SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-KSB
Amendment 1
Annual Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended:
December 31, 1995 Commission File Number: 0-15754
CREATIVE TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2721083
(State or other jurisdiction of(IRS Employer Identification
Number)
incorporation of organization)
170 53rd Street, Brooklyn, New York 11232
(Address of principal executive offices) (Zip Code)
(718) 492-8400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 Par Value
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-B (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-KSB or any amendment to this Form 10-
KSB. [X]
Registrant's revenues for fiscal year ended December 31,
1995 was $14,142,030.
The aggregate market value of voting stock held by non
affiliates of the Registrant is $5,730,238 as of March 28,
1996.
The number of shares outstanding of the registrant's Common
Stock as of March 28, 1996 is:
Class Outstanding at March 28, 1996
Common Stock, $.03 par value 7,834,183
<PAGE>
PART I
ITEM 1. BUSINESS
Creative Technologies Corp. (the "Company") is engaged in
the design, manufacture, marketing and distribution of niche
consumer products. The Company currently sells electric
motor-driven pasta machines and a food griller. The Company
is also the exclusive distributor of Brabantia International
("Brabantia") products in the United States. Brabantia,
headquartered in the Netherlands, is a leading manufacturer
of top of the line houseware products in Europe. Its
products are sold in 68 countries throughout the world.
The Company manufactures and markets an electric motor-
driven pasta machine throughout the United States and Canada
under the name "Pasta Express" and "Takka Pasta and Dough
Machine". This product mixes, kneads, extrudes and dries
pasta and other dough. See "Pasta Machine."
The Company has developed, and is marketing, a novel
griller, the "Grill Express," which grills meat, fish,
vegetables and poultry in under two minutes while retaining
the appearance and taste inherent to traditional grilling.
See "Grill Express."
Since January 1, 1996, the Company has been distributing, on
an exclusive basis, a full line of Brabantia products in the
United States. This line includes high quality bread boxes,
step-on pails and waste paper baskets, ironing boards, 2 and
3 step stools and a complete line of kitchen tools and other
household items. See "Brabantia Products".
Product Selection For Development
The Company, along with its manufacturer in China, is
developing a household appliance that could produce frozen
yogurt from a liquid yogurt mix by making certain
modifications to an ice cream machine that the company
manufactured and marketed in the past. There can be no
assurances that this product will be successfully developed
or marketed. The Company may also enter into
distributorship agreements with other manufacturers if the
Company believes such products would fit in with the
Company's business objectives.
Pasta Machine
The Company is manufacturing and selling electric motor
driven pasta machines which mix, knead, extrude and dry
dough. The Company is currently selling four different
models ranging in price at retail from $99.00 to $169.00.
The component parts of the pasta machines have been
manufactured to the Company's specifications by several
different vendors such as injection molders and motor, sheet
metal, screw and electrical component manufacturers and
jobbers. A majority of the pasta machines sold by the
Company in 1995 were assembled at its assembly plant in
Brooklyn, New York. The Company expects to have the
manufacturing of this product done in China and maintain a
one month supply of finished goods in its inventory.
The Company's pasta machines have been sold throughout the
United States and Canada in various department stores such
as May Corp., Federated, Dillards, J.C. Penney, Sears and
Boscovs; through certain mail order catalogues such as
Chef's Catalog, Hanover Direct and Damark; catalog showrooms
such as Best Products; and in certain mass merchandising
stores and other outlets such as QVC, Lechmere, Home Express
and Montgomery Ward. In order to promote the pasta machine,
the Company uses co-op advertising, in-store demonstrations
by live demonstrators and demo tapes on video monitors in
the stores. The Company's marketing and sales activities are
currently being done by its President in conjunction with a
force of approximately 20 independent manufacturer
representative organizations. In addition, the Company
demonstrates the pasta machine at certain major houseware
shows.
<PAGE>
The Company fills orders as they are received and generally
maintains an inventory of finished goods to meet projected
orders. The models currently being sold by the Company are
differentiated by the quantities of dies (to create as many
as 24 different types of pastas), construction material,
appearance, ability to "dry" the pasta and by varying the
accessory kits.
During 1994 and 1995, approximately seven new companies
entered into the electric pasta machine market, most
producing lower priced machines. The effect of the new
entries on the market was to saturate the market with less
expensive machines, cause price erosion and hurt the "sell
through" during and after the 1994 Christmas season. In
addition, throughout 1995, many of these new entries
abandoned the pasta machine market, causing a glut of pasta
machines on the market as they closed out their inventory
positions.
Grill Express
The Grill Express is designed to grill food very quickly by
utilizing heat and pressure and cooking both sides of the
item simultaneously. The Griller is capable of grilling
chicken and steak in one to two minutes and vegetables and
shrimp in under 30 seconds while retaining the appearance
and taste inherent to traditional grilling. The Grill
Express has a removable top grill element which adjusts to
the height of the food and a patented cooking process which
utilizes heat and pressure in a liquid sealed environment,
allowing foods to retain its natural juices and essentially
its full
size.
The Company has been marketing the Grill Express primarily
with a 30 minute infomercial that it produced and has been
airing on selected cable and TV channels since late 1993.
The Company spent approximately $3,278,000 on infomercial
advertising of the Grill Express in 1995. Marketing of this
product to retail stores is being accomplished in
substantially the same manner as the Company markets the
pasta machine and is generally selling in the same stores.
This product is being manufactured and completely assembled
for the Company in China. The typical retail price for this
product is $99.00 - $149.00. The Company is unaware of a
similar product on the market that will cook food in as
short a time as the Company's griller while still
maintaining the grilled taste and appearance.
Brabantia Products
The Company and Brabantia, a Netherlands company, entered
into a five-year distributorship Agreement effective January
1, 1996. The agreement provides that the Company will have
the exclusive right to distribute Brabantia products in the
United States. Brabantia manufactures high quality
houseware products and sells its products in 68 countries
throughout the world. Sales of Brabantia products worldwide
in 1995 were in excess of $100,000,000. The parties have
the right to reevaluate the relationship in December 1996 in
the event either of the parties decide not to continue the
relationship.
Brabantia's major product categories include bread boxes,
storage canisters, step-on cans, ironing boards, mail boxes,
kitchen tools and gadgets, step stools, waste paper baskets,
cork screws and items used in food preparation. Brabantia's
product lines are of high quality, with extensive
diversification and suitable for rapid distribution through
the Company's existing customer base. Brabantia develops
and introduces new products every year and could produce
private labels for special occasions.
The Company believes that Brabantia's product line has been
well received by the retail community. Management believes
that Brabantia's product line is not-seasonal, non-cyclical,
and appeals to a broader range of customers than the
Company's other two products. Furthermore, the inclusion of
these products will diversify the Company's product line so
it will not be a two product Company. Historically, the
return rate for Brabantia products is low. The Brabantia
line of products will be distributed by the Company through
its manufacturer representative organizations.
<PAGE>
Product Warranty
The Company provides a limited six-month to one-year
warranty on parts and labor on its products. The Company
replaces, free of charge, any machines returned to it which
are covered by the warranty. Products which are defective
are either returned for credit or repaired in-house.
Products which have been returned used but undamaged are
repackaged and sold through remarketers, while unopened
products are put back into inventory. The Company has a
toll free number with customer service representatives.
Brabantia products sold by the Company contain between a two
and ten-year limited warranty provided by Brabantia. Any
product returned to the Company as defective is returned to
Brabantia for credit.
Lack of Proprietary Rights
The Pasta Machine is covered by a basic utility patent and a
design patent. In July 1993, the Company, by letter to
Popeil Pasta Products Inc. ("Popeil"), charged them with
infringement of the Company's pasta machine patent. Popeil
obtained a declaratory judgement that its pasta machine does
not infringe the Company's patent. Popeil commenced an
action in Superior Court of the State of California for
malicious prosecution and intentional interference with
economic relationships, against the Company, a director and
the attorneys that represented the Company in connection
with this patent suit. The Company has denied the
allegations and believes it has valid defenses. The Company
also believes that it is covered by insurance and the
Company is being represented by attorneys for the insurance
company.
In June 1995, Popeil filed a suit against the Company
claiming that the Company's Model X-500 infringes Popeil's
patent. The Company is asking the court for a declaratory
judgement that the Company's pasta machine Model X-500 does
not infringe on Popeils Patents. The Company cannot predict
the outcome of this action. The Company, however, is
currently not selling the X-500 in the United States.
The Company also received a utility and design patent for
the Grill Express. The Company intends to file patent
applications where it believes meaningful patent protection
can be obtained for each of the products prior to
commercializing such products. There can be no assurance
that the current patents will provide the Company with
significant protection from infringement or that any other
patent will be granted or that any invention will be
developed into commercially viable products or that other
entities will not assert claims against the Company with
respect to any products developed which may be covered by
any such patent. The manufacture and marketing of any
products may involve the use of patented processes or
proprietary information, the rights to which are held by
others. The Company may be adversely affected by the costs
and delays resulting from any litigation which may be
required to enforce any patents or licenses or otherwise to
protect non patentable inventions, and there is no assurance
that the Company would be successful in such litigation.
<PAGE>
Product Liability
The Company has product liability insurance of up to $1
million per incident. In July 1994, the Consumer Product
Safety Commission (the "CPSC") requested that the Company
provide it with information to allow the CPSC to determine
whether any defect is present in the Company's pasta
machine. The request from the CPSC was precipitated by a
consumer claiming that she severed the tip of her finger
while operating the Company's pasta machine. The CPSC has
made a preliminary determination that the Pasta Express
represents a "substantial product hazard" as that term is
defined in the Consumer Product Safety Act. The Company has
disputed this
preliminary determination. The Company is currently
involved in negotiations with the CPSC to try to resolve
this matter in an amicable manner.
The Company has received notice that several other consumers
claim to have suffered finger injuries while using the pasta
machine. These claims are covered by the Company's product
liability insurance carrier. The Company redesigned the lid
of the pasta machine in August, 1992. The Company believes
that this modification should minimize the possibility of
such injury.
In August 1995, the Company notified the CPSC that it
recently became aware that the heating element in some of
its griller units shipped during an identified time period
had become loose, caused the bottom of the unit to melt, and
on a few occasions, caused damage to the customer's
countertop. The CPSC accepted the Company's voluntary plan
to offer to repair or to replace such units at no cost to
the customer. The plan has now been completed with
approximately 3,000 units having been returned and repaired
or replaced.
Competition
The Company's products have applications in the consumer
field which includes many major companies and research
centers developing, manufacturing and marketing products
that are similar to the Company's products, some of which
companies may dominate their particular market. The Company
believes that its various products have features not
available on competitors' products. The Company believes
that there were approximately 10 different companies
producing and marketing electric pasta machines in the U.S.
in 1995. Some of these companies are no longer producing
pasta machines.
Competition for the Grill Express comes from grills
manufactured by approximately four other companies and such
competitor's grills generally sell at lower price points.
The Company believes that such competitive grills cannot
replicate the results produced by the Grill Express in terms
of taste, convenience or cleanup. These companies, however,
are major companies with substantially greater financial
resources than the Company.
Brabantia's products also compete with numerous companies
selling similar products. The Company believes that
Brabantia's products are of higher quality and have a higher
price point than most competitors.
<PAGE>
Employees
The Company has an administrative staff, including customer
services, of approximately 20-25 people and currently
employs approximately 15 hourly workers, who are engaged in
shipping and repairing the Company's products in Brooklyn,
New York. The Company laid off a substantial number of
assembly workers at its Brooklyn plant at the end of 1995.
Future assembly of the pasta machines is expected to take
place in China. The Company entered into an agreement with
United Production Workers Union, Local 17-18 under which
agreement the hourly employees of the Company receive
certain health benefits and cost of living increases. This
agreement has been extended until March 19, 1999.
ITEM 2. PROPERTIES
The Company's executive offices and factory consist of
approximately 120,000 square feet located at 170 53rd
Street, Brooklyn, New York 11232. The Company entered into
a lease with Ace Surgical Supply Co. Inc. ("Ace") for 10
years which commenced on January 1, 1992. Annual rent is a
minimum of $467,000 for the first three years and thereafter
annual rents will be subject to agreement between the
parties based on the then current economic conditions,
including rents for comparable space in the local area. The
Company is also subject to additional payments for real
estate tax and other assessments. Rent expense, inclusive
of real estate taxes and assessments, for 1995 was $600,000.
