<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9632
AMRE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2041737
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8585 N. STEMMONS FREEWAY, SOUTH TOWER 75247
DALLAS, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (214) 658-6300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of July 28, 1996, there were 19,749,758 shares of the registrant's
stock, $.01 par value, outstanding.
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<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheet - June 30, 1996 and December 31, 1995 . . . . . . . . . . . . 1
Consolidated Statement of Operations - Quarterly periods ended June 30, 1996
and July 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Operations - Six month periods ended June 30, 1996
and July 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Cash Flows - Six month periods ended June 30, 1996
and July 2, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Changes in Stockholders' Equity - Six-month period
ended June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS . . . . . . . . . . . . . . . . . . . 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
- -------------
Note: Items 2, 3 and 5 of Part II are omitted because they are not
applicable.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
AMRE, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------- ------------
<S> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 11,269 $ 13,177
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . 3,504 9,523
Accounts receivable -
Trade, net of allowance for doubtful accounts of $918 and $891 . 9,392 8,806
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 913
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3,987
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,908 7,370
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3,346 3,983
-------------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . 34,011 47,759
Property, plant and equipment, net . . . . . . . . . . . . . . . . . 9,174 9,291
Goodwill, less accumulated amortization of $2,334 and $2,164 . . . . 9,123 9,768
Notes receivable - related parties . . . . . . . . . . . . . . . . . -- 469
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,544 1,499
-------------- ------------
$ 53,852 $ 68,786
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,589 $ 16,516
Wages, commissions and bonuses . . . . . . . . . . . . . . . . . . 5,592 5,698
Accrued workers' compensation . . . . . . . . . . . . . . . . . . . 2,073 2,076
Current portion - long-term debt and capital lease obligations . . 1,528 2,283
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 16,820 20,678
Total current liabilities . . . . . . . . . . . . . . . . . . 47,602 47,251
-------------- ------------
Long-term debt and capital lease obligations . . . . . . . . . . . . 5,762 6,120
-------------- ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 53,364 53,371
-------------- ------------
Commitments and contingencies
Senior Convertible Redeemable Preferred Stock - $.10 par value;
300,000 shares issued and outstanding, liquidation
value of $10 per share . . . . . . . . . . . . . . . . . . . 3,121 3,000
Stockholders' equity:
Preferred stock - $.10 par value, 1,000,000 shares
authorized; 300,000 Senior Convertible shares outstanding . . . . -- --
Common stock - $.01 par value, 40,000,000 shares
authorized, 20,114,554 and 18,872,039 shares issued; 19,502,356
and 17,649,841 shares outstanding . . . . . . . . . . . . . . . . 201 189
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 44,925 34,293
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . (37,500) (6,446)
-------------- ------------
7,626 28,036
Less: Treasury stock, at cost (612,198 and 1,222,198 shares) . . . (5,160) (10,301)
Unearned ESOP compensation . . . . . . . . . . . . . . . . (5,099) (5,320)
-------------- ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . (2,633) 12,415
-------------- ------------
$ 53,852 $ 68,786
============== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
1
<PAGE> 4
AMRE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------
JUNE 30, 1996 JULY 2, 1995
-------------- ------------
<S> <C> <C>
Contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,875 $ 90,209
Contract costs . . . . . . . . . . . . . . . . . . . . . . . . . . 23,231 29,698
------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,644 60,511
------------ ------------
Branch operating expenses . . . . . . . . . . . . . . . . . . . . . 6,225 5,999
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . 21,309 22,874
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . 12,753 16,067
License and finance fees . . . . . . . . . . . . . . . . . . . . . 4,073 10,714
General and administrative expenses . . . . . . . . . . . . . . . . 7,721 7,459
------------ ------------
52,081 63,113
------------ ------------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . (12,437) (2,602)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . 184 444
Other income (expense), net . . . . . . . . . . . . . . . . . . . . 209 124
------------ ------------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . (12,044) (2,034)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 (197)
------------ ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,094) $ (1,837)
============ =============
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . $ (.63) $ (.11)
============ =============
Cash dividends declared per share . . . . . . . . . . . . . . . . . $ -- $ .03
============ =============
Weighted average shares outstanding . . . . . . . . . . . . . . . . 19,214 17,128
============ =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2
<PAGE> 5
AMRE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTH PERIODS ENDED
--------------------------------------
JUNE 30, 1996 JULY 2, 1995
-------------- ---------------
<S> <C> <C>
