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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
__X__ Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended August 31, 1995
Or
_____ Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from
________________ to __________________
Commission File Number: 0-17442
THOMAS EDISON INNS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
MICHIGAN 38-2730460
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
500 NORTH RIVERSIDE
ST. CLAIR, MICHIGAN 48079
(Address of Principal Executive Offices)
(313) 329-2222
(Issuer's Telephone Number, including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes __X__ No _____
As of September 20, 1995, there were 3,020,150 issued and outstanding shares
of common stock, $0.01 par value.
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Item 310(b) and (c) of Regulation S-B. Accordingly, they do not contain
all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting solely of normal recurring
adjustments) considered necessary for a fair presentation of the financial
position, results of operations and cash flows of the Company have been
included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report
on Form 10-KSB, as amended, for the fiscal year ended November 30, 1994.
[Remainder of Page Left Blank Intentionally]
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<TABLE>
Thomas Edison Inns, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
As of August 31, 1995
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,796,120
Trade accounts receivable, less allowance for
doubtful accounts of $24,000 636,688
Inventories 202,166
Prepaid expenses and other current assets 314,733
Refundable federal income taxes 103,000
Total current assets 3,052,707
PROPERTY, PLANT AND EQUIPMENT, net 13,207,018
OTHER ASSETS, net 1,452,540
AMOUNTS DUE FROM RELATED PARTIES 456,275
Total assets $18,168,540
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Notes payable - bank $ 200,551
Current portion of long-term debt 400,831
Trade accounts payable 582,117
Accrued expenses 378,961
Total current liabilities 1,562,460
LONG-TERM DEBT 11,120,052
DEFERRED TAXES 640,993
STOCKHOLDERS' EQUITY
Preferred stock - $0.01 par value: authorized
- 5,000,000 shares; issued and outstanding, none
Common stock - $0.01 par value: authorized
- 30,000,000 shares; issued and outstanding
1,520,150 15,200
Additional paid in capital 5,217,820
Accumulated deficit (387,985)
Total stockholders' equity 4,845,035
Total liabilities and stockholders' equity $18,168,540
</TABLE>
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<TABLE>
Thomas Edison Inns, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the nine-month period ended August 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Net sales
Room rents $ 4,513,033 $ 4,564,812
Food and beverages 6,180,558 6,929,993
Total sales 10,693,591 11,494,805
Costs and expenses
Cost of food and beverages 2,161,619 2,293,897
Operating expenses 5,343,350 5,489,182
General and administrative expenses 2,394,385 1,704,648
Depreciation and amortization 921,912 954,024
Total costs and expenses 10,821,266 10,441,751
Income (loss) from operations (127,675) 1,053,054
Other income (expense)
Interest expense (1,011,737) (831,223)
Other 656,377 185,969
(355,360) (645,254)
Income (loss) before federal income tax
(benefit) and change in accounting principle (483,035) 407,800
Federal income tax (benefit) (103,000) 145,800
Net income (loss) before change in
accounting principle (380,035) 262,000
Change in accounting principle -
Cumulative effect to November 30, 1993
of application of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" -- (110,800)
Net income (loss) (380,035) 151,200
Retained earnings (deficit) - beginning of period (7,950) 19,212
Retained earnings (deficit) - end of period ($387,985) $170,412
Income (loss) per share
Before cumulative effect of change in accounting principle ($0.25) $0.17
Cumulative effect of change in accounting principle -- (0.07)
After cumulative effect of change in accounting principle ($0.25) $0.10
Number of common shares outstanding 1,520,150 1,520,150
</TABLE>
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<TABLE>
Thomas Edison Inns, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine-month period ended August 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ($380,035) $151,200
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 921,912 954,024
Increase in deferred taxes (7,807) 116,500
Gain on disposal of investments (234,113) --
(Increase) decrease in assets
Accounts receivable 39,404 (162,409)
Other current assets and deferred charges 39,609 (84,424)
Refundable federal income taxes 11,795 (36,495)
Payment to obtain financing -- (231,567)
Increase (decrease) in liabilities
Accounts payable and accrued expenses 244,892 325,755
Income taxes payable -- (8,357)
Net cash provided by operating activities 635,657 1,024,227
Cash flows from investing activities
Purchase of property, plant and equipment (331,148) (488,965)
Proceeds from sale of investments 609,113 --
Decrease (increase) in other assets (189,755) (150,663)
Additions to amounts due from stockholder (47,942) (35,575)
Payments on amounts due from stockholder 1,766,942 --
Addition to amounts due from other related parties -- (152,574)
Payments on amounts due from other related parties 108,431 461,750
Net cash provided by (used in) investing activities 1,915,641 (336,027)
Cash flows from financing activities
Proceeds from long-term borrowings -- 152,000
Proceeds (payments) related to borrowings from
stockholders and related parties (250,463) (76,733)
Principal payments of long-term debt (1,126,476) (324,801)
Net cash used in financing activities (1,376,939) (249,534)
Net increase in cash 1,174,359 408,666
Cash and cash equivalents - beginning of period 621,761 450,712
Cash and cash equivalents - end of period $1,796,120 $ 859,378
</TABLE>
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<TABLE>
Thomas Edison Inns, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the three-month period ended August 31, 1995 and 1994
<CAPTION>
1995 1994
<S> <C> <C>
Net sales
Room rents $2,155,524 $2,141,812
Food and beverages 2,522,556 2,659,283
Total sales 4,678,080 4,801,095
Costs and expenses
Cost of food and beverages 875,815 867,472
Operating expenses 1,947,979 1,928,027
General and administrative expenses 836,403 663,776
Depreciation and amortization 308,102 263,029
Total costs and expenses 3,968,209 3,722,304
Income from operations 709,871 1,078,791
Other income (expense)
Interest expense (279,086) (337,085)
Other 118,406 60,654
(160,680) (276,431)
Income before federal income tax
and change in accounting principle 549,191 802,360
Federal income tax 247,900 279,900
Net Income $ 301,291 $ 522,460
Income per share $0.20 $0.34
Number of common shares outstanding 1,520,150 1,520,150
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following is management's discussion and analysis of certain
significant factors which have affected the Company's results of
operations and financial condition during the period included in the
accompanying unaudited consolidated financial statements.
OPERATIONS REPORT
A summary of the period-to-period changes in principal items included
in the consolidated statements of income is shown below:
<TABLE>
Comparisons of periods ended
AUGUST 31, 1994 VS. AUGUST 31, 1995
Increase (Decrease)
<CAPTION>
THREE MONTHS NINE MONTHS
<S> <C> <C> <C> <C>
Net Sales ($ 123,015) (2.6)% ($ 800,214) (7.0)%
General and Admin. Expense 172,627 26.0 689,737 40.5
Total Costs and Expenses 245,905 6.6 379,515 3.6
Income from Operations (368,920) (34.2) (1,180,729) (112.1)
Income Before Federal
Income Taxes (Benefit) (253,169) (31.6) (890,835) (218.4)
Net Income Before Change
In Accounting Principle<Fna> (221,169) (42.3) (642,035) (245.1)
Net Income (Decrease) (221,169) (42.3) (531,235) (351.3)
______________________
<FN>
<FNa> In the fiscal year ended November 30, 1994, the Company incurred a
one time extraordinary charge of $110,800 ($.07 per share) to reflect the
cumulative effect to November 30, 1993, of the application of Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires that an asset and liability approach be applied
for income taxes and provides revised criteria for the recognition of
deferred tax assets. The cumulative prior year effect of adopting SFAS
109 may be recorded in a single year and prior years' financial statements
need not be restated.
</FN>
</TABLE>
NET SALES
For the 9 months ended August 31, 1995, consolidated net sales
decreased $800,214, or 7.0%, as compared to the same period in 1994. Net
sales decreased $123,015, or 2.6%, for the quarter ended August 31, 1995,
as compared to the same quarter in the prior year. During the 9-month
period ended August 31, 1995, net sales at St. Clair Inn decreased
$175,310, or 5.1%, as compared to the same period in 1994. During the
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same period, net sales at Thomas Edison Inn decreased $644,242, or 8.3%,
and net sales at Spring Lake Holiday Inn increased $18,377, or 0.6%,
respectively, as compared to the same period in 1994.
