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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________
FORM 10-K
_________________________
/ X / Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the fiscal year ended March 31, 1995.
Commission File Number: 0-016072
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DECORA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 68-0003300
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
1 Mill Street
Fort Edward, New York 12828
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (518) 747-6255
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of Each Class on which registered
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<S> <C>
None None
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $ .01 PAR VALUE
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Yes X No
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As of June 28, 1995, the Registrant had 30,717,737 shares of Common Stock
outstanding. The aggregate market value of the Common Stock held by
nonaffiliates as of June 28, 1995, was approximately $29,511,640 based on the
average of the closing bid and asked prices on that date.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits filed to the following are incorporated by reference in Part IV
- - Exhibits, Financial Statement Schedules and Reports on Form 8-K hereof (See
Exhibit list on Page 32):
(1) Report on Form 10-K for the fiscal year ended March 31, 1988.
(2) Report on Form 8-K dated April 18, 1990.
(3) Report on Form 8-K dated April 6, 1992.
(4) Report on Form 10-K for the fiscal year ended March 31, 1992.
(5) Report on Form 8-K dated November 5, 1992.
(6) Report on Form 8-K dated April 19, 1993.
(7) Report on Form 10-K for the fiscal year ended March 31, 1993.
(8) Report on Form 10-K for the fiscal year ended March 31, 1994.
(9) Report on Form 10-Q for the fiscal quarter ended December
31, 1994.
(10) Report on Form 8-K dated March 2, 1995.
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Decora Industries, Inc. (the "Company" or "Decora"), a holding company, is a
Delaware corporation operating through its primary subsidiary, Decora,
Incorporated ("Decora Manufacturing"). The main emphasis of the Company is the
development, manufacture and sale of self-adhesive consumer decorative products
and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective coating technologies.
In April 1994, the Company made the decision to sell the operations of ComTel
Industries, Inc. ("ComTel"), a full service telecommunications company which
manufactured, sold and serviced new and used telephone equipment and
accessories (see "Discontinued Operation" below).
HISTORY OF THE COMPANY
The Company, as presently structured, is the result of a 1988 change in control
effected by a group of investors who completed a management change and new
strategic plan. In March 1992, the Company, formerly named Utilitech,
Incorporated, changed its name to reflect the strategic decision of management
to place future emphasis on consumer decorative products as well as specialized
industrial products derived from its coating, laminating, adhesive and release
technologies. In 1988, the Company was a diversified holding company with a
number of subsidiaries operating various businesses, including industrial
lighting, utility repair, utility software, and pipe manufacture. Management
evaluated these businesses and determined that the majority of these businesses
either did not possess sufficient growth potential or did not fit with the
Company's strategic direction. From late 1989 to 1990, the Company engaged in
the divestiture of these entities and meanwhile sought other opportunities.
On April 18, 1990, the Company acquired the assets of the Decora Division of
United Merchants and Manufacturers, Inc. (a NYSE company). Decora
Manufacturing has been in business since 1945 and was the originator of the
pressure-sensitive, stylized, decorative covering material bearing the brand
name Con-Tact(R). Concurrent with the acquisition, Decora Manufacturing
entered into a five-year manufacturing and distribution agreement (the
"Manufacturing Agreement") with Rubbermaid Incorporated ("Rubbermaid") which
has since been extended to 1999, whereby decorative self-adhesive vinyl and
textile products are exclusively manufactured for and distributed by Rubbermaid
under their Con-Tact(R), Fabri-Art(TM), and Kid Scapes(TM) brand names. The
Con-Tact(R) manufacturing and adhesive technology and trademark were originally
developed and owned by Decora Manufacturing and in the 1950's enabled Decora
Manufacturing to establish its market leadership position in the industry.
Decora Manufacturing has continued to invest in and improve the coating and
adhesive technology involved in the manufacture of these products, and in
conjunction with the development of its Wearlon(R) technology, has recently
developed a new group of proprietary products for Rubbermaid and for new
strategic partners.
In May 1988 the Company acquired ComTel (then known as Utility Marketing and
Development Corporation), a privately held, fully integrated telecommunications
enterprise - installing, refurbishing and servicing new
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and used telecommunications equipment and systems. In July 1990 and September
1991, respectively ComTel's 80%-owned subsidiary, ComTel Metals, Inc., acquired
the Siemens-Stromberg Carlson ("SSC") metal manufacturing divisions in El Paso,
Texas and Sanford, Florida. The purchases included 5-year supply contracts for
all metal parts required to produce SSC's line of central office equipment. In
December 1993, ComTel entered into a purchase and service support agreement
with Fujitsu Business Communications Systems to provide secondary market
support for Fujitsu's Focus 960 telecommunications switching system. As a
result of its desire to focus resources on its core Decora Manufacturing
subsidiary, in April 1994, the Company made the decision to sell the operations
of ComTel. The ComTel business has now been disposed of (see "Discontinued
Operations" below).
In December 1989, the Company, in a leveraged acquisition acquired all of the
stock of Yorkville Industries, Inc. ("Yorkville"), a nationwide distributor of
specialty light bulbs and lighting products which was then severely
undercapitalized. The Company at that time had another lighting subsidiary and
intended to expand its lighting business. The Company intended to raise
significant working capital by selling Yorkville's real estate holdings and
creating liquidity for working capital purposes. Following the acquisition,
the planned turnaround was not viable due to a continuing severe shortage of
capital caused in large measure by the recissionary drastic decrease in the
value of the real estate as well as reduced demand for Yorkville's products due
primarily to the recession. Yorkville continued to incur substantial losses.
After reviewing the deteriorating financial condition of Yorkville, and its
overall business and growth plan, the Company discontinued substantially all of
the operations of Yorkville and completed the liquidation of assets as of June
1992.
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
Decora Industries, Inc. is a holding company operating through its subsidiary,
Decora Manufacturing. The Company provides complete management oversight to
its subsidiaries including the direction of strategic planning, financing and
business development. The "Company" as used herein shall refer to the holding
company and its subsidiary unless the context indicates otherwise.
Decora is in the business of developing, manufacturing and selling
self-adhesive consumer decorative products and specialty industrial products.
It develops and manufactures these products utilizing its proprietary
pressure-sensitive adhesive and release technologies, including its technology
known as Wearlon(R). At this time, 93% of the Company's revenues are for sales
of its core ConTact(R) product and other decorative houseware products similar
to ConTact(R) under a single contract with Rubbermaid. Following the
acquisition in April 1990, management began to seek growth and diversification
opportunities in order to complement Decora Manufacturing's mature core
business. In the development of long-term growth strategies management's main
focus has been:
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. To maximize its strategic alliance with Rubbermaid and its
outstanding consumer distribution network;
. To utilize its modular product components and technologies to
create self-adhesive products for new applications and market
segments;
. To establish additional strategic relationships for distribution
of new products in segments and channels not served by
Rubbermaid; and
. To compliment its consumer products with other applications and
products for the industrial and coatings and substrates
markets.
Significant resources have been invested in researching and initiating new
product programs arising from the Company's base technology. The development
program has resulted in a new generation of decorative consumer products
including several for its core business with Rubbermaid as well as for other
new strategic distributors for other market segments. Several new consumer
products were introduced during this past fiscal year and the Company continues
to invest in research efforts as well as in the commercialization and
refinement of new products and the expansion of marketing relationships and
distribution channels.
As a compliment to the Company's consumer products business, Decora also
introduced new industrial release coating and coated substrate products based
upon its Wearlon(R) adhesive and release coating technologies. These
industrial products further broaden the Company's potential market
opportunities.
PRODUCTS AND SERVICES - CONSUMER DECORATIVE PRODUCTS GROUP
Decora manufactures proprietary decorative self-adhesive products for sale into
an increasing number of market segments including housewares, arts and crafts,
wallcovering and hardware. Such products are produced with a modular system of
varying substrates, coatings, finishes and packaging depending on the
requirements of the application, distribution channel and end user. The
Company's goal is to maximize this modular system through the development and
sale of self-adhesive products for as many household applications and through
as many market segments as possible.
The Company's traditional and primary consumer product is Con-Tact(R), a
repositionable, self-adhesive, vinyl decorative covering material which is used
for do-it-yourself shelf decorations, surface protection, arts and crafts and
other applications. Con-Tact(R) is manufactured by Decora utilizing the
Company's proprietary and patented repositionable adhesive technology and is
sold in roll form with a wide range of finishes including printed patterns,
solid colors, clear vinyl and specialty metallics. All of Decora's Con-Tact(R)
production is purchased by Rubbermaid under a recently renewed and expanded
Manufacturing Agreement (the "New Manufacturing Agreement") which currently
expires in 1999. Rubbermaid markets and sells Con-Tact(R) primarily in the
housewares departments of mass merchandisers in the U.S., including WalMart,
K-Mart, Target and others.
In addition to Con-Tact(R), Decora has developed several new products for
distribution by Rubbermaid which are being sold to an increasing range of
market segments. These include decorative self-adhesive Rubbermaid Borders for
the wallcovering segment, FabriArt(TM) self-adhesive textiles for the arts and
crafts segment, Kid
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Scapes(TM) self-adhesive wall murals and borders for the juvenile segment,
Con-Tact(R) Cushion foam shelf-liner for the housewares segment and Con-Tact(R)
Ultra self-adhesive woodgrains for the hardware/Do-it-yourself ("DIY") segment.
Under the Manufacturing Agreement, Decora Manufacturing provides Rubbermaid
with 100% of its worldwide product needs according to periodically negotiated
pricing levels which are adjusted primarily based on changes in raw material
costs and volume. Historically, product was shipped in jumbo roll form to
Rubbermaid for finished packaging and distribution. The New Manufacturing
Agreement allows Decora to market Rubbermaid's decorative products in certain
international markets, to market its own line of decorative products in Europe
and to now also perform the consumer packaging component of the manufacturing
process.
In July 1994, Decora Manufacturing established a distribution relationship for
its decorative products in Europe with the signing of a License Agreement with
Friedola Debr. Holzapfel GmbH & Co. KG ("Friedola") under which Friedola
purchases from Decora self-adhesive decorative products for exclusive
distribution throughout western Europe. In conjunction with Friedola, the
Company expanded product offering with a new range of decorative designs,
substrates and finishes. The Europe line was introduced to the market at the
Heimtextil show in Frankfurt, Germany in January 1995. Following the initial
introduction and initial consumer response, the product line is currently being
refined and initial manufacturing inefficiencies are being addressed. Revenues
are anticipated beginning at the end of calender 1995 when the relaunch is
scheduled to begin. In addition to its European activities, the Company is
also selling decorative products internationally to customers in South America
and the Middle East.
Decora has also recently introduced new technology based products for the
wallcovering and home decorating market. The Company has introduced
self-adhesive thin film products based on a new, proprietary thin film
technology (patents pending) developed over the last three years. These new
decorative film products are very thin, yet durable and removable and printed
in a variety of solid colors and decorative patterns. Sold in the form of
accents or stencil-like products, they blend seamlessly onto most smooth or
textured surfaces. The Company recently signed a long-term exclusive supply
agreement with North American Decorative Products, Inc. ("Norwall"), a leading
wallcovering manufacturer, for the manufacture and supply of such thin film
decorative products to be sold by Norwall under the brand name Artworks(TM).
In addition to the thin film products, the Company has developed a patented
system through which a conventional wallpaper substrate is converted into a
stable, self-wound, self-adhesive, repositionable and removable wallcovering.
Using Wearlon(R) and Decora's other adhesive and coating technologies, the
Company believes this is a breakthrough for the wallcovering industry with
significant market potential primarily in the area of decorative border
products. In addition to the agreement with Norwall noted above, in June 1994,
Decora signed an exclusive Licensing and Supply Agreement with Norwall, under
which the Company will supply its self-adhesive wall covering system
exclusively for Norwall's wallcovering products which are sold primarily
through the mass merchants in North America. Both agreements with Norwall
expire five years from the date of first successful commercial shipments and in
order to maintain exclusivity, Norwall must purchase minimum volumes of such
products from the Company over the life of the agreements. While issues
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related to the efficient large scale production of these new products continue
to be addressed, the Company anticipates significant revenues to be generated
from such products during the second half of fiscal 1996.
Management believes these new products and marketing efforts broaden Decora's
potential consumer products revenue base beyond housewares and across new
market segments such as hardware, paint and sundries, arts and crafts and
wallcovering, both in the U.S. and internationally. During fiscal 1995, 93%
of Decora's sales were to Rubbermaid, as opposed to 95% for the prior year.
Decora plans to continually introduce new consumer products through its
principal distributors and to pursue its growth plan both domestically and
internationally.
PRODUCTS AND SERVICES - INDUSTRIAL PRODUCTS GROUP
In addition to its consumer decorative products, Decora has developed an
industrial liquid coatings business which markets proprietary coatings under
the Wearlon(R) brand name to the specialty industrial coatings market. The
Company has recently embarked on a program of marketing such coatings for use
in a wide range of applications in the specialty industrial coatings market.
These unique non-stick, yet abrasion-resistant coatings are water-based and
cure at room temperature, providing the industrial market with an
environmentally friendly coating system for specialized applications. These
include industrial maintenance applications such as machinery valves and clean
rooms, marine maintenance and foul release, and specialized OEM product and
process applications. The Company has established a sales network in North
America, consisting of manufacturers representatives and qualified professional
applicators through which the product is marketed for a variety of
applications. To date, the coatings have been sold through this network on a
limited basis for use in the automotive, marine, paper, petroleum and food
processing industries.
The Company is also marketing Wearlon(R) on a direct basis to large potential
end users including government agencies, utilities and OEM's where there are
several ongoing pilot programs. Wearlon(R) is currently being tested by the
U.S. Navy for marine applications as well as by several North American utility
companies for Zebra mussel protection and friction reduction applications. In
addition to these programs, in November 1994, the Company signed a License and
Technology Development and Cooperation Agreement with The B.F. Goodrich
Company for the development of specialty coatings for its various divisions
utilizing Wearlon(R). The Company is actively engaged in research and
development under this agreement.
As a result of the high performance nature of the coating and the costs
associated with installing such coatings in large projects, testing for
specific applications and any associated tailored product development takes
many months and requires application refinements in response to testing
results. As a result, revenue potential for Wearlon(R)-based specialty
coatings is anticipated to develop over a longer time frame than is associated
with new consumer decorative products. Although management continues to
believe that liquid coating products hold significant opportunity for the
Company, revenues from all coating products have not been material to Decora's
overall business to date. The necessity of long-term evaluation and testing
programs required for various technically oriented industrial applications and
related long selling cycle result in a slower initial growth of revenue
opportunities than is achievable with certain of the Company's consumer
products.
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In addition to the products summarized above, Decora's Industrial Products
Group also markets various other products, including commercial laminating,
coating and printing services and a line of high quality hazardous marking
tapes and electrical tapes sold under Decora's Cobra(R) tradename.
For fiscal 1995, industrial products represented 2% of Decora's revenues.
Ongoing technology development and commercialization efforts may generate
additional revenues in the future both through its own direct development and
selling efforts and through domestic and international strategic relationships.
MANUFACTURING
The majority of the products sold by Decora are produced at its facility in
Fort Edward, New York. Management believes that the plant currently has
available capacity which will be utilized in connection with the proposed
expansion of existing and new decorative self-adhesive products and industrial
products. The Company also utilizes outside suppliers when required for
certain printing, coating and finishing purposes for which it does not have
industrial capabilities. Management also anticipates making significant
capital expenditures in the future in order to increase operating efficiencies
and to add additional capacity as warranted by product demand and mix. The
Company is currently spending significant capital on the addition of finished
consumer packaging equipment to its Fort Edwards facility for its ConTact(R)
product line pursuant to the New Manufacturing Agreement. The primary raw
materials used in Decora Manufacturing's products are paper, vinyl, adhesives,
inks, silicone and other chemicals. Decora uses two primary suppliers for its
vinyl and relations with such suppliers are good. The Company believes that it
has alternative sources of its significant and primary raw materials.
MARKETING, RESEARCH AND DEVELOPMENT
Decora's strategy for its consumer products is to develop and sell products and
marketing programs through strategic partners with existing and significant
distribution capabilities. Such distribution partners may have broad market
impact such as Rubbermaid, or more focus in a particular market segment, such
as the wallcovering manufacturer. Accordingly, for the majority of sales of
product covered by the Manufacturing Agreement and other supply agreements,
Decora does not incur what might otherwise be typical distribution, and
selling expenses relating to consumer decorative products and has relied on the
services of third party sales and marketing consultants when deemed necessary.
The Company recently has increased internal sales and marketing efforts
relative to the development of programs to be taken to market by its strategic
partners. Establishment of distribution relationships for a new product is
ordinarily a long term process because the distributor must become familiar
with the new product and engage in testing prior to agreeing to the
distribution of a new product. Of course, the product is often modified based
upon response to pilot testing. The Company has taken a similar strategy for
international sales of its Consumer Decorative Products as reflected by its new
distributor agreement with Friedola. Initial sales to its European
distributor began in the third quarter of fiscal 1995, although time and effort
required to initiate market penetration is significant and significant
revenues are not anticipated until the second half of fiscal 1996.
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For its Industrial Products Group, Decora is pursuing varying marketing
strategies for different markets. As noted above, for its industrial coatings,
the Company has established a manufacturer's representative network in the U.S.
and with this network has developed relationships with carefully selected
professional applicators across the country to market and apply its Wearlon(R)
coatings in industrial maintenance, OEM and marine applications. The Company
is also actively pursuing opportunities for strategic relationships in other
specific niche markets where Wearlon(R) coatings are believed by management to
have the most potential, such as it has in the anti-graffiti and aviation
markets. As described above, due to the nature of these products, the
development process for the industrial products is expected to span a
significant duration.
With regard to research and development, Decora maintains a small internal
research group which has made significant progress in producing various new
products based on Wearlon(R) and the rest of its proprietary adhesive and
coating technologies. The majority of recent efforts have been placed on the
refinement and enhancement of products already developed; however, that group
also continues to focus its efforts on the pursuit of new consumer and
industrial applications. In addition, the Company has been seeking other
entities which have development expertise in certain niche areas to complement
the Company's commercialization efforts such as B.F. Goodrich. This strategy
will allow the Company to conserve its existing resources.
Since fiscal 1992, Decora has increased significantly its expenditures on
marketing and product development as it seeks to expand its product lines
through the commercialization of new products and technology in the consumer
and industrial markets. While spending on pure research has declined during
the period, total expenditures on marketing, research and product and process
development amounted to approximately $3.5 million, $2.8 million and $2 million
in fiscal 1995, 1994 and 1993, respectively. Management anticipates continued
expenditures at the same or greater rate on products, program and process
development while continuing to de-emphasize pure research as new distribution
relationships are developed, new product applications and programs are explored
and developed, and international marketing channels are opened. As new
products have recently been commercialized, a portion of these resources have
been invested on the development of strategic marketing relationships and
distribution channels as preparation for expansion of production and sales
activities (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations").
PROPRIETARY RIGHTS
Decora owns the rights to the pressure sensitive adhesive technology used in
the manufacturing of Con-Tact(R) products, although the tradename is owned by
Rubbermaid. In addition, it owns the Cobra(R) and Wearlon(R) tradenames and
has recently been issued a patent on its new self-wound self-adhesive
wallcovering product. The Company has also applied for tradename and patent
protection for certain of its other new products including the protective and
decorative thin film products and Wearlon(R) liquid coatings. Several of the
Company's new products utilize Wearlon(R) technology as a component of their
construction. Decora Manufacturing's rights to Wearlon(R) were formalized in
fiscal 1991 and the technology is the result of more than a decade of research
and development in adhesive and coating systems. Wearlon(R) includes a water
based polymer which management believes is a breakthrough in coatings requiring
extraordinary non-stick and slip-lubricity properties combined with excellent
levels of resistance to corrosion, abrasion, chemicals and solvents.
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It also provides the ability to control surface release characteristics across
a broad spectrum for a variety of applications and cures at room temperature.
The Company believes that its commercial position is enhanced by the patents it
owns as well as the know-how and trade secrets it has developed and maintains.
Decora has also applied for foreign protection for certain of its established
and new technologies and has acquired certain trademark protection. In the
interests of product development and establishment of a distribution network,
certain of its technologies have been licensed to third parties. The Company
has executed trade secret and confidentiality agreements with its licensees and
others to protect its proprietary rights as part of its overall secrecy
protection program.
CUSTOMERS
During fiscal 1995, sales to Rubbermaid represented 93% of Decora's revenues.
Con-Tact(R), Fabri-Art(TM) and other related products are distributed through
Rubbermaid on a nationwide basis to consumers in conjunction with the extensive
product lines of Rubbermaid. The Company has also recently signed supply
agreements with Norwall and Friedola both of which have the future potential of
becoming significant contributors to Decora's business. Decora has
approximately 50 customers in addition to Rubbermaid, Norwall and Friedola,
primarily for its Industrial Products Group but also for international
decorative product sales. Decora plans to develop strategic distribution
relationships for its industrial products, similar to the relationship it has
with Rubbermaid for its consumer products.
COMPETITION
Although Con-Tact(R) and associated products are not sold by Decora to the
ultimate consumer, competition experienced by Rubbermaid affects the purchase
requirements under the Manufacturing Agreement and Decora's ultimate revenues.
Management believes that the Con-Tact(R) product dominates the U.S. market for
its class of decorative material as well as miscellaneous end-use surface
protection applications. There are several similar products, including a low
cost shelf liner produced and sold by Rubbermaid, which, in Management's
opinion, have not significantly penetrated the market. Management believes
that Decora (and ultimately Rubbermaid) compete effectively on the basis of
price and the superior quality of their product.
Domestic and international markets for self-adhesive decorative products and
industrial coating products are very competitive with competitors who are
larger and have more financial resources than the Company. Management believes
that the formulation and performance characteristics of Wearlon(R)-based
products are unique, and that the proprietary technology utilized in several
new products may provide a competitive advantage in certain applications.
Management intends to focus on such specific applications. Other than
Con-Tact(R) sold in the U.S., Decora does not yet have any significant market
share in its various other consumer decorative or industrial coating products.
SEASONALITY
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Decora generally experiences higher earnings in its first two fiscal quarters
due to the purchase requirements of Rubbermaid to meet late spring and late
summer slightly seasonal demand for Con-Tact(R). There is no identified
seasonality for Decora's other products.
EMPLOYEES
At May 31, 1995, the Company employed 172 people of which 169 were in Decora
Manufacturing and three were employed in the Company's corporate office. One
hundred and fifteen of Decora Manufacturing's employees are represented by a
labor union. The contract with such union currently expires in April 1996.
There have been no major work stoppages in recent years and the Company
believes that its relations with its labor force are good.
DISCONTINUED OPERATIONS
COMTEL INDUSTRIES, INC.
In April 1994, the Company decided to sell the operations of its last non-core
subsidiary, ComTel Industries, Inc. ("ComTel"), headquartered in Tampa,
Florida. ComTel was a full service telecommunications company which
manufactured, sold and serviced new and used telephone equipment and
proprietary accessories. The first step in the plan to divest the operations
was completed in June 1994 with the sale of ComTel's El Paso, Texas
manufacturing operation to a third party. The second phase was completed on
March 31, 1995 with the sale of the Secondary Market and Services Division
which was headquartered in Tampa, Florida, and the final phase was completed
with the sale of the remaining operation located in Sanford, Florida on June
14, 1995 (see "Management's Discussion and Analysis - Discontinued
Operations").
ITEM 2. PROPERTIES
Decora Manufacturing owns its 220,000 square foot facility located on
approximately 12 acres in Fort Edward, New York. The Company's corporate
headquarters are located within this facility.
Management of the Company believes that the facilities of the Company are
adequate for present and foreseeable future needs including the addition of new
consumer packaging operations in the facility.
ITEM 3. LEGAL PROCEEDINGS
In May 1994, a complaint was filed by in the U.S. District Court, Eastern
District of California, by Rudolph J. Burgin, a former employee of the
Company's Elsco Lighting & Products, Inc. subsidiary prior to the Company's
disposition of such entity. The complaint alleges various ERISA violations as
well as a failure to pay benefits and seeks unspecified damages. The Company
has been in negotiations to resolve this matter and anticipates settling the
claim by payment of his accrued contributions. The Company has reserved an
estimated amount for this claim.
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In June 1992, a complaint was filed against the Company's ComTel Metals, Inc.
subsidiary in the 210th Judicial District Court of Texas, by a former employee
of the subsidiary. The claim seeks damages stemming from the alleged wrongful
termination of the plaintiff, although management believes that this claim has
no merit. Trial is set for July 1995.
In July 1993, the Company's Decora Manufacturing subsidiary was notified by the
Environmental Protection Agency ("EPA") that a site in which it disposed of
hazardous waste has been named a Superfund site and that it is a potentially
responsible party. It is likely that Decora Manufacturing will be required to
contribute to the cost of cleanup of the site. The amount of such cleanup cost
cannot be quantified at this time although the Company has reserved an
estimated amount based upon available information.
The Company and its subsidiaries are defendants in other pending actions,
which, in the opinion of management of the Company, are not material to the
Company's financial condition or results of operations. Although no assurances
can be given regarding the ultimate outcome of such matters, the Company has
accrued amounts for defense and settlement costs which the Company considers
adequate.
Pursuant to a court mandated settlement in July 1994 of an action filed
in the Supreme Court of the State of New York relating to the purchase of the
Company's former Yorkville subsidiary, the Company is obligated by the court
order to the Former Yorkville Owners to file a registration statement for the
purpose of registering shares worth $1,587,000. The deadline for the Company to
have an effective registration statement was June 30, 1995. The Company filed a
registration statement with the SEC, however it is not yet effective. While the
shares were not registered by June 30, 1995, the Company has 20 days to cure
such default and Management believes that such default does not create a default
under the Company's other debt agreements. If the Company is unable to cure in
the prescribed time, the Former Yorkville Owners may be entitled to enter a
judgment in the amount of $1,587,000 against the Company. The SEC has not
notified the Company when the Registration Statement may be effective.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On February 13, 1995, an annual shareholders meeting was held.
1. The following five persons were elected to the Board of Directors as
follows:
NATHAN HEVRONY:
In favor: 24,193,864
Against: 651,884
Abstaining: 0
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ROGER GRAFFTEY-SMITH
In Favor: 24,484,864
Against: 360,884
Abstaining: 0
GABRIEL THOMAS
In Favor: 24,484,851
Against: 360,897
Abstaining: 0
STEPHEN VERCHICK
In Favor: 24,484,851
Against: 360,897
Abstaining: 0
RONALD ARTZER
In Favor: 24,484,851
Against: 360,897
Abstaining: 0
2. Price Waterhouse LLP was ratified as the Company's independent auditors
for fiscal year 1995 as follows:
In Favor: 24,587,743
Against: 195,840
Abstaining: 62,165
11
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
a. MARKET INFORMATION
The Company's Common Stock trades over the counter and is quoted on
NASDAQ ("Small Cap"). The Company's Warrants, which were for the
purchase of one share of Common Stock of the Company at a price of
$3.75, previously traded in the same manner, but expired and ceased
trading on April 15, 1993.
b. STOCK PRICE INFORMATION
The following table reflects inter-dealer quotations, without retail
markup, markdown or commission, and may not necessarily represent actual
transactions. The high and low range of the Common Stock and bid prices
for the dates indicated have been provided by the National Quotation
Bureau, Inc.
<TABLE>
<CAPTION>
COMMON STOCK
------------
BID PRICES
----------
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1995:
First Quarter 1 5/16 5/16
Second Quarter 2 3/32 1 1/8
Third Quarter 1 13/32 1 7/16
Fourth Quarter 1 1/4 15/16
Fiscal 1994:
First Quarter 2 1/8 1 1/2
Second Quarter 2 1/32 1 7/16
Third Quarter 1 5/8 1 7/16
Fourth Quarter 1 9/16 1
Fiscal 1993:
First Quarter 2 1/8 1 1/4
Second Quarter 2 13/32 1 1/2
Third Quarter 2 3/8 1 7/16
Fourth Quarter 2 9/32 1 5/8
</TABLE>
12
<PAGE> 16
On June 29, 1995, the closing bid and asked prices for the shares in the
over-the-counter market were $1.06 and $1.09, respectively, as reported
by the National Quotation Bureau, Inc. The Company has also authorized a
class of preferred stock, although no shares of preferred stock have been
issued.
c. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK.
There were 925 holders of record of Common Stock as of June 26, 1995.
d. DIVIDENDS
The Company has never paid a cash dividend and intends to retain
earnings, if any, for use in its business. The Company's agreements with
its lenders restrict the ability of the Company to pay cash dividends and
the Company does not presently intend to pay any cash dividends on its
Common Stock for the foreseeable future.
ITEM 6. SELECTED FINANCIAL INFORMATION.
The following selected financial data of the Company as to the five fiscal
years ended March 31, 1995 are derived from the consolidated financial
statements that have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's financial
statements and the notes thereto. None of the information in the table
includes discontinued operations of the Company. See Note 3 of the financial
statements. See also Item 7, "Management's Discussion and Analysis of
Financial Condition".
13
<PAGE> 17
DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA
For the five years ended March 31, 1995
(In thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
-----------------------------
Revenues $40,414 $39,955 $38,543 $40,751 $ 35,472
Operating Income 3,895 4,192 3,107 3,291 3,530
Income (Loss) from Continuing
Operations 2,408 1,629 623 ( 428) ( 136)
Income (Loss) from Discontinued
Operations (1,297) ( 1,481) 68 ( 8,673) (2,225)
------- -------- -------- -------- -------
Net Income (Loss) $1,111 $ 148 $ 691 ($ 9,101) ($ 2,361)
======= ======== ======== ========= =========
Income (Loss) Per Share(1):
Continuing Operations $ 0.08 $ 0.06 $ 0.02 $ 0 ($ 0.01)
Discontinued Operations ( 0.04) ( 0.05) 0.01 ( 0.44) ( 0.13)
-------- -------- -------- -------- -------
Income (Loss) Per Share(1) $ 0.04 $ 0.01 $ 0.03 ($ 0.44) ($ 0.14)
======== ======== ======== ======== ========
BALANCE SHEET DATA:(3)
------------------
Total Assets $31,021 $30,023 $34,952 $34,165 $55,038
Working capital (deficit) $ 238 $ 515 ($ 1,904) ($ 5,605) ($ 7,980)
Long-term Obligations $18,163 $18,473 $18,883 $19,358 $22,033
STOCKHOLDERS EQUITY: $ 4,396 $ 2,577 $ 1,666 ($ 2,838) ($ 431)
--------------------
Cash Dividends per common share(2) $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
- -----------------------
(1) Includes shares issuable upon exercise of outstanding warrants and
options to purchase Common Stock if their inclusion is dilutive.
(2) The Company does not anticipate paying cash dividends in the
foreseeable future.
(3) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant
measurement date occurred.
14
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
After an extensive period of product and market development utilizing the
Company's proprietary Wearlon(R) coating and adhesives technologies, the
Company's results of operations for the year ended March 31, 1995 reflect a
change in product breadth and mix as well as customer and market
diversification. The results also reflect initial start-up manufacturing costs
and inefficiencies resulting from such new products and customer programs.
Such activities are discussed in more detail below. In April 1995 the Company
signed an expanded exclusive manufacturing agreement with its largest customer,
Rubbermaid, Inc. ( the "new Rubbermaid agreement") under which the Company will
integrate additional decorative product manufacturing operations into its
existing facilities. After the planned completion of the integration in July
1995 and the absorption of excess inventory levels created by the
consolidation, these new operation are anticipated to increase the Company's
revenues by approximately $7.5 million in the first full year of operation (see
"Subsequent Events" below).