See "Certain Relationships and Related Transactions." The
Company believes that its executive offices and assembly
space are sufficient for its current needs.
ITEM 3. LEGAL PROCEEDINGS
In November 1995, the Company filed a lawsuit in the Eastern
District of New York against Panint Electric Ltd. and its
principal John Kwok, seeking damages of $1,700,000 for
breach of contract and breach of warranty with respect to
Panint's manufacturing of the Grill Express and Pasta
Express. In January 1996, Panint denied the allegations in
the complaint and counterclaimed for $1,400,000 predicated
primarily upon allegations that the Company wrongfully
canceled pending purchase orders. The Company believes that
due to Panint's breaches, the Company was within its rights
to cancel the orders.
Management knows of no other material legal proceeding
pending, threatened or contemplated which the Company is or
may be a party to or which any of its property is subject.
See "Lack of Propriety Rights" and "Product Liability".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There was a special meeting of the Shareholders of the
Company on January 26, 1996 to ratify and approve the
issuance by the Company of up to 4,000,000 shares of Common
Stock in a private placement which would result in the
issuance of more than 20% of the Company's Common Stock for
less than the market value of the stock. 3,164,655 shares
were voted in favor of the proposal, 54,541 shares against
and 18,732 abstained.
<PAGE>
PART II.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter
market on the National Market System of the National
Association of Securities Dealers Automatic Quotation System
("NASDAQ"). The following table sets forth the range of
high and low bid prices of the Company's Common Stock as
quoted by NASDAQ. These quotations represent prices between
dealers in securities, do not include retail mark-ups, mark-
downs or commissions and do not necessarily represent actual
transactions.
Fiscal Year Ended Fiscal Year Ended
December 31, 1995 December 31, 1994
High Bid Low Bid High Bid Low Bid
COMMON STOCK (CRTV)
First Quarter 5 4 3/3 71/4 5 1/2
Second Quarter 4 5/8 2 1/4 5 7/8 3 3/4
Third Quarter 3 3/16 2 1/2 6 5/8 4
Fourth Quarter 3 5/16 1 1/8 6 1/2 4 1/2
____________________________
The closing bid price of the Common Stock on March 28, 1996
was 7/8.
At March 28, 1996, there were in excess of 1,000
Shareholders. Holders of Common Stock are entitled to
dividends when, as, and if declared by the Board of
Directors out of funds legally available therefore. The
Company has not paid any cash dividends on its Common Stock
and, for the immediate future, intends to retain earnings,
if any, to finance the development and expansion of its
business.
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
For the year ended December 31, 1995 ("fiscal 1995"), cash
used in operating activities was $7,651,000. Cash of
$161,000 was used in investing activities and cash of
$8,166,000 was provided by financing activities. As a
result, at December 31, 1995, cash increased by $354,000 to
$717,000 compared to $417,000 at December 31, 1994. The
Company had a negative working capital of $1,356,000 at
December 31, 1995.
Accounts payable and other liabilities decreased from
$3,429,000 at December 31, 1994 to $1,664,000 at December
31, 1995 due to a decline in purchases.
<PAGE>
Until April 1995, the Company sold substantially all of its
trade receivables at various levels of recourse to Rosenthal
& Rosenthal (the "factor"). On April 19, 1995, the Company
ceased the factoring arrangement with Rosenthal & Rosenthal
and instead obtained a one year credit facility from Shawmut
Capital Corporation ("Shawmut") in the total amount of
$15,000,000, consisting of a one year term loan of
$1,000,000 and a revolving credit facility for the
remainder. The term loan was payable in twelve equal
installments and was personally guaranteed by David
Guttmann, the Chief Executive Officer. Loans on the
revolving credit facility were available in amounts equal to
70% of the Eligible Accounts Receivables plus the lesser of
$7,500,000 or the sum of the Eligible Inventory. The
Company paid a closing fee of $100,000 to Shawmut and
$120,000 to a finder. In February 1996, the Company and
Shawmut agreed to discontinue the banking relationship. The
Company repaid Shawmut $1,500,000 and executed a non-
interest bearing two year note to Shawmut in the amount of
$200,000. In addition, David Guttmann assumed the payment
of the remainder of the term loan in the total amount of
approximately $333,333, payable in $5,000 per month
installments. In order to repay Shawmut the workout amount,
the Company obtained short term loans of approximately
$1,000,000 from several individuals. The loans contain
interest at approximately 2% per month plus expenses.
The Company derived a pre-tax profit on the workout of
approximately $1,550,000. The Company is seeking to obtain
a new line of credit in order to repay the short term loans
and for working capital. The Company will issue 333,333
shares to the designees of David Guttmann in consideration
for their assumption of the term note in the amount of
$333,333. The Company also borrowed, subsequent to December
31, 1995, approximately $543,000 on a short-term basis, with
interest at 18% per annum.
At December 31, 1995, the Company had notes payable due
September 30, 1996 in the amount of $1,000,000 payable to an
entity whose principal is a director of the Company. The
loan bears interest at a rate of 18% per annum. At December
31, 1995, the Company also had $1,980,000 of notes
outstanding to various individuals and shareholders of the
Company. These additional loans bear interest at 18% per
annum and are due on September 30, 1996. These loans,
amounting to $2,980,000, were guaranteed by David Guttmann,
the CEO and a principal stockholder of the Company, and
Barry Septimus, the husband of a principal stockholder of
the Company.
In the third quarter of 1995, the Company raised $830,000
through the sale of 830,000 shares in a private placement.
The Board of Directors authorized the raising of an
additional $4,000,000 in a private placement subject to
obtaining the approval of the shareholders in accordance
with the NASDAQ listing requirements. At a Shareholders'
meeting held on January 26, 1996 the private placement was
approved and 1,623,000 shares of Common Stock were issued at
$1.00 per share, effective December 31, 1995.
The Company expects to fund its operations over the next
twelve months by obtaining bank lines of credit, if
available, borrowing money privately and cash flows from
operations. The Company is also continuing the private
placement described above. In addition, designees of David
Guttmann and Barry Septimus have agreed to lend the Company
on a short-term basis an aggregate of $800,000 at 10%
interest per anum. See "Certain Transactions."
At December 31, 1995, the Company had outstanding
approximately $656,000 in commercial letters of credit
covering the production and importation of the Grill
Express.
[R]
In order to reduce future losses, the Company has reduced
expenses by cutting its administrative staff, closing its
assembly plant in Brooklyn, New York and moving the
manufacture of the pasta machine to China, cutting back or
eliminating the use of outside consulting services and
otherwise reducing overhead. In addition, certain key
employees have taken voluntary pay cuts. The Company has
also identified and is currently using a more reliable
factory for manufacturing the Grill Express. This factory
will also be producing the Pasta Machine. Management believes
that this new factory used by the Company in past since the new
factory is larger and has more expertise in manufacturing electrical
appliances. Accordingly, the Company believes that this will result
in a lower return rate relative to sales. Hoewever, it is too early
to quantify any such reduction.
[/R]
The Company signed a distribution Agreement with Brabantia,
effective January 1, 1996, pursuant to which the Company
will distribute Brabantia products, on an exclusive basis,
in the United States. The Company believes that this will
be very beneficial to the Company since the Brabantia
products are of high quality, extensive and well
diversified, competitively priced and have selling features
that differentiate them from the competition. The Company
will be purchasing these products on open account and hopes
to benefit from a fast turnaround. The Company believes that sales of these
products will not be seasonal or cyclical. In addition,
becoming a distributor for a company with worldwide sales in
excess of 100 million dollars per year and with a line of
houseware products filling a 110-page catalog, will allow
the Company to no longer be perceived as a two-product
company.
Results of Operations
The Company had net sales of approximately $30,066,000 in
the fiscal year ended December 31, 1994 ("fiscal 1994")
compared to net sales of approximately $14,142,000 in fiscal
year ended December 31, 1995 ("fiscal 1995"). The decrease
in sales was primarily the result of less unit sales of the
pasta machines, high returns relative to sales, a glut of
pasta machines on the market causing lower price points,
very soft retail demand and sales the Company was forced to
make at lower prices to reduce inventory in order to raise
cash. In addition, the Company was unable to fill orders of
the Grill Express due to the closing of one factory that
produced this product and late delivery and quality problems
at another factory which resulted in lost sales and higher
returns.
Gross profit margins for the fiscal years ended December 31,
1995 and 1994 were 23% and 43.2% respectively. The decrease
in gross profit margins is attributable to the merchandise
returns and the aforementioned reduction in unit selling
price of the pasta machines. Also contributing to the gross
profit margin decrease, were higher costs associated with
the production of pasta machines at its Brooklyn, New York,
facility because of the delays experienced in having them
produced in China.
Selling, general and administrative expenses for fiscal 1995
were $9,452,000, an increase of $976,000 over fiscal 1994's
expense of $8,476,000. The increase is attributable to
advertising expenses which amounted to $4,753,000 and
$3,307,000, respectively, for fiscal 1995 and 1994. The
increase of $1,446,000 in advertising expenses is
attributable to an increase in airings of a new Grill
Express infomercial which was introduced during early 1995
and the initial airings of the Wonder Cooker infomercial in
the second half of 1995. Also contributing to the increased
expense was the write offs during the second half of 1995 of
infomercial production costs for the Grill Express, Wonder
Cooker and Pasta Express.
<PAGE>
Interest expense and financing costs in fiscal 1995
increased $689,000 over fiscal 1994 to $1,298,000 due to
increased borrowings and the finance costs incurred in
obtaining financing from Shawmut, which were written off
during the second half of fiscal 1995. The additional
borrowings were necessary to fund operations.
Ending inventory at December 31, 1995 was $3,296,000
compared to $5,471,000 at December 31, 1994. The inventory
turnover ratio was 2.5 in 1995 compared to 4.3 in 1994. The
decrease in inventory and decrease in the inventory turnover
ratio was due to lower sales and purchases in fiscal 1995.
Due to the foregoing, in fiscal 1995, the Company had a net
loss of approximately $7,251,000 compared to a net income in
fiscal 1994 of approximately $3,513,000.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Pages F-1 through F-15
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The officers and directors of the Company are as
follows:
Name Age Title
Benjamin Sporn 57 Chairman of the Board
David Refson 50 Vice Chairman and Director
David Guttmann 49 Director and Chief Executive Officer
Richard Helfman 49 Director and President
David Selengut 40 Secretary
Benjamin Sporn has been a Director of the Company since
January 1985 and Chairman of the Board since March 1990.
Mr. Sporn has been an attorney in private practice since
January 1990. From 1964 until December 1989, Mr. Sporn was
an attorney with AT&T and retired as General Attorney for
Intellectual Property matters. Mr. Sporn is Chairman of the
Board of Micel Corp.
<PAGE>
David Refson has been Vice Chairman and a Director of the
Company since January 1985. Mr. Refson is the President and
principal stockholder of Newmarket Co. Limited of Liberia
("Newmarket"), which invests in various entities. Mr.
Refson has been a private investor for more than the past
five years and in his capacity as President of Newmarket,
acts as a consultant to a number of foreign companies.
David Guttmann has been a director and Chief Executive
Officer of the Company since May 1994. From June 1983 until
May 1994, Mr. Guttmann was Chief Executive Officer of
Applied Microbiology Inc., and has been its chairman since
June 1983. Mr. Guttmann also serves as Chairman of Ace
Surgical Supply Co., Inc., a supplier of disposable surgical
materials to the health care field.
Richard Helfman has been a Director of the Company since
April 1990 and President since March 1990. He devotes all
his business time to the affairs of the Company. From May
1987 to June 1989, Mr. Helfman was a commercial lending
officer at The First New York Bank for Business, and from
1979 until May 1987, was a commercial lending officer at
Extebank.
