,000, $1,400,000, and
$1,222,000 for fiscal 1995, 1994, and 1993, respectively. In addition, the
Company has research and development agreements with several licensees
pursuant to which each company makes known to the others the results of
research undertaken by it in the field of surface enhancement.
Environmental Considerations
Compliance with Federal, state, and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, is not expected to
have a material effect on the Company's capital expenditures, earnings, or
competitive position.
Employees
As of September 30, 1995, Multi-Arc employed approximately 325 persons,
none of whom are covered by collective bargaining agreements. Multi-Arc
believes that its relationship with its employees is good.
Item 2. Properties
The Company's executive office is located in approximately 3,800 square
feet of leased space at 909 Third Avenue, New York, New York.
Multi-Arc's administrative offices and Northeast Coating Center are
located in a 20,400 square foot building located in Rockaway, New Jersey. The
building, which the Company has an option to purchase, at market value, leases
for a base rent of $226,900 per year. The seven other coating centers which
are owned and operated by the Company in the United States and Canada occupy
leased facilities containing an aggregate of approximately 88,000 square feet,
at an aggregate annual rental of approximately $605,000. In addition, the
Company leases a 25,000 square foot coating facility in the United Kingdom for
Pounds Sterling32,250 (approximately $51,000) per year.
All of the foregoing facilities are suitably equipped and adequate for
their current use.
Item 3. Legal Proceedings
In August 1982, National States Electric Corp. ("NSEC"), a subsidiary of
the Company then engaged in the electrical contracting business, commenced an
action in the New York Supreme Court, County of New York, against LFO
Construction Company ("LFO") for breach of contract. The action arose out of
a subcontract agreement between NSEC and LFO in connection with a New York
City construction project for which LFO served as construction manager. LFO,
in response, asserted various counterclaims and set-offs against NSEC; and, in
October 1982, LFO and two other parties commenced an action in the same court
against NSEC, the Company, and Andrew J. Frankel, Chairman of the Board of the
Company, in which the plaintiffs essentially realleged the counterclaims and
set-offs. These actions were tried in October 1992. The court dismissed the
claims against the Company and Mr. Frankel on the merits and with prejudice;
but the jury returned a verdict against NSEC for approximately $3.8 million,
including interest and costs; and a judgement was entered on the verdict in
November 1992. LFO and its associates appealed from that part of the judgement
which dismissed the action against the Company and Mr. Frankel. NSEC, in
turn, appealed from the judgement against it. In April 1994, the Appellate
Division affirmed the dismissal of the claims against the Company and Mr.
Frankel. In addition, the Court struck the award for damages against NSEC and
remanded the matter to the trial court for a new trial as to damages. In
January 1995, NSEC settled the issue of damages with LFO by assigning to LFO
its only asset which consisted of a claim it had against the New York City
Transit Authority for work it performed for the Authority many years ago. The
claim has been carried on the books of NSEC at no value; and, accordingly, the
settlement did not result in any loss to the Company.
The Company, as successor to Circle Industries Corp. ("Circle"), its
former subsidiary engaged in the installation of flooring, is a defendant in
an action before the Supreme Court, New York County, commenced in May 1983 by
Manhattan Plaza Associates against Circle and others alleging negligent
installation of flooring and installation of defective flooring resulting in
damages allegedly in excess of $5 million. The Company has filed an answer
denying liability, asserting defenses and cross-claiming against Masonite
Corporation, the manufacturer of the flooring. In June 1994, a similar action
against the Company was settled for a cash payment by the Company of
approximately $100,000. The Company cannot determine what effect the outcome
of the aforementioned legal proceeding will have on the Company's financial
position, results of operations, or liquidity. No liability has been accrued
for this matter, as it is not considered probable that a liability has been
incurred.
The Company is aware of various other lawsuits, claims, and
administrative roceedings which are pending involving it and its subsidiaries.
In the opinion of the Company's management, these matters will not result
in any material adverse effect on the Company's consolidated financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder
Matters
Although the Company's common stock is listed on the NASD OTC Bulletin
Board, transactions in and quotations of the stock have been limited and
sporadic and, in the Company's opinion, do not constitute an established
public trading market. The following table sets forth the range of high and
low bid prices per share of the common stock as reported by the Pink Sheets
and the NASD OTC Bulletin Board. Such quotations reflect inter-dealer prices
without retail mark-up, mark-down, or commission and may not necessarily
represent actual prices.
BID PRICES
High Low
FISCAL 1995
First Quarter $2.50 $2.00
Second Quarter $2.25 $2.25
Third Quarter $2.25 $2.25
Fourth Quarter $2.25 $2.25
FISCAL 1994
First Quarter $2.00 $2.00
Second Quarter $2.00 $2.00
Third Quarter $3.00 $2.00
Fourth Quarter $3.00 $2.00
As of December 29, 1995, the number of registered holders of the
Company's common stock was 1,145.
The Company has never paid a cash dividend on its common stock and does
not anticipate paying such dividends in the foreseeable future.
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected financial data as of the fiscal
year-end of each respective year and for the year then ended:
September 30,
1995 1994 1993 1992 1991
(Thousands of dollars, except per share amounts)
Operating revenues $30,383 $27,077 $24,887 $20,834 $41,892
Inc. (loss) from operations 2,414 1,627 832 (1,048) (1,926)
Income (loss) from continuing
operations 879 (771) (433) (2,733) (21,865)
Income (loss) from
discontinued operations 1,007 (350) (527) (2,067) (2,000)
Net income (loss) 1,886 (1,121) (960) (4,800) (23,865)
Income (loss) per share from
continuing operations 2.67 (2.34) (1.31) (8.29) (66.29)
Net income (loss) per share 5.72 (3.40) (2.91) (14.55) (72.35)
Average number of common shares
outstanding (000) 330 330 330 330 330
Total assets $23,625 $20,457 $23,475 $24,282 $29,544
Long-term obligations (excluding
current maturities) 17,585 16,141 18,721 20,398 7,715
Shareholders' equity
(deficit) (5,098) (6,984) (5,863) (4,903) (103)
Book value (deficit) per share at
year end (15.46) (21.17) (17.77) (14.86) (0.31)
See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," Notes 1, 12, and
13 of the Notes to Consolidated Financial Statements, and Report of
Independent Auditors regarding the basis of presentation of this financial
data.
See Note 5 of the Notes to Consolidated Financial Statements for a
description of the income (loss) from discontinued operations recorded in
1995, 1994, and 1993. The loss from discontinued operations in 1992 relates
to a $1,852,000 loss on disposal of the Company's investment in preferred
stock, common stock, and promissory notes due from Olsher Metals Corporation
("OMC") and a $215,000 loss for the Company's equity share of OMC's loss for
1992. The loss from discontinued operations for 1991 consists of a provision
of $640,000 for expected losses on discontinued construction operations and
$1,360,000 resulting principally from a judgement against the Company relating
to its discontinued flooring installation business.
In September 1991, after an evaluation of its investment in Multi-Arc,
giving consideration to its historical operating performance and general
economic conditions, particularly in the automobile industry, the Company
recorded a write-off of the balance of its goodwill in the amount of
$16,781,000.
On June 18, 1991, the Company completed the sale of substantially all of
the assets and liabilities of its wholly-owned subsidiary, Salem Tube, Inc.
("Salem"). The sales price included a $700,000 subordinated promissory note
due in equal quarterly installments beginning on September 30, 1994. The
selling price of the net assets of Salem was approximately $700,000 in excess
of Andal's carrying value at June 18, 1991. This gain was deferred and was to
be recognized as the subordinated note payments were received. On August 4,
1994, the purchaser of Salem filed a voluntary petition for bankruptcy under
Chapter 11 of the Federal Bankruptcy Code. In June 1995, the Bankruptcy Court
approved Salem's Plan of Reorganization. Under the Plan, Andal received
$100,000 in June 1995, is scheduled to receive $50,000 in December 1995, and
may receive another $70,000 at an unspecified time in the future, depending on
the recovery of certain preference payments. All recoveries have been and
will be, when and if received, credited to discontinued operations.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
1995 vs. 1994
A summary of business segment information for the three fiscal years
ended September 30, 1995 is provided in Note 20. All note references in this
discussion and analysis are to the Notes to Consolidated Financial Statements
included elsewhere in this Report.
Andal's consolidated revenues, entirely attributable to Multi-Arc, for
the year ended September 30, 1995 were $30.4 million compared with $27.1
million in 1994. The increase was the result of both higher coating services
revenues of approximately $1.9 million or 8% and higher revenues from
equipment sales of $1.4 million. Coating services revenues benefitted
particularly from an increase of $830,000 or 29% in the United Kingdom which
reflected better economic conditions and significantly improved market
penetration. Coating service revenues in the United States rose as a result
of moderately better economic conditions. Equipment sales (which approximated
12% of 1995 revenues) were up because of increased system deliveries with
sales in the United States, Taiwan, and India. Royalty and commission income
decreased $106,000 from the prior year which reflects the final effects of
Multi-Arc's restructuring of its European licensee arrangements. Equity in
foreign joint ventures provided income of $53,000 in 1995 compared with a loss
of $16,000 in 1994. The 1995 amount includes income from Multi-Arc India
Ltd. ("India") of $163,000 offset by a loss from Multi-Arc's Singapore joint
venture of $110,000. Earnings in India are up as a result of increased demand
for decorative products.
Income (loss) from continuing operations was $879,000 in 1995 compared
with $(771,000) in 1994.
Operating profits of Multi-Arc increased $1.4 million in 1995 which is
attributable to an increase in coating services operating revenues which
contributed $1,050,000 in additional operating profits, principally from
Multi-Arc (UK) Ltd. The improved operating income in the coating services
business is the direct result of higher volume, slightly improved margins, and
lower depreciation expense. Operating profits from equipment sales rose
approximately $570,000 due to higher sales and consistent margins with the
prior year. Equity in earnings of foreign affiliates rose $69,000 over prior
year entirely due to improved results in India. Operating profit was
adversely effected by the lower royalty and commission income and increased
spending of $228,000 on research and development.
Selling, general, and administrative expenses rose $767,000 from the
prior year. Approximately $582,000 of the increase related to higher
personnel costs at Multi-Arc due to continued expansion of its selling and
marketing efforts. Multi-Arc's administrative costs also increased $421,000
due to additional personnel, higher volume, and higher incentive compensation
expense related to higher profitability. Andal's general corporate expenses
declined $436,000 as the result of lower rent, depreciation, insurance, and
legal costs, principally related to the prior year's financial restructuring.
During 1995, the Company sold approximately 7.4% of its interest in
Multi-Arc to management, foreign licensees, and other investors for cash and
notes and recognized a gain of $348,000 on the transaction (see Note 3). In
addition to this gain, a gain of $396,000 related to the portion of this sale
to management has been deferred as the sales were financed by non-recourse
loans. Another $452,000 of gain has also been deferred relating to sales made
to foreign investors with deferred payment arrangements. The minority
interest in net income of Multi-Arc resulted in a first-time charge of
$152,000 for 1995.
In November 1994, Multi-Arc India Ltd. completed an initial public
offering on the Bombay stock exchange which reduced Multi-Arc's interest in
India from 40% to 21%; and the Company recorded a pretax gain of $85,000 on
this transaction (see Note 4). Investment and other income increased to
$37,000 from a loss of $756,000 in 1994. The 1994 amount was adversely
impacted by the loss of $766,000 on the sale of a substantial portion of the
Company's interest in Integrated's stock (see Note 7).
Interest expense for 1995 was $1.8 million compared with $1.6 million in
1994. The increase was a function primarily of higher interest rates.
Although debt levels have increased from the prior year, such increase
principally occurred in the fourth quarter.
Operating revenues and operating income attributable to foreign
operations rose $1.0 million and $494,000, respectively, over 1994 principally
as a result of a substantial improvement in operations in the United Kingdom.
1994 vs. 1993
Andal's consolidated revenues for the year ended September 30, 1994 were
$27.1 million compared with $24.9 million in 1993. The increase was the
result of higher coating services revenues of $3.3 million or 15% which
reflects improved economic conditions in North America and the United Kingdom.
Revenues from equipment sales, which comprised 8% of total revenue in 1994,
declined $875,000 from the prior year due to fewer system deliveries,
particularly export sales in the fourth quarter. Royalty and commission
income decreased $82,000 from the prior year which reflects the effects of
Multi-Arc's restructuring of its European licensee arrangements. Equity in
foreign joint ventures was a loss of $16,000 in 1994 which includes income
from Multi-Arc India Ltd. of $95,000 and a loss from Multi-Arc's Singapore
joint venture of $111,000. (See Note 4.)
Income (loss) from continuing operations was $(771,000) in 1994 compared
with $(433,000) in 1993.
Operating profits of Multi-Arc increased $1.1 million in 1994 which is
directly attributable to the increase in coating services operating revenues
which contributed $1.4 million in additional operating profits, as well as
improved margins in coating center services which contributed $700,000 of
increased operating profits in 1994. The improved margins in the coating
center business are the result of higher revenues, improved operating
efficiency, and continued emphasis on cost reduction. Operating profit was
adversely effected by the lower royalty and commission income, equity losses,
and higher spending on research and development of $178,000. Operating
profits from equipment sales remained flat despite a decline in revenues. In
1993, such profits had been adversely affected as the Company wrote off
$343,000 of deferred costs in anticipation of the restructuring of its
European licensee royalty arrangements.
Selling, general, and administrative expenses rose $1.1 million from the
prior year. Approximately $360,000 of the increase related to increased
personnel costs at Multi-Arc due to expanded sales and marketing efforts.
Multi-Arc's administrative costs also increased $400,000 due to some
additional personnel, the effects of higher volume, and higher incentive
compensation expense related to improved profitability. Andal's general
corporate expenses rose $384,000, from higher legal expenses ($353,000
compared with $119,000) principally related to restructuring activities in the
fourth quarter.
Investment and other income declined $920,000 as a result of the loss of
$766,000 on the sale of a substantial portion of the Company's interest in
Integrated's stock (see Note 7), compared with a gain of $60,000 on the sale
of Integrated's stock in 1993 and a gain of $77,000 in 1993 on forgiveness of
debt in the United Kingdom (see Note 12). Equity in earnings of Integrated
decreased to nil from $234,000 in 1993. Effective June 23, 1993, the Company
began to account for its ownership of Integrated by the cost method (see Note
7).
Operating revenues and operating income attributable to foreign
operations in 1994 rose $282,000 and $153,000, respectively, over 1993 due to
an increase in coating center revenues in the United Kingdom and Canada of
approximately 18% offset, in part, by the fact that 1993 included the
first-time sale of equipment in the United Kingdom with no similar sales in
1994.
Effects of Inflation
Inflation has a minimal effect on Andal's operations.
Liquidity and Capital Resources
Cash decreased $293,000 during 1995 as cash provided by operating
activities of $2.1 million and financing activities of $803,000 were offset by
cash used by investing activities of $3.2 million.
Cash flow provided by operating activities of $2.1 million in 1995
compared with $3.6 million in 1994 and $2.1 million in 1993. In 1995, the
Company benefitted from income from continuing operations before income taxes
of $933,000 which was an improvement of $1.7 million over the prior year.
However, in 1995, receivables increased $954,000 over the prior year,
primarily related to the timing of the collection of equipment sales
receivables and a decrease of $200,000 in inventories due to September
deliveries. In 1994, the Company realized cash from a decrease of $1.1
million in accounts receivable, primarily due to the collections of equipment
sales receivables, offset by an increase of $459,000 in inventories, both
related to timing. In 1993, the Company sustained a substantial increase in
accounts receivable over the prior year, again primarily due to the timing of
equipment sales, offset by reductions in inventories and high levels of
current liabilities which were also related to timing. Also, in 1994, the
Company recorded non-cash losses of $766,000 from the sale of Integrated's
stock (see Note 7) and, in 1993, wrote off $343,000 of deferred expenses in
anticipation of the reorganization of its European licensing arrangements.
The Company's operating costs continue to bear a very high level of
depreciation and amortization charges.
Cash flow from operating activities in 1995 includes the adverse effect
of $309,000 of cash used by discontinued operations to fund legal costs,
offset by proceeds of $141,000 from the settlement of a construction claim.
Cash flow from operating activities in 1994 includes the adverse effect of
$747,000 of cash used by discontinued operations to fund legal costs, offset
by proceeds of $500,000 from the sale of the Company's remaining investment in
OMC (see Note 5), compared with $386,000 of cash used by discontinued
operations in 1993 to fund legal costs.
Cash flow provided by financing activities of $803,000 in 1995 reflects
new long term debt of $3.9 million which is comprised of proceeds from the
refinancing of the debt of Multi-Arc (UK) Ltd. of $2.4 million and borrowings
on Multi-Arc's revolving credit facilities of $1.5 million. (See Note 12.)
Of the latter borrowing, $1.0 million was loaned to the management of
Multi-Arc Inc. for its participation in the Company's sale of a minority
interest in Multi-Arc Inc. (see Note 3). The sale of minority interest in
Multi-Arc Inc. generated proceeds of $1.7 million. During 1995, the Company
retired $3.0 million of long term debt, of which $786,000 related to
Multi-Arc's U. S. term loan with First Fidelity Bank and the retirement of
debt in the United Kingdom in connection with the refinancing of Multi-Arc
(UK) Ltd. Multi-Arc also negotiated modifications to the agreement covering
its revolving credit facility and term loan which made certain financial
covenants less restrictive with respect to its cash flow.
Cash flow used by financing activities of $1,979,000 in 1994 reflects the
Company's continued reduction of debt levels in both the United States and the
United Kingdom. In September 1994, Multi-Arc obtained a $6.0 million term
loan from First Fidelity Bank, N. A.; and the proceeds were ultimately used to
retire a substantial portion of Andal's bank indebtedness (see Note 12). In
1993, the Company benefitted from the favorable effect of interest deferrals
on restructured debt of $460,000.
Cash flow used by investing activities of $3.2 million in 1995 includes
$3 million of capital expenditures and net investments of $211,000 in
Multi-Arc's foreign joint ventures. Cash flow used by investing activities of
$910,000 in 1994 includes approximately $2.0 million of capital expenditures
and net investments of $188,000 in Multi-Arc's foreign joint ventures, net of
dividends in Multi-Arc India Ltd. Also during 1994, the Company received
$1,661,000 of cash from the sale of 2,129,500 shares of Integrated (see Note
7). Cash flow used by investing activities of $1.5 million in 1993 included
approximately $1.3 million of capital expenditures which included funds for
the elimination of freon from the Multi-Arc process in accordance with
government environmental regulations. Also during 1993, the Company received
$134,000 of cash from the sale of 65,000 shares of Integrated and invested
$176,000 in a Multi-Arc joint venture in Singapore.
The Company's only source of cash flow, other than from the sale of
capital assets, is Multi-Arc. Pursuant to the terms of the 1994 restructuring
of Multi-Arc and of Multi-Arc's term loan and revolving credit facility with
First Fidelity Bank, Multi-Arc is not permitted to pay dividends or make loans
to Andal, except that Multi-Arc is permitted to pay cash to Andal to the
extent that it utilizes any of Andal's federal, state, and local net operating
loss carry forwards for income tax purposes. However, such payments cannot
exceed $1 million per year for fiscal 1995 and 1996, after which no further
payments are permitted (See Notes 1, 12, and 13 for additional information
regarding the 1994 restructuring of Multi-Arc and of the Company's senior
indebtedness). Andal could also raise cash by making sales of the remaining
Integrated stock it owns, as market conditions permit (approximately $440,000
at the current market value); and, in fiscal 1996, Andal expects to receive
approximately $750,000 from the 1995 sales of Multi-Arc stock and debentures
(see Note 3).
The Company's fiscal 1996 cash requirements are estimated to be $2
million for operating cash needs, $3 million for the required exercise of the
UBC Option described in Notes 1 and 2, and $1 million for principal payments
on shareholder debt as described in Note 13. In addition, the Company may
also require cash to fund litigation costs related to discontinued operations
and/or to make payments to creditors who have yet to make payment demands. As
discussed in Note 2, the Company is currently negotiating to restructure its
indebtedness to shareholders by selling the UBC Option to them. Unless the
Company can accomplish a restructuring of its indebtedness to its shareholder
lenders which will allow it to meet its fiscal 1996 cash needs, either through
the sale of the UBC Option to them or otherwise, there may be no alternative
to the Company other than to enter into bankruptcy proceedings. (See Notes 1,
12, and 13 of the Notes to Consolidated Financial Statements and Report of
Independent Auditors included elsewhere in this report.)
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Schedules at page 33 below.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information regarding the
Directors
and executive officers of the Company as of November 30, 1995.
Name Age Positions and Offices with the Company
Andrew J. Frankel 63 Chairman of the Board of Directors
and Chief Executive Officer
Alan N. Cohen 64 President and Director
Michael S. Huber 52 Senior Vice President, Chief Financial Officer
and Treasurer
Walter N. Kreil, Jr. 48 Vice President, Chief Accounting Officer,
and Controller
Peter D. Flood 52 Director
Carl D. Glickman 69 Director
The Company's Directors are elected annually and hold office until their
successors are elected and qualified.
Andrew J. Frankel has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since 1971. He served as a member of the
Board of Directors of Integrated Brands Inc. from December 1985 until June
1993.
Alan N. Cohen has been a Director of the Company since October 1979 and
has been President of the Company since October 1981. Between January 1981
and October 1981, Mr. Cohen served as Vice Chairman of the Board of the
Company. Mr. Cohen was a member of the Board of Directors of Integrated
Brands Inc. from December 1985 until June 1993. From December 1986 until
September 1993, Mr. Cohen was Vice Chairman of the Board and Treasurer of
Celtics, Inc., the general partner of Boston Celtics Limited Partnership.
Michael S. Huber joined the Company in December, 1987 as Senior Vice
President, Chief Financial Officer, and Treasurer. From June 1991 through
October 1992, Mr. Huber was also employed as an officer and director of Salem
Tube, Inc., the company that purchased the assets and certain liabilities of
the subsidiary of the Company that formerly bore that name; and he served as a
financial consultant to that company, pursuant to a consulting agreement from
November 1992 to June 1994. Mr. Huber was separately compensated by Salem for
such employee and consulting activities. Mr. Huber devotes approximately
one-third of his time to the affairs of the Company.
Walter N. Kreil, Jr. was elected a Vice President of the Company in
September 1987 and serves as the Company's Controller and Chief Accounting
Officer and as Vice President and Chief Financial Officer of Multi-Arc. Mr.
Kreil joined the Company as Assistant Vice President and Controller in June
1984.
Peter D. Flood has been a Director of the Company since December 1985 and
the Chief Executive Officer of Multi-Arc since March 1981.
Carl D. Glickman has been a Director of the Company since May 1981. Mr.
Glickman is presently, and has been for more than the past five years, a
private investor. He is president of the Glickman Organization and serves as
a member of the Board of Directors of the following companies: The Bear
Stearns Companies, Inc.; Continental Health Affiliates; Franklin Holdings,
Inc.; Alliance Tyre and Rubber Company; Custodial Trust Company; Infu Tech
Inc.; Lexington Corp. Properties; Jerusalem Economic Corp.; and Office Max
Inc.
Item 11. Executive Compensation
The following table sets forth information concerning the compensation
for the past three fiscal years of the Chief Executive Officer of the Company
and all other executive officers whose annual salary exceeded $100,000 for the
year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long All Other
Term
Compensation
Other Annual Options/ ($)
Name and Salary Bonuses Compensation SARs (401K Plan
Principal Position Year ($) ($) (1) (#)
Contributions)
Andrew J. Frankel 1995 244,000 0 33,333 0 0
Chief Exec. Off. 1994 144,000 0 27,858 0 0
1993 120,000 0 27,557 0 0
Alan N. Cohen 1995 244,000 0 16,000 0 0
President 1994 144,000 0 13,720 0 0
1993 120,000 0 13,264 0 0
Peter D. Flood 1995 250,000 151,000 (2) 2,500(3) 4,620
CEO of Multi-Arc 1994 250,000 85,000 (2) 0 4,620
1993 250,000 33,000 (2) 0 2,248
WalterN.Kreil,Jr. 1995 135,200 50,000 (2) 500(3) 4,620
CFO of Multi-Arc 1994 132,600 24,000 (2) 0 4,620
1993 130,000 12,000 (2) 0 2,248
No other bonuses, restricted stock awards, long term incentive plan
payouts, or other compensation was awarded or paid to the named executives
during the periods indicated.
(1) Other Annual Compensation includes professional services and
supplemental life and medical insurance, as follows:
Andrew J. Frankel Alan N. Cohen
Professional Supplemental Professional
Services Insurance Services
1995 10,000 5,194 10,000
1994 10,000 4,007 10,000
1993 10,000 6,090 10,000
(2) Amounts were less than 10% of salary.
(3) Options to acquire common stock of Multi-Arc Inc. at $205.13 per
share.
Stock Options
No stock options or stock appreciation rights were granted by the Company
during the fiscal year ended September 30, 1995 to the Chief Executive Officer
of the Company and all other executive officers whose annual salary exceeded
$100,000 for the fiscal year ended September 30, 1995.
In December 1995, Multi-Arc Inc. granted options to purchase 2,500 shares
and 500 shares, respectively, of its common stock to Messrs. Flood and Kreil.
The exercise price of the options is $205.13 per share. The options become
exercisable 20% per year, and the options expire ten years from date of grant.
The following table sets forth information with respect to the individual
grants of stock options made during fiscal 1995 to the Chief Executive Officer
and all other executive officers whose annual salary exceeded $100,000 for the
fiscal year ended September 30, 1995:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Value of
Assumed Annual
Rates of Stock
Individual Grants Price
-------------------------------------------- Appreciation
for Option
Term
Number of Percent of ---------------
Securities Total
underlying Options/SARs Exercise
Option/SARs Granted to of Base
Granted (#) Employees in Price Expiration
Name (1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
Andrew J. Frankel 0 0 0 0 0 0
Alan N. Cohen 0 0 0 0 0 0
Peter D. Flood 2,500 (1) 50% $205.13 12/16/2004$322,513
$817,310
WalterN.Kreil,Jr. 500 (1) 10% $205.13 12/16/2004 $64,503
$163,462
(1) Options to purchase common stock of Multi-Arc Inc.
The following table sets forth information with respect to the exercise
during fiscal 1995 and the value as of September 30, 1995 of unexercised stock
options and stock appreciation rights for the Chief Executive Officer and all
other executive officers whose annual salary exceeded $100,000 for the fiscal
year ended September 30, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END
OPTION/SAR VALUES
Number of Value of
Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value Fiscal Year End (#) Fiscal Year End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
Andrew J. Frankel 0 0 0/0 0/0
Alan N. Cohen 0 0 0/0 0/0
Peter D. Flood 0 0 7,500/5,000(1) 0/0
0/2,500(2) 0/0
WalterN.Kreil,Jr. 0 0 0/750(1) 0/0
0/500(2) 0/0
The Company does not have a long term incentive compensation plan for its
executives.
(1) Options on Andal Corp. common stock.
(2) Options on Multi-Arc Inc. common stock.
Pension Plan
Messrs. Frankel and Cohen were members of a noncontributory pension plan
of the Company which was terminated effective January 1, 1985. Upon the
termination of the plan, the Company purchased straight life annuity policies
sufficient to pay each of the individuals upon their retirement at normal
retirement age the benefits they had accrued under the plan up to January 1,
1985. The amounts payable annually at normal retirement of each of these
persons
are as follows:
Annual Benefit upon
Name Retirement
Andrew J. Frankel $61,402
Alan N. Cohen 36,988
Compensation of Directors
Directors who are not employed by Andal are entitled to fees of $5,000
per annum plus $250 for each meeting of the Board they attend and $250 for
each meeting of a committee of the Board they attend which is held on a day
that the Board does not meet. During 1995, these directors have served and
currently serve without compensation. Directors are reimbursed for travel
expenses incurred in attending Board and Committee meetings. Mr. Glickman was
paid $12,000 during fiscal 1995 for consulting services.