The Company's financial statements for the year ended March 31, 1995 also
reflect completion of the divestiture of the operations of Company's last
non-core subsidiary, ComTel Industries, Inc, as well as the restructuring and
refinancing of debts and judgements primarily related to a previously
discontinued Yorkville Industries operations. These significant transactions
have all contributed to clarification of the Company's strategic direction and
enhancement of its financial condition.
In April 1994, management decided to discontinue the operations of a second
wholly-owned subsidiary, ComTel Industries, Inc. ("ComTel"). The divestiture
plan was completed through the sale of ComTel's operations in three
transactions, the last of which was completed on June 14, 1995. Cash proceeds
from the sales of these operations (aggregating $1.9 million) were used to
reduce the secured debt of the subsidiary. The operating losses for the
divested business caused largely by its manufacturing operation which was the
last part to be sold, and the net loss on disposal have been segregated and
reported as a discontinued operation (see "Discontinued Operations" below).
On July 22, 1994, the Company completed a refinancing and settlement
transaction which refinanced all of the past due debt and settlement
obligations of the Parent Company including obligations to Chase Manhattan Bank
("Chase"), InterEast Capital Limited ("IECL"), the former owners of Yorkville
(the "Former Yorkville Owners") and a former director. These obligations
totaling $7,552,000 as of March 31, 1994, consisted of debt securities and
previous settlements related primarily to the previously discontinued Yorkville
operations. All of such obligations had become due and payable during fiscal
1994. The total amount due was settled for a combination of cash, securities
and forgiveness of debt. The transaction included full releases from the
former creditors with respect to all past obligations other than the pending
registration and issuance of common stock to the Former Yorkville Owners (see
Note 13 to the financial statements and "Liquidity and Capital Resources").
15
<PAGE> 19
RESULTS OF CONTINUING OPERATIONS
While revenues of the Company's operating subsidiary, Decora Manufacturing,
grew slightly in the year just ended, the mix of such revenues changed as lower
revenues from its mature core Con-Tact(R) housewares products and certain
phased out industrial products were offset by increased sales of new products
both to its largest customer, Rubbermaid and to new customers primarily in the
walldecor and other self-adhesive decorative markets. The commercialization
and full-scale manufacture of such new products, many of which incorporate the
Company's Wearlon(R) technology, also resulted in non-recurring start-up costs
and inefficiencies in the production of brand new processes which adversely
affected the Company's overall profitability but which the Company believes
have been reduced and will continue to be reduced during fiscal 1996. The
Company also invested in increased sales and marketing costs related to the
sale of such new products and the establishment of supply agreements with new
customers which the Company anticipates will result in future increased sales
and profitability.
FISCAL 1995 VS. FISCAL 1994 AND FORWARD LOOKING INFORMATION
Revenues of Decora Manufacturing increased by 1.1% or $459,000 from $39,955,000
in fiscal 1994 to $40,414,000 in fiscal 1995. Revenues from its traditional
Con-Tact(R) product line decreased by 4.5% or $1,615,000 and discontinued
industrial release liner product revenue decreased $850,000. These declines
were off-set by a $2,054,000 increase in sales of recently introduced, and
newly developed, self-adhesive products for Rubbermaid including Con-Tact(R)
Ultra, Con-Tact(R) Cushion(TM) and Fabri-Art(TM) and a $1,105,000 increase of
other consumer decorative products to other customers in the wallcovering and
decorative markets including North American Decorative Products, Inc.
("Norwall") and Friedola Gebr. Holzapfel GmbH & Co. KG ("Friedola"). While not
yet significant, sales of Wearlon(R) liquid coatings in the industrial
maintenance market also increased over the prior year.
As a result of the new Rubbermaid agreement (see "Subsequent Events" below),
the Company will consolidate into its facility additional processing operations
previously performed by Rubbermaid with respect to its core product line
beginning in fiscal 1996. Integration of the operations is scheduled for
completion in July 1995 and is anticipated to generate approximately $7,500,000
of additional revenue during the first full year of operations. As a result of
the consolidation of operations, such increase will be partially offset by
absorption of excess inventory in the forms of work-in-process and finished
goods owned by Rubbermaid in the Company's facility. Such absorption is
anticipated to occur in the first and second quarters of fiscal 1996.
During the first quarter of fiscal 1995, Decora Manufacturing signed two five
year exclusive license and supply agreements with Norwall for (a) proprietary
coating and laminating services for the conversion of Norwall's standard
wallcovering products into repositionable, removable, self-adhesive products
and (b) the manufacture and supply of decorative thin film coordinated accents.
These agreements contain minimum purchase volumes in order for Norwall to
retain exclusivity in addition to royalties to be paid based on the sale of
such products. In addition to the Norwall agreements, during fiscal 1995 the
Company signed a License and Supply Agreement with Friedola under which
Friedola will purchase from Decora a wide variety of its consumer and
commercial decorative products for exclusive distribution throughout western
Europe.
16
<PAGE> 20
Based in Germany, Friedola is a 105 year old manufacturer and wholesaler of
housewares and home furnishing products with annual revenues in excess of $100
million. This agreement also contains minimum purchase volumes in order to
retain exclusivity.
Initial sales under the Company's new supply agreements with Norwall and
Friedola occurred primarily during the third and fourth quarters of the fiscal
year ended March 31, 1995 as a result of initial market introductions. While
these new products generated interest in the marketplace, the Company
concentrated on upgrading production from small lots to commercial production
and experienced start-up manufacturing inefficiencies and shipping delays with
certain products. As a result, initial minimum volumes under the agreements
were not achieved and the customers are currently refining product programs
based on market feedback from the initial introduction. The Company
anticipates completing modifications to the respective agreements to reflect
the anticipated timing of orders and the new programs which are scheduled to be
introduced beginning in September 1995 in the U.S. and later in the year in
Europe.
Gross profit of the Company increased by $1,230,000 during the current fiscal
year from $10,386,000 in fiscal 1994 to $11,616,000 in fiscal 1995 reflecting a
combination of increased sales volume, discontinuance of certain less
profitable industrial products and manufacturing cost reductions. While gross
profit margins increased from 26% to 29%, management anticipates that such
margins may return to more historical levels until such time that the revenue
contribution of new products with greater margin is more significant relative
to its core products. Gross margins are also anticipated to return to more
historical levels as a result of additional costs related to products which
have been in the development stage and changes in product mix related primarily
to the new manufacturing operations being added pursuant to the new Rubbermaid
agreement.
Operating Income of the Company decreased $297,000 during the current fiscal
year from $4,192,000 in fiscal 1994 to $3,895,000 in fiscal 1995. Higher gross
profit was offset by new product manufacturing development and start-up costs.
These additional costs which were mainly a result of manufacturing process
development as well as market development resulted primarily from existing and
new consumer products being distributed by Rubbermaid as well as those for the
Company's new additional strategic supply relationships with Norwall and
Friedola. While the Company anticipates continued investment in these
activities in the future, certain expenditures in fiscal 1995 were
non-recurring costs associated with initiating the commercial production of new
technology-based products. The Company continues to place more emphasis on
sales and marketing activities as well commercial processing development rather
than on pure research and development. R&D spending decreased from $1,364,000
in fiscal 1994 to $1,067,000 in fiscal 1995 with such decrease being more than
offset by increases in sales and marketing and production activities. The
primary emphasis is now the fulfillment of its major customer product
requirements and the domestic and international sales and marketing of products
which are the result of research and development activities over the past three
years.
Interest expense increased 8% from $2,451,000 in fiscal 1994 to $2,658,000 in
fiscal 1995. While total liabilities decreased by $821,000 during the year,
such decrease was offset by increased interest rates on floating rate debt and
increased amortization of the debt discount related to the CIGNA Subordinated
notes as
17
<PAGE> 21
a result of the extension of the first sinking fund payment from April 1995 to
April 1996 (see Liquidity and Capital Resources below).
Income from continuing operations was impacted favorably by a tax benefit of
$1,400,000 resulting from net operating loss carry forwards which had not
previously been given value on the Company's financial statements (see Note 8
to the financial statements). The final disposition of non-core subsidiaries
and the historical profitability of continuing operations resulted in the
recognition of this benefit under accounting principles applicable to a portion
of the Company's net operating loss carry forwards. The remaining unrecognized
net operating loss carry forwards will be reviewed periodically and credited to
income when their recognition is considered to be more likely than not.
For the fourth quarter of fiscal 1995, revenues of the Company were lower by
$778,000 (8%) as compared to the comparable period of the prior year primarily
as a result of the timing differences of large, end of quarter orders by the
Company's largest customer, Rubbermaid. Such decline was offset by cost
savings and changes in product mix resulting in an increase in gross profit of
$155,000 in the current period. The revenues and operating results of ComTel
(discontinued operations) experienced a sharp decline in the fourth quarter
mainly as the result of the pending sales of the operations on customer orders,
supplier deliveries and internal operations. On March 31, 1995, ComTel
disposed of its telecommunications Secondary Market and Services businesses and
on June 14, 1995 completed the sale of its last remaining operation in Sanford,
Florida (see "Results of Discontinued Operations" below). The net income of
$88,000 for the fourth quarter of fiscal 1995 is attributable to the losses
incurred by ComTel, offset by the income from continuing operations which
included the tax benefit of $1,400,000. There were no other material unusual
charges or adjustments during the fourth quarter.
The Company's near term growth is anticipated by management to come primarily
from the addition of new manufacturing operations under its New Manufacturing
Agreement with Rubbermaid and the sale of Wearlon(R) coating and self-adhesive
systems for wallcovering as well as decorative thin film products. Such
increases will initially be offset by the absorption of excess inventory owned
by Rubbermaid. Longer term growth is also anticipated to be derived from these
products as well as from sales of Wearlon(R) liquid coatings both in the
industrial maintenance and other niche markets and the international expansion
of sales activities for its other consumer decorative products. It is
anticipated that such products and marketing activities will add growth to the
relatively flat revenues experienced in the last few years from the mature
domestic Con-Tact(R) business.
FISCAL 1994 VS. FISCAL 1993
Revenues of Decora Manufacturing increased by 4% or $1,412,000 from $38,543,000
in fiscal 1993 to $39,955,000 in fiscal 1994. The prior year's results
included $618,000 of revenues from other industrial products of Decora
Manufacturing which were previously discontinued and thus revenues from
comparable existing and new product lines increased by approximately 5% or
$2,030,000 in fiscal 1994 over the prior fiscal year as new products lines
began to show results. Approximately 40% of the increase in such revenues was
derived from new products and their respective selling programs which had no
revenue in the prior year including sales of the new thin film decorative
products, sales of Wearlon(R) coatings and chemicals and
18
<PAGE> 22
international sales of ConTact(R) products by the Company's international sales
group. Additionally, approximately 28% of such increase in revenues was
derived from sales of new ConTact(R) products including Fabri-Craft(TM) textile
products, KidScape(TM) self adhesive wall murals and decorative trims and
borders, and 24% of the increase in sales resulted from the Company's
proprietary industrial transprint release paper products. Traditional
ConTact(R) products provided the remainder of the growth in revenues increasing
less than 1% over the prior year.
Operating Income of Decora Manufacturing increased by $785,000, during the
current fiscal year from $3,921,000 in fiscal 1993 to $4,706,000 in fiscal
1994. Higher sales and marketing expenses were partially offset by lower
research and development costs as well as increased gross profit resulting from
the combination of higher revenues and reduced fixed and variable expenses. As
the Company started to market its new products, it increased investment in
sales and marketing efforts and to a lesser degree on research and development,
spending an aggregate of $2.8 million in fiscal 1994 as compared with $2.0
million in the prior year for all such activities with all of the increase
related to increased sales and marketing activities. These expenses include
all marketing, sales and development costs which are also related to the
consumer products being distributed by Rubbermaid.
During the fourth quarter of fiscal 1994, the Company signed a new and
exclusive six year Manufacturing Agreement with Rubbermaid covering the
traditional ConTact(R) products as well as new products including
Fabri-Craft(TM) self-adhesive textiles and KidScape(TM) wall murals. In
addition, the new agreement allows Decora Manufacturing to sell its decorative
products in certain international markets. The Company generated over $500,000
of such sales during the last half of fiscal 1994 in the Middle East and South
America.
Corporate expenses were approximately $200,000 greater in the current fiscal
year compared to the prior year as the result of the significant one-time legal
and professional fees incurred in connection with the debt restructurings
finalized in July 1994.
Interest expense decreased 3% from $2,514,000 in fiscal 1993 to $2,451,000 in
fiscal 1994. This decrease resulted primarily from the favorable impact of the
two year extension of the potential put obligation relating to the warrants in
the subsidiary (see Note 5(b) to the financial statements) which was partially
offset by higher interest expense of Decora Manufacturing resulting from
increases in prime rate and higher average line of credit borrowings.
RESULTS OF DISCONTINUED OPERATIONS
Revenues of ComTel Industries through completion of the sale of all operations
decreased $2,382,000 from $11,603,000 in fiscal 1994 to $9,221,000 in the
fiscal 1995, primarily due to the ongoing sales of the operations through
several transactions during the year and the related impact such sales
activities had on customer orders, vendor supplies and internal operations,
particularly in the fourth quarter of fiscal 1995 primarily for the metals
operation. Declining business from two of ComTel's major customers, Siemens
Stromberg-Carlson and the General Services Administration (GSA), and restricted
working capital also
19
<PAGE> 23
contributed to significant operating losses late in the fourth quarter. As a
result, operating losses from discontinued operations were $875,000 in fiscal
1995 versus$1,269,000 in fiscal 1994.
On March 31, 1995, the Company sold the telecommunications assets of ComTel for
$1,810,000 (consisting of cash of $250,000 and notes receivable of $1,560,000).
In addition, the purchaser assumed approximately $1,700,000 of the Company's
liabilities. The notes receivable bear interest monthly at 7% with interest
only accruing during the first three years and level interest and principal
payments due thereafter until maturity on March 31, 2002. The notes are
secured by the assets of the purchaser and are guaranteed by the purchaser's
parent company. The transaction resulted in a gain approximating $118,000.
On June 14, 1995, the Company completed the sale of the fixed assets and
inventory related to the manufacturing division of ComTel's business. The
selling price was $1,370,000 (consisting of $1,100,000 cash and a note for
$270,000) plus the assumption of approximately $75,000 of liabilities. The
note is scheduled to be repaid during the six months following closing as
inventory purchased is used by the purchaser to fulfill customer purchase
orders. In addition, in conjunction with the sale, claims on ComTel's assets
with respect to a $300,000 note payable to a customer were forgiven except for
$50,000 which is to be paid from the proceeds of the note receivable. The
assets of the company were sold to a buyer who does not intend to continue in
the same business and therefore did not assume operational liabilities which
were anticipated to be assumed. As a result, the net loss arising from this
transaction was approximately $540,000 (which was approximately $745,000 less
than the net gain anticipated at December 31, 1994).
On September 28, 1992 ComTel entered into a credit agreement with Fleet Bank
which provided for a $1,000,000 term loan and up to a $2,500,000 revolving
credit facility, secured by certain of its fixed assets and substantially all
of its inventory and receivables. The term loan ($750,000 at March 31, 1994)
was payable through 1997 and the revolving credit facility was extended until
June 30, 1995. The balance outstanding on the revolving credit facility was
$2,175,000 at March 31, 1994. Due to the divestiture plan and the
manufacturing and operating difficulties experienced by ComTel in that period
as discussed elsewhere herein, ComTel had been in default of certain financial
covenant tests applicable to this credit agreement. As a result of the sales
of the operations which was completed on June 14, 1995, ComTel repaid the
entire term loan balance from cash proceeds and the majority of the revolving
credit facility. Following the final sale on June 14, 1995, the remaining
balance on the credit facility was $765,000. The Company is in principal
agreement with the lender to restructure the remaining balance and to repay it
with the proceeds of a new two year promissory note.
Certain liabilities of the ComTel businesses, were not assumed by the buyers of
those business units. As a result, the Company is in the process of settling
these liabilities for less than face value and expects to be able to do so.
Certain remaining notes and accounts receivable were not sold to the buyers,
and the Company expects to recover the majority of accounts receivable although
no assurances can be given. The Company presently expects that the net effects
of the assets and liabilities (not settled in connection with the sale
transactions described above) will result in a gain approximating $500,000.
20
<PAGE> 24
At December 31, 1994, the Company had expected that gains on the sale of assets
and the anticipated timing of such sales would offset any additional operating
losses through the date of disposition. The Company was not able to complete
the sale transactions soon enough to stop the operating losses or to fully
attain the anticipated sale value. The additional operating losses of the
ComTel businesses recorded during the quarter ended March 31, 1995 were
$592,000. As a result of the consummation of these transactions on March 31,
1995 and June 14, 1995, the Company recorded a loss from discontinued
operations of $1,297,000 for the year ended March 31, 1995 which was comprised
of operating losses of $875,000 and losses on disposal of $422,000.
While the Company is in the process of settling certain net liabilities of its
former ComTel business, no operations remain and no further losses are expected
to be incurred with respect to the ComTel operations.
LIQUIDITY AND CAPITAL RESOURCES
Changes in the Company's consolidated balance sheet from March 31, 1994 to
March 31, 1995 reflect a slight decrease in overall net working capital from
$515,000 as of March 31, 1994 to $238,000 as of March 31, 1995. Accounts
receivable decreased $966,000 and inventory increased $1,866,000, primarily as
a result of timing differences between the periods with respects to large
orders from the Company's major customer. The $909,000 reduction in accounts
payable also reflects timing differences, primarily regarding raw material
deliveries while the $2,282,000 increase in the current portion of long term
debt is a result primarily of the reclassification from long term debt of a
convertible note of the Company in the amount of $550,000 which is due December
31, 1995 and a subordinated convertible note of the Company in the principal
amount of $1,500,000 which is due November 3, 1995.
Consolidated cash balances as of March 31, 1995 were $309,000 which are limited
by certain security agreements and debt covenants as to use. The Parent Company
therefore has limited cash resources. During recent fiscal periods, the
Company and its subsidiaries generated cash from operations which was utilized
primarily to fund working capital requirements and repay debt. During the
current fiscal year Decora Manufacturing generated positive operating cash flow
while the Parent Company, due to administrative expenses and expenses
associated with the Refinancing and Settlement Transaction had negative cash
flow which was funded through management fees and through a small private
placement of equity securities (see Note 13 to the financial statements). The
Company also owes former directors and officers of the Company with respect to
a contingent obligation of approximately $185,000 which resulted from a
settlement and restricted stock issuance in 1992 and which came due in
September 1994. The Company is attempting to structure payment terms in
accordance with the its cash flow resources, although no assurances can be
given that such a settlement will be achieved.
In conjunction with the Refinancing and Settlement Transaction described above,
Decora Manufacturing's revolving credit line was increased to $6,000,000 and
was extended to July 31, 1996. In addition, the remaining term loan balance of
$2,000,000 as of the closing date was refinanced together with an additional
$6,000,000 of new debt in a five-year term loan facility and an additional
$1,000,000 was made available under the term loan facility (if required) to
fund capital expenditures until July 31, 1995. The $6,000,000 of
21
<PAGE> 25
new term loan funding was utilized to refinance Parent Company debt (see Note
13 to the financial statements). As of March 31, 1995, the balance of the term
loan was $7,625,000, and the balance of the revolving credit facility was
$1,704,000. As of March 31, 1995, the Company had not drawn down any of the
available capital expenditure term loan facility.
In connection with the acquisition of Decora Manufacturing by the Company in
April 1990, Decora Manufacturing issued $7,000,000 principal amount of
subordinated notes, of which $2,500,000 was due April 15, 1995 and $1,500,000
on each April 15 thereafter through 1998. CIGNA and the Company have agreed to
extend the April 15, 1995 payment until April 15, 1996 at which time a total of
$4,000,000 will be due. These notes were issued with warrants which include
certain put features which may become payable in May 1997 and call features
which begin in May 1998. This put feature was extended from its previous
effective date of May 1995 as part of the Refinancing and Settlement
Transaction.
Pursuant to a court mandated settlement in July 1994 of an action filed
in the Supreme Court of the State of New York relating to the purchase of the
Company's former Yorkville subsidiary, the Company is obligated by the court
order to the Former Yorkville Owners to file a registration statement for the
purpose of registering shares worth $1,587,000. The deadline for the Company to
have an effective registration statement was June 30, 1995. The Company filed a
registration statement with the SEC, however it is not yet effective. While the
shares were not registered by June 30, 1995, the Company has 20 days to cure
such default and Management believes that such default does not create a default
under the Company's other debt agreements. If the Company is unable to cure in
the prescribed time, the Former Yorkville Owners may be entitled to enter a
judgment in the amount of $1,587,000 against the Company. The SEC has not
notified the Company when the Registration Statement may be effective.
Management believes that Decora Manufacturing's cash flow from operations and
lending facilities will be adequate to meet its debt service and fund its
working capital needs.
Capital expenditures for the fiscal year ended March 31, 1995 were
approximately $920,000. Management considers the aforementioned amount of
capital expenditures to be typical for the historical level of operations. As
a result of the New Manufacturing Agreement signed with Rubbermaid (see
"Subsequent Events" below) and the resulting consolidation of additional
manufacturing operations into the Company's Fort Edward facility, the Company
anticipates spending approximately $2,500,000 on capital improvements, employee
hiring and training and other costs during fiscal 1995 in addition to routine
capital expenditures of approximately $1,200,000. The Company is in the
process of executing a financing plan for these expenditures which combines (a)
raising additional debt in the amount of approximately $2,875,000 through the
issuance of tax-exempt industrial development bonds and through a low cost loan
from the local municipal development corporation; (b) receipt of interest
subsidy and job training grants through existing State programs; (c)
utilization of existing bank facilities and operating cash flow and (d) the
sharing of certain project costs with Rubbermaid. The additional operations
are anticipated to generate sufficient cash flow to service additional debt to
be raised, although no assurances can be given that such funds will be adequate
or that the financing plan will be executed as currently planned.
SUBSEQUENT EVENT
22
<PAGE> 26
On April 17, 1995, Decora Manufacturing signed an expanded exclusive
manufacturing agreement with its largest customer, Rubbermaid. Under the new
agreement, which expires on March 31, 1999, the Company will perform consumer
packaging operations for its decorative products line which are currently
performed by Rubbermaid in the Company's Fort Edward facility. The Company
anticipates that the additional manufacturing operations, which will centralize
an integrated manufacturing process with resulting time and cost efficiencies,
will generate incremental annual revenues of approximately $7,500,000 in the
first full year of operations and is anticipated to contribute to the overall
profitability of the decorative coverings business. The agreement becomes
effective upon the relocation of the operations which is ongoing and is
anticipated to be completed in July 1995. Integrating the operations requires
relocation of machinery and equipment from North Carolina to New York as well
as improvements to the Company's facility and is anticipated to create
approximately fifty additional manufacturing jobs at the Company's facility.
The Company has developed a financing plan to fund the required improvements
which it is in the process of executing (see "Liquidity and Capital Resources"
above).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is submitted in response to Part IV
hereof. See the Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
DIRECTORS AND EXECUTIVE OFFICERS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, present occupation,
and business experience for the past five years of each director and executive
officer, including those persons nominated to serve on the Board of Directors:
23
<PAGE> 27
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME AGE POSITION DIRECTOR
- ----------------- --- --------------------------- ------------
<S> <C> <C> <C>
Nathan Hevrony 43 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 63 Director 1988
Gabriel Thomas 53 Director 1991
Stephen Verchick 54 Director 1993
Ronald Artzer 52 Director 1994
Timothy N. Burditt 40 Executive Vice President, -
Administration and Finance,
Secretary
Richard A. DeCoste 56 Executive Vice President, -
Decora Industries; President
Decora Manufacturing,
Consumer Decorative Products Group
Frank J. Nolfi, Jr. 63 Vice President-Finance, -
Decora Manufacturing
John Tattersall 37 Chief Operating Officer, -
Decora Manufacturing
</TABLE>
DIRECTORS
NATHAN HEVRONY. Mr. Hevrony has served as a director and secretary of the
Company since August 1988. He was elected Chief Executive Officer and Chairman
of the Board in September 1989. He was a Director of two publicly traded
companies, until June 1988 while he was employed as a Director of Planning and
Development at a publicly traded holding Company from June 1986 to June 1988.
ROGER GRAFFTEY-SMITH. Mr. Grafftey-Smith has served as a director of the
Company since August 1988 and has been a managing partner of Grafftey-Smith &
Associates since 1981, an international financial consulting firm.
Mr. Grafftey-Smith also serves as a director of Americanino Capital
Corporation, a publicly-traded corporation.
24
<PAGE> 28
GABRIEL THOMAS. Mr. Thomas has served as a director of the Company since June
1991. He has served as President and Director of Unilab Corporation since
December 1989. During the period from 1986 to 1991, Mr. Thomas has been a
consultant in international marketing and management. In 1985 to 1986, he was
a consultant to Frankfurt Consult, the mergers and acquisitions subsidiary of
BHF Bank, Frankfurt, Germany.
STEPHEN H. VERCHICK. Mr. Verchick was elected to the Board of Directors in
October 1993. He has been engaged in the private practice of law as President
of Stephen H. Verchick & Associates, Professional Corporation, in Beverly
Hills, California, for the past 24 years. Mr. Verchick is also President of
Warner Capital Associates, a Los Angeles based investment banking and venture
capital firm.
RONALD A. ARTZER. Mr. Artzer was elected to the Board of Directors in May
1994. In March 1994, Mr. Artzer became President and Chief Executive Officer
of Signature Foods, a food processing and packaging company. From 1991 to
1993, Mr. Artzer served as President and Chief Executive Officer of Design
Foods, a Division of Sara Lee Corporation. From 1988 to 1991, he was President
of STP Consumer Services, Inc., a subsidiary of First Brands Corporation. From
1984 to 1988 he was President of Toddle House Restaurants, Inc., a subsidiary
of Carson Pirie Scott & Company. Prior thereto, he served in various Executive
Officer capacities of Sambo's Restaurants, Pepsi-Cola Company and General Foods
Corporation.
Directors of the Company hold office until the next annual meeting of
shareholders, until successors are elected and qualified or until their earlier
resignation or removal.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named as Executive Vice President,
Administration and Finance in April 1993 and was named Secretary in August
1993. From 1991 until his employment with the Company, Mr. Burditt was
President and Chief Operating Officer of Monitor Television, Inc., a Boston
area cable and broadcasting television station and worldwide shortwave radio
network. Prior to his employment with Monitor, Mr. Burditt was Vice President,
Investment Banking, of Fleet Associates, Inc., an investment banking firm, from
1988 through 1991, Senior Associate for Investment Banking for the First Boston
Corporation from 1986 to 1987 and held various positions with GE Capital, Inc.
from 1983 to 1986.
JOHN TATTERSALL. Mr. Tattersall was named as Chief Operating Officer of the
Company's Decora Manufacturing subsidiary at the end of June 1995. From 1984
until his employment with Decora Manufacturing, Mr. Tattersall held several key
executive positions with General Electric Company including Business Manager
from 1991 to June 1995 and Product Manager from 1989 to 1991.
RICHARD A. DECOSTE. Mr. DeCoste was named as the President of the Company's
Decora Manufacturing subsidiary in January 1993. In February 1994, Mr. DeCoste
became President of its Consumer Decorative Products Group. In November 1994,
he became Executive Vice President of the Company. From 1989 through 1991 Mr.
DeCoste was President of Plural Technologies, a manufacturer of commercial
coatings. In addition, he has owned DeCoste Remodeling/Design, a building
materials company since 1987.
25
<PAGE> 29
FRANK J. NOLFI, JR. Mr. Nolfi has served as Vice-President Finance of the
Company's Decora Manufacturing subsidiary since the Company's acquisition in
April 1990. He served in the same position for the Uniglass Industries
division of the prior owner, United Merchants and Manufacturers, Inc.
Officers of the Company are elected by the Board of Directors and hold office
until their successors are chosen and qualified, until their death or until
they resign or have been removed from office. All corporate officers serve at
the discretion of the Board of Directors. There are no family relationships
between any director or executive officer of the Company and any other director
or executive officer of the Company. Richard DeCoste was an officer of Plural
Technologies, Inc. when it filed a petition for bankruptcy under Chapter 7 of
the Bankruptcy Code in September 1991.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors convened six formal meeting during fiscal 1995. In
addition, the Board took action numerous times during the fiscal year by
unanimous written consent. Management confers frequently with its directors on
an informal basis to discuss Company affairs.
The Board of Directors has two standing committees: an Audit Committee and a
Compensation Committee. The Board does not have a Nominating Committee.
The function of the Audit Committee is to review and approve the selection of
and all services performed by the Company's independent accountants, to meet
and consult with, and to receive reports from, the Company's independent
accountants and its financial and accounting staff and to review and act or
report to the Board of Directors with respect to the scope of audit procedures,
accounting practices, and internal accounting and financial controls of the
Company. The current members of the Audit Committee are Roger Grafftey-Smith,
Gabriel Thomas and Stephen Verchick. The Audit Committee held one meeting
during fiscal 1995 and took action by written consent.
The Compensation Committee is generally authorized to review and recommend to
the Board the compensation to be paid to the Company's principal officers and
to administer the Company's 1987 Stock Option Plan. The current members of the
Compensation Committee are Roger Grafftey-Smith (Chairman), Gabriel Thomas and
Stephen Verchick. The Compensation Committee held no meetings during fiscal
1995 but took action several times by written consent.
COMPENSATION OF DIRECTORS
Directors are paid $1,000 for each Board meeting which they attend, and $500
for each committee meeting which they attend. Directors may also receive stock
options under the Company's 1987 Stock Option Plan, or by other grant by the
Company. The Company reimburses directors for reasonable expenses incurred in
connection with their attendance at meetings and other Company related
functions.
26
<PAGE> 30
ITEM 11. EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by, or paid to the Company's Chief Executive Officer and to
its most highly compensated executive officers during the fiscal years ended
March 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ----------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK OPTIONS
- --------------------------- ------ ----------- ------- -----------------------
<S> <C> <C> <C> <C>
Nathan Hevrony 1995 $180,000(5) $25,000 400,000(2)
Chief Executive Officer 1994 $125,000 $25,000 -
1993 $125,000 - 750,000
Timothy N. Burditt 1995 $ 90,000 $27,000 -
Executive Vice President, 1994 $ 81,000 - 100,000
Administration & Finance 1993 - - -
Walter E. Buske 1995 $136,115 - -
President, Decora 1994 $130,000 - 50,000(3)
Manufacturing 1993 - - -
Richard DeCoste 1995 $128,000 - -
Executive Vice President, 1994 $116,000 - -
Decora Manufacturing 1993 $ 32,900 - 75,000(4)
</TABLE>
- -----------------------
(1) Messrs. Hevrony, DeCoste and Burditt were compensated pursuant to
employment agreements. See "Employment Agreements" below.
(2) The options vest as follows: 150,000 vest if the share price is $3.00
or more for 30 consecutive days and 250,000 shall vest if the share
price is $4.00 or more for 30 consecutive days any time until May 31,
1997. None of these options are vested at this time.
(3) Although Mr. Buske was originally granted 350,000 options, the Company
and Mr. Buske have agreed to reduce the number to 50,000. Mr. Buske is
no longer employed by Decora Manufacturing.
(4) Options vest on a quarterly basis, with one-third vesting during each
fiscal year from the date of grant.
(5) The Company also paid the premium for term life insurance for the
benefit of Mr. Hevrony of $17,665.
