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, 1997
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 (I. R. S. employer ID no.)
or organization)
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
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. [ X ]
Nonaffiliates of the Registrant hold approximately 52% of the Registrant's
common stock. The aggregate market value of the shares of common equity held by
nonaffiliates of the Registrant as of December 12, 1997 was approximately
$5,600,000.
As of December 12, 1997, the number of outstanding shares of
Registrant's Common Stock was 433,029 shares.
<PAGE>
PART I
Item 1. Business
GENERAL
During the year ended September 30, 1997, Andal Corp. (the "Company" or
"Andal"), through its majority-owned Multi-Arc Inc. subsidiary ("Multi-Arc"),
had been engaged in surface enhancement which is the utilization of advanced
technologies to apply thin-film coatings of various metals, metal compounds,
and other materials to base materials to enhance their hardness, wear and
corrosion resistance, lubricity, and appearance.
On September 25, 1997, the Company's shareholders at a meeting of
shareholders approved an Agreement and Plan of Merger (the "Agreement") dated
as of June 9, 1997, between Bernex Inc. ("Bernex"), M-A Acquisition Corp.,
Multi-Arc, and the Company. The Agreement, in essence, represented a contract
to sell Multi-Arc to Bernex for cash. Bernex and M-A Acquisition Corp. are
indirectly owned subsidiaries of Saurer AG, a publicly traded Swiss
corporation.
The sale of Multi-Arc was completed on September 30, 1997. Pursuant to
the Agreement, M-A Acquisition Corp. was merged into Multi-Arc; and Multi-Arc
became the surviving corporation and also became wholly-owned by Bernex. The
Company recorded a gain of approximately $8.8 million from the sale.
As a result of the merger, the Company received net proceeds of
approximately $17.8 million of cash and may be entitled to receive additional
cash from three escrow funds which were established at the time of closing, as
described below. As a result of the sale, the Company has no operating
business. The directors of the Company are currently considering whether the
Company should be liquidated, function as an investment company, or seek to
enter some other business activity. A decision on the future direction of the
Company is expected to be made during fiscal 1998.
Net Proceeds from the Sale of Multi-Arc
The 100% ownership of Multi-Arc was sold to Bernex for $29,200,000 in
cash. At the time of closing, Andal owned approximately 84% of Multi-Arc. A
reconciliation of Andal's 84% share of the gross proceeds to the amount of
cash actually received by Andal at the closing is as follows:
000's
Andal share of gross proceeds--
approximately 84% ownership $24,517
Plus:
Net payment received from Multi-Arc stock option holders
and minority shareholders pursuant to the Agreement 839
Less:
Payments to Escrow accounts
Main Escrow Fund (2,451)
Tax Escrow Fund (955)
Expense Escrow Fund (630)
--------
Net proceeds before amounts paid at closing 21,320
Bonus payments to Multi-Arc management (1,965)
Repayment of intercompany indebtedness to Multi-Arc (1,390)
Repayment of shareholder loan (97)
--------
Net cash received by Andal $17,868
========
The Main Escrow Fund
An escrow fund for a portion of the selling price of Multi-Arc, of which
Andal's share is approximately $2,451,000, was established at the closing to
secure Bernex against breaches of representations and warranties and the
covenants made by Multi-Arc and the Company in connection with the Agreement.
This escrow fund (the "Main Escrow") may also be a source for payment of
certain indemnifications for environmental and tax obligations, and also for
payment to Multi-Arc minority shareholders who exercise their appraisal rights
and obtain an award in excess of their pro rata share of the agreed to selling
price of Multi-Arc. Certain types of claims against the Main Escrow would
have to aggregate $700,000 before such claims would be eligible for
reimbursement from the fund, and then only the amount over $700,000 would be
eligible. By the terms of the Agreement, the Main Escrow terminates on March
31, 1999.
While the Company believes that its representations and warranties
concerning Multi-Arc are accurate and that adequate provision has been made
for all indemnifications, the Company has deferred recognition of the gain
equal to the $2,451,000 until such time as the cash has been received.
The Tax Escrow Fund
A second escrow fund (the "Tax Escrow") was established under the
Agreement out of funds which would otherwise have been payable to Andal in the
amount of $955,000 to indemnify Bernex against certain tax obligations of
Andal to a taxing authority which have been assessed and which were contested
by Andal and not paid. If, by July 31, 2002, these tax claims have not been
resolved entirely, Andal has agreed to pay $300,000 to Bernex out of this
fund. Under certain circumstances, Andal is entitled to use this fund for
payment of certain taxes.
The Company has established reserves in its financial statements related
to this tax obligation, and the Company has determined that it is not
reasonably possible that the resolution of this contingency will have a
material adverse impact upon income in future periods. Nevertheless, the
Company believes it prudent to defer recognition of the gain equal to this Tax
Escrow Fund until such time as it is received in cash.
The Expense Escrow Fund
At the closing, an escrow fund of $750,000 (the "Expense Escrow") was
established out of the proceeds otherwise payable to Andal and the minority
shareholders of Multi-Arc to pay for the legal and other expenses of Andal and
Multi-Arc relating to the sale. At and soon after closing, a substantial
portion of this fund was disbursed in payment of such expenses. Recovery from
the fund will not be material and will be recognized as income when received.
The escrow funds are in the possession of a commercial bank which serves
as escrow agent and are being invested in a money market fund pending their
resolution.
Election of Officers and Office Relocation
Effective with the sale of Multi-Arc, Messrs. Peter D. Flood and Walter N.
Kreil, Jr., Chairman and Chief Executive Officer, and Vice President and Chief
Financial Officer, respectively, of the Company and of Multi-Arc, resigned as
officers and directors of the Company, and the Company's corporate office was
relocated back to its former premises in New York City. On October 1, 1997,
the remaining directors, consisting of Andrew J. Frankel and Alan N. Cohen,
appointed new officers; and the directors resolved that the Company should
once again absorb all of the costs of the New York City premises, including
the cost of executive, administrative, and secretarial services, except that
Messrs. Frankel and Cohen agreed to reimburse the Company for 25% of the lease,
utility, office expense, and other costs to maintain the New York premises
(excluding salary costs of all Company personnel). This reimbursement
represents a reimbursement for the personal use of the Company's facility by
Messrs. Frankel and Cohen.
The following officers were elected at the October 1, 1997 meeting of the
Board:
Andrew J. Frankel Chairman and Chief Executive Officer
Alan N. Cohen President
Michael S. Huber Senior Vice President, Chief Financial
Officer, and Treasurer
Mary Lou Holcombe Vice President and Secretary
See Item 10--Directors and Executive Officers of the Company, Item 11--
Executive Compensation, and Item 12--Security Ownership of Certain Beneficial
Owners and Management included elsewhere herein.
Stockholders' Appraisal Rights
In connection with the sale of Multi-Arc, certain shareholders of Andal
had indicated an interest in selling their shares in the Company or seeking
appraisal rights, including the Small Business Administration of the Federal
Government (the "SBA"), the beneficial owner of 8,672 shares of the Company's
common stock. In lieu of appraisal, on October 1, 1997, the Company purchased
these shares from the SBA at a price of $25.00 per share. Also, on October 1,
1997, the directors of the Company authorized the Company to make additional
incidental stock purchases from non-affiliates who make unsolicited inquiries
at a price not to exceed $25.00 per share, so long as the aggregate purchases
made would not reach a level where any such purchases could be considered part
of a "going private transaction." During the period October 1, 1997 through
December 7, 1997, 14,330 shares were purchased by the Company. The Company
ceased purchasing its shares on December 8, 1997. See Item 5--"Market for the
Company's Common Equity and Related Stockholder Matters."
Item 2. Properties
The Company's executive office and only location is at 909 Third Avenue,
New York, New York. The office occupies approximately 4,000 square feet of
space under a lease requiring an annual rental payment of approximately
$80,000. The lease expires on September 29, 1998 and cannot be renewed.
Item 3. Legal Proceedings
The Company is aware of several lawsuits which are pending involving it
or its inactive subsidiaries. In the opinion of the Company's management,
these lawsuits will not result in any material adverse effect on the Company's
consolidated financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
An annual meeting of shareholders of Andal Corp. was held on September 22,
1997 and adjourned until September 25, 1997. At this meeting, an election of
directors was held and the approval of shareholders was sought of an Agreement
and Plan of Merger with Bernex, Inc., M-A Acquisition Corp., and Multi-Arc Inc.
Proxies for this meeting were solicited pursuant to Regulation 14A, and
there was no opposing solicitation. At the meeting of shareholders, the
following directors of the Company were elected by the following votes:
Director For Withheld
Andrew J. Frankel 330,973 11,221
Alan N. Cohen 330,973 11,219
Peter D. Flood 330,991 11,203
Walter N. Kreil, Jr. 330,996 11,198
Mr. Flood and Mr. Kreil resigned as directors on September 30, 1997.
With respect to the approval of the Agreement and Plan of Merger, the
Agreement was approved by the following vote:
For Against Abstained Brokers' Non-Vote
332,341 9,835 18 0
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
The Company's common stock was delisted from the American Stock Exchange in
October 1992. During the period from November 1992 until September 1995, the
Company's common stock was quoted on the NASDAQ OTC Bulletin Board by a market
maker. During the period September 1995 through September 1997, the Company's
common stock had not been quoted on the NASDAQ OTC Bulletin Board or on any
other established public market. During the period that the Company's common
stock was quoted on the NASDAQ OTC Bulletin Board, transactions in the stock
were limited and sporadic and, in the Company's opinion, did not constitute an
established public trading market. The Company was made aware of the existence
of a market-making activity in the Company's common stock on December 7, 1997;
and, on December 8, 1997, the Board of Directors terminated its authorization
of unsolicited stock purchases. During the period October 1 through December
12, 1997, the market maker has quoted a bid/ask range of $20--$30 per share.
See Item 1--"Business--Stockholders' Appraisal Rights" for a discussion of
recent purchases of the Company's common stock by the Company.
As of December 12, 1997, the number of registered holders of the Company's
common stock was 1,108.
The Company has never paid a cash dividend on its common stock.