Employment Agreement
Mr. Flood is employed by the Company as President and Chief Executive
Officer of Multi-Arc under an employment agreement expiring on September 30,
1999 under which he is entitled to receive a base salary of $250,000 per year
plus incentive compensation equal to 7-1/2% of the first $2,000,000 of annual
pretax income of Multi-Arc in excess of $1,000,000 and 5% thereafter.
Repricing of Options/SARs
As reflected in the following table, the Executive Committee approved the
repricing of stock options previously granted to Peter D. Flood and Walter N.
Kreil, Jr. The Committee took these actions because the decline in the market
price of the Company's common stock during 1992-1995 caused the pre-existing
options held by these individuals to be so far "out of the money" as to
provide little, if any, incentive, as there was no prospect for long-term
reward. The repriced options were granted at the market value of the
Company's stock at time of grant.
TEN-YEAR OPTION/SAR REPRICINGS
Market
Price of Exercise Length
of
Stock at Price at Original
Time of Time of Option
Term
Number of Repricing Repricing
Remaining at
Options/SAR's or or New Date of
Repriced or Amendment Amendment Exercise
Repricing or
Name Date Amended (#) ($) ($) Price ($)
Amendment
Peter D. Flood 7/8/92 5,000 $10.00 $32.50 $10.00 47
Months
CEO of Multi-Arc 7/25/95 5,000 $2.25 $10.00 $2.25 24
Months
WalterN.Kreil,Jr. 7/8/92 500 $10.00 $122.50 $10.00 8
Months
CFO of Multi-Arc 7/8/92 250 $10.00 $112.50 $112.50 18
Months
7/25/95 750 $2.25 $10.00 $2.25 24
Months
Additional Information with Respect to Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
The Company's Compensation Committee is comprised of Andrew J. Frankel,
Chairman of the Board of Directors and Chief Executive Officer of the Company
and a principal shareholder, and Alan N. Cohen, Director and President of the
Company and a principal shareholder. See "Security Ownership of Certain
Beneficial Owners and Management" and "Certain Relationships and Related
Transactions" for information with respect to transactions between these
individuals and the Company and the percentage ownership of the Company by them.
Board Compensation Committee Report on Executive Compensation
On October 5, 1995, the Compensation Committee submitted the following
report concerning compensation paid to executive officers during 1995:
Messrs. Frankel and Cohen, who comprise the Compensation
Committee and are also, respectively, the Chief Executive Officer
and President of the Company, increased their 1995 salary by
$100,000 each to $244,000 each per annum. The $100,000 increase has
been deferred and is payable on January 1, 1997. Interest on the
deferred compensation accrues at the rate of 7% per annum. Such
salaries were not, they believe, reflective of their true worth to
the Company but were the most the Company could afford to pay them
in its strained financial circumstances. Except as an indication of
the continuing financial problems of the Company, there was not
intended to be any relationship between their compensation and their
performance.
Pursuant to an employment agreement which expires on September
30, 1999, the salary of Mr. Flood, the Chief Executive Officer of
Multi-Arc, was not changed in 1995. The salary of Mr. Kreil, Vice
President and Chief Financial Officer of Multi-Arc, was increased 2%
for 1995. In view of the limited resources of the Company, a more
substantial increase which might have been warranted could not be
considered.
A bonus of $151,000 was awarded to Mr. Flood pursuant to his
employment agreement. A bonus of $35,000 was awarded to Mr. Kreil
in accordance with Multi-Arc's Corporate Management Incentive Plan
which provides for a bonus pool to be divided proportionally based
on normal compensation, among three of Multi-Arc's senior executives
(other than Mr. Flood). The pool is calculated at 1 1/2% of
earnings before interest and taxes up to $1 million, plus 2% of such
earnings between $1 to $2 million, plus 2 1/2% of such earnings over
$2 million. Mr. Kreil also received a special bonus of $15,000 from
Andal in recognition for his efforts in refinancing Multi-Arc Inc.
Respectfully submitted,
Andrew J. Frankel
Alan N. Cohen
Performance Graph
The following line graph compares the cumulative total return of the
company's common stock to the American Stock Exchange Market Value and
Industrial
Service Company Indices for the period October 1, 1990 to September 30, 1995.
CUMULATIVE TOTAL RETURN
Andal Shares vs. Amex Indices
Measurement Period Andal Invested AMEX MV Invested AMEX Ind. Invested
9/30/90 $100.00 $100.00 $100.00
9/30/91 15.91 124.19 92.92
9/30/92 5.68 124.89 96.72
9/30/93 0.00 152.63 138.39
9/30/94 1.82 152.11 128.39
9/30/95 2.05 180.59 156.55
Assumes $100 invested on September 30, 1990 in Andal Corp. Common Stock, the
Amex
Market Value Index and the Amex Industrial Service Company Index.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of November 30, 1995, with
respect to all shareholders known by Andal to be the beneficial owners of more
than 5% of its outstanding common stock, each director, and all officers and
directors as a group.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Frankhill Associates 77,215 shs. (1) (13) 23.4%
c/o Andal Corp.
909 Third Avenue
New York, NY 10022
Andrew J. Frankel 1,730 (1)
c/o Andal Corp. 77,215 (2) (13)
909 Third Avenue 2,019 (3)
New York, NY 10022 498 (4)
------
81,462 shs. 24.7%
Alan N. Cohen 29,825 (1) (13)
c/o Andal Corp. 4,250 (5)
909 Third Avenue ------
New York, NY 10022 34,075 shs. 10.3%
Peter D. Flood 4,114 shs. (9) 1.2%
c/o Multi-Arc Inc.
200 Roundhill Drive
Rockaway, NJ 07866
Carl D. Glickman 1,750 shs. 0.5%
c/o Andal Corp.
909 Third Avenue
New York, NY 10022
Builtland Partners 63,294 shs. (1)(6) 19.2%
c/o Milstein Properties
1271 Avenue of the Americas
New York,, NY 10020
Paul Milstein 84,337 shs. (7)(8) 25.6%
c/o Milstein Properties
1271 Avenue of the Americas
New York, NY 10020
Troster Singer Division 35,405 shs. (11) 10.7%
of Spear, Leeds & Kellogg
115 Broadway
New York, New York 10006
All officers and directors
as a group (8 persons) 121,561 shs. (12) 36.8%
(1) Direct record and beneficial ownership.
(2) As a general partner of, or person designated to exercise voting power or
investment power on behalf of, Frankhill Associates, the record holder of
these shares.
(3) Held as co-trustee with his sister, with whom Mr. Frankel shares voting
power. Mr. Frankel and his children have an interest in one-half of the
principal and income of the trust.
(4) Held as co-trustee with his wife of a trust for Mr. Frankel's three
children.
(5) Includes 4,250 shares held by a not-for-profit corporation of which Mr.
Cohen is an officer and director. Mr. Cohen disclaims beneficial
ownership of such shares owned by the Corporation.
(6) Builtland Partners is a New York General Partnership comprised of Seymour
Milstein, Paul Milstein, and members of their respective families.
(7) Includes all the shares owned by Builtland Partners, as well as shares
wholly beneficially owned by Paul Milstein, directly and indirectly.
(8) Includes 4,845 shares owned by Milstein Family Foundation, Inc., a New
York not-for-profit corporation of which Mr. Milstein is president and a
director. Mr. Milstein disclaims any beneficial interest in such shares.
(9) Consists of 4,114 shares owned of record and beneficially by Mr. Flood.
(10) Not used
(11) Beneficial ownership based upon information obtained from the company
during December 1995.
(12) Includes the shares owned directly or indirectly by the officers and
directors of the Company as set forth in the table, plus shares owned by
officers not named in the table.
(13) Includes 278 shares issuable upon conversion of debentures.
Item 13. Certain Relationships and Related Transactions
On July 5, 1990, the Company borrowed an aggregate of $5 million from
Messrs. Alan N. Cohen, President and a director of the Company, Paul Milstein,
who was then a director of the Company, and Frankhill Associates, a limited
partnership of which Andrew J. Frankel, Chairman of the Board and a director
of the Company, is a general partner (collectively, in such capacity, the "UBC
Lenders"). The proceeds of the loan (the "UBC Loan") were used to reduce
then-outstanding indebtedness and for general corporate and working capital
purposes.
The UBC Loan is secured by a pledge of the capital stock of UBC Virginia
Corp. ("UBC Corp."), a subsidiary of the Company which holds an option (the
"Option") to purchase a parcel of real estate located at 61st Street and First
Avenue in New York City (the "UBC Property"). In addition, the Company paid
the UBC Lenders a $50,000 commitment fee and issued to them an aggregate of
25,000 warrants, each entitling the holder to purchase one share of the
Company's common stock at an exercise price of $80.00 per share. The closing
market price of Andal's common stock on July 5, 1990 was $65.00 per share. The
warrants were exercisable from December 31, 1990 until July 5, 1995, at which
time they lapsed unexercised.
In May 1992, the Company restructured the UBC Loan, as well as its loans
with Chemical Bank and Fleet Bank, most of which were originally made over 15
years ago and were used for general corporate purposes. Under the terms of
such restructuring, the interest rate on all such loans was reduced to the prime
rate; and interest accrued from October 1, 1991 through March 31, 1993 of
$571,285 on the UBC Loan was deferred and added to the principal. Since March
31, 1993, the aggregate principal balance of the UBC Loan has been $5,571,285.
The UBC Loan is due and payable on the earlier of March 31, 1997, or the day
after the Company's bank loans have been paid in full. In addition to requiring
prepayment of the UBC Loan in the event of a sale of the Company's interest in
the UBC Property, the restructuring agreement also requires prepayments of such
loans if the Company obtains cash recoveries on various claims and litigations
relating to its discontinued construction contracting operations or if the
Company's cash flow from operations exceeds a specified amount.
In connection with the 1992 restructuring, the banks consented to the
Company's grant to the UBC Lenders of a second lien on those assets of the
Company which serve as collateral for the bank loans; and the UBC Lenders
consented to the Company's grant to the banks of a second lien on the stock of
UBC Corp.
In March 1994, after discussions initiated by Fleet Bank, which had
indicated that it desired to dispose of its portion of the Company's bank
loans, Frankhill Associates, Alan N. Cohen, and Paul Milstein (collectively, in
such capacity, the "Fleet Assignees") each purchased a one-third interest in the
Company's indebtedness to Fleet Bank (the "Fleet Indebtedness"), which
indebtedness totalled $3,042,000. The terms of such indebtedness did not
change as a result of this purchase. In November 1994, Peter D. Flood, a
director of the Company and Chief Executive Officer of Multi-Arc Inc.,
purchased an aggregate of 6.4% of the Fleet Indebtedness from Frankhill
Associates, Alan N. Cohen, and Paul Milstein.
In September 1994, in order to facilitate the restructuring and
refinancing of Multi-Arc, the Fleet Assignees agreed to yield their lien on
Multi-Arc's assets and to defer the approximately $1.6 million payment to which
they would have otherwise been entitled; and Chemical Bank agreed to accept a
$255,000 discount for payment in full to it of the Company's outstanding debt.
In consideration for the concessions agreed to by the Fleet Assignees, the
Company's Board of Directors (Messrs. Frankel and Cohen not voting) approved a
payment of $255,000 by the Company to the Fleet Assignees. The May 1992
Restructuring Agreement was amended to provide for principal payments on the
Fleet Assignee debt at the rate of $250,000 per quarter beginning March 31,
1995, with the remaining principal balance becoming due on March 31, 1997. The
payment that was due on September 30, 1995 was made on October 24, 1995.
Furthermore, Andal is required to make prepayments to the extent that it sells
any of its capital assets or receives capital distributions from Multi-Arc.
The UBC Loan continues to be due and payable on the earlier of March 31, 1997,
or the day after the Fleet Assignee debt has been paid in full.
Andal's remaining obligation to Chemical Bank consists of $941,000 of
aggregate liability under outstanding letters of credit issued by Chemical
Bank in connection with an appeal bond and in connection with its discontinued
real estate development activities. Because of Andal's inability to fund the
liabilities represented by the letters of credit, in order to secure the
release of collateral held by Chemical Bank so that Multi-Arc could obtain its
term loan and revolving credit facility from First Fidelity Bank, Messrs.
Andrew J. Frankel, Paul A. Milstein, and Alan N. Cohen each personally
guaranteed one-third of the letter of credit liabilities, for which Andal has
agreed to pay to Messrs. Frankel, Milstein, and Cohen an aggregate annual
guarantee fee equal to 2% of the letters of credit outstanding.
See Item 1. Business. General. for a discussion of the 1995
developments concerning the UBC Property and the possible sale of it to the UBC
Lenders in satisfaction of the UBC Loan.
In December 1994, Andal sold, for $500,000, approximately 2-1/2% of the
common stock of Multi-Arc to Multi-Arc's management; and Multi-Arc issued
$500,000 of convertible subordinated debentures (convertible into 2% of Multi-
Arc common stock) to such management. Both the sale of the common stock and
the issuance of the debentures were funded through non-recourse loans made to
its management by Multi-Arc using Multi-Arc's revolving credit facility with
First Fidelity Bank. The management loans included $500,000 and $100,000,
respectively, to Peter D. Flood, a Director of the Company and Chief Executive
Officer of Multi-Arc, and Walter N. Kreil, Jr., an officer of the Company and
Vice President and Chief Financial Officer of Multi-Arc. These loans bear
interest at 8.35% and are repayable on December 15, 2004, or upon termination
of employment. The loans are secured by common stock and debentures of Multi-
Arc. The Notes evidencing these loans are pledged by Multi-Arc to First
Fidelity Bank.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements
See Index to Financial Statements and Schedules at page 33 below.
(a)(2) Financial Statement Schedules
See Index to Financial Statements and Schedules at page 33 below.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter ended
September 30, 1995.
(c) Exhibits
The following exhibits are filed herewith unless otherwise indicated:
3(a) Restated Certificate of Incorporation of the Company as filed with
the Secretary of State of New York on March 16, 1972 (the
"Certificate of Incorporation") (incorporated by reference to
Exhibit 3(a) to Company's Annual Report on Form 10-K for fiscal year
ended September 30, 1986).
3(b) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on November 5, 1979
(incorporated by reference to Exhibit 3(b) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(c) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on October 22, 1981
(incorporated by reference to Exhibit 3(c) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(d) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on November 7, 1983
(incorporated by reference to Exhibit 3(d) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(e) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on April 8, 1987
(incorporated by reference to Exhibit 4.5 to Company's Registration
Statement on Form S-8 as filed with the Securities and Exchange
Commission on May 5, 1987).
3(f) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on June 15, 1993
(incorporated by reference to Exhibit 3(f) to Company's Annual
Report on Form 10-K for Fiscal Year ended September 30, 1993).
3(g) By-laws of the Company (incorporated by reference to Exhibit 4.6 to
Company's Registration Statement on Form S-8 as filed with the
Securities and Exchange Commission on May 5, 1987).
4(a) Indenture dated as of September 15, 1972 between the Company and
Manufacturers Hanover Trust Company, as Trustee, relating to the
Company's 5 1/2% convertible subordinated debentures due September
15, 1997 (incorporated by reference to Exhibit 4(a) to Company's
Annual Report on Form 10-K for fiscal year ended September 30,
1986).
4(b) First Supplemental Indenture dated as of January 12, 1982 between
the Company and United States Trust Company of New York, as Trustee,
relating to the Company's 5 1/2% convertible subordinated debentures
due September 15, 1997 (incorporated by reference to Exhibit 4(b) to
Company's Annual Report on Form 10-K for fiscal year ended September
30, 1986).
10(a) 1987 Stock Option Plan of the Company (incorporated by
reference to Exhibit 10(c) to the Company's Annual Report on
Form 10-K for fiscal year ended September 30, 1987).
10(b) Option Agreement dated as of August 1, 1982 between
Schnurmacher Corp. and the Company (incorporated by reference to
Exhibit 10(v) to Company's Annual Report on Form 10-K for fiscal
year ended September 30, 1986).
10(c) Lease dated May 11, 1988, containing an Option to Purchase,
between Roundhill Associates and the Company (incorporated by
reference to Exhibit 10(ag) to Company's Annual Report on Form
10-K for fiscal year ended September 30, 1988).
10(d) Intercreditor Agreement among Frankhill Associates, Paul
Milstein, Alan N. Cohen, and Andal Corp. dated July 5, 1990
(incorporated by reference to Exhibit 10(ac) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1990).
10(e) Stock Pledge Agreement among Andal Corp., Frankhill Associates,
Paul Milstein, and Alan N. Cohen dated July 5, 1990
(incorporated by reference to Exhibit 10(ad) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1990).
10(f) Warranty Agreement among Andal Corp., Frankhill Associates,
Paul Milstein, and Alan N. Cohen dated July 5, 1990
(incorporated by reference to Exhibit 10(ae) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1990).
10(g) Restructuring Agreement, Amendment, Guarantee, and Security
Agreement dated May 27, 1992 ("Restructuring Agreement") by and
among Andal Corp., certain subsidiaries of Andal Corp., Norstar
Bank, Manufacturers Hanover Trust Company, Manufacturers
Hanover Trust Company as agent for the banks, Alan N. Cohen, Paul
Milstein, Frankhill Associates, and the Bank of New York as
collateral agent for the Lenders (incorporated by reference to
Exhibit 10(t) to the Company's Annual Report on Form 10-K for
the year ended September 30, 1992).
10(h) First Amendment to the Restructuring Agreement dated June 5,
1992 (incorporated by reference to Exhibit 10(s) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1992).
10(i) Plan of Restructuring adopted by the Board of Directors and
Andal Corp. as approved by the Shareholders on August 16, 1994
(incorporated by reference to Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1994).
10(j) Loan and Security Agreement dated September 30, 1994 by and
between First Fidelity Bank, N.A. and Scientific Coatings of
Illinois, Inc., Scientific Coatings, Inc., and SCI Coatings
Southwest, Inc. (incorporated by reference to Exhibit 10(k) to
the Company's Annual Report on Form 10-K for the year ended
September 30, 1994).
10(k) Subordination Agreement dated September 30, 1994 of Multi-Arc
Inc. as debtor and Andal Corp. as subordinated lender in favor of
First Fidelity Bank, N.A. (incorporated by reference to Exhibit
10(l) to the Company's Annual Report on Form 10-K for the year
ended September 30, 1994).
10(l) Security Agreement dated September 30, 1994 by and between
First Fidelity Bank, N.A. and Vagle Technology, Inc., Multi-Arc,
Inc. (a Minnesota corporation), Multi-Arc Inc., Multi-Arc of
Ohio, Inc., and S. C. I. Coatings Limited (incorporated by
reference to Exhibit 10(m) to the Company's Annual Report on
Form 10-K for the year ended September 30, 1994).
10(m) Amendment dated September 30, 1994 to the Restructuring
Agreement, Amendment, Guarantee, and Security Agreement dated
May 27, 1992 among Andal Corp. and certain subsidiaries, Fleet
Bank, Chemical Bank, Alan N. Cohen, Paul Milstein, Frankhill
Associates, and The Bank of New York as collateral agent
(incorporated by reference to Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the year ended September 30,
1994).
10(n) Multi-Arc Inc., Andal Corp., and United States Trust Company of
New York, Trustee. Second Supplemental Indenture dated as of
September 30, 1994 5 1/2% Convertible Subordinated Debentures
due 1997 (incorporated by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1994).
10(o) Pledge and Security Agreement dated September 30, 1994 by and
among Andal Corp. and First Fidelity Bank, N.A. (incorporated by
reference to Exhibit 10(p) to the Company's Annual Report on
Form 10-K for the year ended September 30, 1994).
10(p) Form of Multi-Arc Inc. 6% Convertible Subordinated Debenture
due December 15, 2004.
10(q) Form of Multi-Arc Inc. Stockholders Agreement dated June 15,
1995.
10(r) 1994 Multi-Arc Inc. Stock Option Plan.
10(s) Loan Agreement dated September 21, 1995 between First Fidelity
Bank N. A. and Multi-Arc (UK) Ltd.
10(t) Overdraft Facility Agreement between First Fidelity Bank N. A.
and Multi-Arc (UK) Ltd. dated September 21, 1995.
10(u) 61st Street Option Exercise.
22 Subsidiaries of the Company
24(a) Consent of Kelly Graham Myska & Partners.
24(b) Consent of KPMG Peat Marwick.
24(c) Consent of BDO Seidman.
27 Financial Data Schedule
<PAGE>
Index to Financial Statements and Schedules
Financial Statements Page
Report of Independent Auditors on Financial Statements 36
Consolidated Balance Sheet--September 30, 1995 and September 30, 1994 F-1
Consolidated Statement of Operations--Years ended September 30, 1995,
1994, and 1993 F-2
Consolidated Statement of Shareholders' Equity (Deficit)
--Years Ended September 30, 1995, 1994, and 1993 F-3
Consolidated Statement of Cash Flows--Years Ended September 30, 1995,
1994, and 1993 F-4
Notes to Consolidated Financial Statements F-6
All schedules are omitted because they are not applicable, not required,
or the other information required to be set forth therein is included in the
Consolidated Financial Statements or in the Notes thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
ANDAL CORP.
(Registrant)
By /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board of Directors
Dated: January 5, 1996
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
Principal Executive Officer:
/s/ Andrew J. Frankel Chairman of the Board of January 5, 1996
(Andrew J. Frankel) Directors, Chief Executive
Officer, and Director
Principal Financial Officer:
/s/ Michael S. Huber Senior Vice President, January 5, 1996
(Michael S. Huber) Chief Financial Officer,
and Treasurer
Principal Accounting
Officer:
/s/ Walter N. Kreil, Jr. Vice President, Chief January 5, 1996
(Walter N. Kreil, Jr.) Accounting Officer, and
Controller
Directors:
/s/ Alan N. Cohen Director January 5, 1996
(Alan N. Cohen)
/s/ Peter D. Flood Director January 5, 1996
(Peter D. Flood)
/s/ Carl D. Glickman Director January 5, 1996
(Carl D. Glickman)
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Andal Corp.
We have audited the accompanying consolidated balance sheets of Andal Corp.
and subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows or
each of the three years in the period ended September 30, 1995. 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 did not audit the financial statements of certain consolidated
subsidiaries, which statements reflect total assets constituting 26% in 1994
and total revenues constituting 16% in 1994 and 1993 of the related
consolidated totals. The financial statements of Steve's Homemade Ice Cream,
Inc. (an equity method investee in 1993) also have not been audited by us.
Those statements were audited by other auditors whose reports have been
furnished to us and our opinion, insofar as it relates to the amounts included
for such subsidiaries and investee, is based solely on the reports of other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Andal Corp. and
subsidiaries at September 30, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended September 30, 1995, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As more fully described in Notes
1 and 2, the Company has incurred losses in 1994 and 1993 and has a working
capital deficiency and a shareholders' deficit at September 30, 1995. In
addition, the Company is obligated under one of its loan agreements to
exercise an option it holds on certain property, for which the Company
currently does not have sufficient resources. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustment to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
As described in Note 17, in 1994 the Company changed its method of accounting
for income taxes.
ERNST & YOUNG LLP
November 15, 1995
except for Note 12 as to which the date is
January 5, 1996
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
September 30,
1995 1994
Current assets:
Cash $ 850,000 $ 1,143,000
Accounts receivable 4,998,000 4,028,000
Inventories 1,073,000 1,254,000
Prepaid expenses 307,000 317,000
Other current assets 906,000 216,000
------------ -------------
Total current assets 8,134,000 6,958,000
Investments in joint ventures 1,268,000 842,000
Property and equipment 10,789,000 9,732,000
Loans due from Multi-Arc Inc. management 1,000,000 0
Other assets 2,434,000 2,925,000
------------ ------------
$23,625,000 $20,457,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short term borrowings, including
current portion of long term debt $ 1,206,000 $ 1,425,000
Current portion of debt due
shareholders 1,250,000 750,000
Accounts payable 1,606,000 1,764,000
Other accrued expenses 5,106,000 5,834,000
------------- -------------
Total current liabilities 9,168,000 9,773,000
Long-term debt 7,886,000 6,952,000
Debt due shareholders 6,364,000 7,364,000
Other deferred income 1,430,000 1,527,000
Convertible subordinated debentures 3,335,000 1,825,000
Minority interest in Multi-Arc Inc. 540,000 0
Shareholders' equity (deficit):
Common shares, par value $20 per share,
1,500,000 authorized
and 370,496 issued 7,410,000 7,410,000
Paid-in-capital 31,625,000 31,625,000
Deficit (38,472,000) (40,358,000)
Less 40,637 common shares
held in treasury, at cost (5,661,000) (5,661,000)
------------- ------------
Total shareholders' equity
(deficit) (5,098,000) (6,984,000)
------------ ------------
$23,625,000 $20,457,000
=========== ===========
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended September 30
1995 1994 1993
Operating revenues:
Trade sales $30,015,000 $26,672,000 $24,384,000
Royalties and commissions 315,000 421,000 503,000
Equity in net income (loss) of
foreign joint ventures 53,000 (16,000) 0
------------ ------------ ------------
30,383,000 27,077,000 24,887,000
Operating costs and expenses:
Cost of revenues 15,545,000 13,466,000 13,052,000
Depreciation expense 1,907,000 2,234,000 2,336,000
Selling, general and
administrative expenses 10,517,000 9,750,000 8,667,000
------------ ------------ ------------
27,969,000 25,450,000 24,055,000
Income from operations 2,414,000 1,627,000 832,000
Other income (expense):
Gain on sale of minority interest
in Multi-Arc Inc. 348,000 0 0
Minority interest in net income
of Multi-Arc Inc. (152,000) 0 0
Gain from initial public offering of
Multi-Arc India Ltd. 85,000 0 0
Investment and other income, net 37,000 (756,000) 164,000
Interest expense (1,799,000) (1,625,000) (1,663,000)
------------ ------------ -----------
(1,481,000) (2,381,000) (1,499,000)
Equity in net income of
Integrated Brands Inc. 0 0 234,000
----------- ------------ -----------
Income (loss) from continuing
operations before income taxes 933,000 (754,000) (433,000)
Provision for income taxes (54,000) (17,000) 0
----------- ------------ -----------
Inc. (loss) from continuing operations 879,000 (771,000) (433,000)
Income (loss) from discontinued
operations 1,007,000 (350,000) (527,000)
----------- ------------ -----------
Net income (loss) $1,886,000 $(1,121,000) $(960,000)
========== ============ ==========
Income (loss) per common share:
Income (loss) from
continuing operation $2.67 $(2.34) $(1.31)
Income (loss) from
discontinued operations 3.05 (1.06) (1.60)
----- ------- -------
Net income (loss) $5.72 $(3.40) $(2.91)
===== ======= =======
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Retained
Common Paid-in- Earnings Treasury
Stock Capital (Deficit) Stock Total
Balance at
Sept. 30, 1992 $7,399,000 $31,636,000 $(38,277,000) $(5,661,000)
$(4,903,000)
Effects of
reverse split 11,000 (11,000) 0 0
0
Net loss for 1993 0 0 (960,000) 0
(960,000)
Balance at
Sept. 30, 1993 7,410,000 31,625,000 (39,237,000) (5,661,000)
(5,863,000)
Net loss for 1994 0 0 (1,121,000) 0
(1,121,000)
Balance at
Sept. 30, 1994 7,410,000 31,625,000 (40,358,000) (5,661,000)
(6,984,000)
Net income for 1995 0 0 1,886,000 0
1,886,000
Balance at
Sept. 30, 1995 $7,410,000 $31,625,000 $(38,472,000) $(5,661,000)
$(5,098,000)
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30,
1995 1994 1993
Cash provided (used) by operations:
Income (loss) from continuing
operations before income taxes $ 933,000 $ (754,000) $ (433,000)
Adjustments to reconcile income
(loss) from continuing operations
to net cash provided by operations
Depreciation 1,907,000 2,234,000 2,336,000
Gain on sale of minority
interest in Multi-Arc Inc. (348,000) 0 0
Minority interest in net
income of Multi-Arc Inc. 152,000 0 0
Amortization of patents,
trademarks, and license rights 192,000 186,000 760,000
Equity in net (income) loss
of foreign joint ventures (53,000) 16,000 0
Equity in (income) of Integrated 0 0 (234,000)
Deferred income accrued 64,000 40,000 153,000
Amortization of deferred income (149,000) (95,000) (156,000)
Provision (credit) for bad debts (16,000) 42,000 71,000
Losses (gains) on investment
transactions 0 766,000 (137,000)
Gain from initial public offering of
Multi-Arc India Ltd. (85,000) 0 0
Other, net 28,000 39,000 112,000
Change in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (954,000) 1,127,000 (1,755,000)
Decrease (increase) in
inventories 200,000 (459,000) 605,000
Decrease (increase) in other current
assets 76,000 60,000 (22,000)
Increase in accounts payable
and accrued liabilities 369,000 634,000 1,200,000
Cash (used) by discontinued
operations (168,000) (247,000) (386,000)
Income taxes paid (87,000) (34,000) (29,000)
------------ ----------- -----------
Net cash provided by operating
activities 2,061,000 3,555,000 2,085,000
Cash flows from financing activities:
Proceeds from long-term debt 3,870,000 6,162,000 50,000
Loans to Multi-Arc management (1,000,000) 0 0
Proceeds from sale of common stock
and debentures of Multi-Arc Inc. 1,714,000 0 0
Additions to principal for
interest deferral 0 0 460,000
Deferred financing costs (126,000) 0 0
Reductions of long-term debt (3,024,000) (7,743,000) (996,000)
Decrease in debt due within
one year (631,000) (398,000) (130,000)
----------- ----------- -----------
Net cash provided (used) by
financing activities 803,000 (1,979,000) (616,000)
----------- ----------- -----------
Cash flows from investing activities:
Reduction of (investment in)
affiliated companies (211,000) 1,459,000 (42,000)
Gross additions to property
and equipment (2,964,000) (1,999,000) (1,268,000)
Other, net 18,000 (370,000) (222,000)
----------- ----------- -----------
Net cash (used) by
investing activities (3,157,000) (910,000) (1,532,000)
----------- ----------- -----------
Increase (decrease) in cash (293,000) 666,000 (63,000)
Cash at beginning of year 1,143,000 477,000 540,000
----------- ----------- -----------
Cash at end of year $ 850,000 $1,143,000 $477,000
========== ========== ========
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared on
a going concern basis which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business. Andal Corp.