27
<PAGE> 31
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Hevrony, its
Chief Executive Officer which has been extended until May 31, 1997. The
extended agreement provides for an annual salary of $185,000 and a cash bonus
of up to $60,000 for the fiscal year ended March 31, 1995. The maximum of
$60,000 shall be paid if the Company's earnings per share from continuing
perations are twice the prior year's earnings. No bonus shall be paid unless
earnings per share exceed the prior year's amount ($.06 per share). In
addition, during August 1994, Mr. Hevrony received an option to purchase up to
400,000 shares at $2.00 per share. The options vest as follows: 150,000 vest
if the share price is $3.00 or more for 30 consecutive days and 250,000 shall
vest if the share price is $4.00 or more for 30 consecutive days any time until
May 31, 1997. None of these options are vested at this time. The employment
agreement shall terminate upon breach of a material term of the agreement or
upon the permanent disability of Mr. Hevrony. In the event of termination
without cause (as defined in such agreement), Mr. Hevrony is entitled to
receive compensation for the remainder of the term of the agreement (through
May 31, 1997) and an additional 24 month period. The Company has entered into
a three year employment agreement with Mr. Tattersall which initially provides
for minimum annual compensation in the amount of $130,000. In addition, such
agreement provides for an annual bonus of up to half his salary contingent upon
certain performance criteria. Upon termination without cause, Mr. Tattersall
is entitled to receive compensation for the greater of 12 months or the
remainder of the term of his agreement
The Company has entered into a three year employment agreement with Mr. DeCoste
which initially provided for minimum annual compensation in the amount of
$90,000. During fiscal 1994, such amount was increased to $125,000. In
addition, such agreement provides for an annual bonus of up to $37,500
contingent upon certain performance criteria. Upon termination without cause,
Mr. DeCoste is entitled to receive compensation and health and medical
benefits for a period of one year from the date of termination.
The Company has entered into a three year employment agreement with Mr. Burditt
which provides for a minimum annual compensation in the amount of $90,000. In
addition, such agreement provides for an annual bonus in the amount of $27,000.
Upon termination without cause, Mr. Burditt is entitled to receive any earned
but unpaid bonuses on a pro-rata basis, plus compensation in the amount of
twelve months during the first year of the term, nine months compensation
during the thirteenth to eighteenth month of the term and the lesser of six
months or until the end of the term if terminated after the eighteenth month.
28
<PAGE> 32
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---- -------- ----------- -------------- ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nathan Hevrony 400,000(2) 89% $2.00 8/14/97 $ -0- $126,100 $264,800
Walter Buske 50,000(3) 11% $1.20 3/31/98 $7,500 $ 9,460 $ 19,860
</TABLE>
- -----------------------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed
rates of appreciation only, compounded on an annual basis. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock conditions. The
amounts reflected in this table may not necessarily be achieved.
(2) Options were granted at $2.00 per share. The options vest as follows:
150,000 vest if the share price is $3.00 or more for 30 consecutive
days and 250,000 shall vest if the share price is $4.00 or more for 30
consecutive days any time until May 31, 1997 at which time such options
expire. None of these options are vested at this time.
(3) In July 1994, up to 350,000 options were granted at $1.35 per share.
80,000 options were vested on the date of grant. The others were
scheduled to vest as follows: 85,000 on July 5, 1995; 85,000 on July
15, 1996; and 100,000 if certain revenue increased were achieved.
However, in connection with Mr. Buske's departure from the Company, the
number of options vested was reduced to 50,000, exercisable at $1.20
per share exercisable until July 1997.
AGGREGATED MARCH 31, 1995 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(3)
---- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Nathan Hevrony 750,000 400,000 $ -0- $ -0-
Timothy Burditt 75,000(1) 25,000 $ -0- $ -0-
Richard DeCoste 62,497(1)(2) 6,255 $ -0- $ -0-
Walter Buske 50,000 -0- $- 0- $ -0-
</TABLE>
- -----------------------
29
<PAGE> 33
(1) Options were granted at 85% of market value (closing bid price for the
Company's Common Stock as reported by NASDAQ) at date of grant.
(2) Options have a term of ten years, subject to termination upon the
termination of employment. Unvested options are subject to
acceleration upon a consolidation or merger in which the Company is not
the surviving corporation or which results in the acquisition of
substantially all of the Company's outstanding stock by a single person
or entity (unless the terms of such agreement specifically provide for
the assumption of such options), or in the event of the sale or
transfer of substantially all of the Company's assets.
(3) Value of unexercised in-the-money options was calculated using the
average of the bid and asked price for the Company's stock on March 31,
1995.
During fiscal 1995 none of the executive officers exercised any outstanding
stock options. The only unexercised options held by such executive officers as
of March 31, 1995, are shown in the table above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 15, 1995, certain information with
respect to the Common Stock of the Company which may be deemed to be
beneficially owned by each stockholder who is known by the Company to own more
than 5% of the outstanding Common Stock, by each director of the Company and by
all directors and officers as a group.
<TABLE>
<CAPTION>
NAME AND PERCENT
ADDRESS OF COMMON OTHER OF
BENEFICIAL OWNER(1) STOCK SECURITIES TOTAL CLASS
- -------------------- -------- ---------- --------- -------
<S> <C> <C> <C> <C>
Nathan Hevrony 753,750 750,000(2) 1,503,750 4.6%
1 Mill Street
Fort Edward, NY 12828
Gabriel Thomas -0- 412,000(2) 412,000 1%
1 Mill Street
Fort Edward, NY 12828
Roger Grafftey-Smith 375,000 262,000(2) 637,000 2.0%
1 Mill Street
Fort Edward, NY 12828
</TABLE>
30
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
Stephen H. Verchick -0- 75,000(2) 75,000 (4)
21550 Oxnard Street
Suite 300
Woodland Hills, CA 91367
Ronald Artzer -0- 50,000(2) 50,000 (4)
315 Mullins Street
Mullins, South Carolina 29574
Timothy N. Burditt -0- 100,000(2) 100,000 (4)
1 Mill Street
Fort Edward, NY 12828
John Tattersall -0- 50,000(2) 50,000 (4)
1 Mill Street
Fort Edward, NY 12828
Richard DeCoste -0- 68,745(2) 68,745 (4)
1 Mill Street
Fort Edward, NY 12828
Frank J. Nolfi, Jr. -0- -0- -0- (5)
1 Mill Street
Fort Edward, NY 12828
Robert W. Johnson, IV(6) 926,909(3) 1,207,353(2)(5) 2,134,262 6.6%
The Johnson Company
630 Fifth Avenue, Suite 918
New York, NY 10111
All directors and officers as
a group including the named
persons (9 persons) 1,138,750 2,097,745 3,236,495 9.9%
- ---------------------------
</TABLE>
(1) Unless otherwise indicated, each person included in the table has sole
investment power and sole voting power with respect to the securities
beneficially owned.
(2) The amounts shown reflect shares of common stock underlying stock
options, convertible notes or warrants which are exercisable within 60
days of June 15, 1995.
31
<PAGE> 35
(3) Mr. Johnson disclaims beneficial interest in 40,000 shares which are
held by a trust for which he is a trustee.
(4) Each of these persons owns less than 1% of the outstanding common
stock of the Company.
(5) Includes 882,353 shares issuable upon the conversion of the Johnson
Note.
(6) Pursuant to the terms of a Note and Warrant Agreement, dated November
3, 1992, by and between the Company and Mr. Johnson, the Company is
obligated to name Mr. Johnson as a director nominee. Mr. Johnson has
indicated to the Company that he does not intend to exercise such
right at the present time.
- -----------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1994, the Company issued options to Stephen Verchick, a director of the
Company, to purchase 75,000 shares of common stock and to Ronald Artzer, also a
director, an option to purchase 50,000 shares of common stock both at an
exercise price of $1.25 per share, exercisable for five years.
In January 1995, the Company entered into a consulting agreement with Gabriel
Thomas, a director of the Company where Mr. Thomas is paid $75,000 per annum
for consulting services which includes assistance with European operations. In
July 1995, the Company issued Mr. Thomas an option to purchase 150,000 shares
of common stock at an exercise price of $1.25 per share, exercisable for three
years in connection with various consulting services in connection with
European operations.
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial statements. See Index to Consolidated Financial
Statements.
2. Financial Statement Schedules. See Index to Consolidated
Financial Statements.
3. Exhibits.
The following exhibits are filed or incorporated by reference as part of this
Report.
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Certificate of Incorporation filed on March 27, 1992.(8)
3.2 By-laws.(8)
32
<PAGE> 36
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
4.1 Certificate of Incorporation (see Exhibits 3.1-3.2).
4.2 Form of Specimen Certificate.
(10) MATERIAL CONTRACTS
10.1 Utilitech, Incorporated, 1987 Stock Option Plan.(1)
10.2 Management Agreement dated as of April 18, 1990 by and between
Utilitech and Decora Manufacturing.(2)
10.3 Loan and Security Agreement dated as of April 18, 1990 by and
between Decora Manufacturing, Utilitech and Norstar Bank of
Upstate NY ("Norstar").(2)
10.4 Mortgage dated as of April 18, 1990 by and between Decora
Manufacturing and Norstar.(2)
10.5 Guaranty of Utilitech to Norstar dated as of April 18, 1990.(2)
10.6 Secured Revolving Line of Credit Agreement dated as of April
18, 1990 by and between Decora Manufacturing and Norstar.(2)
10.7 Form of Warrant to Purchase Common Stock of Decora
Manufacturing expiring April 15, 1998 dated as of April 18,
1990 by and between Decora and CIGNA Mezzanine Partners II,
L.P., CIGNA Property and Casualty Insurance Company and Zande
and Co.(2)
10.8 Forms of 14% Senior Subordinated Notes due April 15, 1998
dated as of April 18, 1990 in the amounts of $3,206,480.21,
$1,327,732.26, $1,138,055.27 and $1,327,732.26 to CIGNA
Mezzanine Partners II, L.P., CIGNA Property and Casualty
Property and Casualty Insurance Company and Zande and Co.(2)
10.9 Securities Purchase Agreement dated as of April 15, 1990 by
and between Utilitech, Decora Manufacturing and Purchasers of
14% Senior Subordinated Notes due 1998 and Warrants to
Purchase Common Stock of Decora Manufacturing.(2)
10.10 Agreement and Plan of Merger by and between Decora Industries,
Inc. and Utilitech, Incorporated dated March 3, 1992.(3)
10.11 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Nathan Hevrony.(4)
33
<PAGE> 37
10.12 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Roger Grafftey-Smith.(4)
10.13 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Gabriel Thomas.(4)
10.14 Note and Warrant Purchase Agreement by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.15 Convertible Negotiable Promissory Note by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.16 Series A Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
10.17 Series B Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
10.18 Settlement and Release Agreement dated April 19, 1993 among
Decora Industries, Inc., Yorkville Industries, Inc. and
certain members of the Rabinowitz Family.(6)
10.19 License Agreement dated August 9, 1991, by and between the
Company and John Smith.(7)
10.20 Loan and Security Agreement, in the amount of $1,000,000,
dated September 28, 1992, by and between ComTel Industries,
Inc. ComTel Metals, Inc., Decora Manufacturing and Fleet Bank
of New York.(7)
10.21 Term Note, in the amount of $1,000,000, executed by ComTel
Industries, Inc. and ComTel Metals, Inc. in connection with
the Loan and Security Agreement.(7)
10.22 Secured Revolving Working Capital Line of Credit Agreement, in
the amount of $2,500,000 dated September 28, 1992, by and
between ComTel Industries, Inc. and Fleet Bank of New York.(7)
10.23 Secured Working Capital Promissory Note, in the amount of
$1,500,000 executed by ComTel Industries, Inc. in connection
with the Working Capital Line of Credit Agreement dated as of
September 28, 1992.(7)
10.24 Option Agreement dated as of May 5, 1993, by and between
Arnold Zimmerman and the Company.(7)
34
<PAGE> 38
10.25 Form of Option Agreement dated as of January 11, 1993, by and
between Richard A. DeCoste and the Company.(7)
10.26 Form of Option Agreement dated as of July 15, 1992, by and
between Richard G. Winslow and the Company.(7)
10.27 Asset Purchase Agreement date May 14, 1993 by and among ComTel
Industries, Inc., the Company and Sun Financial Group, Inc.(7)
10.28 Employment Agreement, dated as of July 1, 1993, by and between
the Company and Timothy J. Burditt.(7)
10.29 1988 Employee Stock Purchase Plan.(7)
10.30 Amendment Agreement dated as of July 3, 1993 by and between
the Company and InterEast Capital.(8)
10.31 Second Amendment to Secured Revolving Line of Credit Agreement
dated as of July 29, 1993 by and between Decora and Fleet Bank
of New York (successor to Norstar).(8)
10.32 Revision to Secured Promissory Note (originally dated July 5,
1990, in the principal amount of $850,000), effective
September 28, 1992, by and between ComTel Metals, Inc. and
Siemens Stromberg-Carlson.(8)
10.33 Subordination Agreement, dated September 28, 1992, by and
among ComTel, ComTel Metals, Inc., Siemens Stromberg-Carlson
and Fleet Bank of New York.(8)
10.34 Labor Agreement, effective June 9, 1992, by and between Decora
Manufacturing and Local #13 United Paperworkers International
Union.(8)
10.35 Asset Purchase Agreement by and between Fujitsu Business
Communications, Inc. and ComTel Industries, Inc. dated as of
December 10, 1993.(8)
10.36 Manufacturing Agreement dated as of February 18, 1994, by and
Between Decora Industries, Inc., Decora Incorporated and
Rubbermaid Incorporated.(8)
10.37 Promissory Note in the amount of $8,500,000 by and between
Decora Incorporated and Fleet Bank of New York dated July 20,
1994.(8)
10.38 Amendment No. 1 to Loan and Security Agreement between Decora
Incorporated and Fleet Bank of New York dated July 20,
1994.(8)
35
<PAGE> 39
10.39 Promissory Note in the amount of $1,000,000 by and between
Decora Incorporated and Fleet Bank of New York dated July 20,
1994.(8)
10.40 Loan and Security Agreement in the amount of $1,000,000 by and
between Decora Incorporated and Fleet Bank of New York dated
July 20, 1994.(8)
10.41 Revolving Line of Credit Note in the amount of $6,000,000 by
and between Decora Incorporated and Fleet Bank of New York
dated July 20, 1994.(8)
10.42 Third Amendment to Secured Revolving Line of Credit Agreement
by and between Decora Incorporated and Fleet Bank of New York
dated July 20, 1994.(8)
10.43 Asset Purchase Agreement by and among ComTel Metals, Inc.,
ComTel Industries, Inc. and Keptel, Inc. dated June 28,
1994.(8)
10.44 Amendment to License Agreement dated March 31, 1994 by and
among Decora Industries, Inc., Decora Incorporated and John R.
Smith.(8)
10.45 Assignment of Ownership dated June 30, 1994 by and among
Decora Industries, Inc., Decora Incorporated and John R.
Smith relating to License Agreement.(8)
10.46 Form of InterEast Warrant dated May 4, 1994 to purchase common
stock of Decora.(8)
10.47 Warrant to Confidesa AG to Purchase 100,000 Shares of Common
Stock dated June 29, 1993.(8)
10.48 Form of Warrant to Confidesa AG to Purchase 50,000 shares of
Common Stock dated June 1994.(8)
10.49 Form of Convertible Promissory Note dated June 1994, in the
amount of $550,000 by and between Confidesa AG and Decora
Industries, Inc.(8)
10.50 Letter of Fleet Bank to Decora Industries dated July 29, 1994
regarding the extension of the line of credit of ComTel
Industries, Inc.(8)
10.51 Amendment to Securities Purchase Agreement dated as of July
19, 1994 by and between Decora, Incorporated and Cigna
Mezzanine Partners, Inc., Cigna Property and Casualty and
Insurance Company of North America.(8)
10.52 General Mutual Releases, Settlement Agreement and Covenants
for Peace from Further Litigation, Proceedings, Claims,
Purported Advocacy of Claims and Unwanted Publicity, by and
between Jacqueline B. Cotsen and Decora Industries, Inc.,
dated July 20, 1994.(8)
36
<PAGE> 40
10.53 Assignment Agreement by and among Chase Manhattan Bank, N.A.,
Decora Industries, Inc., and Winslow Bank Limited, dated July
20, 1994.(8)
10.54 Restated Settlement and Release Agreement by and between
Stanley Rabinowitz, Milton Rabinowitz, the Estate of Solomon
Rabinowitz, the Estate of Clara Rabinowitz, Sherri Rabinowitz
Sussman, Suzanne Rabinowitz, Jeffrey Rabinowitz, Laurence
Rabinowitz and Barbie Rabinowitz Lieber, on the one hand, and
Decora Industries, Inc., and Yorkville Industries, Inc., on
the other hand, dated July 20, 1994.(8)
10.55 Agreement and Release by and between InterEast Capital Limited
and Decora Industries, Inc., dated July 20, 1994.(8)
10.56 Promissory Note in the amount of $6,000,000 dated as of July
20, 1994 by and between Decora Industries as borrower and
Decora Incorporated as lender.(8)
10.57 Option Agreement dated as of July 15, 1994, by and between
Decora Industries, Inc. and Walter E. Buske.(8)
10.58 Form of Employment Agreement dated as of June 1, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(8)
10.59 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Stephen Verchick.(8)
10.60 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Ronald Artzer.(8)
10.61 Form of Option Agreement dated as of August 15, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(9)
10.62 Employment Agreement effective as of August 1, 1994 between
the Company and Walter Buske.(9)
10.63 Letter dated November 18, 1994 from Fleet Bank to Richard J.
Winslow, President, ComTel Industries, Inc. re extension of
revolving working capital line of credit in the amount of
$2,000,000 until December 31, 1994.(9)
10.64 Letter dated November 18, 1994 from Fleet Bank to Richard J.
Winslow, President, ComTel Industries, Inc. re extension of
revolving working capital line of credit in the amount of
$2,000,000 until January 31, 1995.(9)
37
<PAGE> 41
10.65 Registration Rights Agreement dated as of April 19, 1993 by
and between Decora Industries, Inc. and members of the
Rabinowitz family.(10)
10.66 Modification, Extension and Restatement Agreements by and
between Fleet Bank and ComTel.(10)
10.67 Asset Purchase Agreement dated as of March 31, 1995 by and
between ComTel Systems Corporation and ComTel Industries, Inc.
10.68 Secured Promissory Note I dated as of March 31, 1995 in the
amount of $850,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.
10.69 Secured Promissory Note II dated as of March 31, 1995 in the
amount of $710,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.
10.70 Amendment to Securities Purchase Agreement dated as of April 1,
1995, by and among Decora, Incorporated and Cigna Mezzanine
Partners II, L.P., Cigna Property and Casualty Insurance
Company and Insurance Company of North America.
10.71 Manufacturing Agreement dated April 12, 1995 by and among
Decora Industries, Inc., Decora, Incorporated and Rubbermaid
Incorporated (11).
10.72 Agreement of Purchase and Sale of Assets dated June 13, 1995,
by and between DMX Integration, Inc. and ComTel Metals, Inc.
10.73 Secured Promissory Note dated June 13, 1995, in the amount of
$270,809.90 by and between DMX Integration, Inc., as Debtor
and ComTel Metals, Inc., as Lender.
10.74 Guaranty of Datamax Corporation dated June 13, 1995.
10.75 Employment Agreement dated June 28, 1995 by and between John
Tattersall and Decora Incorporated.
10.76 Option Agreement dated June 28, 1995 by and between John
Tattersall and Decora Industries, Inc.
10.77 Option Agreement dated July 6, 1995 by and between Gabriel
Thomas and Decora Industries, Inc.
(22) SUBSIDIARIES OF THE REGISTRANT(8)
(24) CONSENTS OF EXPERTS AND COUNSEL
38
<PAGE> 42
24.1 CONSENT OF PRICE WATERHOUSE LLP.
- -----------------------
Notes
(1) Previously filed as Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended March
31, 1988.
(2) Previously filed as Exhibits to the Company's Report
on Form 8-K dated April 18, 1990.
(3) Previously filed as Exhibit to the Company's Report
on Form 8-K dated April 6, 1992.
(4) Previously filed as Exhibits to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1992.
(5) Previously filed as Exhibits to the Company's Report
on Form 8-K dated November 5, 1992.
(6) Previously filed as Exhibit to the Company's Report
on Form 8-K dated April 19, 1993.
(7) Previously filed as Exhibit to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1993.
(8) Previously filed as Exhibit to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1994.
(9) Previously filed as Exhibit to the Company's Report
on Form 10-Q for the fiscal quarter ended December
31, 1994.
(10) Previously filed as Exhibit to the Company's Report
on Form 8-K dated March 2, 1995.
(11) Confidential treatment requested.
39
<PAGE> 43
(b) REPORTS ON FORM 8-K
A report was filed on March 2, 1995 voluntarily including certain
material contracts.
(c) FINANCIAL STATEMENT SCHEDULES
Not Applicable.
40
<PAGE> 44
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DECORA INDUSTRIES, INC.
By: /s/ NATHAN HEVRONY
_________________________________________
Nathan Hevrony
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) THE SECURITIES ACT
OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROGER GRAFFTEY-SMITH Director July 10, 1995
- --------------------------------------
Roger Grafftey-Smith
/s/ GABRIEL THOMAS Director July 10, 1995
- --------------------------------------
Gabriel Thomas
/s/ NATHAN HEVRONY Chief Executive Officer July 10, 1995
- -------------------------------------- and Director (Principal
Nathan Hevrony Executive Officer)
/s/ STEPHEN H. VERCHICK Director July 10, 1995
- --------------------------------------
Stephen H. Verchick
/s/ RONALD ARTZER Director July 10, 1995
- --------------------------------------
Ronald Artzer
</TABLE>
41
<PAGE> 45
<TABLE>
<S> <C> <C>
/s/ TIMOTHY BURDITT Executive Vice President, July 10, 1995
- -------------------------------------- Administration and Finance
Timothy Burditt (Principal Financial and
Accounting Officer)
</TABLE>
42
<PAGE> 46
DECORA INDUSTRIES, INC.
ITEMS 14(a)(1) AND (2) - INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
----
<S> <C>
The following Consolidated Financial Statements
of Decora Industries, Inc., and Report of Independent
Accountants are filed as part of this report:
Report of Independent Accountants F-2
Consolidated Balance Sheet at March 31,
1995 and 1994 F-3
Consolidated Statements of Operations
for the Years Ended March 31, 1995,
1994 and 1993 F-5
Consolidated Statements of Cash Flows
for the Years Ended March 31, 1995,
1994 and 1993 F-6
Consolidated Statements of Shareholders'
Equity (Deficit) for the Years Ended
March 31, 1995, 1994 and 1993 F-7
Notes to Consolidated Financial Statements F-8
FINANCIAL STATEMENT SCHEDULES:
</TABLE>
Schedules not listed above have been omitted because they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto.
F-1
<PAGE> 47
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Decora Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity (deficit) listed in the Index appearing under Items
14(a)(1) and (2) on Page F-1 present fairly, in all material respects, the
financial position of Decora Industries, Inc. and its subsidiaries at March 31,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Syracuse, New York
June 29, 1995
F-2
<PAGE> 48
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 309,000 $ 320,000
Accounts receivable, less allowance for
doubtful accounts of $189,000
and $71,000 (Note 11) 2,941,000 3,907,000
Inventories (Notes 1 and 3) 4,874,000 3,008,000
Prepaid expenses and other current assets 503,000 364,000
---------------- ----------------
Total current assets 8,627,000 7,599,000
Property and equipment, net (Notes 1 and 4) 7,646,000 7,898,000
Notes receivable (Note 2) 1,560,000 -
Intangibles, net (Notes 1 and 2) 11,788,000 12,314,000
Net non-current assets of discontinued operations -
ComTel (Note 2) - 2,115,000
Deferred income taxes (Note 8) 1,400,000 -
Other assets - 97,000
---------------- ----------------
Total Assets $ 31,021,000 $ 30,023,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 49
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,840,000 $ 3,749,000
Accrued liabilities 1,791,000 1,949,000
Current portion of long-term debt (Note 5) 3,157,000 875,000
Net current liabilities of discontinued
operations - ComTel (Note 2) 601,000 511,000
---------------- ----------------
Total current liabilities 8,389,000 7,084,000
Long-term debt (Note 5) 15,006,000 11,314,000
Liabilities settled in refinancing (Note 13) - 6,284,000
Net non-current liabilities of discontinued
operations - Yorkville (Note 2) 1,520,000 1,339,000
Other non-current liabilities 285,000 -
---------------- ----------------
Total liabilities 25,200,000 26,021,000
---------------- ----------------
Warrants in subsidiary (Note 5) 1,425,000 1,425,000
---------------- ----------------
Shareholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized - -
Common stock, $.01 par value; 45,000,000 and
35,000,000 shares authorized; 30,718,000 and
29,859,000 shares issued and outstanding (Note 6) 307,000 299,000
Additional paid-in capital 28,288,000 27,588,000
Accumulated deficit (24,199,000) (25,310,000)
---------------- ----------------
Total shareholders' equity 4,396,000 2,577,000
---------------- ----------------
Commitments and contingencies (Notes 9 and 10)
---------------- ----------------
Total Liabilities and Shareholders' Equity $ 31,021,000 $ 30,023,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 50
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues (Note 11) $ 40,414,000 $ 39,955,000 $ 38,543,000
Cost of goods sold 28,798,000 29,569,000 30,104,000
---------------- ----------------- ----------------
Gross profit 11,616,000 10,386,000 8,439,000
Marketing, general and administrative
expense 7,721,000 6,194,000 5,332,000
---------------- ----------------- ----------------
Operating income 3,895,000 4,192,000 3,107,000
Interest expense 2,658,000 2,451,000 2,514,000
---------------- ----------------- ----------------
Income from continuing
operations before taxes 1,237,000 1,741,000 593,000
Provision (benefit) for taxes (Notes 1 and 8) (1,171,000) 112,000 (30,000)
---------------- ----------------- ----------------
Income from continuing operations 2,408,000 1,629,000 623,000
---------------- ----------------- ----------------
Discontinued operations (Note 2):
Income (loss) from operations (875,000) (1,269,000) 68,000
Provision for discontinued operations (422,000) (212,000) -
---------------- ----------------- ----------------
Income (loss) from discontinued operations (1,297,000) (1,481,000) 68,000
---------------- ----------------- ----------------
Net income $ 1,111,000 $ 148,000 $ 691,000
================ ================= ================
Income (loss) per common share (Note 1):
Continuing operations $ 0.08 $ 0.06 $ 0.02
Discontinued operations (0.04) (0.05) 0.01
---------------- ----------------- ----------------
Income per common share $ 0.04 $ 0.01 $ 0.03
================ ================= ================
Average shares of common stock used in
computation of income per share (Note 1) 30,357,000 29,690,000 27,587,000
================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 51
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,111,000 $ 148,000 $ 691,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,623,000 1,534,000 1,966,000
Amortization of debt discount 489,000 261,000 184,000
Loss on disposal of fixed assets 75,000 - 9,000
Provision for loss on disposal of
discontinued operations 422,000 212,000 -
Stock issued for services 176,000 - -
Deferred income tax benefit (1,400,000) - -
Net changes in current assets and
liabilities, exclusive of acquisitions and
dispositions of subsidiaries (Note 12) (1,724,000) 555,000 (463,000)
---------------- ----------------- ----------------
Net cash provided by operating activities 772,000 2,710,000 2,387,000
---------------- ----------------- ----------------
Cash flows from investing activities:
Proceeds from sale of discontinued operations 1,090,000 - -
Additions to notes receivable (1,560,000) - -
Cash of discontinued operations (180,000) (66,000) -
Purchase of fixed assets (920,000) (1,275,000) (1,298,000)
Increase (decrease) in liabilities - discontinued
operations 1,054,000 (376,000) (1,787,000)
---------------- ----------------- ----------------
Net cash used in investing activities (516,000) (1,717,000) (3,085,000)
---------------- ----------------- ----------------
Cash flows from financing activities:
Proceeds from additional borrowings 226,000 1,050,000 5,131,000
Repayment of debt (875,000) (2,600,000) (6,168,000)
Proceeds from exercise of stock options 50,000 - 228,000
Proceeds from issuance of common stock - - 1,207,000
Stock issued in connection with
debt restructuring 150,000 230,000 150,000
Stock issued to pay interest expense 182,000 133,000 -
Stock issued in acquisition - 400,000 -
Reduction of warrants in subsidiary - (200,000) (125,000)
Other - (52,000) 42,000
---------------- ----------------- ----------------
Net cash provided by (used in)
financing activities (267,000) (1,039,000) 465,000
---------------- ----------------- ----------------
Net decrease in cash (11,000) (46,000) (233,000)
Cash at beginning of period 320,000 366,000 599,000
---------------- ----------------- ----------------
Cash at end of period $ 309,000 $ 320,000 $ 366,000
================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 52
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------------
ADDITIONAL
PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT
<S> <C> <C> <C> <C>
Balance at March 31, 1992 25,856,000 $ 259,000 $ 23,012,000 $ (26,149,000)
Common shares issued in
private placements 782,000 8,000 1,199,000 -
Common shares issued in
debt restructuring 1,691,000 17,000 1,853,000 -
Interest paid in common shares 90,000 1,000 179,000 -
Stock options exercised 733,000 7,000 221,000 -
Common shares issued in
litigation settlement 94,000 1,000 126,000 -
Other 143,000 1,000 240,000 -
Net income - - - 691,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1993 29,389,000 294,000 26,830,000 (25,458,000)
Interest paid in
common shares 96,000 1,000 132,000 -
Common shares issued in
acquisition 200,000 2,000 398,000 -
Common shares issued in
debt restructure 174,000 2,000 228,000 -
Net income - - - 148,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1994 29,859,000 299,000 27,588,000 (25,310,000)
Interest paid in
common shares 258,000 2,000 180,000 -
Conversion of debentures 131,000 1,000 149,000 -
Common shares issued in debt
restructuring 125,000 1,000 149,000 -
Stock options exercised 50,000 1,000 49,000 -
Common shares issued to
settle outstanding obligations 295,000 3,000 173,000 -
Net income - - - 1,111,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1995 30,718,000 $ 307,000 $ 28,288,000 $ (24,199,000)
========== ================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 53
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Decora Industries, Inc. (the "Company") is a holding company primarily
engaged in the development, manufacture, and sale of consumer decorative
products and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective technologies.
The Company operates through its wholly-owned subsidiary, Decora
Manufacturing. In April 1994, management decided to discontinue the
operations of a second wholly-owned subsidiary, ComTel Industries, Inc.
("ComTel"), which manufactured, installed and serviced telecommunications
equipment and systems (see Note 2). Accordingly, the continuing
operations of the Company now comprise the various divisions of Decora
Manufacturing, which constitutes a single significant business segment.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Decora
Industries, Inc., its operating subsidiary and the discontinued
subsidiary. All significant intercompany accounts and transactions have
been eliminated in consolidation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair value disclosure for financial instruments.
Notes receivable
The carrying amount of the Company's notes receivable approximates fair
value, which is estimated by discontinuing the future cash flows using
current interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities.
Long-term debt
The carrying amount, which approximates fair value of the Company's
senior subordinated notes, is based on discounting future cash flows
using interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities. The
carrying amount of the Company's remaining debt approximates fair value.
Warrants in subsidiary
The carrying amount approximates fair value of the Company's obligation
for the warrants in subsidiary. The determination of the carrying amount
of these warrants is more fully described in Note 5.
