<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________________
Commission file number: 0-13649
COOPER LIFE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2563513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 BROADWAY, NEW YORK, NEW YORK 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 791-5362
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
As of June 8, 1995, there were 2,111,695 outstanding shares of the
issuers Common Stock, $.10 par value.
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1995 and October 31, 1994 3
Consolidated Statements of Operations
For The Three and Six Months Ended
April 30, 1995 and 1994 4
Condensed Statements of Consolidated
Cash Flows For The Six Months Ended
April 30, 1995 and 1994 5
Notes to Consolidated Condensed
Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote
of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
Index of Exhibits
</TABLE>
2
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
---------- -------
ASSETS
<S> <C> <C>
Cash and cash equivalents .................... $ 1,419 $ 444
Marketable Securities - The Cooper
Companies, Inc. common stock ................ 16,548 19,602
Investment in Unistar Gaming Corp. ........... 5,000 --
Due from Second Advantage .................... 382 --
Prepaid expenses and other ................... 80 53
Property and equipment, net .................. 38 45
Net assets of discontinued operations ........ 3 22,438
-------- --------
$ 23,470 $ 42,582
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings - warehouse lines of credit .. -- $ 18,034
other ...................... 1,500 1,500
Notes payable - affiliates ................... 650 2,300
Accounts payable and other accrued liabilities 1,293 1,329
-------- --------
3,443 23,163
Stockholders' Equity
Preferred stock - $.10 par value: 6,000,000
shares authorized: none issued ............. -- --
Common stock - $.10 par value: 6,000,000
shares authorized: 2,516,095 shares issued:
2,111,695 shares and 2,109,695 shares
outstanding at April 30, 1995 and
October 31, 1994, respectively ............. 251 251
Additional paid-in capital ................... 78,283 78,283
Unrealized gain on marketable securities ..... 4,293 5,783
Accumulated deficit .......................... (60,221) (62,293)
Less: Common stock in treasury - at cost;
404,400 shares and 406,400 shares at
April 30, 1995 and October 31, 1994,
respectively ................................ (2,104) (2,130)
Minimum pension liability adjustment ......... (475) (475)
-------- --------
Total Stockholders' Equity ................... 20,027 19,419
-------- --------
$ 23,470 $ 42,582
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Gains on sales of mortgage
loans and servicing rights ........... $ -- $ 2,077 $ -- $ 5,039
Loan servicing revenue, net of
amortization of purchased
servicing rights ..................... -- 422 -- 767
Mortgage interest income .............. -- 782 -- 2,335
Unrealized gain (loss) on
marketable securities ................ -- 3,334 -- 2,728
Loss on sales of marketable securities (188) -- (188) --
Interest and other income ............. 3 192 15 344
-------- -------- -------- --------
(185) 6,807 (173) 11,213
-------- -------- -------- --------
Expenses
General and administrative ............ 147 4,587 503 9,909
Mortgage interest ..................... -- 584 -- 1,828
Other interest ........................ 44 73 82 145
-------- -------- -------- --------
Total Expenses ............... 191 5,244 585 11,882
-------- -------- -------- --------
Income (loss) from continuing
operations before income taxes
and minority interest ................ (376) 1,563 (758) (669)
Provision for income taxes ............ 1 -- 1 2
-------- -------- -------- --------
(377) 1,563 (759) (671)
Minority interest ..................... -- 710 -- 1,336
-------- -------- -------- --------
Income (loss) from continuing
operations ........................... (377) 2,273 (759) 665
Income (loss) from sale of discontinued
operations - net of taxes ............ (819) -- 2,831 --
-------- -------- -------- --------
Net income (loss) ..................... $ (1,196) $ 2,273 $ 2,072 $ 665
======== ======== ======== ========
Net income (loss) per share
Continuing operations ................ $ (.18) $ 1.13 $ (.34) $ .33
Discontinued operations .............. $ (.39) $ -- $ 1.27 $ --
-------- -------- -------- --------
Net income (loss) per share ........... $ (.57) $ 1.13 $ .93 $ .33
======== ======== ======== ========
Average number of shares outstanding .. 2,112 2,014 2,224 2,023
======== ======== ======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
1995 1994
--------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 2,072 $ 665
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on marketable securities ..................... 188 --
Unrealized gain on marketable securities .......... -- (2,728)