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,
1997 1996 1995 1994 1993
(Thousands of dollars, except per share amounts)
Operating revenues 0 0 0 0 0
Operating income (loss) (417) (1,953) (1,333) (1,768) (1,375)
Income (loss) from
continuing operations (423) 3,390 (2,129) (2,435) (1,708)
Income (loss) from
discontinued operations 10,081 4,995 4,015 3,556 748
Net income (loss) 9,658 8,385 1,886 (1,121) (960)
Income (loss) per share from
continuing operations (0.95) 9.98 (6.45) (7.38) (5.18)
Net income (loss) per share 21.59 24.69 5.72 (3.40) (2.91)
Average number of common
shares outstanding (000) 447 340 330 330 330
Total assets 21,775 9,488 6,420 6,521 7,441
Long-term obligations
(excluding current
maturities) 0 0 6,364 7,364 14,720
Shareholders' equity
(deficit) 14,513 4,855 (5,098) (6,984) (5,863)
Book value (deficit)
per share at year end 32.44 10.85 (15.46) (21.17) (17.77)
See Notes 2 and 6 of the Notes to Consolidated Financial Statements for a
description of the income (loss) from discontinued operations recorded in 1997,
1996, and 1995. Income from discontinued operations in 1994 and 1993 resulted
from the operations of the Company's discontinued Multi-Arc business, after
deduction of $419,000 and $527,000, respectively, of legal expenses and
settlements on litigation related to the Company's discontinued construction
operations. The 1994 income from discontinued operations also included
$69,000 of gain relating to the divestiture of Olsher Metals Corporation.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
1997 vs. 1996
General and administrative expense declined from $1,953,000 in fiscal
1996 to $417,000 in fiscal 1997. The 1996 fiscal year expense included one-
time charges of $441,000 of retirement costs and accruals for management
signing bonuses of $300,000. The remainder of the decline in expense from
1996 to 1997 of approximately $800,000 resulted from a reduction of executive
and administrative salaries, insurance costs, occupancy costs, and office
expenses; all such reductions resulting from the retirement of the Company's
then Chief Executive Officer and its then President in August of 1996 and the
relocation of the Company's executive office. In addition, the fiscal 1997 base
compensation of the Company's President and Chief Financial Officer was borne
by Multi-Arc. In 1996 the Company recorded a $6,009,000 one-time gain from
the sale of its 61st Street property. Interest expense in fiscal 1996 was
$747,000, compared with only $6,000 in fiscal 1997, as the Company was able to
repay substantially all of its debt by the end of fiscal 1996 with the
proceeds from the sale of the 61st Street property. Income from discontinued
operations in fiscal 1996 was $4,995,000, representing $4,761,000 of equity in
earnings of Multi-Arc (including a tax benefit of approximately $2,300,000
relating to the recognition of the cumulative net benefit of net operating
loss carryforwards) plus $234,000 from the Company's discontinued construction
operations. In fiscal 1997 the Company's equity in earnings in Multi-Arc
declined to $1,337,000 as a result of a softening in Multi-Arc's business
during the year; and the Company recorded a gain of $8,734,000 from the sale
of Multi-Arc.
1996 vs. 1995
General and administrative expense increased from $1,333,000 in fiscal
1995 to $1,953,000 in fiscal 1996, principally as a result of the one-time
charges discussed above. Interest expense was $833,000 in fiscal 1995,
compared with $747,000 in fiscal 1996, reflecting lower levels of debt. The
Company's equity in earnings of Multi-Arc was $2,660,000 in fiscal 1995,
compared with $4,761,000 in fiscal 1996. The increase in 1996 was accounted
for primarily by reduced pre-tax income of Multi-Arc, offset by the one-time
tax benefit discussed above.
Investment income for 1996 includes recognition of $232,000 of deferred
income on the collection of notes related to the sale of a minority interest
in Multi-Arc and $42,000 of interest on said notes, offset by a writedown of
$143,000 on the Company's investment in Integrated Brands Inc. ("Integrated").
Effects of Inflation
Inflation has a minimal effect on Andal's operations.
Liquidity and Capital Resources
The Company had $17,875,000 of cash at September 30, 1997, substantially
all of which resulted from the sale of Multi-Arc; and it believes that income
from its cash and investments will be sufficient to fund its operating cash
needs for the foreseeable future. The Company has no indebtedness.
New Accounting Pronouncements
In the first quarter of fiscal 1998, the Company is required to adopt the
provisions of FASB 128, "Earnings per Share." This pronouncement is not
expected to have any impact on the reported amounts of earnings per share of
the Company.
Trends
As a result of the disposition of Multi-Arc Inc. during the past fiscal
year, comparative historical financial information is not indicative of the
Company's anticipated results of operations. Income in future periods will be
dependent upon releases of funds from the escrows (which income has been
deferred) and the interest earned on the Company's cash and investments, less
the cost of corporate office operations.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements at page 20 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, 1997.
Name Age Positions and Offices with the Company
Andrew J. Frankel 65 Chairman of the Board of Directors
and Chief Executive Officer
Alan N. Cohen 66 President and Director
Michael S. Huber 54 Senior Vice President, Chief Financial
Officer, and Treasurer
Mary Lou Holcombe 53 Vice President and Secretary
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 (except for the period September
1, 1996 through September 30, 1997, during which time he served as a Director).
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
served as President of the Company from October 1981 (except for the period
September 1, 1996 through September 30, 1997). 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 the Boston Celtics Limited Partnership.
Michael S. Huber joined the Company in December 1987 as Senior Vice
President, Chief Financial Officer, and Treasurer and has served in that
position continuously (except for the period September 1, 1996 through
September 30, 1997).
Ms. Holcombe has been employed by the Company since 1970 (except for the
period September 1, 1996 through September 30, 1997) and served as Assistant
Vice President and Secretary of the Company from August 1994 to September 1,
1996. Ms. Holcombe was re-elected Secretary on October 1, 1997.
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 $100,000 for the
year ended September 30, 1997.
SUMMARY COMPENSATION TABLE
Annual Compensation Long All Other
------------------------------ Term Compensation
Name and Other Annual Options ($)
Principal Salary Bonuses Compensation SARs (401K Plan
Position Year ($) ($) (1) (#) Contributions)
Peter D. Flood 1997 250,000 1,510,000 (2) 0 4,750
Chief Executive
Officer and 1996 250,000 138,000 (2) 0 4,750
President from
September 1996 1995 250,000 151,000 (2) 2,500(3) 4,620
to September 30,
1997 and Chief
Executive of
Multi-Arc
Walter N. Kreil, 1997 149,350 580,000 (2) 0 4,750
Jr.
Senior Vice 1996 142,000 35,000 (2) 0 4,750
President and
Chief Financial 1995 135,200 50,000 (2) 500(3) 4,620
Officer from
September 1996
to September 30,
1997 and Chief
Financial
Officer of
Multi-Arc
Andrew J. 1997 0 0 0 0 0
Frankel
Chief Executive 1996 157,000 0 42,739 0 0
Officer through
August 1996 1995 244,000 0 33,333 0 0
Alan N. Cohen 1997 0 0 0 0 0
President
through August 1996 157,000 0 16,000 0 0
1996
1995 244,000 0 16,000 0 0
(1) Other Annual Compensation includes professional services and
supplemental life and accrued medical insurance, as follows:
Andrew J. Frankel Alan N. Cohen
------------------------- -------------
Professional Supplemental Professional
Services Insurance Services
------------ ------------ ------------
1996 10,000 10,494 10,000
1995 10,000 5,194 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.
The salaries of Messrs. Flood and Kreil were paid by and charged to
Multi-Arc for all years.
Certain bonuses paid to Messrs. Flood and Kreil were paid by and charged
to Andal as follows:
Amounts Paid by Andal to
-----------------------------------
Year Peter D. Flood Walter N. Kreil, Jr.
-------------- --------------------
1997 $1,400,000(a) $550,000(b)
1996 0 0
1995 0 15,000
(a) Consists of a bonus payment of $1,150,000 as a result of the sale of
Multi-Arc, plus a bonus payment of $250,000 in connection with the
1996 execution of an employment agreement. In addition, in 1997,
Multi-Arc paid a bonus of $110,000 to Mr. Flood in accordance with
the employment agreement.
(b) Consists of a bonus payment of $500,000 as a result of the sale of
Multi-Arc, plus a bonus payment of $50,000 in accordance with the
1996 execution of an employment agreement. In addition, in 1997,
Multi-Arc paid a bonus of $30,000 to Mr. Kreil in accordance with an
incentive compensation plan.
On September 30, 1997, Messrs Flood and Kreil exercised their options to
acquire common shares of Multi-Arc. As a result of the Multi-Arc sale, they
received net cash of $220,000 and $35,000, respectively, from the sale of
their ownership in Multi-Arc resulting from the exercise of such options and
from the sale of Multi-Arc's stock and debentures they had acquired in 1995
(after deducting for payments required to exercise the options and repay loans
made to them in 1995 to acquire the Multi-Arc shares and debentures).
Stock Options
No stock options or stock appreciation rights were granted by the Company
during the fiscal year ended September 30, 1997 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, 1997.
The following table sets forth information with respect to the exercise
during fiscal 1997 and the value as of September 30, 1997 of unexercised stock
options and stock appreciation rights for the Chief Executive Officer and all
other executive officers whose annual salary exceeded $100,000 for the fiscal
year ended September 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR END OPTION/SAR VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired on Fiscal Year End Fiscal Year End
Exercise Value (#) Exercisable ($) Exercisable/
Name (#) Realized($) /Unexercisable Unexercisable
Peter D.
Flood 0 0 2,000/3,000 45,500/68,250
Walter N.
Kreil, Jr. 0 0 300/450 6,825/10,238
Andrew J.
Frankel 0 0 0/0 0/0
Alan N. Cohen 0 0 0/0 0/0
The Company does not have a long term incentive compensation plan for its
executives.
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. Directors are reimbursed for travel expenses
incurred in attending Board and Committee meetings.
Employment Agreements
The Company does not have any employment agreements with its officers.
Pursuant to a retirement agreement between the Company and Messrs. Frankel and
Cohen entered into on August 31, 1996, the Company is obligated to provide
life and health insurance benefits to Messrs. Frankel and Cohen for the
remainder of their lives and to provide health insurance benefits to Ms.
Holcombe until age 65. In fiscal 1996, the Company recorded a charge of
$441,000 in connection with the retirement agreement.
Repricing of Options/SARs
No stock options previously granted to the Company's executive officers
were repriced during the fiscal year ended September 30, 1997.
Additional Information with Respect to Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
The Company's Compensation Committee is comprised of Messrs. Frankel and
Cohen. 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
Messrs. Frankel and Cohen comprise the Compensation Committee and are
also Chief Executive Officer and President of the Company. On October 1, 1997,
they submitted the following report:
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation policies applicable to its executive
officers are administered by the Compensation Committee (the "Committee")
of the Board of Directors.
Base Salary
The base salaries of the executive officers of the Company were
determined by employment contracts entered into in 1995. On October
1, 1997, the members of the Committee were elected as officers and
agreed to accept salaries as Chairman of the Board and President of
$100,000 each, less than they had earned in prior years.
Bonuses
The Committee reviewed and gave final approval for a bonus plan
for the Multi-Arc officers to encourage their promotion of the recent
sale of Multi-Arc.
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 Index and
the S&P 500 Index for the period October 1, 1992 to September 30, 1997.
CUMULATIVE TOTAL RETURN
Andal Shares vs. Amex Indices and S&P 500
Measurement Andal AMEX MV S & P 500
Period Invested Invested Invested
9/30/92 100 100 100
9/30/93 0 122.21 109.84
9/30/94 32 121.79 110.75
9/30/95 36 144.6 139.88
9/30/96 0 151.7 164.51
9/30/97 400 191 226.73
Assumes $100 invested on September 30, 1992 in Andal Corp. Common
Stock, the Amex Market Value Index, and the S&P 500 Index.
The closing market price per share of the Company's common stock on
September 30, 1997 has been assumed to be $25.00 per share for purposes of
computing cumulative total return. See Item 1--"Business--Stockholders'
Appraisal Rights and Item 5--Market Value for the Company's Common Equity and
Related Stockholder Matters" included elsewhere herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of December 12, 1997, 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 124,437 shares (1)
909 Third Avenue
Ninth Floor
New York, NY 10022
Andrew J. Frankel 1,730 (1)
909 Third Avenue 124,437 (2)
Ninth Floor 2,019 (3)
New York, NY 10022 602 (4)
-------
128,788 shares 29.7%
Alan N. Cohen Family 47,500 shares (1)
Company LLC
909 Third Avenue
Ninth Floor
New York, NY 10022
Alan N. Cohen 47,500 (9)
909 Third Avenue 27,712 (1)
Ninth Floor 4,250 (5)
New York, NY 10022 ------
79,462 shares 18.4%
Builtland Partners 63,294 shares (1)(6)
c/o Milstein Properties
1271 Avenue of the Americas
New York, NY 10020
Paul Milstein 99,337 shares (7)(8) 22.9%
c/o Milstein Properties
1271 Avenue of the Americas
New York, NY 10020
All officers and directors
as a group (4 persons) 209,010 shares (10) 48.2%
(1) Direct record and beneficial ownership.