For the 9 months ended August 31, 1995, room rents increased
$55,772, or 4.0%, at Spring Lake Holiday Inn, increased slightly by $499,
or less than 1%, at the St. Clair Inn, but decreased by $92,206, or 4.6%,
at Thomas Edison Inn. Food and beverage revenues for the 9-month period
ended August 31, 1995, decreased at Spring Lake Holiday Inn, Thomas
Edison Inn and St. Clair Inn by $37,435, $552,036, and $175,809, or 2.6%,
17.4% and 7.6%, respectively, compared to the same period in 1994.
The relatively modest increase in revenues at the Spring Lake
Holiday Inn is due to increases in room and beverage revenues offsetting a
decline in food revenues. The decrease in revenues at the St. Clair Inn
is attributable to declines in food and beverage revenues. At the Thomas
Edison Inn, revenues declined in all three areas reflecting a decrease in
business bookings compared to the first 9 months in the previous year.
GENERAL AND ADMINISTRATIVE EXPENSES
Comparative consolidated general and administrative expenses are:
<TABLE>
<CAPTION>
PERCENT OF
EXPENSE NET SALES
<S> <C> <C> <C>
3 months ended August 31, 1995 $ 836,403 17.88%
3 months ended August 31, 1994 663,776 13.83
9 months ended August 31, 1995 2,394,385 22.39
9 months ended August 31, 1994 1,704,648 14.83
</TABLE>
The increases in general and administrative expenses reflect some salary
increases, but are primarily attributable to loan guarantee fees and legal
expenses. At August 31, 1995, the Company paid loan guarantee fees to
Donald Reynolds in the amount of $144,000. The Company has paid legal
fees as a result of two lawsuits brought against the Company by several
shareholders. These lawsuits are described in Part 1, Item 3 in Amendment
No. 1 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended November 30, 1994, and in Part II, Item 5 of the Company's Quarterly
Report on Form 10-QSB for the quarter ended May 31, 1995.
At August 31, 1995, Mr. Donald W. Reynolds, Chairman of the Board,
President, Treasurer, Secretary and principal shareholder of the Company,
owed the Company amounts aggregating approximately $241,493 (a decrease of
approximately $1,187,496 from November 30, 1994), and companies affiliated
with Mr. Reynolds, or Mr. Reynolds and Mr. William F. Ehinger, a director
of the Company, owed the Company amounts aggregating $214,782 (a decrease
of approximately $639,935 from November 30, 1994).
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As previously reported, the Company and each of its subsidiaries has
entered into a Management Agreement with Innkeepers Management Company,
which is wholly owned by Mr. Reynolds ("Innkeepers"), for the management
of the subsidiaries. Under the Management Agreement, the Company agreed
to pay Innkeepers a management fee of 3% of gross revenues derived from
the operations of the subsidiaries. On February 28, 1995, the Management
Agreement was amended to reduce the management fee from 3% to 2% for a
term ending on December 1, 1996, and to provide that the Management
Agreement may be terminated by any of the subsidiaries at any time upon 30
days' prior written notice to Innkeepers. Pursuant to a certain Stock
Purchase and Sale Agreement executed and delivered among the Company,
Meritage Hospitality Group Incorporated (a shareholder of the Company),
Mr. Reynolds and Innkeepers on September 19, 1995, the Management
Agreement will terminate without any cost or recourse to the Company upon
the closing of the transactions contemplated by the Stock Purchase and
Sale Agreement. The transactions contemplated by the Stock Purchase and
Sale Agreement are to close immediately following the adjournment of the
next annual shareholders' meeting, or at a date and time mutually agreed
upon by the parties. For a description of the Stock Purchase and Sale
Agreement, see the discussion below in Part II, Item 5, "Other
Information," which is incorporated herein by reference.
From June 1, 1995 to August 31, 1995, the Company accrued management
fees due to Innkeepers in the amount of $150,394. At August 31, 1995, the
Company had disbursed to Innkeepers management fees in the amount of
$120,000, and had net prepaid management fees in the amount of $30,394.
As of August 31, 1995, the Company had paid certain life insurance
premiums to be reimbursed by Mr. Reynolds in the aggregate amount of
$6,906.
INTEREST EXPENSE
The Company's increased interest expense ($1,011,737 as compared to
$831,223 for the 9 months ended August 31, 1995 and 1994, respectively)
are due to increases in the prime rate, which determines the current
interest rate for all of the Company's long-term and some of its short-
term indebtedness. The loans on all three inns are variable in nature and
interest rates associated with these loans increase or decrease based on
changes in the prime rate.
NET INCOME (LOSS) PER SHARE
The Company's loss of $.25 per share for the 9-month period ended
August 31, 1995, is primarily due to three factors: a $180,000 increase in
interest expense, an almost $600,000 increase in general and
administrative expenses, and a $750,000 decrease in food and beverage
revenues due to a lower level of business bookings. Although food and
beverage costs declined by approximately $130,000, this reduction was
inadequate to offset the revenue decline. These losses were partially
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offset by income attributable to the sale of property adjacent to the
Thomas Edison Inn. For the 3 months ended August 31, 1995, net income
after taxes was $301,291 ($.20 per share) as compared to $522,460 ($.34
per share) for the same period in 1994, a 42.3% decease. For the 3 months
ended August 31, 1995, room revenue increased slightly ($13,712 or 0.6%),
but food and beverage revenues declined more than $136,000, or 5.1%.
Another factor affecting and contributing to the lower income was an
increase of more than $172,000 of general and administrative expenses,
primarily reflecting legal expenses. The Company is currently
implementing several measures to stimulate commercial bookings and lower
food and beverage costs.
CASH FLOWS
For the 9 months ended August 31, 1995, operating activities provided
net cash in the amount of $635,657. During that period, cash flows from
investing activities were $1,915,641, including the purchase of property,
plant and equipment in the amount of $331,148, proceeds from sales of
assets of $609,113, receipt of payments due from a shareholder of
$1,766,942, and receipt of payments due from other related parties of
$108,431. The Company reduced the balances due on its long-term borrowing
by $1,126,476, primarily associated with a prepayment to E.Q. Financial
Services associated with the release of its security interest in a
nonrecourse mortgage note pledged by Mr. Reynolds as additional security
for the First Federal Loan (described below), and received payments on
borrowings from shareholders and related parties of $250,463, resulting in
cash inflows from financing activities of $1,376,939. The net effect of
the above and other transactions resulted in an increase in cash of
$1,174,359, to a balance of $1,796,120 as of August 31, 1995.
FINANCIAL CONDITION AND LIQUIDITY
At August 31, 1995, total assets declined to $18,168,540, a decrease
of $1,519,889 (7.7%) from November 30, 1994. At the same date, current
assets increased $1,083,551 (55.0%) from November 30, 1994. Cash, cash
equivalents, and certificates of deposit increased $1,174,359 (188.9%),
trade accounts receivable decreased $39,404 (5.8%), inventories increased
by $5,406 (2.7%) and prepaid expenses and other current assets decreased
$56,810 (12.0%) from November 30, 1994.
Current liabilities at August 31, 1995 were $1,562,460, a decrease of
$413 (less than 1%) from November 30, 1994. The current portion of long-
term debt rose to $400,831, an increase of $5,158 (1.3%) from November 30,
1994. Notes payable were unchanged from November 30, 1994. Accrued
expenses increased $126,470 (39.7%) and trade accounts payable increased
$84,059 (21.1%) from November 30, 1994.
The Company has outstanding indebtedness to Michigan National Bank-
Central, which consists of two notes in the respective amounts of
$3,625,497 (the "Mortgage Loan") and $1,095,300 (the "Term Loan")
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(collectively referred to as the "MNB Loan"). The interest rates on both
the Mortgage Loan and the Term Loan are equal to the Citibank, N.A. prime
rate plus 1%, fully floating. As of August 31, 1995, the MNB Loan had a
principal balance of $4,328,133, which consisted of a balance of
$3,459,252 on the Mortgage Loan and a balance of $868,881 on the Term
Loan.