Depreciation and amortization ..................... 7 587
Minority interest ................................. -- (1,336)
Excess servicing fee gains ........................ -- (7)
Changes in assets and liabilities:
Decrease in mortgage loans held for sale ......... -- 84,609
(Increase) decrease in accrued income
and receivables ................................. (382) 488
(Increase) decrease in prepaid expenses and other (27) 25
Decrease in accounts payable and other
accrued liabilities ............................. (36) (1,862)
--------- ---------
Net cash provided by continuing
operating activities ............................. 1,822 80,441
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ........................ -- (224)
Acquisition of purchased servicing rights ................. -- (107)
Investment in Unistar Gaming Corp. ........................ (3,624) --
Sale of discontinued operations ........................... 22,435 --
Issuance of common stock from treasury .................... 26 --
--------- ---------
Net cash provided by (used in) investing activities 18,837 (331)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) notes payable - affiliate .... (1,650) 750
Proceeds from other bank borrowing ........................ -- 500
Decrease in line of credit borrowing ...................... (18,034) (61,603)
Proceeds from servicing secured debt ...................... -- 4,000
Decrease in drafts payable for mortgage loans ............. -- (23,551)
--------- ---------
Net cash used in financing activities ............. (19,684) (79,904)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 975 206
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD ............ 444 1,559
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD .................. $ 1,419 $ 1,765
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest ................................. $ 82 $ 1,971
Cash used to pay taxes .................................... $ 1 $ 2
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1995 AND 1994
NOTE 1. - BUSINESS OF THE COMPANY
Cooper Life Sciences, Inc., a Delaware corporation (the "Company"), as
a result of the sale of substantially all of the assets of its mortgage banking
business on November 30, 1994, is not presently engaged in any business
operations.
On February 28, 1995, Unistar Gaming Corp. ("UGC") acquired Unistar
Entertainment, Inc., a privately held Colorado corporation ("Unistar"). Unistar
holds an exclusive contract with the Coeur d'Alene Indian Tribe in Idaho to
develop and manage what would be the first national lottery in the United
States. As a result of the acquisition, approximately 27.5 percent of the
outstanding Common Stock of UGC is now owned by the Company, and approximately
72.5 percent of the outstanding Common Stock of UGC is now owned by the former
stockholders of Unistar. The shares of UGC Common Stock which are owned by the
Company were purchased for $5 million comprised primarily of cash, portfolio
securities and a note payable.
UGC and Unistar are presently in various stages of discussions with
several potential vendors with respect to the development and financing of the
computer/telecommunications system upon which the lottery will be based. It is
the present intention of the Company that upon the completion of the Securities
and Exchange Commission ("SEC") approval process, substantially all of the
shares of Common Stock of UGC which are owned by the Company will be
distributed, on a one for one basis, to the Company's stockholders of record on
the record date for the distribution (which has not yet been determined). The
distribution would be in the form of a taxable spin-off. At that time, the
shares of UGC which had been owned by the Company would be owned by its
individual stockholders. Thereafter, UGC (which owns all of Unistar) would carry
on its business as an independent public corporation. However, it is not
anticipated that final SEC approval of the distribution will be requested until
satisfactory arrangements have been made with respect to the development and
financing of the tele-lottery system. The Company has been granted the right,
for a six year period, to designate one-third of the members of the Board of
Directors of UGC.
The consolidated financial statements include the accounts of Cooper
Life Sciences, Inc. and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Certain amounts in
the 1994 financial statements have been reclassified to conform to the current
year's presentation.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary to present fairly the Company's consolidated financial
position as of April 30, 1995 and October 31, 1994 and the consolidated results
of its operations for the three and six month periods ended April 30, 1995 and
1994, and its consolidated cash flows for the six month periods ended April 30,
1995 and 1994.