(2) As the managing general partner of, and a person designated to exercise
voting power and 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 trusts 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) As manager of the Alan N. Cohen Family Company, LLC, the record holder
of these shares.
(10) Includes 650 shares issuable on exercise of stock options.
Item 13. Certain Relationships and Related Transactions
See Item 1--Business-Election of Officers and Office Relocation, Item 10--
Directors and Executive Officers of the Company, Item 11--Executive
Compensation, and Item 12--Security Ownership of Certain Beneficial Owners and
Management.
<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 20 below.
(a)(2) Financial Statement Schedules
None.
(b) Reports on Form 8-K
None.
(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
iled 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).
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) Retirement Agreement between Andal Corp. and Andrew J. Frankel
and Alan N. Cohen dated August 31, 1996 (incorporated by
reference to Exhibit 10(a) to the Company's Current Report on
Form 8-K dated August 30, 1996).
10(c) Agreement and Plan of Merger by and among Bernex, Inc., M-A
Acquisition Corp., Andal Corp., and Multi-Arc Inc.
(incorporated by reference to Exhibit 10(a) to Company's report
on Form 8-K as filed with the Securities and Exchange
Commission on October 15, 1997).
10(d) First Amendment dated September 24, 1997 to the Agreement and
Plan of Merger by and among Bernex, Inc., M-A Acquisition Corp.,
Andal Corp., and Multi-Arc Inc. (incorporated by reference to
Exhibit 10(b) to Company's report on Form 8-K as filed with the
Securities and Exchange Commission on October 15, 1997).
10(e) Second Amendment dated September 30, 1997 to the Agreement and
Plan of Merger by and among Bernex, Inc., M-A Acquisition Corp.,
Andal Corp., and Multi-Arc Inc. (incorporated by reference to
Exhibit 10(c) to Company's report on Form 8-K as filed with the
Securities and Exchange Commission on October 15, 1997).
10(f) Escrow Agreement dated September 30, 1997 among Bernex, Inc.,
Multi-Arc Inc., Andal Corp., as agent, and the Chase Manhattan
Bank as escrow agent.
10(g) Andal Escrow Agreement dated September 30, 1997, among Bernex,
Inc., Multi-Arc Inc., Andal Corp., as agent, and the Chase
Manhattan Bank as escrow agent.
10(h) Expense Escrow Agreement dated September 30, 1997, among Bernex,
Inc., Multi-Arc Inc., Andal Corp., as agent, and the Chase
Manhattan Bank as escrow agent.
27 Financial Data Schedule
<PAGE>
Index to Financial Statements
Financial Statements Page
Report of Independent Auditors 22
Consolidated Balance Sheet--September 30, 1997 and September 30, 1996 F-1
Consolidated Statement of Operations--Years ended September 30, 1997,
1996, and 1995 F-2
Consolidated Statement of Shareholders' Equity (Deficit)
--Years Ended September 30, 1997, 1996, and 1995 F-3
Consolidated Statement of Cash Flows--Years Ended September 30,
1997, 1996, and 1995 F-4
Notes to Consolidated Financial Statements F-5
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: December 23, 1997
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 December 23, 1997
(Andrew J. Frankel) Directors, Chief Executive
Officer, President, and
Director
Principal Financial Officer:
/s/ Michael S. Huber Senior Vice President, December 23, 1997
(Michael S. Huber) Chief Financial Officer,
and Treasurer
Directors:
/s/ Andrew J. Frankel Director December 23, 1997
(Andrew J. Frankel)
/s/ Alan N. Cohen Director December 23, 1997
(Alan N. Cohen)
<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, 1997 and 1996, 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, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our provide a reasonable basis for our opinion.
In our opinion, 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, 1997 and 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 2, 1997
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
September 30
1997 1996
Current assets:
Cash $ 17,875,000 $ 21,000
Accounts and notes receivable 191,000 402,000
Other current assets 36,000 0
------------- -------------
Total current assets 18,102,000 423,000
Investment in Integrated Brands, Inc. 250,000 250,000
Net assets of Multi-Arc Inc. 0 8,450,000
Escrow accounts receivable 3,407,000 0
Other assets 16,000 365,000
------------- -------------
$ 21,775,000 $ 9,488,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt due shareholders $ 0 $ 97,000
Accounts payable 223,000 126,000
Accrued expenses 3,632,000 3,794,000
------------- -------------
Total current liabilities 3,855,000 4,017,000
Deferred income 3,407,000 616,000
Shareholders' equity (deficit):
Common shares, par value $20 per share,
1,500,000 authorized, 447,359 issued 8,947,000 8,947,000
Paid-in-capital 25,995,000 25,995,000
Deficit (20,429,000) (30,087,000)
------------- -------------
Total shareholders' equity 14,513,000 4,855,000
------------- -------------
$ 21,775,000 $ 9,488,000
============= =============
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended September 30
1997 1996 1995
Operating costs and expenses:
General and administrative expense $ (417,000) $(1,953,000) $(1,333,000)
Other income (expense):
Gain on sale of 61st Street property 0 6,009,000 0
Interest expense (6,000) (747,000) (833,000)
Investment and other income 0 150,000 37,000
----------- ------------ ------------
Income (loss) from continuing operations
before income taxes (423,000) 3,459,000 (2,129,000)
(Provision) benefit for income taxes 0 (69,000) 0
----------- ------------ ------------
Income (loss) from continuing operations (423,000) 3,390,000 (2,129,000)
Income from discontinued operations
(net of income tax expense (benefit)
of $(2,311,000) in 1996 and
$532,000 in 1995 1,285,000 4,995,000 3,667,000
Gain on sale of Multi-Arc Inc.
(net of income tax expense of
$489,000 in 1997) 8,796,000 0 348,000
------------ ------------ ------------
Net income $ 9,658,000 $ 8,385,000 $ 1,886,000
============ ============ ============
Income (loss) per common share:
Income (loss) from continuing operations $ (.95) $ 9.98 $ (6.45)
Income from discontinued operations 2.87 14.71 11.12
Gain on sale of Multi-Arc Inc. 19.67 0.00 1.05
------- ------- -------
Net income $21.59 $24.69 $ 5.72
====== ====== =======
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, 1994 $7,410,000 $31,625,000 $(40,358,000) $(5,661,000) $(6,984,000)
Net income 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)
Net income 1996 0 0 8,385,000 0 8,385,000
Shares issued
pursuant to
retirement
agreement 1,300,000 (1,153,000) 0 0 147,000
Shares issued
pursuant to
retirement
of debt 900,000 504,000 0 0 1,404,000
Shares issued
pursuant to
employment
agreement 150,000 (133,000) 0 0 17,000
Issuance of
Treasury Stock
in connection
with above
transactions (813,000) (4,848,000) 0 5,661,000 0
---------- ----------- ------------ ------------ ------------
Balance at
Sept. 30, 1996 8,947,000 25,995,000 (30,087,000) 0 4,855,000
Net income 1997 0 0 9,658,000 0 9,658,000
----------- ----------- ------------ ------------ ------------
Balance at
Sept. 30, 1997 $8,947,000 $25,995,000 $(20,429,000) $ 0 $14,513,000
========== =========== ============= ============ ============
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30
1997 1996 1995
Cash provided (used) by operations:
Income (loss) from continuing operations
before income taxes $ (423,000) $ 3,390,000 $(2,129,000)
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided (used) by operations
Depreciation 0 8,000 9,000
Write down of investment in Integrated 0 143,000 0
Gain on sale of 61st Street property 0 (6,009,000) 0
Other, net 7,000 121,000 41,000
Change in operating assets and liabilities:
Decrease in accounts receivable 211,000 306,000 0
(Increase) decrease in
other current assets (36,000) 93,000 4,000
Increase (decrease) in accounts payable
and accrued liabilities (66,000) 773,000 (379,000)
Cash provided (used) by discontinued
operations 344,000 73,000 (294,000)
----------- ------------- -----------
Net cash provided (used) by operating
activities before income taxes 37,000 (1,102,000) (2,748,000)
Income taxes paid (51,000) (25,000) (25,000)
----------- ------------- -----------
Net cash provided (used) by
operating activities (14,000) (1,127,000) (2,773,000)
----------- ------------ -----------
Cash flows from financing activities:
Advances from (repayments to)
Multi-Arc Inc. (930,000) 643,000 0
Reductions of long term debt 0 (543,000) (1,357,000)
Decrease in debt due to shareholders (97,000) 0 -
----------- ------------- ------------
Net cash provided (used) by
financing activities (1,027,000) 100,000 (1,357,000)
------------ ------------- -----------
Cash flows from investing activities:
Net proceeds from sale of
Multi-Arc Inc. 18,895,000 468,000 2,671,000
Distributions from Multi-Arc Inc. 0 0 957,000
Net proceeds from sale of
61st Street property 0 529,000 0
Other, net 0 0 18,000
------------ ------------- -----------
Net cash (used) by investing activities 18,895,000 997,000 3,646,000
------------ ------------- -----------
(Decrease) increase in cash 17,854,000 (30,000) (484,000)
Cash at beginning of year 21,000 51,000 535,000
------------ ------------- -----------
Cash at end of year $17,875,000 $ 21,000 $ 51,000
============ ============= ===========
See accompanying notes.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of Andal Corp.
("Andal" or the "Company") and its subsidiaries, all of which subsidiaries are
inactive and insignificant. As discussed in Note 2, on September 30, 1997,
the Company closed on the sale of its only operating business, Multi-Arc Inc.
("Multi-Arc"); and, thereafter, its operations consist of the maintenance of a
corporate executive and administrative office. Accordingly, the consolidated
financial statements for 1996 and 1995 have been reclassified to show the
accounts of Multi-Arc as a discontinued operation. (See Note 2.)
Property and Equipment
Property and equipment are recorded at cost and depreciated over estimated
useful lives on a straight-line basis. The Company's property and equipment is
comprised of office furniture and equipment, all of which is fully depreciated.
Stock Based Compensation
The Company accounts for its stock based compensation arrangements under
the provisions of APB 25, "Accounting for Stock Issued to Employees."
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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 immaterial.
The average number of shares used in computing primary income (loss) per
share was 447,359 in 1997, 339,639 in 1996, and 329,859 in 1995.
2. SALE OF MULTI-ARC
During the year ended September 30, 1997, Andal Corp. (the "Company" or
"Andal"), through its majority-owned Multi-Arc Inc. subsidiary ("Multi-Arc"),
had been engaged in surface enhancement which is the utilization of advanced
technologies to apply thin-film coatings of various metals, metal compounds,
and other materials to base materials to enhance their hardness, wear and
corrosion resistance, lubricity, and appearance.
On September 25, 1997, the Company's shareholders at a meeting of
shareholders approved an Agreement and Plan of Merger (the "Agreement") dated as
of June 9, 1997, between Bernex Inc. ("Bernex"), M-A Acquisitions Corp., Multi-
Arc, and the Company. The Agreement, in essence, represented a contract to sell
Multi-Arc to Bernex for cash. Bernex and M-A Acquisition Corp. are indirectly
owned subsidiaries of Saurer AG, a publicly traded Swiss corporation.