In addition, under a Reimbursement Agreement entered into with First
Federal Savings and Loan Association (formerly, First Federal Savings Bank
and Trust) ("First Federal"), the Company is obligated to reimburse First
Federal for amounts used to retire bonds issued by the Michigan Strategic
Fund in connection with a loan extended by the Michigan Strategic Fund to
the Company. At August 31, 1995, the principal amount due under the
Reimbursement Agreement was $3,996,205
First Federal also has a separate loan to the Company (the "First
Federal Loan"), which loan is secured by, among other collateral, a first
real estate mortgage on the St. Clair Inn. The principal amount due under
the First Federal Loan as of August 31, 1995, was $2,923,330. Mr.
Reynolds has guaranteed the Company's obligations to First Federal. Mr.
Reynolds had also granted a security interest to First Federal in a
nonrecourse mortgage note receivable as additional collateral. In
addition, Mr. Reynolds had granted the Company a second security interest
in the same mortgage note as collateral for the amounts due from Mr.
Reynolds. During the second quarter of 1995, the current holder of the
Company's obligations under the First Federal Loan agreed to release its
interest in the mortgage note upon a prepayment by the Company on the
amount due under the First Federal Loan. Mr. Reynolds paid on behalf of
the Company the amount of the prepayment to the current holder of the
First Federal Loan. The Company then reimbursed Mr. Reynolds for the
amount of the prepayment he made on behalf of the Company.
The loans and other advances to Mr. Reynolds and companies affiliated
with Mr. Reynolds or Mr. Reynolds and Mr. Ehinger, described above in this
Item 2, may be deemed to have been made in breach of certain restrictions
in the agreements with Michigan National Bank-Central and First Federal.
The Company continues to hold land adjacent to the Thomas Edison Inn
for future possible expansion, although it sold one parcel of land during
the second quarter of fiscal year 1995.
As previously reported, a shareholder of the Company, Meritage
Hospitality Group Incorporated ("Meritage"), filed a complaint for
declaratory and injunctive relief against Mr. Reynolds and other related
parties ("Defendants") on July 5, 1995 (the "7B Suit"). The Company was
later also named as a defendant in the proceeding. Meritage contested
the Defendants' right to vote their shares of Company common stock in
light of Mr. Reynolds' execution of an Irrevocable Option Agreement to
Purchase Common Stock and Irrevocable Proxy (the "Option Agreement") and a
Rescission Agreement and Amendment No. 1 to Irrevocable Option Agreement
-12-
to Purchase Common Stock and Irrevocable Proxy (the "Rescission
Agreement") with Mr. Robert J. Skandalaris. These agreements are
described in detail in Part I, Item 2, "Management's Discussion and
Analysis or Plan of Operation," under the subheading "Financial Condition
and Liquidity," in the Company's Quarterly Report on Form 10-QSB for the
quarter ended May 31, 1995, previously filed by the Company with the
Securities and Exchange Commission on July 17, 1995. On September 19,
1995, pursuant to the terms and conditions of the Stock Purchase and Sale
Agreement entered into by the Company, Meritage, Mr. Reynolds, and
Innkeepers (described in Item 5 below), the parties authorized their
respective counsel to enter a Stipulation and Order Retaining Jurisdiction
for Limited Purposes in the 7B Suit. As a result, the 7B Suit was settled.
The information required herein with respect to the Stock Purchase and Sale
Agreement is set forth in Item 1 of the Company's Current Report on Form
8-K, dated September 19, 1995, previously filed by the Company with the
Securities and Exchange Commission on October 4, 1995, which is here
incorporated by reference.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information required by this item is included in (i) Part I, Item
3, "Legal Proceedings," in Amendment No. 1 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended November 30, 1994, previously
filed by the Company with the Securities and Exchange Commission on March
15, 1995, (ii) Part II, Item 5, "Other Information" in the Company's
Quarterly Report on Form 10-QSB for the quarter ended May 31, 1995, and
(iii) Part II, Item 5, "Other Information," set forth below.
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 1995, the Company's Board of Directors
amended the Company's Bylaws by adding a new Article X concerning
"Control Share Acquisitions." On September 10, 1995, the Company's Board
of Directors passed a resolution confirming this action, effective as of
September 10, 1995, by removing old Article X and replacing it with new
Article X. The amendment prevented the application of the provisions of
Chapter 7B of the Michigan Business Corporation Act ("MBCA") to shares
purchased after the effective date of the amendment. Chapter 7B of the
MBCA generally denies voting rights to shares of stock acquired in
a "control share acquisition" unless the corporation's disinterested
shareholders (defined to exclude the acquiring person, officers of the
corporation, and directors who are also employees of the corporation) vote
to confer voting rights on the shares. A "control share acquisition" is
defined as an acquisition of shares by an acquirer which, when combined
with other shares held by that person or entity, would give the acquirer
voting power at or above any of the following thresholds: 20%; 33 1/3%;
-13-
or 50%. Chapter 7B of the MBCA does not affect the voting rights of
shares owned by the acquirer before the control share acquisition. The
general effect of the amendment to the Company's Bylaws is to remove an
obstacle to the acquisition of potentially controlling interests in the
Company by guaranteeing that such shares will have voting rights after a
control share acquisition. On September 22, 1995, pursuant to the terms
and conditions of the Stock Purchase and Sale Agreement described in Item
5 below, the Company's Board of Directors adopted a resolution to opt into
Chapter 7B of the MBCA with respect to all control share acquisitions
occurring thereafter by removing Article X from the Company's Bylaws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For a description of potential defaults of the provisions of the
Company's indebtedness to Michigan National Bank-Central and First Federal
Savings and Loan Association, see the above discussion in Part I, Item 2,
"Management's Discussion and Analysis or Plan of Operation," under the
subheading "Financial Condition and Liquidity" which is incorporated
herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
As previously reported and discussed above, Meritage, a shareholder of
the Company, filed the 7B Suit in the U.S. District Court for the Western
District of Michigan on July 5, 1995. The 7B Suit was brought against
Donald W. Reynolds, Rebecca L. Awtrey, Cynthia Distad, Thomas Reynolds,
Deborah Reynolds, and Innkeepers Management Company. The Company was
later named as a defendant in the proceeding.
The 7B Suit alleged that the Rescission Agreement entered into between
Donald W. Reynolds and Robert J. Skandalaris, discussed above in Part I,
Item 2, "Management's Discussion and Analysis or Plan of Operation," under
the subheading "Financial Condition and Liquidity," deprived Plaintiff of
its alleged right to determine whether the shares covered under the Option
Agreement are to be accorded voting rights under Chapter 7B of the MBCA.
Meritage therefore contested the Defendants' present right to vote the
shares and to take shareholder action by written consent.
Meritage sought relief against the Defendants in the nature of: an
injunction against the Defendants from voting their shares of Company
common stock pending a final determination of their voting rights under
Chapter 7B of the MBCA; a declaration that the Defendants are not entitled
to vote their shares of Company common stock at a shareholders' meeting or
to execute written consents in lieu of a shareholders' meeting unless and
until voting rights have been conferred on the stock pursuant to Chapter
7B of the MBCA; and a declaration that the shares of Company common stock
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owned beneficially by the Defendants are "interested shares" as defined
under Section 792 of the MBCA.
On September 19, 1995, as previously reported, the Company, Meritage,
Mr. Reynolds and Innkeepers entered into the Stock Purchase and Sale
Agreement, whereby the Company sold 1,500,000 shares of previously
authorized, newly-issued Company common stock, $.01 par value (the
"Stock"), to Meritage at a total price of $10,500,000. As a result of the
sale of the Stock to Meritage, Meritage and its affiliates have informed
the Company that they now beneficially own 51.6% of the Company's
outstanding voting securities.
Upon execution of the Stock Purchase and Sale Agreement, Meritage
executed a Secured Promissory Note (the "Note") in favor of the Company in
the amount of the purchase price of the Stock. The Note provides that
Meritage has no obligation to make any payments to the Company on the Note
for three years from the date of the Note. Beginning on the third
anniversary of the Note, and continuing on the same day of each successive
year thereafter through and including the ninth anniversary of the Note,
Meritage is required to pay the Company principal in the amount of
$1,312,500. The outstanding principal does not bear interest, provided
that an event of default as defined in the Note does not occur. If an
event of default occurs, the outstanding principal balance will bear
interest at the rate of 3% per annum. The entire outstanding principal
balance is due and payable in full on the tenth anniversary of the Note.
The Note includes provisions limiting the Company's recourse against
Meritage for payment of the indebtedness evidenced by the Note to an
amount determined by a formula contained in Section IV of the Note.