NOTE 2. - SIGNIFICANT ACCOUNTING POLICIES
Net income per share is determined using the weighted average number of
common and common equivalent shares outstanding during the respective periods,
including the incremental shares from the dilutive effects of warrants and stock
options. Common stock equivalents have not been included in the determination of
net loss per share as they are antidilutive.
6
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 1995 AND 1994
On October 31, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). In accordance with SFAS No. 115, Company
management determines the appropriate classification of securities at the time
of purchase and reevaluates such designation as of each balance sheet date.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in a separate component of shareholders'
equity. The cost of securities sold is based on the average cost method. At
April 30, 1995, the Company considers all of its holdings of The Cooper
Companies, Inc. common stock (the "TCC Common Stock") to be available-for-sale
securities. Changes in the valuation allowance resulting from unrealized gains
or losses on the TCC Common Stock were recorded in the statement of operations
prior to the adoption of SFAS No. 115 on October 31, 1994. At April 30, 1995,
the Company owned 6,967,600 shares of TCC Common Stock.
The Company owns approximately 20% of the outstanding TCC Common Stock
and intends to liquidate its holdings of TCC Common Stock in an orderly fashion
which should result in a holding of less than 20% of the outstanding TCC Common
Stock. Accordingly, management believes that fair value is the most meaningful
method of valuing this investment.
NOTE 3. - DISCONTINUED OPERATIONS
On October 31, 1994, management of the Company formulated a plan to
discontinue its mortgage banking business. Accordingly the entire mortgage
banking operations of the Company's majority owned subsidiary, Second Advantage
Mortgage Corp. ("Second Advantage") and its wholly owned subsidiary, Entrust
Financial Corporation ("Entrust"), have been considered a discontinued operation
as of October 31, 1994.
On November 30, 1994, pursuant to an Asset Purchase Agreement dated as
of November 23, 1994 by and between The Long Island Savings Bank, FSB ("LISB")
and Entrust (the "Asset Purchase Agreement"), Entrust sold to LISB its entire
origination business, including mortgage loans held for sale and mortgage loans
in process, a substantial portion of its rights to service loans for others, and
a substantial portion of its fixed assets for approximately $31 million in cash.
Approximately $750,000 of the purchase price will be retained in an interest
bearing escrow account through 1996 as security for the performance or payment
of indemnification obligations of Entrust to LISB, if any, (the "LISB Escrow").
Pursuant to a Redemption Agreement dated as of April 19, 1995 (but
effective as of March 31, 1995), by and among Second Advantage and all of its
stockholders, including the Company, (the "Redemption Agreement"), Second
Advantage purchased all of its outstanding capital stock held by the Company for
a cash purchase price equal to (a) approximately $3,879,000 plus (b) certain
contingent considerations consisting primarily of 50% of the first $763,800 to
be received from the LISB Escrow in 1995 and 1996.
NOTE 4. - BORROWINGS
In August 1993, the Company borrowed $1,500,000 from a bank the
proceeds of which were utilized in connection with the acquisition of Second
Advantage and is payable on August 29, 1995. The Company also maintains a
$500,000 revolving line of credit facility with the bank which expires on August
29, 1995. At April 30, 1995, there were no borrowings against the line of credit
facility. The loan and line of credit facility bear interest at the bank's prime
rate (9.00% at April 30, 1995) plus 1.5%. The loan and line of credit facility
are collateralized by 1,500,000 shares of TCC Common Stock owned by the Company.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
On October 31, 1994, management of the Company formulated a plan to
discontinue its mortgage origination and servicing business which was acquired
in August 1993. On November 30, 1994 the Company sold the majority of such
business to The Long Island Savings Bank, FSB ("LISB"), and effective as of
March 31, 1995, the Company sold its remaining interest in such business (see
Note 3 of Notes to Consolidated Condensed Financial Statements). Accordingly,
the results of the entire mortgage banking operations of Entrust have been
considered a discontinued operation for the three and six months ended April 30,
1995. References to the "Company" herein shall be deemed to refer to the Company
and its consolidated subsidiaries unless the context otherwise requires.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1995 COMPARED
TO THE THREE AND SIX MONTHS ENDED APRIL 30, 1994
DISCONTINUED OPERATIONS. For the six months ended April 30, 1995, net
income from discontinued operations was approximately $2,831,000 and includes
the gain on the sale of the majority of the business to LISB in November 1994
offset by the loss of approximately $819,000 on the disposition by the Company
of its remaining interest in the business effective as of March 31, 1995.