David Selengut was elected Secretary of the Company in
September 1987. Mr. Selengut has been a partner at the law
firm of Singer, Bienenstock, Zamansky, Ogele & Selengut,
LLP. since May 1995. That firm has acted as counsel to the
Company with respect to certain matters. From May 1988
until April 1995, he was an Associate in the law firm of
Neiman Ginsburg & Mairanz P.C., New York, New York.
Each of the Company's Directors has been elected to serve
until the next annual meeting of the stockholders. The
Company's executive officers are appointed annually by the
Company's Directors. Each of the Company's Directors and
Officers continues to serve until his successor has been
elected and qualified. Pursuant to a management agreement
with Ace, Ace has the right to appoint two members of the
Board of Directors. Ace has never exercised this right.
The Company has an audit committee consisting of Benjamin
Sporn and David Refson.
To the Company's knowledge, there were no delinquent 16(a)
filers for transactions in the Company's securities during
the year ended December 31, 1995.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The compensation paid to the Company's Chief Executive
Officer and to each of the other executive officers whose
total compensation exceeded $100,000 during each of the
preceding three fiscal years are as follows:
1995 SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation
Compensation Other
Annual Awards
Name and PrincipalYear Salary Compensation Options
Position ($) ($) (#)
David Guttmann, 1995 $128,218(1) 50,000
Chief Executive
Officer 1994 $88,269(1) -0-
Richard Helfman, 1995 $187,692 -0- 50,000(4)
President 1994 $234,576
1993 $175,000 $30,000(3) -0-
Benjamin Sporn, 1995 -0- -0- 50,000(4)
Director
Alan Miller, 1995 $77,308
Chief Financial Officer 1994 $94,606(2) 30,000
<PAGE>
(1) Represents compensation since May, 1994. David
Guttmann was being compensated at the rate of $150,000 per
annum. Mr. Guttmann voluntarily reduced his salary to
$50,000 per annum during the latter part of 1995.
(2) Represents compensation and consulting fees in 1994.
Mr. Miller was compensated at the rate of $120,000 per
annum. Mr.
Miller is no longer employed by the Company.
(3) Compensation received under the profit sharing plan.
(4) Represents options previously granted with the exercise
price lowered to $1.82 per share on November 9, 1995 and
$1.00 per share on February 28, 1996.
OPTION GRANTS IN 1995
Percent of Total
Options Options Granted to Exercise Expiration
Name Granted Employees in Fiscal Year Price Date
(a) (b) 1995 $
David Guttmann,
Chairman of the Board 50,000(1) 17% 1.82 May 26, 2004
Richard Helfman 50,000(2) 17% 1.82 May 25, 2004
Benjamin Sporn 50,000(2) 17% 1.82 June 10,2003
(1)The exercise price was reduced to $1.00 per share on
February 28, 1996.
(2)Represents options previously granted with the exercise
price lowered to $1.82 per share on November 9, 1995 and
$1.00 per share on February 28, 1996.
AGGREGATED OPTION EXERCISES IN 1995 AND FOR YEAR-END OPTION
VALUES
Number of Value of
Unexercised Unexercised
Options in-the-Money
at Fiscal Options
Year-End at Fiscal
(#) Year-End
($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
David Guttmann -0- -0- 50,000/0 -0-
Benjamin Sporn -0- -0- 50,000/0 -0-
Richard Helfman 31,333 -0- 25,000/25,000 -0-
<PAGE>
The Company maintained a Qualified Retirement Plan and Trust
for qualified employees effective as of January 1, 1993.
Under the plan, a profit sharing plan, the Company's
contributions are discretionary. The Company did not make
contributions for the Plan Year 1995.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 28, 1996,
certain information as to the stock ownership of each person
known by the Company to own beneficially 5% or more of the
Company's outstanding Common Stock, by each director of the
Company who owns any shares of the Company's Common Stock
and by all officers and directors as a group:
Percentage of
Class
Name of Beneficial Number of Shares of
As of
Owner Common Stock Owned (1)
March 28, 1996
Bonnie Septimus (2) 509,133 6.5%
David Guttmann (3) 737,332 9.4%
Benjamin Sporn (4) 95,541 1.2%
Richard Helfman (5) 93,333 1.2%
All officers and
directors as a
group (5 persons)(6) 926,206 11.6%
(1) Except as otherwise indicated, all shares are
beneficially owned and sole voting and investment power is
held by the persons named.
(2) A portion of the Common Stock is owned by Mrs. Septimus
as nominee for certain members of her family.
(3) A portion of the Common Stock is currently being held
by Mr. Guttmann as nominee for certain members of his
immediate family. Includes 50,000 shares issuable upon
exercise of stock options.
(4) Includes 50,000 shares underlying immediately
exercisable installments of options.
(5) Includes 25,000 shares underlying immediately
exercisable options.
(6) Includes the shares described in footnotes (3)(4) and
(5) above.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Barry Septimus and David Guttmann, the shareholders of Ace
Surgical Supply Co., Inc., personally guaranteed certain
indebtedness of the Company in the amount of $1,980,000. In
addition, David Guttmann guaranteed the term loan of
$1,000,000 issued to Shawmut and upon the workout with
Shawmut in March 1996, David Guttmann agreed to repay the
remainder of the term loan in the amount of $333,333. The
Company agreed to issue a total of 333,333 Shares of Common
Stock to his designees in consideration of the assumption of
this debt.
In March 1993, the Company borrowed $600,000 from an
affiliated entity of David Refson, director of the Company.
In January, 1995, the Company borrowed an additional
$400,000 from that entity. Interest on these loans are 18%
per annum and are due September 30, 1996. This loan is also
guaranteed by David Guttmann and Barry Septimus.
David Guttmann purchased for himself and as nominee for
members of his family, 10,000 shares of Common Stock at
$1.00 per share, in the Company's Private Placement in
addition to the 166,666 shares received in connection with
the assumption of the Shawmut debt. In addition, the
designees of David Guttmann and Barry Septimus have agreed
to lend the Company up to the aggregate of $800,000
repayable, with interest at 10% per annum, in three months.
They also have the right to convert the loan into shares of
Common Stock offered in the private placement at $1.25 per
share.
In June 1991, the Company moved its executive offices and in
December 1991 its assembly line into a building at 170 53rd
Street, Brooklyn, New York, which the Company leases from
Ace, an entity owned by Barry Septimus and David Guttmann.
The Company executed a 10-year lease with Ace which provides
for minimum annual rent of $467,000 for the first three
years and thereafter annual rents will be negotiated between
the parties based on the then-current economic conditions
including rents for comparable space in the local area in
each year thereafter. The Company is also responsible for
its share of real estate tax assessment. The Company
believes that the rent is not higher than would be paid to a
non-affiliated company.
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND
REPORTS ON FORM 8-K
3. (A) Certificate of Incorporation filed with the
Department of State of the State of New York on January 2,
1985 -- Incorporated by reference to the Registrant's
Registration Statement on Form S-1 (File No. 33-2100),
Exhibit 3.1.
(B) Certificate of Amendment to the Certificate of
Incorporation, filed with the Department of State of the
State of New York on November 29, 1985 -- Incorporated by
reference to the Registrant's Registration Statement on Form
S-1 (File No. 33-2100), Exhibit 3.2.
(C) By-Laws of Registrant -- Incorporated by reference
to the Registrant's Registration Statement on Form S-1 (File
No. 33-2100), Exhibit 3.3.
10. (F) 1985 Stock Option Plan -- Incorporated by
reference to the Registrant's Registration Statement on Form
S-1 (File No. 33-2100), Exhibit 10.6.
(I) 1993 Stock Option Plan - Incorporated by reference
to the Registration Statement on Form S-8 filed December 2,
1993.
(J) Management Agreement between the Company and Ace
Surgical Supply Co., Inc. - Incorporated by reference to the
Form 10-Q for quarter ended September 30, 1989.
(K) Lease Agreement between the Company and Ace
Surgical Supply Co., Inc. - Incorporated by reference to the
form 10-K for year ended December 31, 1991.
(L) Recognition Agreement between the Company and
United Production Workers Union, Local 17-18 - Incorporated
by reference to form 10-K for year ended December 31, 1991.
(M) Amendment No. 1 to the Management Agreement with
Ace Surgical Supply Co., Inc. -Incorporated by reference to
Post Effective Amendment No. 2 to the registration statement
on Form S-1 (File No. 33-2100).
(N) Termination Agreement of the Infomercial Agreement
with Direct Marketing Enterprises. Incorporated by reference
to Form 10-KSB for year ended December 31, 1993.
(O) Factor Agreement with Rosenthal & Rosenthal .
Incorporated by reference to Form 10-KSB for year ended
December 31, 1994.
(P) Final Agreement with Shawmut.
(Q) Brabantia Agreement.
REPORTS ON FORM 8-K
None.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
INDEX TO FINANCIAL STATEMENTS
FILED WITH THE ANNUAL REPORT OF THE
COMPANY ON FORM 10-KSB
DECEMBER 31, 1995
INCLUDED IN PART II:
REPORT OF INDEPENDENT AUDITORS BALANCE SHEET AS AT
DECEMBER 31, 1995
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS
ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994 STATEMENTS OF
OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND
DECEMBER 31, 1994
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
1995 AND DECEMBER 31, 1994
NOTES TO FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Creative Technologies Corp.
Brooklyn, New York
We have audited the accompanying balance sheet of Creative
Technologies Corp. as at December 31, 1995 and the related
statements of changes in stockholders' equity, operations
and cash flows for each of the years in the two-year period
then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above
present fairly, in all material respects, the financial
position of Creative Technologies Corp. as at December 31,
1995 and the results of its operations and its cash flows
for each of the years in the two-year period then ended in
conformity with generally accepted accounting principles.
New York, New York
March 19, 1996
<PAGE>
<TABLE>
CREATIVE TECHNOLOGIES CORP.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<CAPTION>
Pro Forma
A S S E T S (Note A[1])
Note B) (Unaudited)
<S> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . .$ 771,000 $ 771,000
Accounts receivable - net of allowance
for doubtful accounts of $450,000 . . . 2,907,000 2,907,000
Inventories (Notes A[4] and C). . . . . . 3,296,000 3,296,000
Prepaid expenses and other current assets 738,000 738,000
Deferred tax benefit (Note I) . . . . . . 400,000 - 0
Total current assets . . . . . . . 8,112,000 7,712,000
Fixed assets - at cost (less accumulated
depreciation and amortization of
$1,423,000) (Notes A[2] and D). . . . . .2,191,000 2,191,000
Intangible and other assets (Note A[3]) 196,000 196,000
Deferred tax benefit (Note I). . . . . . . 45,000 45,000
T O T A L. . . . . . . . . . . . .$10,544,000 $10,144,000
</TABLE>
<TABLE>
<CAPTION>
LI A B I L I T I E S
<S> <C> <C>
Current liabilities:
Loan payable - bank (Note A[1]) . . . . .$ 4,824,000 $ 200,000
Loan balance satisfied prior to
settlement (Note A[1]). . . . . . . . . 1,241,000
Notes payable (Note H[1]) . . . . . . . .2,980,000 4,480,000
Accounts payable and accrued expenses . .1,664,000 1,664,000
Total current liabilities. . . . .9,468,000 7,585,000
Commitments and contingencies
(Notes B, G and K)
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; authorized 5,000,000 (Note
E). . . . . . . . . . . .
Common stock - $.03 par value; authorized 20,000,000 shares;
issued and outstanding
7,501,000 shares (Note F) . . . . . . . 224,000 234,000
Additional paid-in capital . . . . . . . .8,577,000 8,900,000
Deficit. . . . . . . . . . . . . . . . ..(7,675,000)(6,525,000)
Subscription receivable. . . . . . . . . . .(50,000) (50,000)
Total stockholders' equity . . . 1,076,000 2,559,000
T O T A L. . . . . . . . . . .$10,544,000 $10,144,000
<FN>
The accompanying notes to financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
CREATIVE TECHNOLOGIES CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Note A[1])
<CAPTION>
Preferred Stock Common Stock Additional Stock
Number of Number of Par Paid-In Subscription
Shares Value Shares Value Capital Receivable Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994
1,598 $1,598,000 3,585,000 $107,000 $4,532,000 $(3,937,000)$ 2,300,000
Exercise of options
102,000 3,000 69,000 72,000
Dividends paid and accrued
on preferred stock (140,000) (140,000)
Conversion of preferred
stock and accumulated
dividends for common
stock (Note E). . . . .