(the "Company" or "Andal") has incurred losses in 1994 and 1993 and has a
working capital deficiency of $1,034,000 and a shareholders' deficit of
$5,098,000 at September 30, 1995. The Company's only source of cash flow,
other than from the sale of capital assets, is Multi-Arc. Pursuant to the
terms of the 1994 restructuring of Multi-Arc and of Multi-Arc's term loan and
revolving credit facility with First Fidelity Bank, Multi-Arc is not permitted
to pay dividends or make loans to Andal, except that Multi-Arc is permitted to
pay cash to Andal to the extent that it utilizes any of Andal's federal, state,
and local net operating loss carry forwards for income tax purposes. However,
such payments cannot exceed $1 million per year for fiscal 1995 and 1996, after
which no further payments are permitted (see Note 12 for additional information
regarding the restructuring of Multi-Arc). Andal could also raise cash by
making sales of the remaining Integrated stock it owns, as market conditions
permit (approximately $440,000 at the current market value) and, in fiscal 1996,
expects to receive approximately $750,000 for the 1995 sales of Multi-Arc stock
and debentures (see Note 3).
The Company's fiscal 1996 cash requirements are estimated to be $2
million for operating cash needs, $3 million for the required exercise of the
Option described in Note 2, and $1 million for principal payments on
shareholder debt as described in Note 13. In addition, the Company may also
require cash to fund litigation costs related to discontinued operations and/or
to make payments to creditors who have yet to make payment demands. As
discussed in Note 2, the Company is currently negotiating to restructure its
indebtedness to shareholders by selling the Option to them. Unless the Company
can accomplish a restructuring of its indebtedness to its shareholder lenders
which will allow it to meet its fiscal 1996 cash needs, either through the sale
of the UBC Option to them or otherwise, there may be no alternative to the
Company other than to enter into bankruptcy proceedings. The accompanying
consolidated financial statements do not include any adjustments relating to
the possible effect on the recoverability and classification of assets or the
amounts and classification of liabilities that may be necessary should the
Company be unable to continue as a going concern.
Principles of Consolidation
The consolidated financial statements include the accounts of Andal Corp.
and its subsidiaries. Foreign affiliates in which Andal owns 20% to 50% are
accounted for using the equity method. Andal's remaining operating business
is Multi-Arc. All significant intercompany transactions and accounts are
eliminated in consolidation.
Inventories
Inventories are stated at lower of cost (determined principally by the
first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated over
estimated useful lives on a straight-line basis.
Revenue and Deferred Income
Revenue is recognized when it is earned. In the case of Multi-Arc system
sales, the point for revenue recognition normally corresponds to the date when
the system is shipped to the customer. To the extent the Company sells
coating systems or license rights to its joint ventures, a proportionate
percentage of the profit on these is deferred and subsequently amortized into
revenue. Such amortization offsets the related depreciation or license rights
expense recorded by the corresponding joint venture company.
Research and Development Expenses
Research and development expenditures ($1,628,000 in 1995, $1,400,000 in
1994, and $1,222,000 in 1993) are charged to cost of revenues as incurred.
Income (Loss) per Share
Primary income (loss) per common share for all periods was computed based
on the average number of shares outstanding during each of the respective
periods. Fully diluted per share amounts are not shown for the periods, as
the effects would be anti-dilutive.
The average number of shares used in computing primary income/(loss) per
share was 329,859 in each of 1995, 1994, and 1993.
2. UBC OPTION
The Company, through a wholly-owned subsidiary, UBC Virginia Corp. ("UBC
Corp."), owns an option (the "Option") to purchase a parcel of real estate
(the "UBC Property") located on 61st Street and First Avenue in New York City,
which Option has been carried on the books of the Company at nil value for many
years. The Option grants the Company the right to purchase the UBC Property for
approximately $3 million in cash and is exercisable only after the death of
the later to die of two of the principals of the corporation that granted the
Option. The Option expires 91 (ninety-one) days after the Company has been
given formal notice of such death by the Optionor. The Company was given
formal notice of such death on September 22, 1995. The Company does not have
the $3 million of cash that is required to exercise the Option, and it does not
believe it will be able to raise such a sum through borrowings from unrelated
parties or through the sale of assets other than the Option. However, under
the terms of the loan described below, the Company is obligated to exercise the
Option. Accordingly, on October 13, 1995 the Company gave the Optionor formal
notice of its election to exercise the Option; and the parties have agreed that
the transaction must be closed on or before February 27, 1996.
The capital stock of UBC Corp. was pledged as security for a $5 million
loan, hereafter referred to as the "UBC Loan," made to the Company in 1990 by
Alan N. Cohen, President and a Director of the Company, Paul Milstein, who was
then a Director of the Company, and Frankhill Associates, a limited
partnership of which Andrew J. Frankel, Chairman of the Board and a Director of
the Company, is a general partner (collectively, in such capacity, the "UBC
Lenders").
As of September 30, 1995, the principal balance of the loan, after
adjustment for a restructuring which occurred in 1992, is $5,571,285 which is
due and payable on the earlier of March 31, 1997, or the day after certain other
indebtedness to shareholders of the Company, including the individuals
mentioned above, has been paid in full.
The capital stock of UBC Corp. also serves as security (second lien) for
a $2,043,000 loan (hereafter referred to as the "Fleet Assignee Loan")
outstanding as of September 30, 1995 between the Company and certain of its
directors and a stockholder who was formerly a director.
The Company's failure to pay the $3 million purchase price for the UBC
Property will result in an event of default under the UBC Loan, which will
give the UBC Lenders the right to exercise the Option on the Company's behalf
and to declare the loan immediately due and payable, including all sums
advanced by the UBC Lenders in exercising the Option. In addition, the UBC
Lenders will have all of the remedies available to them under applicable law
for secured lenders, including, without limitation, the public or private sale
of the UBC Property acquired by exercise of the Option. Default under the UBC
Loan will also result in default under the Fleet Assignee Loan.
Until January 1995, the Company had been under contract to sell the
option to an unrelated real estate developer, who had contracted to purchase the
option in 1984. The developer was unable to obtain financing to consummate the
purchase; and, as a result, the Company terminated the contract. Upon
termination of the contract, the Company has attempted to sell the option to
various other parties. In addition, after the Company received the Option
Notice from the Optionor, the Company made contact with several brokers who
have not been able to identify a buyer. To date, the Company has not received
a bona fide offer from a third party for the option.
The UBC Lenders have expressed an interest in acquiring the UBC Property
in satisfaction of the amount outstanding on the UBC Loan. In that event, the
Company would no longer be obligated with respect to the $3 million purchase
price obligation due on the UBC Option exercise.
The Board of Directors of the Company met on October 5, 1995 to discuss
the difficulties entailed in the Company's exercise of the Option, including
the Company's lack of cash flow, diminished borrowing power, debt structure, and
difficulties in raising funds through a private placement of Multi-Arc's
common stock and subordinated debentures (see "Sale of Minority Interest in
Multi-Arc Inc." included elsewhere in this Report). After discussion, the
Board members who are not UBC Lenders (Messrs. Flood and Glickman) authorized
the officers of the Company to engage an independent appraiser to conduct an
appraisal of the UBC Property, following which such Board members would seek to
negotiate a transaction with the UBC Lenders taking into account, in addition
to the appraisal, all material circumstances relating to the UBC Property,
including, without limitation, the inability of the Company to raise sufficient
funds required to exercise the Option, the time constraints within which the
Company must exercise the Option, and the consequent probability that, without
a sale to a related party, the Option will expire worthless.
On November 21, 1995, the Company received a report from the independent
appraiser it had retained which concluded that the range for the market value
of the UBC Property was between $9.9 million and $11.9 million (before deducting
the $3 million that would have to be paid to exercise the UBC Option), depending
on the ultimate cost of complying with zoning restrictions and other costs that
would be incurred in the development of the UBC Property. The appraiser's
conclusion was based on a number of assumptions, including the assumption that
a sale would occur after a reasonable exposure in a competitive market under
all conditions requisite for a fair sale, with the buyer and seller acting
prudently, knowledgeably, for self-interest, and not under undue duress.
The members of the Company's Board of Directors who are not UBC Lenders
and the UBC Lenders are each considering the results of the appraisal. The
Company expects that formal negotiations between the Company and the UBC
Lenders will commence in early January 1996.
3. SALE OF MINORITY INTEREST IN MULTI-ARC INC.
In December 1994, Andal sold, for $500,000 approximately 2-1/2% of the
common stock of Multi-Arc to Multi-Arc's management; and Multi-Arc issued
$500,000 of convertible subordinated debentures (convertible into approximately
2% of Multi-Arc common stock) to such management, the proceeds of which were
remitted to Andal as a return of capital. Both the sale of the common stock
and the issuance of the debentures were funded through non-recourse loans of $1
million made to the management by Multi-Arc utilizing Multi-Arc's revolving
facility with First Fidelity Bank. These loans bear interest from 6% to 8.35%
and are repayable on December 15, 2004 or upon termination of employment. The
loans are secured by common stock and debentures of Multi-Arc. The Notes
evidencing these loans are pledged by Multi-Arc to First Fidelity Bank.
Because of the non-recourse nature of the loans, the gain on the sale of Multi-
Arc common stock of approximately $396,000 has been deferred until such time as
the management loans are repaid.
In June and September 1995, Andal sold, for $1,010,000, approximately
4.9% of the common stock of Multi-Arc to certain foreign licensees and other
investors; and Multi-Arc sold to such licensees and other investors $1,010,000
of convertible subordinated debentures (convertible into approximately 3.8% of
Multi-Arc common stock), the cash proceeds of which were remitted to Andal as
a return of capital. These debentures bear interest at 6% and are payable on
December 15, 2004. Approximately $450,000 of the common stock sold, and
$450,000 principal amount of the debentures sold are evidenced by a promissory
note which require monthly principal payments over three years plus interest at
6% per annum. An additional $153,000 of common stock and $153,000 principal
amount of the debentures were sold on open account. The gain on these sales of
Multi-Arc common stock was $800,000, of which $452,000 was deferred and will be
recognized as the amounts are collected.
The Company had agreed, in principal, to a total $3.5 million in stock
sales and $3.5 million of Multi-Arc debenture issuances to its foreign
licensees and other investors. However, the offer was not fully subscribed;
and the unsubscribed portion of the offer has been withdrawn.
4. MULTI-ARC JOINT VENTURES
In 1993, Multi-Arc acquired a 29% interest in Multi-Arc Scientific
Coatings (S) Pte. Ltd. ("Singapore"), a joint venture which commenced
operations in August 1993. Multi-Arc's share of Singapore's net income (loss),
recorded on the equity method, for the years ended September 30, 1995 and 1994
was $(110,000) and $(111,000), respectively. During fiscal 1995, the Company
invested an additional $247,000 in cash and converted a long term receivable of
$77,000 into equity. At September 30, 1995, Investments in Affiliates include
the Company's investment in Singapore of $293,000 ($79,000 at September 30,
1994).
Multi-Arc had a 40% equity interest in Multi-Arc India Ltd. ("India")
which has a fiscal year end of March 31. In November 1994, India completed an
initial public offering and was listed on the Bombay Stock Exchange. As a
result of this transaction, Multi-Arc's interest in India was reduced to 21%
and the Company recorded a pretax gain of $85,000. Multi-Arc's share of
India's net income (loss), recorded on the equity method, for the years ended
September 30, 1995, 1994, and 1993 was $163,000 $95,000, and $-0-,
respectively. During fiscal 1995, the Company received $36,000 of dividends in
cash. During fiscal 1994, the Company made additional equity investments in
India of $218,000 in cash and received $30,000 of dividends in cash. At
September 30, 1995, Investments in Affiliates includes Andal's investment in
India of $975,000 ($763,000 at September 30, 1994).
5. DISCONTINUED OPERATIONS
The income (loss) from discontinued operations in 1995, 1994, and 1993 is
comprised of the following:
1995 1994 1993
Gain on divestiture of OMC $ 0 $ 69,000 $ 0
Reversal of reserve for
income taxes 996,000 0 0
Income (loss) on discontinued
construction operations 11,000 (419,000) (527,000)
---------- ---------- ----------
$1,007,000 $(350,000) $(527,000)
========== ========== ==========
On June 30, 1995, an appeals tribunal dismissed a claim against the
Company by a local taxing authority for income taxes relating to certain of its
discontinued operations. Income from discontinued operations for the year
ended September 30, 1995 includes the reversal of a reserve for income taxes,
plus accrued interest, in the aggregate amount of $996,000. The 1995 amount
also includes income of $141,000 related to settlement of a construction claim
and legal expenses of $130,000.
Construction operations consisted of construction subcontracting
businesses involved in wall, flooring and ceiling installation and plumbing,
heating, and electrical subcontracting. The Company commenced a program to
discontinue these businesses in 1981 which program was completed in 1983. The
loss on discontinued construction operations for 1994 and 1993 is due to legal
expenses incurred and settlements on litigation related to those businesses.
At September 30, 1993, the Company's remaining investment in Olsher
Metals Corporations ("OMC") consisted of 19.5% of OMC's common stock valued at
$431,000 which approximated its share of the underlying book value of OMC. In
January 1994, the Company sold its remaining investment in OMC for $500,000 in
cash. The proceeds were used to repay debt. The gain on this transaction has
been included in income (loss) from discontinued operations.
6. SALE OF SALEM TUBE, INC.
On June 18, 1991, the Company completed the sale of substantially all of
the assets and liabilities of its wholly-owned subsidiary, Salem Tube,
Inc.("Salem"). The sales price included a $700,000 subordinated promissory
note due in equal quarterly installments beginning on September 30, 1994. The
selling price of the net assets of Salem was approximately $700,000 in excess of
Andal's carrying value at June 18, 1991. This gain was deferred and was to be
recognized as the subordinated note payments were received. On August 4, 1994,
the purchaser of Salem filed a voluntary petition for bankruptcy under Chapter
11 of the Federal Bankruptcy Code. In June 1995, the Bankruptcy Court approved
Salem's Plan of Reorganization. Under the Plan, Andal received $100,000 in
June 1995, is scheduled to receive $50,000 in December 1995, and may receive
another $70,000 at an unspecified time in the future, depending on the recovery
of certain preference payments. All recoveries have been and will be, when and
if received, credited to discontinued operations.
7. INTEGRATED BRANDS INC.
In December 1985, Andal purchased 46.5% of the common stock of Integrated
Brands Inc. ("Integrated"), formerly Steve's Homemade Ice Cream, Inc. Through
a series of transactions, Andal's interest has been reduced to 3%. At
September 30, 1995 and 1994, Other Assets includes Andal's investment in
Integrated of $393,000.
On June 22, 1993, the Company's Chairman and President resigned as
directors of Integrated and the Company was not in a position to exercise
significant influence over the operating and financial policies of
Integrated's. Accordingly, on June 23, 1993, the Company began to account for
its then 21% ownership of the common stock of Integrated by the cost method.
In August 1993, the Company sold 65,000 shares of Integrated stock for
$134,000 in cash and recorded a gain of $60,000 on the transaction. During
1994, the Company disposed of 129,500 shares of Integrated in various
transactions for $161,000 in cash and recorded a net gain of $14,000. In an
additional transaction in August 1994, the Company sold 2,000,000 shares of
Integrated for $1,500,000 in cash and recorded a loss of $780,000. All
proceeds were used to repay debt.
8. ACCOUNTS RECEIVABLE
Receivables consist of the following:
September 30,
1995 1994
Accounts receivable $5,096,000 $4,142,000
Allowance for doubtful
accounts (98,000) (114,000)
----------- -----------
$4,998,000 $4,028,000
========== ==========
9. INVENTORIES
Inventories consist of the following:
September 30,
1995 1994
Raw materials and supplies $ 820,000 $1,198,000
Work in progress 253,000 56,000
---------- ----------
$1,073,000 $1,254,000
========== ==========
<PAGE>
10. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30,
1995 1994
Building and leasehold
improvements $ 2,521,000 $ 2,987,000
Furniture and equipment 24,098,000 23,403,000
------------ ------------
26,619,000 26,390,000
Less accumulated
depreciation and
amortization (15,830,000) (16,658,000)
------------ ------------
$10,789,000 $ 9,732,000
=========== ===========
Substantially all property and equipment at September 30, 1995 is pledged
as collateral pursuant to loan agreements.
In addition to property owned, the company leases various operating
facilities and equipment. Rent expense under operating leases was $1,321,000,
$1,305,000, and $1,457,000 for the three years ended September 30, 1995,
1994, and 1993, respectively.
The aggregate minimum rental commitments under operating leases as of
September 30, 1995 for each of the fiscal years ended September 30 are as
follows: 1996, $1,130,000; 1997, $1,016,000; 1998, $758,000; 1999, $501,000;
2000, $234,000, and $95,000 thereafter.
11. 401K PLANS
The Company maintains several defined contribution 401K savings plans for
the benefit of its employees. Annual contributions to the plans are at the
discretion of management. Aggregate expense related to all plans amounted to
$294,000 in 1995, $225,000 in 1994, and $97,000 in 1993.
12. CREDIT FACILITIES AND LONG TERM DEBT
Long term debt consists of the following:
September 30,
1995 1994
First Fidelity Bank, N. A.
U. S. -Term loan $ 5,214,000 $ 6,000,000
Revolving credit facility 1,500,000 0
U. K. - Term loan 2,370,000 0
Siemens Financial Services 0 1,766,000
Bank of Scotland 0 358,000
Capital Leases 0 123,000
Other 8,000 70,000
------------ -----------
9,092,000 8,317,000
Less current portion (1,206,000) (1,365,000)
----------- -----------
$7,886,000 $6,952,000
========== ==========
In September 1995, the Company refinanced the debt of its subsidiary,
Multi-Arc (UK) Ltd., with First Fidelity Bank N. A. The new credit facilities
consist of a five-year term loan in the principal amount of Pounds
Sterling1,500,000 repayable in quarterly installments of Pounds Sterling
54,000 commencing in December 1995 and a final installment of Pounds Sterling
474,000 due in September 2000. Proceeds of the term loan were used to repay
outstanding indebtedness to Siemens Financial Services and Bank of Scotland,
to advance an inter-corporate loan to Multi-Arc Inc., and for acquisition of
new equipment. In addition to the term loan, First Fidelity has extended a
Pounds Sterling250,000 overdraft facility for working capital purposes. At
September 30, 1995, no borrowings had been made under this facility.
During 1994, the Company's Board of Directors (and subsequently the
shareholders) approved a Plan of Restructuring that caused substantially all
of the assets and liabilities of its Multi-Arc Scientific Coatings division to
be transferred to Multi-Arc Inc. In connection with the restructuring, Multi-
Arc Inc. assumed the Company's obligations under its 5 1/2% convertible
subordinated debentures due in 1997 and the related indenture (see Note 14).
The debentures continue to be convertible into Andal common stock. Also, in
connection with the restructuring, Multi-Arc Inc. obtained a $6 million term
loan repayable in equal monthly installments over seven years from First
Fidelity Bank, N.A. with interest at 8.36%. Proceeds of the term loan were
used to retire intercompany indebtedness to Andal; and Andal, in turn, applied
a substantial portion of the proceeds to the prepayment of its bank
indebtedness to Chemical Bank. In addition to the term loan, First Fidelity
Bank has extended a $4 million revolving credit facility, due March 31, 1997,
to Multi-Arc for working capital purposes. Borrowings under this facility are
limited based on specified percentages of eligible receivables and inventories,
and bear interest at the prime rate. At September 30, 1995, Multi-Arc had an
additional $1,550,000 available under this facility.
Andal's remaining obligation to Chemical Bank consists of $941,000 of
aggregate liability under outstanding letters of credit issued by Chemical
Bank in connection with an appeal bond and in connection with its discontinued
real estate development activities. Because of Andal's inability to fund the
liabilities represented by the letters of credit, in order to secure the
release of collateral held by Chemical Bank so that Multi-Arc could obtain its
term loan and revolving credit facility from First Fidelity Bank, Messrs.
Andrew J. Frankel, Paul A. Milstein, and Alan N. Cohen each personally
guaranteed one-third of the letter of credit liabilities, for which Andal has
agreed to pay to Messrs. Frankel, Milstein, and Cohen an aggregate annual
guarantee fee equal to 2% of the letters of credit outstanding.
In July 1993, Multi-Arc (UK) Ltd. rescheduled its debt due Siemens
Financial Services into a fixed rate, five-year term loan repayable in equal
monthly installments with interest at 7-3/8% and, in connection therewith,
received forgiveness of debt in the amount of $77,000 which was recorded as
income in 1993.
Substantially all of the Company's assets serve as collateral for the
various term loans and lines of credit. The various term loan agreements
require the Company to maintain compliance with certain financial ratios and
other covenants. As of September 30, 1995, the Company was in compliance with
or has obtained waivers of all such covenants for which it was not in
compliance. The agreement covering the U. S. term loan and revolving credit
facility has been modified to make certain financial covenants less restrictive.
The aggregate annual maturities of long term debt during the next five
fiscal years (including the debt due shareholders) are: 1996, $2,456,000;
1997, $9,062,000; 1998, $1,198,000; 1999, $1,198,000; and 2000, $1,198,000.
Interest paid during the fiscal years ended September 30, 1995, 1994, and 1993
amounted to $1,631,000, $1,650,000, and $1,125,000, respectively.
13. DEBT DUE SHAREHOLDERS
Debt due shareholders consists of:
September 30,
1995 1994
UBC Lenders $5,571,000 $5,571,000
Fleet Assignees 2,043,000 2,543,000
----------- -----------
7,614,000 8,114,000
Less current portion (1,250,000) (750,000)
----------- -----------
$6,364,000 $7,364,000
========== ==========
On July 5, 1990, Andal borrowed an aggregate of $5 million from Alan N.
Cohen, Paul Milstein, and a partnership controlled by Andrew J. Frankel,
collectively referred to as the "UBC Lenders." Messrs. Frankel and Cohen are
officers, directors, and principal shareholders; and Mr. Milstein is a
principal shareholder and former director of Andal. The proceeds of the
loan were used to reduce current indebtedness and for general corporate and
working capital purposes.
The loan is secured by a pledge of the stock of a subsidiary which holds
Andal's option to purchase a parcel of real estate located at 61st Street and
First Avenue in New York City (the "UBC Property") and must be prepaid in the
event of a sale of the Company's interest in that property. (See Note 2.) In
connection with the loan, the Company paid the UBC Lenders a $50,000
commitment fee and issued to them an aggregate of 25,000 warrants, each
entitling the holder to purchase one share of common stock for $80.00 per
share. The closing market price of Andal's common stock on July 5, 1990 was
$65.00 per share. The warrants were exercisable from December 31, 1990 until
July 5, 1995 at which time they lapsed unexercised. The Company agreed to pay
the UBC Lenders' expenses incurred in connection with the loans and to
indemnify the UBC Lenders against any claims which may be asserted against them
by reason of the loans.
In May 1992, the Company restructured this indebtedness. Under the terms
of the restructuring, the interest rate was reduced from 2 1/2% over the prime
rate to the prime rate; and interest accrued from October 1, 1991 through
March 31, 1993 was deferred and added to principal. The principal amount of the
loans and all accrued and unpaid interest has been rescheduled to be payable on
the earlier of March 31, 1997 or the day after the Company's obligations to
banks have been paid in full. In addition to prepayment in the event of a sale
of the Company's interest in the UBC Property (see Note 2), the restructuring
agreement also requires prepayments if the Company obtains cash recoveries on
various claims and litigations relating to its discontinued construction
operations and/or if the Company's cash flow from operations exceeds a
specified amount.
In consideration for the restructuring, the banks consented to the
Company granting to the UBC Lenders a second lien on all of the assets of the
Company which serve as collateral for the bank loans; and the UBC Lenders
consented to the Company's granting to the banks a second lien on the stock of
the subsidiary of the Company which holds the Company's interest in the UBC
Option.
In March 1994, after discussions initiated by Fleet Bank, which had
indicated that it desired to dispose of its portion of the Company's bank
loans, Frankhill Associates, Alan N. Cohen, and Paul Milstein (collectively, in
such capacity, the "Fleet Assignees") each purchased a one-third interest in the
Company's indebtedness to Fleet Bank (the "Fleet Indebtedness"), which
indebtedness totalled $3,042,000. The terms of such indebtedness did not
change as a result of this purchase. In November 1994, Peter D. Flood, a
director of the Company and Chief Executive Officer of Multi-Arc Inc.,
purchased an aggregate of 6.4% of the Fleet Indebtedness from Frankhill
Associates, Alan N. Cohen, and Paul Milstein.
As part of the restructuring, Andal has renegotiated the repayment
schedule on $2,543,000 due to the Fleet Assignees. Principal payments on this
debt, at the rate of $250,000 per quarter, did not begin until March 31, 1995,
with the remaining principal balance becoming due on March 31, 1997. The
payment that was due on September 30, 1995 was made on October 24, 1995.
Furthermore, Andal is required to make prepayments to the extent that it sells
any of its capital assets or receives capital distributions from Multi-Arc.
The Fleet Indebtedness bears interest at 1% over the prime rate payable
quarterly. The UBC Loans continue to be due and payable on the earlier of
March 31, 1997 or the day after the Fleet Assignee debt has been paid in full.