CASH AND CASH EQUIVALENTS
The Company invests surplus cash in highly liquid debt instruments which
have original maturities of less than three months and are considered to
be cash equivalents.
F-8
<PAGE> 54
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
SERVICE AND PRODUCT REVENUES
Revenues from sales of products and services are recognized when products
are shipped and services are performed.
F-9
<PAGE> 55
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Cost includes materials, labor and manufacturing overhead.
DEPRECIATION
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, generally five to thirty years.
INTANGIBLES
The excess of the aggregate purchase price over the fair market value of
the net assets of businesses acquired has been recorded as goodwill and
is being amortized on a straight-line basis over forty years. Trademarks
are being amortized over twenty years. At each balance sheet date, the
Company evaluates the recoverability of its intangible assets based on
estimated future gross cash flows. Based upon its most recent analysis,
the Company believes that there was no impairment of its intangible
assets at March 31, 1995.
INCOME PER SHARE
Income per share of common stock is based on the average number of shares
and equivalents of common stock outstanding during each period. Fully
diluted income per share is not presented for each of the periods since
the reduction from primary income per share is less than 3%.
INCOME TAXES
Income taxes are provided based on the liability method of accounting
pursuant to the Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109"). Deferred income taxes are
recorded to reflect expected future tax consequences of events that have
been recognized in a company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted tax rates in the years in
which the differences are expected to reverse.
RESEARCH AND DEVELOPMENT
Company-sponsored research and development costs related to both present
and future products are expensed currently. Research and development
expenses amounted to $1,067,000, $1,364,000 and $1,639,000 in fiscal
1995, 1994 and 1993, respectively.
2. DISCONTINUED OPERATIONS
ComTel Industries, Inc. - In April 1994, management of the Company
decided to divest its telecommunications services and manufacturing
operations ("ComTel"). In its March 31, 1994 consolidated financial
statements, the Company included a provision for discontinued operations
of $212,000, which reflected the then expected loss on disposal of the
related assets of ComTel.
F-10
<PAGE> 56
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
On June 28, 1994, the Company sold the El Paso division of its
telecommunications business for $840,000 cash and assumption by the buyer
of the long-term lease on a facility. The transaction resulted in a loss
approximating $212,000 with respect to the book value of the related
assets at that date.
On March 31, 1995, the Company sold the telecommunications assets of
ComTel for $1,810,000 (consisting of cash of $250,000 and notes
receivable of $1,560,000). In addition, the purchaser assumed $1,700,000
of the Company's liabilities. The notes receivable bear interest at 7%
with interest only accruing during the first three years and level
interest and principal payments due thereafter until maturity on March
31, 2002. The notes are secured by the assets of the purchaser and are
guaranteed by the purchaser's parent company. The transactions resulted
in a gain approximating $118,000 with respect to the book value of the
related assets at that date.
On June 14, 1995, the Company completed the sale of the fixed assets and
inventory related to the manufacturing division of ComTel's business.
The selling price was $1,370,000 (consisting of $1,100,000 cash and a
note for $270,000) plus the assumption of $75,000 of liabilities. The
note receivable bears interest at 10% payable semi-annually, and will be
repaid quarterly until December 1995 based on usage of purchased
inventory. After certain adjustments, the remaining balance will be
payable three years thereafter. In addition, in conjunction with the
sale, claims on ComTel's assets with respect to a $300,000 note payable
to a customer were forgiven except for $50,000 (Note 5) which is to be
paid from the proceeds of the note receivable. The transactions resulted
in a loss approximating $540,000 with respect to the book value of the
related assets at that date.
Certain liabilities of the ComTel businesses, which were not guaranteed
by the Company, were not assumed by the buyers of those business units.
As a result, the Company is in the process of settling these liabilities
for less than face value and expects to be able to do so. Certain
remaining notes and accounts receivable were not sold to the buyers, and
the Company expects that losses will be incurred on a portion of such
receivables, which are provided for at March 31, 1995.
While the Company remains obligated for certain net liabilities of its
former ComTel business, no operations or employees remain and no further
losses are expected to be incurred with respect to the ComTel operations.
The results of operations of ComTel have been reported as discontinued
operations in the accompanying financial statements and consist of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues $ 9,221,000 $ 11,603,000 $ 13,378,000
Operating Income (Loss) $ (875,000) $ (1,269,000) $ 360,000
Net Income (Loss) $ (1,297,000) $ (1,481,000) $ 68,000
</TABLE>
F-11
<PAGE> 57
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The net assets and liabilities of these operations have been included in
net assets or liabilities of discontinued operations based on the
appropriate balance sheet classifications.
The composition of net assets of discontinued operations for ComTel are
as follows:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Cash $ 180,000 $ 66,000
Receivables 437,000 1,582,000
Inventories 1,279,000 3,423,000
Property and equipment, net 1,108,000 2,587,000
Other assets 51,000 283,000
Current portion of long-term debt (Note 5) (1,806,000) (3,143,000)
Other current liabilities (1,850,000) (2,439,000)
Long-term liabilities - (755,000)
----------- -----------
Net assets (liabilities) of discontinued
operations $ (601,000) $ 1,604,000
=========== ===========
Net non-current assets $ - $ 2,115,000
Net current liabilities
(601,000) (511,000)
----------- -----------
Net assets (liabilities) of discontinued
operations $ (601,000) $ 1,604,000
=========== ===========
</TABLE>
Yorkville Industries, Inc. - In January 1992, the Company sold
substantially all of Yorkville's inventory and other fixed assets to an
unrelated third party for approximately $325,000. Certain product lines,
compatible with other ongoing businesses of the Company, were retained.
The trademark associated with these product lines is included in the
financial statements and is being amortized over twenty years. The
remaining assets of Yorkville have been liquidated and the proceeds used
to reduce the obligation to Yorkville's former secured lender, Chase
Manhattan Bank ("Chase"). Concurrent with the sale, Yorkville ceased
operations. Yorkville had been acquired by the Company in December 1989.
F-12
<PAGE> 58
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company had entered into a repayment and forbearance agreement with
Chase for the Yorkville debt which had previously been guaranteed by the
Company and a binding settlement pursuant to a court stipulation with
the former owners of Yorkville (the "Former Yorkville Owners") requiring
cash payments and the registration and issuance of the common stock of
the Company to the Former Yorkville Owners. Pursuant to the Refinancing
and Settlement Transaction completed on July 22, 1994 (described in Note
13), the Chase obligation was fully satisfied, and the remaining
obligation to the Former Yorkville Owners consists of registering and
issuing no less than 875,000 shares of common stock of the Company to
the Former Yorkville Owners by June 30, 1995 with an aggregate minimum
value of $1,587,000. (See Note 13 for a description of the remaining
obligation.) The present value of the remaining payments (cash and
stock) which had been due under the forbearance and settlement
agreements were paid in full from the proceeds of the Refinancing and
Settlement Transaction described in Note 13 and are included in the net
liabilities of discontinued operations.
The net liabilities of Yorkville have been included in net non-current
liabilities of discontinued operations based on the applicable balance
sheet classifications. The composition of net liabilities relating to
Yorkville is as follows:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Cash $ - $ 2,000
Receivables - 60,000
Accrued liabilities - (125,000)
Due to Chase Manhattan Bank - (3,885,000)
Due to Former Yorkville owners (1,520,000) (1,911,000)
---------------- ----------------
(1,520,000) (5,859,000)
Less amounts settled (Note 13) - 4,520,000
---------------- ----------------
Net liabilities of discontinued operations $ (1,520,000) $ (1,339,000)
================ ================
Net non-current liabilities $ (1,520,000) $ (1,339,000)
================ ================
</TABLE>
F-13
<PAGE> 59
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Inventories consist of:
Raw materials $ 2,593,000 $ 1,803,000
Work-in-process 1,250,000 814,000
Finished goods 1,031,000 391,000
---------------- ----------------
$ 4,874,000 $ 3,008,000
================ ================
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Land and buildings $ 4,020,000 $ 3,885,000
Vehicles and related equipment 33,000 38,000
Machinery and equipment 7,632,000 7,038,000
Furniture and fixtures 322,000 285,000
Leasehold improvements 617,000 617,000
---------------- ----------------
12,624,000 11,863,000
Less accumulated depreciation 4,978,000 3,965,000
---------------- ----------------
$ 7,646,000 $ 7,898,000
================ ================
</TABLE>
F-14
<PAGE> 60
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Decora Industries, Inc. Credit Facility (a) $ - $ 564,000
Decora Manufacturing Debt (b) 14,625,000 9,500,000
Decora Manufacturing Line of Credit (b) 1,704,000 1,194,000
ComTel Debt (c) - -
Convertible Notes (d) 2,050,000 2,200,000
Note Payable to Former Director (e) - 1,200,000
---------------- ----------------
18,379,000 14,658,000
Less: Amounts due within one year (3,157,000) (875,000)
Amounts Settled (a and e) (Note 13) - (1,764,000)
Unamortized Debt Discount (216,000) (705,000)
---------------- ----------------
$ 15,006,000 $ 11,314,000
================ ================
</TABLE>
Amounts maturing within the next five years are: $3,157,000, $7,036,000,
$2,849,000, $2,832,000 and $2,505,000.
(a) The amount owed on a note with InterEast Capital Limited ("IECL"), which
had previously been extended to February 1994, had been in default since
that date. This balance was repaid from the proceeds of the Refinancing
and Settlement Transaction described in Note 13.
(b) Both the Decora Manufacturing term loan and the line of credit facility
were extended and modified in July 1994 as part of the Refinancing and
Settlement Transaction described in Note 13. The loan bears interest at
9.52% and is secured by certain of Decora Manufacturing's accounts
receivable, inventory and property and equipment. Decora Manufacturing
also has a revolving line of credit of up to $6 million secured by
various accounts receivable, inventory and equipment. The amount
outstanding under the facility bears interest at prime plus 1 1/4%.
Availability under this credit facility is limited by specified
percentages of receivables and inventories.
F-15
<PAGE> 61
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In addition to the term loan, Decora Manufacturing issued $7 million of
14% senior subordinated notes of which interest on the notes is payable
semi-annually. On April 1, 1995, the repayment terms of the notes were
extended to include a payment of $4 million due on April 15, 1996 and
$1.5 million due on April 15, 1997 and 1998. Warrants were issued which
are exercisable by April 15, 1998 (or upon the public offering of the
shares of Decora Manufacturing, if earlier) into 20% of the equity of
Decora Manufacturing for a nominal cash payment. If there has been no
public offering of the shares of Decora Manufacturing by April 15, 1997,
these warrants can then be "put" to the Company for a cash payment based
upon earnings of Decora Manufacturing. The date of such put was extended
from April 15, 1995 to April 15, 1997 with the consent of the lender as
part of the Refinancing and Settlement Transaction described in Note 13.
At March 31, 1995, the warrants were valued at $1,425,000. Changes in
the value of the warrants (based upon results of operations and
financial position of Decora Manufacturing) are charged or credited to
interest expense. During the years ended March 31, 1995, 1994 and 1993,
$0, $200,000 and $125,000 were credited, respectively. The note is
recorded net of unamortized discount of $216,000 and $646,000 at March
31, 1995 and 1994, respectively.
(c) In connection with the acquisitions of the Siemens divisions, ComTel
issued promissory notes for $1,375,000. The balances on these notes at
March 31, 1995 and 1994 were $50,000 and $755,000, respectively, and
these amounts were included in long-term liabilities of discontinued
operations. During fiscal 1995, the notes were renegotiated and Siemens
relinquished all claims against the assets of ComTel for consideration
of $50,000 which is to be paid in fiscal 1996.
ComTel has a revolving credit facility which provides for borrowings of
up to $2,500,000 and had a $750,000 term loan at March 31, 1995. Both
credit facilities were secured by certain of its fixed assets and
substantially all of its inventory and receivables. As part of the
transaction relating to the June 1994 sale of its El Paso facility,
ComTel repaid $550,000 of the term loan. The remainder of the term loan
was repaid during fiscal 1995. Amounts outstanding against the credit
line at March 31, 1994 were $1,800,000. As part of the transaction
related to the sale of its telecommunication assets, ComTel repaid
$250,000 of the line of credit balance. As part of the transaction
relating to the sale of the manufacturing division, ComTel repaid
$800,000 of the line of credit balance subsequent to March 31, 1995. In
June 1995, the remaining balance of $750,000 was repaid with a borrowing
from the Decora Manufacturing revolving line of credit facility. The
term loan and the line of credit amounts are included in net current
liabilities of discontinued operations.
(d) On November 3, 1992, the Company borrowed $1,500,000 from a private
lender and issued a convertible note. As part of the transaction, the
Company also issued 89,076 shares of its common stock, warrants to
purchase 225,000 shares of common stock at $1.40 per share and warrants
for an additional 100,000 shares of common stock at prices contingent
upon the future market price of the Company's common stock. The
convertible note is due November 3, 1995, and bears interest at 12% per
annum, payable in the form of the Company's common stock. In
F-16
<PAGE> 62
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
June 1993, the Company borrowed $550,000 from a private lender and issued
a convertible note. On March 15, 1995, the note was extended to December
31, 1995, and is convertible into shares of the company's common stock
computed at 40% of the market price on the date of conversion. Interest
is payable at the rate of 12%.
At March 31, 1994, the Company had a convertible note in the principal
amount of $150,000 payable to a private investor. In June 1994, the note
was converted to 132,000 shares of the Company's common stock.
(e) The amount of $1,200,000 owed to a former director which had been in
default since October 1993 was satisfied through a payment of $1,014,000
($800,000 principal and $214,000 of legal fees and interest) from the
proceeds of the Refinancing and Settlement Transaction described in Note
13.
6. COMMON STOCK
At March 31, 1995, the Company had an aggregate of 4,838,000 shares of
common stock reserved for: (1) Options for the purchase of 4,013,000
shares of common stock, and (2) exercise of warrants for common stock of
450,000 at $0.75 per shares, 275,000 at $1.40 per share and 100,000 at a
range of $0.50-$1.40 per share. On October 5, 1988, the shareholders of
the Company approved the Decora Industries, Inc. 1988 Employee Stock
Purchase Plan pursuant to which a total of 500,000 shares of the
Company's common stock may be issued to participants during the term of
the Plan at an issue price of 85% of fair market value at the date of
purchase. No shares have been purchased pursuant to the Plan.
7. STOCK OPTIONS
The Company has a Stock Option Plan covering the directors and employees
of the Company and its subsidiaries adopted in 1987 ("1987 Plan") under
which 1,700,000 shares of common stock are available for grant. The Plan
is administered by a committee of the Board of Directors of the Company
who are not covered by the Plan. All options granted under the 1987 Plan
terminate either five years or ten years after the date of grant and
those granted vest quarterly subsequent to the grant date over a
three-year period unless modified by the Company. Options for 730,000
shares of common stock have been exercised to date.
F-17
<PAGE> 63
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The following summarizes the Company's stock option activity for the
years ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
MARCH 31, 1995 MARCH 31, 1994
NUMBER OF PRICE NUMBER OF PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
<S> <C> <C> <C> <C>
Beginning balance 3,999,000 $.50 - $1.86 3,999,000 $.50 - $2.25
Options granted 1,175,000 $1.03 - $2.00 1,075,000 $1.03 - $1.86
Options exercised (50,000) $1.00 - -
Options expired (1,111,000) $.75 - $1.86 (1,075,000) $.85 - $2.25
---------- ------------ ---------- ------------
Ending balance 4,013,000 $.50 - $2.00 3,999,000 $.50 - $1.86
========== ============ ========== ============
Exercisable 3,406,000 3,145,000
========== ==========
</TABLE>
8. INCOME TAXES
The provision (benefit) for income taxes charged to continuing
operations for the years ended March 31, 1995, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ (3,000) $ 31,000 $ -
State 232,000 81,000 (30,000)
-------------- ------------ ---------
Total current 229,000 112,000 (30,000)
Deferred tax benefit (1,400,000) - -
-------------- ------------ ---------
Provision (benefit) for income taxes $ (1,171,000) $ 112,000 $ (30,000)
============== ============ =========
</TABLE>
F-18
<PAGE> 64
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Deferred tax liabilities (assets) are comprised of the following at
March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Depreciation $ 244,000 $ 158,000
Discontinued operations 378,000 388,000
Organization cost amortization 137,000 81,000
----------- -----------
759,000 627,000
----------- -----------
Net operating loss carryforwards (6,178,000) (6,654,000)
Inventory valuation allowance (81,000) (127,000)
Loss on sale of ComTel assets (154,000) -
Deferred compensation liability (106,000) (101,000)
Other (219,000) (86,000)
----------- -----------
(6,738,000) (6,968,000)
----------- -----------
Deferred tax assets valuation allowance 4,579,000 6,341,000
----------- -----------
Deferred taxes, net $ 1,400,000 $ -
=========== ===========
</TABLE>
The provision (benefit) for income taxes for the three years ended March
31, 1995 differs from the amount of income tax determined by applying
the applicable U.S. statutory federal income tax rate to pretax income
from continuing operations as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Pretax income at statutory rate $ 13,000 $ 106,000 $ 225,000
State tax expense (benefit) 232,000 81,000 (30,000)
Effect of net operating loss (16,000) (75,000) (225,000)
Change in valuation allowance (1,400,000) - -
----------- ----------- -----------
Provision (benefit) for income taxes $(1,171,000) $ 112,000 $ (30,000)
=========== =========== ===========
</TABLE>
Approximately $17,652,000 of the company's loss carryforwards remain
available at March 31, 1995. Their use is limited to future taxable
earnings of the Company. The carryforwards expire over the period 1999
through 2007.
F-19
<PAGE> 65
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Management believes that it is more likely than not that it will
generate taxable income sufficient to realize a portion of the tax
benefit associated with future deductible temporary differences and the
net operating loss carryforwards prior to their expiration. This belief
is based upon, among other factors, changes in operations that have
occurred during 1994 and 1995. Specifically, cost savings associated
with capital investments in and strategic realignment of Decora
Manufacturing have improved operating results. As described in Note 2,
the Company divested itself of its ComTel subsidiary, which had
generated significant operating losses in 1994 and 1995.
Management believes that the valuation allowance is appropriate given
the current estimates of future taxable income. If the Company is unable
to generate sufficient taxable income in the future through operating
results, increases in the valuation allowance will be required through a
charge to expense. However, if the Company achieves sufficient
profitability to utilize a greater portion of the deferred tax asset,
the valuation allowance will be reduced through a credit to income.
9. COMMITMENTS
COMPENSATING BALANCE
Under an agreement with the lending bank at March 31, 1995, the Company
maintained on deposit a $200,000 compensating balance, which represented
an additional security interest pledged to the bank for payment of a
note of a discontinued subsidiary and performance of certain obligations
pursuant to the note guarantee agreement.
10. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, the ultimate
resolution of which, in the opinion of management of the Company, will
not have a material impact on the financial condition or results of
operations of the Company.
11. BUSINESS AND CREDIT CONCENTRATIONS
Decora Manufacturing's primary customer is Rubbermaid Inc., who
accounted for $37,764,000 (93%), $37,327,000 (94%) and $37,255,000 (97%)
of net sales in fiscal 1995, 1994 and 1993, respectively. Gross accounts
receivable with Rubbermaid at March 31, 1995, 1994 and 1993 were
$1,601,000 (63%), $2,806,000 (81%) and $1,969,000 (89%), respectively.
The Company believes there are no significant credit risk in existence
with respect to these accounts receivable.
F-20
<PAGE> 66
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and liabilities, exclusive of acquisitions and
dispositions of subsidiaries, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
(Increase) decrease in
accounts receivable $ 966,000 $(1,055,000) $(1,167,000)
Increase in inventory (1,866,000) (306,000) (690,000)
(Increase) decrease in other assets (42,000) 322,000 340,000
Increase (decrease) in
accounts payable (909,000) 1,342,000 1,046,000
Increase in accrued liabilities 127,000 252,000 8,000
----------- ----------- -----------
$(1,724,000) $ 555,000 $ (463,000)
=========== =========== ===========
</TABLE>
Supplemental cash flow information is as follows:
<TABLE>
<S> <C> <C> <C>
Cash paid during the year for interest $ 1,731,000 $ 1,519,000 $ 2,215,000
=========== =========== ===========
Cash paid during the year for
income taxes $ 235,000 $ 133,000 $ 175,000
=========== =========== ===========
</TABLE>
13. REFINANCING AND SETTLEMENT TRANSACTION
On July 22, 1994, the Company and its subsidiary, Decora Manufacturing,
entered into several transactions to repay four major creditors of the
Company. The transactions and the effect upon each creditor is described
below.
Effective July 1994, the borrowing transaction resulted in an increase
in the amount outstanding under the term loan from $2,000,000 to
$8,000,000. In addition, Decora Manufacturing obtained a commitment for
up to an additional $1,000,000 to finance capital improvements. The
terms of the line-of-credit facility (Note 5) were also modified and the
expiration of the facility was extended to July 31, 1996. The additional
net proceeds from the borrowing ($6,000,000) were advanced by Decora
Manufacturing to the Parent Company (Decora Industries, Inc.) for the
purpose
F-21
<PAGE> 67
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
of repaying certain creditors as described below. The repayment of the
creditors was effected as follows:
1. Under a Forbearance Agreement with Chase Manhattan Bank ("Chase")
relating to the Company's former Yorkville Industries, Inc.
subsidiary ("Yorkville"), a payment of $2,200,000 was due on
February 1, 1994. Since that payment was not made, Chase demanded
payment of the entire amount due (approximately $3,885,000). Chase
received $3,380,000 from the proceeds of the Refinancing and
Settlement Transaction and has released all claims against the
Company.
2. To comply with the settlement terms reached in November 1992 with
the former owners of Yorkville (the "Former Yorkville Owners"), the
Company was obligated to register with the Securities and Exchange
Commission and issue to the Former Yorkville Owners its common
shares valued at approximately $1,587,000. The Company was unable to
register the securities due to matters pertaining to other creditors
as described herein. In addition, pursuant to the settlement terms
with the Former Yorkville Owners, monthly payments were continuing
to such owners and to Chase. As part of the Refinancing and
Settlement Transaction, the Company paid $751,000 to the Former
Yorkville Owners to decrease the monthly payment obligations and has
also obtained an extension of the effective date of the registration
requirements. The transaction (and related settlement with Chase)
also released the Former Yorkville Owners' collateral then being
held by Chase and concurrently the obligation of the Company to
indemnify the Former Yorkville Owners if such collateral had been
sold by Chase.
After the Settlement and Repayment Transaction, the only remaining
obligation of the Company to the Former Yorkville Owners is the
registration and issuance to them of shares of the Company's common
shares having an aggregate minimum value of $1,587,000 by June 30,
1995. The Company filed the registration statement, but it was not
effective by that date. Accordingly, on July 5, 1995, a notice of
default was received from the Former Yorkville Owners. The Company
has at least until July 25, 1995 to cure. The Company believes that
if it is unable to cure, a reasonable extension can be procured from
the Former Yorkville Owners.
3. The balance of a note due to IECL of approximately $564,000 was paid
in full from the proceeds of the Refinancing and Settlement
Transaction (see Note 5).
4. The note payable to the former director was satisfied through a
payment of $1,014,000 from the proceeds of the Refinancing and
Settlement Transaction (see Note 5).
F-22
<PAGE> 68
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. In addition to repayment of the creditors, the repayment terms of
the increased term loan ($8,000,000) to Decora Manufacturing were
also modified to provide for four quarterly payments of $125,000
from August 31, 1994 to May 31, 1995; an additional fifteen
quarterly payments of $333,000 from August 31, 1995 through February
28, 1999 and a final payment of $2,505,000 on May 31, 1999.
The debt which was settled as reflected in the accompanying consolidated
balance sheet at March 31, 1994 was as follows:
<TABLE>
<S> <C>
Amount due Chase Manhattan Bank $ 3,885,000
Note payable to former director 1,200,000
Monthly cash payments due former
Yorkville owners (at present value) 635,000
Amount due IECL 564,000
----------------
Total debt settled and refinanced $ 6,284,000
================
</TABLE>
The resulting gain from the Refinancing and Settlement Transaction, net
of certain costs, is not considered to be material in relation to the
consolidated results of operations of the Company.
14. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1995
1ST 2ND 3RD 4TH YEAR
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 11,017 $ 10,545 $ 8,955 $ 9,897 $ 40,414
Gross profit $ 2,857 $ 2,785 $ 3,026 $ 2,948 $ 11,616
Income from continuing
operations $ 543 $ 547 $ 216 $ 1,102 $ 2,408
Discontinued operations:
Income (loss) from operations $ (90) $ 2 $ (195) $ (592) $ (875)
Provision for discontinued
operations $ - $ - $ - $ (422) $ (422)
Net income $ 453 $ 549 $ 21 $ 88 $ 1,111
Income (loss) per share:
Continuing operations $ .02 $ .02 $ .01 $ .03 $ .08
Discontinued operations - - (.01) (.03) (.04)
---------- ---------- -------- --------- ----------
</TABLE>
F-23
<PAGE> 69
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Income per share $ .02 $ .02 $ - $ - $ .04
========== ========== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1994
1ST 2ND 3RD 4TH YEAR
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 10,910 $ 9,536 $ 8,835 $ 10,674 $ 39,955
Gross profit $ 2,662 $ 2,435 $ 2,496 $ 2,793 $ 10,386
Income from continuing
operations $ 507 $ 262 $ 374 $ 486 $ 1,629
Discontinued operations:
Income (loss) from operations $ 41 $ 191 $ (38) $ (1,463) $ (1,269)
Provision for discontinued
operations $ - $ - $ - $ (212) $ (212)
Net income (loss) $ 548 $ 453 $ 336 $ (1,189) $ 148
Income (loss) per share:
Continuing operations $ .02 $ .01 $ .01 $ .02 $ .06
Discontinued operations - .01 - (.06) (.05)
---------- ---------- -------- ---------- -----------
Income (loss) per share $ .02 $ .02 $ .01 $ (.04) $ .01
========== ========== ======== ========== ===========
</TABLE>
F-24
<PAGE> 1
EXHIBIT 10.67
ASSET PURCHASE AGREEMENT
THIS AGREEMENT IS MADE as of this 31st day of March, 1995, by and
between COMTEL SYSTEMS CORPORATION, a Florida corporation with offices at 250
East Park Avenue, Lake Wales, Florida 33853 ("ComTel Systems"), and COMTEL
INDUSTRIES, INC., a Florida corporation with offices at 6801 North 54th Street,
Tampa, Florida 33610 ("ComTel").
In consideration of the mutual covenants, agreements and warranties
herein contained, and for other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, it is agreed that ComTel Systems
shall acquire from ComTel all of the Acquired Assets (defined herein) upon the
terms and conditions hereinafter set forth. The Acquired Assets relate to
ComTel's secondary market and service business.
DEFINITIONS
The following terms shall have the meanings set forth herein for the
purposes of the transactions described in this Agreement:
"Accounts Receivable" shall have the meaning given to it in Section
1.1(g).
"Acquired Assets" shall have the meaning given to it in Section 1.1.
"Affiliate" of any person shall mean any corporation, proprietorship,
partnership or business entity which, directly or indirectly, owns or controls,
is under common ownership or control with, or is owned or controlled by, such
person.
"Agreement" shall mean this Asset Purchase Agreement, including
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Assumed Obligations" shall have the meaning given to it in
Section 1.4.
"Balance Sheet" shall have the meaning given to it in Section 3.4.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article X hereof.
1
<PAGE> 2
"Closing Date" shall mean the date on which the Closing occurs or is
to occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any rules and regulations promulgated thereunder.
"ComTel Purchase Orders" shall have the meaning given to it in Section
1.2(c).
"Continuing Employees" shall have the meaning given to it in Section
9.1.
"Customer Purchase Orders" shall have the meaning given to it
in Section 1.2(d).
"Equipment" shall have the meaning given to it in Section
1.1 (b).
"Equipment and Other Personal Property Leases" shall have the meaning
given to it in Section 1.2(b).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" shall have the meaning given to it in Section 1.3.
"Information and Records" shall have the meaning given to it in Section
1.1(c).
"Inventories" shall have the meaning given to it in Section 1.1(d).
"Losses" shall mean all liabilities, losses, costs, damages, penalties
or expenses (including, without limitation, reasonable attorneys' fees and
expenses and costs of investigation and litigation) which have been reduced to
judgment net of the amount received as compensation therefor under any
insurance policies.
"Other Assets" shall have the meaning given to it in Section 1.1(e).
"Other Contracts" shall have the meaning given to it in Section 1.2(e).
"Permits" shall have the meaning given to it in Section 1.2(f).
"Purchase Price" shall mean the purchase price of the Acquired Assets.
2
<PAGE> 3
"Real Property Leases" shall have the meaning given to it in Section
1.2(a).
"Retained Obligations" shall have the meaning given to it in Section
1.5.
"Taxes" shall mean all taxes, charges, fees, duties, levies or other
assessments, including without limitation the taxes enumerated in the first
sentence of Section 3.13 of this Agreement, which are imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof, and such term shall include any interest, penalties or additions to
tax attributable to such Taxes.
"Tax Return" shall mean any report or return required to be supplied
to a taxing authority in connection with Taxes.
"Toxic or Hazardous Substance, Material or Waste" shall mean any
substance, the presence of which constitutes an unauthorized release, discharge
or emission to the air, soil or water at, on, or under the real property
subject hereto; or requires response or investigation under federal, state or
local laws; or is defined as a toxic or hazardous substance, material or waste,
pollutant or contaminant under any federal, state, or local laws, including,
but not limited to the Comprehensive Environmental Response, Compensation and
Liability Act (42 USC Sections 2601 et seq.); or is hazardous to the
health, safety or welfare of persons on or off the subject property.
"Vehicles" shall have the meaning given to it in Section 1.1(a).
ARTICLE I
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
1.1 Acquired Assets. Subject to the terms and conditions set forth
in this Agreement, at the Closing ComTel shall sell, assign, transfer and
deliver to ComTel Systems, and ComTel Systems shall purchase, acquire and take
assignment and delivery of, all of the assets (wherever located) which are
described or referenced in this Section 1.1 or Section 1.2 and not including
those assets described or referenced in Section 1.3 (all of the assets and
rights sold, assigned, transferred and delivered to ComTel Systems hereunder
are referred to collectively herein as the "Acquired Assets"). The Acquired
Assets include the following:
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(a) Vehicles. Those vehicles described in Schedule
1.1(a) hereto, together with all ancillary equipment and
related property, and together with any additional vehicles
and ancillary equipment purchased by ComTel after the date
hereof and prior to the Closing Date to which ComTel Systems
shall have expressly consented in writing (the "Vehicles");
(b) Equipment. All other tangible operating and trade
assets used in the ordinary course of ComTel's current operations
including, without limitation, furniture and fixtures, equipment and
tools, but excluding those assets listed on Schedule 1.3 hereto (the
"Equipment");
(c) Information and Records. All customer lists and
files which are related to, or used by ComTel in connection with its
business and operations; all personnel and labor relations records and
other records relating to the Continuing Employees; all environmental
control, permitting, monitoring, enforcement and test records; all
maintenance records; all plats and surveys of the real property
subject to the Real Property Leases and all plans and designs of
buildings, structures and fixtures located on such real property (the
"Information and Records"). Further, ComTel shall make available to
ComTel Systems, at ComTel Systems' request, for a period of two (2)
years following the Closing, ComTel's financial, tax and historical
files (or copies thereof);
(d) Inventories. All of ComTel's inventories, including,
without limitation, all spare parts inventory, and all other
inventories and supplies owned by ComTel to be used in the normal
business and operations of ComTel;
(e) Other Assets. Any utility deposits, all prepaid
expense credits, petty cash (not to exceed $1,000), any outstanding
cash advances to any of the Continuing Employees and any assets
acquired by ComTel in the ordinary course of business since March 15,
1995 (the "Other Assets") which used in connection with its operations
and with respect to which acquisition ComTel Systems has consented in
writing;
(f) Other Intangibles. All software used in connection
with ComTel's current operations (excluding the IBM AS400 and related
Mapics software); the goodwill, if any, related to or used in
conjunction with the use of the corporation name "ComTel Industries,
Inc."; the corporate name, telephone numbers, logo and other corporate
insignia
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of ComTel; and the right to continue the operations of ComTel as a
going concern; and
(g) Accounts Receivable. Except for those receivables
listed on Schedule 1.1(g), any and all trade accounts receivable,
customer revenue accounts and other trade receivables and customer
revenue accruals arising in the ordinary course of business, said
receivables being not less than $1,240,184.00 (the "Accounts
Receivable"). Certain receivables were paid during the period of
March 28, 29, 30 and 31 ("Collected Receivables"), and due to ComTel's
lockbox arrangement, could not be allocated prior to the Closing Date.