The Note is secured by a Stock Pledge Agreement (the "Security
Agreement"), executed contemporaneously with the Stock Purchase and Sale
Agreement. The Security Agreement covers all 1,500,000 shares of Stock
issued to Meritage, and provides that the Company will release shares of
stock covered by the Security Agreement pursuant to a formula upon
satisfaction by Meritage of requirements set forth in the Security
Agreement.
As required by the Stock Purchase and Sale Agreement, the parties
instructed their respective counsel to enter a Stipulation and Order
Retaining Jurisdiction for Limited Purposes in the 7B Suit. As a result
of the Stipulation and Order Retaining Jurisdiction for Limited Purposes,
the 7B Suit was settled.
The Closing of the transactions contemplated by the Stock Purchase and
Sale Agreement is to take place immediately following the adjournment of
the annual shareholders' meeting, which is to take place within 120 days
of September 19, 1995, or at a date and time mutually agreed upon by the
parties. At the Closing, the Management Agreement entered into among the
Company, its subsidiaries and Innkeepers will be terminated without cost
or recourse to the Company or Meritage. In addition, various other
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transactions will or may be effected by the parties at the Closing,
subject to the satisfaction of certain conditions set forth in the Stock
Purchase and Sale Agreement, all of which are described in detail in Item
1 of the Company's Current Report on Form 8-K dated September 19, 1995,
previously filed by the Company with the Securities and Exchange
Commission on October 4, 1995, which is here incorporated by reference.
As previously reported, on July 6, 1995, TEI Acquisition, Inc.
("TAI"), entered into a Stock Purchase Agreement with Mr. Reynolds, Debra
A. Reynolds, Rebecca L. Reynolds-Awtrey, Thomas W. Reynolds, Cynthia Distad
and Innkeepers (collectively the "Sellers"). Under the Stock Purchase
Agreement, the Sellers agreed to sell to TAI the 870,248 shares of Company
common stock (the "Shares") beneficially owned by the Sellers. In
connection with the Stock Purchase Agreement, the Sellers granted to TAI an
Irrevocable Proxy to vote the Shares. Because the Shares were pledged
to other parties, the closing of the transaction contemplated by the
Stock Purchase Agreement was to occur when all approvals, consents and
authorizations for a transfer of the Shares to TAI were obtained by the
Sellers. If the closing did not take place by September 20, 1995, TAI had
the option to either terminate the Stock Purchase Agreement, in which case
the proxy would also terminate, or to extend the Stock Purchase Agreement,
in which case the proxy would remain in effect. Prior to September 20, 1995,
TAI opted to extend the Stock Purchase Agreement. The closing of the
transfer of the Shares has not yet been accomplished. For a discussion of
the Stock Purchase Agreement, see Item 1 of the Company's Current Report on
Form 8-K, dated July 17, 1995, previously filed with the Securities and
Exchange Commission on August 1, 1995.
On September 25, 1995, TAI filed a Motion To Intervene As Defendant
(the "Motion") in the 7B Suit. In the Motion, TAI claims that the terms of
the Stock Purchase and Sale Agreement entered into on September 19, 1995,
among the Company, Meritage, Mr. Reynolds and Innkeepers may improperly
dilute the voting power of the Shares TAI beneficially owns pursuant to the
Stock Purchase Agreement as a result of the issuance of previously
authorized, unissued shares of Company common stock. TAI asserts in the
Motion that such issuance deprives TAI of the controlling interest in the
Company which it claims to have purchased by entering into the Stock
Purchase Agreement. In addition, TAI asserts that the provision of the
Stock Purchase and Sale Agreement providing that Meritage will receive a
"breakup fee" of $750,000 if the transactions contemplated under the Stock
Purchase and Sale Agreement are not closed will detrimentally affect the
value of the Shares it purchased pursuant to the Stock Purchase Agreement
if the breakup fee is required to be paid.
As set forth in the Motion, TAI seeks relief in the nature of:
intervention in the 7B Suit as a defendant; entry of a preliminary and
permanent injunction preventing consummation of any transactions
contemplated by the Stock Purchase and Sale Agreement that would (i)
affect the disposition of the Shares, (ii) affect the voting rights of the
Shares, and (iii) allow for the issuance of previously authorized, unissued
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Company common stock without a vote of shareholders, including TAI; and a
confirmation of TAI's voting rights under the Stock Purchase Agreement and
the Irrevocable Proxy. A hearing on TAI's Motion is scheduled to occur on
October 18, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed as part of this
report:
EXHIBIT NO. DESCRIPTION OF DOCUMENT
3(i) Articles of Incorporation of Thomas Edison Inns, Inc.*
3(ii) Restated and Amended Bylaws of Thomas Edison Inns, Inc.
4 Form of Warrant issued to Buys-MacGregor, MacNaughton-
Greenawalt & Co.*
10(a) Management Agreement.*
10(b) Amendment No. 1 to Management Agreement.*
10(c) Amendment No. 2 to Management Agreement.*
10(d) Adoption Agreement For Pathway Benefit Services, Inc. Regional
Prototype Non-Standardized 401(k) Profit-Sharing Plan and Trust;
Pathway Benefit Services, Inc. Regional Prototype Defined
Contribution Plan and Trust.*
10(e) Amendment No. 3 to Management Agreement.*
10(f) Reimbursement Agreement between the Company and First Federal
Savings Bank and Trust.*
10(g) License Agreement between Spring Lake Inn, Inc. and Holiday Inns,
Inc.*
10(h) Loan Agreement between the Company and Michigan National Bank-
Central.*
10(i) Loan Agreement between St. Clair Inn, Inc. and First Federal
Savings Bank and Trust.*
10(j) Assignment of Promissory Note and Mortgage as Security.*
10(k) Assignment of Mortgage as Security.*
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EXHIBIT NO. DESCRIPTION OF DOCUMENT
10(l) Assignment of Promissory Note and Security Agreements as
Security.*
10(m) Promissory Note issued by Fables-Innkeepers Management, Inc. in
the principal amount of $61,538.23.*
10(n) Promissory Note issued by Fables-Innkeepers Management, Inc. in
the principal amount of $117,487.65.*
10(o) Amendment No. 5 to Management Agreement. (There is no written
Amendment No. 4 to Management Agreement.)*
10(p) Consulting Agreement between the Company and Robert J.
Skandalaris, dated February 20, 1995.*
10(q) Stock Purchase and Sale Agreement, dated September 19, 1995,
between the Company, Meritage Hospitality Group Incorporated, Donald
W. Reynolds and Innkeepers Management Company, and accompanying
exhibits.*
27 Financial Data Schedule.
___________________________
*Previously filed.
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K dated June 16, 1995, to
report the change in control of the Company pursuant to Item 1 of Form 8-K
as a result of the Rescission Agreement entered into between Donald W.
Reynolds and Robert J. Skandalaris. The Company also filed a report on
Form 8-K dated July 17, 1995, to report the change in control of the
Company pursuant to Item 1 of Form 8-K as a result of the Stock Purchase
Agreement entered into by Donald W. Reynolds, Debra A. Reynolds, Rebecca
L. Reynolds-Awtrey, Thomas W. Reynolds, Cynthia Distad, Innkeepers
Management Company and TEI Acquisition, Inc.
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SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: October 10, 1995 THOMAS EDISON INNS, INC.
(Registrant)
By /S/ DONALD W. REYNOLDS
Donald W. Reynolds
Its Chairman of the Board,
Chief Executive Officer,
President, Treasurer and Secretary
By /S/ DAVID C. DISTAD
David C. Distad
Its Vice President and Chief Financial
Officer (principal financial and
accounting officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
3(i) Articles of Incorporation of Thomas Edison Inns, Inc.
(incorporated by reference to Exhibit 3(a) of the
registration statement on Form S-18 No. 33-10798c).*
3(ii) Restated and Amended Bylaws of Thomas Edison Inns, Inc.