The sale of Multi-Arc was completed on September 30, 1997. Pursuant
to the Agreement, M-A Acquisition Corp. was merged into Multi-Arc; and Multi-
Arc became the surviving corporation and also became wholly-owned by Bernex.
The Company recorded a gain of approximately $8.8 million from the sale.
As a result of the merger, the Company received net proceeds of
approximately $17.8 million of cash and may be entitled to receive additional
cash from three escrow funds which were established at the time of closing, as
described below. As a result of the sale, the Company has no operating
business. The directors of the Company are currently considering whether the
Company should be liquidated, function as an investment company, or seek to
enter some other business activity. A decision on the future direction of the
Company is expected to be made by during fiscal 1998.
Net Proceeds from the Sale of Multi-Arc
The 100% ownership of Multi-Arc was sold to Bernex for $29,200,000 in
cash. At the time of closing, Andal owned approximately 84% of Multi-Arc. A
reconciliation of Andal's 84% share of the gross proceeds to the amount of
cash actually received by Andal at the closing is as follows:
000's
Andal share of gross proceeds--approximately 84% ownership $24,517
Plus:
Net payment received from Multi-Arc stock option holders
and minority shareholders pursuant to the Agreement 839
Less:
Payments to Escrow accounts
Main Escrow Fund (2,451)
Tax Escrow Fund (955)
Expense Escrow Fund (630)
--------
Net proceeds before amounts paid at closing 21,320
Bonus payments to Multi-Arc management (1,965)
Repayment of intercompany indebtedness to Multi-Arc (1,390)
Repayment of shareholder loan (97)
-------
Net cash received by Andal $17,868
========
The Main Escrow Fund
An escrow fund for a portion of the selling price of Multi-Arc, of which
Andal's share is approximately $2,451,000, was established at the closing to
secure Bernex against breaches of representations and warranties and the
covenants made by Multi-Arc and the Company in connection with the Agreement.
This escrow fund (the "Main Escrow") may also be a source for payment of
certain indemnifications for environmental and tax obligations, and also for
payment to Multi-Arc minority shareholders who exercise their appraisal rights
and obtain an award in excess of their pro rata share of the agreed to selling
price of Multi-Arc. Certain types of claims against the Main Escrow would have
to aggregate $700,000 before such claims would be eligible for reimbursement
from the fund, and then only the amount over $700,000 would be eligible. By
the terms of the Agreement, the Main Escrow terminates on March 31, 1999.
While the Company believes that its representations and warranties
concerning Multi-Arc are accurate and that adequate provision has been made
for all indemnifications, the Company has deferred recognition of the gain
equal to the $2,451,000 until such time as the cash has been received.
The Tax Escrow Fund
A second escrow fund (the "Tax Escrow") was established under the
Agreement out of funds which would otherwise have been payable to Andal in the
amount of $955,000 to indemnify Bernex against certain tax obligations of
Andal to a taxing authority which have been assessed and which were contested
by Andal and not paid. If, by July 31, 2002, these tax claims have not been
resolved entirely, Andal has agreed to pay $300,000 to Bernex out of this fund.
Under certain circumstances, Andal is entitled to use this fund for payment of
certain taxes.
The Company has established reserves in its financial statements related to
this tax obligation, and the Company has determined that it is not reasonably
possible that the resolution of this contingency will have a material adverse
impact upon income in future periods. Nevertheless, the Company believes it
prudent to defer recognition of the gain equal to this Tax Escrow Fund until
such time as it is received in cash.
The Expense Escrow Fund
At the closing, an escrow fund of $750,000 (the "Expense Escrow") was
established out of the proceeds otherwise payable to Andal and the minority
shareholders of Multi-Arc to pay for the legal and other expenses of Andal and
Multi-Arc relating to the sale. At and soon after closing, a substantial
portion of this fund was disbursed in payment of such expenses. Recovery from
the fund will not be material and will be recognized as income when received.
The escrow funds are in the possession of a commercial bank which serves as
escrow agent and are being invested in a money market fund pending their
resolution.
3. PURCHASE AND SALE OF THE UBC PROPERTY
Prior to May 8, 1996, the Company, directly or through a wholly-owned
subsidiary, UBC Virginia Corp. ("UBC Corp.) had owned an option (the "Option")
to purchase a parcel of real estate (the "Property") located on 61st Street and
First Avenue in New York City, which Option had been carried on the books of the
Company at nil value for many years. The original cost of the Option was $1.5
million. UBC Corp. was merged into the Company in March 1996, after which time
the Option became directly owned by the Company.
In 1990, the Option was pledged as security for a $5 million loan,
hereafter referred to as the "Option Loan," made to the Company by Alan N.
Cohen, who was then 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, who was then Chairman of the Board and
a Director of the Company, is a general partner (collectively, in such capacity,
the "Option Lenders").
The Option granted the Company the right to purchase the Property for
approximately $3 million in cash and was exercisable only after the death of the
later to die of two of the principals of the corporation that granted the
Option. Such death occurred in 1995. The Company did not have the cash
required to exercise the Option, and it could not raise it through borrowing
from unrelated parties or through the sale of assets other than the Option.
However, under the terms of the Option Loan, the Company was obligated to
exercise the Option. Accordingly, the Option was exercised in October 1995;
and the Company purchased the Property on May 8, 1996. In order to make the
purchase, on May 7, 1996, the Company borrowed $3.3 million (the "Demand Loan")
from the Option Lenders evidenced by a demand note and secured by a mortgage
on the Property. The Demand Loan bore interest at 10% per annum.
The Company's failure to exercise the Option and pay the purchase price for
the Property would have resulted in an event of default under the Option Loan,
which would have given the Option Lenders the right to exercise the Option on
the Company's behalf and to declare the Option Loan immediately due and payable,
including all sums advanced by the Option Lenders in exercising the Option. In
addition, the Option Lenders would have had all of the remedies available to
them under applicable law for secured lenders, including, without limitation,
the public or private sale of the Property acquired by exercise of the Option.
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 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 were not able to
identify a buyer. The Company's attempts to sell the Option did not result in
any bona fide offer from a third party to purchase the Option.
Once it was learned that the Option had become exercisable, the Option
Lenders expressed an interest in acquiring the Property in satisfaction of the
amount outstanding on the Option Loan. In that event, the Company would no
longer have been obligated with respect to the $3 million purchase price
obligation due on the 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. After discussion, the Board members
who were not Option Lenders (Messrs. Flood and Glickman) authorized the officers
of the Company to engage an independent appraiser to conduct an appraisal of
the Property, following which such Board members would seek to negotiate a
transaction with the Option Lenders taking into account, in addition to the
appraisal, all material circumstances relating to the 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 would 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 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 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.
On March 4, 1996, at a special meeting of the Board of Directors of the
Company, appropriate officers of the Company were authorized and empowered to
engage in negotiations with the Option Lenders to reach a definite agreement
to sell the Option to them under terms and conditions that were outlined by
the Board. Although the parties were unable to reach a definitive agreement
prior to May 8, 1996, the Company continued to negotiate with affiliates of the
Option Lenders for the sale of the Property to them; and, on July 10, 1996, the
Company entered into a contract to sell the Property to FAM, LLC ("FAM"), a
Delaware limited liability company owned by Frankhill Associates, the Alan N.
Cohen Family Company, LLC, a Delaware limited liability company, of which Alan
N. Cohen is manager, and Builtland Associates, a New York general partnership,
of which Paul Milstein is a general partner. Builtland Associates is the
managing director of FAM and, as such, controls its activities.
On August 1, 1996, FAM purchased the Property for $9.1 million, paid for
as follows:
a) Cancellation of the principal balance of the Option Loan in the
amount of $5,571,285 (after adjustment for a restructuring which
occurred in 1992) due to Frankhill Associates, the Alan N. Cohen
Family Company, LLC, and Paul Milstein, and at closing held by
FAM.
b) Cancellation of the Demand Loan of $3.3 million due Frankhill
Associates, the Alan N. Cohen Family Company, LLC, and Paul
Milstein, and at closing held by FAM.
c) Cash payment to the Company of $228,715.
In addition to the consideration outlined above, the Company was not
required to pay unpaid interest of $283,000 on the Option Loan and Demand Loan
and would have been entitled to additional consideration if, within one year
from the date of sale to FAM, all or any portion of the Property was further
transferred to a bona fide third party or if FAM entered into an agreement to
transfer all or any portion of the Property to a bona fide third party and such
transfer ultimately occurred. In either of such events, the Company would have
been entitled to 50% of the amount by which the "Net Proceeds" of the sale of
all or any portion of the Property exceeds $10 million. In no event could such
additional consideration exceed $3 million. As of August 1, 1997, FAM had not
transferred or entered into any agreement to transfer the property to an
independent third party. Accordingly, the Company is not entitled to any
additional consideration.
The Company reported a gain of approximately $6 million from the sale.
4. RETIREMENT AGREEMENT
On August 31, 1996, Messrs. Andrew J. Frankel, then Chairman of the Board
of Directors, and Alan N. Cohen, then President of the Company, retired pursuant
to an agreement which provides that, in exchange for the issuance of 32,500
common shares of the Company to each of them, they agreed to reimburse Andal for
the lease obligation of Andal's executive headquarters office in New York City
and certain other costs of operation of that office, including the salary of
Andal employees located there. The Company agreed to maintain, at its own
expense, health and life insurance benefits on Andal's New York employees and to
continue to pay the costs of a letter of credit guarantee by Mr. Frankel and Mr.
Cohen until September 29, 1998, at which time Andal would use its best efforts
to replace the letters of credit guarantee with other security. The Company
intends to fund this outstanding letter of credit with an interest-bearing cash
deposit of approximately $900,000, at which time the guarantors will be released
from their guarantee. The Company recorded a charge of $441,000 in 1996 in
connection with this Agreement. In September 1996, Andal's executive office
records were moved to Multi-Arc's facilities in Rockaway, New Jersey.
In September 1997, as a result of the sale of Multi-Arc, the Company
relocated its executive headquarters back to the New York City location; and,
on October 1, 1997, Messrs. Frankel and Cohen reassumed their positions as
Chairman and President, respectively, of the Company. In addition, the Company
reassumed all of the costs of the office, including executive, administrative,
and secretarial expenses, except that Messrs. Frankel and Cohen agreed to
reimburse the Company for 25% of the lease, utility, office expense, and other
costs of maintaining the premises (excluding salary costs of all Company
personnel), respecting their personal use of the premises.
5. 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 Union National Bank. Because of the non-recourse nature of
the loans, the gain on the sale of Multi-Arc common stock of approximately
$396,000 was deferred until such time as the management loans were repaid,
which occurred on September 30, 1997.
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. Approximately $450,000 of the common stock sold, and
$450,000 principal amount of the debentures sold were evidenced by a promissory
note which required monthly principal payments over three years plus interest at
6% per annum. The unpaid balance of this note was $555,000 at September 30,
1996. An additional $153,000 of common stock and $153,000 principal amount of
the debentures were sold on open account which was paid in October 1996. The
gain on these sales of Multi-Arc common stock was $800,000, of which $452,000
was deferred. In 1996, $232,000 of the deferred gain was included in investment
income.
The management loans and the balance of the promissory note were repaid
upon the sale of Multi-Arc (described in Note 2). Accordingly, all deferred
gains relating to the minority interest sales discussed above were realized at
September 30, 1997.