In order to facilitate the restructuring, the Fleet Assignees agreed to
yield their lien on Multi-Arc's assets and to defer the approximately $1.6
million payment to which they would have otherwise been entitled; and Chemical
Bank agreed to accept a $255,000 discount for payment in full to it of the
Company's outstanding debt. In consideration for the concessions agreed to by
the Fleet Assignees, the Company's Board of Directors (Messrs. Frankel and
Cohen not voting) approved a payment of $255,000 by the Company to the Fleet
Assignees.
See Notes 1 and 2 for a discussion of the potential sale of the UBC
Property to the UBC Lenders in satisfaction of the UBC Loan.
14. CONVERTIBLE SUBORDINATED DEBT
Convertible subordinated debt at September 30, 1995 and 1994 consists of
$1,825,000 of Andal's 5 1/2% convertible subordinated debentures due in 1997
and, at September 30, 1995, $1,510,000 of Multi-Arc's 6% convertible
subordinated debentures due in 2004 (see Note 3).
Andal's 5 1/2% convertible subordinated debentures are (i) at Andal's
election, redeemable (with accrued interest) at 100% of the principal amount;
and (ii) convertible into one common share for each $450.00 of principal amount,
subject to usual anti-dilution provisions, or a total of 4,056 common shares
at September 30, 1995. All sinking fund requirements have been met. (See Note
12.)
The Multi-Arc debentures are convertible into approximately 5.7% of the
common stock of Multi-Arc Inc. at any time after September 30, 1996.
15. CAPITAL SHARES
At September 30, 1995, common shares reserved for future issuance were as
follows:
Issuable under stock option plans 15,000
Issuable upon conversion of convertible
subordinated debentures 4,056
16. STOCK OPTIONS
In 1987, Andal adopted a Stock Option Plan under which options covering
up to 15,000 shares of Andal common stock may be granted to eligible key
employees. Options granted under the plan may be either "incentive stock
options" or non-qualified options. Under the plan, the purchase price per
share for stock options granted must equal or exceed the market value of
Andal's common stock at the time of grant. All options granted under the plan
expire no later than five years from the date of grant. Options may not be
exercised for a period of 30 months after grant. After 30 months, 40% of the
option shares may be exercised; after 42 months, 60% of such shares may be
exercised; and, after 48 months, all of such shares may be exercised. The
options expire 60 months after grant. The Board of Directors or the
Compensation Committee thereof may accelerate, in whole or in part, the time
or times at which such options may be exercised. In the case of incentive
stock options, whether granted under this plan or any earlier plan of the
Company, no more than $100,000 in value of shares (determined on the
date of grant) may become exercisable by any single optionee during any
calendar year.
The plan also permits the granting of stock appreciation rights either at
the time that an option is granted or a later time under which an optionee
may, instead of paying the option price and receiving the full number of shares
covered by the exercised option, receive instead the then excess of the value
of the shares subject to the option over the option price. Payment under a
stock appreciation right may be in shares of stock (at current fair market
value), or cash, or any combination thereof.
No options were converted or exercised under this plan in 1995, 1994, and
1993.
At September 30, 1995, there were 6,050 shares (6,170 at September 30,
1994) reserved for future grant of options. At September 30, 1995 and 1994,
none of the outstanding options were exercisable. A summary of stock option
transactions follows:
1987 Stock Option Plan
Average Price per
Number of Shares Share
Options outstanding at
September 30, 1992 11,630 $ 41.80
Cancelled during 1993 (2,700) $143.52
Options outstanding at
September 30, 1993 8,930 $ 11.15
Cancelled during 1994 (100) $112.50
Options outstanding at
September 30, 1994 8,830 $ 10.00
Cancelled during 1995 (8,830) $ 10.00
Granted during 1995 8,950 $ 2.25
Options outstanding at
September 30, 1995 8,950 $ 2.25
In December, 1994, Multi-Arc adopted the Multi-Arc Inc. 1994 Incentive
and Non-Statutory Stock Option Plan (the "Multi-Arc Plan") under which options
covering up to 5,000 shares of Multi-Arc common stock may be granted to by
employees. Under the Plan, the purchase price per share for stock options
granted must equal or exceed the market value of Multi-Arc's stock at time of
grant. Options may be exercised at the rate of 20% per annum. The options
expire ten years after date of grant.
During 1995, Multi-Arc Inc. granted options for 5,000 shares to eligible
employees at $205.13 per share. No further shares are available for grant
under the Multi-Arc Plan.
17. INCOME TAXES
Andal and its subsidiaries file a consolidated federal income tax return,
and state and local tax returns are generally filed on a combined basis. The
provision (credit) for income taxes principally represents federal taxes in
1994 and state and local taxes for each of the years ended September 30, 1995,
1994, and 1993.
The Company has adopted the provisions of the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes," effective
October 1, 1993. As permitted by the Statement, prior years' financial
statements have not been restated to reflect the change in accounting method.
There was no cumulative effect on the Company's financial statements as of
October 1, 1993 for adopting Statement No. 109.
Under Statement No. 109, the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax basis of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Prior to
the adoption of Statement No. 109, income tax expense was determined using the
deferred method. Deferred tax expense was based on items of income and
expense that were reported in different years in the financial statements and
tax returns and were measured at the tax rate in effect in the year the
difference originated.
At September 30, 1995, the Company had net operating loss carryforwards
("NOL's") for federal income tax purposes of approximately $31.5 million which
expire in varying amounts in years 1995 through 2008. In addition, the
Company's subsidiary in the United Kingdom had unrelieved corporation tax
losses of approximately $2.8 million.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of September
30, 1995 and 1994 are as follows:
1995 1994
Deferred Tax Assets:
Accruals and Reserves $ 3,074,000 $2,514,300
Installment Note 258,000 279,600
Deferred Gain on Sale of Subsidiary Stock 181,000 0
Future Tax Benefit of NOL Carryforwards 13,329,000 13,354,200
Future Tax Benefit of Credit Carryforwards 564,000 473,000
------------ ----------
Gross Deferred Tax Assets 17,406,000 16,621,100
------------ ----------
Deferred Tax Liabilities:
Fixed Assets and Intangibles 1,053,000 354,000
Foreign income 498,000 167,000
Investment in Foreign Joint Ventures 124,000 0
----------- ----------
Deferred Tax Liabilities 1,675,000 521,000
----------- ----------
Net Deferred Tax Assets 15,731,000 16,100,100
Valuation Allowance (15,731,000) (16,100,100)
------------ ------------
Net Deferred Taxes $ 0 $ 0
=========== ===========
The Company has provided a valuation allowance because it is more likely
than not that the net deferred tax assets will not be realized.
The reconciliation of income taxes computed at the U. S. statutory rate
to income tax expense for the year ended September 30, 1995 and 1994 is:
1995 1994
Tax expense (benefit) at
U. S. statutory rate $317,000 $(387,000)
State taxes, net of federal
benefit 46,000 0
Utilization of federal and state
net operating losses (300,000) 551,300
Foreign earnings permanently
reinvested (16,000) (145,000)
Other items 7,000 (2,300)
Income tax expense (benefit) $ 54,000 $(17,000)
18. LITIGATION
In August 1982, National States Electric Corp. ("NSEC"), a subsidiary of
the Company then engaged in the electrical contracting business, commenced an
action in the New York Supreme Court, County of New York, against LFO
Construction Company ("LFO") for breach of contract. The action arose out of
a subcontract agreement between NSEC and LFO in connection with a New York City
construction project for which LFO served as construction manager. LFO, in
response, asserted various counterclaims and set-offs against NSEC; and, in
October 1982, LFO and two other parties commenced an action in the same court
against NSEC, the Company, and Andrew J. Frankel, Chairman of the Board of the
Company, in which the plaintiffs essentially realleged the counterclaims and
set-offs. These actions were tried in October 1992. The court dismissed the
claims against the Company and Mr. Frankel on the merits and with prejudice;
but the jury returned a verdict against NSEC for approximately $3.8 million,
including interest and costs; and a judgement was entered on the verdict in
November 1992. LFO and its associates appealed from that part of the judgement
which dismissed the action against the Company and Mr. Frankel. NSEC, in turn,
appealed from the judgement against it. In April 1994, the Appellate Division
affirmed the dismissal of the claims against the Company and Mr. Frankel. In
addition, the Court struck the award for damages against NSEC and remanded the
matter to the trial court for a new trial as to damages. In January 1995, NSEC
settled the issue of damages with LFO by assigning to LFO its only asset which
consisted of a claim it had against the New York City Transit Authority for
work it performed for the Authority many years ago. The claim has been carried
on the books of NSEC at no value; and, accordingly, the settlement did not
result in any loss to the Company.
The Company, as successor to Circle Industries Corp. ("Circle"), its
former subsidiary engaged in the installation of flooring, is a defendant in an
action before the Supreme Court, New York County, commenced in May 1983 by
Manhattan Plaza Associates against Circle and others alleging negligent
installation of flooring and installation of defective flooring resulting in
damages allegedly in excess of $5 million. The Company has filed an answer
denying liability, asserting defenses and cross-claiming against Masonite
Corporation, the manufacturer of the flooring. In June 1994, a similar action
against the Company was settled for a cash payment by the Company of
approximately $100,000. The Company cannot determine what effect the outcome
of the aformentioned legal proceeding will have on the Company's financial
position, results of operations, or liquidity. No liability has been accrued
for this matter, as it is not considered probable that a liability has been
incurred.
The Company is aware of various other lawsuits, claims, and
administrative proceedings which are pending involving it and its subsidiaries.
In the opinion of the Company's management, these matters will not result
in any material adverse effect on the Company's consolidated financial
position.
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly results of operations for the fiscal years ended September 30,
1995 and 1994 are summarized in the following table:
First Second Third Fourth
Quarter Quarter Quarter Quarter
(Thousands of Dollars,
except per Share Amounts)
1995
Operating revenues $6,507 $8,404 $7,753 $7,719
Income (loss) from operations 277 1,069 542 526
Income (loss) from
continuing operations (81) 595 241 124
Net income (loss) (192) 696 1,273 109
Income (loss) per common share:
Income (loss) from
continuing operations (.24) 1.80 .73 .38
Net income (loss) (.58) 2.11 3.86 .33
1994
Operating revenues $5,897 $7,833 $6,942 $6,405
Income (loss) from operations 147 978 501 1
Income (loss) from
continuing operations (231) 591 111 (1,242)
Net income (loss) (553) 591 91 (1,250)
Income (loss) per common share:
Income (loss) from
continuing operations (.70) 1.79 .34 (3.77)
Net income (loss) (1.68) 1.79 .28 (3.79)
In the fourth quarter of 1995, the Company recorded additional gains of
$160,000 on the sale of minority interest in Multi-Arc Inc. and additional
minority interest in the net income of Multi-Arc Inc. of $93,000.
In the fourth quarter of 1994, the Company recorded a loss of $780,000 on
the sale of Integrated stock (see Note 6) and incurred $218,000 of legal
expenses in connection with restructuring activities.
20. INDUSTRY SEGMENT INFORMATION
Andal, through its Multi-Arc Inc. subsidiary, is engaged in surface
enhancement, the business of coating materials, primarily metals. Multi-Arc
is also engaged in the design, manufacture, assembly, and sale of proprietary
coating equipment systems.
Operating profit (loss) is computed as total revenue less operating
expenses. The computation includes other income but excludes interest
expense, general corporate overhead, and income taxes. Identifiable assets by
industry are those assets that are used in Andal's operations in each industry
segment.
Export sales of coating system equipment amounted to $2,630,000 in 1993,
principally to the Far East.
The following table sets forth information on the effects of foreign
operations (principally in the United Kingdom) as of and for the years ended
September 30, 1995, 1994, and 1993:
September 30,
1995 1994 1993
(Thousands of Dollars)
Revenues $5,255 $4,268 $3,986
Operating profits 1,363 869 713
Identifiable assets 6,463 5,352 5,467
Capital expenditures 1,411 340 193
Depreciation and amortization 547 622 615
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995
ANDAL CORP.
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
3(a) Restated Certificate of Incorporation of the Company as filed with
the Secretary of State of New York on March 16, 1972 (the
"Certificate of Incorporation") (incorporated by reference to
Exhibit 3(a) to Company's Annual Report on Form 10-K for fiscal year
ended September 30, 1986).
3(b) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on November 5, 1979
(incorporated by reference to Exhibit 3(b) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(c) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on October 22, 1981
(incorporated by reference to Exhibit 3(c) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(d) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on November 7, 1983
(incorporated by reference to Exhibit 3(d) to Company's Annual
Report on Form 10-K for fiscal year ended September 30, 1986).
3(e) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on April 8, 1987
(incorporated by reference to Exhibit 4.5 to Company's Registration
Statement on Form S-8 as filed with the Securities and Exchange
Commission on May 5, 1987).
3(f) Certificate of Amendment of the Certificate of Incorporation as
filed with the Secretary of State of New York on June 15, 1993
(incorporated by reference to Exhibit 3(f) to Company's Annual
Report on Form 10-K for Fiscal Year ended September 30, 1993).
3(g) By-laws of the Company (incorporated by reference to Exhibit 4.6 to
Company's Registration Statement on Form S-8 as filed with the
Securities and Exchange Commission on May 5, 1987).
4(a) Indenture dated as of September 15, 1972 between the Company and
Manufacturers Hanover Trust Company, as Trustee, relating to the
Company's 5 1/2% convertible subordinated debentures due September
15, 1997 (incorporated by reference to Exhibit 4(a) to Company's
Annual Report on Form 10-K for fiscal year ended September 30,
1986).
4(b) First Supplemental Indenture dated as of January 12, 1982 between
the Company and United States Trust Company of New York, as Trustee,
relating to the Company's 5 1/2% convertible subordinated debentures
due September 15, 1997 (incorporated by reference to Exhibit 4(b) to
Company's Annual Report on Form 10-K for fiscal year ended September
30, 1986).
10(a) 1987 Stock Option Plan of the Company (incorporated by reference to
Exhibit 10(c) to the Company's Annual Report on Form 10-K for fiscal
year ended September 30, 1987).
10(b) Option Agreement dated as of August 1, 1982 between Schnurmacher
Corp. and the Company (incorporated by reference to Exhibit 10(v) to
Company's Annual Report on Form 10-K for fiscal year ended September
30, 1986).
10(c) Lease dated May 11, 1988, containing an Option to Purchase, between
Roundhill Associates and the Company (incorporated by reference to
Exhibit 10(ag) to Company's Annual Report on Form 10-K for fiscal
year ended September 30, 1988).
10(d) Intercreditor Agreement among Frankhill Associates, Paul Milstein,
Alan N. Cohen, and Andal Corp. dated July 5, 1990 (incorporated by
reference to Exhibit 10(ac) to the Company's Annual Report on Form
10-K for the year ended September 30, 1990).
10(e) Stock Pledge Agreement among Andal Corp., Frankhill Associates, Paul
Milstein, and Alan N. Cohen dated July 5, 1990 (incorporated by
reference to Exhibit 10(ad) to the Company's Annual Report on Form
10-K for the year ended September 30, 1990).
10(f) Warranty Agreement among Andal Corp., Frankhill Associates, Paul
Milstein, and Alan N. Cohen dated July 5, 1990 (incorporated by
reference to Exhibit 10(ae) to the Company's Annual Report on Form
10-K for the year ended September 30, 1990).
10(g) Employment Agreement dated as of January 1, 1991, by and between the
Company and Peter D. Flood (incorporated by reference to Exhibit
10(x) to the Company's Annual Report on Form 10-K for the year ended
September 30, 1991).
10(h) Restructuring Agreement, Amendment, Guarantee, and Security
Agreement dated May 27, 1992 ("Restructuring Agreement") by and
among Andal Corp., certain subsidiaries of Andal Corp., Norstar
Bank, Manufacturers Hanover Trust Company, Manufacturers Hanover
Trust Company as agent for the banks, Alan N. Cohen, Paul Milstein,
Frankhill Associates, and the Bank of New York as collateral agent
for the Lenders (incorporated by reference to Exhibit 10(t) to the
Company's Annual Report on Form 10-K for the year ended September
30, 1992).
10(i) First Amendment to the Restructuring Agreement dated June 5, 1992
(incorporated by reference to Exhibit 10(s) to the Company's Annual
Report on Form 10-K for the year ended September 30, 1992).
10(j) Plan of Restructuring adopted by the Board of Directors and Andal
Corp. as approved by the Shareholders on August 16, 1994.
10(k) Loan and Security Agreement dated September 30, 1994 by and between
First Fidelity Bank, N.A. and Scientific Coatings of Illinois, Inc.,
Scientific Coatings, Inc., and SCI Coatings Southwest, Inc.
10(l) Subordination Agreement dated September 30, 1994 of Multi-Arc Inc.
as debtor and Andal Corp. as subordinated lender in favor of First
Fidelity Bank, N.A.
10(m) Security Agreement dated September 30, 1994 by and between First
Fidelity Bank, N.A. and Vagle Technology, Inc., Multi-Arc, Inc. (a
Minnesota corporation), Multi-Arc Inc., Multi-Arc of Ohio, Inc., and
S. C. I. Coatings Limited.
10(n) Amendment dated September 30, 1994 to the Restructuring Agreement,
Amendment, Guarantee, and Security Agreement dated May 27, 1992
among Andal Corp. and certain subsidiaries, Fleet Bank, Chemical
Bank, Alan N. Cohen, Paul Milstein, Frankhill Associates, and The
Bank of New York as collateral agent.
10(o) Multi-Arc Inc., Andal Corp., and United States Trust Company of New
York, Trustee. Second Supplemental Indenture dated as of September
30, 1994 5 1/2% Convertible Subordinated Debentures due 1997.
10(p) Pledge and Security Agreement dated September 30, 1994 by and among
Andal Corp. and First Fidelity Bank, N.A.
22 Subsidiaries of the Company
24(a) Consent of Kelly Graham Myska & Partners.
24(b) Consent of KPMG Peat Marwick.
24(c) Consent of BDO Seidman.
27 Financial Data Schedule
<PAGE>
EXHIBIT 10(p)
No. A-(Number) $(Amount #)
MULTI-ARC INC.
Rockaway, New Jersey
Issue Date: September 15, 1995
6% Convertible Subordinated Debenture
Due December 15, 2004
Multi-Arc Inc., a Delaware corporation (the "Corporation"), for value
received, promises to pay to (Name) or registered assigns, the sum of (Amount
Written) Dollars ($(Amount #)) on December 15, 2004 upon presentation and
surrender of this Debenture at the office of the Corporation in Rockaway, New
Jersey, and to pay interest at the rate of six percent (6%) per annum semi-
annually on the first day of January and July of each year, computed from the
Issue Date, until payment of the principal amount of this Debenture has been
made. Payment of principal and interest shall be made at the offices of the
Corporation, in lawful money of the United States of America, and shall be
mailed to the registered owner or owners hereof at the address appearing on
the books of the Corporation.
<PAGE>
1. The Debenture. This Debenture is one of a duly authorized issue
of $4,000,000 of debentures of the Corporation designated as its 6%
Convertible Subordinated Debentures due December 15, 2004 (the "Debentures")
and issued in denominations of $1,000, all of like date, tenor and maturity,
except variations necessary to express the number and payee of each debenture
and except for the Issue Date.
2. Equal Rank. All debentures of this issue and series rank equally
and ratably without priority over one another.
3. Conversion. The holder or holders of this Debenture may convert,
at any time prior to the maturity hereof, after September 30, 1996 (or at
any time before that date if the Corporation shall then have sold in a
registered public offering at least $5,000,000 of its Common Stock) the
principal amount of this Debenture into common stock of the Corporation at the
conversion ratio of $266.6667 of debenture principal for one share of common
stock, or at the adjusted conversion price (as provided for herein) in effect
at the time of the conversion; provided that if the Corporation has called
this Debenture for redemption, the right to convert shall terminate at the
close of business on the second business day prior to the day fixed as the
date for the redemption.
To convert this Debenture, the holder or holders must surrender the same
at the office of the Corporation, accompanied by a written notice of
conversion and by a written instrument of transfer in a form satisfactory to
the Corporation, properly completed and executed by the registered holder or
holders hereof or a duly authorized attorney.
The shares to be delivered upon conversion of this Debenture are to be
repurchased by the Corporation from its parent Andal Corp. pursuant to that
certain Contingent Repurchase Agreement dated December 16, 1994 between the
Corporation and Andal Corp. which the Corporation acknowledges has been
entered into for the benefit of the holder hereof.
4. Fractional Shares. The Corporation shall convert this debenture
into fractional shares to at least the fifth decimal place rounded even. No
cash shall be paid in lieu of any remaining fraction.
5. Adjustments to Conversion Ratio. If the Corporation at any time
pays to the holders of its common stock a dividend in common stock, the
number of shares of common stock issuable upon the conversion of this Debenture
shall be proportionally increased, effective at the close of business on the
record date for determination of the holders of the common stock entitled to
the dividend.
If the Corporation at any time subdivides or combines in a larger or
smaller number of shares its outstanding shares of common stock, then the
number of shares of common stock issuable upon the conversion of this
Debenture shall be proportionally increased in the case of a subdivision and
decreased in the case of a combination, effective in either case at the close
of business on the date that the subdivision or combination becomes
effective.
If the Corporation is recapitalized, consolidated with or merged into
any other corporation, or sells or conveys to any other corporation all or
substantially all of its property as an entity, provision shall be made as
part of the terms of any such transaction so that the holder or holders of
this Debenture may receive, in lieu of the common stock otherwise issuable to
them upon conversion hereof, at the same conversion ratio, the same kind and
amount of securities or assets as may be distributable upon the
recapitalization, consolidation, merger, sale, or conveyance with respect to
the common stock.
6. Subordination.
(a) Anything herein or in the Debenture to the contrary
notwithstanding, the indebtedness evidenced by the Debenture and the payment
of principal of and interest on the Debenture shall be subordinate and junior
in right of payment, to the extent and in the manner hereinafter set forth,
to all Senior Indebtedness of the Corporation, as defined herein, whether
outstanding at the date of this Agreement or incurred after the date of this
Agreement:
(i) The indebtedness evidenced by this Debenture shall not
have any claim to the assets of the Corporation on a parity with or prior
to the claim of the Senior Indebtedness, and, unless and until the
Senior Indebtedness shall have been fully paid and satisfied, no holder
of the Debenture will (a) take, demand or receive, and the
Corporation will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment or
security for the whole or any part of the principal of or interest on
the indebtedness evidenced by the Debenture; provided, however,
that so long as no default or event of default with respect to any
Senior Indebtedness has occurred and is continuing, and so long as no
default hereunder has occurred and is continuing, payments of interest
on the Debenture may be made when due or within ten (10) days in advance
thereof, in accordance with the terms hereof; or (b) commence any
proceeding to enforce payment of the indebtedness evidenced by this
Debenture, or join with any other creditors of the Corporation in
commencing any proceeding against the Corporation under any bankruptcy,
reorganization, readjustment of debt, dissolution, receivership or
liquidation proceeding or otherwise exercise any remedies otherwise
permitted by applicable law upon a default hereunder.
(ii) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Corporation or to
its creditors, as such, or to its property, and in the event of any
proceedings for voluntary or involuntary liquidation, dissolution or
other winding-up of the Corporation whether or not involving insolvency
or bankruptcy, then the holders of Senior Indebtedness shall be entitled
to receive payment in full of all principal and interest on all Senior
Indebtedness before the holder of the Debenture are entitled to
receive any payment on account of principal or interest upon the
Debenture, and to that end, the holders of Senior Indebtedness shall
be entitled to receive for application in payment thereof any payment
or distribution of any kind or character, whether in cash or property
or securities, which may be payable or deliverable in any such
proceedings in respect of the Debenture, except securities which
are subordinate and junior in right of payment to the payment of all
Senior Indebtedness then outstanding;
(iii) In the event that this Debenture is declared due and
payable before its expressed maturity because of the occurrence of
a default hereunder (under circumstances when the provisions of the
foregoing clause (ii) shall not be applicable), the holders of
the Senior Indebtedness shall be entitled to receive payment in
full of all principal and interest on all Senior Indebtedness before
the holders of the Debenture is entitled to receive any payment on
account of the principal or interest upon the Debenture; and
(iv) If any payment or distribution or security, or the
proceeds of any thereof, is collected or received by any holder of
the Debenture in respect of any of the indebtedness evidenced by the
Debenture prior to the full payment and satisfaction of the Senior
Indebtedness, and such collection or receipt is not expressly
permitted under this Agreement, such holder of the Debenture will
forthwith deliver the same, in precisely the form received (except
for the endorsement or assignment of such holder of the Debenture
where necessary), to the holders of Senior Indebtedness, or to their
representative or representatives to be turned over to the holders
of Senior Indebtedness, for application as a payment on account of
the Senior Indebtedness, and unless so delivered by such holder of
the Debenture, the same shall be held in trust by such holder of the
Debenture as the property of the holders of Senior Indebtedness.
(b) The holder of the Debenture undertakes and agrees for the
benefit of each holder of Senior Indebtedness to execute, verify, deliver and
file any proofs of claim, consents, assignments or other instruments which
any holder of Senior Indebtedness may at any time require in order to prove and
realize upon any rights or claims pertaining to the Debenture and to
effectuate the full benefit of the subordination contained herein; and upon
failure of the holder of any Debenture so to do, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of the holder of the Debenture to execute, verify, deliver
and file any such proofs of claim, consents, assignments or other
instrument.
(c) Without the necessity of any reservation of rights against the
holder of the Debenture, without notice to or further assent by any holder of
the Debenture, without affecting the liabilities and obligations hereunder
of any holder of the Debenture and without affecting the subordination
provisions provided for herein, any present or future holder of Senior
Indebtedness may modify or amend the terms of such Senior Indebtedness or any
security or guaranty therefor (including but not limited to extending
the time of payment) and may increase the amount of such Senior Indebtedness
and may release, sell or exchange such security or guaranty and otherwise deal
freely with the Corporation and any other party obligated to such Holder with
respect to such Senior Indebtedness.
(d) No present or future holder of Senior Indebtedness shall be
prejudiced in his right to enforce subordination of the Debenture by any act
or failure to act or delay in acting on the part of the Corporation or such
holder. The provisions of this Section are solely for the purpose of
defining the relative rights of the holders of Senior Indebtedness on the one
hand and the holder of the Debenture on the other hand, and nothing herein
shall impair as between the Corporation and the holder of the Debenture the
obligation of the Corporation, which is unconditional and absolute, to pay to
the holder thereof the principal, premium, if any, and interest thereon in
accordance with its terms, nor shall anything therein prevent the holder of the
Debenture from exercising all remedies otherwise permitted by applicable law or
hereunder upon default hereunder subject to the rights under this Section of
holders of Senior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to holder of the Debenture.
(e) The Corporation agrees, for the benefit of the holders of
Senior Indebtedness, that in the event that the Debenture is declared due and
payable before its expressed maturity because of the occurrence of a default
hereunder (i) the Corporation will give prompt notice in writing of such
happening to the holders of Senior Indebtedness and (ii) absent the written
consent of the holder of such Senior Indebtedness to the Corporation all
Senior Indebtedness shall forthwith become immediately due and payable upon
demand regardless of the expressed maturity thereof.
(f) Subject to the payment in full of all Senior Indebtedness, the
holder of the Debenture shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Corporation applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Debenture shall be paid in
full and no such payments or distributions to the holder of the Debenture of
cash, property or securities otherwise distributable to the holders of the
Senior Indebtedness shall, as between the Corporation, its creditors, other
than the holders of Senior Indebtedness, and the holder of the Debenture,
be deemed to be a payment by the Corporation to or on account of the
Debenture. It is understood that these subordination provisions are and are
intended solely for the purpose of defining the relative rights of the holder
of the Debenture, on the one hand, and the holders of the Senior
Indebtedness, on the other hand. Nothing contained herein is intended to or
shall impair, as between the Corporation, its creditors, other than the
holders of Senior Indebtedness, and the holder of the Debenture, the
obligation of the Corporation, which is unconditional and absolute, to pay to
the holder of the Debenture the principal of, premium, if any, and interest on
the Debenture as and when the same shall become due and payable in accordance
with its terms, or to affect the relative rights of the holder of the
Debenture and creditors of the Corporation, other than the holders of the
Senior Indebtedness.