Contract revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,476 $ 165,040
Contract costs . . . . . . . . . . . . . . . . . . . . . . . . . . 44,616 55,765
-------------- ---------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,860 109,275
-------------- ---------------
Branch operating expenses . . . . . . . . . . . . . . . . . . . . . 12,162 11,588
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . 45,188 43,838
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . 25,644 30,362
License and finance fees . . . . . . . . . . . . . . . . . . . . . 8,603 19,582
General and administrative expenses . . . . . . . . . . . . . . . . 14,215 13,574
Non-recurring charges . . . . . . . . . . . . . . . . . . . . . . . 2,500 --
-------------- ---------------
108,312 118,944
-------------- ---------------
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . (31,452) (9,669)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . 471 736
Other income (expense), net . . . . . . . . . . . . . . . . . . . . (5) (53)
-------------- ---------------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . (30,986) (8,986)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 (2,634)
-------------- ---------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (31,036) $ (6,352)
============== ===============
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . $ (1.67) $ (.37)
============== ===============
Cash dividends declared per share . . . . . . . . . . . . . . . . . $ -- $ .05
============== ===============
Weighted average shares outstanding . . . . . . . . . . . . . . . . 18,663 17,118
============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
3
<PAGE> 6
AMRE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
------------------------------------
JUNE 30, 1996 JULY 2, 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (31,036) $ (6,352)
------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 50 (2,634)
Depreciation and amortization . . . . . . . . . . . . . . . . . 1,635 1,506
Provision for doubtful accounts . . . . . . . . . . . . . . . . 642 (186)
Other non-cash items . . . . . . . . . . . . . . . . . . . . . 1,314 305
Cash receipts of (payments for) income taxes . . . . . . . . . 3,957 (246)
Changes in assets and liabilities:
Accounts receivable and other . . . . . . . . . . . . . . . . (883) (4,046)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 1,462 (468)
Prepaid expenses and other assets . . . . . . . . . . . . . . 207 (2,815)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 5,073 (1,892)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . (4,011) 6,086
------------ ------------
Total adjustments . . . . . . . . . . . . . . . . . . . . 9,446 (4,390)
------------ ------------
Net cash used in operating activities . . . . . . . . . . . . . . (21,590) (10,742)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities . . . . . . . . . . . . . . . . . 13,309 24,025
Purchase of marketable securities . . . . . . . . . . . . . . . (7,328) (15,795)
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . 469 137
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (1,701) (1,836)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 --
------------ ------------
Net cash provided by investing activities . . . . . . . . . . . . 4,985 6,531
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . . . . . . . . . . . . . 100 521
Payments on long-term debt . . . . . . . . . . . . . . . . . . (1,292) (280)
Issuance of common stock . . . . . . . . . . . . . . . . . . . 15,907 81
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (18) (805)
------------ ------------
Net cash provided by (used in) financing activities . . . . . . . 14,697 (483)
------------ ------------
Net change in cash and cash equivalents . . . . . . . . . . . . . (1,908) (4,694)
Cash and cash equivalents at beginning of period . . . . . . . . 13,177 9,344
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . $ 11,269 $ 4,650
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
4
<PAGE> 7
AMRE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED TREASURY STOCK
------------------ PAID-IN RETAINED ESOP -------------------
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION SHARES AMOUNT
------ ------ ------- ------- ------------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 . 18,872 $ 189 $ 34,293 $ ( 6,446) $ (5,320) (1,222) $ (10,301)
Net loss . . . . . . . . . . -- -- -- (31,036) -- -- --
Preferred stock dividends . . -- -- (121) -- -- -- --
Common stock dividends . . . -- -- -- (18) -- -- --
Issuance of stock . . . . . 839 8 12,029 -- -- -- --
Exercise of options . . . . . 404 4 (1,276) -- -- 610 5,141
Compensation expense for
ESOP shares released . . . -- -- -- -- 221 -- --
------ ----- -------- --------- -------- ---- --------
Balance, June 30, 1996 . . . 20,115 $ 201 $ 44,925 $ (37,500) $ (5,099) (612) $ (5,160)
====== ===== ======== ========= ======== ==== ========
</TABLE>
5
<PAGE> 8
AMRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation - The accompanying interim consolidated financial
statements of AMRE, Inc. (the "Company" or "AMRE") and its subsidiaries,
American Remodeling, Inc., Facelifters Home Systems, Inc., Congressional
Construction Corporation and Century 21 Home Improvements, Inc. as of June 30,
1996 and for the three-month and six-month periods ended June 30, 1996 and July
2, 1995 are unaudited; however, in the opinion of management, these interim
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position,
results of operations and cash flows. These financial statements should be
read in conjunction with the consolidated annual financial statements and
related notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
On April 25, 1996, the Company consummated a merger with Facelifters Home
Systems, Inc. ("Facelifters"). The merger is accounted for as a pooling of
interests. The accompanying unaudited consolidated financial statements give
retroactive effect to this transaction.