6. DISCONTINUED OPERATIONS
The income (loss) from discontinued operations in 1997, 1996, and 1995 is
comprised of the following:
1997 1996 1995
Gain on sale of Multi-Arc $ 8,796,000 $ 0 $ 348,000
Reversal of reserve for income taxes 0 0 996,000
Equity in earnings of Multi-Arc 1,275,000 4,761,000 2,660,000
Income from discontinued
construction operations 10,000 234,000 11,000
------------ ---------- ----------
$10,081,000 $4,995,000 $4,015,000
=========== ========== ==========
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.
Construction operations consisted of construction subcontracting businesses
involved in wall, flooring, 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 income from
discontinued construction operations for 1997, 1996, and 1995 is principally due
to claims, settlements, and miscellaneous income.
See Note 2 for a discussion of the sale of Multi-Arc.
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 3.5%. In the
fourth quarter of 1996, based on then current market conditions, the Company
recorded a writedown of $143,000 of its investment in Integrated.
8. 401(k) PLANS
The Company maintains a defined contribution 401(k) savings plan for the
benefit of its employees. Annual contributions to the plan are at the
discretion of management and were insignificant for all periods presented.
9. DEBT DUE SHAREHOLDERS
On August 31, 1996, Andal Corp. retired $1,404,000 of indebtedness owing to
Frankhill Associates, Alan N. Cohen, and Paul Milstein in exchange for 45,000
shares of the Company's common stock which is reflected as a contribution of
capital in the accompanying financial statements. Frankhill Associates and
Messrs. Cohen and Milstein had purchased the indebtedness from the Fleet Bank in
1994. Subsequently, Peter D. Flood purchased a portion of such debt from
Frankhill Associates and Messrs. Cohen and Milstein. During fiscal 1996, the
Company had repaid $543,000 of the debt in cash. At September 30, 1996, $97,000
of the Fleet Assignee Debt was owing to Mr. Flood. This amount was repaid to
Mr. Flood on September 30, 1997.
10. CAPITAL SHARES
At September 30, 1997, common shares reserved for future issuance were as
follows:
Issuable under stock option plans 15,000
Messrs. Frankel and Cohen retired on August 31, 1996 pursuant to an
agreement which provided for the issuance of 32,500 common shares of the Company
to each of them (see Note 4).
See Note 10 for a discussion of the 45,000 shares of common stock of the
Company issued in cancellation of the Fleet Assignee debt.
On August 31, 1996, the Company issued 7,500 common shares to Peter D.
Flood, pursuant to his employment agreement and recorded an expense of $17,000.
11. 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.
ptions 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 24
months after grant. After 24 months, 40% of the option shares may be exercised;
after 36 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 1997, 1996, and
1995.
At September 30, 1997 and 1996, there were 6,125 shares reserved for future
grant of options. At September 30, 1997, 3,550 shares were exercisable. None
were exercisable at September 30, 1996. A summary of stock option transactions
follows:
1987 Stock Option Plan
Average Price per
Number of Shares Share
Options outstanding at
September 30, 1993 8,930 $ 11.15
Canceled during 1994 (100) $112.50
-------
Options outstanding at
September 30, 1994 8,830 $ 10.00
Canceled during 1995 (8,830) $ 10.00
Granted during 1995 8,950 $ 2.25
-------
Options outstanding at
September 30, 1995 8,950 $ 2.25
Cancelled during 1996 (75) $ 2.25
-------
Options outstanding at
September 30, 1997
and 1996 8,875 $ 2.25
=====
12. 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 Company uses the liability method 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.
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, 1997
and 1996 are as follows:
1997 1996
Deferred Tax Assets:
Accruals and Reserves $ 1,218,000 $ 1,218,000
Deferred Gain on Sale of Subsidiary Stock 0 228,000
Future Tax Benefit of NOL Carryforwards 5,184,000 7,297,000
Future Tax Benefit of Credit Carryforwards 239,000 69,000
------------ ------------
Gross Deferred Tax Assets 6,641,000 8,812,000
Valuation Allowance (6,641,000) (8,812,000)
------------ ------------
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) benefit applicable to continuing operations for the year
ended September 30, 1997, 1996, and 1995 is:
1997 1996 1995
Tax (expense) benefit at
U. S. statutory rate $ (144,000) $ 1,176,000 $(724,000)
Utilization of federal and state
net operating losses 2,311,000 0 0
Other 4,000 4,000 3,000
Change in valuation allowance (2,171,000) (1,111,000) 721,000
------------ ------------ ----------
Income tax (expense) benefit $ 0 $ 69,000 $ 0
At September 30, 1997, the Company had net operating loss carryforwards
("NOL's") for federal income tax purposes of approximately $13.3 million which
expire in varying amounts through 2010.
The gain on sale of Multi-Arc stock for income tax purposes was
approximately $8.5 million. The corresponding income tax liability on such sale
is approximately $489,000, which principally represents the federal alternative
minimum taxes. As part of the sales agreement, the Company and the acquirer may
elect to treat such stock sale as a sale of Multi-Arc assets, pursuant to
Section 338(h)(10) of the Internal Revenue Code. If such election were to be
made, the acquirers have agreed to indemnify Andal for any federal or state
income taxes due in excess of $170,000. The Company's federal net operating
loss carryforward would be reduced to approximately $4.6 million in the event of
such election.
14. LITIGATION
The Company is aware of various lawsuits, claims, and administrative
proceedings which are pending involving it or 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 condition.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997
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).
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) Retirement Agreement between Andal Corp. and Andrew J. Frankel and
Alan N. Cohen dated August 31, 1996 (incorporated by reference to
Exhibit 10(a) to the Company's Current Report on Form 8-K dated August
30, 1996).
10(c) Agreement and Plan of Merger by and among Bernex, Inc., M-A
Acquisition Corp., Andal Corp., and Multi-Arc Inc. (incorporated by
reference to Exhibit 10(a) to Company's report on Form 8-K as filed
with the Securities and Exchange Commission on October 15, 1997).
10(d) First Amendment dated September 24, 1997 to the Agreement and Plan of
Merger by and among Bernex, Inc., M-A Acquisition Corp., Andal Corp.,
and Multi-Arc Inc. (incorporated by reference to Exhibit 10(b) to
Company's report on Form 8-K as filed with the Securities and Exchange
Commission on October 15, 1997).
10(e) Second Amendment dated September 30, 1997 to the Agreement and Plan
of Merger by and among Bernex, Inc., M-A Acquisition Corp., Andal
Corp., and Multi-Arc Inc. (incorporated by reference to Exhibit
10(c) to Company's report on Form 8-K as filed with the Securities and
Exchange Commission on October 15, 1997).
10(f) Escrow Agreement dated September 30, 1997 among Bernex, Inc., Multi-
Arc Inc., Andal Corp., as agent, and the Chase Manhattan Bank as
escrow agent.
10(g) Andal Escrow Agreement dated September 30, 1997 among Bernex, Inc.,
Multi-Arc Inc., Andal Corp., as agent, and the Chase Manhattan Bank as
escrow agent.
10(h) Expense Escrow Agreement dated September, 1997 among Bernex, Inc.,
Multi-Arc Inc., Andal Corp., as agent, and the Chase Manhattan Bank as
escrow agent.
27 Financial Data Schedule
<PAGE>
EXHIBIT 10(f)
- -------------
ESCROW AGREEMENT
This Escrow Agreement, dated September 30, 1997 (the "Closing Date"), among
Bernex Inc., a Delaware corporation ("Parent"), Multi-Arc Inc., a Delaware
corporation (the "Company"), Andal Corp., a New York corporation, as agent for
the Company Shareholders (as defined below) ("Andal"), and The Chase Manhattan
Bank, a New York banking corporation, as escrow agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Agreement and Plan of
Merger dated June 9, 1997, as amended September 24, 1997 and September 30, 1997
(the "Merger Agreement") among Parent, M-A Acquisition Corp., Andal and the
Company.
Pursuant to Article 12 of the Merger Agreement, Andal has been appointed as
agent for the Company Shareholders to act on behalf of the Company Shareholders
in connection with the Merger Agreement and this Escrow Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. Establishment of Escrow
(a) Simultaneously with the execution of this Agreement, Parent is
depositing with Escrow Agent into the "Andal Corp. Expense Escrow" account
(Account No. 10649) an amount equal to Two Million Nine Hundred and Twenty
Thousand Dollars ($2,920,000) in immediately available funds (as increased by
any earnings thereon and as reduced by any disbursements, amounts withdrawn
under Section 5(j), or losses on investments, the "Escrow Fund"). Escrow Agent
acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment of funds
Except as Parent and Andal may from time to time jointly instruct Escrow
Agent in writing, the Escrow Fund shall be invested from time to time until
disbursement of the entire Escrow Fund, to the extent possible, in direct
obligations of, or obligations fully guaranteed or insured by, the United States
of America, or interest bearing accounts of any bank or trust company
incorporated under the laws of the United States of America or any state, which
has combined capital and surplus of not less than $100,000,000, in each case
having maturity of not more than one year after the date of acquisition thereof.
Escrow Agent is authorized to liquidate in accordance with its customary
procedures any portion of the Escrow Fund consisting of investments to provide
for payments required to be made under this Agreement.
3. Claims
(a) From time to time on or before March 31, 1999, Parent may give notice
(a "Notice") to Andal and Escrow Agent specifying in reasonable detail the
nature and dollar amount of any claim (a "Claim") it may have under Section 2.8,
Section 7.13, Article 10, Section 11.2 or Section 11.3 of the Merger Agreement.
If Andal gives notice to Parent and Escrow Agent disputing any Claim (a "Counter
Notice") within 30 days following receipt by Escrow Agent of the Notice
regarding such Claim, such Claim shall be resolved as provided in Section 3(b).
If no Counter Notice is received by Escrow Agent within such 30-day period, then
the dollar amount of damages claimed by Parent as set forth in its Notice shall
be deemed established for purposes of this Escrow Agreement and the Merger
Agreement and, at the end of such 30-day period, Escrow Agent shall pay to
Parent the dollar amount claimed in the Notice from the Escrow Fund. Escrow
Agent shall not inquire into or consider whether a Claim complies with the
requirements of the Merger Agreement.
(b) If a Counter Notice is given with respect to a Claim, Escrow Agent
shall make payment with respect thereto only in accordance with (i) joint
written instructions of Parent and Andal or (ii) a final non-appealable order of
a court of competent jurisdiction.
4. Termination of Escrow
(a) On March 31, 1999, Escrow Agent shall pay and distribute, subject to
Section 4(c), the remaining balance of the Escrow Fund to the shareholders of
the Company (each, a "Company Shareholder" and, collectively, the "Company
Shareholders") in such proportions and to the address set forth for each Company
Shareholder as set forth on Schedule I attached hereto, unless (i) any Claims
are then pending, in which case an amount equal to the aggregate dollar amount
of such Claims (as shown in the Notices of such Claims) shall be retained by
Escrow Agent in the Escrow Fund (and the balance paid to the Company
Shareholders as aforesaid), or (ii) Parent has given notice to Andal and Escrow
Agent specifying in reasonable detail the nature of any other claim it may have
under Section 2.8, Section 7.13, Article 10, Section 11.2 or Section 11.3 of the
Merger Agreement with respect to which it is unable to specify the amount of
Damages, in which case the entire Escrow Fund shall be retained by Escrow Agent.