(g) The term "Senior Indebtedness" shall mean the principal of (and
premium, if any) and unpaid interest on (i) indebtedness of the Corporation,
whether outstanding on the date of execution of this Debenture or thereafter
created, incurred or assumed, which is (a) for money borrowed or (b)
evidenced by a note, debenture or other similar instrument given in connection
with the acquisition of any property or assets, including securities, (ii) any
indebtedness of others of the kinds described in the preceding clause
(i) guaranteed by the Corporation or for which the Corporation is otherwise
liable, and (iii) amendments, modifications, renewals, extensions and
refundings of any such indebtedness, including without limitation, the
FFB Indebtedness; provided, however, that the term shall not include any
indebtedness of the character described in clauses (i) or (ii) above, or any
amendment, increases, renewal, extension or refunding of any such
indebtedness if in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided
that such indebtedness, or such amendment, renewal, extension or refunding
thereof is not senior in right of payment to the Debenture.
(h) The term "FFB Indebtedness" shall mean the indebtedness of the
Corporation to First Fidelity Bank, N.A. ("FFB") under a Guaranty and
Suretyship Agreement- NJ - Corporation dated September 30, 1994 by the
Corporation and others in favor of FFB, pursuant to which, inter alia, the
Corporation guaranteed all the then existing and thereafter incurred
indebtedness of Scientific Coatings of Illinois, Inc., Scientific Coatings,
Inc. and SCI Coatings Southwest, Inc. to FFB.
7. Default. If any of the following events occur ("Event of
Default"), the entire unpaid principal amount of, and accrued and unpaid
interest on, this Debenture shall immediately be due and payable:
(a) The Corporation fails to pay any interest on this Debenture when
it is due and payable, and the failure continues for a period of
30 days;
(b) The Corporation fails to pay the principal of this Debenture at
its maturity;
(c) The Corporation commences any voluntary proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, receivership, dissolution, or liquidation law or statute,
of any jurisdiction, whether now or subsequently in effect; or the
Corporation is adjudicated insolvent or bankrupt by a court of
competent jurisdiction; or the Corporation petitions or applies
for, acquiesces in, or consents to, the appointment of any
receiver or trustee of the Corporation or for all or substantially
all of its property or assets; or the Corporation makes an
assignment for the benefit of its creditors; or the Corporation
admits in writing its inability to pay its debts as they mature;
or
(d) There is commenced against the Corporation any proceeding relating
to the Corporation under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, receivership,
dissolution, or liquidation law or statute, of any jurisdiction,
whether now or subsequently in effect, and the proceeding remains
undismissed for a period of 60 days or the Corporation by any act
indicates its consent to, approval of, or acquiescence in, the
proceeding; or a receiver or trustee is appointed for the Corpora-
tion or for all or substantially all of its property or assets,
and the receivership or trusteeship remains undischarged for a
period of 60 days; or a warrant of attachment, execution or
similar process is issued against any substantial part of the
property or assets of the Corporation, and the warrant or similar
process is not dismissed or bonded within 60 days after the levy.
8. Redemption. This Debenture may be redeemed at any time on or
after October 1, 1996, prior to maturity, as a whole at any time or in part
from time to time, at the office of the Corporation, upon the notice referred
to below, at the following redemption prices (expressed in common percentages
of the principal amount of this Debenture) together with accrued interest to
the date of redemption:
If Redeemed During Percentage
12 Month Period of Principal
Beginning Amount
December 16, 1995 . . . . . . . . . . . . . . . . . . . . 106
December 16, 1996 . . . . . . . . . . . . . . . . . . . . 105
December 16, 1997 . . . . . . . . . . . . . . . . . . . . 104
December 16, 1998 . . . . . . . . . . . . . . . . . . . . 104
December 16, 1999 . . . . . . . . . . . . . . . . . . . . 103
December 16, 2000 . . . . . . . . . . . . . . . . . . . . 103
December 16, 2001 . . . . . . . . . . . . . . . . . . . . 102
December 16, 2002 . . . . . . . . . . . . . . . . . . . . 102
December 16, 2003 . . . . . . . . . . . . . . . . . . . . 101
9. Notice of redemption, etc. Notice of redemption shall be mailed
to the holder of the Debenture not less than 30 nor more than 60 days prior
to the date fixed for redemption at their last addresses as they appear upon
the records of the Corporation. If this Debenture is redeemed in part, the
Corporation shall, without charge to the holder or holders hereof, either (1)
execute and deliver to the holder or holders a debenture for the unredeemed
balance of the principal amount hereof, or (2) make note hereon of the
principal amount called for redemption and redeemed, upon surrender of this
Debenture at the office of the Corporation. Following the date fixed for
redemption, interest shall be payable only on the portion of this Debenture
not called for redemption.
10. Exchange. The holder of this Debenture may, at any time on or
before the date of its maturity or the date fixed for its redemption, by
surrendering this Debenture to the Corporation at its office, exchange this
Debenture and/or any other of the Debentures for another debenture or
debentures of a like principal amount and of like tenor, date and maturity in
denominations of $1,000 or any multiple of that amount.
11. Transfer. This Debenture may be transferred only at the office
of the Corporation by the surrender hereof for cancellation, and upon the
payment of any stamp tax or other governmental charge connected with the
transfer. If this Debenture is transferred, a new debenture or debentures of
like tenor, date and maturity shall be issued to the transferee.
12. Registered owner. The Corporation may treat the person or persons
whose name or names appear hereon as the absolute owner or owners of this
Debenture for the purpose of receiving payment of, or on account of, the
principal and interest due on this Debenture and for all other purposes, and
it shall not be affected by any notice to the contrary.
13. Corporate obligation. The holder or holders of this Debenture
shall not have any recourse for the payment in whole or of any part of the
principal or interest on this Debenture against any incorporator, or present
or future stockholder of the Corporation by virtue of any law, or by the
enforcement of any assessment, or otherwise, or against any officer or
director of the Corporation by reason of any matter prior to the delivery of
this Debenture, or against any present or future officer or director of the
Corporation. The holder of this Debenture, by the acceptance hereof and as
a part of the consideration for this Debenture, expressly agree that the
Debenture is an obligation solely of the Corporation and expressly release
all claims and waive all liability against the foregoing persons in connection
with this Debenture.
IN WITNESS WHEREOF, the Corporation has signed and sealed this 6%
Convertible Subordinated Debenture due December 16, 2004 this 15th day of
September, 1995.
MULTI-ARC INC.
Corporate /s/ Peter D. Flood
Seal Peter D. Flood, President
/s/ Walter N. Kreil, Jr.
Walter N. Kreil, Jr., Secretary
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF MULTI-ARC INC. (THE "COMPANY")
THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY: (1)
TO THE COMPANY (UPON REPURCHASE THEREOF OR OTHERWISE), (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT, PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, PROVIDED THAT THERE ARE NO DIRECTED
SELLING EFFORTS IN THE UNITED STATES AND OTHER ADDITIONAL CONDITIONS OF
REGULATION S FOR RESALES HAVE BEEN SATISFIED, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATIONIN ACCORDANCE WITH RULE 144 (IF AVAILABLE) UNDER THE SECURITIES
ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, AND SUBJECT TO THE RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE
WITH APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE HOLDER OF
SUCH SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN AMENDED AND RESTATED STOCKHOLDERS'
AGREEMENT DATED AS OF MAY 15, 1995, AS AMENDED, AMONG MULTI-ARC INC. AND
CERTAIN HOLDERS OF OUTSTANDING COMMON STOCK OF SUCH CORPORATION, OUTSTANDING
CONVERTIBLE SUBORDINATED DEBENTURES OR STOCK OPTIONS. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY ANY HOLDER OF
THIS CERTIFICATE ADDRESSED TO THE SECRETARY OF MULTI-ARC INC.
<PAGE>
EXHIBIT 10(q)
MULTI-ARC INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated May 15,
1995 Multi-Arc Inc., a Delaware corporation (the "Corporation"), and Andal Corp.
("Andal"), Peter D. Flood, Walter N. Kreil, Jr., Multi-Arc India Ltd. and the
stockholders listed on Exhibit A hereto (collectively, the "Stockholders").
WHEREAS, the Corporation is a corporation duly organized and
existing under the laws of the State of Delaware having issued and outstanding
100,000 shares of common stock $0.01 par value (the "Common Stock") and each of
the Stockholders owns that number of shares of Common Stock and the principal
amount of 6% Convertible Subordinated Debentures due December 16, 2004 of the
Corporation (the "Debentures") and the employee stock options (the "Options")
set forth opposite its or his name on Schedule I attached hereto; and
WHEREAS, Mr. Flood and Mr. Kreil have on December 16, 1994 purchased
their shares of Common Stock from Andal and their Debentures from the
Corporation on the express condition that this Agreement be entered into; and
WHEREAS, it is deemed to be in the best interests of the Corporation
and the Stockholders that provision be made for the continuity and stability
of the business and policies of the Corporation and, to that end, the
Corporation and the Stockholders hereby set forth their agreement with respect
to the shares of Common Stock owned by the Stockholders; and
WHEREAS, all Stockholders and the Corporation entered into a
Stockholders Agreement dated December 16, 1994 and desire to amend and restate
that Agreement to permit the extension from April 15, 1995 to June 15, 1995
the time for completion of an offering of Common Stock and Debentures.
NOW, THEREFORE, in consideration of the premises and of the mutual
consents and obligations hereinafter set forth, the parties hereto hereby
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall
have the following respective meanings:
(a) Affiliate shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, any Stockholder.
(b) Eligible Group shall mean any Stockholder Group except a
Selling Group or a Group which includes a Stockholder as to whom or which an
Event of Option shall have occurred.
(c) Event of Option shall mean the occurrence of one or more of the
following events:
(i) a Stockholder shall be declared bankrupt or a receiver,
executor, administrator, guardian, legal committee or other legal custodian of
his or its property (including any Stock owned by such Stockholder) shall be
appointed; provided, however that no appointment of any executor or
administrator of the property of a Stockholder who is an individual, upon the
death of such Stockholder, shall be deemed an Event of Option as to any Stock
owned by such Stockholder until and unless such executor or administrator, or
any successor thereof, shall have disposed of such Stock other than by
transferring it to a member or members of the Group of such Stockholder, which
member or members shall have agreed in writing, at the time of such transfer,
to be bound by and to comply with, to the same extent as the Stockholder as a
result of whose death such Stock was distributed, all applicable provisions of
this Agreement and to be deemed a member of such Stockholder's Group;
(ii) a Stockholder shall Sell any Stock in violation of
Section 2, 3 or 5;
(iii) a Stockholder who became a Stockholder only by virtue of
being an Affiliate ceases to be an Affiliate (in a manner other than as
contemplated by Section l(c)(i)) while it owns any Stock; or
(iv) a writ of attachment or levy or other court order shall
prevent a Stockholder from exercising his or its voting and other rights with
respect to any Stock.
An Event of Option shall be deemed to be continuing until the procedures set
forth in Section 4 with respect to the Stock affected thereby have been
exhausted.
(d) Fair Value shall mean, as of the date of determination, the
fair value of each share of Common Stock determined in good faith by a majority
of the Board of Directors of the Corporation which may be on the basis, in the
case of Common Stock, of $205.13 a share plus or minus net income or net loss
per share from October 1, 1994.
(e) Group shall mean:
(i) In the case of a Stockholder who is an individual, (A)
such Stockholder, (B) the spouse, parents, siblings and lineal descendants of
such Stockholder, (C) a trust for the benefit of any of the foregoing and (D)
any corporation or partnership controlled by such Stockholder;
(ii) In the case of a Stockholder which is a partnership, (A)
such partnership and any of its limited or general partners, (B) any
corporation or other business organization to which such partnership shall sell
all or substantially all of its assets or with which it shall be merged and (C)
any Affiliate of such partnership;
(iii) In the case of a Stockholder which is a corporation, (A)
any of its subsidiaries, (B) any corporation or other business organization to
which it shall sell all or substantially all of its assets or with which it
shall be managed, (C) any Affiliate of the corporation and (D) any officer of
such corporation; and
(iv) In the case of any Investor or Stockholder which is a
trust, (A) such trust and (B) the beneficiaries of such trust.
(f) Prohibited Transferee shall mean any individual, corporation,
firm or other legal entity receiving or holding any Stock, directly or
indirectly, as the result of the occurrence of an Event of Option.
(g) Proportionate Percentage shall mean the pro rata percentage of
a class of Stock (A) being offered by a Selling Group pursuant to Section 3
which each Eligible Group shall be entitled to purchase, if any, or (B) which
each Eligible Group shall be entitled to purchase from the Stockholder as to
which an Event of Option has occurred, his or its representatives or assigns,
or the Prohibited Transferee, as the case may be. Such pro rata percentage, as
to each Eligible Group, shall be the percentage figure which expresses the
ratio, based upon voting power, assuming full conversion of Debentures and/or
full exercise of Options, between the number of shares of Common Stock that
would then be outstanding owned by such Eligible Group and the aggregate number
of such shares of Common Stock that would be owned by all Eligible Groups.
(h) Sell as to any Security, shall mean to sell, or in any other
way directly or indirectly transfer, assign, distribute, encumber or otherwise
dispose of, either voluntarily or involuntarily.
(i) Selling Group shall mean a Group of a Stockholder proposing to
Sell its Security, or which has delivered a notice of intention to Sell,
pursuant to Section 3.
(j) Securities shall mean (1) the presently issued and outstanding
shares of Common Stock, (2) any additional shares of capital stock hereafter
issued and outstanding and (3) any securities or options which may be
converted into or exercised for shares of capital stock of the Corporation
(k) Stockholders shall mean those persons identified on Schedule I
attached hereto as the holders of Securities and shall include any other
person who agrees in writing with the parties hereto to be bound by and to
comply with all applicable provisions of this Agreement as contemplated by
Sections 2(b) and 2(c).
SECTION 2. Limitations on Sales of Securities -- General. Each
Stockholder, and each member of the Group of such Stockholder, hereby agrees
that he or it shall not at any time during the term of this Agreement Sell any
Securities except:
(a) by sale in accordance with Sections 3 and 6;
(b) by pledge which creates a mere security interest in the
Securities; provided, that the pledgee thereof shall agree in writing in
advance with the parties hereto to be bound by and comply with all applicable
provisions of this Agreement to the same extent as if it were the Stockholder
making such pledge; or
(c) by transfer to another member of the Group to which such
Stockholder belongs; provided, that the recipient of such Securities shall
agree in writing with the parties hereto to be bound by and to comply with all
applicable provisions of this Agreement and to be deemed a member of such
Group; or
(d) by pledge or other transfer to First Fidelity Bank, National
Association ("First Fidelity") pursuant to the Loan and Security Agreement
dated September 30, 1994 with First Fidelity or any Agreement entered into in
connection therewith or any revision or substitution thereof; or
(e) by a sale made prior to June 15, 1995 provided the purchaser shall
agree to become a party to this Agreement.
(f) by surrender to the Corporation in satisfaction of any note given to
enable the purchase of the Securities by the members of management of the
Corporation.
SECTION 3. Procedures on Sale of Stock. Except as otherwise
expressly provided herein, each Stockholder and each member of the Group to
which such Stockholder belongs hereby agrees that it or he shall not Sell any
Securities except in accordance with the following procedures:
(a) The Selling Group shall first deliver to the Corporation and
each Eligible Group a written notice, which shall be irrevocable for a period
of 10 days after delivery thereof, offering all or any part of the Securities
owned by the Selling Group at the purchase price and on the terms specified
therein, whereupon (i) first, the Corporation shall have the right and option to
purchase all of the Securities so offered at the purchase price and on the
terms stated in the notice of intention to Sell (such acceptance to be made by
the delivery of a written notice to the Selling Group and each Eligible Group
within the 10-day period after delivery of the aforesaid notice of intention to
Sell); and (ii) second, if and only if the Corporation shall have failed to
accept or shall have rejected in writing the foregoing offer, each Eligible
Group shall have the right and option (subject to the provisions of Section
3(e)), to accept its Proportionate Percentage or some portion thereof of the
Securities so offered at the purchase price and on the terms stated in the
notice of intention to Sell, such acceptance to be made by the delivery of a
written notice to the Selling Group within a 10-day period after the
Corporation's failure to accept or rejection in writing of the foregoing offer.
(b) If any Eligible Group shall fail to accept, or shall reject in
writing, or only partly accept the offer made pursuant to Section 3(a), then,
upon the earlier of the expiration of such 10-day period or the receipt of
written notices of acceptance, or written rejections of such offer, from all
Eligible Groups, the Selling Group's then remaining Securities formerly
subject to such offer shall be reoffered to the remaining Eligible Groups, if
any, which accepted their Proportionate Percentage of such offer for an
additional 5-day period. Such subsequent offer shall be on the terms and
subject to acceptance in the manner provided in Section 3(a), except that the
Eligible Groups receiving such subsequent offer shall have the further right
and option to offer, in any written notice of acceptance, to purchase any of
such Securities not purchased by other Eligible Groups, in which case such
Securities not accepted by the other Eligible Groups shall be deemed to have
been offered to and accepted by the Eligible Groups which exercised their
further right and option, pro rata in accordance with their respective
Proportionate Percentages, and on the above-described terms and conditions.
(c) Sales of Securities under the terms of Sections 3(a) and (b)
above shall be made at the offices of the Corporation on a mutually satisfactory
business day within 15 days after the expiration of the aforesaid periods.
Delivery of certificates or other instruments evidencing such Stock duly
endorsed for transfer to the Corporation or members of the Eligible Groups, as
applicable, shall be made on such date against payment of the purchase price
therefor.
(d) If effective acceptance shall not be received pursuant to
Sections 3(a) and (b) above with respect to all or any part of the Securities
offered for sale pursuant to the aforesaid written notice, then the Selling
Group may sell all or any part of the remaining Securities so offered for sale
at a price not less than the price, and on terms not more favorable to the
purchaser thereof than the terms, stated in the written notice of intention to
Sell, at any time within 120 days after the expiration of the offer required by
Sections 3(a) and (b) above. In the event the remaining Securities are not
sold by the Selling Group during such 120-day period, the right of the Selling
Group to Sell such remaining Securities shall expire and the obligations of
this Section 3 shall be reinstated; provided, however, that in the event the
Selling Group determines, at any time during such 120-day period, that the sale
of all or any part of the remaining Securities on the terms set forth in the
written notice of intention to Sell is impractical, the Selling Group can
terminate the offer and reinstate the procedure provided in this Section 3
without waiting for the expiration of such 120-day period.
(e) Notwithstanding Sections 3(a) and 3(b), if the Selling Group holds
shares originally sold to management of the Corporation, Eligible Groups
holding stock issued to the other management shall have the first option to
purchase such shares.
(f) Notwithstanding Sections 3(a) and 3(b), Andal may deliver shares to
the Corporation pursuant to that certain Contingent Purchase Agreement dated
December 16, 1994.
(g) Notwithstanding Sections 3(a) and 3(b), all Stockholders may sell
shares pursuant to the offering described in Section 13, hereof.
SECTION 4. Event of Option. (a) If an Event of Option shall occur,
each Eligible Group shall have the right and option to give the Corporation
and the Stockholder (or his representatives or assigns) as to which such Event
of Option has occurred, or the Prohibited Transferee, as the case may be, notice
of its election to have the Fair Value of the Securities held determined,
whereupon the Stockholders shall cause such determination to be made with
reasonable promptness. Upon the completion of such determination, each
Eligible Group shall have the right and option for a period of 10 days after
such determination, to purchase from such Stockholder, his representatives or
assigns, or the Prohibited Transferee, as the case may be, for cash, and at the
Fair Value, its Proportionate Percentage (but not less than its Proportionate
Percentage) of the Securities as to which such Event of Option has occurred,
which option shall be exercised by delivery to the Corporation, during such 10-
day period, of a written notice of election to purchase such Securities,
whereupon the Corporation shall forthwith transmit any written notice of
election to purchase delivered pursuant to this Section 4(a) to the Stockholder
as to which such Event of Option has occurred, its representatives or assigns,
or the Prohibited Transferee, as the case may be, but failure of the
Corporation so to transmit any such notice shall in no way invalidate such
notice; provided, however, that the Eligible Groups delivering such notice of
election to purchase shall have the further right and option to purchase, in
any such written notice of election to purchase, any such Stock not purchased
by other Eligible Groups, in which case such Stock not accepted by the other
Eligible Groups shall be deemed to have been offered to and accepted by the
Eligible Groups which exercised their option hereunder, pro rata in accordance
with their respective Proportionate Percentages, and on the above--described
terms and conditions.
(b) Sales of Securities effected under the terms of Section 4(a)
shall be made at the offices of the Corporation on a mutually acceptable
business day within 15 days after the expiration of the period referred to in
Section 4(a). Delivery of certificates or other instruments evidencing such
Securities duly endorsed for transfer shall be made on such date against
payment of the purchase price therefor.
(c) If any Securities as to which an Event of Option shall have
occurred shall not be purchased in accordance with Section 4(a) for any reason
other than failure of the owner thereof to comply with the provisions of this
Agreement, such Securities shall thereupon cease to be subject to this
Agreement; provided, however, that if such Securities are thereafter acquired
by a member of any Group, they shall once again be deemed to be subject to this
Agreement.
(d) So long as a Stockholder belonging to an Eligible Group complies
with the provisions of this Section 4, the provisions of Section 3 shall not
apply to the sale of Stock being effected pursuant to this Section 4.
SECTION 5. Right of Co-Sale. In the event any Stockholder or
member of the Group to which such Stockholder belongs receives a bona fide
offer from a third party which is not an Affiliate to purchase from such
Stockholder or member of the Group of such Stockholder an amount of stock, when
aggregated with contemporaneous offer amount to not less than 20% of the Common
Stock then outstanding, assuming full conversion of Debentures or exercise of
Options for a specified price payable in cash or otherwise and on specified
terms and conditions (a "Section 5 Offer"), such Stockholder or member of such
Group shall promptly forward a copy of the Section 5 Offer to the Corporation,
and to the other Stockholders. Each such Stockholder or member of such Group
shall not sell any such Securities to the Section 5 Offeror unless the terms of
the Section 5 Offer are extended to the other Stockholders on a pro rata basis
(being the ratio, based upon voting power, between the number of such shares
owned by such Stockholder or member of such Group and all Stockholders). Such
other Stockholders shall have 20 days from the date of the foregoing offer to
accept such offer. Before the Stockholder or member of the Group who had
received the Section 5 Offer extends such Section 5 Offer to the other
Stockholders pursuant to this Section 5, such Stockholder or member of such
Group shall first comply with the provisions of Section 3.
SECTION 6. Board of Directors. At such time as Andal holds less
than 90% of the Common Stock, the Board of Directors of the Corporation shall
consist of eight members and shall include:
(i) four directors who shall be designated by Andal;
(ii) one director who shall be designated by Peter D. Flood;
(iii) three directors who shall be non-management affiliated,
non-Andal affiliated Stockholders who shall be designated in the first
instance by the Board as a whole and then determined by the three outgoing
directors.
All Stockholders agree to vote all shares held by them at any Annual or
Special Meeting of Shareholders for such nominees and this Agreement is
intended to be specifically enforceable should a dispute arise.
SECTION 7. Legend on Stock Certificates. Each certificate of the
signatories hereto representing Securities shall bear the following legend,
until such time as the Securities represented thereby are no longer subject to
the provisions hereof:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE HOLDER OF
SUCH SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 16,
1994, AMONG MULTI-ARC INC. AND CERTAIN HOLDERS OF OUTSTANDING COMMON STOCK OF
SUCH CORPORATION, OUTSTANDING CONVERTIBLE SUBORDINATED DEBENTURES OR
STOCK OPTIONS. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY ANY HOLDER OF THIS CERTIFICATE ADDRESSED TO THE SECRETARY OF
MULTI-ARC INC."
All of the Securities are presently pledged. The foregoing legend will be
placed on the certificates representing these pledged shares upon their release
by the pledgee.
SECTION 8. Duration of Agreement. The rights and obligations of
each Stockholder under this Agreement shall terminate as to such Stockholder
upon the earlier to occur of (i) the transfer of all Stock owned by the Group
of which such Stockholder is a member in accordance with this Agreement, (ii)
on the tenth anniversary of the date hereof or (iii) the consummation of an
underwritten public offering of the Corporation's Common Stock registered
pursuant to the Securities Act of 1933, as amended.
SECTION 9. Severability; Governing Law. If any provision of this
Agreement shall be determined to be illegal and unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in accordance
with their terms. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.
SECTION 10. Benefits of Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, legal representatives and heirs.
SECTION 11. Notices. All notices, advices and communications to be
given or otherwise made to any party to this Agreement, or to the Group of any
such party, shall be deemed to be sufficient if contained in a written
instrument delivered in person or duly sent by first class registered or
certified mail, postage prepaid, addressed to such party at the address set
forth below or at such other address as may hereafter be designated in writing
by the addressee:
If to the Corporation:
Multi-Arc Inc.
200 Roundhill Drive
Rockaway, New Jersey 07866
If to the Stockholders:
At their respective addresses set forth in Schedule I
attached hereto
or to such other address or addresses as shall have been designated by notice
in writing to the parties hereto.
All such notices, advices and communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery
and (b) in the case of mailing, on the third business day following such
mailing.
SECTION 12. Modification. Except as otherwise provided herein,
neither this Agreement nor any provision hereof can be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom the enforcement of any modification, change, discharge or
termination is sought or by the agreement of holders of 90% in voting power,
assuming conversion of all outstanding Debentures and exercise of all
outstanding Options, of all shares of Common Stock subject to this Agreement;
provided, however that no modification or amendment shall be effective to
reduce the percentage of the shares of Common Stock the consent of the holders
of which is required under this Section 12, and provided that no modifications
shall be made prior to June 15, 1995.
SECTION 13. Offering by Prospectus. Andal agrees to offer to
licensees of Multi-Arc Inc. 17,062.5 shares (7/8th of 19,500 shares) of
Multi-Arc Inc. Common Stock and Multi-Arc Inc. agrees to offer to such licensees
$3,500,000 principal amount of its Debentures by offering by prospectus and in
connection therewith Mr. Flood agrees to reoffer to management of Multi-Arc
Inc. 975 shares of Common Stock and $200,000 principal amount of the
Debentures. The offering price of the Common Stock shall be $205.1282 per
share and the Debentures will be offered at par. The offering shall be
conducted as soon as practical and close no later than June 15, 1995. Each
purchaser in such offering, as a condition of their purchase, shall first agree
in writing to become a party to this Agreement and Schedule I hereto shall
thereupon be revised.
SECTION 14. Captions. The captions herein are inserted for
convenience only and shall not define, limit, extend or describe the scope of
this Agreement or affect the construction hereof.
SECTION 15. Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
SECTION 16. Jurisdiction. Each party hereto hereby irrevocably and
unconditionally submits to the nonexclusive jurisdiction of any New Jersey
State court and Federal court of the United States of America sitting in the
State of New Jersey, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement.
SECTION 17. Merger Provision. This Agreement constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection therewith.
SECTION 18. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
MULTI-ARC INC.
By: /s/ Peter D. Flood
Peter D. Flood, President
ANDAL CORP.
By: /s/ Walter N. Kreil, Jr.
Walter N. Kreil, Jr.
Vice President and Controller
/s/ Peter D. Flood
Peter D. Flood
/s/ Walter N. Kreil, Jr.
Walter N. Kreil, Jr.
MULTI-ARC INDIA LTD.