CONTINUING OPERATIONS. General and administrative expenses of
continuing operations for the three months ended April 30, 1995 decreased by
$106,000, or 42%, to $147,000 from $253,000 in the year ago period. The decrease
was due primarily to a decrease in professional fees and insurance costs of
approximately $162,000 offset by an increase in printing expense and the
settlement of a legal dispute.
The Company's general and administrative expenses for the six months
ended April 30, 1995 increased by $6,000 to $503,000 from $497,000 in the year
ago period.
For the six months ended April 30, 1995, interest expense decreased by
$63,000 to $82,000 from $145,000 due to the repayment of a note payable to an
affiliate. The unrealized gain on marketable securities of $2,728,000 in 1994
represents a reversal of previously recorded valuation allowance due to an
increase in the market price of the TCC Common Stock owned by the Company. As of
October 31, 1994 with the adoption of SFAS No. 115, such unrealized gains (or
unrealized losses, if any) are reported in a separate component of shareholders'
equity (see Note 2 of Notes to Consolidated Condensed Financial Statements).
CAPITAL RESOURCES AND LIQUIDITY:
During the fiscal year ended October 31, 1994 the Company used cash
primarily to fund its mortgage banking business. Due to the sale of its mortgage
banking business in November 1994, the Company anticipates that its principal
financing needs for the remainder of fiscal 1995 will consist primarily of
funding its general and administrative expenses.
The Company believes that cash on hand will be sufficient to finance
its general and administrative expenses during fiscal 1995. In addition, it is
the Company's intention to dispose of the shares of TCC Common Stock which are
owned by it through sales from time to time in the open market (depending upon
prevailing market conditions), through privately negotiated transactions or
otherwise.
The Company did not have any material capital commitments at April 30,
1995.
8
<PAGE>
INFLATION AND CHANGING PRICES:
The Company has not been materially affected by inflation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
BERLEX LABORATORIES, INC. V. COOPER LIFE SCIENCES, INC., ET AL.
In June 1988, Berlex Laboratories, Inc. ("Berlex") filed a number of
related actions naming as defendants, the Company, Cooper Holdings, Inc., Cooper
Development Company ("CDC"), TCC, The First National Bank of Boston, solely in
its capacity as Trustee of the Cooper Laboratories, Inc. Stockholders'
Liquidating Trust (the "Trustee"), and others.
Berlex is seeking to force the defendants to ensure that Berlex will be
indemnified, if necessary, with regard to Diethylstilbestrol ("DES") claims and
environmental problems that could arise at the Virgin Islands and Cedar Knolls
facilities sold to Berlex by Cooper Laboratories, Inc. ("Labs") (the former
parent company of the Company, CDC and TCC) in 1979 along with certain assets of
Labs' internal medicine business.
On May 10, 1991, a settlement agreement (the "Settlement Agreement")
was reached in connection with the Cedar Knolls facility only. The Settlement
Agreement, funded entirely by the Trustee and the co-Defendant, Penwalt (now
known as Atochem), did not require any contribution by the Company.
On April 17, 1995, a final settlement agreement (the "Final Settlement
Agreement") was reached in connection with all remaining litigation, including
claims relating to the Virgin Islands facility. Pursuant to the Final Settlement
Agreement, to which the Company contributed approximately $21,000, the parties
agreed to release each other from all outstanding claims, including those
relating to environmental contamination at the Virgin Islands facility.
HERAEUS LASERSONICS, INC. V. COOPER LIFE SCIENCES, INC.