On May 28, 1996, the Company consummated a merger with Congressional
Construction Corporation ("Congressional"). The merger is accounted for as a
pooling of interests. The accompanying unaudited consolidated financial
statements give retroactive effect to this transaction.
Fiscal period - The Company's quarterly periods end on the Sunday nearest
to the last day in the calendar quarter except at year end which is December
31.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
Litigation - AMRE has been named as a defendant in a proceeding filed on
February 29, 1996 in the Superior Court of California by a party who claims
ownership of a registered service mark and trade name styled "21st Century Home
Improvement." AMRE has been advised by Century 21 Real Estate Corporation
(CENTURY 21), the owner of the CENTURY 21(R) Home Improvements(SM) name, that
the action has been moved from state court to federal court. The plaintiff
alleges, among other things, that the CENTURY 21 Home Improvements name is an
infringement of the plaintiff's trade name and registered mark and constitutes
an unfair business practice. The plaintiff seeks a preliminary and permanent
injunction enjoining AMRE from operating under the CENTURY 21 Home Improvements
name, general damages according to proof, all profits realized by AMRE from
operating under the CENTURY 21 Home Improvements name in California and costs
and attorneys' fees.
AMRE has been advised by CENTURY 21 that it gave notice to counsel for the
owner of the "21st Century Home Improvement" mark that the latter mark
infringed on CENTURY 21's federally registered mark. AMRE has further been
advised by CENTURY 21 that : (i) it is its policy and practice to vigorously
defend its trade name, (ii) CENTURY 21 has successfully litigated in the past
to protect its trade name and federally registered mark, and (iii) it has
obtained a number of judgements against such entities which had used "21st
CENTURY" or marks containing the word "CENTURY" in connection with remodeling
or home construction services. In addition, CENTURY 21 has advised AMRE that
CENTURY 21's federal registration predates the use of the "21st Century Home
Improvement" mark, and for the above-listed reasons, AMRE believes at this time
that it is legally entitled to use the CENTURY 21 Home Improvements name in
California.
The Company is a party to certain other legal proceedings arising in the
ordinary course of business, none of which is believed to be material to the
financial position of the Company.
6
<PAGE> 9
Credit Agreement - AMRE has an agreement with a financial institution which
makes financing available to its customers. The agreement provides the
financial institution with a right of first refusal on substantially all of
AMRE's customer credit applications and provides AMRE with a minimum acceptance
rate of customer credit applications based on specified criteria. AMRE's risk
under the agreement is limited to its normal warranties and representations
regarding materials and workmanship. AMRE has experienced lower customer
credit ratings in the first half of 1996, resulting in higher sales credit
rejects than in prior years and lower net sales closing rates. On May 8, 1996,
the agreement was amended to provide for (i) an increased minimum acceptance
rate regardless of the specified credit criteria and (ii) a fee to be paid by
AMRE on every customer loan provided by the financial institution. The fee
amount, which was set initially at 5.45 percent of the loan amount, is tied to
the specified credit criteria and is subject to adjustment every six months.
AMRE estimates that approximately 66 percent of its contract revenues are
financed under this agreement. While the amendment is designed to provide
increased revenue dollars, net of the fee, and therefore increased
profitability, there can be no assurance that revenues will increase.