ComTel will provide a check to ComTel Systems in the amount of the
Collected Receivables within five (5) business days of confirmation of
such amount from Fleet Bank, its lender.
1.2 Assignment of Contracts, Leases and Other Assets.
Subject to the terms and conditions set forth in this Agreement, and
to the terms and limitations contained in each contract, lease or
other agreement or permit described below in this Section 1.2, ComTel
will assign and transfer to ComTel Systems, effective as of the
Closing Date (to the extent permitted by the other party), all of
ComTel's right, title and interest in and to, and ComTel Systems will
take assignment of, the following (and all of the following shall be
deemed included in the term "Acquired Assets" as used herein):
(a) Real Property Leases. All of the leases of real
property necessary for the continuation of ComTel's business, said
leases having been provided to ComTel Systems prior to Closing (the
"Real Property Leases");
(b) Equipment and Other Personal Property Leases. All of
ComTel's right, title and interest in and to the leases of Equipment
including, without limitation, owner-operator leases, machinery,
copiers, postage meters, installations, Vehicles and other personal
property described on Schedule 1.2(b) (the "Equipment and Other
Personal Property Leases");
(c) ComTel Purchase Orders. All of the purchase orders,
contracts and agreements described in Schedule 1.2(c), for the
purchase of goods, materials and services and such other purchase
orders or contracts as shall be entered into between the date hereof
and the Closing Date in the ordinary course of business and in
accordance with the provisions of Section 5.16 that ComTel Systems may
expressly approve (the "ComTel Purchase Orders");
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(d) Customer Purchase Orders. All of the customer
purchase orders and maintenance contacts including, but not
limited to, those contracts listed in Schedule 1.2(d), and
such other contracts with customers as shall be entered into
between the date hereof and the Closing Date in the ordinary
course of business that ComTel Systems may expressly approve
(the "Customer Purchase Orders"). With respect to the GSA POTS
contracts, ComTel agrees to execute a Subcontractor Master
Agreement appointing ComTel Systems as its exclusive
subcontractor, to perform all of its obligations thereunder
until such time as said contracts are assigned, or until the
terms of said contracts expire, whichever occurs first;
(e) Other Contracts, Claims and Warranties. All of the
other contracts listed on Schedule 1.2(e), together with all claims
and manufacturers' warranties with respect to the Acquired Assets or
the Assumed Obligations (the "Other Contracts");
(f) Permits. All of the licenses, tags, certificates of
authority, permits, variances, interim permits, applications for any
of the foregoing, approvals or other authorizations under any law,
statute, rule, regulation, order or ordinance required by any
governmental agency or body in connection with the operation of
ComTel's business (the "Permits"); and
(g) Warranties. All manufacturer's and service
warranties with respect to the Acquired Assets.
1.3 Excluded Assets. The assets listed on Schedule 1.3 shall be
retained by ComTel and are not being sold or assigned to ComTel Systems
hereunder (all of the assets retained by ComTel are referred to collectively as
the "Excluded Assets").
1.4 Assumed Obligations. At the Closing, ComTel Systems shall
assume, and agree to pay, perform, fulfill and discharge, the following
obligations of ComTel (the "Assumed Obligations"):
(a) Obligations which are required to be performed, and which
accrue after the Closing Date, under the following contracts and
agreements, except where the consent of any third party is required
for the assignment of such contract or agreement and such consent has
not been obtained within sixty (60) days following the Closing:
(i) the Real Property Leases as modified;
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(ii) the Equipment and Other Personal Property
Leases (excluding the AS400 lease with IBM
Credit Corporation);
(iii) the ComTel Purchase Orders;
(iv) the Customer Purchase Orders; and
(v) the Other Contracts;
If such consent is not obtained within 45 days of the Closing Date, then ComTel
Systems shall notify ComTel. At that time, unless ComTel Systems notifies
ComTel of its willingness to keep negotiating for a consent, the
Agreement shall be terminated immediately by ComTel and ComTel Systems
shall pay for the performance of the Agreement until it is properly terminated.
If ComTel Systems wishes to continue to procure consent, then ComTel Systems
shall do so, but shall assume all further obligations under such agreement.
(b) ComTel's trade payables listed in Schedule 1.4(b)
(c) The accrued payables for the categories of payables
listed on Schedule 1.4(c) (the "Accrued Payables"). Within ten (10)
days of the Closing Date, the parties shall confirm the amounts of
such payables.
(d) All warranty claims related to ComTel's standard policy
of 12 months for services division equipment sold and 6 months for
secondary market warranty claims for repairs and sales.
(e) All litigation not retained by ComTel relating to
payables as provided in Schedule 3.12.
(f) Amounts owed to hourly employees, prior to the Closing
Date, the amount of which was not available on the Closing Date.
(g) Except as expressly provided in this Section 1.4,
ComTel Systems shall not be liable or responsible for any liabilities
or obligations of ComTel, whether accrued, absolute, contingent or
otherwise, and ComTel shall pay all such liabilities and obligations
when due and shall hold ComTel Systems free and harmless therefrom.
1.5 Retained Obligations. ComTel shall retain all of ComTel's
obligations and liabilities not expressly assumed by
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ComTel Systems pursuant to Section 1.4, whether such obligations and
liabilities are existing or contingent, known or unknown, including, without
limitation, all pending and threatened litigation affecting ComTel as of the
Closing Date (the "Retained Obligations"), except as described in Schedule
3.12.
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 Calculation of Purchase Price. The total purchase price (the
"Purchase Price") for the purchase of the Acquired Assets described above shall
be One Million Eight Hundred Ten Thousand and 00/100 Dollars ($1,810,000).
2.2 Payment of Purchase Price. The Purchase Price shall be
payable as follows:
(a) $250,000 payable at Closing by certified check.
(b) At Closing, ComTel Systems will execute a promissory note
in the amount of $850,000, payable over seven (7) years. Interest
will accrue at the rate of seven percent (7%), with interest only
payable for the first thirty (30) months. Both principal and interest
will thereafter be paid in equal monthly installments for the
remaining fifty-four (54) months ("Note I"). ComTel Systems shall
also execute a Security Agreement granting ComTel a first priority
security interest in the Acquired Assets to secure the amount owed
under said promissory note. The sole shareholder of ComTel Systems,
Association Risk Management Service Company, shall execute a guaranty
of Note I and the obligations of ComTel Systems under this Agreement.
(c) At Closing, ComTel Systems will execute a promissory note
in the amount of $710,000 (this amount is subject to change at closing
based on updated A/R and A/P figures), payable over seven (7) years.
Interest will accrue on said amount at the rate of seven percent (7%).
Interest will accrue but no payments will be due for the first thirty
(30) months following execution of the note, with principal and
interest thereafter being in equal monthly installments for the
remaining fifty-four (54) months ("Note II"). ComTel Systems shall
also execute a Security Agreement granting ComTel a first priority
security interest in the Acquired Assets to secure the amount owed
under said Promissory Note. The sole shareholder of ComTel Systems,
Association Risk Management Service Company, shall execute a guaranty
of Note II (the guaranties of Note I and
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Note II and other obligations hereunder shall be referred to as the
"Guaranty")
2.3 Allocation of Purchase Price. The Purchase Price shall be
allocated as provided in Schedule 2.3.
2.4 Prorations. Except as otherwise provided herein and on
Schedule 1.4(b), ComTel and ComTel Systems agree that all of the items listed
below relating to the business and operations of ComTel and the Acquired Assets
will be prorated as of the Closing Date, with ComTel liable to the extent such
items relate to any time period up to and including the Closing Date, and
ComTel Systems liable to the extent such items relate to periods subsequent to
the Closing Date:
(a) personal property, real estate, occupancy and water
taxes and special assessments, if any, on or with respect to the
business and operations of ComTel or the Acquired Assets;
(b) rents, taxes and other items payable by ComTel under
any lease, contract or other agreement or arrangement to be assigned
to and assumed by ComTel Systems hereunder;
(c) the amount of any license, certificate of authority,
tag or registration fees with respect to any licenses, tags or
registrations which are being assigned or transferred hereunder;
(d) the amount of sewer rents and charges for water,
telephone, electricity and other utilities and fuel; and
(e) all items included in Section 1.4(b) (to the extent
not specifically described in subsections (a)-(d) above) which are
normally prorated in connection with similar transactions.
ComTel agrees to furnish ComTel Systems with such documents and other records
as ComTel Systems reasonably requests in order to confirm all adjustment and
proration calculations made pursuant to this Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMTEL
Except as otherwise provided in this Article III, ComTel
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represents and warrants to ComTel Systems as follows, only as such
representations and warranties relate to the Acquired Assets:
3.1 Due Incorporation, etc. ComTel is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
ComTel is duly organized and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be
qualified would have a material adverse effect.
3.2 Due Authorization. ComTel has full power and authority to
enter into this Agreement and to carry out the transactions contemplated
herein, and this Agreement has been duly and validly executed and delivered by
ComTel, and constitutes the legal, valid and binding obligation of ComTel,
enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally, and the effect of general principles of equity. The execution,
delivery and performance of this Agreement and all other instruments,
agreements, certificates and documents contemplated hereby by ComTel do not, on
the date hereof, and will not, on the Closing Date, (i) violate any decree or
judgment of any court or governmental authority which may be applicable to the
interest of ComTel in any of the Acquired Assets; (ii) to the knowledge of
ComTel, violate any law (or any order, rule or regulation promulgated under any
law); (iii) violate any decree or judgment of any court or governmental
authority binding on ComTel or any of the Acquired Assets; (iv) violate or
conflict with, or result in a breach of, or constitute a default (or an event
which, with or without notice or lapse of time or both, would constitute a
default) under, or result in the creation of, any mortgage, lien, restriction,
charge, security interest, claim, right of another, or other encumbrance upon
the Acquired Assets under any of the terms, conditions, or provisions of any
note, bond, mortgage, indenture, lease, license, franchise, permit, or other
agreement or instrument known to ComTel to which ComTel is a party, or by which
ComTel or any of the Acquired Assets are bound (subject to ComTel obtaining the
consents required, if any, to assign and transfer leases, contracts and other
items described in Section 1.2); or (v) violate or conflict with any provision
of the Articles of Incorporation or bylaws of ComTel.
3.3 Permits, Consents and Approvals. To the best of ComTel's
knowledge and belief, other than the Permits held by ComTel, no other licenses,
certificates of authority, tags, permits, franchises and rights, whether
federal, state, local or
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foreign, are currently necessary for the lawful operation of ComTel's business.
ComTel warrants its Permits are in full force and effect and that it has
received no notice that any of them have been suspended or canceled by the
agency which issued them.
No consent, approval, order or other authorization, corporate or
governmental, is required to be obtained by ComTel in connection with the
execution and delivery by ComTel of this Agreement or the sale and transfer by
ComTel of the Acquired Assets, except (i) such as have been or will be obtained
and are or will be in effect on and as of the Closing Date; (ii) consents which
may be required for the assignment or transfer of specific contracts, permits,
licenses, authorizations and similar documents under the terms thereof between
ComTel and third parties as disclosed on Schedule 3.3; and (iii) such other
consents and approvals as are not material to the business or operations of
ComTel, taken as a whole.
3.4 Financial Statements. All accounts receivables listed in
Schedule 3.4 are valid receivables, subject to no setoffs or counterclaims.
3.5 No Adverse Change. Except as listed on Schedule 3.5, since
January 1, 1995, there has not been (i) any material adverse change in the
financial condition, financial statements, business, properties, assets, or
results of the business and operations of ComTel, (ii) any material loss or
damage (whether or not covered by insurance) to any of the Acquired Assets
which materially affects or impairs the ability of ComTel to conduct its
business, (iii) any mortgage or pledge of any of the Acquired Assets, (iv) any
indebtedness incurred by ComTel relating to, or taking as security any interest
whatsoever in, the Acquired Assets, (v) any contract or other transaction
entered into by ComTel relating to, or otherwise affecting in any way, the
business and operations, other than in the ordinary course of business, (vi)
any sale or transfer of the Acquired Assets, or any cancellation of any debts
or claims of ComTel, except in the ordinary course of business, or (vii) any
changes in the accounting systems, policies or practices of ComTel. Since
January 1, 1995, the business of ComTel has been conducted in all respects only
in the ordinary course and there has not been any material change in its
affairs which has not been fully disclosed in writing to ComTel Systems.
Without limiting the generality of the foregoing since January 1, 1995:
(i) other than normal trade payables, accruals and other
obligations incurred in the ordinary course of business and in
conformity with this Agreement, ComTel has not created, incurred, or
assumed any indebtedness (including capitalized lease
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obligations) either involving more than $10,000 on an individual basis
or $50,000 in the aggregate or outside the ordinary course of
business;
(ii) ComTel has not canceled, compromised, waived or released
any right or claim (or series of related rights and claims) with
respect to the Acquired Assets or Assumed Obligations either involving
more than $10,000 or outside the ordinary course of business; and
(iii) there has not been any other occurrence, event,
incident, action, failure to act, or transaction either within or
outside the ordinary course of business that would materially
adversely affect the Acquired Assets.
3.6 Title to and Condition of Properties. ComTel has good and
marketable title to, is the lawful owner of, and has the full right to sell,
convey, transfer, assign and deliver the Acquired Assets, free and clear of any
mortgage, lien, pledge, security interest, option, lease (or sublease),
conditional sales agreement, title retention agreement, charge, claim,
encumbrance, easement or encroachment, except as disclosed in Schedule 3.6
hereto. Except for title to vehicles listed on Schedule 1.1(a), at and as of
the Closing, ComTel will convey the Acquired Assets to ComTel Systems by deeds,
bill of sale, certificates of title and instruments of assignment, and shall
transfer good and valid record and marketable title to all of the Acquired
Assets to ComTel Systems, free and clear of all liens, charges, restrictions
and encumbrances other than those described or referenced in this Section 3.6.
ComTel will cooperate with ComTel Systems so that clear title to the vehicles
can be obtained.
3.7 Real Property. Schedule 1.2(a) hereto lists real property
used in connection with its business and operations which, after the Closing
Date, is to be leased to ComTel Systems. To the best of ComTel's knowledge,
the respective lessors are the owners of all such real property free and clear
of all material liens and encumbrances that might in any material respect
interfere with the full use and enjoyment thereof, and each such site has full
and complete access for the uses being conducted thereon. Except for the air
conditioning unit in Tampa, Florida, to the best of ComTel's knowledge, the
buildings, facilities, installations, fixtures and other structures or
improvements located on or at the Tampa property and the Homewood property have
been well maintained for industrial properties and are in good operating
condition and repair (with the exception of normal wear and tear). The
activities carried on in such buildings, plants, facilities, installations,
fixtures and other structures
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or improvements, and the buildings, plants, facilities, installations, fixtures
and other structures or improvements themselves, are not in any material
respect in violation of or in conflict with any applicable zoning, health
regulation or ordinance or any other similar law, statute, regulation or
ordinance. ComTel has delivered to ComTel Systems true, correct and complete
copies of all Real Property Leases which are not month to month. Except as set
forth in Schedule 3.7, to the best knowledge of ComTel, without inquiry, none
of the real property comprising a part of the Real Property Leases is or has
been designated as an environmental clean up/contamination site of any nature
whatsoever within the meaning of any federal or state law and ComTel has no
basis for believing that any such real property may be so designated in the
future.
3.8 Vehicles, Equipment, and Other Personal Property Leases. The
Equipment and Other Personal Property Leases listed in Schedule 1.2(b) hereto
include all leases by ComTel of any item of personal property used in
connection with its business and operations, except for those leases which
ComTel Systems has elected not to assume hereunder. Except as disclosed in
Schedule 3.8 hereto, all of the Vehicles and Equipment and all of the personal
property leased by ComTel under the Equipment and Other Personal Property
Leases is presently utilized by ComTel in the ordinary course of its business
and operations and is well maintained and in good operating condition and
repair (with the exception of normal wear and tear), free from known material
defects. ComTel has delivered to ComTel Systems true, correct and complete
copies of all Equipment and Other Personal Property Leases.
3.9 Contracts. Schedules 1.2(a), (b), (c), (d) and (e) and
Schedule 3.9 list all material contracts, agreements and instruments relating
to the business, assets and operation of ComTel. ComTel has delivered to
ComTel Systems true and correct copies of each listed document. Except as set
forth on Schedule 3.9, there are no oral agreements of ComTel material to its
operations and ComTel Systems is not assuming and shall not be subject to any
such agreements.
Such contracts include, without limitation:
(i) any pension, retirement, incentive
compensation, bonus, stock purchase, stock option, welfare,
hospitalization or insurance plan or arrangement or any vacation pay,
or severance pay or any other employee benefit arrangement for its
officers, employees, consultants or agents whether pursuant to a
written contract or pursuant to custom or informal understanding,
together with the most
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recent annual report completed with respect to each such plan or
arrangement;
(ii) any contract, lease or purchase order or
other arrangement of any kind material to the conduct of ComTel's
business with any person or entity affiliated with or controlled by
(or with power to control) any officer, director, employee or
stockholder;
(iii) any contract or agreement with a broker,
sales agency, advertising agency or other person engaged in sales,
distributing or promotional activities;
(iv) any material indentures, credit agreements,
loan agreements, notes, mortgages, security agreements, leases of real
or personal property and agreements for financing;
(v) any commitment or arrangement involving a
partnership, joint venture or other cooperative undertaking, or
involving any restrictions of the geographical area of operations or
scope or type of business of ComTel;
(vi) any property, casualty and other forms of
insurance;
(vii) any arrangement concerning confidentiality or
non-competition;
(viii) agreements under which the requirements for
performance extend beyond thirty (30) days from the date of this
Agreement; and
(ix) all other material contracts not made in the
ordinary course of business which are to be performed at or after the
date of this Agreement.
Each such contract (A) is in full force and effect, and (B) will
continue to be in full force and effect on identical terms following the
Closing Date (unless otherwise addressed herein) assuming, if applicable, that
required consents to assignment are obtained. Except for ComTel's payment
obligations listed in Section 1.4, neither ComTel nor, to the best of ComTel's
knowledge, any other party to any such contract is in breach or default, and to
the best of ComTel's knowledge, no event has occurred which with notice or
lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder and no party has made any claim
thereunder. Neither ComTel nor, to the best of ComTel's knowledge, any other
party has repudiated any provision of any
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such contract. No purchase order or commitment of ComTel has been made in
excess of normal requirements.
3.10 Employee Benefit Plans. Other than those plans described on
Schedule 3.10, ComTel has no profit sharing or other employee benefit plan, nor
does it maintain any retirement or deferred compensation plan. A true and
correct copy of each of the plans and arrangements listed on Schedule 3.10 and
each trust agreement relating to each such plan and arrangement has been
supplied to ComTel Systems. In the case of any plan or arrangement which is
not in written form, ComTel Systems has been supplied with an accurate
description of such plan or arrangement as in effect on the Closing Date.
3.11 No Violations.
(a) ComTel is in material compliance with and is not, in any
material respect, in violation or default under or with respect to, any law,
governmental regulation, permit or rule or order of any court or governmental
authority that is applicable in any way to its business or operations, whether
federal, state, local or foreign. Except as set forth in Schedule 3.11, to the
knowledge of ComTel none of the properties owned or leased by ComTel which are
included in the Acquired Assets, is in material violation of any law, building,
zoning or other ordinance, code or regulation applicable to it, or is subject
to any law, ordinance, code, regulation or order requiring any change,
assessment or penalty, which would materially adversely affect the business of
ComTel, and no notice from any governmental body has been served upon ComTel or
threatened claiming any violation of any such law, ordinance, code or
regulation or requiring any work or construction or asserting any assessment or
penalty which would have a material adverse effect on the business or
operations of ComTel.
(b) To the best of ComTel's knowledge, ComTel has complied with
all applicable laws (including rules and regulations thereunder) relating to
the employment of labor, employee civil rights, and equal employment
opportunities, the noncompliance with which would have a material adverse
effect on the operations of ComTel.
(c) To the best of ComTel's knowledge, ComTel has not violated in
any respect or received a notice or charge asserting any violation of the
Sherman Act, the Clayton Act, the Robinson-Patman Act, or the Federal Trade
Commission Act, each as amended, the violation of which would have a material
adverse effect on the operations of ComTel.
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(d) To the best of ComTel's knowledge, ComTel has possession of
all records and documents it was required to retain under all applicable laws
(including rules and regulations thereunder).
3.12 Litigation. Except as disclosed in Schedule 3.12, there are no
actions, suits, labor disputes or other litigation, proceedings or governmental
investigations pending or, to the knowledge of ComTel, threatened (excluding
verbal and written threats made by creditors seeking payment of outstanding
payables) against or affecting ComTel or any of the Acquired Assets, or any
officers, directors, employees or the stockholders thereof in their capacity as
such, or relating to the transactions contemplated by this Agreement.
3.13 Taxes. All taxes, license fees, and other charges imposed on
or with respect to the Acquired Assets or ComTel's business or operations, to
the extent they may have an effect on the Acquired Assets if not timely paid,
imposed by the United States or by any state, county, municipality or
subdivision, or instrumentality thereof, or of any foreign country or by any
other tax authority, including penalty and interest, have been determined in
accordance with applicable rules and regulations and have been paid in full on
time. ComTel has duly filed all Tax Returns of every nature required to be
filed by it, in every jurisdiction in which the same may have been so required,
and has paid all Taxes disclosed on such returns. All Taxes of which notice
has been received or which shall accrue on or prior to the Closing Date (except
those included in the Assumed Obligations) have been paid or shall be paid by
ComTel in due course. ComTel does not have outstanding waivers of the statute
of limitations for any Taxes for any taxable year. All deposits required by law
to be made by ComTel with respect to employees' withholding taxes have been
made. There are no tax liens on any assets of ComTel, except liens for Taxes
not yet due and with respect to which ComTel has agreed to pay a pro rata
portion thereof as of the Closing Date. There are no claims pending against
ComTel for past due Taxes and ComTel does not know of any such threatened claim
or the basis for any such claim. Except for a State of Florida Sales and Use
tax audit, there are not now any matters under discussion with any, and no
notice (written or oral) of intent to audit or request for information has been
received from any federal, state, local or other authority with respect to any
additional Taxes or assessments relating to ComTel.
ComTel is not a foreign person within the meaning of Section
1445(f)(3) of the Code for purposes of withholding tax on disposition of United
States real estate interests.
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3.14 Insurance Policies. ComTel currently has insurance, including
employee health and accident insurance, and property, general liability, and
workers' compensation insurance, as described on Schedule 3.14. Schedule 3.14
contains a list of each insurance policy currently providing coverage for the
assets of ComTel or its business and a copy of each such policy as it pertains
to the Acquired Assets, the Assumed Obligations or loss or liability resulting
from environmental contamination has been delivered to ComTel Systems.
3.15 Collective Bargaining. There are no unfair labor practices,
employment related litigation, administrative proceedings or controversies
pending or, to the knowledge of ComTel, threatened involving any employee of
ComTel. Except for electric workers union agreement which was terminated by
mutual consent some time ago, ComTel is not and has never been a party to any
collective bargaining agreement. ComTel is in compliance in all material
respects with its obligations under all statutes, executive orders and other
governmental regulations governing its employment practices, including without
limitation, provisions relating to wages, hours, equal opportunity and payment
of social security and other taxes. ComTel has not suffered or sustained any
labor disputes resulting in any work stoppage and no such work stoppage is
threatened. To the knowledge of ComTel, there are no attempts being made to
organize any employees presently employed by ComTel.
3.16 Undisclosed Liabilities. ComTel has no material liability
(and there is no basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against ComTel
giving rise to any material liability), except for (i) liabilities set forth in
the Financial Statements, (ii) liabilities which have arisen after the date
hereof in the ordinary course of business and in conformity with this Agreement
and (iii) liabilities identified on the Schedules hereto.
3.17 Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate or other information furnished or to be furnished
by ComTel to ComTel Systems in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain, to the knowledge of
ComTel, any untrue statement of a material fact or omits to state any material
fact regarding ComTel, the Acquired Assets, the Assumed Obligations or the
business or operations of ComTel necessary in order to make the statements and
information contained herein and the schedules, exhibits and attachments
hereto, in light of the circumstances in which they are made, not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMTEL SYSTEMS
Except as otherwise provided in this Article IV, ComTel Systems
represents and warrants to ComTel as follows:
4.1 Due Incorporation, etc. ComTel Systems is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma with all requisite corporate power and authority (including necessary
authorization to do business as a foreign corporation where required) to own,
lease and operate its properties and to carry on its business as now being
conducted.
4.2 Corporate Authority. ComTel Systems has all requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by ComTel Systems have been duly authorized by all necessary
corporate action on the part of ComTel Systems. This Agreement has been duly
executed and delivered by ComTel Systems and constitutes the legal, valid and
binding obligation of ComTel Systems, enforceable in accordance with its terms.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, violate any provisions of the
Articles of Incorporation or bylaws of ComTel Systems or violate any provision
of or result in the acceleration of any obligation or the creation or any lien
or security interest under any agreement, indenture, instrument, lease,
security, mortgage, lien, order, arbitration award, judgment or decree to which
ComTel Systems is a party or by which it or its respective properties is bound,
and will not violate any other restriction of any character to which it is
subject.
4.3 Consents. Except as set forth on Schedule 4.3, no notice to,
filing with, authorization of, exemption by, or consent of any person, entity,
or public or governmental authority is required in order for ComTel Systems to
consummate the transactions contemplated hereby.
4.4 Knowledge. ComTel Systems is purchasing the Acquired Assets with
the intention to operate the business as a going concern in connection with the
existing Central Communication and Automation Co. business. ComTel Systems has
the know-how, financial resources, and management to operate the business
related to the Acquired Assets as a going concern and intends to do so.
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ARTICLE V
COVENANTS OF COMTEL
ComTel hereby agrees:
5.1 Implementing Agreement. ComTel will take all necessary action
within its control required of it to fulfill its obligations under the terms of
this Agreement and the transactions contemplated herein.
5.2 Consents and Approvals. ComTel shall use its best efforts to
transfer the Permits to ComTel at Closing and to obtain all consents and
approvals to the performance of this Agreement and the transactions
contemplated hereby by each party to any of the Assumed Obligations, together
with any other necessary consents and approvals. In the event that certain
Permits are not transferable or replacements therefor are not obtainable on or
before the Closing, but such Permits may be transferable or replacements
therefor may be obtainable after the Closing, ComTel shall continue to use such
efforts in cooperation with ComTel Systems after the Closing as may be required
to obtain all required consents and approvals to transfer, or obtain
replacements for, such Permits after the Closing.
5.3 No Modifications. Subsequent to Closing, ComTel shall not
modify, amend or otherwise alter or change any of the material terms or
provisions of any of the Assumed Obligations.
5.4 Corporate Name. ComTel shall, as soon as practicable
following the Closing Date, change its name to protect ComTel Systems' right to
use "ComTel Industries, Inc." as provided in Section 1.1(f). Within ninety
(90) days following the Closing Date, ComTel's subsidiary, ComTel Metals, Inc.,
shall change its name to protect ComTel Systems' right to use "ComTel
Industries, Inc." as provided in Section 1.1(f).
5.5 Discontinue Operations. ComTel shall discontinue is
telecommunications operations, except for those operations currently performed
by ComTel Metals, Inc., and shall not resume said operations for a period of
seven (7) years from the Closing Date.
ARTICLE VI
COVENANTS OF COMTEL SYSTEMS
ComTel Systems agrees that from the date hereof to the Closing Date:
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<PAGE> 20
6.1 Corporate and Other Action. ComTel Systems will take all
necessary action within its control required to fulfill its obligations under
this Agreement and the transactions contemplated hereby.
6.2 Consents and Approvals. ComTel Systems shall use its best
efforts to obtain all necessary consents and approvals to the performance of
its obligations under this Agreement and the transactions contemplated hereby.
ComTel Systems shall make all filings, applications, statements and reports to
all federal or state government agencies or entities which are required to be
made prior to the Closing Date by or on behalf of ComTel Systems pursuant to
any applicable statute, rule or regulation in connection with this Agreement
and the transactions contemplated hereby.
6.3 Assumed Obligations. ComTel Systems shall execute and deliver
to ComTel and ComTel's appropriate customers, suppliers and other creditors all
assumptions, assignments and other agreements as may be necessary or reasonably
requested to assure ComTel Systems' assumption of the Assumed Obligations.
6.4 Employment of Existing Employees. ComTel Systems will not
undertake to assume any existing labor contracts affecting the operation of
ComTel nor shall it assume any liability for workers' compensation claims.
ComTel Systems will not be obligated for severance pay and other benefits with
respect to the Continuing Employees, except to the extent expressly reflected
in the Assumed Obligations.
6.5 Access to Information and Records; Employees. ComTel Systems
shall provide to ComTel unlimited access to the Information and Records to the
extent ComTel Systems receives the originals thereof and to Continuing
Employees for the following purposes: (i) preparing Tax Returns, (ii)
monitoring and collecting Accounts Receivable reassigned to it pursuant hereto,
(iii) defending claims and suits asserted or pending against it following the
Closing Date, and (iv) other matters related to its business or assets prior to
the Closing Date.
ARTICLE VII
INTENTIONALLY DELETED
ARTICLE VIII
INTENTIONALLY DELETED
ARTICLE IX
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<PAGE> 21
EMPLOYEES AND BENEFIT PLANS
9.1 Employees. Schedule 9.1(a) is a true, correct and complete
list of all of ComTel's employees, wherever located, indicating the rate of pay
of each such employee as of March 1, 1995 and the location of such employee.