By:
Name:
Title:
THE STOCKHOLDERS LISTED ON
EXHIBIT A HERETO
By:/s/ Peter D. Flood
Peter D. Flood
Attorney-in-Fact
<PAGE>
SCHEDULE I
Name and Common
Address Stock Debentures Options
Andal Corp. 94,562.50 0 0
909 Third Avenue
New York, NY 10022
Peter D. Flood 2,193.75 $450,000 2,500
31 Old Armstead Road
Chester, NJ 07930
Walter N. Kreil, Jr. 243.75 $ 50,000 500
875 Bradford Avenue
Westfield, NJ 07090
Multi-Arc India Ltd. 1,218.75 $ 250,000 0
17, Kadamgirl Complex
Hanuman Road
Vlle Parle (East)
Bombay - 400 057
India
<PAGE>
EXHIBIT 10(r)
INCENTIVE STOCK OPTION AGREEMENT
This INCENTIVE STOCK OPTION AGREEMENT, dated as of June 15, 1995,
between MULTI-ARC INC., a Delaware corporation (the "Corporation"), having is
principal place of business at 200 Roundhill Drive, Rockaway, New Jersey 07866
and (Name), an employee of the Corporation or its subsidiary (herein
"Employee") residing at (Address).
The Corporation desires, by affording the Employee an opportunity to
purchase shares of its Common Stock $.01 Par Value (the "Common Stock"), to
provide the Employee with an added incentive to continue in the employ of the
Corporation and to continue and increase the Employee's efforts in that
connection. This Incentive Stock Option Agreement (this "Agreement") is being
entered into pursuant to the Multi-Arc Inc. 1994 Incentive and Non-Statutory
Stock Option Plan (the "Plan") and is subject to the provisions thereof,
including the determinations to be made by the Board of Directors of the
Corporation (the "Board") pursuant to the Plan.
In consideration of the mutual covenants hereinafter set forth and for
other good and valuable consideration, the parties hereto hereby agree as
follows:
1. Grant. The Corporation with the approval and direction of the
Board irrevocably grants the employee the right and option (the "Option") to
purchase all or any part of an aggregate of Two Hundred (200) shares of Common
Stock on the terms and conditions herein set forth. This Option shall be an
Incentive Stock Option.
2. Price. The purchase price of the shares of Common Stock covered
by the Option shall be $205.1282 per share, being the fair market value of the
Common Stock on the date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
ten (10) years from the date hereof, subject to earlier termination as
provided in this Agreement. Except as provided in Paragraphs 5 and 6 hereof,
the Option may not be exercised unless the Employee shall at the time of
exercise be an employee of the Corporation. Neither the Option nor any rights
related to the Option shall be exercisable for a period of one year from the
date hereof when twenty percent (20%) of the Option shall become exercisable,
except that if the Employee shall die, retire or become disabled then the
Option shall be fully exercisable commencing upon such event. An additional
twenty percent (20%) of the Option shall become exercisable each of the four
successive anniversaries of the date hereof until the Option shall be fully
exercisable. Notwithstanding the foregoing, no Option may be exercised
prior to October 1, 1996.
4. No Transfer. The Option shall not be transferable by the Employee
otherwise than by Will or the laws of descent and distribution, and the Option
may be exercised during his lifetime only by the Employee. The Option may not
be assigned, transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process upon the
Option shall be null and void and without effect.
5. Termination. In the event the employment of the Employee shall be
terminated by reason of retirement (or early retirement pursuant to any
pension or profit sharing retirement plan provided by the Corporation or any
50% or more owned subsidiary (a "Subsidiary") or disability, the Option may be
exercised by the Employee at any time within thirty (30) days after such date
(or one year after such date if the Employee is disabled within the meaning of
Internal Revenue Code Section 22(e)(3)), but in no event after the expiration
of ten (10) years from the date hereof, and only if and to the extent that he
was entitled to exercise the Option at the date of his retirement (or early
retirement)). The Option shall not be affected (i) by any change of duties or
position so long as the Employee continues to be an employee of the
Corporation or a Subsidiary or (ii) by any temporary leave of absence that
does not sever the employment relationship, which leave of absence is
approved, if for a period of not more than three months, by an officer of the
Corporation, or if for a period of more than three months, by the Board.
6. Death of Employee. If the Employee shall die while entitled to
exercise the Option, the Option may be exercised by the legatee or legatees of
the Option under the Employee's Will, the personal representative or
distributees of the Employee to the extent that the Option would otherwise
have been exercisable by the Employee at any time within a period of one (1)
year after the date of the Employee's death, but this provision shall not
otherwise extend the ten (10) year duration of the Option.
7. Anti-Dilution Adjustments. In the event of any change in the
outstanding Common Stock of the Corporation by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations or
exchanges of shares, split-ups, split-offs, liquidations or other similar
changes in capitalization, or any distributions to common stockholders other
than cash dividends, the numbers, class and prices of shares covered by this
Option shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive; provided, however, that no such adjustment
shall give the Employee any additional benefits under the Option.
8. Corporate Transactions. Notwithstanding the provisions of Paragraph
7, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of 1986
occurs after the date of this Agreement, and in connection with such corporate
transaction, the Corporation and another corporation enter into an agreement
providing for the issuance of substitute stock options in exchange for the
Option or the assumption of the Option, in either case giving the Employee the
right to purchase the largest whole number of shares of Common Stock of the
Corporation or of any other corporation at the lowest option price permitted
by said Section 1.425-1, the Option shall be deemed to provide for the
purchase of such number of shares of Common Stock at such option price as
shall be agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then covered by
the Option and the term "Common Stock" shall mean such stock.
9. No Employment Agreement. This Agreement does not confer upon the
Employee any right to continue in the employ of the Corporation nor does it
interfere in any way with the right of the Corporation or the right of the
Employee to terminate the employment of the Employee at any time.
10. Restrictions. The obligation of the Corporation to sell and
deliver shares of Common Stock with respect to the Option shall be subject to
(i) all applicable laws, rules, regulations and such approvals by any
governmental agencies as may be required, including the effectiveness of a
registration statement under the Securities Act of 1933, as amended and (ii)
the condition that the shares of Common Stock to be received upon exercise of
the Option shall have been duly listed, upon official notice of issuance, on a
stock exchange (to the extent that the Common Stock of the Corporation is then
listed on any such stock exchange). In the event that the shares shall be
delivered otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is subject to
the further condition that the Employee will execute and deliver to the
Corporation an undertaking in form and substance satisfactory to the
Corporation that (i) it is the Employee's intention to acquire and hold such
shares for investment and not for resale or distribution, (ii) the shares will
not be sold without registration or exemption from the requirement of
registration under the Securities Act and (iii) the Employee will indemnify
the Corporation for any costs, liabilities and expenses which it may sustain
by reason of any violation of the Securities Act or any other law regulating
the sale or purchase of securities occasioned by any act on his part with
respect to such shares. The Corporation may require that any certificate or
certificates evidencing shares issued pursuant to the Plan bear a restrictive
legend intended to effect compliance with the Securities Act or any other
applicable regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer agent.
11. Exercise. Subject to the terms and conditions of this
Agreement, the Option may be exercised only by written notice delivered to the
Corporation at its principal business office, attention of the Chief Financial
Officer, of intention to exercise such Option and by making payment of the
purchase price of such shares against delivery of a certificate or
certificates therefor as hereinafter provided. Such written notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) fix a date not less than seven (7) business days from the
date such notice is received by the Corporation for delivery
of the certificate or certificates for said shares and the
payment of the purchase price therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Employee, be accompanied by appro-
priate proof of the right of such person or persons to
exercise the Option.
On the date fixed in said written notice, a certificate or certificates for
the shares as to which the Option shall have been so exercised, registered in
the name of the person or persons so exercising the Option, shall be issued by
the Corporation and delivered to or upon the order of such person or persons
against payment in full at the above-mentioned address of the purchase price
of said shares in cash, by check or by surrender or delivery to the
Corporation of shares of the Corporation's Common Stock with a fair market
value equal to or less than the Option price, plus cash equal to any
difference. All shares issued as provided herein will be fully paid and
nonassessable. The Employee shall not have any of the rights of the
stockholder with respect to the shares of Common Stock subject to the Option
until the certificate evidencing such shares shall be issued to him upon the
due exercise of the Option.
12. Option to Repurchase. So long as the Corporation's Common Stock
is neither listed for trading nor traded in the over-the-counter market, the
Corporation shall have the right to repurchase any and all shares of Common
Stock acquired upon exercise of the option at such time as the Employee
terminates his employment or the Employee's employment with the Corporation or
any subsidiary is terminated for any reason (including death or disability)
and this option shall continue for thirty (30) days after the date of
termination or the date of any exercise of the stock option, whichever is
later. The repurchase price shall be fair market value. A legend to this
effect shall be conspicuously noted of each certificate for shares acquired
pursuant to this Agreement.
13. Availability of Shares. The Corporation shall at all times
during the term of the Option reserve and keep available or contract for the
availability of such number of shares of Common Stock as will be sufficient
to satisfy the requirements of this Agreement, shall pay all original issue
taxes with respect to the issue of shares pursuant hereto and all other fees
and expenses necessarily incurred by the Corporation in connection therewith
and will from time to time use its best efforts to comply with all laws and
regulations which in the opinion of counsel for the Corporation shall be
applicable thereto.
14. Fair Market Value. As used herein, the "fair market value" of
a share of Common Stock shall be:
(a) if the Common Stock is listed on a national securities
exchange, the closing price of the Common Stock on the
Composite Tape on the trading day immediately
preceding such given date;
(b) if the Common Stock is traded on the over-the-counter
market, the average of the bid and the asked price for
the Common Stock as reported by the Wall Street
Journal at the close of trading on the trading day
immediately preceding such given date, and
(c) if the Common Stock is neither listed on a national
securities exchange or traded on the over-the-counter
market, such value as the Board in good faith shall
determine, which determination shall be conclusive.
15. Repurchase Option. If the Employee is not employed by the
Company on the date of exercise, or if subsequent to the date of exercise the
employee ceases to be employed by the Company, the Company shall have the
option for thirty (30) days from the later of (1) the date of termination, or
(2) the date of exercise of the option (such later date being the "Repurchase
Date") to elect to repurchase the Option Shares at the fair market value of
the shares on the Repurchase Date.
16. The Plan. The Option is granted pursuant to the terms of the
Plan, which terms are incorporated herein by reference, and the Option shall
in all respects be interpreted in accordance with the Plan. The Board of
Directors shall interpret and construe the Plan and this Agreement, and the
Board's interpretations and determinations shall be conclusive and binding on
the parties hereto and any other person claiming an interest hereunder with
respect to any issue arising hereunder or thereunder.
17. Governing Law. This Agreement has been entered into and shall
be construed in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly
executed and sealed by its duly authorized officers and the Employee has
hereunder set his hand, all as of the day and year first above written.
ATTEST: MULTI-ARC INC.
/s/ Walter N. Kreil, Jr. By:/s/ Peter D. Flood
Walter N. Kreil, Jr., Secretary Peter D. Flood, President
EMPLOYEE
____________________________________
(Name)
<PAGE>
EXHIBIT 10(s)
First Fidelity Bank NA
London Branch
1 Bishopsgate
London EC2N 3AB
ENGLAND
Telephone: 0171-621 1477
Telex: 883432
Facs: 0171-929 4644
The Directors of
Multi-Arc (U.K.) Limited
Number One Industrial Estate
Unit 36, Medomsley Road
Consett
County Durham
DH8 6TS
Date: 21st September 1995
Dear Sirs
We are pleased to advise you that First Fidelity Bank N.A. (the "Bank") (which
expression shall include its successors, transferees and assigns) is agreeable
to making available to Multi-Arc (U.K.) Limited, a company incorporated in
England and Wales under registered number 1665506 (the "Borrower") and having
an address at Number One Industrial Estate, Unit 36, Medomsley Road, Consett,
County Durham, DH8 6TS a loan facility of a principal amount of
Pounds Sterling1,500,000 by way of a single cash advance (the "Loan Facility")
on the following terms and subject to the following conditions:
1. DEFINITIONS
In this Agreement:-
"Agreement" means the agreement resulting from the Borrower
countersigning this letter;
"Bank Basis" means a calculation made on the basis of the actual number
of days elapsed or, as the case may be, to elapse and a 365 day year;
"Borrowed Money" means Indebtedness incurred in respect of (I) money
borrowed or raised, (ii) any bond, note, loan stock, debenture, bill of
exchange, commercial paper or similar instrument (including share capital
carrying a right to a preferential dividend redeemable at the option of
shareholders or the issuer thereof at any time), (iii) acceptance or
documentary credit facilities, (iv) rental payments under leases and hire-
purchase agreements so far as attributable to payments of capital (in all cases
whether in respect of land, buildings, machinery, equipment or otherwise)
entered into primarily as a method of raising finance or of financing the
acquisition of the asset the subject thereof, (v) obligations under conditional
or instalment sale agreements or any other obligation to pay the deferred
purchase or construction price of assets or services, except trade accounts
arising in the normal course of day-to-day trading, and (vi) all other
Indebtedness under any arrangement entered into primarily as a method of
raising finance (and not in the normal course of, and as part of, day-to-day
trading) and which is not referred to in the foregoing paragraphs of this
definition and for the purposes of Clause 11.1(1) as shown in the latest
accounts of the Borrower delivered pursuant to this Agreement. PROVIDED THAT
Borrowed Money expressed in or calculated by reference to a currency other than
Sterling shall be converted into Sterling by reference to the rate of exchange
used for the conversion of such currency in the preparation of the relevant
accounts or, if the relevant currency was not thereby involved, by reference to
such rate of exchange or approximate rate of exchange ruling on the date of
such determination as the Bank may in its absolute discretion determine or
approve;
"Business Day" means a day on which commercial banks are open in London
for transactions of the type of business contemplated by this Agreement;
"Capital Expenditure" means capital expenditure as determined in
accordance with generally accepted accounting principles and bases and as
shown in the relevant accounts of the Borrower delivered pursuant to this
Agreement for the relevant period;
"Cash Flow" means, in respect of the Borrower and the period being
measured, net income (including for the avoidance of doubt interest received)
after adding back Debt Payments, depreciation and any other non-cash charges,
less capital expenditure all as shown in the relevant accounts of the Borrower
delivered pursuant to this Agreement;
"Charge over Shares" means the charge over shares to be entered into by
the Guarantor in favour of the Bank in form and substance satisfactory to the
Bank;
"Current Assets" means, at any time, the assets of the Borrower which, in
accordance with generally accepted accounting principles and bases, are
classified as such in the latest accounts of the Borrower delivered pursuant to
this Agreement, after deducting all reserves properly deductible in respect of
such assets (again as shown in the latest accounts of the Borrower delivered
pursuant to this Agreement);
"Current Liabilities" means, at any time, the aggregate of the
liabilities of the Borrower falling due within one year of the date of
computation as shown in the latest accounts of the Borrower delivered pursuant
to this Agreement;
"Current Ratio" means the ratio of Current Assets to Current Liabilities;
"Dangerous Substances" means any radioactive emissions and any natural or
artificial substances (whether in solid or liquid form or in the form of a gas
or vapour and whether alone or in combination with any other substances) capable
of causing harm to man or any other living organism supported by the
environment, or damaging the environment or public health or welfare, including
any controlled, special, hazardous, toxic, radioactive or dangerous waste;
"Debt Payments" means in respect of the Borrower and the period being
measured, interest accruing pursuant to the Overdraft Facility, interest
accruing pursuant to the terms hereof and all payments of principal due and/or
made hereunder together with all and any interest, commission, fees or other
similar financing costs accruing or, as the case may be, incurred and all
payments of principal due and/or made under or in connection with any Borrowed
Money, all as shown in the relevant accounts of the Borrower delivered pursuant
to this Agreement;
"Debt Service Coverage Ratio" means the ratio of Cash Flow to Debt
Payments of the Borrower;
"Environmental Law" means all laws, regulations, codes of practice,
circulars, guidance notices and the like binding on the Borrower, (whether of
the United Kingdom or elsewhere and including any directive of the European
Community which is so binding) concerning the protection of human health or the
environment or the conditions of the workplace or the generation,
transportation, storage, treatment or disposal of Dangerous Substances;
"Environmental Licences" means any permit, licence, authorisation,
consent or other approval required by any Environmental Law;
"Event of Default" means any one of the events specified in Clause 12 or
any event which with the passing of time or the giving of notice or the making
of any determination, formation of any opinion or fulfilment of any other
condition would constitute such an event;
"Finance Documents" means this Agreement, the Overdraft Facility, each of
the Security Documents, any certificates or notices given pursuant to any of
the same and any other document as between any of the Borrower, the Guarantor
and the Bank designated as such by the Bank;
"Fixed Rate" means the fixed rate of interest which the Bank is prepared
to offer the Borrower in connection with the Loan Facility and which is
notified to the Borrower prior to the latest time for the issue of the Notice
of Drawing or, prior to the date on which a Notice of Fixed Interest Rate
Selection is to take effect (as applicable);
"Guarantor" means Multi-Arc, Inc;
"Indebtedness" includes any obligation whether as principal or as surety
for the payment or repayment of money, whether present or future, actual or
contingent;
"Interbank Rate" means in relation to any Interest Period the rate
(rounded upwards if necessary to 4 decimal places) at which the Bank is
offered deposits of Sterling by leading banks in the London Interbank Market at
or about 11.00 a.m. (London time) on the first day of such Interest Period for
a period equal to such Interest Period and in an amount comparable with the
amount to be outstanding during such Interest Period;
"Interest Payment Date" in relation to any Interest Period means the last
day of such Interest Period;
"Interest Period" means:
(A) if the fixed interest rate option is chosen in the Notice of
Drawing, a period ending on each Repayment Date with the first such period
commencing on the date the Loan is made and each subsequent Interest Period
commencing forthwith upon the expiry of the previous Interest Period; or
(B) in relation to the period after a Notice of Fixed Interest Rate
Selection has been given to the Bank, a period ending on each subsequent
Repayment Date with the first such period commencing on the date the Notice of
Fixed Interest Rate Selection is to take effect and each subsequent Interest
Period commencing forthwith upon the expiry of the previous Interest Period; or
(C) if the variable interest rate option is chosen in the Notice of
Drawing and no Notice of Fixed Interest Rate Selection has been given to the
Bank, subject as provided below, a period of three months, but so that:-
(1) the first Interest Period shall commence on the date the Loan
is made;
(2) each subsequent Interest Period will commence forthwith upon
the expiry of the previous Interest Period;
(3) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to the next
succeeding Business Day unless such succeeding Business Day falls in another
calendar month in which event the Interest Period shall end upon the
immediately preceding Business Day; and
(4) if any Interest Period would otherwise end after the Final
Repayment Date, it shall be shortened so as to end on the Final Repayment
Date.
"Loan" means the Pounds Sterling1,500,000 to be lent to the Borrower in
accordance with Clause 5, or, where the context so requires, the principal
amount thereof outstanding from time to time;
"Margin" means one and one half per cent (1-1/2%) per annum;
"MLA Cost Rate" means in relation to any Interest Period, the cost to the
Bank of complying with all reserve, special deposit, capital adequacy,
solvency, liquidity ratios or other requirements of or imposed by the Bank of
England or any other governmental or regulatory authority for the time being
attributable to the Loan (rounded up if necessary to 4 decimal places) as
conclusively determined by the Bank;
"Mortgage Debenture" means the mortgage debenture to be entered into by
the Borrower in favour of the Bank in form and substance satisfactory to the
Bank;
"Notice of Drawing" means a notice requesting drawing substantially in
the form set out in the Schedule;
"Notice of Fixed Interest Rate Selection" means a notice to be given to
the Bank no later than two Business Days prior to an Interest Payment Date to
take effect on that Interest Payment Date and stating that the Borrower wishes
to switch to the Fixed Rate for the remainder of the term of the Loan.
"Overdraft Facility" means the overdraft facility to be entered into by
the Borrower and the Bank together with an ancillary letter from the Bank to
the Borrower setting out further details pursuant to which an overdraft
facility is to be made available to the Borrower by the Bank;
"Multi-Arc. Inc Guarantee" means the guarantee to be given by Multi-Arc,
Inc in favour of the Bank for the obligations of the Borrower to the Bank
hereunder and under the Overdraft Facility;
"Multi-Arc (U.K.) Limited Guarantee" means the guarantee to be given by
the Borrower in favour of the Bank for the obligations of the Guarantor to the
Bank under the SC Guarantee;
"Permitted Encumbrance" means any Security Interest (or in the case of
(b) only, any lien):-
(a) created or outstanding with the prior written consent of the Bank;
(b) arising by operation of law (and not as a result of any default or
omission on the part of the Borrower) in the ordinary course of business and
securing obligations not more than three months overdue;
(c) arising under any retention of title arrangements (other than "all
moneys" retention of title arrangements) entered into in the ordinary course
of trading and not entered into primarily for the purpose of securing any
Indebtedness;
(d) over goods or documents of title to goods arising in the ordinary
course of trading in connection with documentary credit transactions where
such Security Interest secures only so much of the acquisition cost or selling
price (and amounts incidental thereto) of such goods and products which is
required to be paid within 180 days after the date upon which the same was
first incurred;
(e) on assets acquired after the date of this Agreement, or on assets of
a body corporate which becomes a Subsidiary by acquisition after the date of
this Agreement, provided that:
(i) any such Security Interest is in existence prior to such acquisition
and is not created in contemplation of such acquisition; and
(ii) the amount secured by such Security Interest does not exceed, at any
time, the maximum amount secured or agreed to be secured by it (in accordance
with the original terms on which such Security Interest was created) as at
the date of acquisition;
(iii) such Security Interest is discharged within a period of 3
months after the acquisition; and
(iv) no guarantee is given by the Borrower in respect of such Security
Interest or the amount secured by it;
(f) securing Indebtedness incurred to refinance other Indebtedness
permitted to be secured under paragraphs (a) to (e) above inclusive and/or
this paragraph (f), provided that the aggregate principal amount of the
Indebtedness secured by such Security Interest is not increased and such
Security Interest does not extend to any assets other than those which were
subject to the original Security Interest securing the refinanced Indebtedness;
"Repayment Date" means the date falling 90 days after the date of
drawdown of the Loan and each date falling three months after the previous
Repayment Date, and the "Final Repayment Date" shall mean the date falling five
years after the date of drawdown of the Loan;
"SC Borrowers" means all and each of Scientific Coatings of Illinois,
Inc., Scientific Coatings, Inc. and SCI Coatings Southwest, Inc;
"SC Facility Agreement" means the Loan and Security Agreement dated 30
September 1994 and made between the Bank and the SC Borrowers;
"SC Guarantee" means the guarantee dated 30 September 1994, as the same
is or has been varied, amended, supplemented, substituted, novated or assigned
from time to time given by Vagle Technology, Inc and the Guarantor in favour of
the Bank for the obligations of the SC Borrowers under, inter alia, the SC
Facilities;
"Security Documents" means the Mortgage Debenture, the Charge over
Shares, the Multi-Arc, Inc Guarantee, any interest rate hedging agreement from
time to time entered into by the Borrower, any certificates or notices given
pursuant to any of the same and any other document designated as such by the
Bank;
"Security Interest" means any mortgage, charge, pledge, lien,
encumbrance, conditional sale or other title retention agreement, trust
arrangement, preferential right or other agreement or arrangement the economic
or commercial effect of which is similar to security or any other security
interest whatsoever, howsoever created or arising;
"Sterling" or "Pounds Sterling" means the lawful currency of the United
Kingdom;
"subsidiary" and "subsidiary undertaking" shall have the meanings given
to them by Sections 736 and 258 (respectively) of the Companies Act 1985 (as
amended);
"Tangible Net Worth" means the aggregate of the amounts paid-up or
credited as paid-up on the Borrower's issued share capital and the amount of
the consolidated capital and revenue reserves of the Borrower (including any
share premium account, merger reserve, capital redemption reserve, revaluation
reserve and retained earnings) and the balance on the Borrower's profit and
loss account all as shown by the latest accounts of the Borrower delivered
pursuant to this Agreement from time to time but after:-
(i) deducting any amount shown in respect of goodwill (including
goodwill arising on consolidation), patents, trade marks, copyrights, brands,
research and development expenditure and other intangible assets;
(ii) deducting any amounts distributed or proposed to be distributed out
of the profits accrued prior to the date of such financial statements to the
extent that such distribution is not provided for therein;
(iii) excluding any sums set aside or otherwise reserved or provided
for losses, taxation or expenses;
(iv) excluding any amounts as in the opinion of the auditors of the
Borrower for the time being are attributable to any write ups of fixed assets
in the books of the Borrower made after the date hereof; and
(v) making such adjustments to reflect any variations which shall have
occurred since the date of such financial statements:-
(a) in the amounts paid up or credited as paid up on the issued
share capital of the Borrower (including any share premium account, merger
reserve, capital redemption reserve, revaluation reserve and retained
earnings); and
(b) to reflect any changes in generally accepted accounting
principles and bases and the application of standards and practices since then
as may be appropriate in the opinion of the auditors for the time being
of the Borrower;
Headings in this Agreement are inserted for convenience only and shall be
ignored in construing this Agreement.
Expressions herein defined shall have the same meanings herein.
Unless the context otherwise requires, words denoting the singular number
only shall include the plural and vice versa and words denoting persons shall
include companies, corporations and partnerships and vice versa.
References to Clauses and Schedules are to be construed as references to
Clauses of and Schedules to this Agreement unless the context otherwise
requires.
A time of day is a reference to London time.
Any reference in this Agreement to an agreement or document shall be
construed as a reference to that agreement or document as the same may have
been, or may from time to time be, varied, amended, supplemented, substituted,
novated or assigned.
References in this Agreement to statutes and/or statutory provisions
shall be construed as referring to such statutes or statutory provisions as
respectively replaced, amended, extended, consolidated or re-enacted from time
to time and shall include any order, regulation, instrument or other
subordinate legislation made under the relevant statute or statutory provisions.
2. PURPOSE
The Borrower undertakes to the Bank that the Loan Facility shall only be
applied in and towards the refinancing of term debt from Siemens Financial
Services Limited, The Governor and Company of The Bank of Scotland, Derwentside
District Council and British Coal Enterprise Limited, the purchase of equipment
from Multi-Arc, Inc on arms length terms, the making of a loan by the Borrower
to Multi-Arc Inc and/or the refinancing of term debt from British Steel.
3. AMOUNT
Subject to the terms and conditions of this Agreement, the Bank agrees to
make available to the Borrower the Loan Facility.
4. CONDITIONS PRECEDENT
The rights of the Borrower under this Agreement to draw down the Loan
Facility are conditional upon the Bank having received, in form and substance
satisfactory to it, all of the following:-
(A) a copy, certified by a director of the Borrower to be true,
complete and up to date, of the memorandum and articles of association,
certificate of incorporation and any certificates of incorporation on change of
name of the Borrower;
(B) a copy, certified by a director of the Borrower to be true, complete
and up to date, of minutes of the meeting(s) of the board of directors of the
Borrower at which valid resolutions were adopted approving the Finance
Documents to which it is a party and all the other documents relating thereto
and authorising a person or persons to sign and deliver (or execute as a deed,
if appropriate) the Finance Documents to which it is a party and to sign and
deliver or despatch all other such documents and all notices, communications or
documents to be given by it pursuant to or in connection with such Finance
Documents;
(C) a copy, certified by a director of the Guarantor to be true,
complete and up to date, of minutes of the meeting(s) of the board of
directors of the Guarantor at which valid resolutions were adopted approving
the Finance Documents to which it is a party and all the other documents
relating thereto and authorising a person or persons to sign and deliver (or
execute as a deed, if appropriate) the Finance Documents to which it is a party
and to sign and deliver or despatch all other such documents and all notices,
communications or documents to be given by it pursuant to or in connection with
such Finance Documents;
(D) a list of names and specimen signatures, certified as aforesaid, of
each of the persons referred to in Clauses 4(B) and 4(C);
(E) a certificate signed by a director of the Borrower stating, inter
alia, that the signing of the Finance Documents to which it is a party is
within its corporate powers and will not cause any limitation on its borrowing
or other powers or on the right of its directors to exercise any such powers
(whether contained in its constitutional documentation or in any agreement or
instrument or imposed by statute or regulation or otherwise) to be exceeded;
(F) the Security Documents and the Multi-Arc (U.K.) Limited Guarantee
duly executed by the parties thereto (except the Bank) and all documents
required to be delivered to the Bank pursuant to the Security Documents,
including without limitation all documents of title and all insurance policies;
(G) relevant bank mandates and other forms required for the operation of
any account of the Borrower;
(H) evidence that satisfactory insurance cover (including public
liability cover and terrorism risk) in respect of the assets of the Borrower
has been taken out and that the premium payments are up to date and that the
Bank is a joint insured under all such insurance or the Bank's interest as
mortgagee has been noted on the policy(ies) and full details of such insurance;
(I) the initial fee payable pursuant to Clause 13.1;
(J) written confirmation from the Borrower's auditors that they are
aware that the Bank will be relying on the Borrower's audited financial
statements from time to time for the purposes hereof; and
(K) such other documents and information as the Bank may require.