Prior to 1995, the Company assumed some recourse liability, or credit risk
in certain customer financing agreements, if customer defaults exceed specified
levels. The Company has provided a reserve for estimated losses under the
recourse liability. However, customer defaults may differ from the estimated
amount and therefore the reserve may be adjusted in future periods.
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
The Company recorded non-cash items as follows:
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
----------------------------
JUNE 30, JULY 2,
1996 1995
-------- -------
<S> <C> <C>
Amortization of investment premium and discounts . . . 39 96
Compensation expense for ESOP shares released . . . . . 221 215
Leaseholds and other assets written off . . . . . . . . 990 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 64 (6)
----- ---
1,314 305
===== ===
</TABLE>
NOTE 4 - NON-RECURRING CHARGES
AMRE incurred a non-recurring charge to operations of approximately $2.5
million during the first quarter of 1996 to reflect costs associated with the
mergers, and the integration of Facelifters and Congressional. This estimate
is subject to change based upon additional information.
7
<PAGE> 10
NOTE 5 - INCOME TAXES
The Company has recorded a valuation allowance to reflect the uncertainties
associated with the ultimate realization of its deferred tax asset. Management
periodically reviews the expected realization of the deferred tax asset and
makes adjustments to the valuation allowance, as appropriate, when existing
conditions change the probability of ultimate realization. The Company
established a valuation allowance of $6.4 million at December 31, 1995 which
equaled 100% of its deferred tax asset.
Management's evaluation as to the realizability of the deferred tax asset
took into consideration available evidence, both positive and negative,
regarding ultimate realization. Negative evidence considered by management
included (1) a significant loss in 1995, (2) operating losses in two of the
last three years, (3) the expected decline in revenues in 1996, (4) the
uncertainties associated with the time and cost to build awareness of the
CENTURY 21 Home Improvements name and generate significant amounts of
cost-effective leads and the process of integrating the companies when the
mergers were consummated made it difficult to estimate when the Company would
return to profitability and (5) costs relating to the brand transition and the
mergers.
Positive evidence considered by management included (1) a 3.0% license fee
(subject to an $11.0 million minimum in 1996) to be paid for use of the CENTURY
21 Home Improvements name as compared to a 12.0% license fee paid to Sears in
1995 and (2) expanded geographic and product opportunities under the Century 21
License Agreement.
Until the Century 21 License Agreement is in operation for a period of
time, there is no historical or objective evidence to determine its impact on
future taxable income. Therefore, based on the existing objective evidence,
management believes it is more likely than not that the Company will be unable
to generate sufficient taxable income to utilize the deferred tax asset and
that a reserve should be provided for the entire deferred tax asset. No tax
benefit has been provided for the pre-tax loss of the current period ended June
30, 1996. Management will review the valuation allowance in the future as the
results and impact of the CENTURY 21 Home Improvements license arrangement are
known.
NOTE 6 - CAPITALIZATION
Revolving credit facility - At June 30, 1996, no loans had been made under
the credit facility.
Senior Convertible Redeemable Preferred Stock - At June 30, 1996, $121,000
of dividends have been accrued on the Senior Convertible Redeemable Preferred
Stock.
Amendment to Certificate of Incorporation - In connection with the
Facelifters merger, on April 25, 1996, the stockholders of the Company approved
an amendment to the Certificate of Incorporation to increase the number of
authorized shares of common stock of the Company from 20 million to 40 million
shares.
Common Stock Issued in Private Placement - On April 30, 1996, the Company
completed a private placement with institutional investors pursuant to which
the Company issued 800,500 shares of its common stock. The purchasers had not
previously owned any common stock of the Company. The common stock was sold at
a discount to the then current market price in exchange for an agreement with
the investors not to sell the shares for a minimum of 180 days. The Company
received approximately $12 million of net proceeds after transaction expenses.
8
<PAGE> 11
NOTE 7 - MERGERS WITH FACELIFTERS AND CONGRESSIONAL
On October 31, 1995, the Company and Facelifters entered into an agreement
whereby a newly formed subsidiary of the Company would be merged with and into
Facelifters. Facelifters designs, manufactures, markets, sells and installs
kitchen cabinet refacing products utilized in kitchen remodeling, directly to
consumers in 23 markets, primarily markets in which the Company did not
operate.