On November 22, 1992, Heraeus Lasersonics, Inc. ("Heraeus") filed an
action which is currently pending in Santa Clara County Superior Court (the
"California Action"). In this action, Heraeus, the successor to the Company's
medical laser business, claims that the Asset Purchase Agreement (the "Asset
Purchase Agreement") between the parties obligates the Company to indemnify
Heraeus with respect to lawsuits in which the plaintiff alleges injury caused by
a laser sold by the Company prior to the date of the Asset Purchase Agreement.
Heraeus claims, in particular, that the Company is required to indemnify it for
monies expended by Heraeus in defending, and in settlement of, an Ohio lawsuit,
referred to as the Sutyak action. Heraeus also raises claims based on the
principles of equitable indemnity, fraud and breach of contract and seeks a
declaratory judgement as to the proper interpretation of the parties'
obligations under the Asset Purchase Agreement.
The Company has filed a cross-claim asserting that it has no duty to
indemnify Heraeus under the terms of the Asset Purchase Agreement and that part
or all of the damages in the Sutyak action were caused by Heraeus' independent
negligence, breach of its duty to warn and/or its liability with respect to its
own product. The Company's counterclaims also seek indemnification from Heraeus
both under the Asset Purchase Agreement and under common law principles for
monies expended by the Company in defending and in settlement of the Sutyak
action and seeks a declaratory judgement that Heraeus is obligated to defend the
Company in products liability cases involving lasers used after the date of the
Asset Purchase Agreement. The Company intends to vigorously defend the
California Action.
9
<PAGE>
Other Actions
The Company is also a defendant in certain other litigation relating to
its former business operations. In the opinion of management, based on the
advice of legal counsel, the ultimate outcome of these matters should not have a
material impact on the financial position or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on April 11,
1995. At that meeting, the following persons were elected as the members of the
Board of Directors of the Company, each to hold office until the next annual
meeting of stockholders and until his successor has been duly elected and
qualified:
Name For Election Withheld Vote
William L. Cohen ....................... 1,873,267 3,761
Mel Schnell ............................ 1,873,283 3,745
Randolph B. Stockwell .................. 1,873,273 3,755
At said Annual Meeting of Stockholders the proposal to ratify the
appointment of Grant Thornton LLP as the independent certified public
accountants of the Company for the fiscal year ending October 31, 1995 was duly
approved by the stockholders of the Company. The number of votes cast with
respect to said matter was as follows:
Number of Votes
FOR: 1,873,663
AGAINST: 1,152
ABSTAIN: 2,108
ITEM 5. OTHER INFORMATION
As a result of the death of Mr. Mel Schnell, the Company's President
and a member of its Board of Directors, a number of management changes were
instituted during May 1995. The number of persons comprising the Board of
Directors of the Company was increased from three to four, and Messrs. Moses
Marx (a principal stockholder of the Company) and Steven Rosenberg (Vice
President-Finance of the Company) were appointed by the continuing members of
the Board of Directors to fill the vacancies created by the death of Mr. Schnell
and the creation of an additional directorship. Each of such persons was
appointed to serve until the next annual meeting of stockholders and until his
successor has been elected and qualified. Mr. Marx was also designated by the
Company to replace Mr. Schnell as one of the Company's three designees on the
Board of Directors of The Cooper Companies, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Description
10.24 Redemption Agreement, dated as of April 19, 1995 (but effective as of
March 31, 1995), by and among Second Advantage Mortgage Corporation,
Emanuel Nadler, Efraim Nadler, Greater American Finance Group, Inc.,
Albert C. Kocourek, James W. Raker, H. Franklin Green III and the
Company.
27 Financial Data Schedule.
b. There were no reports filed by the Company on Form 8-K during the quarter for
which this report on Form 10-Q is filed.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COOPER LIFE SCIENCES, INC.
(Registrant)
Date: June 14, 1995 By: /s/ Steven Rosenberg
---------------- ----------------------
STEVEN ROSENBERG
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Sequential
Page Number
10.24 Redemption Agreement, dated as of April 19, 1995
(but effective as of March 31, 1995), by and
among Second Advantage Mortgage Corporation,
Emanuel Nadler, Efraim Nadler, Greater American
Finance Group, Inc., Albert C. Kocourek,
James W. Raker, H. Franklin Green III and
the Company.