4 Form of Warrant issued to Buys-MacGregor, MacNaughton-
Greenawalt & Co. (incorporated by reference to Exhibit
4(a) of the Annual Report on Form 10-K for the
Company's fiscal year ended November 30, 1987).*
10(a) Management Agreement (incorporated by reference to
Exhibit 10 of the registration statement on Form S-18
No. 33-10798c).*
10(b) Amendment No. 1 to Management Agreement (incorporated by
reference to Exhibit 10(b) of the Annual Report on Form 10-K
for the Company's fiscal year ended November 30, 1988).*
10(c) Amendment No. 2 to Management Agreement (incorporated by
reference to Exhibit 10(c) of the Annual Report on Form 10-K
for the Company's fiscal year ended November 30, 1988).*
10(d) Adoption Agreement For Pathway Benefit Services, Inc.
Regional Prototype Non-Standardized 401(k) Profit Sharing
Plan and Trust; Pathway Benefit Services, Inc. Regional
Prototype Defined Contribution Plan and Trust; as amended
May 24, 1994 (incorporated by reference to Exhibit 10(d) to
the Annual Report on Form 10-KSB for the Company's fiscal
year ended November 30, 1994).*
10(e) Amendment No. 3 to Management Agreement dated
February 11, 1995 (incorporated by reference to Exhibit
10(e) to the Annual Report on Form 10-KSB for the Company's
fiscal year ended November 30, 1994).*
10(f) Reimbursement Agreement between the Company and First
Federal Savings Bank and Trust dated April 15, 1987, as
amended on October 1, 1992 (incorporated by reference to
Exhibit 10(f) to the Annual Report on Form 10-KSB for the
Company's fiscal year ended November 30, 1994).*
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EXHIBIT NO. DESCRIPTION OF DOCUMENT
10(g) License Agreement between Spring Lake Inn, Inc. and
Holiday Inns, Inc. dated July 26, 1983 (incorporated by
reference to Exhibit 10(g) to the Annual Report on Form 10-
KSB for the Company's fiscal year ended November 30, 1994).*
10(h) Loan Agreement between the Company and Michigan National
Bank-Central dated January 28, 1987, as amended on
August 19, 1993 (incorporated by reference to Exhibit 10(h)
to the Annual Report on Form 10-KSB for the Company's fiscal
year ended November 30, 1994).*
10(i) Loan Agreement between St. Clair Inn, Inc. and First
Federal Savings Bank and Trust dated July 16, 1985, as
amended on October 1, 1992 (incorporated by reference
to Exhibit 10(i) to the Annual Report on Form 10-KSB
for the Company's fiscal year ended November 30,
1994).*
10(j) Assignment of Promissory Note and Mortgage as Security
dated June 30, 1994 (incorporated by reference to
Exhibit 10(j) to the Annual Report on Form 10-KSB for
the Company's fiscal year ended November 30, 1994).*
10(k) Assignment of Mortgage as Security dated April 15, 1987
(incorporated by reference to Exhibit 10(k) to the Annual
Report on Form 10-KSB for the Company's fiscal year ended
November 30, 1994).*
10(l) Assignment of Promissory Note and Security Agreements
as Security dated April 15, 1987 (incorporated by
reference to Exhibit 10(l) to the Annual Report on Form
10-KSB for the Company's fiscal year ended November 30,
1994).*
10(m) Promissory Note issued by Fables-Innkeepers Management,
Inc., in the principal amount of $61,538.23 dated
December 31, 1992 (incorporated by reference to Exhibit
10(m) to the Annual Report on Form 10-KSB for the Company's
fiscal year ended November 30, 1994).*
10(n) Promissory Note issued by Fables-Innkeepers Management,
Inc. in the principal amount of $117,487.65 dated December
31, 1992 (incorporated by reference to Exhibit 10(n) to the
Annual Report on Form 10-KSB for the Company's fiscal year
ended November 30, 1994).*
10(o) Amendment No. 5 to Management Agreement. (There is no
written Amendment No. 4 to Management Agreement.)*
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EXHIBIT NO. DESCRIPTION OF DOCUMENT
10(p) Consulting Agreement between the Company and Robert J.
Skandalaris, dated February 20, 1995.*
10(q) Stock Purchase and Sale Agreement, dated September 19,
1995, between the Company, Meritage Hospitality Group
Incorporated, Donald W. Reynolds and Innkeepers Management
Company, and accompanying exhibits.*
27 Financial Data Schedule.
__________________
*Previously filed
#35748
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EXHIBIT 3(ii)
RESTATED AND AMENDED
BYLAWS
OF
THOMAS EDISON INNS, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the
City of St. Clair, County of St. Clair, State of Michigan.
Section 2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Michigan as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the shareholders of
this corporation shall be held at the registered office or such other
place, either within or without the State of Michigan, as may be determined
from time to time by the board of directors.
Section 2. Annual Meeting of Shareholders. The annual meeting of
shareholders for election of directors and for such other business as may
properly come before the meeting, commencing with the year 1987, shall be
held on the third Tuesday of May, if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 am., local time,
or at such other date and time as shall be determined from time to time by
the board of directors, unless such action is taken by written consent as
provided in Article II, Section 12 of these bylaws. If the annual meeting
is not held on the date designated therefor, the board shall cause the
meeting to be held as soon thereafter as convenient.
Section 3. Order of Business at Annual Meeting. The order of
business at the annual meeting of the shareholders shall be as follows:
(a) Reading of notice and proof of mailing,
(b) Reports of Officers,
(c) Election of Directors,
(d) Transaction of other business mentioned in the notice,
(e) Adjournment,
provided that, in the absence of any objection, the presiding officer may
vary the order of business at his discretion.
Section 4. Notice of Meeting of Shareholders. Except as otherwise
provided in the Michigan Business Corporation Act (herein called the
"Act"), written notice of the time, place, and purpose of a meeting of
shareholders shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting, either personally or by mail, to each
shareholder of record entitled to vote at the meeting. When a meeting is
adjourned to another time or place, it is not necessary to give notice of
the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken
and at the adjourned meeting only such business is transacted as might have
been transacted at the original meeting. However, if after the adjournment
the board of directors fix a new record date for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of
record on the new record date entitled to vote at the meeting.
Section 5. List of Shareholders Entitled to Vote. The officer or
agent having charge of the stock transfer books for shares of the
corporation shall make and certify a complete list of the shareholders
entitled to vote at a shareholders' meeting or any adjournment thereof.
The list shall:
(a) Be arranged alphabetically within each class and
series, with the address of, and the number of shares held by,
each shareholder.
(b) Be produced at the time and place of the meeting.
(c) Be subject to inspection by any shareholder during the
whole time of the meeting.
(d) Be prima facie evidence as to who are the shareholders
entitled to examine the list or to vote at the meeting.
Section 6. Special Meeting of Shareholders. A special meeting of
shareholders may be called at any time by the chief executive officer of
the corporation (See Article V, Section 4) or by a majority of the members
of the board of directors then in office, or by shareholders owning, in the
aggregate, not less than ten percent (10%) of all the shares entitled to
vote at such special meeting. The method by which such meeting may be
called is as follows: Upon receipt of a specification in writing setting
forth the date and objects of such proposed special meeting, signed by the
chief executive officer, or by a majority of the members of the board of
directors then in office, or by shareholders as above provided, the
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secretary of this corporation shall prepare, sign, and mail the notices
requisite to such meeting.
Section 7. Quorum of Shareholders. Unless a greater or lesser quorum
is provided in the articles of incorporation, in a bylaw adopted by the
shareholders, or in the Act, shares entitled to cast a majority of the
votes at a meeting constitute a quorum at the meeting. The shareholders
present in person or by proxy at such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum. Whether or not a quorum is present, the meeting
may be adjourned by a vote of the shares present.
Section 8. Vote of Shareholders. Each outstanding share is entitled
to one (1) vote on each matter submitted to a vote, unless otherwise
provided in the articles of incorporation. A vote may be cast either
orally or in writing. When an action, other than the election of
directors, is to be taken by vote of the shareholders, it shall be
authorized by a majority of the votes cast by the holders of shares
entitled to vote thereon, unless a greater plurality is required by the
articles of incorporation or the Act. Directors shall be elected by a
plurality of the votes cast at an election.