(b) Following the distribution pursuant to paragraph (a) above, any
portion of the Escrow Fund not distributed in accordance with clauses (i) or
(ii) of such paragraph (a) shall be retained by Escrow Agent until it receives
joint written instructions of Parent and Andal or a final non-appealable order
of a court of competent jurisdiction, in which case, subject to any contrary
direction in such instruction or order, the Escrow Agent shall distribute,
subject to Section 4(c), such remaining portion of the Escrow Fund to the
Company Shareholders in such proportions and to the address set forth for each
Company Shareholder as set forth on Schedule I attached hereto.
(c) Notwithstanding the foregoing, no distribution of any portion of the
Escrow Fund shall be made to any Company Shareholder set forth on Schedule II
attached hereto unless and until the Escrow Agent receives joint written
instructions of Parent and Andal or a final non-appealable order of a court of
competent jurisdiction, in either case, to the effect that distributions may be
made to such Company Shareholder, in which case the Escrow Agent shall then
deliver to such Company Shareholder all distributions, without interest, to
which such Company Shareholder was theretofore entitled. Pending any such
distribution, Escrow Agent shall hold all amounts allocable to such Company
Shareholders pursuant to paragraph (a) above, in accordance with Section 2 of
this Agreement.
(d) On the second business day following the seven month anniversary of
the date the entire Escrow Fund shall have been distributed, other than amounts
held pursuant to Section 4(c) or otherwise, the Escrow Agent shall distribute
such amounts held pursuant to Section 4(c) to the Company.
5. Duties of Escrow Agent
(a) Escrow Agent shall not be under any duty to give the Escrow Fund held
by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder shall not earn or
accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross negligence
or willful misconduct and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Agent, the other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent (and any successor Escrow Agent) from and against any and
all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the foregoing, Escrow Agent shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any reasonable delays in the
investment or reinvestment of the Escrow Fund, or any loss of interest incident
to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person (or any successor
representative whom Escrow Agent has received notice of in accordance with
Section 8 of this Agreement) has full power and authority to instruct Escrow
Agent on behalf of that party unless written notice to the contrary is delivered
to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with respect to
any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
(e) Escrow Agent does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and having only possession
thereof. Any payments of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United States taxes. The
parties hereto will provide Escrow Agent with appropriate Internal Revenue
Service Forms W-9 for tax identification number certification, or non-resident
alien certifications. This Section 5(e) and Section 5(b) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
(f) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any time resign
as such by delivering the Escrow Fund to any successor Escrow Agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
(i) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Agent is in doubt as to what action it should
take hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final non-appealable order of a court of
competent jurisdiction directing delivery of the Escrow Fund or (ii) a written
agreement executed by the other parties hereto directing delivery of the Escrow
Fund, in which event Escrow Agent shall disburse the Escrow Fund in accordance
with such order or agreement. Any court order shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to Escrow Agent to the
effect that the order is final and non-appealable. Escrow Agent shall act on
such court order and legal opinion without further question.
(j) The parties hereto (other than Escrow Agent) shall pay Escrow Agent
compensation (as payment in full) for the services to be rendered by Escrow
Agent hereunder in the amount set forth on Schedule III hereto and agree to
reimburse Escrow Agent for all reasonable expenses, disbursements and advances
incurred or made by Escrow Agent in performance of its duties hereunder
(including reasonable fees, expenses and disbursements of its counsel). Any
such compensation and reimbursement to which Escrow Agent is entitled shall be
borne 50% by Parent and 50% by the Company Shareholders . Any fees or expenses
of Escrow Agent or its counsel that are not paid as provided for herein may
be taken from any property held by Escrow Agent hereunder.
(k) The other parties hereto authorize Escrow Agent, for any securities
held hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, the
Depositary Trust Company and the Federal Reserve Book Entry System.
6. Limited Responsibility
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto (to which Escrow Agent is not a party) except this Agreement.
7. Ownership for Tax Purposes
Parent and Andal agree that, for purposes of federal and other taxes based
on income, the Company Shareholders will be treated as the owner of the Escrow
Fund in such proportions as set forth on Schedule I, and that the Company
Shareholders will report all income, if any, that is earned on, or derived from,
the Escrow Fund as their income, in such proportions, in the taxable year or
years in which such income is properly includible and pay any taxes attributable
thereto.
8. Notices
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Parent or the Company:
Bernex Inc.
c/o Saurer AG
Schlassgasse 2
CH- 9320 Arbon
Switzerland
Attention: Ernst Kessler, Director
Telephone No.: 41-71-447-5282
Facsimile No.: 41-71-447-5288
and
Bernex Inc.
c/o Berna AG Olten
Industriestrasse 211
CH- 4600 Olten
Switzerland
Attention: Thomas Weilenmann, Chairman of the Board
Telephone No.: 41-62-287-8787
Facsimile No.: 41-62-287-8788
and
Bernex Inc.
c/o Saurer Textile Systems Charlotte Inc.
4200 Performance Road
P.O. Box 668027
Charlotte, North Carolina 28266
Attention: George E. Rickles III
Telephone No.: (704) 394-8111
Facsimile No.: (704) 394-1502
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, LLP
2029 Century Park East, Suite 4150
Los Angeles, California 90067
Attention: Gary Apfel, Esq.
Telephone No.: 310-229-1040
Facsimile No.: 310-229-3870
Andal:
c/o Messrs. Andrew J. Frankel and Alan N. Cohen
909 Third Avenue
New York, New York 10022
Telephone No.: (212) 376-5545
Facsimile No.: (212) 376-5669
with copies to:
Dillon, Bitar & Luther
53 Maple Avenue
Morristown, New Jersey 07963
Attention: William F. Campbell, III, Esq.
Telephone No.: (201) 539-3100
Facsimile No.: (201) 292-2960
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Neale Albert, Esq. and
Alfred Youngwood, Esq.
Telephone No.: (212) 373-3000
Facsimile No.: (212) 373-2315
Escrow Agent:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Mr. William Ponce
Telephone No.: (212) 789-4108
Facsimile No.: (212) 270-4823
9. Jurisdiction; Service of Process
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New York, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
10. Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
11. Section Headings
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
12. Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
13. Exclusive Agreement and Modification
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
parties hereto.
14. Assignments, successors and no third-party rights
Neither Parent nor Andal may assign any of its rights under this Agreement
without the prior consent of the other, except that Parent shall be entitled to
assign this Agreement to any Affiliate of Parent, provided that such assigning
party shall remain liable for all of its liabilities and obligations hereunder.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
15. Governing Law
This Agreement shall be governed by the laws of the State of New York,
without regard to conflicts of law principles.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PARENT:
BERNEX INC.
By:
Name: Thomas Weilenmann
Title: Chairman ofthe Board
COMPANY:
MULTI-ARC INC.
By:
Name: Peter D. Flood
Title: President
ANDAL:
ANDAL CORP., as Agent
By:
Name: Peter D Flood
Title: Chairman, President and CEO
ESCROW AGENT:
THE CHASE MANHATTAN BANK
By:
Name:
Title:
SCHEDULE I
Company Shareholders
Name and Address
Percentage (%)
SCHEDULE II
Company Shareholders Subject to Section 4(c)
SCHEDULE III
Compensation of Escrow Agent
Two thousand dollars ($2,000) plus a $25 fee for every check
issued by the Escrow Agent.
<PAGE>
EXHIBIT 10(g)
- -------------
ANDAL ESCROW AGREEMENT
This Escrow Agreement, dated September 30, 1997 (the "Closing Date"), among
Bernex Inc., a Delaware corporation ("Parent"), Multi-Arc Inc., a Delaware
corporation (the "Company"), Andal Corp., a New York corporation ("Andal"), and
The Chase Manhattan Bank, a New York banking corporation, as escrow agent
("Escrow Agent").
This is the Andal Escrow Agreement referred to in the Agreement and Plan of
Merger dated June 9, 1997, as amended September 24, 1997 and September 30, 1997
(the "Merger Agreement") among Parent, M-A Acquisition Corp., Andal and the
Company.
The parties, intending to be legally bound, hereby agree as follows:
16. Establishment of Escrow
(a) Simultaneously with the execution of this Agreement, Parent is
depositing with Escrow Agent into the "Andal Corp. Escrow Agreement" account
(Account No. 106-50-60) an amount equal to Nine Hundred Fifty Five Thousand
Dollars ($955,000) in immediately available funds (as increased by any earnings
thereon and as reduced by any disbursements, amounts withdrawn under Section
5(j), or losses on investments, the "Andal Escrow Fund"). Escrow Agent
acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Andal Escrow Fund pursuant to the terms and
conditions hereof.
17. Investment of funds
Except as Parent and Andal may from time to time jointly instruct Escrow
Agent in writing, the Andal Escrow Fund shall be invested from time to time
until disbursement of the entire Andal Escrow Fund, to the extent possible, in
direct obligations of, or obligations fully guaranteed or insured by, the United
States of America, or interest bearing accounts of any bank or trust company
incorporated under the laws of the United States of America or any state, which
has combined capital and surplus of not less than $100,000,000, in each case
having maturity of not more than one year after the date of acquisition thereof.
Escrow Agent is authorized to liquidate in accordance with its customary
procedures any portion of the Andal Escrow Fund consisting of investments to
provide for payments required to be made under this Agreement.
18. Claims
(a) From time to time on or before July 31, 2002, Parent may give notice
(a "Notice") to Andal and Escrow Agent specifying in reasonable detail the
nature and dollar amount of any claim (a "Section 11.7 Claim") it may have under
Section 11.7(a) of the Merger Agreement. If Andal gives notice to Parent and
Escrow Agent disputing any Section 11.7 Claim (a "Counter Notice") within 30
days following receipt by Escrow Agent of the Notice regarding such Section 11.7
Claim, such Section 11.7 Claim shall be resolved as provided in Section 3(c).
If no Counter Notice is received by Escrow Agent within such 30-day period, then
the dollar amount of damages claimed by Parent as set forth in its Notice shall
be deemed established for purposes of this Escrow Agreement and the Merger
Agreement and, at the end of such 30-day period, Escrow Agent shall pay to
Parent the dollar amount claimed in the Notice from the Andal Escrow Fund.
Escrow Agent shall not inquire into or consider whether a Section 11.7 Claim
complies with the requirements of the Merger Agreement.
(b) From time to time on or before July 31, 2002, Andal may give notice
(an "Andal Notice") to Parent and Escrow Agent specifying in reasonable detail
the nature and dollar amount of (i) any taxes actually paid by it to the
applicable taxing authority with respect to earnings on the Andal Escrow Fund of
which Andal is the owner pursuant to Section 7 hereof, including a calculation
prepared by an independent accounting firm as to the amount of such taxes (a
"Tax Claim") or (ii) either (A) taxes actually paid to New York City by Andal
pursuant to Section 11.7(b) of the Merger Agreement or (B) taxes proposed to be
paid to New York City by Andal pursuant to Section 11.7(b) of the Merger
Agreement, together with written evidence in form and substance satisfactory to
Parent in its sole reasonable discretion that upon such proposed payment, the
full amount of the Second Assessment referred to in Section 11.7 of the Merger
Agreement will have been paid in full (including all accrued interest through
the date of payment) and notice of the New York City account to which any such
proposed payment should be made (any such amount under this clause (ii) not to
exceed $455,000) (a "NYC Repayment Claim"). If Parent gives notice to Andal and
Escrow Agent disputing any Tax Claim or NYC Repayment Claim (a "Parent Counter
Notice") within 30 days following receipt by Escrow Agent of the Andal Notice
regarding such Tax Claim or NYC Repayment Claim, as the case may be, such Tax
Claim or NYC Repayment Claim shall be resolved as provided in Section 3(c).