27 Financial Data Schedule
12
<PAGE>
EXHIBIT I
REDEMPTION AGREEMENT
This Redemption Agreement dated as of this 19th day of April, 1995 (but
effective as of March 31, 1995), by and among SECOND ADVANTAGE MORTGAGE
CORPORATION, a Delaware corporation (the "Company"), EMANUEL NADLER, EFRAIM
NADLER (collectively, with Emanuel Nadler, the "Nadlers"), GREATER AMERICAN
FINANCE GROUP, INC., a Delaware corporation ("GAFC"), ALBERT C. KOCOUREK, JAMES
W. RAKER AND H. FRANKLIN GREEN III (said individuals being hereinafter sometimes
collectively called the "Management Investors") and COOPER LIFE SCIENCES, INC.,
a Delaware corporation ("CLS").
WITNESSETH:
WHEREAS, Nadlers, GAFC and the Management Investors own all of the
issued and outstanding capital stock of the Company;
WHEREAS, GAFC and the Management Investors desire to sell all of their
capital stock in the Company to the Company pursuant to the terms of this
Agreement;
WHEREAS, the Company is willing to redeem all of the capital stock held
by GAFC and the Management Investors in the Company pursuant to the terms of
this Agreement;
WHEREAS, to induce the Company to make such redemptions, CLS has agreed
to join in this Agreement for the purpose of making certain reimbursements in
favor of the Company; and
WHEREAS, the Nadlers have joined herein to evidence their consent to
this Agreement and the transactions contemplated hereby in their capacity as
stockholders of the Company.
NOW, THEREFORE, in consideration of the premises, the terms and
provisions hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by the parties, it
is agreed by them as follows:
1. REDEMPTION OF MANAGEMENT INVESTORS. At the Closing (as herein
defined) the Company shall purchase all of the outstanding
capital stock in the Company held by the Management Investors
consisting of 425,600 shares of the Class B common stock of the
Company for an aggregate purchase price of $353,870 of which
$176,930 shall be paid to Albert C. Kocourek and $88,470 shall be
paid to each of James W. Raker and H. Franklin Green III. The
purchase price shall be paid to the Management Investors, by
check or wire transfer, against delivery of certificates
representing the aforesaid shares of Class B common stock of the
Company, endorsed in blank by the holder or with a separate stock
power executed by the holder. Closing shall be on April 17, 1995
at 11:00 a.m. at the offices of Silver, Freedman & Taff, L.L.P.,
1100 New York Avenue, N.W., 7th Floor East, Washington, D.C.
20005.
<PAGE>
2. REDEMPTION OF GAFC. At the Closing the Company shall purchase all
of the outstanding capital stock in the Company held by GAFC
consisting of 5,100,000 shares of Class A common stock and
4,900,000 shares of Class B common stock for a purchase price
equal to (a) $3,879,490 plus (b) the Contingent Consideration (as
defined in Paragraph 3 below) less off-sets against the
Contingent Consideration for any reimbursement claims which have
not been satisfied by GAFC or CLS. At Closing the Company shall
pay to GAFC, $1,379,490, by check or wire transfer, and discharge
and release the account indebtedness of GAFC to Entrust Financial
Corporation, a wholly owned subsidiary of the Company ("Entrust")
in the amount of $2,500,000 in full satisfaction of its purchase
price obligation under subparagraph (a) hereinabove, against
delivery of certificates representing the aforesaid shares of
Class A and B common stock of the Company, endorsed in blank by
GAFC or with a separate stock power executed by GAFC.