On April 25, 1996, the stockholders of the Company and Facelifters approved
the merger ("Facelifters Merger") and Facelifters became a direct, wholly-owned
subsidiary of AMRE. Each outstanding share of common stock of Facelifters,
$.01 par value per share (the "Facelifters Common Stock"), was converted into
one share of AMRE Common Stock. Based on the number of shares of Facelifters
Common Stock outstanding upon consummation of the Facelifters Merger,
approximately 3,578,439 shares of AMRE Common Stock were issued to holders of
Facelifters Common Stock. In addition, AMRE reserved approximately 368,255
shares of AMRE Common Stock for issuance upon the exercise of outstanding
options to acquire Facelifters Common Stock.
On December 30, 1995, the Company and Congressional entered into an
agreement whereby a newly formed subsidiary of the Company would be merged with
and into Congressional. Congressional markets, sells, furnishes and installs
home improvement products, including siding, fencing, wooden decks, replacement
vinyl windows, roofing and patio enclosures directly to consumers in certain
markets, primarily markets in which the Company does not currently operate. In
connection with the merger, which was consummated on May 28, 1996, 899,998
shares were issued to the existing stockholders of Congressional.
Combined and separate results of the Company, Congressional and Facelifters
for the periods presented are as follows:
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED SIX-MONTH PERIODS ENDED
-------------------------------------- ---------------------------------------
JUNE 30, 1996 JULY 2, 1995 JUNE 30, 1996 JULY 2, 1995
---------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Contract revenues:
AMRE . . . . . . . . . $ 50,534 $ 73,737 $ 96,136 $ 134,622
Congressional . . . . . 2,714 4,765 5,353 8,044
Facelifters . . . . . . 9,627 11,707 19,987 22,374
---------------- --------------- ----------------- ---------------
Combined . . . . . . . $ 62,875 $ 90,209 $ 121,476 $ 165,040
---------------- --------------- ----------------- ---------------
Net income (loss):
AMRE . . . . . . . . . $ (11,118) $ (2,063) $ (25,773) $ (5,958)
Congressional . . . . . (484) (116) (1,020) (572)
Facelifters . . . . . . (492) 342 (4,243) 178
---------------- --------------- ----------------- ---------------
Combined . . . . . . . $ (12,094) $ (1,837) $ (31,036) $ (6,352)
---------------- --------------- ----------------- ---------------
Income (loss) per share:
AMRE . . . . . . . . . $ (.58) $ (.12) $ (1.38) $ (.35)
Congressional . . . . . (.02) (.01) (.06) (.03)
Facelifters . . . . . . (.03) .02 (.23) .01
---------------- --------------- ----------------- ---------------
Combined . . . . . . . $ (.63) $ (.11) $ (1.67) $ (.37)
---------------- --------------- ----------------- ---------------
</TABLE>
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is engaged through direct consumer marketing, in the in-home
sale and installation of siding and related exterior home improvement products,
kitchen cabinet refacing and custom countertops, replacement windows, and in
certain of its territories, exterior coating, wooden decks, fencing, roofing
and patio enclosures. The business of the Company is characterized by the need
to continuously generate prospective customer leads, and in this respect,
marketing and selling expenses constitute a substantial portion of the overall
expense of the Company.
To assist in understanding the Company's operating results, the following
table indicates the percentage relationship of various income and expense items
included in the Statement of Operations for the three-month and six- month
periods ended June 30, 1996 and July 2, 1995.