If no Parent Counter Notice is received by Escrow Agent within such 30-day
period, then the dollar amount claimed by Andal as set forth in the Andal Notice
shall be deemed established for purposes of this Escrow Agreement and, at the
end of such 30-day period, Escrow Agent shall pay the dollar amount claimed in
the Andal Notice from the Andal Escrow Fund to Andal (in the case of a notice
given pursuant to clause (ii)(A) above) or New York City to the account
designated in the Andal Notice (in the case of a notice given pursuant to clause
(ii)(B) above). Andal agrees to use to the fullest extent possible any and all
deductions, tax credits, net operating loss carryforwards, and any other tax
benefits available to it to minimize the amount of taxes payable pursuant to
clause (i) of the first sentence of this Section 3(b).
(c) If a Counter Notice or Parent Counter Notice is given with respect to
a Section 11.7 Claim, a Tax Claim or a NYC Repayment Claim, as the case may be,
Escrow Agent shall make payment with respect thereto only in accordance with (i)
joint written instructions of Parent and Andal or (ii) a final non-appealable
order of a court of competent jurisdiction.
19. Termination of Escrow
(a) On July 31, 2002 (the "Distribution Date"), Escrow Agent shall
pay and distribute the sum of Three Hundred Thousand Dollars ($300,000) plus
interest earned thereon in accordance with Section 2 from the date hereof
through the Distribution Date (or, if less, the entire remaining balance of the
Andal Escrow Fund) to Parent, and the remaining balance of the Andal Escrow
Fund, if any, to Andal, unless the Escrow Agent shall have received joint
written instructions from Parent and Andal to the effect that the entire
remaining balance of the Andal Escrow Fund on the Distribution Date should be
distributed to Andal, in which case the Andal Escrow Fund shall be disbursed in
such manner (or such other manner specified in such joint written instructions).
Notwithstanding the foregoing, in the event that on the Distribution Date (i)
any Section 11.7 Claims are pending, an amount equal to the aggregate dollar
amount of such claims (as shown in the notices of such claims) shall be deducted
from the amount otherwise payable to Andal, and retained by Escrow Agent in the
Andal Escrow Fund, (ii) any Tax Claims or NYC Repayment Claims are pending, an
amount equal to the aggregate dollar amount of such claims (as shown in the
notices of such claims) shall be deducted from the amount otherwise payable to
Andal (with any remaining amount in dispute deducted from the amount otherwise
payable to Parent), and retained by Escrow Agent in the Andal Escrow Fund or
(iii) Parent has given notice to Andal and Escrow Agent specifying in reasonable
detail the nature of any other claim it may have under Section 11.7 of the
Merger Agreement with respect to which it is unable to specify the amount of
Damages, the entire amount of the Andal Escrow Fund otherwise payable to Andal
shall be retained by Escrow Agent in the Andal Escrow Fund.
(b) Following the distributions pursuant to paragraph (a) above, any
portion of the Andal Escrow Fund not distributed in accordance with the second
sentence of such paragraph (a) shall be retained by Escrow Agent until it
receives joint written instructions of Parent and Andal or a final non-
appealable order of a court of competent jurisdiction, in which case, subject to
any contrary direction in such instruction or order, the Escrow Agent shall
distribute such remaining portion of the Andal Escrow Fund to Andal.
20. Duties of Escrow Agent
(a) Escrow Agent shall not be under any duty to give the Andal Escrow Fund
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder shall not earn or
accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross negligence
or willful misconduct and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Agent, the other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent (and any successor Escrow Agent) from and against any and
all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the foregoing, Escrow Agent shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any reasonable delays in the
investment or reinvestment of the Andal Escrow Fund, or any loss of interest
incident to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person (or any successor
representative whom Escrow Agent has received notice of in accordance with
Section 8 of this Agreement) has full power and authority to instruct Escrow
Agent on behalf of that party unless written notice to the contrary is delivered
to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with respect to
any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
(e) Escrow Agent does not have any interest in the Andal Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Any payments of income from this Andal Escrow Fund shall be
subject to withholding regulations then in force with respect to United States
taxes. The parties hereto will provide Escrow Agent with appropriate Internal
Revenue Service Forms W-9 for tax identification number certification, or non-
resident alien certifications. This Section 5(e) and Section 5(b) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
(f) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any time resign
as such by delivering the Andal Escrow Fund to any successor Escrow Agent
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Andal Escrow
Fund until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
(i) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in connection with the
Andal Escrow Fund or in the event that Escrow Agent is in doubt as to what
action it should take hereunder, Escrow Agent shall be entitled to retain the
Andal Escrow Fund until Escrow Agent shall have received (i) a final non-
appealable order of a court of competent jurisdiction directing delivery of the
Andal Escrow Fund or (ii) a written agreement executed by the other parties
hereto directing delivery of the Andal Escrow Fund, in which event Escrow Agent
shall disburse the Andal Escrow Fund in accordance with such order or agreement.
Any court order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that the order is
final and non-appealable. Escrow Agent shall act on such court order and legal
opinion without further question.
(j) Andal shall pay Escrow Agent compensation (as payment in full) for the
services to be rendered by Escrow Agent hereunder in the amount set forth on
Schedule I hereto and agree to reimburse Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel). Any fees or expenses of Escrow Agent or its
counsel that are not paid as provided for herein may be taken from any property
held by Escrow Agent hereunder, provided, that if Parent is entitled under the
terms of the Merger Agreement or this Agreement to the amount of funds taken
from the Andal Escrow Fund to satisfy such fees or expenses, Andal shall make
payment to Parent of such amount at the time such portion of the Andal Escrow
Fund would have otherwise been paid to Parent.
(k) The other parties hereto authorize Escrow Agent, for any securities
held hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, the
Depositary Trust Company and the Federal Reserve Book Entry System.
21. Limited Responsibility
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto (to which Escrow Agent is not a party) except this Agreement.
22. Ownership for Tax Purposes
Parent and Andal agree that, for purposes of federal and other taxes based
on income, Andal will be treated as the owner of the Andal Escrow Fund and will
report all income, if any, that is earned on, or derived from, the Andal Escrow
Fund as its income in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
23. Notices
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Parent or the Company:
Bernex Inc.
c/o Saurer AG
Schlassgasse 2
CH- 9320 Arbon
Switzerland
Attention: Ernst Kessler, Director
Telephone No.: 41-71-447-5282
Facsimile No.: 41-71-447-5288
and
Bernex Inc.
c/o Berna AG Olten
Industriestrasse 211
CH- 4600 Olten
Switzerland
Attention: Thomas Weilenmann, Chairman of the Board
Telephone No.: 41-62-287-8787
Facsimile No.: 41-62-287-8788
and
Bernex Inc.
c/o Saurer Textile Systems Charlotte Inc.
4200 Performance Road
P.O. Box 668027
Charlotte, North Carolina 28266
Attention: George E. Rickles III
Telephone No.: (704) 394-8111
Facsimile No.: (704) 394-1502
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, LLP
2029 Century Park East, Suite 4150
Los Angeles, California 90067
Attention: Gary Apfel, Esq.
Telephone No.: 310-229-1040
Facsimile No.: 310-229-3870
Andal:
c/o Messrs. Andrew J. Frankel and Alan N. Cohen
909 Third Avenue
New York, New York 10022
Telephone No.: (212) 376-5545
Facsimile No.: (212) 376-5669
with copies to:
Dillon, Bitar & Luther
53 Maple Avenue
Morristown, New Jersey 07963
Attention: William F. Campbell, III, Esq.
Telephone No.: (201) 539-3100
Facsimile No.: (201) 292-2960
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Neale Albert, Esq. and Alfred Youngwood, Esq.
Telephone No.: (212) 373-3000
Facsimile No.: (212) 373-2315
Escrow Agent:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Mr. William Ponce
Telephone No.: (212) 789-4108
Facsimile No.: (212) 270-4823
24. Jurisdiction; Service of Process
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New York, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
25. Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
26. Section Headings
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
27. Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
28. Exclusive Agreement and Modification
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
parties hereto.
29. Assignments, successors and no third-party rights
Neither Parent nor Andal may assign any of its rights under this Agreement
without the prior consent of the other, except that Parent shall be entitled to
assign this Agreement to any Affiliate of Parent, provided that such assigning
party shall remain liable for all of its liabilities and obligations hereunder.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
30. Governing Law
This Agreement shall be governed by the laws of the State of
New York, without regard to conflicts of law principles.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PARENT:
BERNEX INC.
By:
Name: Thomas Weilenmann
Title: Chairman of the Board
COMPANY:
MULTI-ARC INC.
By:
Name: Peter D. Flood
Title: President
ANDAL:
ANDAL CORP.
By:
Name: Peter D. Flood
Title: Chairman, President and CEO
ESCROW AGENT:
THE CHASE MANHATTAN BANK
By:
Name:
Title:
SCHEDULE I
Compensation of Escrow Agent
Two Thousand Dollars ($2,000).
<PAGE>
EXHIBIT 10(h)
- -------------
EXPENSE ESCROW AGREEMENT
This Escrow Agreement, dated September 30, 1997 (the "Closing Date"),
between Andal Corp., a New York corporation, as representative
("Representative") of the Company Shareholders (as defined below) ("Andal"), and
The Chase Manhattan Bank, a New York banking corporation, as escrow agent
("Expense Escrow Agent").
This is the Expense Escrow Agreement referred to in the Agreement and Plan
of Merger dated June 9, 1997 (the "Merger Agreement"), among BERNEX Inc. \
("Parent"), M-A Acquisition Corp., Andal and Multi-Arc Inc. (the "Company").
Pursuant to Article 12 of the Merger Agreement, Andal has been appointed as
Representative of the Company Shareholders to act on behalf of the Company
Shareholders in connection with this Expense Escrow Agreement.
The parties, intending to be legally bound, hereby agree as follows:
i. Establishment of Escrow. Simultaneously with the execution of
this Agreement, Parent is depositing with Expense Escrow Agent
into the "Andal Corp. Expense Account Agreement" account (Account
No. 106-47-60) an amount equal to Seven Hundred and Fifty
Thousand Dollars ($750,000) in immediately available funds (as
increased by any earnings thereon and as reduced by any
disbursements, amounts withdrawn under Section 5(j), or losses on
investments, the "Expense Escrow Fund"). Expense Escrow Agent
acknowledges receipt thereof.