Section 9. Record Date for Determination of Shareholders. For the
purpose of determining shareholders entitled to notice of and to vote at a
meeting of shareholders or an adjournment thereof, or to express consent or
to dissent from a proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action, the board may
fix, in advance, a date as the record date for any such determination of
shareholders. The date shall not be more than sixty (60) nor less than ten
(10) days before the date of the meeting, nor more than sixty (60) days
before any other action. If a record date is not fixed (a) the record date
for determination of shareholders entitled to notice of or to vote at a
meeting of shareholders shall be the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the
day next preceding the day on which the meeting is held, and (b) the record
date for determining shareholders for any purpose other than that specified
in subdivision (a) shall be the close of business on the day on which the
resolution of the board relating thereto is adopted. When a determination
of shareholders of record entitled to notice of or to vote at a meeting of
shareholders has been made as provided in this Section, the determination
applies to any adjournment of the meeting, unless the board fixes a new
record date under this Section for the adjourned meeting.
Section 10. Proxies. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may
authorize one or more other persons to act for him by proxy. A proxy shall
be signed by the shareholder or his authorized agent or representative. A
proxy is not valid after the expiration of three (3) years from its date
unless otherwise provided in the proxy.
-3-
Section 11. Inspectors of Election. The board of directors, in
advance of a shareholders' meeting, may appoint one (1) or more inspectors
of election to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at a shareholders'
meeting may, and on request of a shareholder entitled to vote thereat
shall, appoint one (1) or more inspectors. In case a person appointed
fails to appear or act, the vacancy may be filled by appointment made by
the board of directors in advance of the meeting or at the meeting by the
person presiding thereat. The inspectors shall determine the number of
shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine challenges
and questions arising in connection with the right to vote, count and
tabulate votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all
shareholders. On request of the person presiding at the meeting or a
shareholder entitled to vote thereat, the inspectors shall make and execute
a written report to the person presiding at the meeting of any of the facts
found by them and matters determined by them. The report is prima facie
evidence of the facts stated and of the vote as certified by the
inspectors.
Section 12. Consent of Stockholders in Lieu of Meeting. The articles
of incorporation may provide that any action required or permitted by the
Act to be taken at an annual or special meeting of shareholders may be
taken without a meeting, without prior notice, and without a vote, if a
consent in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take the action at a meeting
at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to shareholders who have
not consented in writing. Any action required or permitted by the Act to
be taken at an annual or special meeting of shareholders may be taken
without a meeting, without prior notice, and without a vote, if all the
shareholders entitled to vote thereon consent thereto in writing.
Section 13. Participation in Meeting by Telephone. By oral or
written permission of a majority of the shareholders, a shareholder may
participate in a meeting of shareholders by conference telephone or similar
communications equipment by which all persons participating in the meeting
may hear each other if all participants are advised of the communications
equipment and the names of the participants in the conference are divulged
to all participants. Participation in a meeting pursuant to this Section
constitute presence in person at the meeting.
-4-
ARTICLE III
DIRECTORS
Section 1. Number and Term of Directors. The number of directors
which shall constitute the whole board shall be not less than two nor more
than ten. The first board shall consist of five (5) directors.
Thereafter, the number of directors which shall constitute the board of
directors for each ensuing year shall be determined at the annual meeting
by vote of the shareholders prior to such election; provided, however, that
if a motion is not made and carried to increase or decrease the number of
directors, the board shall consist of the same number of directors as were
elected for the preceding year. The first board of directors shall hold
office until the first annual meeting of shareholders. At the first annual
meeting of shareholders and at each annual meeting thereafter the
shareholders shall elect directors to hold office until the succeeding
annual meeting, except in case of the classification of directors as
permitted by the Act. A director shall hold office for the term for which
he is elected and until his successor is elected and qualified, or until
his resignation or removal. Directors need not be shareholders.
Section 2. Vacancies. A position occurring in the board resulting
from a vacancy or an increase in the number of directors may be filled by
the affirmative vote of a majority of the remaining directors though less
than a quorum of the board for a term of office continuing only until the
next election of directors by the shareholders. If because of death,
resignation, or other cause, the corporation has no directors in office, an
officer, a shareholder, an executor, administrator, trustee or guardian of
a shareholder, or other fiduciary entrusted with like responsibility for
the person or estate of a shareholder, may call a special meeting of
shareholders in accordance with the articles of incorporation or these
bylaws.
Section 3. Removal. A director or the entire board may be removed at
any time, with or without cause, by vote of the holders of a majority of
the shares entitled to vote at an election of directors.
Section 4. Resignation. A director may resign by written notice to
the corporation. The resignation is effective upon its receipt by the
corporation or a subsequent time as set forth in the notice of resignation.
Section 5. Powers. The business and affairs of the corporation shall
be managed by its board of directors except as otherwise provided in the
Act or in the articles of incorporation.
Section 6. Location of Meetings. Regular or special meetings of the
board of directors may be held either within or without the State of
Michigan.
-5-
Section 7. Organization Meeting of Board. The first meeting of each
newly elected board of directors shall be held at the place of holding the
annual meeting of shareholders, and immediately following the same, for the
purpose of electing officers and transacting any other business properly
brought before it, provided that the organization meeting in any year may
be held at a different time and place than that herein provided by a
consent of a majority of the directors of such new board. No notice of
such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present,
unless said meeting is not held at the place of holding and immediately
following the annual meeting of shareholders.
Section 8. Regular Meeting of Board. Regular meetings of the board
of directors may be held without notice at such time and at such place as
shall from time to time be determined by the board.
Section 9. Special Meeting of Board. Special meetings of the board
of directors may be called by the chief executive officer, or by a majority
of the persons then comprising the board of directors, at any time by means
of notice of the time and place thereof to each director, given not less
than twenty-four (24) hours before the time such special meeting is to be
held.
Section 10. Committees of Directors. The board of directors may
designate one (1) or more committees, each committee to consist of one or
more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace an
absent or disqualified member at a meeting of the committee. In the
absence or disqualification of a member of a committee, the members thereof
present at a meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors creating such committee, may exercise
all the powers and authority of the board of directors in the management of
the business and affairs of the corporation. However, such a committee
does not have the power or authority to amend the articles of
incorporation, adopt an agreement of merger or consolidation, recommend to
the shareholders the sale, lease, or exchange of all or substantially all
of the corporation's property and assets, recommend to the shareholders a
dissolution of the corporation or a revocation of a dissolution, amend the
bylaws of the corporation, fill vacancies in the board of directors, or fix
compensation of the directors serving on the board or on a committee; and,
unless the resolution of the board of directors creating such committee or
the articles of incorporation expressly so provides, such a committee does
not have the power or authority to declare a dividend or to authorize the
issuance of stock. Any such committee, and each member thereof, shall
serve at the pleasure of the board of directors.
-6-
Section 11. Quorum and Required Vote of Board and Committees. At all
meetings of the board of directors, or of a committee thereof, a majority
of the members of the board then in office, or of the members of a
committee thereof, constitutes a quorum for transaction of business. The
vote of the majority of members present at a meeting at which a quorum is
present constitutes the action of the board or of the committee unless the
vote of a larger number is required by the Act. Amendment of these bylaws
by the board requires the vote of not less than a majority of the members
of the board then in office. If a quorum shall not be present at any
meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 12. Action by Written Consent. Action required or permitted
to be taken pursuant to authorization voted at a meeting of the board of
directors or a committee thereof, may be taken without a meeting if, before
or after the action, all members of the board or of the committee consent
thereto in writing. The written consents shall be filed with the minutes
of the proceedings of the board or committee. The consent has the same
effect as a vote of the board or committee for all purposes.
Section 13. Compensation of Directors. The board of directors, by
affirmative vote of a majority of directors in office and irrespective of
any personal interest of any of them, may establish reasonable compensation
of directors for services to the corporation as directors or officers, but
approval of the shareholders is required if the articles of incorporation,
these bylaws or any provisions of the Act so provide.
Section 14. Participation in Meeting by Telephone. By oral or
written permission of a majority of the board of directors, a member of the
board of directors or of a committee designated by the board may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
Section constitutes presence in person at the meeting.