(1,598)(1,598,000) 1,280,000 38,000 1,680,000 120,000
Net income for the year
ended December 31, 1994 .
3,513,000 3,513,000
Balance - December 31, 1994
- 0 - - 0 - 4,967,000 148,000 6,141,000 (424,000) 5,865,000
Exercise of options . . . . . . . . . . . . . . .
31,000 1,000 8,000 9,000
Issuance of common stock in connection with
private placement (Note F) . . . . . . . . . .
2,503,000 75,000 2,428,000 $(50,000) 2,453,000
Net (loss) for the year ended December 31, 1995
(7,251,000) (7,251,000)
Balance - December 31, 1995
- 0 - - 0 - 7,501,000 224,000 8,577,000 (50,000) (7,675,000) 1,076,000
Pro forma adjustments Note A[1]:
Debt reduction, net of taxes . . . . . . . . .
1,150,000 1,150,000
Common stock issued in connection
with bank settlement (Note A[1])
333,000 10,000 323,000 333,000
PRO FORMA BALANCE (UNAUDITED)
- - DECEMBER 31, 1995.
- - 0 - $ - 0 - 7,834,000 $234,000 $8,900,000 $(50,000) $(6,525,000) $2,559,000
<FN>
The accompanying notes to financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
CREATIVE TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
1995 1994
<S> <C> <C>
Net sales.. . . . . . . . . . . . . .$14,142,000 $30,066,000
Cost of sales. . . . . . . . . . . . .10,885,000 17,082,000
Gross profit . . . . . . . . . . . . . 3,257,000 12,984,000
Operating expenses:
Selling, general and administrative
expenses. . . . . . . . . . . . .9,452,000 8,476,000
Interest expense and financing costs. . .
1,298,000 609,000
10,750,000 9,085,000
Net (loss) income before (benefit)
provision for income taxes. . . (7,493,000) 3,899,000
(Benefit) provision for income taxes
(Note I):
Current . . . . . . . . . . . . . . . .(242,000) 431,000
Deferred. . . . . . . . . . . . . . . . (45,000)
(242,000) 386,000
NET (LOSS) INCOME.. . . . . . . . ..$(7,251,000)$ 3,513,000
Net (loss) income attributable to common
stockholders. . . . . . . . . . . .$(7,251,000)$ 3,478,000
Primary (loss) earnings per common share $(1.33) $.74
Fully diluted earnings per common share $.70
<FN>
The accompanying notes to financial statements
are an integral part hereof.
</TABLE>
<PAGE>
<TABLE>
CREATIVE TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income. . . . . . . . ..$(7,251,000) $ 3,513,000
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization. . . . .600,000 480,000
Loss on write-down of fixed asset. . . 194,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable, prepaid
expenses and other assets.(1,603,000) (1,458,000)
Decrease (increase) in
inventories 2,175,000 (3,076,000)
(Increase) in deferred tax asset . . . . (45,000)
(Decrease) increase in
accounts payable and other
liabilities. . (1,766,000) 1,402,000
Net cash (used in) provided by operating
activities . . . . . . . .(7,651,000) 816,000
Cash flows from investing activities:
Acquisition of fixed assets. .. . . (108,000) (1,646,000)
Acquisition of intangibles . . . . . .(53,000) (24,000)
Net cash (used in)
investing activities. . . . . (161,000) (1,670,000)
Cash flows from financing activities:
Net proceeds from loan payable - bank 4,824,000
Proceeds from notes payable. . . . . 2,280,000 1,950,000
Repayments of notes payable. . . . .(1,400,000) (450,000)
Dividends paid . . . (400,000)
Proceeds from exercise of options. . . . .9,000 72,000
Proceeds from sale of common stock . .2,453,000
Net cash provided by
financing activities. . . . 8,166,000 1,172,000
NET INCREASE IN CASH.. . . . . . . . . .354,000 318,000
Cash - January 1. . . . . 417,000 99,000
CASH - DECEMBER 31. . . . . . . . . . .$771,000 $ 417,000
Supplemental disclosures of cash flow information:
Interest paid. . . . . . . . . . . .$ 1,265,000 $ 611,000
Taxes paid . . . . . . . . . . . . . . .364,000 243,000
<FN>
The accompanying notes to financial statements
are an integral part hereof.
</TABLE>
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company, Pro Forma Information and its
Significant
Accounting Policies:
The Company is engaged in developing, manufacturing,
importing and marketing small household products,
principally to department and discount stores, catalogue and
other retailers as well as directly to consumers through
television infomercials.
During 1995 the Company experienced a net loss of
$7,251,000, and has a negative working capital of
$1,356,000. Therefore, the Company was in default of
certain provisions of its agreement with its lender bank.
As a result, the Company entered into a settlement agreement
with the bank (see Note A[1]).
The Company has reduced expenses by cutting its
administrative staff, closing its assembly plant in
Brooklyn, and moving the manufacturing of its products
overseas. In addition, the Company signed an exclusive
distribution agreement with a company, located in the
Netherlands, that manufactures and distributes high quality
houseware products worldwide.
A stockholder and a spouse of a stockholder have agreed to
loan the Company $800,000 subsequent to December 31, 1995.
The terms are currently being negotiated. Further, the
Company borrowed funds (see A[1] below) to settle the bank
loan. A stockholder has indicated to the Company that he
will provide additional funds if needed. It is the
intention
of management to obtain a line of credit, borrow additional
money privately, or obtain equity financing through private
placements (see Note F[2]).
[1] Pro Forma Information:
In April of 1995 the Company obtained a line of credit and a
term loan from a bank for $14,000,000 and $1,000,000,
respectively. Interest was being charged on both of these
loans at a rate of 1 1/4% above prime and was collateralized
by substantially all of the assets of the Company and the
term loan was personally guaranteed by a stockholder. At
December 31, 1995 the Company was in default of certain
terms of the agreement.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company, Pro Forma Information and its
Significant
Accounting Policies: (continued)
[1] Pro Forma Information: (continued)
In March of 1996, the Company entered into an agreement with
the bank to pay off indebtedness and release both the
Company and the bank from any future obligations. The
Company borrowed additional funds (see Note H) to pay off
the indebtedness. The resulting settlement is summarized as
follows:
Balance of indebtedness December 31, 1995. .. . .$4,824,000
Paid by the Company (see Note H[1]). . . . . . . .1,500,000
Note payable - noninterest bearing issued by
the Company . . . . . . . . . . . . . . . . . .200,000
Assumed by a stockholder of the Company in
exchange for 333,000 shares of common stock . . 333,000
Reduction of indebtedness due to settlement. . . .1,550,000
Payments subsequent to December 31, 1995 - net . .1,241,000
$4,824,000
The pro forma balance sheet and statement of changes in
stockholders equity give effect to this settlement as if it
occurred on December 31, 1995. The estimated gain on this
transaction is 1,150,000 net of tax effect.
[2] Fixed assets:
Fixed assets are being depreciated over their estimated
useful lives ranging from 5 to 7 years. Leasehold
improvements are amortized over the remaining term of the
lease or the life of the improvement, whichever is shorter.
The Company values these assets according to their projected
benefits over their useful life.
[3] Intangible assets:
Amortization of commercial rights and goodwill is provided
for over a five and ten year period, respectively.
[4] Inventories:
Inventories are stated at the lower of cost (first-in, first
out) or market.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company, Pro Forma Information and its
Significant
Accounting Policies: (continued)
[5] Revenue recognition:
Revenue is recognized upon shipment of merchandise which has
a limited one year warranty on parts and labor. The Company
returns defective parts to vendors for credit. Product
warranty costs have been insignificant and are charged to
expense as incurred. The Company provides for returns and
allowances based on historical experience.
[6] Net income per share of common stock:
Primary earnings per share is based on the weighted average
number of common and common equivalents (stock options and
warrants) outstanding, when dilutive. Fully diluted
earnings per share for 1994 assumes conversion of the
preferred stock and accrued dividends into common stock.
Shares used in the computation of earnings per share are as
follows:
1995 1994
Primary. . . . . . . . . . . 5,433,000 4,703,000
Fully diluted. . . . . . . . 5,044,000
[7] Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company, Pro Forma Information and its
Significant
Accounting Policies: (continued)
[8] Change in accounting principle and recently issued
accounting pronouncements:
In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" ("SFAS 121"),
and Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 121 requires, among other things, that
entities identify events or changes in circumstances
which indicate that the carrying amount of an asset may
not be recoverable. SFAS 123 requires, among other
things, that companies establish a fair value based
method of accounting or disclosure for stockbased
compensation plans.
The effects upon adoption of SFAS 121 and SFAS 123 are
considered to not be material.
(NOTE B) - Concentration of Credit Risk/Factoring
Arrangements:
In April of 1995, the Company terminated its relationship
with its factor. During the years ended December 31,
1995 and
1994, the factors' commissions and interest charges were as
follows:
Commissions
Interest
1995. . . . . . . . . . . . . $ 47,000 $153,000
1994. . . . . . . . . . . . . 330,000 476,000
(NOTE C) - Inventories:
Inventories are comprised of the following:
Finished goods. . . . . . . . . . . . . $1,840,000
Work in process . . . . . . . . . . . . 197,000
Parts . . . . . . . . . . . . . . . . . 1,259,000
T o t a l . . . . . . . . . . $3,296,000
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE D) - Fixed Assets:
Fixed assets are comprised of the following:
Molds . . . . . . . . . . . . . . . . . $ 2,511,000
Equipment . . . . . . . . . . . . . . . 125,000
Furniture and fixtures. . . . . . . . . 218,000
Leasehold improvements. . . . . . . . 761,000
T o t a l . . . . . . . . . . 3,615,000
Less accumulated depreciation and
amortization . . . . . . . . . . . . (1,424,000)
B a l a n c e . . . . . . . . $ 2,191,000
As a result of operations during 1995, the Company reduced
the carrying value of certain fixed assets by approximately
$194,000 based on cash flow considerations. The Company
believes that this reduction will result in the fixed assets
being carried at recoverable values.
(NOTE E) - Preferred Stock:
During 1994, all of the Company's 1,598 shares of preferred
stock and accumulated unpaid dividends were converted into
common stock as follows:
Total Common
Conversion Unpaid Converted
for
Conversion Shares Upon
Date of Conversion Series Shares Value Dividends Common
Shares Price Conversion
March 31, 1994 1989 550 $550,000 $550,000 $1.50 367,000
September 30, 1994 1989 50 50,000 25,000 75,000 1.50 50,000
March 31, 1994 1990 425 425,000 425,000 .75 566,000
March 31, 1994 1992 573 573,000 95,000 668,000 2.25 297,000
$1,598,000 $120,000 $1,718,000 1,280,000
During 1994, dividends on all series of preferred stock
totalled approximately $35,000 and dividends paid in cash to
preferred stockholders, inclusive of arrearages, was
approximately $400,000.
If the conversion of these shares and dividends occurred on
January 1, 1994 earnings per share would have been $.70 for
the year ended December 31, 1994.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Capital Stock:
[1] The Company has a stock option plan (the "1985 Plan")
which provides for issuance of incentive stock options or
nonqualified stock options to key employees, directors,
officers and consultants. The aggregate number of shares of
common stock which may be issued under the 1985 Plan is
233,000. No additional options may be granted under this
Plan. Options become exercisable in annual installments
commencing one year from date of grant and expire, if not
exercised, within a maximum of ten years (five years for a
ten percent or greater stockholder). Incentive stock
options may not be granted at less than the fair market
value of the underlying shares at date of grant (110% of
fair market value for a ten percent or greater stockholder).
Effective 1993, the Company established a stock option plan
(the "1993 Plan") for eligible employees and certain outside
consultants. The aggregate number of shares of common stock
to be issued under this Plan is 500,000. Options are
granted at the discretion of the Board of Directors.