DRAWING THE LOAN
Subject to:-
(1) the conditions set out in Clause 4 having been fulfilled by no later
than 11.00 am on the second Business Day preceding the date on which the Loan
is to be drawn;
(2) no Event of Default having occurred; and
(3) the Bank having received a Notice of Drawing by no later than 9.30
a.m. on the second Business Day preceding the date on which the Loan is to be
drawn (or such later time as the Bank may agree), duly completed and signed by
the Borrower together with evidence showing that the Loan will be used for one
or more of its agreed purposes and the amounts of the loan to be used for each
of such purposes in form and substance satisfactory to the Bank,
the Bank shall, upon and subject to the terms and conditions of this
Agreement, make available the Loan by way of a single drawing on the day and
to the person(s) specified in such Notice of Drawing, or if such day is not a
Business Day on the next succeeding Business Day, provided that if the Loan
shall not have been drawn down on or prior to 30th October 1995 the obligation
of the Bank to make the Loan available hereunder shall be cancelled.
6. INTEREST
6.1 (A) The rate of interest applicable to each Interest Period shall be the
rate determined by the Bank to be the aggregate of (I) the Margin and (ii) the
Fixed Rate, if the fixed interest rate option has been chosen in the Notice of
Drawing or a Notice of Fixed Interest Rate Selection has been given to the
Bank, or the aggregate of (I) the Margin, (ii) the Interbank Rate, and (iii)
the MLA Cost Rate if the variable interest rate option has been chosen in the
Notice of Drawing and no Notice of Fixed Interest Rate Selection has been given
to the Bank;
(B) Interest on the Loan at the rate(s) aforesaid shall be calculated
for each Interest Period on the Bank Basis, shall accrue from day to day and
be paid on each Repayment Date (in the case of the fixed interest rate option)
or on each Interest Payment Date (in the case of the variable interest rate
option); and
(C) On repayment or prepayment of the Loan in whole or in part, all
interest accrued and unpaid on the amount to be repaid or prepaid shall be
paid by the Borrower to the Bank.
6.2 If any sum due and payable by the Borrower hereunder is not paid on the
due date therefor or if any sum due and payable by the Borrower under any
judgment of any court in connection herewith is not paid on the date of such
judgment, such unpaid sum shall bear interest until the obligation of the
Borrower to pay any such sum is discharged in full at the rate per annum which
is determined by the Bank to be the aggregate of (1) the Margin, (2) Midland
Bank plc's base rate from time to time and (3) two per cent (2%) with such
interest being compounded monthly in arrear on the last day of each calendar
month.
7. ALTERNATIVE INTEREST RATES
7.1 Notwithstanding anything to the contrary herein contained, if the
variable interest rate option has been chosen in the Notice of Drawing and
prior to the commencement of any Interest Period relating thereto, the Bank
shall have determined that:-
(A) by reason of circumstances affecting the London Interbank Market
adequate and fair means do not exist for ascertaining the Interbank Rate
applicable to such Interest Period pursuant to Clause 6.1; or
(B) deposits in Sterling are not or will not be available to the Bank in
the London Interbank Market in sufficient amounts in the ordinary course of
business to fund the Loan for such Interest Period,
then the Bank shall as soon as practicable give written notice of such
determination or notice to the Borrower.
7.2 In the case of Clause 7.1 if the Loan has not yet been advanced it shall
not be so advanced and if the Loan has been advanced the liability of the Bank
to maintain the Loan shall cease except, in each case, in accordance with the
following provisions of this Clause 7.
7.3 During the period of thirty days from the date of any such notice given
pursuant to Clause 7.1 the Bank shall establish (in consultation with the
Borrower) an alternative basis (in this Clause 7 referred to as the "Substitute
Basis") for funding the Loan (including but without limiting the generality
hereof, agreeing a suitable alternative length of Interest Period and agreeing
the fixing of an alternative interest rate to be substituted for the rate which
would otherwise have been fixed pursuant to Clause 6). The Substitute Basis
shall reflect all costs to the Bank of making available the Loan and the
Margin and shall be computed in a manner and for a period as similar to those
provided in Clause 6.1 as is reasonably possible.
7.4 If the Bank shall agree such Substitute Basis with the Borrower it shall
again be open to the Borrower (subject to all the other terms of this
Agreement) to request that the Loan be made or to request that the Bank
maintain the Loan, as the case may be, and the Borrower shall, until the
circumstances specified above no longer exist, pay interest on the Loan on such
Substitute Basis. In default of agreement upon a mutually acceptable
Substitute Basis within 30 days of the notice referred to in Clause 7.1 the
Bank shall be discharged from any further obligation to make available the Loan
or to maintain the Loan, as the case may be, and if the Loan shall be
outstanding, the Borrower shall repay forthwith to the Bank the Loan together
with interest thereon to the date of repayment at a rate equal to the
Bank's cost of funding the same and all other amounts payable to the Bank
hereunder.
7.5 The certificates, confirmations and determinations of the Bank as to any
of the matters referred to in this Clause 7 shall, save for manifest error, be
conclusive and binding on the Borrower.
8. REPAYMENT
Subject as otherwise provided in this Agreement, the Borrower shall repay
the Loan by twenty quarterly instalments. The first nineteen instalments will
be of Pounds Sterling54,000 and paid on the first nineteen Repayment Dates with
the final instalment of Pounds Sterling474,000 being paid on the Final
Repayment Date. Each instalment is to be paid on a Repayment Date, and the
Borrower shall ensure that the Loan, together with all interest accrued thereon
is repaid, on the Final Repayment Date.
9. PREPAYMENT
9.1 The Borrower may on giving thirty days' written notice at any time prepay
(upon payment to the Bank of the sum of Pounds Sterling10,000 (the "Prepayment
Fee") (other than where prepayment is effected pursuant to Clause 7.4 and/or
Clause 14) and subject to Clause 16.1) the whole of the Loan together with
interest thereon accrued to the date of prepayment, such notice specifying the
date and the amount of the prepayment and (where appropriate) accompanied by
the Prepayment Fee and evidence satisfactory to the Bank that all
authorisations, consents and approvals, if any, necessary for such prepayment
have been obtained.
9.2 Any notice of intended prepayment pursuant to this Clause 9 shall be
irrevocable and it shall be obligatory for the Borrower to make the prepayment
in accordance with such notice.
9.3 The Borrower shall not be entitled to prepay the Loan or any part thereof
otherwise than in accordance with the provisions of this Agreement. Any amount
prepaid may not be reborrowed.
10. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank on each date that any
amount remains outstanding, or capable of being drawn down, under any of the
Finance Documents as follows:-
(A) it is duly incorporated and validly existing under the laws of the
jurisdiction in which it is incorporated as a limited liability company and is
duly authorised and empowered under the said laws to own its assets and to
carry on its business and it has the power to execute, deliver and perform and
has taken all necessary corporate action to authorise the execution and
delivery of and the performance of its obligations under the Finance Documents
to which it is a party and all other documents referred to herein or therein to
which it is a party;
(B) each of the Finance Documents to which it is a party has been duly
executed on its behalf and constitutes its legal, valid and binding obligations
enforceable in accordance with its terms and the execution and performance of
all of such documents will not breach, conflict with or contravene any
provisions of any law, statute, rule, regulation, agreement, indenture,
undertaking, memorandum and articles of association or other constitutional
documentation or any other instrument binding upon it or on any of its assets
or give cause for acceleration of any of its Indebtedness or result in the
existence of or oblige it to create any Security Interest (other than as
created by the Security Documents) over all or any of its present or future
revenues, assets or properties;
(C) it is not in default under any agreement, instrument, arrangement,
obligation or duty to which it is a party or by which it is or may be bound
and there is no action, litigation, lawsuit or proceeding taking place or
pending or threatened against or affecting it before any court, judicial,
administrative, arbitral or governmental body or agency which in any such case
could result in any material adverse change in its financial condition, assets,
business or operations taken as a whole;
(D) all actions, licences, consents, exemptions and registrations
(including, without limitation filings with all governmental or any other
regulatory body, authority, bureau or agency and any consents or approvals
required for the execution of, or the performance by the Borrower of its
obligations under, the Finance Documents to which it is a party) required for
the validity, performance and enforceability of the Finance Documents to which
it is a party have been obtained and are in full force and effect and any
condition contained therein or otherwise applicable thereto has been fulfilled
or complied with;
(E) all its obligations and liabilities under the Finance Documents to
which it is a party constitute its direct, unconditional and general
obligations and rank ahead in point of security and priority of all its other
present and future Indebtedness and liabilities (with the exception of any
obligations which are mandatorily preferred by law and not by contract);
(F) all the factual information provided by it, any of its officers or
any person on its behalf to the Bank in connection with this Agreement and any
of the matters referred to in Clause 2 is true and accurate in all material
respects and it is not aware of any material facts or circumstances that have
not been disclosed to the Bank and which, if disclosed, could adversely affect
the decision of a person considering whether or not to provide finance to the
Borrower on the terms and subject to the conditions of this Agreement;
(G) its latest audited accounts give a true and fair view of its
financial condition as at the date to which such accounts are made up;
(H) no Dangerous Substance has been used, disposed of, generated,
stored, transported, dumped, deposited, buried or omitted at, on, from or
under any premises (whether or not owned, leased, occupied or controlled by the
Borrower) in circumstances where this might result in a liability on the
Borrower, which, if proven, might in the opinion of the Bank have a material
adverse affect on its ability to perform its obligations under the Finance
Documents;
(I) all requisite Environmental Licences have been obtained and all
Environmental Licences and other applicable Environmental Law have at all
times been complied with;
(J) no Event of Default has occurred; and
(K) the Borrower has no trading subsidiaries or subsidiary undertakings.
11. COVENANTS AND UNDERTAKINGS
11.1 Positive Covenants
The Borrower covenants and undertakes with the Bank that so long as any
amount remains outstanding, or capable of being drawn down or any liability to
the Bank subsists, under any of the Finance Documents it shall:-
(A) ensure that each of its financial years ends on 30th September and
it shall furnish to the Bank within 90 days of the end of each of their
respective financial years a copy of its and the Guarantor's respective audited
financial statements (consolidated in the case of the Guarantor) prepared in
accordance with generally accepted accounting principles and bases in its place
of incorporation consistently applied, audited by a firm of auditors acceptable
to the Bank and representing a true and fair view of its financial position at
the date of such statements and the results of its operations for the period
ended on such date together with a certificate from the auditors confirming
that the Borrower is in compliance with the covenant contained in Clauses
II.I(H), (1), (J), (K) and (L);
(B) furnish to the Bank within 20 days of the end of each calender month
a copy of its and the Guarantor's respective internal monthly management
accounts certified by its finance director (or the Guarantor's finance
director, as appropriate) as representing a true and fair view of its financial
position at the date of such accounts and the results of its operations for the
period ended on such date together with an aged receivables analysis in such
format as the Bank may require certified by its finance director as
representing a true and fair view of the receivables of the Borrower for the
period(s) in question;
(C) promptly furnish to the Bank such additional financial or other
information as the Bank may from time to time reasonably require;
(D) comply with all lawful and applicable laws (including all
Environmental Law) and regulations of all governmental and regulatory
authorities relating to or affecting any of the Borrower's assets and/or its
business and will obtain and promptly renew from time to time and comply with
the terms of all consents, approvals, authorisations, licences (including all
Environmental Licences) and/or exemptions which may be necessary to enable it
properly to operate its business and to carry out its obligations under each of
the Finance Documents;
(E) notify the Bank in writing promptly on becoming aware of any Event
of Default with a description of any steps which it is taking or considering
taking in order to remedy or mitigate the effect of the Event of Default or
otherwise in connection with it;
(F) notify the Bank promptly, and in any event within 14 days of its
becoming aware of the same, in writing of any litigation or proceeding which
is commenced, pending or threatened in respect of the Borrower, where the
litigation concerned could result in a liability of more than Pounds Sterling
25,000 on the part of the Borrower;
(G) ensure that at all times it is able to pay its debts as they fall
due and that any obligation owed to a creditor of the Borrower is met on the
due date therefor or within any applicable originally agreed credit period or
otherwise within time limits customarily adhered to by the Borrower;
(H) ensure that Debt Service Coverage Ratio shall not be less than 1.5:1
for any twelve month period ending on 31 March, 30 June, 30 September and 31
December:
(I) ensure that the ratio of Borrowed Money to Tangible Net Worth shall
not at any time be greater than 2:1;
(J) ensure that its Capital Expenditure does not, in any financial year
of the Borrower, exceed Pounds Sterling350,000 in aggregate, without the prior
written consent of the Bank;
(K) ensure that the Current Assets exceed the Current Liabilities, at
all times, by a minimum of Pounds Sterling25; and
(L) ensure that Tangible Net Worth is at all times in excess of
Pounds Sterling800,000.
11. 2 Negative Covenants
The Borrower covenants and undertakes with the Bank that so long as any
amount remains outstanding, or capable of being drawn down or any liability to
the Bank subsists, under any of the Finance Documents it shall not:-
(A) without the prior written consent of the Bank, create or attempt to
create or permit to subsist any Security Interest of any kind, other than any
Permitted Encumbrances, over the whole or any part of its respective
undertaking, property, assets or revenues save as permitted pursuant to the
Mortgage Debenture;
(B) carry out any business other than the business it presently carries
out at the date hereof, nor shall it make or permit any change in the scope or
nature of its business or cease to carry on its business;
(C) sell, transfer, assign, lease, charter, lend or otherwise dispose of
or part with possession or the ownership of or any interest in any of its
property, assets, revenues or undertaking or any part thereof save in the
ordinary course of business and shall not enter into or undertake any invoice
discounting or factoring arrangements;
(D) it shall not issue any shares, debentures or other securities
without the prior written consent of the Bank;
(E) enter into banking or other credit facility arrangements of
whatsoever nature or any interest rate or other exchange or hedging agreement
other than with the Bank or otherwise incur any Indebtedness in relation to
Borrowed Money (excluding for this purpose rental payments under leases and
hire-purchase agreements provided that the cost of any assets the subject of
such leases or hire purchase agreements purchased in any one financial year of
the Borrower when aggregated with the cost of any other such assets purchased
in that financial year does not exceed Pounds Sterling350,000) other than under
the Finance Documents;
(F) acquire, establish or permit to subsist any subsidiary or subsidiary
undertaking or acquire any interest in, enter into or form any partnership or
joint venture without the prior written consent of the Bank and shall not
permit any dormant subsidiary or subsidiary undertaking to carry out any
activity or take any action which would result in such subsidiary or subsidiary
undertaking ceasing to be dormant;
(G) amend its memorandum or articles of association in any way without
the prior written consent of the Bank; or
(H) make any loans to, grant credit to, grant indemnities in respect of,
or guarantees in support of, or invest in, any third party otherwise than in
the ordinary course of its trading activities or, in the case of loans, to
Multi-Arc, Inc provided that no Event of Default has occurred prior to the
making of any such loan.
12. EVENTS OF DEFAULT
In the event that:-
(A) the Borrower shall fail to pay any sum required to be paid under any
Finance Document in the case of principal or interest on the due date
therefor or in the case of any other payment within 7 Business Days of the due
date therefor; or
(B) the Borrower or the Guarantor shall default in the due performance
or observance of any other covenant, undertaking, condition or provision on
its part contained in any Finance Document and such default is not capable of
remedy, or if in the opinion of the Bank capable of remedy, shall not have been
remedied to the satisfaction of the Bank within10 days of the earlier of the
Bank serving notice on the Borrower or the Guarantor requiring the same to be
remedied and the Borrower or the Guarantor becoming aware of the same; or
(C) any representation, warranty or statement made or deemed to be made
by the Borrower in or pursuant to any Finance Document to which it is a
party (including in any certificate or notice made or delivered pursuant
thereto) and which the Bank considers to be material shall be untrue or
incorrect in any material respect when made or repeated or if any event occurs
as a result of which any such representation, warranty or statement if repeated
at any time hereafter with reference to the facts subsisting at the time of
such repetition, would be untrue or incorrect in any material respect; or
(D) any other Borrowed Money exceeding in aggregate Pounds Sterling25,000
of the Borrower shall by reason of breach or default become due and payable
prior to its stated maturity or due date or if any such Borrowed Money is not
paid at the maturity thereof or due date therefor (or within any originally
stated applicable grace period therefor) or, if payable on demand, is not paid
on demand or if the Borrower fails to pay when due any amount payable by it
under any present or future guarantee or indemnity in respect of Borrowed Money
or if any Security Interest in respect of Borrowed Money created by it becomes
enforceable and steps are taken to enforce the same; or
(E) any Event of Default (as defined in the SC Facility Agreement)
occurs; or
(F) the Borrower or the Guarantor becomes insolvent or applies for or
consents to or suffers the appointment of a liquidator, administrator,
receiver, administrative receiver, encumbrancer, trustee in bankruptcy or
similar official of the whole or any part of its assets, business, property,
revenues or undertaking or a petition for the appointment of an administrator
or liquidator of the Borrower or the Guarantor is presented (and not, unless
the same has been advertised, withdrawn within 21 days of presentation) or the
Borrower or the Guarantor takes any proceedings under any law, regulation or
procedure for adjustment, deferment or rescheduling of its indebtedness or any
part thereof or makes or enters into a general assignment or arrangement or
composition with or for the benefit of its creditors or a moratorium shall be
declared on any of its indebtedness or any creditor of the Borrower or the
Guarantor exercises a contractual right to take over the financial
management of the Borrower or the Guarantor (as applicable) or the Borrower or
the Guarantor is unable to pay its debts as defined in section 123 Insolvency
Act 1986 or the Borrower or the Guarantor fails generally to pay its debts as
and when they fall due or if proceedings are commenced or threatened against
the Borrower or the Guarantor which, if adversely determined, would result in a
liability on the part of the Borrower or the Guarantor (as applicable) in
excess of Pounds Sterling25,000 or any similar event or occurrence shall take
place under the laws of any other jurisdiction applicable to the Borrower or
the Guarantor; or
(G) an order is made or resolution is passed for the winding-up,
liquidation or dissolution of the Borrower or the Guarantor or if analogous
proceedings are taken or the Borrower or the Guarantor stops or threatens to
stop payments generally or the Borrower or the Guarantor ceases or threatens to
cease to carry on its business or any part thereof or the Borrower or the
Guarantor merges, consolidates or amalgamates with or into any other company,
corporation or entity; or
(H) it becomes unlawful or impossible or contrary to the terms of any
consent, authority or other permission for the Borrower or the Guarantor to
perform or to continue to perform any of its obligations under any of the
Finance Documents to which it is a party or if any of such documents ceases to
be in full force and effect or ceases to constitute the legal, valid and
binding obligations of the Borrower or the Guarantor, as applicable,
enforceable in accordance with its respective terms;
or
(I) any event or series of events (including without limitation any
adverse change in the business, assets or financial condition of the Borrower
or the Guarantor) shall occur giving reasonable grounds in the opinion of the
Bank for the belief that the Borrower (or, as the case may be, the Guarantor)
will not, or will not be able, to perform or comply with any of its obligations
expressed to be assumed by it under or in connection with any of the Finance
Documents to which it is a party; or
(J) if any governmental authority or any person or entity acting or
purporting to act under any governmental authority shall have taken any action
in order to condemn, seize or appropriate, or to assume custody or control of
the Borrower or of all or any substantial part of the property or assets of the
Borrower or shall have taken any action to curtail the authority in the overall
conduct of its business or operations of the Borrower; or
(K) if the Bank shall reasonably consider any of its security under the
Security Documents shall be in jeopardy; or
(L) if the audited financial statements of the Borrower or the Guarantor
delivered pursuant to Clause 11. I (A) are qualified to the effect that they
do not or may not give a true and fair view of the financial position of the
Borrower; or
(M) if the Borrower ceases to be a subsidiary of Multi-Arc, Inc, or if
Multi-Arc, Inc at any time owns (legally and beneficially) less than
ninety-nine per cent of the issued share capital of the Borrower;
then in any such case and at any time thereafter while such event is
continuing, the Bank may by written notice to the Borrower:-
(1) declare that the obligations of the Bank to make or, as the case may
be, maintain the Loan shall be cancelled, whereupon the same shall be
cancelled; and/or
(2) declare the whole or any part of the principal of and interest
relating to the Loan and any other sums payable under the Finance Documents to
be due and payable, whereupon the same shall become immediately due and payable
together with accrued interest thereon to the date of actual payment; and/or
(3) declare the Loan shall henceforth be repayable on demand; and/or
(4) direct enforcement of, or take any other action in relation to, any
of the Security Documents in accordance with its terms;
(5) apply the rate of interest referred to in Clause 6.2 to all or any
part of the principal amount of the Loan, any accrued interest and any other
sums payable under the Finance Documents; or
(6) waive the Event of Default.
13. FEES AND EXPENSES
13.1 The Borrower will pay to the Bank an initial fee of Pounds Sterling7,500
on the date the Loan is drawndown pursuant to Clause 5.
13.2 The Borrower shall reimburse the Bank promptly on demand (and without
prejudice to such obligations and notwithstanding the other provisions of this
Agreement authorises the Bank to deduct the same from any account of the
Borrower with the Bank from time to time to the extent that any of the
following are outstanding) and on a full indemnity basis, for all reasonable
fees and all expenses (including but not limited to all legal, travel and other
out-of-pocket expenses and all V.A.T. thereon) incurred by the Bank in
connection with the preparation, negotiation, completion, execution and, where
applicable, registration and filing of the Finance Documents and all documents
in connection herewith and therewith and with granting waivers under or
agreeing amendments to or variations in any of the same or in protecting any of
its rights hereunder or thereunder or in suing for or recovering any sums due
to it or in the preservation or enforcement of any of its rights
under this Agreement or any of the above mentioned documents connected
herewith.
13.3 The Borrower shall reimburse the Bank on demand in respect of liability
to all stamp, registration and other like duties and taxes (including all
VAT), if any, in each case payable in connection with the execution, delivery
and performance of the Finance Documents and all other documents in connection
therewith whether by the Borrower or the Bank or any other party thereto and
whether arising as a result of an election or otherwise or in connection with
the enforcement of any of the Finance Documents and all such other documents
and will indemnify the Bank from any and all liabilities with respect to or
resulting from any delay or omission to pay such duties or taxes.
13.4 Upon the occurrence of any Event of Default the Borrower shall reimburse
the Bank for any subsequent operating and/or management charges or costs of
the Bank relating to the Finance Documents, the matters contemplated thereby
and the Loan, as determined by the Bank.
14. CHANGES IN CIRCUMSTANCES
14.1 If after the date of this Agreement by reason of (1) the introduction of
or any change in law or in its interpretation, administration or application
and/or (other than a general change in the rates of taxation of income in the
United Kingdom or elsewhere) (2) compliance with any new request, directive or
requirement of whatsoever nature, from or requirement of any central bank or
other fiscal, monetary or competent authority (whether or not having the force
of law):-
(A) there is any increase in the cost to the Bank of agreeing to issue,
make, fund or maintain or of issuing, making, funding or maintaining all or
any part of the Loan or any unpaid sums due to it under any of the Finance
Documents; or
(B) the Bank suffers a reduction in the amount of any payment received
or receivable by it or forgoes any interest or other return on or in relation
to the Loan or suffers a reduction in return on capital as a result of having
entered into any of the Finance Documents and performed its obligations
thereunder; or
(C) the Bank becomes liable to make any payment on or calculated by
reference to the amount of any sum received or receivable by it or owed to it
under any of the Finance Documents (other than tax on its overall net income or
profits),
then the Borrower shall from time to time promptly on demand pay to the
Bank amounts sufficient to indemnify the Bank against, as the case may be, any
such cost, reduction, forgoing or liability provided always and it is hereby
agreed that:-
(i) the Bank shall promptly notify the Borrower of the happening of such
event giving reasonable details of how such cost, reduction or liability has
been calculated and attributed to the Loan Facility or the Overdraft Facility;
and
(ii) at any time after receipt of notice under paragraph (i) and so long
as the circumstances giving rise to such cost, reduction, forgoing or
liability continue, the Borrower may on giving the Bank not less than five
Business Days' irrevocable notice, cancel the Bank's obligation to make or, as
the case may be, to maintain the Loan and repay the whole (but not part only)
of the Loan together with all interest and other sums payable by the Borrowers
to the Bank pursuant to any of the Finance Documents but excluding, for the
avoidance of doubt, the Prepayment Fee.
14.2 In the event that by reason of any change in applicable law, regulation
or regulatory requirement or in the interpretation or application thereof
after the date hereof the Bank shall be of the opinion that it has become
unlawful, illegal or otherwise prohibited for the Bank to maintain or give
effect to all or any of its obligations as contemplated by any of the Finance
Documents, the Bank shall give notice to the Borrower to that effect and
thereupon, the liability of the Bank to make or, as the case may be, to
maintain the Loan shall cease and the Borrower shall repay to the Bank on or
before the latest day (being, if possible, the last day of any Interest Period)
permitted by such law, regulation or regulatory requirement the whole of the
Loan, together with all interest and other sums payable by the Borrower to the
Bank pursuant to any of the Finance Documents but
15. PAYMENTS
15.1 For the purposes of this Agreement, any payment to be made by the
Borrower shall be made in Sterling in cleared immediately available funds not
later than 11.00 a.m. on the due date to the account of the Borrower at First
Fidelity Bank N.A., London Branch (or to any other account at such bank and
place which the Bank may from time to time specify).
15.2 All sums received by the Bank under any of the Finance Documents, whether
in respect of principal, interest, fees, costs or otherwise, shall be received
in full without any set-off or counter-claim by the Borrower free and clear of
and without any deduction or withholding for or on account of any present or
future income or other taxes, levies, imposts, duties, charges or withholdings
of any nature whatsoever. In the event that any such deduction or withholding
from any payment for the account of the Bank under any of the Finance Documents
shall be required or in the event that any payment on or in relation to any
amount received by the Bank on account of tax or otherwise shall be required to
be made, in each case under any present or future law, directive, regulation
or practice, then the Borrower shall forthwith pay to the Bank such additional
amounts as will result (after the making of such deduction, withholding or
payment) in the receipt and retention by the Bank of the same amount which
would otherwise have been received and retained by it pursuant to such Finance
Document had no such deduction, withholding or payment been made.
15.3 If any sum becomes due for payment pursuant to any Finance Document on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day unless such Business Day falls in a new calendar month
in which event such payment shall be made on the immediately preceding Business
Day and the amount of any interest or other fee shall, if not already taken
into account, be adjusted accordingly.
15.4 In the case of a partial payment under any Finance Document, the Bank may
appropriate such amount in satisfaction of the obligations of the Borrower in
such order as it shall in its absolute discretion think fit and any such
appropriation shall override any appropriation made by the Borrower or any
guarantor.