3. CONTINGENT CONSIDERATION. The Contingent Consideration shall
consist of the following items as and when received by the
Company or Entrust in the form of cash: (a) 50% of the first
$763,800 of the Long Island Savings Bank ("LISB") hold back; (b)
any additional hold back received from LISB calculated after
provision for corporate income taxes thereon multiplied by 50%;
(c) the amount realized from repurchased loans held by Entrust as
of March 31, 1995 and the loan to be repurchased by Entrust from
Norwest for $92,000 (provided if such loan is not repurchased by
Entrust within 30 days from the date hereof, or is repurchased or
the loss is settled without repurchase within 30 days from the
date hereof, in either case, for less than $92,000, then 50% of
the savings shall be Contingent Consideration payable to GAFC
within 45 days from the date hereof) less all costs and expenses
incurred by the Company or Entrust with respect to the
administration, foreclosure, collection, enforcement or
disposition of such loans or the real estate owned resulting
therefrom multiplied by 50%; (d) the amount realized from loans
subsequently repurchased by the Company or Entrust (excluding the
Norwest loan referred to in subparagraph(c) immediately above)
relating to loans or servicing rights which were sold by the
Company or Entrust prior to March 31, 1995 less all costs and
expenses incurred by the Company or Entrust with respect to the
administration, foreclosure, collection, enforcement or
disposition of such repurchased loans or the real estate owned
resulting therefrom multiplied by 50% (provided however, the
provisions of this subparagraph(d) shall only apply if GAFC or
CLS has satisfied its reimbursement obligations with respect to
funding the repurchase of such loans; and (e) if the actual tax
liability (including the deferred installment tax liability
arising or resulting from the LISB sale) of the Company and/or
Entrust relating to the conduct of business from November 1, 1994
through March 31, 1995 including the sale of assets to LISB (the
"Actual Tax Liability") is less than $808,768, then 50% of the
savings.
4. GAFC REIMBURSEMENTS. GAFC does hereby agree to reimburse the
Company for 50% of the following items upon written demand by the
Company:
a. the amount by which the Actual Tax Liability exceeds
$808,768;
b. any and all unrecorded expenses of the Company or Entrust in
excess of $25,000 relating to the conduct of business
through March 31, 1995 (which amount shall be calculated net
14
<PAGE>
of any tax benefit realized by the Company or Entrust on
account of such expense being deductible by the Company or
Entrust for income tax purposes);
c. the amount to be paid by the Company or Entrust to
repurchase loans which are the subject of Paragraph 3(d)
hereinabove;
d. the amount of any indemnification to be paid by the Company
or Entrust to LISB arising under or by virtue of the sale by
Entrust of substantially all of its assets to LISB but
excluding amounts of indemnification deducted from the LISB
hold back; and
e. any liabilities of the Company or Entrust which are (i) not
reflected on the balance sheet attached hereto as Exhibit A,
(ii) arise from or relate to the conduct of business by the
Company or Entrust during the period prior to April 1, 1995
and (iii) are actually paid by the Company or Entrust after
the date hereof (but excluding items for which reimbursement
is made or to be made by GAFC pursuant to Paragraph 4(b)
above or is offset by LISB to reduce the LISB hold back).
CLS, in a primary capacity, does hereby agree to perform the
reimbursement obligations of GAFC to the extent that such obligations are not
timely performed by GAFC within 5 days after written demand.
5. INSPECTION OF BOOKS AND RECORDS. GAFC and CLS shall have the
right, at their sole costs and expenses, to examine the books and
records of the Company and Entrust for the purpose of verifying
(a) the proper and timely making of payments to GAFC of the
Contingent Consideration, and (b) the propriety of amounts
reimbursed or to be reimbursed to the Company pursuant to
Paragraph 4 above.
6. TERMINATION OF AGREEMENTS. At the Closing, and without any other
action to be taken by the parties hereto, the following
agreements shall be terminated:
(a) that certain Amended and Restated Stock Purchase Agreement
dated as of August 31, 1993 between the parties hereto
(other than CLS) and Leader Financial Corporation (now known
as Entrust); and
(b) that certain Stockholders' Agreement dated as of August 31,
1993 between the parties hereto (other than CLS).
7. RELEASE. Except for the rights of GAFC to the Contingent
Consideration, GAFC and the Management Investors do hereby
forever release and discharge the Company, Entrust and their
respective officers and directors from any and all claims,
demands and causes of action, known or unknown, that they or any
of them have or might have against the Company, Entrust and their
respective officers and directors from the beginning of time to
the date hereof including, but not limited to, any claim by the
Management Investors relating to additional equity rights in the
Company.