Options granted under the 1993 Plan expire at the end of
five or ten years from the date of grant or 89 days after
termination of employment, whichever is earlier.
A summary of stock option activity related to the above
Plans is as follows:
Number of
Number Option Price
Shares
of Shares Per Share
Exercisable Outstanding at
January 1, 1994. . . . . 226,000 $ .30 - $ 4.25
155,000
Granted . . . . . . . . . . 150,000 $3.875
Exercised
. . . . . . . . . (102,000) $ .30 - $ 3.00
Expired . . .. . . (7,000) $ .30 - $ 3.00
Outstanding at
December 31, 1994. . . . 267,000 $ .30 - $ 4.25
101,000
Granted . . . . . . . . . . 280,000 $ 1.82 - $ 5.72
Exercised . . . . . . . . . (31,000) $.30
Expired and canceled. . . . (190,000) $3.875 - $ 4.75
Outstanding at
December 31, 1995. . . . 326,000
161,000
[2] During 1995, the Company raised approximately $2,503,000
in connection with a series of private placements at a price
of $1.00 per share of common stock. 830,000 of these shares
were issued as of December 31, 1995. The issuance of the
remaining 1,673,000 shares was subject to stockholder
approval pursuant to NASD rules which was obtained at a
stockholders' meeting in January of 1996. At this meeting
the stockholders approved the issuance of 4,000,000 shares.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Capital Stock: (continued)
[3] Warrants:
At December 31, 1995, shares of common stock were reserved
for issuance upon exercise of warrants as follows:
Number of Exercise Expiration
Shares Reserved Price Date
31,000 (a) $3.00 June 21, 1997
41,000 (b) $4.00 April 1, 2000
4,000 (c) $4.00 May 1, 2000 through August 1, 2000
50,000 (d) $1.82 August 22, 2000
(a)Issued in 1992 to former guarantors of debt.
(b)Issued in April 1995 in connection with the obtaining of
financing.
(c) Issued 1,000 per month commencing in May 1995 through
August 1995 in connection with the obtaining of
financing. (d ssued in August 1995 in connection with a
series of
private placements.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL
STATEMENTS
(NOTE G) - Commitments and
Contingencies:
[1] The Company is obligated under a lease with a
company owned by the Company's principal stockholders for
office and factory space expiring December 31, 2001. The
lease provides that annual rent payable under the lease
shall be based on the then current economic condition,
including availability of comparable rental space in the
local area. The Company is also subject to additional
payments for real estate tax and
other assessments. The Company has also entered into a
month
to-month lease for an office in Hong Kong. Rent and other
expenses for office and factory space for 1995 and 1994
aggregated $624,000 and $628,000, respectively.
Substantially all of this rent was to a related party.
Included in accounts payable and accrued expenses at
December 31, 1995 is approximately $360,000 due to the
related company for rent in arrears.
[2] The Company has a contract with an officer/shareholder
expiring in December 1997, which provides for annual
negotiation of salary and bonus. Salary for this individual
aggregated approximately $188,000 and $234,000 for 1995 and
1994, respectively.
(NOTE G) - Commitments and Contingencies: (continued)
[3] The Company had an outstanding letter of credit in the
amount of $656,000 at December 31, 1995 which was
collateralized by cash.
(NOTE H) - Notes Payable and Related Party Transactions:
[1] At December 31, 1995 the Company had outstanding notes
payable totalling $2,980,000. These notes are all due by
September 30, 1996 and bear interest at 18%. Of this
amount, $1,000,000 is due to an entity whose principal is a
director of the Company. The remaining $1,980,000 is
payable to various individuals who are stockholders or
entities whose principals are stockholders of the Company.
These notes payable are personally guaranteed by certain
stockholders of the Company.
Subsequent to year end the Company borrowed an additional
$1,543,000 from certain individuals known to two major
stockholders on a short term basis with interest ranging
from 18% to 24%.
It is not practicable to calculate the fair value of these
notes payable.
[2] In December 1992, as consideration for waiving its right
to share in the Company's profits under a 1989 management
agreement, Ace Surgical Supply Co., Inc., whose chairman is
a principal stockholder of the Company, was granted an
exclusive worldwide license to manufacture and sell an
industrial version of the Grill Express. Under this
agreement, the Company is entitled to a 5% royalty on the
net selling price of such product. As of December 31, 1995
no monies have been received under the above agreement.
[3] Interest expense on the above mentioned notes payable
was approximately $496,000 and $120,000 for 1995 and 1994,
respectively.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Income Taxes:
The major deferred tax asset (liability) items at December
31, 1995 are as follows:
Total Current Noncurrent
Net operating loss
carryforwards. $ 3,450,000 $ 197,000 $ 3,253,000
Provision for doubtfu
laccounts 203,000 203,000
Depreciation of fixed
assets . . . . 50,000 50,000
3,703,000 400,000 3,303,000
Valuation
allowance (3,258,000) (3,258,000)
$ 445,000 $ 400,000 $ 45,000
The difference between the tax provision (benefit) and the
amount that would be computed by applying the statutory
Federal income tax rate to income before taxes is
attributable to the following:
December 31,
1995 1994
Income tax provision at 34% . $(2,548,000) $1,326,000
Provision (benefit) for state and
local income taxes - net of
federal benefit . . . (805,000) 323,000
Federal alternative tax . . . . . . 63,000
Increase (reduction) in valuation
allowance on deferred
tax assets. . . . 3,258,000 (1,556,000)
State alternative tax . . . . . . . 178,000
Other . . . . . . . . . . . . . . (147,000) 52,000
$ (242,000) $386,000
In 1994, $178,000 of deferred tax asset was written off
against the valuation allowance for operating loss
carryforwards lost due to state alternative tax and the
balance of the valuation allowance was reversed.
<PAGE>
CREATIVE TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Income Taxes: (continued)
The Company's net operating loss carryforwards for income
tax reporting purposes aggregate approximately $7,672,000
with the following expiration dates: $178,000 in year 2007
and the remaining balance of $7,494,000 expires in year
2010. Due to the Company's private placement during 1995,
the Company's annual use of the net operating loss
carryforwards may be limited pursuant to Section 382 of the
Internal Revenue Code. Management believes no such
limitation applies.
(NOTE J) - Other Matters:
The Company purchases a significant portion of its finished
goods from The Peoples Republic of China, where
substantially all the Company's manufacturing equipment is
located.
(NOTE K) - Product Liability and Litigation:
The Company has received notice that several consumers claim
to have suffered finger injuries while using one of the
Company's appliance products. The claims are covered by the
Company's product liability insurance carrier. The Company
redesigned the appliance in August 1992, and believes that
the modification made should minimize the possibility of
such injury. The Consumer Product Safety Commission (the
"CPSC") has made a preliminary determination that the
Company's appliance product represents a "substantial
product hazard" as that term is defined in the Consumer
Product Safety Act. The Company has disputed this
preliminary determination and is currently involved in
negotiations with the CPSC to try to resolve this matter.
In November 1995, the Company filed a lawsuit against a
vendor seeking damages of $1,700,000 for breach of contract
and breach of warranty with respect to the vendor's
manufacturing of certain products. In January 1996, the
vendor denied the allegations in the complaint and
counterclaimed for $1,400,000 predicated primarily upon
allegations that the Company wrongfully cancelled pending
purchase orders. The Company believes that due to vendor
breaches, the Company was within its rights to cancel the
orders.
The Company believes that the ultimate resolution of these
matters will not have a material effect on its financial
condition.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of
the Securities and Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CREATIVE TECHNOLOGIES CORP.
By: S/RICHARD HELFMAN
Richard Helfman, President
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
s/Benjamin Sporn Chairman of the Board
Benjamin Sporn of Directors
March 29, 1996
s/David Refson Vice Chairman of the
David Refson Board and Director
March 29, 1996
s/ David Guttmann Director and Chief
David Guttmann Executive Officer
March 29, 1996
s/Richard Helfman President, Director and
Richard Helfman Chief Financial Officer
March 29, 1996
SETTLEMENT AGREEMENT
THIS AGREEMENT is made as of this 7th day of
March, 1996, by and among Fleet Capital Corporation
(formerly known as Shawmut Capital Corporation) ("Fleet"),
Creative Technologies Corp. a New York corporation,
("Creative"), and David Guttmann ("Guttmann").
WHEREAS, Creative is indebted to Fleet pursuant to
that certain Loan and Security Agreement dated April 19,
1995 by and between Fleet and Creative, as may have been
amended from time to time (the "Loan Agreement").
Capitalized terms used as defined terms but not otherwise
defined herein shall have the meanings ascribed to such
terms in the Loan Agreement.
WHEREAS, as of February 29th, 1996, the amount of
Creative's Obligations presently due to Fleet under the Loan
Documents is approximately $2,736,143.95, and whereas
interest, costs and expenses, including attorneys' fees,
continue to accrue pursuant to the Loan Documents.
WHEREAS, repayment of the Obligations is secured
by properly perfected security interests in, among other
things, the Collateral;
WHEREAS, Creative is in default of its obligations
to Fleet under the Loan Documents, and the Obligations are
due and payable;
WHEREAS, repayment of the Obligations to Fleet is
guaranteed by Guttmann pursuant to a certain Guaranty dated
April 12, 1995 (the "Guaranty");
WHEREAS, Creative has agreed that it is in
material default under the Loan Documents and Creative has
requested, therefore, that Fleet consent to the terms of
this Agreement.
WHEREAS, the parties hereto desire to resolve
certain claims, issues and potential disputes among them
relating to the matters described above pursuant to the
terms of this Agreement set forth below.
NOW, THEREFORE, in consideration of the recitals,
representations, releases and undertakings set forth herein,
and other good and valuable consideration, the receipt and
sufficiency of which are hereto acknowledged by all parties,
the parties hereto hereby agree as follows:
1. Incorporation of Recitals. The above
recitals are true, accurate and a material part of this
Agreement, and are hereby incorporated in Agreement by this
reference.
2. Monetary Obligations of Creative. Creative
hereby agrees to pay Fleet, in immediately available good
funds, the following amounts at the following times: (a)
$1,500,000 on or before March 15, 1996, or, alternatively,
$1,600,000 on or before March 31, 1996 (the "Principal
Reduction"); provided, however, that the amounts payable by
Creative pursuant to this clause (a) shall be reduced by
cash proceeds of Collateral received by Fleet during the
period commencing February 7, 1996 and ending on the date of
the payment of the Principal Reduction and (b) $200,000 on
or before the date two years after the date of payment of
the Principal Reduction made pursuant to paragraph (a) above
(the "Deferred Portion"). No interest shall accrue on the
Deferred Portion so long as no Creative Event of Default (as
defined below) has occurred and is continuing and shall
thereafter accrue at the rate of five percent (5%) per
annum plus the Base Rate. Upon and after a Creative Event
of Default all interest shall be payable upon demand.
3. Monetary Obligations of Guttmann. Guttmann
hereby agrees to pay Fleet, in immediately available good
funds, an amount equal to $333,333.00 (the "Guttmann
Portion"), payable as follows: the sum of $5,000.00 on March
5, 1996, and on the first day of each month thereafter until
the Guttmann Portion is paid in full, the last installment
being in the amount of the entire unpaid balance of the
Guttmann Portion (plus accrued interest) in full and final
settlement of Guttmann's obligations to Fleet under the
Guaranty. Interest at the Base Rate shall accrue on the
Guttmann Portion from the date hereof, on the balance of
principal thereof remaining from time to time unpaid. Upon
and after a Guttmann Event of Default,
interest shall accrue on the unpaid principal balance of the
Guttmann Portion at a rate of five percent (5%) per annum
plus the Base Rate. All payments made by Guttmann to Fleet
pursuant to this Paragraph 3 shall be applied first to
accrued and unpaid interest and then to principal.
Guttmann's obligations described in this Paragraph 3 shall
be further evidenced by a Promissory Note made by Guttmann
in favor of Fleet, in the form attached hereto as Exhibit A.