<TABLE>
<CAPTION>
PERCENTAGE OF CONTRACT REVENUES
----------------------------------------------------------
THREE-MONTH PERIODS ENDED SIX-MONTH PERIODS ENDED
------------------------- -------------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
---------- ------- -------- -------
<S> <C> <C> <C> <C>
Contract revenues . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Contract costs . . . . . . . . . . . . 36.9 32.9 36.7 33.8
----- ----- ----- -----
Gross profit . . . . . . . . . . . . . 63.1 67.1 63.3 66.2
----- ----- ----- -----
Branch operating expenses . . . . . . . 9.9 6.7 10.0 7.0
Marketing expenses . . . . . . . . . . 33.9 25.4 37.2 26.6
Selling expenses . . . . . . . . . . . 20.3 17.8 21.1 18.4
License and finance fees . . . . . . . 6.5 11.9 7.1 11.9
General and administrative expenses . . 12.3 8.2 11.7 8.2
Non-recurring charges . . . . . . . . . -- -- 2.1 --
Loss from operations . . . . . . . . . (19.8) (2.9) (25.9) (5.9)
----- ----- ----- -----
Other income and (expense), net . . . . .6 .6 .4 .5
Loss before income taxes. . . . . . . . (19.2) (2.3) (25.5) (5.4)
----- ----- ----- -----
Income taxes . . . . . . . . . . . . . -- .3 (.1) 1.5
----- ----- ----- -----
Net loss . . . . . . . . . . . . . . . (19.2)% (2.0)% (25.6)% (3.0)%
===== ===== ===== =====
</TABLE>
10
<PAGE> 13
RESULTS OF OPERATIONS
SIX-MONTH PERIOD ENDED JUNE 30, 1996 COMPARED WITH THE SIX-MONTH PERIOD ENDED
JULY 2, 1995
On October 17, 1995, the Company, TM Acquisition Corporation and Century 21
Real Estate Corporation, subsidiaries of HFS Incorporated, entered into an
agreement, effective January 1, 1996, pursuant to which the Company was granted
an exclusive 20-year license to operate under the name CENTURY 21 Home
Improvements in the marketing, sale, and installation of certain home
improvement products in the United States, Canada, and Mexico. The Company
also has the right to grant sublicenses under the agreement. The Company did
not renew its license agreement with Sears, Roebuck and Co. ("Sears") when it
expired on December 31, 1995.
By switching from the Sears to the CENTURY 21 Home Improvements name, AMRE
implemented a strategic decision to alter significantly the marketing and
distribution focus of its existing home improvements operations as well as to
expand into new product lines and geographical territories. The Company
realized that the Sears brand name is widely accepted in the home improvement
industry and has significant brand name appeal to a wide variety of customers.
However, the Company believes that, over the long term, the CENTURY 21 Home
Improvements name provides the Company with a better opportunity for growth and
profitability, including access to additional geographic markets, a larger
array of licensed products, the ability to expand through sublicensing, a
significantly lower royalty obligation and a 20-year term, facilitating
long-term planning. Although the benefits derived from the brand conversion
are substantial, they are accompanied by marketing and operational risks,
including those discussed below. While AMRE's successful conversion to the
CENTURY 21 Home Improvements brand is not yet complete and remains subject to
numerous risks and uncertainties, management is encouraged by the customer
receptivity of the new brand and is optimistic about the Company's ultimate
profitability.
As discussed below, successfully developing the CENTURY 21 Home
Improvements name entails numerous risks and challenges, including building
consumer awareness of a new brand, developing a cost effective source of sales
leads to replace those previously obtained through the Sears in-store program,
adapting to new advertising media and consumer profiles unrelated to the Sears
customer base, integrating the operations of Facelifters and Congressional and
maintaining liquidity throughout the transition. Although AMRE's ultimate
profitability remains management's uppermost objective, due to the complexity
of the transitional and operational issues facing the Company, management's
strategy in the short term is defined in terms of incremental gains,
quarter-over-quarter, rather than in terms of profitability. Although
management is confident that AMRE's business strategy will be successful over
the long term, it is not possible to estimate when the Company will return to
profitability in light of the transitional challenges and uncertainties which
lie ahead.
AMRE now conducts its advertising using the CENTURY 21 Home Improvements
name. There is no way to estimate the time required to build brand awareness of
the CENTURY 21 Home Improvement name. Although the CENTURY 21 Home Improvements
name was not used in the home improvement industry before 1996, at which time
AMRE began using the name, AMRE's management believes such brand name will also
be well recognized; however, there can be no assurance that revenues under the
CENTURY 21 Home Improvements name will be similar to or greater than those under
the Sears brand name. If the CENTURY 21 Home Improvements name does not result
in advertising response rates and sales rates equal to or better than those
experienced under the Sears brand name, it will likely have an adverse effect on
the business, operating results and financial condition of AMRE.
Leads on potential customers are critically important to AMRE's business.