Such employees shall remain on ComTel's payroll records until the Closing Date
(except for those employees who resign or are terminated by ComTel), and shall
be paid by ComTel all amounts of wages, bonuses and other remuneration
(including, without limitation, discretionary benefits and bonuses) payable to
such employees with respect to periods on or prior to the Closing Date pursuant
to employment and not included in the Assumed Obligations. ComTel Systems
agrees to offer employment to all employees listed on Schedule 9.1(b) (the
"Continuing Employees"); provided, however, that in the event that between the
date hereof and the Closing Date an event or action occurs or becomes known to
ComTel Systems with respect to any of the employees listed on Schedule 9.1(b)
which, in ComTel Systems' judgment, would provide reasonable grounds for the
termination of such employee if such employee were then employed by ComTel
Systems, ComTel Systems may determine not to hire such employee after the
Closing Date and such employee shall no longer be a Continuing Employee and
ComTel Systems shall have no obligations whatsoever with respect to such
employee. To the extent permitted by applicable law, ComTel hereby covenants to
provide promptly to ComTel Systems from time to time prior to the Closing (with
or without a request by ComTel Systems) all information which ComTel Systems
would reasonably consider material concerning an employee for the purposes of
the immediately preceding sentence. Nothing in this Section 9.1 shall obligate
ComTel Systems to offer employment to a Continuing Employee in the identical
job or with the identical responsibilities as such Continuing Employee was
provided by ComTel. ComTel will be responsible for and shall pay, to the extent
not included in the Assumed Obligations, all deferred compensation payments and
vacation pay or pay for other compensated absences earned or accrued by the
Continuing Employees as of the close of business on the Closing Date to the
appropriate Continuing Employee, and any related payroll burden (FICA and other
employment taxes) with respect thereto to the appropriate governmental
authority or private party, whether or not such pay is vested or has been
accrued on the books of ComTel at such close of business, based upon the
remuneration of such Continuing Employees normally used in computing such
vacation pay or pay for other compensated absences. Notwithstanding anything
to the contrary contained herein, ComTel Systems shall have no obligation or
liability with respect to the employment by ComTel of, and ComTel shall pay any
and all workers' compensation claims, severance or other employment benefits
that may be due
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and payable or accrued as of the Closing Date to ComTel's employees, including
those listed on Schedule 9.1(b).
9.2 COBRA Compliance. ComTel (and each other member of ComTel's
control group of corporations) has complied in good faith with the requirements
of Sections 10001 and 10002 of the Consolidated Omnibus Reconciliation Act of
1985 (Public Law No. 99-272) to the extent necessary to prevent the
disallowance of all health care deductions under Section 162 of the Code and
with respect to taxable years beginning after December 31, 1988, to the extent
necessary to prevent the imposition of taxes under Section 4980B of the Code.
ARTICLE X
CLOSING
10.1 Closing. The Closing shall take place at the offices of ComTel
Systems, at 250 East Park Avenue, Lake Wales, Florida, at such date and time to
which the parties hereto shall agree.
10.2 Deliveries by ComTel. At the Closing, ComTel will deliver the
following to ComTel Systems in form and substance reasonably satisfactory to
ComTel Systems:
(i) Bill of sale in the form set forth
in Exhibit A;
(ii) Assignment of the Real Property Leases;
(iii) Originals of, and duly executed assignments
of, all of the following (including, where
necessary, the consent of each third party
thereto):
(A) the Equipment and Other
Personal Property Leases
(and, if such Equipment and
Other Personal Property
Leases or a memorandum
thereof have been recorded,
such assignments shall be in
recordable form);
(B) the ComTel Purchase Orders;
(C) the Customer Purchase orders;
and
(D) the Other Contracts;
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(iv) The originals of all of the Permits,
as available;
(v) The title for each of the Vehicles
and all other motor vehicles and equipment
included in the Acquired Assets for
which certificates of title have been
issued, duly endorsed for transfer by ComTel
to ComTel Systems as available; and
(vi) Lien releases.
10.3 Deliveries by ComTel Systems. At the Closing, ComTel Systems
will deliver the following to ComTel:
(i) The portion of the Purchase Price
payable to ComTel pursuant to Section 2.2(a);
(ii) The Promissory Notes and Security
Agreements referred to in Sections 2.2(b)
and (c);
(iii) Assumption Agreements contemplated by
Section 6.4.
ARTICLE XI
INTENTIONALLY DELETED
ARTICLE XII
SURVIVAL AND REMEDY: INDEMNIFICATION
12.1 Survival. The representations and warranties of the parties
hereto contained herein or in any other certificate or other writing delivered
pursuant hereto shall survive the Closing for a period of one (1) year
following the Closing Date.
12.2 Indemnification by ComTel. ComTel agrees to indemnify ComTel
Systems and each of its Affiliates against, and agrees to hold it and them
harmless from, any and all Losses incurred or suffered by such entity arising
out of any of the following: (a) any material breach of or any inaccuracy in,
any representation or warranty made by ComTel pursuant to this Agreement; (b)
any operations of ComTel (including its predecessor companies) prior to the
closing; (c) any long or short term debts, liabilities or
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<PAGE> 24
obligations of ComTel other than Assumed Obligations; (d) any claims or
liabilities with respect to any personal injury claims made by any third party
against ComTel Systems or any of its Affiliates which relate to the use and
ownership of the Acquired Assets or the business or operation of ComTel on or
prior to the Closing Date; (e) any claims by or liabilities with respect to any
Continuing Employee arising out of or related to his or her employment or
termination of employment on or prior to the Closing Date by ComTel (whether or
not such termination is in accordance with the provisions of Section 9.1),
including, without limitation, any and all workers' compensation claims or
liabilities arising out of any accidents, illness or other events which
occurred on or prior to the Closing Date; (f) except as otherwise provided
herein, any claims by or liabilities with respect to any employee of ComTel who
is not a Continuing Employee, whether such claims are made or such liabilities
arise before or after the Closing Date; and (g) the Retained Obligations.
12.3 Indemnification by ComTel Systems. ComTel Systems agrees to
indemnify ComTel and each of its Affiliates against, and agrees to hold it and
them harmless from, any and all Losses incurred or suffered by such person
arising out of any of the following: (a) any material breach of or any
inaccuracy in, any representation or warranty made by ComTel Systems pursuant
to this Agreement; (b) any operations relating to the Acquired Assets after
Closing to the extent liability for such Losses is not otherwise allocated to
and assumed by ComTel herein; (c) the failure of ComTel Systems to fulfill any
of its duties under or with respect to the Assumed Obligations; or (d) any
claims of Continuing Employees not assumed by ComTel in Section 9.1.
12.4 Notice; Assumption of Defense. The indemnified party shall
give prompt notice to the indemnifying party, in accordance with the terms of
Section 13.4, of the assertion of any claim, or the commencement of any suit,
action or proceeding in respect of which indemnity may be sought hereunder and
of any Losses which the indemnified party deems to be within the ambit of this
Article XII, specifying with reasonable particularity the basis therefor and to
give the indemnifying party such information with respect thereto as the
indemnifying party may reasonably request. The indemnifying party may, at its
own expense, (i) participate in and, (ii) upon notice to the indemnifying party
and the indemnifying party's written agreement that the indemnified party is
entitled to indemnification pursuant to Section 12.2 or Section 12.3 for Losses
arising out of such claim, suit, action or proceeding, at any time during the
course of any such claim, suit, action or proceeding, assume the defense
thereof; provided that (x) the indemnifying party's counsel is reasonably
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satisfactory to the indemnified party, and (y) the indemnifying party shall
thereafter consult with the indemnified party upon the indemnified party's
reasonable request for such consultation from time to time with respect to such
claim, suit, action or proceeding. If the indemnifying party assumes such
defense, the indemnified party shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party. Whether or not
the indemnifying party chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
12.5 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the indemnified party, or the indemnifying party, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 12.2 or Section 12.3 shall also be binding upon the indemnifying
party or the indemnified party, as the case may be, in the same manner as if a
final judgment or decree had been entered by a court of competent jurisdiction
in the amount of such settlement or compromise. The indemnified party will give
the indemnifying party at least 20 days notice of any proposed settlement or
compromise of any claim, suit, action or proceeding it is defending, during
which time the indemnifying party may assume the defense of such claim, suit,
action or proceeding and if it does so the proposed settlement or compromise
may not be made.
12.6 Failure of Indemnifying Party to Act. In the event that the
indemnifying party does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the indemnified party to defend or to
participate in the defense of any such claim, suit, action or proceeding, or to
cause the same to be done, shall not relieve the indemnifying party of its
obligations hereunder, provided, that the indemnified party gives the
indemnifying party at least 20 days notice of its proposed failure to defend or
participate and affords the indemnifying party the opportunity to assume the
defense thereof.
12.7 Procedure for Indemnification. Upon becoming aware of a claim
for indemnification hereunder, the indemnified party shall promptly give, in
accordance with the terms of Section 13.4, notice of such claim (a "Claim
Notice") to the indemnifying party, providing reasonable detail of how the
claim has arisen and an estimate of the amount the indemnified party reasonably
anticipates that it will be entitled to on account of indemnification by the
indemnifying party. If the indemnifying party does not object to such claim
within 20 business days of receiving notice thereof, the indemnified party
shall be entitled to recover the amount of such claim. If, however, the
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indemnifying party advises the indemnified party that it disagrees with the
indemnified party's claim, the parties shall, for a period of 20 business days
after the indemnifying party advises the indemnified party of such
disagreement, attempt to resolve the difference and, failing to do so in such
time, the matter shall be submitted to arbitration pursuant to the provisions
of Section 13.5.
12.8 Limits on Indemnification.
(a) Notwithstanding the foregoing, ComTel shall not be
required to compensate ComTel Systems for any Losses of ComTel Systems unless
such Loss exceeds $500, and shall not be required to compensate ComTel Systems
for any Losses exceeding $810,000.
(b) Losses incurred by ComTel Systems pursuant to Section 12
shall be paid by ComTel by notice of ComTel Systems' right to offset the Note I
installment payments as they become due. No offset shall be made other than
pursuant to this Section 12. No offset shall be made against Note I.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Each party hereto shall bear his own expenses with
respect to this transaction.
ComTel Systems shall pay all sales, use, stamp, transfer, service,
recording, real estate and like taxes or fees, if any, imposed by the United
States or any state or political subdivision thereof, required to be paid in
connection with the transfer and assignment of the Acquired Assets that are
imposed upon such party under the laws of the applicable jurisdiction.
13.2 Amendment. This Agreement may be amended, modified or
supplemented, but only in writing signed by all of the parties hereto.
13.3 Brokers. ComTel Systems and ComTel each warrant to the other
that they have dealt with no business broker or consultant, or any other
person, firm or entity which is or might be entitled to a fee, commission, or
other compensation in connection with this transaction. Accordingly, the
parties hereby covenant to indemnify and hold the other harmless from and
against any and all loss, liability , cost or expense incurred in connection
with this transaction as a result of the acts, conduct or representations of
the other which result in claims or demand made by any broker, consultant or
other person, firm or entity seeking any commission or other compensation
arising out of the
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sale by ComTel or purchase by ComTel Systems of the Acquired Assets, and such
indemnification shall specifically include reimbursement for the other's
attorneys' fees and costs of court occasioned thereby.
13.4 Notices. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, when received if delivered by hand, facsimile machine or
overnight delivery, or, if delivered by mail, five (5) days from deposit in the
U.S. mail, certified or registered mail, return receipt requested, postage
prepaid:
(a) If to ComTel, addressed as follows:
c/o Decora Industries, Inc.
One Mill Street
Ft. Edward, New York 12828
Attn: Nathan Hevrony
(b) If to ComTel Systems, addressed as follows:
ComTel Systems
250 East Park Avenue
Lake Wales, Florida 33853
Attn: R. Michael Grimes
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
13.5 Amounts in United States Dollars. For purposes of this
Agreement, all figures set out herein which are preceded by the "$" symbol
shall be deemed amounts in United States Dollars.
13.6 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof,
including, particularly, the Letter of Intent between the parties hereto, dated
as of March 16, 1995, and is not intended to confer upon any other person any
rights or remedies hereunder. There have been no representations or statements,
oral or written, that have been relied on by any party hereto, except those
expressly set forth in this Agreement.
13.7 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or
of any breach of any term, covenant, representation or warranty contained in
this Agreement
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shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
13.8 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.9 Headings. The headings preceding the text of Articles,
Sections and Schedules of this Agreement are for convenience only and shall not
be deemed part of this Agreement.
13.10 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Florida.
13.11 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
13.12 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective Affiliates and no provision
of this Agreement (including, without limitation, the provisions of Article IX)
shall be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
13.13 Other Discussions. Upon execution of this Agreement, ComTel
and its officers, directors, employees, representatives and agents will not
commence any discussions and negotiations with any other persons, or solicit or
entertain any other offers, regarding the sale or transfer of any of the
Acquired Assets, any of the shares of the stock of ComTel, or all or
substantially all of any of ComTel's business or assets other than the Acquired
Assets, and neither ComTel nor any of its Affiliates will provide any
prospective purchasers (other than ComTel Systems and its Affiliates) or their
employees, representatives or agents, with any information regarding such sale
or transfer or otherwise cooperate with any other persons in connection with
such sale or transfer prior to the Closing Date.
13.14 Tax Matters.
13.14.1 ComTel Systems and ComTel shall treat and report the
transactions contemplated by this Agreement in all respects consistently for
purposes of any federal, state or local tax,
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including, without limitation, the calculation of gain, loss and basis with
reference to the Purchase Price allocation made pursuant to Section 2.3 hereof.
The parties hereto shall not take any actions or positions inconsistent with
the obligations set forth herein.
13.14.2 ComTel Systems shall make available to ComTel, and ComTel
shall make available to ComTel Systems, (i) such records as any such party may
require for the preparation of any Tax Returns required to be filed by ComTel
or ComTel Systems and (ii) such records as ComTel or ComTel Systems may require
for the defense of any audit, examination, administrative appeal, or litigation
of any Tax Return in which ComTel was included.
13.15 Arbitration. Disputes arising from the enforcement of
ComTel Systems' obligations under the Promissory Notes referred to in Sections
2.2(b) and (c), or from the enforcement of the obligations under the Guaranty,
at ComTel's discretion can be resolved in a court in New York, New York with
the prevailing party entitled to attorneys fees. Any other disputes hereunder
shall be submitted to arbitration to be held in Florida. Arbitration will be
conducted in accordance with the rules of the American Arbitration Association,
and judgment upon award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. The parties shall agree to submit the dispute to an
arbitrator. If the parties are unable to agree upon an arbitrator, then the
arbitrator shall be chosen impartially by the American Arbitration Association.
If the dispute is submitted to one arbitrator, the parties shall share equally
the expenses of that arbitrator and all other arbitration expenses.
Attorney's fees and witness fees are not arbitration expenses and must be paid
by the party incurring them. The written determination of the arbitrator(s)
shall be final and binding on all parties.
13.16 Other Instruments. Upon the reasonable request of ComTel
Systems, ComTel will on and after the Closing Date execute and deliver to
ComTel Systems such other documents, releases, assignments and other
instruments as may be required to effectuate completely the transfer and
assignment to ComTel Systems of, and to vest fully in ComTel Systems title to,
each of the Acquired Assets and Assumed Obligations.
13.17 Risk of Loss. ComTel shall bear the risk of loss with respect
to the Acquired Assets on and before the Closing Date.
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13.18 Releases. Following the Closing Date, ComTel Systems shall
proceed in good faith to obtain the full release of ComTel of the obligations
listed in Schedule 13.18 within thirty (30) days of the Closing Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on the date first-above written.
COMTEL SYSTEMS CORPORATION
By:_______________________________
R. Michael Grimes, President
ATTESTED:
By:_______________________
Title:_________________
[seal]
COMTEL INDUSTRIES, INC.
By:_______________________________
Title:________________________
ATTESTED:
By:_______________________
Title:_________________
[seal]
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<PAGE> 1
EXHIBIT 10.68
SECURED PROMISSORY NOTE I
$850,000 Lake Wales, Florida
March 31, 1995
FOR VALUE RECEIVED, the undersigned, ComTel Systems Corporation
("Debtor"), promises to pay to the order of ComTel Industries, Inc. ("Lender")
at 1 Mill Street, Fort Edward, New York 12828, or at such other place as the
holder of this Note may from time to time designate, the principal sum of Eight
Hundred Fifty Thousand Dollars ($850,000), with interest from the date hereof,
on unpaid principal at the rate of seven percent (7%) per annum payable
interest only monthly on the first day of each month commencing on the date
hereof, and continuing thereafter for thirty (30) months. Thereafter,
principal and interest shall be payable in equal monthly installments of
$18,395.34, or more, on the first day of each month for the following
fifty-four (54) months, when the unpaid principal balance of this Note, then
outstanding, and all accrued but unpaid interest shall be due and payable.
Should interest not be paid when due, it shall thereafter bear like
interest as to principal, but such unpaid interest so compounded shall not
exceed an amount equal to simple interest on the unpaid principal at the
maximum rate permitted by the laws of the State of Florida.
At the option of the holder hereof, this Note shall be immediately due
and payable, without notice or demand, upon the occurrence at any time of any
of the following events of default:
1. Payment Default. Any default in the payment of principal or
interest when due hereunder which default is not cured within ten (10) calendar
days;
2. Inability to Pay Debts. The admission by Debtor of its
inability to pay its debts as they mature, or an assignment for the benefit of
the creditors of any of the foregoing parties;
3. Certain Transfers. Any transfer of property by a party liable
thereon, whether as maker, endorser, guarantor, surety or otherwise, under
circumstances which would entitle a trustee in bankruptcy or similar fiduciary
to avoid such transfer under the Federal Bankruptcy Code, as amended, or under
any other laws, whether state or federal, for the relief of debtors, now or
hereafter existing.
<PAGE> 2
4. Bankruptcy. The commencement of proceedings in bankruptcy, or
for the reorganization of any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for the readjustment of any of the debts of
any of the foregoing parties, under the Federal Bankruptcy Code, as amended, or
any part thereof, or under any other laws, whether state or federal, for the
relief of debtors, now or hereafter existing, by any of the foregoing parties,
or against any of the foregoing parties, which shall not be discharged within
thirty (30) days of their commencement;
5. Appointment of Receiver. The appointment of a receiver,
trustee or custodian for any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for any substantial part of the assets of
any of the foregoing parties, or the institution of proceedings for the
dissolution or the full or partial liquidation of any of the foregoing parties,
and such receiver or trustee shall not be discharged within thirty (30) days of
his or its appointment, or such proceedings shall not be discharged within
thirty (30) days of their commencement, or the discontinuance of the business
or the material change in the nature of the business of any of the foregoing
parties;
6. Adverse Judgments. The rendering of a final judgment or
judgments for payment of money aggregating in excess of $10,000 against any
party liable hereon, whether as maker, endorser, guarantor, surety or
otherwise, and the same is not discharged within a period of thirty (30) days
unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed;
7. Dissolution. The dissolution of the Debtor.
8. Other Agreement. Any default or failure of performance by
Debtor or the breach of any material representation, warranty or covenant
(including without limitation payment of Assumed Liabilities as defined in the
Asset Purchase Agreement) of Debtor, which default is not cured within any
grace period granted with respect to such default or, if no specific grace
period is granted with respect to such default, where such default is not cured
within ten (10) business days after written notice thereof from the holder
hereof, or the occurrence of any other event of default, under any of the
following agreements:
(a) The Asset Purchase Agreement of even date herewith;
(b) Note II (as defined in the Asset Purchase Agreement)
of even date herewith, executed by Debtor in favor of Lender;
(c) That certain Security Agreement of even date
herewith, executed by Debtor in favor of Lender; and
-2-
<PAGE> 3
(d) Subcontractor Master Agreement by and between Debtor
and Lender.
(e) Any other document or instrument executed or
delivered pursuant to any of the foregoing.
All payments shall be made hereunder by Debtor without reduction or
offset for any reason.
If this Note is not paid when due, whether at maturity or by
acceleration, the undersigned promises to pay all costs of collection
including, but not limited to, reasonable attorneys' fees and court costs
incurred by the holder hereof on account of such collection, whether or not
suit is filed hereon.
The undersigned may, at any time and from time to time, without
penalty, make prepayments which will be applied to the final payment of
principal under this Note, or the principal components of the remaining
payments under this Note in the order or inverse order of maturity, all as the
holder hereof may determine.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind, are hereby waived.
No single or partial exercise of any power hereunder shall preclude
the other or further exercise thereof or the exercise of any other power. No
delay or omission on the part of the holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
This Note shall be governed and controlled by the laws of the State of
Florida.
This Note and all rights hereunder may be assigned by Lender without
written notice to Debtor, but may not be assigned by Debtor without prior
written consent of Lender.
The obligations of Debtor hereunder are secured by the security
interests granted to Lender in the Security Agreement.
COMTEL SYSTEMS CORPORATION
By:__________________________
Its:_________________________
-3-
<PAGE> 1
EXHIBIT 10.69
SECURED PROMISSORY NOTE II
$710,000 Lake Wales, Florida
March 31, 1995
FOR VALUE RECEIVED, the undersigned, ComTel Systems Corporation
("Debtor"), promises to pay to the order of ComTel Industries, Inc. ("Lender")
at 1 Mill Street, Fort Edward, New York 12828, or at such other place as the
holder of this Note may from time to time designate, the principal sum of Seven
Hundred Ten Thousand Dollars ($710,000), with interest from the date hereof, on
unpaid principal and accrued interest at the rate of seven percent (7%) per
annum. Principal and interest shall be payable in equal monthly installments
of $18,188.71, or more, beginning thirty (30) months from the date hereof and
continuing for the following fifty-four (54) months, when the unpaid principal
balance of this Note, then outstanding, and all accrued but unpaid interest
shall be due and payable.
Should interest not be paid when due, it shall thereafter bear like
interest as to principal, but such unpaid interest so compounded shall not
exceed an amount equal to simple interest on the unpaid principal at the
maximum rate permitted by the laws of the State of Florida.
At the option of the holder hereof, this Note shall be immediately due
and payable, without notice or demand, upon the occurrence at any time of any
of the following events of default:
1. Payment Default. Any default in the payment of principal or
interest when due hereunder which default is not cured within ten (10) calendar
days;
2. Inability to Pay Debts. The admission by Debtor of its
inability to pay its debts as they mature, or an assignment for the benefit of
the creditors of any of the foregoing parties;
3. Certain Transfers. Any transfer of property by a party liable
thereon, whether as maker, endorser, guarantor, surety or otherwise, under
circumstances which would entitle a trustee in bankruptcy or similar fiduciary
to avoid such transfer under the Federal Bankruptcy Code, as amended, or under
any other laws, whether state or federal, for the relief of debtors, now or
hereafter existing.
4. Bankruptcy. The commencement of proceedings in bankruptcy, or
for the reorganization of any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for the readjustment of any of the debts of
any of the foregoing parties, under the Federal Bankruptcy Code, as amended, or
any part thereof, or under any other laws, whether state or federal, for the
relief of debtors, now or hereafter existing, by any of the foregoing parties,
or against any of the foregoing parties, which
<PAGE> 2
shall not be discharged within thirty (30) days of their commencement;
5. Appointment of Receiver. The appointment of a receiver,
trustee or custodian for any party liable hereon, whether as maker, endorser,
guarantor, surety or otherwise, or for any substantial part of the assets of
any of the foregoing parties, or the institution of proceedings for the
dissolution or the full or partial liquidation of any of the foregoing parties,
and such receiver or trustee shall not be discharged within thirty (30) days of
his or its appointment, or such proceedings shall not be discharged within
thirty (30) days of their commencement, or the discontinuance of the business
or the material change in the nature of the business of any of the foregoing
parties;
6. Adverse Judgments. The rendering of a final judgment or
judgments for payment of money aggregating in excess of $10,000 against any
party liable hereon, whether as maker, endorser, guarantor, surety or
otherwise, and the same is not discharged within a period of thirty (30) days
unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed;
7. Dissolution. The dissolution of the Debtor.
8. Other Agreement. Any default or failure of performance by
Debtor or the breach of any material representation, warranty or covenant
(including without limitation payment of Assumed Liabilities as defined in the
Asset Purchase Agreement) of Debtor, which default is not cured within any
grace period granted with respect to such default or, if no specific grace
period is granted with respect to such default, where such default is not cured
within ten (10) business days after written notice thereof from the holder
hereof, or the occurrence of any other event of default, under any of the
following agreements:
(a) The Asset Purchase Agreement of even date herewith;
(b) Note II (as defined in the Purchase Agreement) of
even date herewith, executed by debtor in favor of Lender;
(c) That certain Security Agreement of even date
herewith, executed by Debtor in favor of Lender; and
(d) Subcontractor Master Agreement by and between Debtor
and Lender
(e) Any other document or instrument executed or
delivered pursuant to any of the foregoing.
The only offset or reduction shall be in accordance with Section 12 of
the Asset Purchase Agreement.
If this Note is not paid when due, whether at maturity or by
acceleration, the undersigned promises to pay all costs of
- 2 -
<PAGE> 3
collection including, but not limited to, reasonable attorneys' fees and court
costs incurred by the holder hereof on account of such collection, whether or
not suit is filed hereon.
The undersigned may, at any time and from time to time, without
penalty, make prepayments which will be applied to the final payment of
principal under this Note, or the principal components of the remaining
payments under this Note in the order or inverse order of maturity, all as the
holder hereof may determine.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind, are hereby waived.
No single or partial exercise of any power hereunder shall preclude
the other or further exercise thereof or the exercise of any other power. No
delay or omission on the part of the holder hereof in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
This Note shall be governed and controlled by the laws of the State of
Florida.
This Note and all rights hereunder may be assigned by Lender without
written notice to Debtor, but may not be assigned by Debtor without prior
written consent of Lender.
The obligations of Debtor hereunder are secured by the security
interests granted to Lender in the Security Agreement.
COMTEL SYSTEMS CORPORATION
By:__________________________
Its:_________________________
- 3 -
<PAGE> 1
EXHIBIT 10.70
AMENDMENT
TO SECURITIES PURCHASE AGREEMENT
This AMENDMENT TO SECURITIES PURCHASE AGREEMENT (the "Amendments"), dated as of
April 1, 1995, is made by and between Decora, Incorporated, a Delaware
corporation (the "Company"), and each of the Noteholders (as defined below)
signatory to this document.
BACKGROUND
A. Pursuant to the securities Purchase Agreement dated as of April 15,
1990, between the Company, Utilitech, Incorporated, a California corporation
(and including its successor by merger, Decora Industries, Inc., a Delaware
corporation, the "Guarantor"), and CIGNA Mezzanine Partners IT, L. P., CIGNA
Property and Casualty Insurance Company, and Insurance Company of North America
(collectively, the "Purchasers"), as amended (the "Securities Purchase
Agreement"), the Company issued and the Purchasers purchased $7,000,000 in
aggregate principal amount of the Company's 14% Senior Subordinated Notes due
1998 (the "Notes"), guaranteed by the Guarantor, and Warrants to Purchase 250
Shares of Common Stock of the Company (the "Warrants").
B. The entities listed in Schedule I to this Amendment (the "Noteholders
and Warrantholders") hold the Notes and Warrants.
C. The Company has requested that the Noteholders amend certain of the
Company's obligations under the Securities Purchase Agreement.
D. The Company and the Noteholders desire to enter into this Amendment to
effectuate the above-mentioned amendments.
NOW THEREFORE, in order to induce the Noteholders to grant the amendments
specified below, and in consideration of other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged) the Company and
the Noteholders agree as follows:
1. Definitions.
All capitalized terms used, but not specifically defined, in this Amendment
have the respective meanings assigned to them in the Securities Purchase
Agreement.
2. Effective Date.
The provisions of Section 4 shall take effect on the first date on which all of
the following conditions precedent have been and remain satisfied:
a. Consenting Parties - Noteholders holding not less than one
hundred percent (100%) in aggregate principal amount of the Notes then
outstanding (exclusive of Notes than owned by any one or more of the Company,
the Guarantor, any Subsidiaries and any affiliates) and the Company shall have
duly authorized, executed and delivered this Amendment.
b. No Defaults - No Default or Event of Default exists after
giving effect to the amendments set forth in Section 4; and
<PAGE> 2
c. Acknowledgment and Consent of Guarantor - The Guarantor shall
have duly authorized, executed and delivered the Acknowledgment and Consent
attached to this Amendment.
3. Termination of Amendments.
The amendments set forth in Section 4 shall terminate and shall be null and
void and of no force and effect if any written materials furnished in
connection with this Amendment shall have been false or misleading in any
material respect when made.
4. Amendments.
The table contained in Section 7.1 of the Securities Purchase Agreement is
hereby amended by deleting the existing table and replacing it with the
following;
<TABLE>
<CAPTION>
Principal Amount
Prepayment Date to be Prepaid
--------------- ----------------
<S> <C>
April 15, 1996 $4,000,000
April 15, 1997 $1,500,000
April 15, 1998 $1,500,000
</TABLE>
5. Effect of Agreement.
Except as expressly provided in this Amendment, the Securities Purchase
Agreement and all documents and instruments executed in connection with, or
contemplated by, the Securities Purchase Agreement shall remain in full force
and effect, without modification or amendment. This Amendment shall be binding
upon, and shall inure to the benefit of the successors and assigns of the
parties hereto and the holder from time to time of the Notes.
6. Duplicate Originals; Execution in Counterpart.
Two or more duplicate originals of this Amendment and the attached
Acknowledgment and Consent may be signed by the parties, each of which shall be
an original, but all of which together, shall constitute one and the same
instrument. This Amendment and the attached Acknowledgment and Consent may be
executed in one or more counterparts and shall be effective when at least one
counterpart shall have been executed by each party to this Amendment and the
attached Acknowledgment and Consent, and each set of counterparts which,
collectively, show execution by each such party to this Amendment and the
attached Acknowledgment and Consent shall constitute one duplicate original.
7. Governing Law.
This Amendment shall be governed by, and construed and enforced in accordance
with the law of the State of New York.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have each caused this Amendment to
Securities Purchase Agreement to be duly executed and delivered by their
respective, duly authorized officer as of the date first above written.
COMPANY
DECORA, INCORPORATED
By____________________________________
Name:
Title:
NOTEHOLDERS
CIGNA MEZZANINE PARTNERS II, L.P.
By CIGNA Investments, Inc.
By____________________________________
Name:
Title:
CIGNA PROPERTY AND CASUALTY INSURANCE
COMPANY
By CIGNA Investments, Inc.
By____________________________________
Name:
Title:
INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc.
By____________________________________
Name:
Title:
-3-
<PAGE> 4
Schedule 1
NOTEHOLDERS AND WARRANTHOLDERS
CIGNA Mezzanine Partners II, L.P.
CIGNA Property and Casualty Insurance Company
Insurance Company of North America
-4-
<PAGE> 5
ACKNOWLEDGMENT AND CONSENT
Reference is hereby made to Sections 13.1 through 13.7 of the Securities
Purchase Agreement dated as of April 15, 1990 between Decora, Incorporated, a
Delaware corporation, Utilitech Incorporated, a California corporation (and
including its successor by merger, Decora Industries, Inc., a Delaware
corporation, the "Guarantor"), and CIGNA Mezzanine Partners II, CIGNA Property
and Casualty Insurance Company, and Insurance Company of North America
(collectively, the "Purchasers") as amended (the "Securities Purchase
Agreement"). The Guarantor hereby (a) acknowledges and consents to the
execution and delivery of the Amendment to Securities Purchase Agreement (the
"Amendment") and (b) declares and confirms that its obligations under the
Securities Purchase Agreement, the Notes, and the Warrants to any Noteholder
and Warrantholder, regardless of whether the Noteholder and Warrantholder is a
signatory to the Amendment, shall not be affected in any way due to the
execution and delivery of the Amendment.
Dated as of April 1, 1995.
GUARANTOR
DECORA INDUSTRIES, INC.
By______________________________________
Name:
Title:
-5-
<PAGE> 1
EXHIBIT 10.72
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement made this 13th day of June, 1995, between DMX
Integration, Inc., a Florida Corporation having its principal office at 4501
Parkway Commerce Boulevard, Orlando, Florida 32808 (hereinafter called
"Purchaser"), and ComTel Metals, Inc., a Florida Corporation, having its
principal office and place of business at 1770 E. Lake Mary Boulevard (fka 500
Silver Lake Drive), Sanford, Florida 32773, (hereinafter called "Seller").