4. Prepayment of Creative and Guttmann
Obligations. Principal payments of the Deferred Portion and
the Guttmann Portion may be prepaid, without penalty, in
minimum increments of $500.00. Any such payments received by
Fleet shall be applied first to accrued and unpaid fees,
costs, expenses and interest and then to principal.
5. Fleet's Rights Upon Default. If (a) Creative
fails to make any of the payments as and when required
pursuant to Paragraph 2 above, (b) Creative fails to perform
any of its other obligations hereunder or (c) a voluntary or
involuntary bankruptcy petition is filed by or against
Creative (and in the case of an involuntary petition, such
petition is not dismissed within forty five (45) days after
the date of its filing) (each, a "Creative Event of
Default"), then Creative shall be in default hereunder and
the remaining portion of the Deferred Portion obligation of
Creative hereunder shall be immediately due and payable. If
(x) Guttmann fails to make any of the payments as and when
required pursuant to Paragraph 3 above with respect to the
Guttmann Portion and such failure is not cured within five
days after receipt of facsimile or other notice thereof from
Fleet, (y) Guttmann fails to perform any of his other
obligations hereunder or (z) a voluntary or involuntary
bankruptcy petition is filed by or against Guttmann (and in
the case of an involuntary petition, such petition is not
dismissed within forty-five (45) days after the date of its
filing) (each, a "Guttmann Event of Default"), then Guttmann
shall be in default hereunder and the remaining portion of
the Guttmann Portion obligation of Guttmann hereunder shall
be immediately due and payable.
6. Creative's Rights Upon Full and Final
Payment. Upon the full and "final" payment to Fleet of the
Principal Reduction, Fleet agrees to waive the unpaid
balance of the Obligations. Upon actual receipt of the
amounts owing with respect to the Principal Reduction Fleet
shall release any and all Collateral securing the
Obligations. Such release shall in no way affect Creative's
obligation to pay the Deferred Portion as specified herein.
For purposes of this Paragraph 6, "final" payment shall mean
payment to Fleet at such time: (i) ninety-one days has
passed following the last date on which the actual Principal
Reduction payments have been received by Fleet, and, on the
ninety-first day, neither Guttmann nor Creative has either
commenced a bankruptcy case or had a bankruptcy case
commenced against him or it by his or its creditors or (ii)
if a bankruptcy case is commenced by or against either of
Guttmann or Creative within such ninety-one day period
referenced to in clause (i) above, (1) Fleet has not been
required under the provision of any applicable law,
including without limitation any bankruptcy law, to disgorge
all or any portion of the payments with regard to the
Principal Reduction or to any bankruptcy trustee of their
respective bankruptcy estates, and (2) neither Guttmann nor
Creative or any trustee of their respective bankruptcy
estates or any creditor of Guttmann and Creative can legally
assert any action against Fleet under applicable law,
including without limitation any bankruptcy law, seeking the
recovery from Fleet of all or any portion of the payments
with regard to the Principal Reduction. Upon receipt by
Fleet of actual payment of the Principal Reduction, Fleet
agrees to deliver to Creative (a) UCC termination statements
relating to the Collateral and (b) letters addressed to
Litle & Co. and to Harris Bank authorizing them to remit
receipts as per Creative's direction.
7. Creative's Reaffirmations and Release of
Fleet. Creative hereby reaffirms, ratifies and confirms the
Loan Documents in all respects and, until full and "final"
payment to Fleet as referred to in Paragraph 6, above,
agrees that its liabilities thereunder will continue to
apply with respect to the Obligations, subject to being
reduced or waived pursuant to Paragraph 6, above. Such
release shall in no way affect Creative's obligations to pay
the Deferred Portion as specified herein. Creative hereby
fully and forever waives, releases, withdraws and discharges
any and all defenses, rights of set-off or counterclaims
that it may now or hereafter have under, or relating to, the
Loan Documents and the Obligations. Creative hereby
remises, releases and forever discharges Fleet and its
affiliates, directors, officers, employees, agents,
representatives, successors and assigns from liability for
any and all claims, controversies, actions, causes of
actions, demands, debts, contracts, agreements, promises,
representations, torts, damages, costs, attorneys' fees,
judgments or other liabilities or obligations of any nature
whatsoever in law or in equity, arising out of any agreement
or imposed by law or otherwise, from the beginning of time
to the date on which this Agreement is signed, whether or
not now, heretofore, or hereafter known or unknown,
anticipated or unanticipated, suspected or claimed, fixed or
contingent, whether yet accrued or not, and whether damage
has yet resulted from such or not, including but not limited
to any claims based on, arising out of, or relating in any
manner to, the Loan Documents, the Obligations or Fleet's
administration thereof.
8. Guttmann's Reaffirmations and Releases of
Fleet. Guttmann hereby reaffirms, ratifies and confirms the
Loan Documents and the Guaranty in all respects and agrees
that his liabilities under the Guaranty will continue to
apply with respect to the Obligations until full and "final"
payment to Fleet as referred to in Paragraphs 3 and 6,
above. Such release shall in no way affect Guttmann's
obligation to pay Guttmann's Portion as specified herein.
Guttmann hereby fully and forever waives, releases,
withdraws and discharges any and all defenses, rights of set-
off, or counterclaims that he may now or hereafter have
under, or relating to, the Guaranty, the Loan Documents and
the Obligations. Guttmann hereby remises, releases and
forever discharges Fleet and its affiliates, directors,
officers, employees, agents, representatives, successors and
assigns from liability for any and all claims,
controversies, actions, causes of actions, demands, debts,
contracts, agreements, promises, representations, torts,
damages, costs, attorneys' fees, judgments or other
liabilities or obligations of any nature whatsoever in law
or in equity, arising out of any agreement or imposed by law
or otherwise, from the beginning of time to the date on
which this Agreement is signed, whether or not now,
heretofore, or hereafter known or unknown, anticipated or
unanticipated, suspected or claimed, fixed or contingent,
whether yet accrued or not, and whether damage has yet
resulted from such or not, including but not limited to any
claims based on, arising out of, or relating in any manner
to, the Loan Documents, the Obligations, the Guaranty or
Fleet's administration thereof.
9. Representations and Warranties of Guttmann
and Creative. Guttmann and Creative warrant and represent
to Fleet that they have neither made, nor suffered to be
made, nor will make, any assignment or transfer of any
claims, controversies, actions, causes of action, demands,
debts, contracts, agreements, promises, representations,
torts, damages, costs, attorneys' fees, judgments or other
liabilities or obligations covered by the respective
releases given by them pursuant to this Agreement and that
each
party is the sole and absolute legal and equitable owner of
all thereof.
10. Access to Books and Records. Creative and
Guttmann
shall maintain and preserve in good order and condition all
of Creative's books and records until such time as the
obligations under this Settlement Agreement has been paid in
full and shall promptly, upon Fleet's reasonable request,
turn over all such books and records to Fleet or make such
books and records available to Fleet or Fleet's agents for
duplication.
11. Additional Covenants of Guttmann. Guttmann
shall pay
or cause to be paid all operating deficits of Creative
occurring during the period commencing on the date hereof
and ending on the date of the payment of the Principal
Reduction.
12. Additional Covenants of Creative. Until full
and
final payment to Fleet as referred to in Paragraph 6 above,
Creative shall comply with all financial and other reporting
requirements provided in the Loan Agreement, including
without limitation the requirements set forth in Section
8.1.3 of the Loan Agreement, provided; however, that unless
Creative is notified in writing by Fleet to the contrary,
from and after actual payment of the Principal Reduction,
the only reporting requirements that Creative must comply
with are those set forth in Section 8.1.3(iii) of the Loan
Agreement.
13. Integration and Amendment. This Agreement
constitutes the sole, complete and entire agreement and
understanding of the parties hereto concerning the subject
matter hereof, and this Agreement may neither be altered,
modified, or changed in any manner, nor may any of the
provisions herein be waived, except by a writing duly
executed by the authorized representatives of the parties
hereto. No statements, promises or representations have
been made by any party to any other party, and no
consideration has been or is offered, promised, expected or
held out, other than as stated in this Agreement. No party
is relying on any representations other than those expressly
set forth in this Agreement, and no conditions precedent to
the effectiveness of this Agreement exist, other than as
expressly provided herein. All prior discussions and
communications have been and are merged and integrated into
and superseded by the terms and provisions of this
Agreement.
14. Binding Effect. All of the terms and
provisions
contained in this Agreement shall be binding upon and inure
to the benefit of each of the parties hereto, their
respective legal representatives, heirs predecessors,
successors, heirs and assigns; provided, however, that this
Agreement shall not be binding upon Fleet, at its option,
until executed and delivered by Creative and Guttmann.
15. Construction. This Agreement shall be
construed
without reference to any canon or rule requiring
construction against the party causing this Agreement to be
drafted. This Agreement is an Other Agreement.
16. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute but one and the same document.
17. Governing Law. This Agreement shall be
governed by,
and construed in accordance with, the internal laws of the
State of Illinois, without giving effect to conflicts of law
principles.
18. Mutual Representations and Warranties. Each
individual signing this Agreement represents and warrants
that such individual has the authority and legal ability to
execute and consent to this Agreement on behalf of the party
for whom he or she signs.
19. Descriptive Headings. The description
headings of this Agreement are inserted for convenience only
and are not intended to indicate all of the matter following
them. Accordingly, they shall not control, limit or
otherwise affect the meaning or construction of any of the
provisions hereof.
20. Notices. All notices under this Agreement
shall be in writing and delivered in accordance with Section
11.8 of the Loan Agreement.
21. No Novation. Nothing in this Agreement
constitutes or shall be construed as a novation or other
compromise of the Obligations and the Obligations shall
remain unaffected and unaltered, except as expressly
provided in this Settlement Agreement.
22. Severability. The invalidity, illegality, or
unenforceability of any provision of this Agreement shall
not invalidate this Agreement as a whole, but this Agreement
shall be construed as though it did not contain the
particular provision held to be invalid, illegal or
unenforceable and the rights and obligations of the parties
shall be construed and enforced only to the such extent as
shall be permitted by applicable law.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first hereinabove written.
FLEET CAPITAL CORPORATION
(formerly known as Shawmut Capital
Corporation)
By
Its
CREATIVE TECHNOLOGIES CORP.
By
Its
David Guttmann, guarantor
DISTRIBUTORSHIP AGREEMENT
The undersigned:
1.the limited liability company Brabantia Valkenswaard
Beheer B.V., incorporated and existing under the laws of
The Netherlands with registered office at Leenderweg 182,
5555 CJ Valkenswaard, The Netherlands, legally represented
in this matter by its sales director Mr. Torben Sorensen,
resident in Nuenen, hereinafter referred to as "Brabantia",
and
2.the limited liability company Creative Technologies Corp.,
incorporated and existing under the laws of New York, with
registered office in 170 53rd Street, Brooklyn, New York
11232, USA, legally represented in this matter by its
President, Richard Helfman, and by its CEO, David Guttmann,
hereinafter referred to as "Distributor",
WHEREAS:
parties wish to enter into a exclusive distributorship
agreement;
DECLARE THAT THEY HAVE AGREED AS FOLLOWS:
Article 1. - Exclusive sale, demarcation and protection of
territory.
1.Brabantia hereby grants to Distributor the exclusive right
in the area comprising the territory of USA, hereinafter
referred to as "the territory", to sell as a distributor
for Brabantia all products produced and marketed by
Brabantia under their brand name(s), specified in
Appendix A, hereinafter referred to as "the products". A
separate agreement in writing is required before new
products can be added. Distributor is familiar with the
distributorship agreement between Brabantia and Chantal
Cookware Corp.
2.Brabantia undertakes for the term of the agreement not to
appoint any third parties as importers, representatives,
sales agents, intermediaries or other agents howsoever
described in respect of the territory or market its
products to third parties having their domicile or
registered office in the territory other than through
Distributor: Brabantia shall transmit to Distributor all
orders and enquiries coming from (potential) customers in
the territory.
3.During the term of this agreement and for a period of six
months after termination of this agreement, Distributor
shall not sell or market products obtained from suppliers
other than Brabantia which products are in competition
with products manufactured or marketed by Brabantia.