ARTICLE IV
NOTICES
Section 1. Notice. Whenever any notice or communication is required
to be given by mail to any director or shareholder under any provision of
the Act, or of the articles of incorporation or of these bylaws, it shall
be given in writing, except as otherwise provided in the Act, to such
director or shareholder at the address designated by him for that purpose
or, if none is designated, at his last known address. The notice or
communication is given when deposited, with postage thereon prepaid, in a
post office or official depository under the exclusive care and custody of
the United States postal service. The mailing shall be registered,
-7-
certified, or other first class mail except where otherwise provided in the
Act. Written notice may also be given in person or by telegram, telex,
radiogram, cablegram, or mailgram, and such notice shall be deemed to be
given when the recipient receives the notice personally, or when the
notice, addressed as provided above, has been delivered to the company, or
to the equipment transmitting such notice. Neither the business to be
transacted at, nor the purpose of, a regular or special meeting of the
board of directors need be specified in the notice of the meeting.
Section 2. Waiver of Notice. When, under the Act or the articles of
incorporation or these bylaws, or by the terms of an agreement or
instrument, a corporation or the board or any committee thereof may take
action after notice to any person or after lapse of a prescribed period of
time, the action may be taken without notice and without lapse of the
period of time, if at any time before or after the action is completed the
person entitled to notice or to participate in the action to be taken or,
in case of a shareholder, by his attorney-in-fact, submits a signed waiver
of such requirements. Neither the business to be transacted at, nor the
purpose of, a regular or special meeting of the board of directors need be
specified in the waiver of notice of the meeting. Attendance of a person
at a meeting of shareholders, in person or by proxy, or of a director at a
meeting constitutes a waiver of notice of such meeting, except when the
person or director attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. Selection. The board of directors, at its first meeting
and at each meeting following the annual meeting of shareholders, shall
elect or appoint a president, a secretary, and a treasurer. The board of
directors may also elect or appoint a chairman of the board, one (1) or
more vice presidents and such other officers, employees, and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from
time to time by the board. Two (2) or more offices may be held by the same
person but an officer shall not execute, acknowledge, or verify an
instrument in more than one (1) capacity.
Section 2. Compensation. The salaries of all officers, employees,
and agents of the corporation shall be fixed by the board of directors;
provided, however, that the board may delegate to the officers the fixing
of compensation of assistant officers, employees, and agents.
Section 3. Term, Removal, and Vacancies. Each officer of the
corporation shall hold office for the term for which he is elected or
-8-
appointed and until his successor is elected or appointed and qualified, or
until his resignation or removal. An officer elected or appointed by the
board of directors may be removed by the board with or without cause at any
time. An officer may resign by written notice to the corporation. The
resignation is effective upon its receipt by the corporation or at a
subsequent time specified in the notice of resignation. Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors.
Section 4. Chief Executive Officer. At the first meeting of each
newly-elected board of directors, the board shall designate the chairman of
the board or president as the chief executive officer of the corporation;
provided, however, that if a motion is not made and carried to change the
designation, the designation shall be the same as the designation for the
preceding year; provided, further, that the designation of the chief
executive officer may be changed at any special meeting of the board of
directors. The president shall be the chief executive officer whenever the
office of chairman of the board is vacant. The chief executive officer
shall be responsible to the board of directors for the general supervision
and management of the business and affairs of the corporation and shall see
that all orders and resolutions of the board are carried into effect. The
chairman of the board or president who is not the chief executive officer
shall be subject to the authority of the chief executive officer, but shall
exercise all of the powers and discharge all of the duties of the chief
executive officer, during the absence or disability of the chief executive
officer.
Section 5. Chairman of the Board of Directors. If the board of
directors elects or appoints a chairman of the board, he shall be elected
or appointed by, and from among, the membership of, the board of directors.
He shall preside at all meetings of the shareholders, of the board of
directors and of any executive committee. He shall perform such other
duties and functions as shall be assigned to him from time to time by the
board of directors. He shall be, ex officio, a member of all standing
committees. Except where by law the signature of the president of the
corporation is required, the chairman of the board of directors shall
possess the same power and authority to sign all certificates, contracts,
instruments, papers, and documents of every conceivable kind and character
whatsoever in the name of and on behalf of the corporation which may be
authorized by the board of directors. During the absence or disability of
the president, or while that office is vacant, the chairman of the board of
directors shall exercise all of the powers and discharge all of the duties
of the president.
Section 6. President. The president shall be elected or appointed
by, and from among the membership of, the board of directors. During the
absence or disability of the chairman of the board, or while that office is
vacant, the president shall preside over all meetings of the board of
directors, of the shareholders and of any executive committee, and shall
perform all of the duties and functions, and when so acting shall have all
-9-
powers and authority, of the chairman of the board. He shall be, ex
officio, a member of all standing committees. The president shall, in
general, perform all duties incident to the office of president and such
other duties as may be prescribed by the board of directors.
Section 7. Vice Presidents. The board of directors may elect or
appoint one or more vice presidents. The board of directors may designate
one or more vice presidents as executive or senior vice presidents. Unless
the board of directors shall otherwise provide by resolution duly adopted
by it, such of the vice presidents as shall have been designated executive
or senior vice presidents and are members of the board of directors in the
order specified by the board of directors (or if no vice president who is a
member of the board of directors shall have been designated as executive or
senior vice president, then such vice presidents as are members of the
board of directors in the order specified by the board of directors) shall
perform the duties and exercise the powers of the president during the
absence or disability of the president. The vice presidents shall perform
such other duties as may be delegated to them by the board of directors,
any executive committee, or the president.
Section 8. Secretary. The secretary shall attend all meetings of the
stockholders, and of the board of directors and of any executive committee,
and shall preserve in the books of the corporation true minutes of the
proceedings of all such meetings. He shall safely keep in his custody the
seal of the corporation and shall have authority to affix the same to all
instruments where its use is required or permitted. He shall give all
notice required by the Act, these bylaws or resolution. He shall perform
such other duties as may be delegated to him by the board of directors, any
executive committee, or the president.
Section 9. Treasurer. The treasurer shall have custody of all
corporate funds and securities and shall keep in books belonging to the
corporation full and accurate accounts of all receipts and disbursements;
he shall deposit all moneys, securities, and other valuable effects in the
name of the corporation in such depositories as may be designated for that
purpose by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, taking proper
vouchers for such disbursements, and shall render to the president and the
board of directors whenever requested an account of all his transactions as
treasurer and of the financial condition of the corporation. If required
by the board of directors he shall keep in force a bond in form, amount,
and with a surety or sureties satisfactory to the board of directors,
conditioned for faithful performance of the duties of his office, and for
restoration to the corporation in case of his death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money,
and property of whatever kind in his possession or under his control
belonging to the corporation. He shall perform such other duties as may be
delegated to him by the board of directors, any executive committee, or the
president.
-10-
Section 10. Assistant Secretaries and Assistant Treasurers. The
assistant secretary or assistant secretaries, in the absence or disability
of the secretary, shall perform the duties and exercise the powers of the
secretary. The assistant treasurer or assistant treasurers, in the absence
or disability of the treasurer, shall perform the duties and exercise the
powers of the treasurer. Any assistant treasurer, if required by the board
of directors, shall keep in force a bond as provided in Section 9, Article
V. The assistant secretaries and assistant treasurers, in general, shall
perform such duties as shall be assigned to them by the secretary or by the
treasurer, respectively, or by the board of directors, any executive
committee, or the president.
Section 11. Delegation of Authority and Duties by Board of Directors.
All officers, employees, and agents shall, in addition to the authority
conferred, or duties imposed, on them by these bylaws, have such authority
and perform such duties in the management of the corporation as may be
determined by resolution of the board of directors not inconsistent with
these bylaws.
ARTICLE VI
INDEMNIFICATION
Section 1. Third Party Actions. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by
or in the right of the corporation) by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit, or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders, and with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 2. Actions in the Right of the Corporation. The corporation
shall indemnify any person who was or is a party to or is threatened to be
made a party to any threatened, pending, or completed action or suit by or
-11-
in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation or its shareholders
and except that no indemnification shall be made in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
Section 3. Mandatory and Permissive Payments.
(a) To the extent that a director, officer, employee, or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred
to in Sections 1 or 2 of this Article VI, or in defense of any
claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(b) Any indemnification under Sections 1 or 2 of this
Article VI (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in Sections 1
and 2 of this Article VI. Such determination shall be made in
either of the following ways:
(1) By the board of a majority vote of a quorum
consisting of directors who were not parties to such action,
suit, or proceeding.
(2) If such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors, so directs,
by independent legal counsel who may be the regular counsel
of the corporation in a written opinion.
(3) By the shareholders.