WHEREAS, Purchaser desires to purchase from Seller and Seller desires
to sell, transfer and assign to Purchaser certain assets owned or held by
Seller for the purchase price and upon the terms and conditions hereinafter set
forth,
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
I. PURCHASE AND SALES OF ASSETS.
A. ASSETS TRANSFERRED. Subject to and upon the terms and
conditions set forth in this Agreement, Seller will sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser will purchase
or acquire from Seller at the Closing all right, title and interest
of Seller in and to the following (which shall be hereinafter
referred to collectively as the "Assets"):
1. the properties, assets and rights listed on Schedule
1 hereto, and
2. the following assets primarily relating to or used or
held for use in connection with the operation of Seller's manufacturing
business at the address for Seller set forth above:
(a) all designs, plans, trade secrets,
inventions, processes, procedures, research records,
manufacturing know-how and manufacturing formulae,
wherever located (collectively, the "Know-How");
(b) all books, records, manuals and
other materials including, without limitation,
purchasing materials and records and procedures,
inventory records, personnel records, OSHA records
and reports, quality control records and procedures,
blueprints, research and development files,
accounting records, sales order files and litigation
files;
(c) all inventory including material,
work-in-process and finished goods as of the Closing
Date, and all consumables including spare parts,
office supplies, packaging materials and other
consumables; and
<PAGE> 2
(d) to the extent their transfer is
permitted by law, all governmental licenses, permits,
approvals, license applications and license amendment
applications (collectively, the "Licenses").
The Assets shall be conveyed to Purchaser by Seller free and
clear of all liabilities, obligations, liens, claims and encumbrances.
B. EXCLUDED ASSETS. Purchaser will not purchase
or acquire any assets (collectively, the "Excluded Assets") other than
those listed on Schedule 1 hereto or described in paragraphs A.2.(a),
A.2.(b), A.2.(c) and A.2.(d) above. Without limitation, the following
items are specifically excluded from the Assets under this Agreement:
1. the names "ComTel" and "ComTel Metals";
2. any computer equipment and/or software leased
or licensed by Seller from IBM or MARCAM
Corporations;
3. any tooling which is owned by customers of
Seller; and
4. Accounts receivable, deposits, pre-paid
expenses, petty cash.
II. CLOSING; PURCHASE PRICE.
A. TIME AND PLACE OF CLOSING. The closing of the
sale of the Assets (the "Closing") shall take place at 2:30 p.m.
local time, on June 13, 1995 (the "Closing Date") at the offices of
Purchaser or such other time and place as the parties may agree upon.
B. PURCHASE PRICE AND PAYMENT.
1. On the terms and subject to the conditions
set forth in this Agreement, the purchase
price for the Assets shall be the sum of
$1,100,000 plus an amount to be determined in
accordance with Paragraph B.2.(c) below (the
"Purchase Price").*
2. Purchaser agrees to pay or cause to be paid
the Purchase Price as follows:
(a) $993,102.64 by wire transfer,
payable to Seller** at Closing;
(b) $16,897.36 by check or wire
transfer payable to the lien-holders in
accordance with Paragraph XV.G.4. below;
* In addition to the purchase price, Purchaser shall pay $50,000
of accounts receivable as directed by Seller at closing.
** Or as directed by Seller.
<PAGE> 3
(bb) $90,000 by check or wire
transfer to Silver Lake Realty Company,
Seller's lessor, in full payment and
settlement of Seller's past due obligations
under the lease referred to in Schedule 1;
and
(c) for the inventory described
in I.A.2.(c) above, Purchaser and Seller
shall conduct a complete physical audit
prior to the Closing to verify the existence
and to determine the "actual cost" value
of the inventory. Such inventory shall be
listed and valued on a written schedule
which shall become Schedule 2 to this
Agreement. At Closing, Purchaser shall
deliver to Seller a secured Promissory Note
in the form attached hereto as Exhibit D,
in the amount of seventy percent (70%) of the
total "actual cost" of all inventory listed
in the completed Schedule 2 which note
shall bear interest at Prime + one percent
(1%) with semi-annual interest-only
payments. The amount of the note shall
be secured by the non-raw stock inventory
identified during the audit as described
in the Security Agreement attached hereto as
Exhibit E. Purchaser shall make quarterly
principal payments on the Note equal to
seventy percent (70%) of the "actual cost"
of so much of the inventory as is used by
Purchaser during the preceding quarter in
accordance with the guidelines set forth in
Attachment 1 to this Agreement entitled
"Inventory Tracking and Usage". If any
balance of the note remains unpaid after six
(6) months from the date thereof and after
all adjustments pursuant to Attachment 1
have been made, then such remaining
note balance will continue to bear interest
and such balance together with accrued
interest will become due and payable in
full in one (1) lump sum three (3) years
from the Closing Date or may be prepaid at
any time without penalty.
C. EXCLUDED LIABILITIES. Except as set forth in
Sub-Paragraph D. below, Purchaser is not assuming any liabilities,
obligations or commitments of Seller including, but not limited to
1. any liabilities, obligations or
commitments made or incurred by Seller either before
or after the Closing;
2. liabilities arising out of any
product liability claim(s) pertaining to products
manufactured or sold by Seller prior to the Closing;
3. liabilities arising out of product
warranty claims pertaining to products manufactured
or sold by Seller prior to the Closing;
4. amounts owed to employees, officers
or directors of Seller including accrued salaries,
compensation, vacation pay, bonuses, or severance
compensation and benefits, except as otherwise
specifically set forth in Paragraph VII. below;
<PAGE> 4
5. expenses incurred by Seller directly
relating to this transaction;
6. liabilities arising out of
environmental or pollution claims, if any, asserted
against Seller or resulting from or relating to
events, acts or occurrences prior to the Closing;
7. liabilities arising out of
Occupational Safety and Health Act of 1970 claims,
Equal Employment Opportunity Commission claims, or
other types of employment-related claims against
Seller;
8. liabilities arising out of
violations of law by Seller;
9. liabilities arising out of Seller
Welfare Plans; and
10. liabilities relating to taxes due or
payable by Seller, including any interest and/or
penalties thereon.
<PAGE> 5
D. ASSUMED LIABILITIES. Purchaser shall assume the
following liabilities of Seller:
1. Obligations of Seller as lessee
under the Lease Agreement dated September 19, 1991,
between Cobia Boat Company, Lessor, and Seller,
Lessee, covering the premises known as Building
Number 3 and Building Number 4 and surrounding area
at 500 Silver Lake Drive, Sanford, Florida, limited
to obligations which arise from and after the Closing
Date;
2. Customer purchase orders for which
Seller provides to Purchaser at Closing a signed
customer consent to assignment and to use by
Purchaser of any necessary customer-owned tooling
excluding any liabilities, commitments or obligations
created or incurred by Seller under such orders prior
to Closing; and
3. Up to $75,000.00 of specified costs
as described in Paragraph VII below.
III. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Purchaser as follows:
A. EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENTS;
AUTHORITY.
1. Neither the execution, delivery nor
performance of this Agreement by Seller will, with or
without the giving of notice or the passage of time,
or both, conflict with, result in a default, right to
accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance against
the Assets pursuant to any provision of Seller's
Articles of Incorporation or by-laws or any
franchise, mortgage, deed of trust, lease, license,
agreement, understanding, law, rule or regulation or
any order, judgement or decree to which Seller is a
party or by which Seller may be bound or affected.
Seller has the full power and authority to enter into
this Agreement and to carry out the transactions
contemplated herein.
2. This Agreement has been duly
executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its
terms, except as enforceability may be limited in the
discretion of the equity court or by laws governing
bankruptcy, insolvency, or reorganization or laws
affecting creditors' rights generally.
3. No consent, approval, order or
authorization of, notice to, or registration,
declaration or filing with, any governmental
authority or entity, domestic or foreign (the
"Governmental Approval"), is or has been required on
the part of Seller in connection with the execution
and delivery of this Agreement or the consummation of
the transactions contemplated thereby.
<PAGE> 6
B. ABSENCE OF CHANGES OR EVENTS.
Seller has not:
1. sold, transferred, leased to others
or otherwise disposed of any of the Assets;
2. transferred or granted any rights
under, or entered into any settlement, relating to
the Assets, regarding the breach or infringement of
any United States or foreign license, patent,
copyright, trademark, trade name, invention or
similar rights, or been notified of any existing
rights with respect thereto;
3. entered into any agreement or made
any commitment to take any of the types of action
described in paragraphs 1. and 2. above.
C. LITIGATION. Except as described in Schedule 3
hereto, there is no claim, legal action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, nor any
order, decree or judgement in progress, pending or in effect, or to the
knowledge of Seller threatened, against or relating to the Assets or
against or relating to the transactions contemplated by this Agreement,
and Seller does not know or have reason to be aware of any basis for the
same. No citations, fines or penalties have been asserted against
Seller relating to the Assets, under any foreign, federal, state or
local law relating to air or water pollution or other environmental
protection matters, or relating to occupational health and safety.
D. PROPERTIES.
1. All of the Assets are, or on the
Closing Date will be, located at Seller's principal
place of business at the address for Seller first set
forth above, and Seller has good title to all the
personal property and vehicle(s) listed in Schedule 1
in each case free and clear of any liens, claims or
encumbrances except as otherwise specifically set
forth in Paragraph XV.G.4. below.
2. Seller has delivered to Purchaser
complete and correct copies of all leases of real and
personal property listed onSchedule 1.
E. BROKERS, FINDERS, ETC. All negotiations relating
to this Agreement and the transactions contemplated hereby have been
carried on without the intervention of any Person acting on behalf of
Seller in such manner as to give rise to any claim against Purchaser
for any brokerage or finder's commission, fee or similar compensation.
F. PATENTS, ETC.
1. The Know-How relating to the Assets
is owned by Seller and is owned free and clear of any
material license, sub-license, agreement, right,
<PAGE> 7
understanding, judgement, order, decree, stipulation,
lien, charge agreement, charge or encumbrance grante
or created by Seller. None of the Know-How or any of
the technology covered thereby has been
misappropriated by Seller from any Person. To the
knowledge of Seller, with respect to the Assets,
Seller is not infringing upon or otherwise acting
adversely to any intellectual property owned by any
other Person, and there is no claim or action by any
Person pending, or to the knowledge of Seller
threatened, with respect thereto.
2. To the knowledge of Seller there are
no licenses, sub-licenses or agreements relating to:
(a) the use by third parties of the Know-How, or
(b) the use thereof by Seller pursuant to a
license or sub-license agreement with a third party.
G. DISCLOSURE. No representation or warranty by
Seller contained in this Agreement nor any statement or certificate
furnished or to be furnished by Seller in connection herewith or
pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact
required to make the statements herein or therein contained not
misleading.
H. AS IS SALE. Notwithstanding anything to the
contrary herein, the Assets are sold to Purchaser on an "AS IS, WHERE
IS" basis. No warranty is made as to the condition or marketability
of the assets or the profitability or prospects of the business
conducted by the Seller.
IV. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents
and warrants to Seller as follows:
A. EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENTS;
AUTHORITY.
1. Neither the execution, delivery nor
performance of this Agreement by Purchaser will, with
or without the giving of notice or the passage of
time, or both, conflict with, result in a default,
right to accelerate or loss of rights under, or
result in the creation of any lien, charge or
encumbrance against the Assets pursuant to any
provision of Purchaser's Articles of Incorporation or
by-laws or any franchise, mortgage, deed of trust,
lease, license, agreement, understanding, law, rule
or regulation or any order, judgement or decree to
which Purchaser is a party or by which Purchaser may
be bound or affected. Purchaser has the full power
and authority to enter into this Agreement and to
carry out the transactions contemplated herein.
2. This Agreement has been duly
executed and delivered by Purchaser and constitutes
the legal, valid and binding obligation of
<PAGE> 8
Purchaser, enforceable against Purchaser in
accordance with its terms, except as enforceability
may be limited in the discretion of the equity court
or by laws governing bankruptcy, insolvency, or
reorganization or laws affecting creditors' rights
generally.
3. No consent, approval, order or
authorization of, notice to, or registration,
declaration or filing with, any governmental
authority or entity, domestic or foreign (the
"Governmental Approval"), is or has been required on
the part of Purchaser in connection with the
execution and delivery of this Agreement or the
consummation of the transactions contemplated
thereby.
V. CHANGES IN INFORMATION. Seller shall give Purchaser prompt written
notice of any change which occurs prior to the Closing in any of the
information contained in the representations and warranties made in
this Agreement or the schedules or exhibits referred to herein
(the "Information").
VI. ACCESS TO INFORMATION AND RECORDS; EMPLOYEES. Following the
Closing, Purchaser shall provide to Seller unlimited access to the
information and records to the extent Purchaser receives the
originals thereof for the following purposes:
A. preparing Tax Returns,
B. monitoring and defending claims and suits asserted or
pending against it following the Closing Date, and
C. other matters related to its business or assets prior
to the Closing Date.
VII. EMPLOYEES OF SELLER. Seller understands that Purchaser may offer
employment to certain of Seller's employees. Seller will use
reasonable efforts to cause such employees who are offered employment
by Purchaser to make available their employment services to Purchaser.
Seller will not, and will not permit any of its employees or
affiliates or the employees of its affiliates to, offer employment
within one (1) year of the Closing to any of Seller's employees to
whom Purchaser offers employment unless such employee has declined
Purchaser's offer or is not at the time employed by the Purchaser.
With respect to Seller's employees, including but not limited to any
such employee(s) who accept Purchaser's offer of employment and
commence employment with Purchaser (the "Transferred Employees"),
Purchaser shall assume responsibility for up to $75,000.00 of
aggregate cost for accrued vacation, accrued holiday, accrued payroll
and accrued, current payroll taxes as of the Closing Date.
VIII. AUTHORIZATIONS. Seller and Purchaser shall use commercially
reasonable efforts to take, or cause to be taken, all actions
necessary, proper or advisable in order for it to fulfill its
obligations hereunder and to carry out the intentions of the parties
expressed herein. Seller and Purchaser will
<PAGE> 9
coordinate and cooperate with one another in exchanging such
information and supplying such reasonable assistance as may be
reasonably requested by each in connection with the foregoing.
IX. EMPLOYEE BENEFIT PLANS.
A. Coverage for Seller's employees, including the
Transferred Employees, under all welfare and fringe benefit plans
maintained by Seller, including but not limited to life insurance,
severance pay, medical and dental benefits plans (the "Welfare
Plans"), shall continue until the Closing Date and shall be the
responsibility of Seller until such date. Coverage under the Welfare
Plans for any employee who is retired or terminated from Seller on or
before the Closing Date, or who is on disability leave before the
Closing Date, shall remain the responsibility of Seller. Seller shall
not be responsible for providing coverage to the Transferred Employees
under the Welfare Plans after the Closing Date, except as provided in
Paragraph B.1. below. Seller shall in all events be responsible for
the payment of benefits under the Welfare Plans based on occurrences
prior to the Closing Date, and Seller shall not be responsible for the
payment of future retiree medical benefits, if any, under its medical
plan to any Transferred Employee except to the extent that such
medical benefits are payable with respect to occurrences prior to the
Closing Date.
B. 1. Notwithstanding any other provisions of this
Agreement, Seller agrees to indemnify and hold Purchaser harmless from
and against any liabilities or obligations, including attorney's fees
and disbursements, resulting from
(a) any and all claims for life
insurance, disability and medical benefits based on
occurrences before the Closing Date (including claims
for continuing treatment with respect to any accident
or illness for which coverage was so provided),
whether such claims are asserted before, on or after
the Closing Date;
(b) any and all other welfare and fringe
benefits claims based on occurrences before the
Closing Date, whether such claims are asserted
before, on or after the Closing Date;
(c) any and all life insurance,
disability, severance (including severance claims
based upon the transactions contemplated hereunder),
medical or other welfare and fringe benefits claims
of any individual (or his covered dependents) who
retired from Seller on or before the Closing Date or
who died before the Closing Date and who had been
employed at any time by Seller, regardless of whether
such claim is asserted before, on, or after the
Closing Date;
(d) any and all claims (including third
party claims) under or with respect to any pension or
retirement plan or any other plan of deferred
compensation, and
<PAGE> 10
(e) any and all worker's compensation
claims based on occurrences before the Closing Date.
2. Notwithstanding any other provisions of this
Agreement, Purchaser agrees to indemnify and hold Seller
harmless from and against any cost, liabilities or
obligations, including attorney's fees and disbursements,
resulting from
(a) any and all life insurance,
disability or medical benefits claims based on
coverage provided to Transferred Employees under any
plan maintained or sponsored by Purchaser after the
Closing Date;
(b) any and all other welfare and fringe
benefits claims based on coverage provided to
Transferred Employees under any plan maintained or
sponsored by Purchaser after the Closing date; and
(c) any and all claims under or with
respect to any pension or retirement plan or any plan
of deferred compensation which Purchaser, or
Purchaser's sponsor, contributes to or otherwise
participates in on or after the Closing Date.
X. FURTHER ASSURANCES. After the Closing, Seller shall
A. perform all acts (including, without limitation, the
use of Seller's commercially reasonable efforts to enable Purchaser to
accomplish transfer of registration, licenses, permits, approvals and
the like as contemplated by this Agreement provided, however that
Purchaser shall pay any taxes, charges or similar fees relating to
such transfers) and
B. execute, acknowledge and deliver such assignments,
transfers, consents and other documents and instruments as Purchaser
or its counsel may reasonably request, in each case, to vest in
Purchaser and protect Purchaser's right, title and interest in, and
enjoyment of, the Assets.
XI. PARAGRAPH XI INTENTIONALLY OMITTED.
XII. ACQUISITION PROPOSALS. From the date hereof, Seller shall not,
directly or indirectly, through any officer, director, agent,
representative (including, without limitation, investment bankers,
attorneys and accountants) or otherwise,
A. solicit, initiate or encourage submission of
inquiries, proposals or offers from any person, corporation,
partnership or other entity or group other than Purchaser (a "Third
Party"), relating to any acquisition or purchase of any of the Assets,
or
<PAGE> 11
B. participate in any discussions or negotiations
regarding, or furnish to any Third Party any information with respect
to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any Third Party
in the acquisition or purchase of any of the Assets.
XIII. CONFIDENTIAL INFORMATION. Each party to this Agreement shall
ensure that any confidential information which such party may possess
or may hereafter create or obtain relating to the other party, any
affiliate of such other party, or any customer or supplier of such
other party or any such affiliate shall not be published, disclosed or
made accessible by any of them, in each case without the prior written
consent of the other party; provided, however, that the restriction of
this sentence shall not apply
A. as may otherwise be required by law;
B. as may be necessary or appropriate in connection with
the enforcement of this Agreement;
C. to the extent such information shall have otherwise
become publicly available; or
D. as to the Purchaser, to disclosure by or on its behalf
to lenders, investors, or prospective lenders or investors or others
whose agreement or consent may be required or desirable in connection
with obtaining the financing or consents which are required or desired
to consummate this Agreement. If this Agreement is terminated, each
party shall, and shall cause all of such other persons and entities
who receive confidential data from it to, deliver to the other party
all copies and other tangible evidence of such confidential
information to which the restrictions of this section apply.
XIV. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
to Seller and Purchaser to consummate the transactions contemplated by
this Agreement are subject to the condition that there shall be no
action or proceeding by any foreign or United States federal or state
governmental agency or authority, to restrain, enjoin, or otherwise
prevent the consummation of the transactions contemplated hereby or to
recover any damages or obtain other relief as a result thereof.
XV. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser hereunder are subject, at the option of Purchaser, to the
fulfillment of each of the following conditions as of the Closing, and
Seller shall exert its reasonable commercial efforts to cause each
such condition to be so fulfilled:
A. All representations and warranties of Seller contained
herein or in any document delivered pursuant hereto shall be true and
correct in all material respects when made and shall be deemed to have
been made again at and as of the Closing Date, and shall then be true
and correct in all material respects except for changes in the ordinary
course of business after the date hereof in conformity with the
covenants and agreements contained herein.
<PAGE> 12
B. All covenants, agreements and obligations required by
the terms of this Agreement to be performed by Seller at or before the
Closing shall have been duly and properly performed in all material
respects.
C. Sub-Paragraph C. intentionally omitted.
D. Prior to the Closing Date Seller shall have removed
from the leasehold premises any and all hazardous waste which is
stored or otherwise situated in, on or about the premises.
E. Purchaser shall have received an opinion of Seller's
counsel, dated as of the Closing Date, substantially in accordance
with Exhibit A annexed hereto.
F. Purchaser shall have received the agreement of the
lessor to the assignment of lease by Seller as described in Paragraph
G.3. below.
G. Seller shall have delivered to Purchaser at the
Closing all documents, certificates and agreements necessary to
transfer to Purchaser good and marketable title to the Assets, free
and clear of any and all liens, claims or encumbrances thereon except
as otherwise specifically set forth in G.4. below, including without
limitation:
1. a bill of sale, in form and substance
satisfactory to Purchaser and substantially in accordance with
Exhibit B annexed hereto, dated as of the Closing Date
sufficient to transfer to Purchaser good and marketable title
to all tangible and intangible Assets, free and clear of all
liens, claims and encumbrances;
2. certificates of title to all motor vehicles
to be transferred to Purchaser hereunder, duly endorsed for
transfer to Purchaser as of the Closing Date;
3. an assignment Seller's leasehold interest in
the real property described in Schedule 1, substantially in
accordance with Exhibit C annexed hereto;
4. Schedule 4 hereto lists certain identified
holders of liens against the Assets. With respect to each
such lien and each additional lien, if any, which may exist as
of Closing, Seller shall deliver to Purchaser either:
(a) an executed UCC Termination
Statement or, if no UCC Financing Statement is
involved, other document(s) signed by a duly
authorized representative of the lien-holder
indicating full payment by Seller of the subject
indebtedness; or, if such lien has not been fully
satisfied by Seller prior to Closing, then
(b) a written statement signed by a duly
authorized representative of the lien-holder on the
lien- holder's letterhead:
(i) consenting to the transfer of
the secured assets to Purchaser,
<PAGE> 13
(ii) certifying the amount required
to satisfy the lien and to exercise the
purchase-option for the leased or financed
property, if such is the case; and
(iii) further certifying that upon
such lien-holder's receipt from Purchaser of
such amount, then the lien-holder will
deliver to Purchaser an executed UCC
Termination Statement or other document
required to satisfy and remove-of-record the
lien against the Assets and a bill of sale or
other document required to transfer good
title to the subject property to Purchaser.
With respect to all liens against the Assets
referred to in G.4.(b) above, Purchaser shall, in Purchaser's
sole judgement and at Purchaser's sole option, pay or cause to
be paid to the lien holder or other party in interest, the
required amount as described therein and all such amounts so
paid by Purchaser shall be included as a part of the Purchase
Price for the Assets as described in Paragraph II.B. above,
and
5. To the extent permitted by law, executed
documents of transfer of the Licenses.
XVI. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of
Seller at the Closing are subject, at the option of Seller, to the
fulfillment of each of the following conditions at or prior to the
Closing, and Purchaser shall exert its reasonable commercial efforts
to cause each such condition to be so fulfilled:
A. All representations and warranties of Purchaser
contained herein or in any document delivered pursuant hereto shall
be true and correct in all material respects except for changes in the
ordinary course of business after the date hereof in conformity with
the covenants and agreements contained herein.
B. All covenants, agreements and obligations required by
the terms of this Agreement to be performed by Purchaser at or before
the Closing shall have been duly and properly performed in all material
respects.
C. Purchaser shall have delivered to Seller at the
Closing all documents, certificates and agreements required by this
Agreement to be delivered by Purchaser, including without limitation:
1. funds in the manner and amount described in
Paragraph II.B.2.(a) above;
2. a Promissory Note as described in Paragraph
II.B.2.(c) above in accordance with Exhibit D annexed hereto;
and
<PAGE> 14
3. a Security Agreement as referred to in
Paragraph II.B.2.(c) above in accordance with Exhibit E
annexed hereto.
XVII. INDEMNIFICATION.
A. Seller hereby indemnifies and agrees to hold Purchaser
harmless from, against and in respect of, and shall on demand
reimburse Purchaser for:
1. any and all Losses suffered or incurred by
Purchaser by reason of any untrue representation or
breach of warranty by Seller contained herein or in any
certificate, document or instrument, delivered to Purchaser
hereunder;
2. any and all Losses suffered or incurred by
Purchaser in respect of or in connection with any
Excluded Liabilities, Excluded Assets or any liabilities or
obligations of Seller not assumed by Purchaser pursuant to
this Agreement;
3. any and all Losses in respect of or in
connection with any tax obligation or liability of
Seller except as specifically agreed by Purchaser in Paragraph
VII above;
4. any and all Losses suffered or incurred by
Purchaser by reason of the breach of any agreement or
covenant by Seller contained herein; and
5. any and all Losses incident to any of the
foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
B. Purchaser hereby agrees to indemnify and hold Seller
harmless from, against and in respect of and shall on demand
reimburse Seller for:
1. any and all Losses suffered or incurred
by Seller by reason of any untrue representation or
breach of warranty by Purchaser contained herein or in any
certificate, document or instrument delivered to Seller
hereunder;
2. any and all liabilities or obligations
of Seller specifically assumed by Purchaser at Closing
pursuant to this Agreement;
3. any and all Losses suffered or incurred by
Seller by reason of the breach of any agreement or
covenant by the Purchaser contained herein; and
4. any and all Losses incident to any of the
foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
<PAGE> 15
C. NOTICE; ASSUMPTION OF DEFENSE. The indemnified
party shall give prompt notice to the indemnifying party, in
accordance with the terms of Section XIX, of the assertion of
any claim, for which indemnity may be sought hereunder and of
any Losses which the indemnified party deems to be within the
ambit of this section, specifying with reasonable
particularity the basis therefor and shall give the
indemnifying party such information with respect thereto as
the indemnifying party may reasonably request. The
indemnifying party shall assume the defense, and the
indemnified party shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the
indemnifying party. All of the parties hereto shall cooperate
in the defense or prosecution thereof. "Losses" shall mean
all liabilities, losses, damages and penalties, as well as
out-of-pocket costs and expenses paid or incurred to third
parties (including, without limitation, reasonable attorneys'
fees and expenses and costs of investigation and litigation).
D. LIMITS ON INDEMNIFICATION.
1. Notwithstanding the foregoing, neither
party shall be required to compensate the other for
any Losses unless such Loss exceeds $1,000.00.
2. Purchaser shall not be able to offset
Losses against the Note.
<PAGE> 16
XVIII. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Sections III.A.1.and
III.B.2. shall survive the Closing for a period of four (4) years from
the Closing Date. Except for fraudulent misrepresentation, all other
representations and warranties, made by each of the parties hereto
shall survive the Closing for a period of eighteen (18) months from
the Closing Date. Any action or actions based on fraudulent
misrepresentation must be commenced within five (5) years from the
Closing Date. The commencement of any action based on breach of
representation or warranty shall toll the survival of such
representation and warranty only with respect to the claim which is
the subject of such action until such action is terminated.
XIX. NOTICES. Any and all notices or other communications required
or permitted to be given under any of the provisions of this Agreement
shall be in writing and shall be deemed to have been duly given when
personally delivered or mailed by first-class registered mail, return
receipt requested, or by overnight courier delivery service, addressed
to the parties at the addresses set forth above (or at such other
address as any party may specific by notice to all other parties given
as aforesaid).
XX. COSTS IN EVENT OF DEFAULT.
A. In the event that any party defaults in his or its
obligations under this Agreement (the "Defaulting Party") and,
as a result thereof, the other party (the "Non-Defaulting
Party") seeks to legally enforce his or its rights hereunder
against the Defaulting Party, then, in the event such default
is judicially determined in a proceeding on the merits, in
addition to all damages and other remedies to which the
Non-Defaulting Party is entitled by reason of such default,
the Defaulting Party shall promptly pay to the Non-Defaulting
Party an amount equal to all costs and expenses (including
reasonable attorneys' fees) paid or incurred by the
Non-Defaulting Party in connection with such enforcement.
B. In the event that the Non-Defaulting Party is
entitled to receive payment pursuant to the foregoing
paragraph, then in addition to such payment, the Defaulting
Party shall promptly pay to the Non-Defaulting Party a sum
equal to interest on such payment accruing at the rate of one
percent (1%) per month (but if such rate is not permitted
under the applicable laws, then at the highest rate which is
permitted to be paid under the applicable laws) during the
period between the date such payment should have been made
hereunder and the date of the actual payment thereof.
XXI. TERMINATION AND ABANDONMENT.
A. REASONS FOR TERMINATION. Anything herein or elsewhere
to the contrary notwithstanding, this Agreement may be
terminated and abandoned at any time after the date of this
Agreement but not later than the Closing:
1. by Purchaser at any time if there has been a
material adverse change in the Assets since the date of
Purchaser's last inspection thereof; or
<PAGE> 17
2. by Purchaser, if in the Purchaser's sole
opinion, Purchaser cannot obtain financing for the Purchase
Price upon terms and conditions satisfactory to it; or
3. by Purchaser, if Seller fails or is unable to
deliver to Purchaser at the Closing all or any of the
documents, certificates or agreements required to be delivered
by Seller under Paragraph XV.G. above; or
4. by Purchaser or by Seller at any time, if
there has been a material breach of any representation or
warranty made by the other party herein or in any certificate
or other document delivered pursuant hereto or if there has
been any failure or in any certificate or other document
delivered pursuant hereto or if there has been any failure by
the other party to perform in all material respects all
obligations or to comply with all covenants on its part to be
performed hereunder; or
5. by Purchaser or by Seller if there shall have
been any statute, rule or regulation enacted or promulgated or
deemed applicable to the transactions contemplated by this
Agreement by any government or governmental agency in the
United States that, in the reasonable judgement of Purchaser
or Seller might
(a) result in a significant delay in the
ability of the parties to consummate the transactions
contemplated hereby;
(b) render the parties unable to
consummate the transactions contemplated hereby;
(c) make such consummation illegal; or
(d) otherwise materially adversely
effect the Purchase.
B. PROCEDURE UPON AND EFFECT OF TERMINATION. In the
event of any termination and abandonment pursuant to Section
XXI.A. of this Agreement, written notice thereof shall
forthwith be given to the other party and the transactions,
without further action by the Purchaser or the Seller, and
there shall be no liability on the part of the Seller or
Purchaser or their respective officers, directors or
shareholders except for the material breach of any
representation, warranty or covenant contained herein that is
within control of the party in breach.
XXIII. NONDISCLOSURE. The parties hereby agree that none of them will make
any public disclosure of this transaction or the purchase price,
except
A. as necessary to their affiliates, officers, directors and
advisors,
B. to the extent required by law, or
C. with the prior written approval of the other parties.
<PAGE> 18
XXIV. MISCELLANEOUS.
A. This writing, including all Schedules, Attachments and
Exhibits hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not
be modified, amended or terminated except by a written
agreement specifically referring to this Agreement signed
by all of the parties hereto.
B. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same
or similar nature.
C. This Agreement shall be binding upon and inure to the
benefit of each party hereto, its successors and assigns.
Purchaser shall not have the right to assign its
obligations under this Agreement.
D. The paragraph headings contained herein are for the
purposes of convenience only and are not intended to define or
limit the contents of said paragraphs.
E. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in
order to carry out the provisions and purposes of this
Agreement.
F. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one
original.
G. Subject to the terms of Section XVIII. hereof,
Purchaser shall bear the expenses, costs and fees incurred by
it, and Seller shall bear the expenses, costs and fees
incurred by it, in connection with the transaction
contemplated hereby, whether or not the transactions
contemplated hereby or thereby shall be consummated.