If Distributor wishes to sell non-competing products of
another make or if, at the date this agreement is executed
by both parties, it does so already, it shall inform
Brabantia.
If Distributor undertakes such an activity, the regular
performance of his obligations towards Brabantia must not
be prejudiced thereby.
Distributor shall not knowingly make any sales of the
products and shall refrain from seeking customers outside
the territory. Further Distributor shall refrain from
marketing the products to a third party if it knows or
should know that the aforementioned third party intends or
plans to market the products outside the territory.
Brabantia will inform Distributor if Brabantia knows that
one of their other distributors intends or plan to market
the products in the territory (this means exports from
their own territory).
In that case Brabantia will take appropriate steps.
Distributor is not allowed to take any direct (legal)
actions against theaforementioned distributor.
4.Distributor shall sell or otherwise market the products
exclusively under Brabantia's current and future
brand names or any other symbols, using only Brabantia's
codes and type descriptions. Brabantia hereby grants
Distributor the non-exclusive and non-transferable
licenses required for the purpose of identifying and
advertising the products, within the scope of this
agreement.
Distributor shall not be permitted to issue sublicenses or
to allow unlicensed manufacture of the products. Further
Distributor is not allowed to use the brand names and/or
any other symbols of Brabantia as part of his business
name and is not allowed to remove or to change any brand
name or symbol of Brabantia on the products.
Distributor shall be empowered to affix on the products of
Brabantia which are sold by it a plate bearing its trade
name. This plate shall not detract from or dominate the
Brabantia markings.
Distributor shall neither register, nor have registered,
any of the above mentioned brand names or symbols or
Brabantia (or which are similar to those of Brabantia), in
the territory or elsewhere. Except for liquidating the
stock held by Distributor, Distributor's right to use the
Brabantia's brand names or symbols shall cease immediately
on the expiration or termination for any reason of the
agreement.
5.Distributor shall provide Brabantia with its purchase
schedule and market plans for Brabantia's fiscal year
(January 1st - December 31st inclusive) by November 1st of
each year at the latest. This schedule shall be updated by
Distributor on a quarterly basis. The minimum purchase
amounts and the budgets are specified in Appendix B.
The parties will stipulate how the different quotas are to
be spread over the various years. Brabantia will hand over
the structure for the aforementioned market plan to
Distributor and discuss with Distributor every year (the
means and methods to reach) the goals as well as the
possible contribution of Brabantia to the investments to
be made by Distributor.
This minimum purchase amounts have also been laid down in
good understanding between the parties on the basis of the
knowledge of both parties of the market potential existing
in the territory. If Distributor fails (or threatens to
fail) to achieve the annual minimum purchase amount a
default notice may be served in writing by Brabantia.
Article 1, section 5 (with the exception of the minimum
purchase amount) is applicable as of November 1st, 1996.
Article 2. - The legal relationship between the parties.
1.The relationship between Brabantia and Distributor is that
of seller and buyer. Distributor shall neither be a
representative, agent or nominee of Brabantia nor be
associated with Brabantia in any other way. The products
shall therefore be marketed by Distributor in the
territory on its own account and at its own risk. If, in
order to sell the products, testing and certification are
required in the territory, the costs resulting from this
are borne by Distributor.
2.Each party shall insure at its own expense the risks in
its own area of responsibility.
3.To the extent that Distributor may be charged with
expenses due to damages that have occurred due to
dangerous properties of the products (product liability),
Brabantia is obliged to indemnify Distributor.
4.To the extent that Brabantia may be charged with expenses
due to damages arising from the products caused by
conditions for which Distributor is responsible,
Distributor is obliged to indemnify Brabantia.
Article 3. - Further obligations of Distributor.
1.Distributor shall promote the products throughout the term
of this agreement to the best of its knowledge and ability
and in good faith and refrain from doing anything which
could damage Brabantia's good name and corporate image.
2.Distributor shall set up and maintain an efficient sales
organization for the products at its own expense, risk and
responsibility. Distributor shall be expected to undertake
effective sales promotion and maintain the demand for the
products in the territory.
Distributor shall reasonably advertise the products in the
territory at its own expense; the incentive of Brabantia
is mentioned in Article 1, section 5. The name "Brabantia"
and the "Brabantia logo" shall be reasonably used for this
purpose. This is in order to take advantage of the synergy
effects resulting from Brabantia's international
advertising activities.
Distributor is obliged for the term of the agreement to
obtain and renew registrations and licenses both for
itself and for the products from all the appropriate
federal, national and local authorities, commercial
registers, trade associations and other authorities or
institutions, where this is mandatory or can be reasonably
recommended, to enable the products to be duly marketed in
the territory.
Distributor shall keep Brabantia informed of any relevant
developments in the territory which could have a direct or
indirect effect on Brabantia and its products. This
includes e.g. any structural shifts in the markets, new
competitor products or products lines, changes in
regulations and standards, fairs and exhibitions as well
as all acts of unfair competition affecting Brabantia and
of all infringements of intellectual property rights of
Brabantia which come to its notice. The costs of gathering
information externally (to be approved by Brabantia) will
be borne by Brabantia.
Distributor shall assist Brabantia to the best of his
abilities to protect itself against such acts and
infringements. Distributor shall not participate in fairs
and exhibitions if Brabantia is thereby excluded from
other international fairs and exhibitions in which it
wishes to participate, by virtue of the regulations of the
same.
3.Drawings, technical documents or other technical
information received by Distributor shall not, without
Brabantia's prior consent in writing, be used for any
other purpose than the selling of the products. They may
not be otherwise used or copied, reproduced, transmitted
and/or passed on to a third party; they have to be
returned immediately at the request of Brabantia. All
drawings and technical and commercial documents relating
to the products, their manufacture or their use which have
been passed to Distributor before or after the signing of
this agreement, including all intellectual property
rights, shall remain the property of Brabantia.
4.Where an accident involving one of the products occurs in
the territory, Distributor must notify Brabantia by fax
without delay and be prepared to cooperate fully with
Brabantia to carry out a damage analysis and appraisal.
This is to fulfil a legal liability and to defend any
legal claim of the parties on their respective areas of
responsibility. This obligation shall remain in force
until final settlement of the claim; it shall be observed
in all cases to prevent (further) damages.
5.Distributor must require every employee concerned with the
products to be fully familiar with the contents of the
documentations supplied by Brabantia before concluding any
sales.
6.It shall be the sole duty of Distributor to comply with
the provisions of this agreement. Distributor shall not be
entitled to transfer its rights arising out of this
agreement in whole or in part to third parties.
7.Distributor shall not be permitted to alter or modify the
products and/or the instructions how to use the products.
Article 4. - Further obligations of Brabantia.
Without prejudice to the other provisions in this agreement
Brabantia shall be obliged:
1.To provide Distributor with technical and sales support,
especially during the first six months;
2.To meet with Distributor at least once a quarter during
the first year of this agreement at request of
Distributor, in order to assist Distributor to
successfully market the products in the territory;
3.To devote all possible attention to orders placed and
accepted, to carry them out carefully in accordance with
the requirements and to ensure that the products to be
supplied have a consistent level of quality;
4.To use its best efforts to deliver the products on the
agreed delivery date; in the event of unforeseen delay
Brabantia shall notify Distributor in good time; failure
to meet delivery dates shall not however constitute
grounds for a claim for compensation or cancellation of
the affected order or previous order(s); however, if the
delay exceeds sixty days, Distributor is entitled to annul
the delayed order if Brabantia - after written demand
hereof from Distributor - is unable to deliver within a
reasonable time-limit hereafter; annulment of a delayed
order does not entitle Distributor to annul other orders
and is not regarded as good cause in Article 10, section
2, unless delays have occurred repeatedly during a
substantial period; further Brabantia shall not be obliged
to accept uncoordinated individual orders;
5.To give notice of any major technical modifications in
good time and in writing, issuing at the same time the
necessary technical and where appropriate, pricing
documentation;
6.To announce in good time that a model or type or color of
the products is being taken out of production;
7.To issue a certificate of origin at request of
Distributor.
Furthermore Brabantia shall accept liability in the event of
damage or personal injury caused by its products, if, and
to the extent, such claim is recoverable under its product
liability insurance, irrespective of the basis of the
claim. The sum insured is a maximum of Dutch Guilders
5,000,000.00 per claim and Dutch Guilders 10,000,000.00
per year.
Article 5. - Terms of delivery.
1.All quotations issued by Brabantia are without engagement.
A contract is concluded as soon as Brabantia has confirmed
an (individual) order placed by Distributor.
Brabantia may assume that orders are only issued by duly
authorized employees of Distributor. Orders and
confirmation of the orders must be in writing. This also
applies to any amendments or additions to orders already
placed. Therefore an amended order placed by Distributor
does not bind Brabantia unless Distributor has placed an
amended order with Brabantia within five days of the date
of Brabantia's written confirmation of the original order
and such amended order has itself been confirmed in
writing by Brabantia.
Illustrations, sketches, drawings, specifications and
similar details supplied to Distributor at the quotation
stage only serve as a rough indication for the products to
be delivered and shall only deemed to be binding if they
have been confirmed by Brabantia after an order has been
placed. Brabantia shall not be bound by any obvious
errors in printed material, drawings, sketches and other
documents or any measurements, clerical errors or
arithmetical errors.
2.In case of a complex quotation of prices there is no
obligation for delivery of a part against a corresponding
part for the price stated for the entire order.
3.Delivery f.o.b. according to Incoterms. The delivery time
is extended with the time during which Distributor remains
negligent to observe any obligation of payment or any
other obligation resulting from the order or this
agreement.
4.If the products are not accepted by Distributor when
delivered, Distributor shall be in default. In that case
Brabantia is entitled to store the products or to have
them stored on the account and at the risk of Distributor,
to invoice, and if Distributor does not meet its payment
obligation in time, to make use of his right to cancel the
order.
5.All deliveries are considered to have been approved unless
Distributor, within eight days after the moment the
products have arrived at their warehouse, notifies in
writing that and why it does not agree with the delivery.
Complaints in regard to errors in invoicing are to be
notified within eight days after receipt of the invoice.
After this period of eight days the invoice is considered
to be approved.
6.Payment (only in Dutch Guilders) shall be effected in
principle with an irrevocable letter of credit issued by a
leading Dutch bank (receipt of amounts mentioned in the
invoice: sixty days after date of invoice). However
parties have agreed to start with an open account which
can be changed unilaterally by Brabantia at any time. No
invoice shall be submitted by Brabantia prior to the
shipping of the products in Rotterdam. If at the latest
eight days after receipt of the invoice Distributor does
not find fault with the price calculated, it is considered
to have approved it.
7.The price list (f.o.b.) of the products will be attached
to this agreement as Appendix C December 15, 1995 at the
latest. Brabantia will base the price list for the
following years on their experiences in previous year(s).
Provided Distributor has had three months prior notice,
export prices may be changed by Brabantia during the
validity of the agreement on an annual basis. Further
price adjustments, which may become necessary during any
given year as a result of extraordinary circumstances,
shall be announced at least one full month before they
come into effect. Distributor is aware of these price
adjustments.
8.In the event of overdue payment Brabantia may, after
notifying Distributor in writing, suspend performance of
this order until payment in full has been received.
Brabantia shall be further entitled to suspend fulfillment
of all orders received from Distributor, whether
acknowledged or not, if and as long as Distributor does
not fulfil a claimable obligation, called whatsoever,
towards Brabantia.
9.Any amounts due to Brabantia for products supplied to
Distributor which have not been received in time, shall
accrue an interest rate at the legal Dutch rate of
interest (currently eight percent/year) plus two percent.
If Brabantia finds it necessary (because of this agreement
or an order) to institute measures to recover sums due,
Distributor shall be obliged to reimburse any internal
costs incurred. It shall be assumed that Brabantia is
obliged to institute collecting measures when payment from
Distributor is outstanding to a greater number of days
than agreed upon. Internal cost shall be fixed at five
percent of the invoice amount. The parties undertake not
to demand either a reduction or an increase in these
internal costs in any legal proceedings.