(1) Expense Escrow Agent hereby agrees to act as escrow
agent and to hold, safeguard and disburse the Expense
Escrow Fund pursuant to the terms and conditions hereof.
ii. Investment Of Funds. Except as Andal may from time to time
instruct Expense Escrow Agent in writing, the Expense Escrow Fund
shall be invested from time to time until disbursement of the
entire Expense Escrow Fund, to the extent possible, in direct
obligations of, or obligations fully guaranteed or insured by,
the United States of America, or interest bearing accounts of any
bank or trust company incorporated under the laws of the United
States of America or any state, which has combined capital and
surplus of not less than $100,000,000, in each case having
maturity of not more than one year after the date of acquisition
thereof. Expense Escrow Agent is authorized to liquidate in
accordance with its customary procedures any portion of the
Expense Escrow Fund consisting of investments to provide for
payments required to be made under this Agreement.
iii. Claims. From time to time on or before the end of the three
month period beginning on the Closing Date, any Third-Party
Beneficiary (as defined below), including the Company, may give
notice (a "Notice") to Andal and Expense Escrow Agent specifying
in reasonable detail the nature and dollar amount of any claim (a
"Claim") it may have against the Company, the Company
Shareholders (as defined below) or Andal for payment of fees,
disbursements or other expenses incurred in connection with the
negotiation, execution or performance of the Merger Agreement or
the Contemplated Transactions ("Expenses"), in the case of the
Company, for the period ending at the Effective Time (as defined
in the Merger Agreement). Andal shall give notice within 15
days following receipt by Andal of the Notice regarding such
Claim to Expense Escrow Agent either (i) disputing any Claim (a
"Counter Notice"), in which case such Claim shall be resolved as
provided in Section 3(b), or (ii) approving such Claim (an
"Approval Notice"), in which case the dollar amount claimed by
such Third-Party Beneficiary as set forth in its Notice shall be
deemed established for purposes of this Expense Escrow Agreement
and, prior to the end of the 5-day period following receipt by
the Expense Escrow Agent of such Approval Notice, Expense Escrow
Agent shall pay to such Third-Party Beneficiary the dollar amount
claimed in the Notice from the Expense Escrow Fund. Expense
Escrow Agent shall not inquire into or consider the validity of
any Claim.
(1) If a Counter Notice is given with respect to a Claim,
Expense Escrow Agent shall make payment with respect thereto
only in accordance with (i) joint written instructions of
the Third-Party Beneficiary who made such Claim and Andal or
(ii) a final non-appealable order of a court of competent
jurisdiction.
iv. Termination Of Escrow. On the date which next follows the
final date of the three month period beginning on the Closing
Date, Expense Escrow Agent shall pay and distribute, subject to
Section 4(c), the remaining balance of the Expense Escrow Fund to
the shareholders of the Company (each, a "Company Shareholder"
and, collectively, the "Company Shareholders") in such
proportions and to the address set forth for each Company
Shareholder as set forth on Schedule I attached hereto, unless
any Claims are then pending, in which case an amount equal to the
aggregate dollar amount of such Claims (as shown in the Notices
of such Claims) shall be retained by Expense Escrow Agent in the
Expense Escrow Fund (and the balance paid to the Company
Shareholders as aforesaid).
(1) Following the distribution pursuant to paragraph (a) above,
any portion of the Expense Escrow Fund not distributed in
accordance with such paragraph (a) as a result of a pending
Claim of any Third-Party Beneficiary shall be retained by
Expense Escrow Agent until it receives joint written
instructions of such Third-Party Beneficiary and Andal or a
final non-appealable order of a court of competent
jurisdiction, in which case, subject to any contrary
direction in such instruction or order, the Expense Escrow
Agent shall distribute, subject to Section 4(c), such
remaining portion of the Expense Escrow Fund relating to the
Claim of such Third-Party Beneficiary to the Company
Shareholders in such proportions and to the address set
forth for each Company Shareholder as set forth on Schedule
I attached hereto.
(2) Notwithstanding the foregoing, no distribution of any
portion of the Expense Escrow Fund shall be made to any
Company Shareholder set forth on Schedule II attached hereto
unless and until the Expense Escrow Agent receives written
instructions of Andal or a final non-appealable order of a
court of competent jurisdiction, in either case, to the
effect that distributions may be made to such Company
Shareholder, in which case the Expense Escrow Agent shall
then deliver to such Company Shareholder all distributions,
without interest, to which such Company Shareholder was
theretofore entitled. Pending any such distribution,
Expense Escrow Agent shall hold all amounts allocable to
such Company Shareholders pursuant to paragraph (a) above,
in accordance with Section 2 of this Agreement.
(3) On the second business day following the seven month
anniversary of the date the entire Expense Escrow Fund shall
have been distributed, other than amounts held pursuant to
Section 4(c) or otherwise, the Expense Escrow Agent shall
distribute such amounts held pursuant to Section 4(c) to the
Company.
v. Duties Of Expense Escrow Agent. Expense Escrow Agent shall not
be under any duty to give the Expense Escrow Fund held by it
hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds
held hereunder except as directed in this Agreement. Uninvested
funds held hereunder shall not earn or accrue interest.
(1) Expense Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with
respect to claims based upon gross negligence or willful
misconduct that are successfully asserted against Expense
Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless Expense Escrow Agent
(and any successor Expense Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages
and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this
Agreement. Without limiting the foregoing, Expense Escrow
Agent shall in no event be liable in connection with its
investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any
reasonable delays in the investment or reinvestment of the
Expense Escrow Fund, or any loss of interest incident to any
such delays.
(2) Expense Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument
or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of
any fact stated therein or the propriety or validity of the
service thereof. Expense Escrow Agent may act in reliance
upon any instrument or signature believed by it to be
genuine and may assume that the person purporting to give
receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been
duly authorized to do so. Expense Escrow Agent may
conclusively presume that the undersigned representative
of any party hereto which is an entity other than a natural
person (or any successor representative whom Expense Escrow
Agent has received notice of in accordance with Section 8 of
this Agreement) has full power and authority to instruct
Expense Escrow Agent on behalf of that party unless written
notice to the contrary is delivered to Expense Escrow Agent.
(3) Expense Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this
Agreement and shall not be liable for any action taken or
omitted by it in good faith in accordance with such advice.
(4) Expense Escrow Agent does not have any interest in the
Expense Escrow Fund deposited hereunder but is serving as
escrow holder only and having only possession thereof. Any
payments of income from this Expense Escrow Fund shall be
subject to withholding regulations then in force with
respect to United States taxes. The parties hereto will
provide Expense Escrow Agent with appropriate Internal
Revenue Service Forms W-9 for tax identification number
certification, or non-resident alien certifications. This
Section 5(e) and Section 5(b) shall survive notwithstanding
any termination of this Agreement or the resignation of
Expense Escrow Agent.
(5) Expense Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any
security or other document or instrument held by or
delivered to it.
(6) Expense Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or
refraining from any action with respect to any securities or
other property deposited hereunder.
(7) Expense Escrow Agent (and any successor Expense Escrow
Agent) may at any time resign as such by delivering the
Expense Escrow Fund to any successor Expense Escrow Agent
jointly designated by the other parties hereto in writing,
or to any court of competent jurisdiction, whereupon Expense
Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with this
Agreement. The resignation of Expense Escrow Agent will
take effect on the earlier of (a) the appointment of a
successor (including a court of competent jurisdiction) or
(b) the day which is 30 days after the date of delivery of
its written notice of resignation to the other parties
hereto. If at that time Expense Escrow Agent has not
received a designation of a successor Expense Escrow Agent,
Expense Escrow Agent's sole responsibility after that time
shall be to retain and safeguard the Expense Escrow Fund
until receipt of a designation of successor Expense Escrow
Agent or a joint written disposition instruction by the
other parties hereto or a final non-appealable order of a
court of competent jurisdiction.
(8) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in
connection with the Expense Escrow Fund or in the event that
Expense Escrow Agent is in doubt as to what action it should
take hereunder, Expense Escrow Agent shall be entitled to
retain the Expense Escrow Fund until Expense Escrow Agent
shall have received (i) a final nonappealable order of a
court of competent jurisdiction directing delivery of the
Expense Escrow Fund or (ii) a written agreement executed by
the other parties hereto directing delivery of the Expense
Escrow Fund, in which event Expense Escrow Agent shall
disburse the Expense Escrow Fund in accordance with such
order or agreement. Any court order shall be accompanied by
a legal opinion by counsel for the presenting party
satisfactory to Expense Escrow Agent to the effect that the
order is final and nonappealable. Expense Escrow Agent
shall act on such court order and legal opinion without
further question.
(9) The Company Shareholders shall pay Expense Escrow Agent
compensation (as payment in full) for the services to be
rendered by Expense Escrow Agent hereunder in the amount
set forth on Schedule III hereto and agree to reimburse
Expense Escrow Agent for all reasonable expenses,
disbursements and advances incurred or made by Expense
Escrow Agent in performance of its duties hereunder
(including reasonable fees, expenses and disbursements of
its counsel). Any fees or expenses of Expense Escrow Agent
or its counsel that are not paid as provided for herein may
be taken from any property held by Expense Escrow Agent
hereunder.
(10) The other parties hereto authorize Expense Escrow Agent, for
any securities held hereunder, to use the services of any
United States central securities depository it reasonably
deems appropriate, including, without limitation, the
Depositary Trust Company and the Federal Reserve Book Entry
System.
vi. Limited Responsibility. This Agreement expressly sets forth all
the duties of Expense Escrow Agent with respect to any and all
matters pertinent hereto. No implied duties or obligations shall
be read into this agreement against Expense Escrow Agent.
Expense Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto (to which Expense Escrow
Agent is not a party) except this Agreement.
vii. Ownership For Tax Purposes. For purposes of federal and other
taxes based on income, the Company Shareholders will be treated
as the owner of the Expense Escrow Fund in such proportions as
set forth on Schedule I, and that the Company Shareholders will
report all income, if any, that is earned on, or derived from,
the Expense Escrow Fund as their income, in such proportions, in
the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
viii. Notices. All notices, consents, waivers and other communications
under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by telecopier (with written
confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received
by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Andal:
c/o Messrs. Andrew J. Frankel and Alan N. Cohen
909 Third Avenue
New York, New York 10022
Telephone No.: (212) 376-5545
Facsimile No.: (212) 376-5669
with copies to:
Dillon, Bitar & Luther
53 Maple Avenue
Morristown, New Jersey 07963
Attention: William F. Campbell, III, Esq.
Telephone No.: (201) 539-3100
Facsimile No.: (201) 292-2960
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Neale Albert, Esq. and Alfred Youngwood, Esq.
Telephone No.: (212) 173-3000
Facsimile No.: (212) 373-2315
Expense Escrow Agent:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: William Ponce
Telephone No.: (212) 789-4108
Facsimile No.: (212) 596-3109
ix. Jurisdiction; Service Of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New
York, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and
each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
x. Counterparts. This Agreement may be executed in one or more
counterparts, each of which, when taken together, will be deemed
to constitute one and the same.
xi. Section Headings. The headings of sections in this Agreement are
provided for convenience only and will not affect its
construction or interpretation.
xii. Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party will
be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of
the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
xiii. Exclusive Agreement and Modification. This Agreement supersedes
all prior agreements among the parties with respect to its
subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a
written agreement executed by the parties hereto.
xiv. Assignments, Successors and Third-Party Rights. Andal may not
assign any of its rights under this Agreement without the prior
consent of a majority of the Company Shareholders (not including
Andal, solely for this purpose). Subject to the preceding
sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit
of the parties to this Agreement, their successors and assigns
and any Person to whom the Company, the Company Shareholders or
Andal owes Expenses, in the case of the Company, for the period
ending at the Effective Time (each such Person, a "Third-Party
Beneficiary"). Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the
parties to this Agreement and the Third-Party Beneficiaries any
legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement.
xv. Governing Law. This Agreement shall be governed by the laws of
the State of New York, without regard to conflicts of law
principles.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
ANDAL:
ANDAL CORP., as Representative
By:
Name:
Title:
ESCROW AGENT:
THE CHASE MANHATTAN BANK
By:
Name:
Title:
SCHEDULE I
Company Shareholders
Name and Address Percentage (%)
SCHEDULE II
Company Shareholders Subject to Section 4(c)
[Company Shareholders who have not delivered
Certificates evidencing Shares or Rights]
SCHEDULE III
Compensation of Expense Escrow Agent
Three thousand five hundred dollars ($3,500) plus a $25 fee for
every check issued by the Expense Escrow Agent.
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