8. REPRESENTATIONS AND WARRANTIES.
(a) GAFC and CLS hereby jointly represent and warrant that (i)
each is a duly organized corporation, validly existing and
in good standing under the laws of the State of Delaware
15
<PAGE>
with full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated
herein and (ii) each has taken all necessary corporate
action to approve this Agreement and the transactions
contemplated herein and to authorize the person executing
this Agreement on its behalf to do so as the act and deed of
such corporation.
(b) The Company represents and warrants that (i) it is a duly
organized corporation, validly existing and in good standing
under the laws of the State of Delaware with full corporate
power and authority to enter into this Agreement and
consummate the transaction contemplated herein, and (ii) it
has taken all necessary corporate action to approve this
Agreement and the transactions contemplated herein and to
authorize the person executing this Agreement on its behalf
to do so as its act and deed.
(c) GAFC represents and warrants that it is the sole title and
beneficial owner of 5,100,000 shares of the Class A common
stock of the Company and 4,900,000 shares of the Class B
common stock of the Company; that it owns such shares free
and clear of any liens, charges, security interests,
pledges, rights of third parties or other infirmities; and
that it has no other interests in the Company or any of its
subsidiaries.
(d) Albert C. Kocourek represents and warrants that he is the
sole title and beneficial owner of 212,800 shares of the
Class B common stock of the Company; that he owns such
shares free and clear of any liens, charges, security
interests, pledges, rights of third parties or other
infirmities; and that he has no other interests in the
Company or any of its subsidiaries.
(e) James W. Raker represents and warrants that he is the sole
title and beneficial owner of 106,400 shares of the Class B
common stock of the Company and that he owns such shares
free and clear of any liens, charges, security interests,
pledges, rights of third parties or other infirmities; and
that he has no other interests in the Company or any of its
subsidiaries.
(f) H. Franklin Green III represents and warrants that he is the
sole title and beneficial owner of 106,400 shares of the
Class B common stock of the Company and that he owns such
shares free and clear of any liens, charges, security
interests, pledges, rights of third parties or other
infirmities; and that he has no other interests in the
Company or any of its subsidiaries.
9. SURVIVAL. The terms and provisions contained in this Agreement
shall survive the execution of this document and the Closing of
the transactions contemplated hereby.
10. BINDING EFFECT. This Agreement represents the final contract
between the parties relating to the subject matter hereto and may
only be amended or modified by a subsequent writing executed by
the party or parties whose rights or obligations are altered by
such amendment or modification.
16
<PAGE>
11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Maryland.
THIS AGREEMENT has been executed by the parties on the day and first
year hereinabove written.
SECOND ADVANTAGE MORTGAGE CORPORATION
By: _________________________
Authorized Officer
--------------------------
EMANUEL NADLER
--------------------------
EFRAIM NADLER
GREATER AMERICAN FINANCE GROUP, INC.
By: _________________________
Authorized Officer
--------------------------
ALBERT C. KOCOUREK
--------------------------
JAMES W. RAKER
--------------------------
H. FRANKLIN GREEN III
COOPER LIFE SCIENCES, INC.
By: _________________________
Authorized Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COOPER
LIFE SCIENCES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
APRIL 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> APR-30-1995
<CASH> 1,419
<SECURITIES> 16,548
<RECEIVABLES> 382
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38
<DEPRECIATION> 7
<TOTAL-ASSETS> 23,470
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 251
0
0
<OTHER-SE> 19,776
<TOTAL-LIABILITY-AND-EQUITY> 23,470
<SALES> 0
<TOTAL-REVENUES> (173)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 2,073
<INCOME-TAX> 1
<INCOME-CONTINUING> (758)
<DISCONTINUED> 2,831
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,072
<EPS-PRIMARY> .93
<EPS-DILUTED> .93
<FN>
See the financial statements for an unclassified balance sheet.
</TABLE>