Section 4. Expense Advances. Expenses incurred in defending a civil
or criminal action, suit, or proceeding described in Sections 1 or 2 of
-12-
this Article VI may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in subsection (b) of Section 3 of this Article VI upon receipt of
an undertaking by or on behalf of the director, officer, employee, or agent
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation.
Section 5. Validity of Provisions. A provision made to indemnify
directors or officers of any action, suit, or proceeding referred to in
Sections 1 or 2 of this Article VI whether contained in the articles of
incorporation, these bylaws, a resolution of shareholders or directors, an
agreement or otherwise, shall be invalid only insofar as it is in conflict
with Sections 1 to 5 of this Article VI. Nothing contained in Sections 1
to 5 of this Article VI shall affect any rights to indemnification to which
persons other than directors and officers may be entitled by contract or
otherwise by law. The indemnification provided in Sections 1 to 5 of this
Article VI continues as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
Section 6. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the corporation would
have power to indemnify him against such liability under Sections 1 to 5 of
this Article VI.
Section 7. Constituent Corporation. For the purposes of this Article
VI, references to the corporation include all constituent corporations
absorbed in a consolidation or merger and the resulting or surviving
corporation, so that a person who is or was a director, officer, employee,
or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or
other enterprise shall stand in the same position under the provisions of
this Article VI with respect to the resulting or surviving corporation as
he would if he had served the resulting or surviving corporation in the
same capacity.
ARTICLE VII
STOCK AND TRANSFERS
Section 1. Share Certificates: Required Signatures. The shares of
the corporation shall be represented by certificates signed by the chairman
of the board of directors, vice chairman of the board of directors,
-13-
president or a vice president and which also may be signed by another
officer of the corporation. The certificates may be sealed with the seal
of the corporation or a facsimile of the seal. The signatures of the
officers may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the corporation
itself or its employee. If an officer who has signed or whose facsimile
signature has been placed upon a certificate ceases to be an officer before
the certificate is issued, it may be issued by the corporation with the
same effect as if he were the officer at the date of issue.
Section 2. Share Certificates: Required Provisions. A certificate
representing shares of the corporation shall state upon its face:
(a) That the corporation is formed under the laws of this
state.
(b) The name of the person to whom issued.
(c) The number and class of shares, and the designation of
the series, if any, which the certificate represents.
(d) The par value of each share represented by the
certificate, or a statement that the shares are without par
value.
A certificate representing shares issued by a corporation which is
authorized to issue shares of more than one class shall set forth on its
face or back or state that the corporation will furnish to a shareholder
upon request and without charge a full statement of the designation,
relative rights, preferences, and limitations of the shares of each class
authorized to be issued, and if the corporation is authorized to issue any
class of shares in series, the designation, relative rights, preferences,
and limitations of each series so far as the same have been prescribed and
the authority of the board to designate and prescribe the relative rights,
preferences, and limitations of other series.
Section 3. Replacement of Lost or Destroyed Share Certificates. The
corporation may issue a new certificate for shares or fractional shares in
place of a certificate theretofore issued by it, alleged to have been lost
or destroyed, and the board of directors may require the owner of the lost
or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any
claim that may be made against it on account of the alleged lost or
destroyed certificate or the issuance of such new certificate.
Section 4. Registered Shareholders. The corporation shall have the
right to treat the registered holder of any share as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim
to, or interest in, such share on the part of any other person, whether or
-14-
not the corporation shall have express or other notice thereof, save as may
be otherwise provided by the statutes of Michigan.
Section 5. Transfer Agent and Registrar. The board of directors may
appoint a transfer agent and a registrar in the registration of transfers
of its securities.
Section 6. Regulations. The board of directors shall have power and
authority to make all such rules and regulations as the board shall deem
expedient regulating the issue, transfer, and registration of certificates
for shares in this corporation.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends or other Distributions in Cash or Property. By
action of the board of directors, the corporation may declare and pay
dividends or make other distributions in cash, bonds, or property,
including the shares or bonds of other corporations, on its outstanding
shares, except when currently the corporation is insolvent or would thereby
be made insolvent, or when the declaration, payment, or distribution would
be contrary to any restriction contained in the articles of incorporation.
Dividends may be declared or paid and other distributions may be made out
of surplus only. A dividend paid or any other distribution made, in any
part, from sources other than earned surplus, shall be accompanied by a
written notice (a) disclosing the amounts by which the dividend or
distribution affects stated capital, capital surplus, and earned surplus,
or (b) if such amounts are not determinable at the time of the notice,
disclosing the approximate effect of the dividend or distribution upon
stated capital, capital surplus and earned surplus and stating that the
amounts are not yet determinable.
Section 2. Reserves. The board of directors shall have power and
authority to set apart, out of any funds available for dividends, such
reserve or reserves, for any proper purpose, as the board in its discretion
shall approve, and the board shall have the power and authority to abolish
any reserve created by the board.
Section 3. Voting Securities. Unless otherwise directed by the
board, the chairman of the board or president, or in the case of their
absence or inability to act, the vice presidents, in order of their
seniority, shall have full power and authority on behalf of the corporation
to attend and to act and to vote, or to execute in the name or on behalf of
the corporation a consent in writing in lieu of a meeting of shareholders
or a proxy authorizing an agent or attorney-in-fact for the corporation to
attend and vote at any meetings of security holders of corporations in
which the corporation may hold securities, and at such meetings he or his
-15-
duly authorized agent or attorney-in-fact shall possess and may exercise
any and all rights and powers incident to the ownership of such securities
and which, as the owner thereof, the corporation might have possessed and
exercised if present. The board by resolution from time to time may confer
like power upon any other person or persons.
Section 4. Checks. All checks, drafts, and orders for the payment of
money shall be signed in the name of the corporation in such manner and by
such officer or officers or such other person or persons as the board of
directors shall from time to time designate for that purpose.
Section 5. Contracts, Conveyances, Etc. When the execution of any
contract, conveyance, or other instrument has been authorized without
specification of the executing officers, the chairman of the board,
president or any vice president, and the secretary or assistant secretary,
may execute the same in the name and on behalf of this corporation and may
affix the corporate seal thereto. The board of directors shall have power
to designate the officers and agents who shall have authority to execute
any instrument in behalf of this corporation.
Section 6. Corporate Books and Records. The corporation shall keep
books and records of account and minutes of the proceedings of its
shareholders, board of directors and executive committees, if any. The
books, records, and minutes may be kept outside this state. The
corporation shall keep at its registered office, or at the office of its
transfer agent within or without this state, records containing the names
and addresses of all shareholders, the number, class, and series of shares
held by each and the dates when they respectively became holders of record
thereof. Any of such books, records, or minutes may be in written form or
in any other form capable of being converted into written form within a
reasonable time. The corporation shall convert into written form without
charge any such record not in such form, upon written request of a person
entitled to inspect them.
Section 7. Fiscal Year. The fiscal year of the corporation shall
be fixed by resolution of the board of directors.
Section 8. Seal. If the corporation has a corporate seal, it shall
have inscribed thereon the name of the corporation and the words "Corporate
Seal" and "Michigan." The seal may be used by causing it or a facsimile to
be affixed, impressed, or reproduced in any other manner.
ARTICLE IX
AMENDMENTS
Section 1. The shareholders or the board of directors may amend or
repeal the bylaws or adopt new bylaws unless power to do so is reserved
exclusively to the shareholders by the articles of incorporation. Such
-16-
action may be taken by written consent or at any meeting of shareholders or
the board of directors; provided that if notice of any such meeting is
required by these bylaws, the notice of the meeting shall contain notice of
the proposed amendment, repeal, or new bylaws. Any bylaw hereafter made by
the shareholders shall not be altered or repealed by the board.
-17-
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UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THOMAS EDISON
INNS, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED AUGUST 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<CASH> 1,796
<SECURITIES> 0
<RECEIVABLES> 661
<ALLOWANCES> 24
<INVENTORY> 202
<CURRENT-ASSETS> 3,053
<PP&E> 27,049
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0
0
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<SALES> 10,694
<TOTAL-REVENUES> 11,350
<CGS> 10,821
<TOTAL-COSTS> 10,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,012
<INCOME-PRETAX> (483)
<INCOME-TAX> (103)
<INCOME-CONTINUING> (380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (380)
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