Under the Sears brand name, AMRE generated approximately 20% of its leads
through AMRE-staffed kiosks located inside of Sears stores and 80% of its leads
through television, radio, direct mail, telemarketing and alternative media
sources. AMRE's transition strategy is to replace its prior Sears in-store
lead source with a multi-faceted field marketing program consisting of free
standing kiosks located in malls across the country, increased AMRE presence in
home shows and a cooperative referral program with the CENTURY 21 real estate
broker network. AMRE opened approximately 130 mall kiosks
11
<PAGE> 14
during the first half of 1996 and plans to open 80 additional mall kiosks
during the second half, although the leads are not yet as cost-effective as
those previously obtained under the Sears program.
In addition to the mall kiosks, AMRE announced two new lead generation
programs in July, 1996 which will be implemented during the second half of the
year. The Company announced an agreement with Montgomery Ward & Co., Inc. to
operate branded kiosks in approximately 95 Montgomery Ward stores and to market
its products and services to all Montgomery Wards' charge card holders and
other Montgomery Ward mailing and marketing lists. AMRE also began installing
kiosks in the eight Six Flags Theme Parks located across the country.
AMRE's marketing strategy also includes substantially increasing its
reliance on telemarketing as a lead source and AMRE has opened two outbound
telemarketing centers during the brand transition in order to accomplish this
objective. While management is optimistic about the success of AMRE's new
marketing strategy, there can be no assurances that AMRE's new lead sources
will produce a quantity and quality of leads comparable to that produced under
the Sears name at an equivalent per-lead cost, and the failure to obtain a
sufficient number of quality, cost-effective leads could have a material
adverse impact on AMRE's operations and financial condition.
Among the challenges in switching from the Sears to the CENTURY 21 Home
Improvements name, the Company was required to deliver to Sears in January
1996, all of the leads it generated under the Sears name through December 31,
1995. Thus, in January 1996, the Company had to quickly generate as many leads
as possible and had to do so without in-store leads, a major 1995 lead source.
Since the new outbound telemarketing centers, the in-mall program and the
Century 21 lead referral program would not produce any significant amount of
cost-effective leads for several months, lead generation in early 1996
emphasized quick response media, such as television and radio, as well as
telemarketing leads purchased from a third party vendor, which increased lead
generation costs and resulted in fewer leads at higher costs. Furthermore, the
significant increase in the mix of telemarketing leads and new lead generation
programs, and, during the second quarter, an inability to achieve adequate
sales staffing levels, all reduced the number of appointments as compared to
the prior year.
In addition to the above factors, the Company experienced a decline in the
sales dollars generated per appointment resulting from sharply lower sales
closing rates coupled with selling price discounting in connection with
launching the CENTURY 21 Home Improvements brand name. The lower number of
appointments and lower sales dollars generated per appointment resulted in a
32% decline in the dollar amount of sales orders as compared to the prior year
period and consequently contract revenues declined from $165,040,000 to
$121,476,000 in the current year. Production backlog was approximately $27
million at June 30, 1996, approximately 36% below the same period last year.
Gross profit margin as a percentage of contract revenues declined from
66.2% in the prior year period to 63.3% in the current year. The Company
discounted its selling prices heavily in launching the CENTURY 21 Home
Improvements brand name throughout most of the current year period, as it had
also discounted prices on jobs sold in late 1995 but installed in 1996 under
the Sears name in order to maximize the revenue generated from the remaining
available Sears leads. Management is reviewing opportunities for improving
margins.
Branch operating expenses increased from 7.0% of contract revenues in the
prior year period to 10.0% in 1996. Branch operating expenses are primarily
fixed costs, and as such, increased in percentage terms largely due to lower
contract revenues. Branch operating expenses increased in dollar terms
approximately $574,000 from the prior year period largely due to increased
staffing.