15.5 If the Borrower or any Guarantor pays any increased amount under Clause
15.2 and the Bank actually receives or is granted a credit against or
remission for any income or corporation tax payable by it, the Bank shall, to
the extent that it can do so without prejudice to the retention of the full
amount of such credit or remission, reimburse to the Borrower or Guarantor (as
applicable) such amount of such credit or remission as the Bank shall in its
sole opinion have concluded to be applicable to such deduction or withholding.
Nothing herein contained shall affect the right of the Bank to arrange its tax
affairs as it thinks fit and in particular, the Bank shall be under no
obligation to claim relief from any tax on its corporate profits or similar tax
liability in respect of the imposition of such tax and, if the Bank does claim
any such relief, it shall be under no obligation to claim the same in priority
to any other claims, reliefs, credits or deductions available to it and shall
not in any event be obliged to disclose any matter relating to its tax affairs
or computations to any person.
15.6 The Bank warrants to the Borrower that it is a person recognised by the
Inland Revenue as carrying on through its London Branch a bona fide banking
business in the United Kingdom for the purpose of S.349(3) of the Income and
Corporation Taxes Act 1985 and which brings any interest payable under this
Agreement into account as a trading receipt of that business.
15.7 If, otherwise than as a result of the introduction of or any change in
the interpretation or application of any law or regulation or practice of the
Inland Revenue after the date of this Agreement, the Bank is not or ceases to
be a person as specified in Clause 15.6, the Borrower shall not be liable to
pay to or for the account of, the Bank any increased sum under Clause 15.2.
15.8 The provisions of Clause 15.5 shall apply to the payment of interest
pursuant to the Overdraft Facility and/or any of the Security Documents.
16. PAYMENT AND CURRENCY INDEMNITIES
16.1 The Borrower shall on demand by the Bank indemnify the Bank for all
amounts as the Bank may certify to be necessary to compensate it for all
costs, expenses, liabilities and losses sustained or incurred by it as a result
of (I) any default in payment by any of the Borrower of any sum under any of
the Finance Documents when due, (2) any failure (by reason of any breach or
default of any of the Borrower) to borrow in accordance with Clause 5, (3) the
happening of any Event of Default and/or (4) any repayment or prepayment
of the Loan or any part thereof otherwise than on the Final Repayment Date (if
the fixed rate option has been chosen in the Notice of Drawing or any Notice of
Fixed Interest Rate Selection), or on an Interest Payment Date (if the variable
rate option has been chosen in the Notice of Drawing) relative thereto,
(including in each case but not limited to any losses or expenses sustained or
incurred in liquidating or re-deploying deposits from third parties acquired to
effect or maintain any amounts paid or carried by the Bank, loss of interest
and/or loss of Margin). The certificate of the Bank as to the aforesaid amounts
shall, save for any manifest error, be conclusive.
16.2 Any payment or payments made to the Bank in a currency (the currency in
which the relevant payment is being made is hereinafter referred to as the
"Relevant Currency") other than the currency in which it is expressed to be due
hereunder (the "Due Currency") shall only constitute a discharge to the
Borrower to the extent of the Due Currency amount which the Bank is able, on
the date or dates of receipt by the Bank of such payment or payments in the
Relevant Currency (or, in the case of any such date which is not a Business
Day, on the next succeeding Business Day) to purchase with the amounts so
received by the Bank on such date or dates. If the amount of Due Currency which
the Bank is so able to purchase falls short of the Due Currency amount
originally due to the Bank under this Agreement the Borrower shall immediately
reimburse the Bank in the Due Currency any such shortfall and shall indemnify
the Bank against any direct loss or damage arising as a result of a failure to
make such reimbursement. This indemnity shall constitute a separate and
independent obligation from the other obligations contained in this Agreement.
16.3 If the Borrower is or becomes bound to pay any increased amount under
clause 15.2 or to make any payment under Clause 14.1 for the account of the
Bank then, so long as such obligation continues, it shall be entitled at any
time on giving to the Bank not less than 7 days' notice (which shall be
irrevocable) to prepay the whole (but not part only) of the Loan together with
accrued interest and any other amount payable under this Agreement but subject
always to Clauses 16.1 and 16.2.
17. SET-OFF
The Borrower hereby authorises the Bank to apply any credit balance
(whether matured or unmatured) to which it is entitled on any of its accounts
with the Bank, including without limitation the Accounts, in or towards
satisfaction of any sum due to the Bank by the Borrower under any of the
Finance Documents. For this purpose, the Bank is hereby authorised in the name
of the Borrower to do all acts (including breaking time deposits) and to sign
all documents as may be required to effect such application. The Bank shall not
be obliged to exercise any right conferred or acknowledged by this Clause 17
and nothing expressed or implied in any of the Finance Documents shall in any
way affect any rights which the Bank may have under applicable law.
18. ACCOUNTS
The Bank shall open and maintain on its books in accordance with its
normal practice a loan account evidencing the amounts from time to time
advanced by and owing to it hereunder which loan account shall be prima facie
evidence of such amounts.
19. WAIVERS
No delay or omission of the Bank in exercising any right, power or
privilege under any of the Finance Documents shall operate to impair such
right, power or privilege or be construed as a waiver thereof and any single or
partial exercise of any such right, power or privilege shall not preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided under any of the Finance
Documents are cumulative and not exclusive of any rights or remedies provided
by law.
20. ASSIGNMENT
20.1 This Agreement shall be binding upon and enure for the benefit of the
Borrower, the Bank and their respective successors.
20.2 The Borrower shall not assign or transfer any of its rights and/or
obligations under any of the Finance Documents.
20.3 The Bank at any time may transfer all or any part of its rights, benefits
and obligations under the Finance Documents by assigning to any one or more
other banks (each of which is hereinafter in this Clause 20 called an "Assignee
Bank") all or any part of the Bank's rights and benefits thereunder provided
that (I) such Assignee Bank shall agree to perform that percentage of the
Bank's obligations hereunder as corresponds to that percentage of the Bank's
rights and benefits so assigned to the Assignee Bank and (2) such Assignee Bank
shall, by delivery of such undertaking or agreement as the Bank may approve,
have become bound by the terms of the Finance Documents, and in such
circumstances the Bank may, if it so determines, act as agent for itself and
the Assignee Bank for the purposes of the Finance Documents subject to receipt
of appropriate indemnities and the Bank entering into such appropriate
documentation with the Assignee Bank and the Borrower as the Bank may require.
Notice of any such transfer shall promptly be given to the Borrower and the
Borrower shall execute such documents as the Bank shall require in order
to give effect to any such transfer. For this purpose and for the purpose of
entering into any contractual arrangements with any person in relation to the
matters contemplated by this Agreement the Bank may disclose to a potential
Assignee Bank or any such person such information about the Borrower and its
assets and condition as the Borrower shall have made available to the Bank
hereunder or as shall be known to the Bank otherwise howsoever. The Bank shall
consult with the Borrower prior to any such transfer.
20.4 If the Bank transfers its right, benefits and obligations under the
Finance Documents as provided in Clause 20.3, all references in the Finance
Documents to the Bank shall thereafter be construed as references to the Bank
and its Assignee Bank(s) to the extent of their respective participations, if
any, and the Borrower shall thereafter look only to the Assignee Bank(s) (to
the exclusion of the Bank) in respect of that proportion of the Bank's
obligations thereunder as corresponds to such Assignee Bank's respective
participation therein and accordingly such Bank's maximum liability hereunder
shall be appropriately reduced and the Assignee Bank shall proportionately
assume a maximum liability equivalent to such reduction in such Bank's maximum
liability.
21. NOTICES
21.1 Save as otherwise provided herein, each notice, request, demand or other
communication to be given or made under this Agreement shall be given in
writing delivered personally or by letter by first class mail, or facsimile to
the address or facsimile number of the addressee set out below:-
(1) in the case of the Bank, if by facsimile to it at 0171929 4644 and
if delivered personally or by letter to it at London Branch, 1 Bishopsgate,
London, EC2N 3AB, in each case marked for the attention of Ian G. Morrison,
Vice President;
(2) in the case of the Borrower, if by facsimile to it at 01207 590254
and if delivered personally or by letter to it at Number One, Industrial
Estate, Unit 36, Medomsley Road, Consett, County Durham, DH8 6TS,
or at any other numbers or addresses or marked for the attention of
such other person as the parties hereto may from time to time notify to each
other.
21.2 Any notice, request, demand or other communication to be given or made
under this Agreement shall be deemed to have been delivered, in the case of
any notice, request, demand or other communication given or made by personal
delivery or facsimile, on despatch to the correct facsimile number or delivery
to the correct address unless delivered outside normal business hours when it
shall be deemed to be delivered on the next Business Day and, in the case of
any notice, request, demand or other communication given or made by letter, two
Business Days after being posted by first class mail, provided that any notice,
request, demand or other communication to be made or delivered by the
Borrower to the Bank shall only be effective when received by the Bank.
22. PARTIAL INVALIDITY
22.1 In the case that one or more of the provisions contained in this
Agreement should prove to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
23. GOVERNING LAW
23.1 The law of England and Wales is the law applicable to this Agreement.
Please confirm your agreement to and acceptance of the terms and conditions
set out above on the attached copy of this letter. The offer of the Facilities
shall lapse and shall be deemed to have been withdrawn if the Borrower does not
agree and accept the terms hereof within 5 Business Days of the date of this
Agreement.
Yours faithfully
/s/
duly authorised for n behalf of
FIRST FIDELITY BANK N.A.
We hereby acknowledge our agreement to and acceptance of the terms and
conditions set out in the letter of which the above is a true copy.
/s/
duly authorised for and on behalf of
MULTI-ARC (U.K.) LIMITED
<PAGE>
SCHEDULE
Notice of Drawdown
[On the headed notepaper of Multi-Arc (U.K.) Limited]
To: First Fidelity Bank N.A.
Dear Sirs,
1. We refer to the facility agreement (as from time to time amended, varied,
novated or supplemented) (the "Facility Agreement") dated 1995 and made
between Multi-Arc (U.K.) Limited as Borrower and First Fidelity Bank N.A. as
Bank. Terms used herein shall have the meanings ascribed to them in the
Facility Agreement unless the context otherwise requires.
2. We hereby give you notice that, pursuant to the Facility Agreement and on
[date of proposed Advance], we wish to borrow the amount of [ ] pounds
([ ]) upon the terms and subject to the conditions contained therein.
3. Of the amount referred to in paragraph 2 above [Pounds Sterling ] is
to be used to [specify each purpose] and we attach [specify evidence to be
attached] as evidence that such amount is to be used for each one of the
purposes set out in Clause 2 of the Facility Agreement.
4. The amount referred to in paragraph 2 should be credited to the account
of [specify account(s) into which such amount is to be transferred] for value
on [date of proposed drawdown].
5. We hereby elect for [the fixed interest rate option/the variable interest
rate option] referred to in the Facility Agreement.
6. We confirm that, at the date hereof, the representations and warranties
set out in Clause 10 of the Facility Agreement are true and no Event of
Default has occurred.
Yours sincerely
/s/
for and on behalf of
Multi-Arc (U.K.) Limited
<PAGE>
EXHIBIT 10(t)
OVERDRAFT FACILITY
FIRST FIDELITY BANK
FIRST FIDELITY BANK N.A
To FIRST FIDELITY BANK N.A.
London Branch
1 Bishopsgate
London EC2N 3AB
(hereinafter referred to as "the Bank")
WE MULTI-ARC (U.K.) LIMITED
of Number One Industrial Estate, Unit 36, Medomsley Road, Consett, County
Durham DH8 6TS.
(hereinafter called "we") in consideration of your from time to time granting
or continuing to make available credit or other banking facilities and
accommodation to us ("the Facility") hereby undertake and agree with you as
follows:
Unless otherwise agreed in writing between us in respect of any other specific
facility:-
1. In respect of any overdraft or part thereof made available pursuant to
the Facility, you shall be entitled in your sole discretion to call in amounts
outstanding under the Facility and/or to cancel the Facility (or any part
thereof) and/or to issue legal proceedings in respect of the Facility without
first having made demand on us.
2. You shall be entitled to your sole discretion and as conclusively
determined by you at any time from time to time increase or decrease the
Facility limit (including multiple currency facility limits).
3. We will pay to you interest on the amount from time to time outstanding
under the Facility for the relevant interest period as determined by you at
the rate determined by you being the aggregate of:
(a) either (i) A margin of 1 5% per annum above the rate (as
conclusively determined by you in accordance with your normal procedures) at
which the Bank is offered deposits in currency of the Facility at or about
11:00 a.m. London time on the relevant dealing day on or before the
commencement of the relevant interest period (as determined by you by banks in
the London interbank market for deposits in tho currency of the Facility of
similar amount and for a similar interest period as that of the Facility; or
at your option; or
(ii) the base rate of the Bank from time to time as
conclusively certified by you "Base Rate") plus a margin of 1.5% per annum;
AND
(b) the rate reflecting the cost to you (as determined by you) of
complying with the existing requirements of the Bank of England or other
regulatory authority affecting mandatory liquid assets, special deposits,
reserve, capital adequacy or other requirements of whatever nature and
attributable to the Facility (rounded up, if necessary, to four decimal
places) including any reduction in the rate of return on your capital
resources. A certificate by you as to the amount of such cost shall be
conclusive in the absence of manifest error.
All interest payable shall accrue from day to day and shall be
calculated on the basis of a 360 day year (save in the case of pounds sterling
a 365 day year) for the actual number of days elapsed and shall be paid in the
currency of the Facility. Interest shall be due and payable and debited to
our account on a monthly basis.
4. We will pay to you interest on any amount due hereunder which is not paid
on the due date for payment therefore for the period from such due date up to
tho date of actual receipt by you (as well after judgment as before) on demand
at the rate of 2% per annum above the aggregate interest rate and cost to you
referred to in Clause 3 above (as conclusively determined by you) for such
periods as you may select. Upon expiry of each such period such rate shall be
recalculated on the same basis save that unpaid interest accrued during the
previous periods shall be added to the amount in respect of which we are in
default.
5. We agree to indemnify you upon demand for all costs, charges and expenses
(including legal fees) incurred by you in connection with the drafting,
preparation negotiation and execution of this Agreement and any documents
relative thereto and of any amendment, variation or extension thereof or the
granting of any waiver or consent under this Agreement and the presentation
and enforcement or attempted enforcement of your rights and powers under this
Agreement.
6. The terms and conditions of this Agreement are in addition to and not in
substitution for any other agreements between us and you.
7. All sums payable by us hereunder shall be paid in the currency of the
Facility or such other currency as you may from time to time direct in
immediately available funds to the account maintained in respect of the
Facility or such other account at such ;bank as you may from time to time
specify and without any set-off or counterclaim whatsoever and, save as
required by law, without any deduction or withholding for or on account of any
present or future taxes, levies, imposts, duties, charges or withholdings of
any nature whatsoever. We shall pay all present or future taxes or similar
charges due with respect to such payments which may be imposed by any
competent fiscal authority, except taxes on your overall income. If any such
deduction or withholding has to be made by law from any such payment we will
pay to you an increased amount so that after any deduction or withholding you
receive and retain a net amount equal to the amount which you would have
received and retained had no such deduction or withholding been made.
8. We hereby irrevocably authorise you (but without obligation on your part)
in the event of non-payment of any amounts when due hereunder at any time
without demand and without further notice to set off any credit balance in any
currency standing upon any of our account with you or at any of your branches
or any of your subsidiary, holding or associated companies or any of the
subsidiaries of First Fidelity Bancorporation in or towards payment of any
amount due to you hereunder and in our name to do all such acts and to sign
all such documents as may be required to effect such application. Where such
set-off requires the conversion of one currency into another, such conversion
shall be calculated at the spot rate as conclusively determined by you for
purchasing one currency with the other.
9. Statements of account shall be issued on written application or by
arrangement with the Bank. Failure by us to object to a statement of account
within thirty days after receipt thereof shall be deemed approval of all
entries contained therein and in the absence of any such objections the
statement of account shall be final and binding on us.
10. The certificate signed by one of your duly authorised officers as to any
of the matters referred to in this Agreement including the balance of an
account or the amount owing by us to you shall save for manifest error, be
conclusive and binding on us.
11. We hereby irrevocably appoint the following as our agent to accept
service of all legal process issued out of the High Court of Justice in London
in any local action or proceedings against us/our assets arising out of or in
connection with any transaction or dealing between us and you:
Name:
Address:
Telex: Fax:
("the Service Agent")
We agree that any notice demand or other legal communication to be given
hereunder and any legal process shall be sufficiently served if delivered to
the Service Agent at its address stated in this Agreement or such other
address in England as we may have notified to you for such purpose.
This Agreement is to be governed by and construed in accordance with the laws
of England and we hereby submit to the non-exclusive jurisdiction of the
English courts.
EXECUTION by Company
EXECUTED as a deed and delivered by
the Customer pursuant to a resolution
of its board of directors duly passed
dated
by
Director /s/ John Alan Stevenson
John Alan Stevenson
Director or
Secretary /s/ Walter N. Kreil, Jr.
Walter N. Kreil, Jr.
<PAGE>
EXHIBIT 10(u)
UBC VIRGINIA CORPORATION
c/o Andal Corp.
909 Third Avenue
New York, New York 10022
October 13, 1995
CERTIFIED MAIL -
RETURN RECEIPT REQUESTED
Schnurmacher Corp.
1114 First Avenue
New York, New York 10021
Attn: Ira J. Weinstein
Notice of Exercise of Option
Pursuant to Section 1.3 of
Option Agreement dated as of
August 1, 1982 covering
1110 First Avenue, New York,
New York (the "Option Agreement")
Gentlemen:
The undersigned is the optionee under the Option Agreement. We
are in receipt of your letter dated September 22, 1995 advising of the death
of Irwin Schnurmacher, the later to die of Adolph and Irwin Schnurmacher.
This letter constitutes notice to you of our election to exercise
the option to purchase 1110 First Avenue, New York, New York (the "Premises")
pursuant to Section 1.3 of the Option Agreement and, in furtherance thereof,
enclosed is our good certified check payable to your order in the amount of
$10,000, representing the "Option Exercise Payment" required to be remitted to
you together with this letter pursuant to the terms of the Option Agreement.
We understand from your letter that you would prefer to close
title to the Premises during the month of February, 1996. We are agreeable
and would propose February 27, 1996 at a time and place to be agreed on.
Since the closing will occur more than thirty (30) days after the
date of this letter (as now required by the Option Agreement), we would
appreciate it if you would agree to waive such thirty (30) day provision by
signing a copy of this letter.
We also want to advise you of the possibility that the Option
Agreement and Lease may be assigned before the closing to Messrs. Paul
Milstein and Alan Cohen and Frankhill Associates, a limited partnership, in
which case the assignees will assume all of our obligations under the Lease
and Option Agreement and Contract of Sale annexed thereto. In that event, we
will give notice of such assignment to you not later than thirty (30) days
prior to February 27, 1996, together with executed counterparts of the
Transferee and Transferor Questionnaires required for filing with the
Department of Taxation and Finance in furtherance of the New York State Real
Property Transfer Gains Tax.
If the foregoing is satisfactory, please execute a copy of this
letter to evidence (a) your acknowledgment that the option has been duly
exercised by the undersigned, (b) your agreement to the waiver of the thirty
(30) day provision of the Option Agreement and the Contract of Sale, and (c)
your agreement that in the event of assignment of the Lease and Option
Agreement to Messrs. Milstein and Cohen and Frankhill Associates, and their
assumption of the obligations thereunder, the assignees may properly
consummate the closing under the Option Agreement.
Very truly yours,
UBC VIRGINIA CORPORATION
By: /s/ Michael S. Huber
Name: Michael S. Huber
Title: Senior Vice President
Accepted and agreed to this
25 day of October, 1995.
SCHNURMACHER CORP.
By: /s/ Ira J. Weinstein
Name: Ira J. Weinstein
Title: President
<PAGE>
UBC VIRGINIA CORPORATION
c/o Andal Corp.
909 Third Avenue
New York, New York 10022
October 23, 1995
CERTIFIED MAIL -
RETURN RECEIPT REQUESTED
Schnurmacher Corp.
1114 First Avenue
New York, New York 10021
Attn: Ira J. Weinstein
Gentlemen:
By letter dated October 13, 1995 (the "Letter of Exercise") the
undersigned exercised an option to purchase 1110 First Avenue, New York, New
York, pursuant to Section 1.3 of that certain Option Agreement dated as of
August 1, 1982 between Schnurmacher Corp., as Optionor, and National Kinney
Corp., as Optionee. Capitalized terms used but not otherwise defined herein
shall have the respective meanings ascribed thereto in the Letter of Exercise.
In the Letter of Exercise, the undersigned advised you of the
possibility that the Option Agreement and Lease may be assigned before the
closing to Messrs. Paul Milstein and Alan Cohen and Frankhill Associates, a
limited partnership (collectively, the "Permitted Assignees"), and requested
your agreement that the Permitted Assignees may properly consummate the
closing under the Option Agreement and/or the Contract of Sale annexed
thereto.
We understand that you have consented to such assignment and to
the closing of such acquisition by the Permitted Assignees, conditioned upon
our agreement to assume all liability under the New York State Real Property
Transfer Gains Tax (the "Gains Tax") which Schnurmacher Corp. may suffer or
incur on the sale of the Premises pursuant to the Option Agreement and/or the
Contract of Sale annexed thereto solely by reason of such assignment, and/or
by reason of the assignment of the Option Agreement to the undersigned by
National Kinney Corp., including, without limitation, all Gains Tax due on any
consideration which may be paid to the undersigned by the Permitted Assignees
for and/or on account of such assignment.
This letter will serve to evidence our agreement to assume all
such Gains Tax liability.
Please evidence your acceptance of the foregoing by executing a
copy of this letter where indicated below and return the same to the
undersigned by hand-delivery.
Thank you for your consideration.
Very truly yours,
UBC VIRGINIA CORPORATION
By: /s/ Michael S. Huber
Name: Michael S. Huber
Title: Senior Vice President
Accepted and agreed to this
25 day of October, 1995.
SCHNURMACHER CORP.
By: /s/ Ira J. Weinstein
Name: Ira J. Weinstein
Title: President
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF THE COMPANY
State or Other
Jurisdiction of
Incorporation or
Name Organization
Andal Corp. (parent) New York
Cathedral Equity Corp. Delaware
Circle Acoustics Corp. New York
National States Electric Corp. Delaware
Wadif Corp. New York
Salem Liquidating Corp. Delaware
Uris Mechanical Maintenance, Inc. New York
UBC Westfair Corporation New York
UBC Virginia Corporation New York
Multi-Arc Inc. Delaware
Multi-Arc Scientific Coatings, Inc. New Jersey
Multi-Arc, Inc. Minnesota
Multi-Arc India Limited India
Multi-Arc (U. K.) Ltd. United Kingdom
Multi-Arc Management Corp. New Jersey
Multi-Arc Scientific
Coatings(S)Pte Ltd. Singapore
Vagle Technology, Inc. Michigan
SCI Coatings Southwest, Inc. Texas
Scientific Coatings, Inc. Michigan
Multi-Arc Inc. Canada
Scientific Coatings of
Illinois, Inc. Michigan
<PAGE>
EXHIBIT 24(a)
Kelly Graham Myska & Partners
Chartered Accountants
We consent to the use of our reports on the statement of earnings, financial
position and changes in cash position for the fiscal year ended September 30,
1995 of Multi-Arc Inc. included in the Annual Report of Form 10-K of Andal
Corporation and the Registration Statement S-8 of Andal Corporation which
incorporates such Annual Report by reference.
Cambridge, Ontario
November 3, 1995
/s/ Kelly Graham Myska & Partners
Chartered Accountants
211 Water Street North, P.O. Box 880, Cambridge, Ontario N1R 5X9
Telephone (519)623-1870 FAX (519) 623-9490
<PAGE>
Kelly Graham Myska & Partners
Chartered Accountants
AUDITORS' REPORT
TO THE SHAREHOLDER OF
MULTI-ARC INC.
WE HAVE AUDITED THE FINANCIAL POSITION OF MULTI-ARC INC. AS AT
SEPTEMBER
30, 1995 AND THE STATEMENTS OF OPERATIONS, RETAINED EARNINGS AND
CHANGES IN CASH POSITION FOR THE YEAR THEN ENDED. 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 AUDIT.
WE CONDUCTED OUR AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED
AUDITING STANDARDS. THOSE STANDARDS REQUIRE THAT WE PLAN AND
PERFORM AN AUDIT TO OBTAIN REASONABLE ASSURANCE 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.
IN OUR OPINION, THESE FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL
MATERIAL RESPECTS, THE FINANCIAL POSITION OF THE COMPANY AS AT
SEPTEMBER 30, 1995 AND THE RESULTS OF ITS OPERATIONS AND THE CHANGES
IN
ITS CASH POSITION FOR THE YEAR THEN ENDED IN ACCORDANCE WITH
GENERALLY
CCEPTED ACCOUNTING PRINCIPLES.
CAMBRIDGE, ONTARIO
/s/KELLY GRAHAM MYSKA & PARTNERS
NOVEMBER 2, 1995
CHARTERED ACCOUNTANTS
<PAGE>
EXHIBIT 24(b)
KPMG
Maybrook House Tel +44 (0)191 232 8815
27 Grainger Street Fax +44 (0)191 232 3391
Newcastle upon Tyne
NEl 5JT
Private & confidential
WN Kreil Esq
Mlllti-Arc Scientific Coatings
200 Roundhill Drive
Rockaway
NJ 07866
United States of America
14 December 1995
Dear Sir
Multi-Arc (UK) Limited
Our ref pbm/32 1
Contact Paul Moran
Tel 0191 2328815
On 14 December 1994 we gave our consent to the use of our audit reports for
the purposes of the 1994 filing requirements of Andal. These audit reports
were issued on the financial statements of Multi-Arc (UK) Limited for the year
ended 30 September 1994 and were contained in our letter of 14 December 1994.
We hereby confirm that we consent to the use of these reports for the purposes
of the 1995 filing requirements of Andal.
Yours faithfully
/s/KPMG
KPMG
KPMG is registered by the Institute of business is 8 Salisbury
to carry on audit work and Chartered Accountants inSquare, London EC4Y 8BB
authorized to carry on England and Wales. The where a list of partners'
investment business principal place of names is open to
inspection.
<PAGE>
EXHIBIT 24(c)
BDO Seidman, LLP
Accountants and Consultants
330 Madison Avenue
New York, New York 10017
Telephone: (212) 885-8000
Fax: (212) 697-1299
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Andal Corp.
New York, New York
We hereby consent to the incorporation by reference in the Form 10K of Andal
Corp. of our report dated March 26, 1993, expect to Note 1 which is as of
April
9, 1993, relating to the consolidated financial statements and schedules of
Steve's Homemade Ice Cream, Inc. appearing in the Company's Annual Report on
Form
10-K for the year ended January 2, 1993.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
December 21, 1995
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 850
<SECURITIES> 0
<RECEIVABLES> 5,096
<ALLOWANCES> 98
<INVENTORY> 1,073
<CURRENT-ASSETS> 8,134
<PP&E> 26,619
<DEPRECIATION> 15,830
<TOTAL-ASSETS> 23,625
<CURRENT-LIABILITIES> 9,168
<BONDS> 17,585
0
0
<COMMON> 7,410
<OTHER-SE> (12,508)
<TOTAL-LIABILITY-AND-EQUITY> 23,625
<SALES> 30,015
<TOTAL-REVENUES> 30,383
<CGS> 15,545
<TOTAL-COSTS> 27,414
<OTHER-EXPENSES> (318)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,799
<INCOME-PRETAX> 933
<INCOME-TAX> 54
<INCOME-CONTINUING> 879
<DISCONTINUED> 1,007
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,886
<EPS-PRIMARY> 5.72
<EPS-DILUTED> 5.72
</TABLE>