10. If Distributor instructs Brabantia to manufacture
products from drawings, models, samples or other
indications coming from Distributor, the latter takes on
the full guarantee that as a result of this manufacture or
delivery of these products no trademark, trade model or
other right of third parties is harmed.
11. The products shall remain the property of Brabantia
until such time as full payment for products supplied is
received by Brabantia. If the products are actually in
Distributor's possession before they are paid for, they
shall be deemed to have been shipped on a consignment
basis and Brabantia shall be entitled at any time to
recover these products (entering on to the Distributor's
property for this purpose if necessary) or demand their
return forthwith. If Brabantia agrees to accept an order
without an irrevocable letter of credit, Distributor may,
at Brabantia's sole discretion, be obliged to give
additional security.
12. Individual orders with members of Brabantia's
personnel do not bind the latter as far as they have not
been confirmed in writing or are executed immediately. The
same applies for possible credit notes. In this connection
all employees, exclusive of the management and the
employees who have been authorized in writing by the
management of Brabantia (towards Distributor), are to be
considered as personnel.
13. The parties will consider carefully possible
discrepancies in the terms of delivery used by Brabantia
towards the Distributor as compared with the terms of
delivery used by Distributor towards its customers, e.g.
with regard to the guarantee. Distributor will inform
Brabantia about its selling price and the level of the end
consumer-price in the territory.
14. These terms also apply to extra work, by which is
understood all that is delivered or performed over and
above what is recorded in the confirmation of the order
during the execution of the order. In general the previous
additional order of Distributor will be requested before
the execution of extra work, but if the activities make
the immediate execution necessary, the extra order is to
be considered in the original order and the confirmation
of the original order, and on the basis thereof Brabantia
can charge the additional amount to Distributor. Further
all orders shall be subject also to the remaining
provisions of this agreement (e.g. article 10, section 7).
Article 6. - Warranty.
1.Brabantia shall warrant Distributor that the products
supplied in the version intended for the territory are
free from technical defects. The warranty on these
products shall be valid for respectively 5 years (out door
products) and 10 years (in door-products) from the date of
delivery f.o.b.
2.If a product is defective, Brabantia is obliged, according
to its own choice:
- - to make a new delivery, or
- - to credit Distributor with the value of the products.
The defective products shall be returned to Brabantia once
in a quarter. Half of the costs of transportation will be
payed by Brabantia. This amount will be deducted in the
next invoice to Distributor.
3.Warranty claims shall not be entertained, where:
- the inferiority of the products delivered is not
announced to Brabantia within fourteen days after
establishing the fact;
- - the products have been used in a way which is not
mentioned in the directions for using the products; -
the damage or defect is the result of an extraneous
cause or has been caused by the fact that the products are
subjected to normal wear and tear.
4.Brabantia's liability on account of this agreement is
explicitly limited to observation of the guarantee
obligation described in article 6, unless mandatory law
involves Brabantia in further liability. Each claim in
respect of trading loss or other indirect damage
(including damage to third parties) is ruled out.
5.Brabantia is not liable for costs, damage and interests
that could occur as a direct or indirect result of:
a)mistakes of personnel and third parties that Brabantia
makes use of;
b)a defect in the products supplied, if, on the basis of
the scientific and technical knowledge at the moment
upon which Brabantia released the products, it was not
reasonably possible to discover the existence of the
defect;
c)violation of patents, licenses or other rights of third
parties as a result of use by or on account of the
written data given by Distributor.
6.Distributor safeguards Brabantia for claims of third
parties on account of damage that has appeared in
connection with products delivered to Distributor by
Brabantia, unless there is a talk of product liability.
Article 7. - Anticipated non-performance.
Notwithstanding other provisions in this agreement regarding
suspension, each party shall be entitled to suspend
performance of its obligations under this agreement where
it is clear from the circumstances that the other party
will not be able to perform its obligations. The party
suspending the performance of its contractual obligations
shall forthwith notify the other party thereof in writing,
giving reasons (both by fax and by registered letter with
acknowledgment of receipt).
Article 8. - Confidentiality.
1.Distributor is prohibited, either during the term of the
agreement or after its termination, to disclose to third
parties, directly or indirectly, in any way whatsoever,
any details of Brabantia's business. In this eventuality,
each breach of confidentiality shall be subject to an
penalty amounting to Dutch Guilders 250,000.00, payable
without dun, notice of default or legal intervention,
without prejudice to its obligation, should Brabantia so
require, to pay in place thereof full compensation for any
damages arising in this respect where this amount is
greater than the aforementioned Dutch Guilders 250,000.00.
The aforementioned right of Brabantia doesn't restrict it
to exercise its other rights mentioned in this agreement.
2.Article 8, section 1 is also applicable for Brabantia
concerning products and activities which are not related
to this distributorship agreement.
Article 9. - Force Majeure.
1.Neither party shall be held liable for any breach of this
agreement which can be attributed to force majeure, such
as (e.g.) labor disputes, the unavailability of
transportation, products (e.g. raw or subsidiary
materials) or services, governmental restrictions and/or
actions, regulations issued by the EU authorities or to a
war (whether declared or not).
2.In the event of non-performance or delay attributable to
force majeure, the period for the performance of the
applicable obligation under this agreement shall be
extended for a period equal to the period of delay (with a
maximum of three month).
However, Distributor is obliged to settle on time any sums
outstanding in respect of orders already completed by
Brabantia. The party affected by the delay shall
nevertheless use its best efforts - with no obligation to
spend substantial sums which would not otherwise be
required under this agreement - to circumvent or overcome
the cause of the delay.
Article 10. - Term of the agreement, termination.
1.This agreement shall come into effect on January 1st, 1996
for a duration of five years and shall be extended
automatically at every turn for one further year, unless
notice of termination is given by either party by
registered letter with acknowledgment of delivery no later
than six months before expiration. However parties will
evaluate their relationship in December 1996. If after
this evaluation one of the parties doesn't wish to
continue the existing distributorship agreement (on
whatever ground), the distributorship agreement will be
terminated on December 31st, 1996. In that case neither
party has the right to any compensation.
All notices and other communications provided hereunder
shall be mailed as follows:
a. if to distributor: 170 53rd Street
Brooklyn
New York 11232
USA
b. if to Brabantia: P.O. Box 16
5550 AA Valkenswaard
The Netherlands
2.Each party shall be entitled to terminate this agreement
with good cause by giving thirty day's notice. The
reasoned termination of the agreement requires the written
form and has to be served by registered letter with
acknowledgment of delivery.
Good cause means, among other things, the following:
- - failure to perform essential contractual obligations
(e.g. minimum purchasing amount);
- breach of trust;
- where one of the parties is declared bankrupt or is
insolvent or makes an assignment for the benefit of a
creditor, or where a receiver has been appointed to take
possession of any part of either party's assets;
- - where the legal structure or ownership of one of the
parties has changed in such a way as seriously to
affect
the result that the other party could reasonably expect
from this agreement;
- - if the parties can't reach an agreement concerning the
price list 1996 before December 15 th, 1995.
3.Where a good cause exists, as stated in article 10,
section 2, the following options (in addition to
termination the agreement) shall also be available to
Brabantia, to be used at its own discretion, in the event
of failure to fulfil the minimum purchase obligation as
specified in Appendix B:
- - to convert it into a non-exclusive distribution agreement
and/or,
- - to restrict the territory and/or,
- - to restrict the range of "Brabantia" products to be
marketed.
4.Subject to the provisions of article 10, section 1, on
termination of the agreement the parties shall not be
liable to each other for compensation or the payment of
damages in respect of loss of prospective profits, all
costs, investments, redundancy payments, loss of goodwill
or any other possible consequential losses, whether direct
or indirect.
However the following exception is applicable if this
agreement expires as stated in article 10, section 1 as a
result of an initiative on the part of Brabantia. Then if
Distributor mainly as a result of its own efforts has
brought Brabantia a substantial number of new customers or
has significantly increased the volume of business with
existing customers and Brabantia is able to continue
deriving substantial benefits from the business of such
customers, Distributor is entitled to the following
compensation.
The compensation constitutes 1 1/2 percent of
Distributor's annual turnover (exclusive V.A.T.)
concerning the products, calculated on the basis of the 12
months preceding the date the letter of termination is
sent by Brabantia. In the event that Distributor's annual
turnover exceeds Dutch Guilders 1,000,000.00 the
compensation constitutes 2 1/2 percent of the excess
amount. The compensation shall be paid at the latest 60
days after the termination of this agreement.
5.On termination of the agreement Brabantia has the right to
take back the stock (undamaged products) held by
Distributor at the same price calculated by Brabantia to
Distributor, with deduction of any allowance on damaged
packing. After statement by Brabantia of the products it
will buy back Distributor shall be obliged to put such
products at the disposal of Brabantia forthwith. The
freight charges for the transport of the stock bought back
to the address stated by Brabantia shall be for
Distributor's account.
6.After termination of this agreement Distributor shall
remain empowered to complete all current orders at the
time of the termination. Brabantia shall assist
Distributor to make such deliveries. Furthermore
Distributor shall remain empowered after termination of
this agreement in respect whereof Brabantia has not
exercised its right to repurchase to customers, subject to
the otherwise relevant provisions hereunder. Otherwise,
Distributor shall be obliged after termination of this
agreement to stop the sale of the
products of Brabantia however obtained. Acts performed by
parties after termination of this agreement cannot be
interpreted as a taciturn renewal of the distributorship
agreement.
7.If either Distributor or Brabantia shall default in any of
the covenants in this agreement, obliging the other party
to commence extrajudicial, legal or arbitration
proceedings against the defaulting party, the latter shall
bear all reasonable expenses of this litigation, including
court costs and all attorney's fees incurred by the non
defaulting party.
Article 11. - Applicable law and arbitration.
1.This agreement has been made according to the laws of the
Netherlands and it shall be governed and construed
according to the laws of the Netherlands. In addition,
this agreement between the parties shall be subject to the
provisions of the "Convention of the International Sale of
Goods" (1980).
2.In the event of a dispute between the parties which cannot
be settled amicably, both parties shall submit such
dispute solely to arbitration proceedings in accordance
with the arbitration and conciliation rules of the
International Chamber of Commerce in Paris by
appointing three arbitrators as required under said rules.
The law of the Netherlands will apply in cases not covered
by the aforementioned rules. The award resulting from such
arbitration proceedings shall be final and binding on both
parties. The place of arbitration shall be Amsterdam. The
arbitration proceedings shall be conducted in the English
language.
3.The arbitration clause mentioned in the preceding
paragraph does not restrict each party in urgent cases to
issue court proceedings against the other party to obtain
a court order regulating questions of conduct between the
parties pursuant to this agreement, or to obtain a speedy
settlement by way of a court order to disputes requiring
instantaneous resolution. The party who would like to
start the proceeding has the right to choose the district
court having jurisdiction over the registered office of
Brabantia or of Distributor.
Article 12. - Miscellaneous.
1.No waiver by either party of strict compliance with all
terms and conditions of this agreement shall
constitute a waiver in respect of any subsequent failure
of the other party to comply strictly with all terms and
condition hereof. Further agreements supplementary to
and/or amending this agreement must be agreed in writing.
In the absence of such written agreement they shall be
deemed by the parties to be non-existent.
2.In the event that any part of this agreement shall be
legally declared to be null and void, this shall not
affect the validity of the remainder of this agreement.
The parties shall be obliged to negotiate within one month
a new provision corresponding to the intentions of the
parties to replace the invalid section of this agreement.
If no (new) written agreement can be reached, this shall
be set out by the aforementioned arbitration.
3.This agreement is drawn up in two copies. Each copy shall
be deemed to be an original but both shall constitute only
one document. The parties agree to be bound if they have
received a paraphed and signed copy of the agreement of
the other party by telefax.
As hereinbefore agreed, drawn up in duplicate and signed in
Valkenswaard,
New York,
Date: 30.08.1995 Date: 30.08.1995
Brabantia Valkenswaard Beheer B.V., Creative Technologies
Corp.,
Torben Sorensen Richard Helfman David
Guttmann
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<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<CASH> $ 771,000
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<RECEIVABLES> 3,357,000
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0
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<OTHER-SE> 852,000
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