H. If any provision of this Agreement shall be held or
deemed to be or shall, in fact, be inoperative or
unenforceable as applied in any particular case, such
circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any
other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative,
or unenforceable to any extent whatsoever. The invalidity of
any one or more phrases, sentences, clauses, sections, or
subsections or this Agreement shall not affect the
remaining portions thereof.
I. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Florida applicable to
contracts made and to be performed therein without regard to
any conflict of law provisions.
J. The risk of any loss, damage, impairment, confiscation
or condemnation of the Assets, or any part thereof shall be
upon Seller at all times prior to the Closing Date. In any
<PAGE> 19
such event, the proceeds of, or any claim for any loss payable
under, Seller's insurance policy judgement or award with
respect thereto shall be payable to Seller, which shall either
1. repair, replace or restore any such property
as soon as possible after its loss, impairment, confiscation
condemnation, or,
2. if insurance proceeds are sufficient to
repair, replace or restore the property, pay such proceeds to
Purchaser at the time of Closing, provided that in the event
of substantial or loss damage to a material part of the
Assets, either party may terminate this Agreement with no
penalty or liability to the other.
XXV. RIGHT TO LIMITED SETOFF. Notwithstanding anything to the
contrary herein, the Purchaser shall have the right to setoff
against any amounts owed on the Note, provided the amount of any claim
for setoff is first determined by agreement or binding arbitration
pursuant to the rules of the American Arbitration Association with the
arbitration to be held in Orlando, Florida before a single arbitrator.
The prevailing party(s) in any such arbitration proceeding shall be
entitled to an award of reasonable attorney's fees and costs and the
non-prevailing party shall bear all of the costs of the arbitration.
Such setoff shall apply to the next monies due under the Note. Such
setoff right shall be limited to an aggregate maximum of $50,000.00.
This provision shall not preclude the Purchaser from bringing an
action or actions for any claims it may have in a court of competent
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
<TABLE>
<S> <C>
COMTEL METALS, INC. DMX INTEGRATION, INC.
By: __________________________________ By: ______________________________
President President
</TABLE>
<PAGE> 1
EXHIBIT 10.73
SECURED PROMISSORY NOTE
$270,808.90 Lake Mary, Florida
June 13, 1995
FOR VALUE RECEIVED, the undersigned, DMX Integration, Inc. ("Debtor"),
promises to pay to the order of ComTel Metals, Inc. ("Lender") at 1 Mill
Street, Fort Edward, New York 12828, or at such other place as the holder of
this Note may from time to time designate, the principal sum of Two Hundred
Seventy Thousand Eight Hundred Eight Dollars and Ninety Cents ($270,808.90)
(which amount shall be 70% of the actual cost of the Inventory listed on
Schedule 2 to the Agreement of Purchase and Sale of Assets of even date
herewith between Debtor and Lender (the "Purchase Agreement")), with interest
from the date hereof, on unpaid principal at the prime rate as published in the
Wall Street Journal on the date hereof plus 1%, payable interest only
semianually with the first such payment due six (6) months from the date
hereof. Such payment shall be made in cash, unless payment in kind is permitted
pursuant to Section IIB(2)(c) and Attachment 1 of the Purchase Agreement.
Principal shall be payable quarterly, on September 12, 1995 and December 12,
1995, in an amount(s) determined under the terms of the Purchase Agreement,
until six months from the date hereof. Any remaining balance at the end of such
six month period, after any and all credits and adjustments permitted by the
Purchase Agreement have been made, shall continue to accrue interest until
three (3) years from the date hereof when such remaining balance and all
accrued but unpaid interest, shall be due and payable.
Should interest not be paid when due, it shall thereafter bear like
interest as to principal, but such unpaid interest so compounded shall not
exceed an amount equal to simple interest on the unpaid principal at the
maximum rate permitted by the laws of the State of Florida.
At the option of the holder hereof, this Note shall be immediately due
and payable, without notice or demand, upon the occurrence at any time of any
of the following events of default:
1. Payment Default. Any default in the payment of principal or
interest when due hereunder which default is not cured within ten (10) calendar
days;
2. Inability to Pay Debts. The admission by Debtor of its
inability to pay its debts as they mature, or an assignment for the benefit of
the creditors of Debtor;
3. Bankruptcy. The commencement of proceedings in bankruptcy, or
for the reorganization of Debtor, or for the readjustment of any of the debts
of Debtor under the Federal
<PAGE> 2
Bankruptcy Code, as amended, or any part thereof, or under any other laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
by Debtor or against Debtor, which shall not be discharged within thirty (30)
days of their commencement;
4. Appointment of Receiver. The appointment of a receiver,
trustee or custodian for Debtor, or for any substantial part of the assets of
Debtor, or the institution of proceedings for the dissolution or the full or
partial liquidation of Debtor, and such receiver or trustee shall not be
discharged within thirty (30) days of his or its appointment, or such
proceedings shall not be discharged within thirty (30) days of their
commencement, or the discontinuance of the business or the material change in
the nature of the business of Debtor;
5. Dissolution. The dissolution of the Debtor.
All payments shall be made hereunder by Debtor without reduction or
offset for any reason.
If this Note is not paid when due, whether at maturity or by
acceleration, the undersigned promises to pay all costs of collection
including, but not limited to, reasonable attorneys' fees and court costs
incurred by the holder hereof on account of such collection, whether or not
suit is filed hereon.
The undersigned may, at any time and from time to time, without
penalty, make prepayments in whole or in part which will be applied to the
final payment of principal under this Note, or the principal components of the
remaining payments under this Note in the order or inverse order of maturity,
all as the holder hereof may determine.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind, are hereby waived.
No single or partial exercise of any power hereunder shall preclude the
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of the holder hereof in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this Note.
This Note shall be governed and controlled by the laws of the State of
Florida.
This Note and all rights hereunder may be assigned by Lender without
written notice to Debtor, but may not be assigned by Debtor without prior
written consent of Lender.
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<PAGE> 3
The obligations of Debtor hereunder are secured by the security
interests granted to Lender in the Security Agreement.
DMX INTEGRATION, INC.
By: _______________________________
Its: _______________________________
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<PAGE> 1
EXHIBIT 10.74
GUARANTY
To induce ComTel Metals, Inc. ("ComTel") to enter into that certain
Agreement for Purchase and Sale of Assets with DMX Integration, Inc. ("DMX")
dated June __, 1995, (the "Asset Purchase Agreement") and for other good and
valuable consideration, the receipt and sufficiency for which is hereby
acknowledged, Datamax Corporation ("Datamax") hereby unconditionally guarantees
to ComTel the prompt payment and performance according to their terms of all of
DMX's Obligations (as herein defined) to ComTel, and does agree that if the
Obligations, or any of them, are not so paid or performed to ComTel, Datamax
will immediately do so. All capitalized terms not defined herein shall have
the meanings assigned to them in the Asset Purchase Agreement.
The term "Obligations" as used herein means all(i) obligations of DMX
to ComTel under the Note or Security Agreement, and (ii) renewals, extensions
or modification, in whole or in part, of any of the foregoing. Datamax hereby
agrees that its obligations under this Guaranty shall be unconditional,
irrespective of the validity, regularity or enforceability of the Asset
Purchase Agreement with respect to DMX.
The following shall be events of default causing all of the
Obligations as between DMX and ComTel to be immediately due and payable,
without notice or demand of any kind:
(a) in the event any proceeding is instituted by or against DMX
under the Federal Bankruptcy Code or any other bankruptcy, insolvency, or
moratorium law; and
(b) dissolution of Datamax.
Failure by ComTel to give the undersigned (I) notice of the creation
of any of the Obligations, (ii) notice of non-payment or default by DMX under
any of the Obligations, (iii) notice of presentment, (iv) demand, (v) notice of
dishonor, (vi) protest, (vii) notice of acceptance of this Guaranty or of the
creation or extension or renewal of any Obligation, or (vii) any other notice
whatsoever shall not affect or impair, or release Datamax from its liability
under this Guaranty.
In the event any claim hereunder is referred to an attorney at law for
collection, Datamax shall be liable to ComTel for all costs of collection
including reasonable attorneys' fees.
The liability of DMX hereunder is primary, and if the Obligations, or
any of them, are not promptly paid or performed by DMX when due, ComTel may
proceed against DMX hereunder without first proceeding against Datamax or any
collateral securing any of the Obligations.
This Guaranty is subject to all the terms, conditions, agreements, and
stipulations contained in any agreements, notes,
<PAGE> 2
instruments, or other documents evidencing the Obligations, and DMX agrees that
the terms, conditions, and provisions of such agreements, notes, instruments,
or other documents shall, simultaneously with their execution, become a part of
this Guaranty.
This Guaranty is binding upon the successors and assigns of DMX.
This Guaranty shall be governed by and construed and in force
according to the laws of the State of Florida.
SIGNED, SEALED AND DELIVERED this ____ day of June, 1995.
DATAMAX CORPORATION
By: ________________________________
Its authorized representative
2
<PAGE> 1
EXHIBIT 10.75
EMPLOYMENT AGREEMENT
This Agreement is effective as of the 28th day
of June, 1995, by and between John Tattersall (hereinafter
referred to as "Employee"), and Decora Incorporated (dba
Decora Manufacturing), a Delaware Corporation, (hereinafter
referred to as "Employer").
R E C I T A L S
WHEREAS, Employer desires to engage Employee to
perform services on its behalf on a full time basis as an
employee under the terms and conditions of this Agreement
which, except as otherwise stated herein, shall supersede any
other understandings and agreements between the parties
concerning employment;
NOW, THEREFORE, it is mutually agreed as follows:
1. INCORPORATION OF RECITALS: The parties hereby
incorporate by this reference the recitals set forth above.
2. EMPLOYMENT: Employer hereby employs Employee and
Employee hereby accepts employment on the terms and conditions
of this Agreement.
3. SERVICES:
(a) Employee shall have the title of Executive
Vice President of Decora Industries, Inc. ("DII"), the parent
of Employer and Chief Operating Officer of Employer, which
office shall include, without limitation:
Head of management of production,
engineering, materials, quality, marketing,
sales, research and development for Employer;
and
Within one year of this date, the Board of Directors will
review with you the promotion to the position of President of
DII. At that time, consideration will be given to nominating
Employee to the Board of Directors of DII.
(b) Employee agrees that he will at all times
faithfully, industriously and to the best of his ability,
experience and talents, perform to the reasonable satisfaction
of Employer all of the duties that may be assigned to him
hereunder and shall devote such time to the performance of
these duties as may be reasonably necessary therefor.
<PAGE> 2
(c) During the term of the Agreement,
Employee shall be available on a full-time basis, to perform
the duties assigned him, in accordance with the prevailing
policies of Employer. Expenditures of reasonable amounts of
time for personal, business, charitable and other activities
shall not be deemed a breach of this Agreement, provided that
such activities do not interfere with the services required to be
rendered to Employer hereunder.
4. EMPLOYER'S AUTHORITY: Employee agrees to observe
and comply with Employer's rules and regulations as adopted
by Employer's board of directors regarding performance of his
duties and to carry out and to perform orders, directions,
and policies stated by Employer to him periodically, either
orally or in writing.
5. TERM: The term of this Agreement shall be
three (3) years (the "Term"). The term of this Agreement
shall, however, in any event, be subject to prior termination
as provided hereinbelow in paragraph 10. Employer must give
Employee written notice six months prior to the end of the
Term if it does not intend to renew the Agreement.
6. COMPENSATION:
(a) Salary. Employer agrees to pay to
Employee a base salary of $130,000 for the first six months of
the Term. Employee's salary shall be reviewed at that time.
Such salary shall be payable in installments in accordance
with the general practice of Employer.
(b) Bonus. There shall be an annual cash
bonus of up to 50% of Employee's annual salary to be paid at
the end of each fiscal year in accordance with guidelines
established by the Compensation Committee within 90 days of
the date hereof. Such bonus will be based on meeting the
objectives set forth in the 1996 Operating Plan.
7. TAXES:
(a) Deductions. All compensation shall be
subject to the customary withholding tax and other
employment taxes as required with respect to compensation
paid by a corporation to an employee.
8. EMPLOYEE BENEFITS: In addition to the
compensation set forth above, Employer agrees to grant
Employee the following benefits for the Term:
(a) An annual vacation with pay of three (3)
weeks. In the event that Employee does not take his allotted
time for vacation, he will not be compensated in lieu of
vacation time. Employee may, however, carry such vacation
time for each year over to the successive year if he so chooses;
however, not to exceed two (2) years. Vacation time shall be
fully paid at the normal rate of compensation;
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<PAGE> 3
(b) Sick leave and personal leave with pay in
accord with the prevailing policies of Employer;
(c) Health and medical benefit insurance as
granted by Employer to employees performing similar services,
except that any waiting period which Employer can waive shall
be waived;
(d) Any other benefits not specifically set
forth herein as may be granted by Employer, in its sole and
absolute discretion, including without limitation, its 401(k)
plan, life insurance and pension plan to employees performing
similar services; and
(e) An automobile allowance of $500 per month.
9. BUSINESS EXPENSES: Employee may incur,
on behalf of and for the convenience of Employer, certain
reasonable business expenses including travel and
entertainment and other miscellaneous expenses. Expenses of
Employee incurred on behalf of Employer will be reimbursed
by Employer and it shall be the responsibility of Employee to
retain vouchers and other proof of proper expenditures. The
decision as to whether an expense incurred by Employee is for
the benefit of Employer shall be in the sole discretion of
Employer, and all expenses not deemed to be incurred for the
benefit of Employer shall be paid by Employee.
10. TERMINATION:
(a) This Agreement shall terminate at the
option of the Employer:
i) Immediately upon the death or
permanent disability of Employee, "permanent disability"
being defined as the inability of Employee to perform his
duties as required hereunder as a result of physical or mental
illness for a continuous period in excess of sixty (60) days.
ii) At the election of the Employer,
immediately upon the dismissal of Employee by the Employer
for cause. "Cause", as used in this section, shall include,
without limitation, any one or more of the following:
(1) The breach by Employee of
any material term or condition of this Agreement after written
notice by Employer and failure of Employee to satisfactorily
cure the breach within 90 days;
(2) The refusal or failure to
perform duties assigned in accordance with the terms of this
Agreement, if such refusal shall continue for a 90 day period
after written instructions to perform such duties have been
given under the authority of the Board of Directors of the
Employer.
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<PAGE> 4
(3) Engaging in one or more
acts constituting a felony;
(4) Engaging in one or more
acts involving fraud or serious moral turpitude;
(5) Misappropriating
Employer's assets or engaging in gross misconduct materially
injurious to the Employer or its affiliates or subsidiaries; or
(6) Breach of any Trade
Secrets and Confidentiality Agreement with Employer,
including without limitation the agreement dated June 28,
1995.
(b) The compensation paid upon termination
shall be determined as follows:
i) In the event of termination of this
Agreement prior to completion of the Term as set forth in
Paragraph 10(a)(i) or 10(a)(ii), Employee shall be entitled to
receive only accrued, but unpaid compensation up to the date
of termination, including a pro rata share of any bonus to
date of termination and any vested options. Any unvested
options at the date of termination shall terminate.
ii) In the event of any other
termination of the Agreement prior to the completion of the
Term, Employee shall be entitled to receive his compensation
and benefits as set forth in this Agreement (including a pro-
rata share of any bonus to date of termination and any vested
options) for the greater of twelve months from the date of
termination or the remainder of the Term. Any unvested
options at the date of termination shall terminate.
Employer shall have the option of paying such amount in
accordance with its regular payroll practices.
11. STOCK OPTIONS: Employer will grant to
Employee as of the date hereof, an option to purchase up to
200,000 shares of common stock of DII pursuant to the form
of Stock Option Agreement attached as Exhibit A. The option
shall be exercisable at an exercise price equal to the fair
market value of a share of common stock of DII as of the date
hereof. Such options shall vest as follows: 50,000 shall vest
as of the date hereof; 50,000 options shall vest on each of the
next three successive 12 month anniversary dates. Each
option shall be exercisable for three years following vesting.
12. RESTRICTION UPON STOCK GRANTED BY
EMPLOYER: All shares acquired by Employee pursuant to
Paragraph 11 above have not been and will not be registered
pursuant to the Securities Act of 1933, as amended, and
Employee shall, concurrently with the acquisition of any such
shares, provide his written certification in form and substance
satisfactory to Employee that he intends to acquire such shares
for investment and without any intent to resell or distribute
any such shares. In addition, upon the issuance of certificates
representing any and all such shares, each such certificate
shall have endorsed hereon such legend or deemed necessary or
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<PAGE> 5
appropriate by Employee's legal counsel to comply with
applicable federal and state securities laws.
13. NOTICE: All notices and demands of every
kind shall be personally delivered or sent by first class mail to
the parties at their last known address or at such other
addresses as either party may designate in writing. Any such
notice or demand shall be effective immediately upon personal
delivery or five days after deposit in the United States mail, as
the case may be.
14. ARBITRATION: Any claim arising out of this
Employment Agreement shall be settled by binding arbitration
in Albany, New York in accordance with the Commercial
Rules of the American Arbitration Association. The arbitrator
shall be an active member of the New York bar. The
arbitrator shall prepare an award in writing which shall
include factual findings and any legal conclusions on which
the decision is based. Judgement upon an award so rendered
may be entered in any court having jurisdiction.
15. REPRESENTATION: Employee acknowledges
that he has been advised to retain independent counsel and
that he has not been represented by Miller & Holguin.
16. MISCELLANEOUS:
(a) This Agreement shall be governed and
construed in accordance with the substantive laws of the State
of New York.
(b) No change in the terms of this
Agreement shall be effective unless made in writing and signed
by the Employee and a duly authorized representative of
Employer.
(c) A waiver of any term or condition of this
Agreement shall not be construed as a general waiver by
Employer and Employer shall be free to reinstate any such
term or condition with or without notice to the other party.
(d) Employee's rights and obligations under
this Agreement are personal and not assignable.
(e) This Agreement contains the entire
Agreement and understanding between the parties and
supersedes all other agreements or understandings between the
parties concerning employment, whether oral or written.
Neither party has relied on any representations other than
those as contained herein.
(f) This Agreement shall be binding on and
inure to the benefit of the heirs, personal representatives,
successors, and assigns of the parties; subject, however, to the
restrictions on assignment contained herein.
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<PAGE> 6
(g) The paragraph headings used in this
Agreement are for reference and convenience only, and shall
not in any way limit or amplify the terms and provisions
hereof, nor enter into the interpretation of this Agreement.
IN WITNESS WHEREOF, Employer has caused this
Agreement to be signed by their duly authorized officers and
Employee has executed this Agreement effective as of the day
and year first above written.
EMPLOYER: EMPLOYEE:
DECORA MANUFACTURING
By:
------------------ -----------------
JOHN TATTERSALL
Its:
----------------
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<PAGE> 1
EXHIBIT 10.76
OPTION AGREEMENT
THIS AGREEMENT is made effective as of June 28,
1995 by and between John Tattersall (hereinafter referred to as
"Optionee"), and Decora Industries, Inc., a Delaware
corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee is now assuming the position of
Chief Operating Officer of Decora Manufacturing pursuant to an
Employment Agreement as of the date hereof; and
WHEREAS, to compensate Optionee for his services to
Optionor, Optionor desires to grant to Optionee and Optionee is
desirous of acquiring an option to purchase shares of the
common stock of Optionor, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby
incorporate by this reference the recitals set forth above.
2. Grant of Option. Subject to the terms and
conditions hereinafter set forth, Optionor hereby gives and grants
to Optionee the right and option to purchase heretofore
authorized but unissued common shares of Optionor at such time
and for the purchase price specified below.
A. Optionor hereby gives and grants to
Optionee, an option to purchase up to 200,000 shares of the
common stock of Optionor. The option shall be exercisable at an
exercise price of $1.03 (the fair market value of a share of
common stock as of the date hereof).
B. Such options shall vest as follows: 50,000
shall vest as of the date hereof, and 50,000 options shall vest on
each of the next three successive anniversary dates.
C. Each option shall be exercisable for three
years following vesting. Notwithstanding the foregoing, upon
termination of the Employment Agreement no further options
shall vest and Optionee shall have a maximum of twelve months
to exercise the vested options hereunder.
3. Vesting on Change in Control. Upon a Change in
Control of Optionor, all of Optionee's options hereunder shall
vest. Change in Control shall be defined as a change in control
of the board of directors of Optionor.
<PAGE> 2
4. Exercise of Option. Optionee may exercise any
option granted hereunder by notifying Optionor in writing of its
intention to exercise such option. A closing date shall then be
agreed to in good faith no later than 30 days after the notice, at
which time Optionee shall pay the purchase price of the Shares
being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all
or any part of the Shares subject to options granted hereby.
5. Representations. Optionor represents and warrants
to Optionee that Optionee, upon proper exercise, shall receive
good and marketable title to the shares of Optionor underlying
the options being granted hereby, free of all pledges, liens and
encumbrances, except as stated in paragraph 5.
6. Representations and Warranties of Optionee.
Optionee hereby represents and warrants that:
A. The options granted hereby and the Shares
which will be purchased by and delivered to
Optionee upon exercise of such options are
being acquired by Optionee for his own
account and not with a view to resale or
other disposition thereof.
B. Optionee will not sell, transfer, or make
any other disposition of the shares to be
purchased and delivered to Optionee
hereunder upon the exercise of such option
unless and until (a) such option or shares,
as applicable, are included in a registration
statement or a post-effective amendment
under the Securities Act which has been
filed by the Optionor and declared effective
by the Securities and Exchange
Commission (the "SEC"), or (b) in the
opinion of counsel for the Optionor, no
such registration statement or post-effective
amendment is required, or (c) the SEC has
first issued a "no action" letter regarding
any such proposed disposition of any option
or the shares.
7. Federal and State Securities Law Requirements.
The obligation of the Optionor to deliver and transfer the shares
to the Optionee upon any exercise of any option shall be subject
to the following:
A. Optionor may require Optionee, as an
additional condition of its obligation to
deliver the shares upon exercise of any
option hereunder, to make any
representations and warranties (including
without limit those set forth in Paragraph 5
hereof) with respect to the shares as may,
in the opinion of counsel to Optionor, be
required to ensure compliance with the
Securities Act, the securities laws of any
state, or any other applicable law,
regulation, or rule of any governmental
agency.
B. Each certificate representing the shares
issued pursuant to this Agreement shall
bear whatever legends are required by
federal or state law or by any
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<PAGE> 3
governmental agency. In particular, unless
an appropriate registration statement is filed
pursuant to the Securities Act with respect
to the shares, each certificate representing
such shares shall be endorsed on its face
with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR
TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT
OR THERE EXISTS AN EXEMPTION
FROM REGISTRATION UNDER SAID
ACT OR THE RULES AND
REGULATIONS THEREUNDER
EVIDENCED BY A NO-ACTION LETTER
OR AN OPINION OF COUNSEL TO THE
ISSUER OR TO THE HOLDER HEREOF
REASONABLY SATISFACTORY TO THE
ISSUER.
8. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend
declared by Optionor, unless and until an
option is exercised; and
B. Shall not be entitled to any voting rights by
virtue of an option; and
C. Acknowledges that the options granted
hereby are personal to Optionee and that
Optionee may not sell, assign, transfer or
otherwise dispose of such options to any
other person.
9. Anti-Dilution. If prior to the exercise of any
option granted hereunder Optionor shall have effected one or
more stock split-ups, stock dividends, or other increases or
reductions of the number of Shares of its common stock
outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock
subject to the options hereby granted shall (a) if a net increase
shall have been effected in the number of outstanding shares of
Optionor's common stock, be proportionately increased and the
cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the
number of outstanding Shares of Optionor's common stock, be
proportionately reduced and the cash consideration payable per
Share be proportionately increased.
10. Notice and Opportunity to Cure Default. In the
event of a perceived default of the provisions of this agreement,
Optionor agrees to provide Optionee and his counsel written
notice of any default and Optionor shall have 10 days from
receipt of said notice to cure the stated default.
11. Agreement to Perform Necessary Acts. The parties
hereto agree to cooperate fully with one another in executing all
documents, certificates, notices, filings and the like and
performing all acts reasonably necessary to carry out the intent
of this agreement.
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<PAGE> 4
12. Assignment and Transfer. No option granted
hereby may be assigned by Optionee without the prior written
consent of Optionor.
13. Amendments. This agreement may not be
modified, amended or changed except by an instrument in writing
signed by the parties hereto.
14. ARBITRATION: Any claim arising out of this
Agreement shall be settled by binding arbitration in Albany, New
York in accordance with the Commercial Rules of the American
Arbitration Association. The arbitrator shall be an active
member of the New York bar. The arbitrator shall prepare an
award in writing which shall include factual findings and any
legal conclusions on which the decision is based. Judgement
upon an award so rendered may be entered in any court having
jurisdiction.
IN WITNESS WHEREOF, the parties have executed this
option Agreement as of the day and year first above written.
OPTIONOR OPTIONEE
DECORA INDUSTRIES, INC.
By:
---------------------
Its:
-------------------- ----------------------
JOHN TATTERSALL
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<PAGE> 1
EXHIBIT 10.77
OPTION AGREEMENT
THIS AGREEMENT is made effective as of July 6, 1995, by and between
Gabriel Thomas (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as a director, and assisting in identifying Friedola
Gebr. Holzapfel GmbH & Co. KG as an exclusive distributor of Contact(R) in parts
of Europe and Scandinavia for Optionor's Decora Manfacturing subsidiary which is
anticipated to be a significant relationship for Decora Manufacturing; and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From January 7, 1995, and up until and including January 6,
1998, Optionee shall have the right and option to purchase, at $1.25 per share
(market price for seven days prior to the date of this Agreement), and Optionor
shall have the obligation to issue to Optionee, 150,000 shares of the authorized
but unissued common shares of Optionor.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of such
options are being acquired by Optionee for his own account and
not with a view to resale or other disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased and
delivered to Optionee hereunder upon the exercise of such
option unless and until (a) such option or shares, as
applicable, are included in a registration statement or a
post-effective amendment under the Securities Act which has
been filed by the Optionor and declared effective by the
Securities and Exchange Commission (the "SEC"), or (b) in the
opinion of counsel for the Optionor, no such registration
statement or post-effective amendment is required, or (c) the
SEC has first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional condition of
its obligation to deliver the shares upon exercise of any
option hereunder, to make any representations and warranties
(including without limit those set forth in Paragraph 5
hereof) with respect to the shares as may, in the opinion of
counsel to Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any other
applicable law, regulation, or rule of any governmental
agency.
B. Each certificate representing the shares issued pursuant to
this Agreement shall bear whatever legends are required by
federal or state law or by any governmental agency. In
particular, unless an appropriate registration statement is
filed pursuant to the Securities Act with respect to the
shares, each certificate representing such shares shall be
endorsed on its face with the following legend or its
equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES
MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE BEEN REGISTERED
UNDER SAID ACT OR THERE EXISTS AN EXEMPTION FROM REGISTRATION
UNDER
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<PAGE> 3
SAID ACT OR THE RULES AND REGULATIONS THEREUNDER EVIDENCED BY
A NO-ACTION LETTER OR AN OPINION OF COUNSEL TO THE ISSUER OR
TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared by
Optionor, unless and until an option is exercised; and
B. Shall not be entitled to any voting rights by virtue of an
option; and
C. Acknowledges that the options granted hereby are personal to
Optionee and that Optionee may not sell, assign, transfer or
otherwise dispose of such options to any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Piggyback Registration Rights.
A. The Optionor will permit any option shares subject to this
agreement to be included, at the request of the Optionee in any
registration of securities of the Optionor (other than shares of
Common Stock pursuant to the Optionor's stock option plan or
stock purchase plan) under a registration statement filed by the
Optionor under the Securities Act. The Optionor shall provide
written notice to the Optionee at least 30 days prior to the
filing of any such registration statement sent by registered
mail to the address of record of the Optionee. If Optionee shall
deliver a written request to the Optionor within ten (10)
business days after the mailing of such notice, setting forth
the number of securities which he intends to sell in the public
offering (the "Registered Securities"), and requesting inclusion
of such Registered Securities therein, the Optionor agrees to
include the Registered Securities in such registration statement
and related underwriting agreements (if
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<PAGE> 4
any) or if the Optionor eligible to use Form S-3 permit Optionee
to utilize a selling shareholders Registration Statement on Form
S-3. Notwithstanding the above, the Optionee may only have
option shares subject to this agreement so registered one time.
B. The parties hereto agree that if the offering is underwritten,
the Registered Securities shall be for purposes of the preceding
sentence underwritten by the same underwriter or underwriters on
terms no less favorable than those applicable to the shares
offered by the Optionor or other stockholders pursuant to such
registration statement, and agree, at the request of the
Optionor or such other stockholders, to join with the Optionor
or such other stockholders in executing appropriate underwriting
agreements with such underwriter or underwriters and to execute
appropriate powers of attorney and custodian agreements in forms
acceptable to the underwriter or underwriters, which agreements
shall not place any restrictions upon the sale or transfer of
the Registered Securities not otherwise placed on all other
shareholders whose shares are registered in such registration
statement. Optionee agrees that if, in spite of the best efforts
of the Optionor (which the Optionor agrees to use), the
inclusion of all of the Registered Securities which he may
desire to include in any such registration statement shall not
be acceptable to the managing underwriter or underwriters of the
offering (acting reasonably and in good faith), some or all of
his Registered Securities may be excluded or withdrawn from such
registration statement in accordance with the following
provision: Optionee shall have the right to include in such
registration statement such number (but only such number) of
shares, as applicable, as shall bear the same relationship to
the total number of Units, Warrants, or shares, as applicable,
which the managing underwriter or underwriters will permit to be
included in such registration statement by all holders of
securities who wish to register securities in such registration
statement.
C. Optionor shall pay all expenses associated with filing and
causing to become effective any registration statement and with
maintaining its effectiveness excepting only (i) the
underwriting discounts and commissions incurred directly on the
sale of any of Optionee's Registered Securities included
therein, and (ii) legal expense individually incurred by
Optionee, said discounts,
-4-
<PAGE> 5
commissions and legal expenses with respect to the sale of
Optionee's shares to be borne by Optionee.
10. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
11. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
12. Assignment and Transfer. No option granted hereby may be assigned
by Optionee without the prior written consent of Optionor.
13. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
14. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE OPTIONOR
Decora Industries, Inc.
By: _________________________
Its: ________________________ ______________________
GABRIEL THOMAS
-5-
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 29, 1994 relating to
the financial statements of Decora Industries, Inc. which appears in such
Prospectus. We also consent to the references to us under the headings
"Selected Financial Data" and "Experts" appearing on pages 4 and 9 in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
Syracuse, New York
June 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 309
<SECURITIES> 0
<RECEIVABLES> 3,130
<ALLOWANCES> (189)
<INVENTORY> 4,874
<CURRENT-ASSETS> 8,627
<PP&E> 12,624
<DEPRECIATION> (4,978)
<TOTAL-ASSETS> 31,021
<CURRENT-LIABILITIES> 8,389
<BONDS> 15,006
<COMMON> 307
0
0
<OTHER-SE> 1,425
<TOTAL-LIABILITY-AND-EQUITY> 31,021
<SALES> 40,414
<TOTAL-REVENUES> 40,414
<CGS> 28,798
<TOTAL-COSTS> 28,798
<OTHER-EXPENSES> 7,721
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 2,658
<INCOME-PRETAX> 1,237
<INCOME-TAX> (1,171)
<INCOME-CONTINUING> 2,408
<DISCONTINUED> (1,297)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,111
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