Marketing expense increased from $43,838,000 or 26.6% of contract revenues
to $45,188,000 or 37.2% of contract revenues. The increase in marketing
expenses principally reflects the transition to the CENTURY 21 Home
Improvements brand name during which the Company has experienced a decline in
the sales dollars generated per appointment as well as a higher marketing cost
per appointment. As discussed above, the Company concentrated its advertising
efforts in quick response media, such as television and radio, as well as
telemarketing leads purchased from a third party vendor, all of which are
higher cost media as compared to the Company's other lead generation
12
<PAGE> 15
sources. Additionally, the in-mall kiosk programs, the two telemarketing call
centers, and the CENTURY 21 real estate broker referral program increased
marketing expenditures during the period but were not expected to generate a
significant lead flow during their start-up phase. In the Company's normal
operating cycle, advertising expenses can precede the securing of sales orders
by up to two months, and precede completion of installations by up to four
months, depending upon the responsiveness of the advertising media selected and
the production cycle time of the product. This also contributes to a higher
level of marketing expense as a percent of contract revenues when the
production backlog increases.
Selling expenses increased to 21.1% of contract revenues as compared to
18.4% in the prior year period. Sales compensation, excluding management
salaries, was approximately 12% in both periods. Other selling expenses, which
include sales manager salaries, and training, insurance costs, recruiting and
travel, all of which are primarily fixed expenses in nature, increased in
percentage terms due to the decline in contract revenues from the prior year
period.
License and finance fees decreased to 7.1% of contract revenues as compared
to 11.9% in the same period last year. The decrease in percentage terms
reflects the lower license fee rate under the Century 21 License Agreement
partially offset by financing fees under the Company's new customer financing
credit agreement. In addition, a portion of the jobs installed in the current
year period were sold late in 1995 under the Sears License Agreement which had
a 12% license fee.
General and administrative expenses increased from 8.2% of contract
revenues in the prior year to 11.7% in the current year. In the 1995 period,
general and administrative expenses included a $550,000 charge associated with
a separation agreement between the Company and its former President and Chief
Executive Officer. In 1996, the Company incurred increases in bad debt and
legal expenses as compared to the prior year and therefore, in the aggregate,
the dollar amount of general and administrative expenses increased a net
$641,000 from the prior year period.
The Company had recorded a 100% valuation allowance at December 31, 1995 to
reflect the uncertainties associated with the ultimate realization of its
deferred tax asset. Management periodically reviews the expected realization
of the deferred tax asset and makes adjustments to the valuation allowance, as
appropriate, when existing conditions change the probability of ultimate
realization. Until the Century 21 License Agreement is in operation for a
period of time, there is no historical or objective evidence to determine its
impact on future taxable income. Therefore, based on the existing objective
evidence, management believes it is more likely than not that the Company will
be unable to generate sufficient taxable income to utilize the deferred tax
asset. No tax benefit has been provided for the pre-tax loss of the current
period ended June 30, 1996.
Although the Company was unable to achieve a satisfactory level of
appointments or sales closing rates in the first half of 1996, both the number
of appointments and the sales closing rates improved in the second quarter
compared to the first quarter and management expects this improvement to
continue in the third quarter. However, sales staffing levels must be ramped
up substantially for the expected higher appointment levels and this may
require much of the third quarter. In addition, while each of the in-mall and
Century 21 referral programs and the new outbound telemarketing centers
generated leads in the first half, it will require more time before each of
these sources is generating sufficient quantities of cost-effective leads.
Consequently, the marketing cost per appointment will likely remain high in the
third quarter of 1996 as compared to the prior year period.
As a result of these factors, and considering the low level of backlog at
June 30, 1996, despite a 26% growth in backlog from the first quarter to the
second quarter, the Company expects a significant decline in contract revenues
in the third quarter period of 1996 as compared to the prior year period, and
therefore, it is unlikely the Company will return to profitability in the
third quarter.
13
<PAGE> 16
THREE-MONTH PERIOD ENDED JUNE 30, 1996 COMPARED WITH THE THREE-MONTH PERIOD
ENDED JULY 2, 1995
The dollar amount of sales orders declined approximately 28% from the
prior year period due to fewer appointments resulting from inadequate sales
staffing levels, and lower sales dollars generated per appointment resulting
from selling price discounting as well as lower sales closing rates. As a
result of the lower amount of sales orders, contract revenues declined from
$90,209,000 in the prior year period to $62,895,000 in the current year period.
The operating loss was $12,437,000 as compared to $2,602,000 in the prior year
period.
Gross profit margin as a percentage of contract revenues declined from
67.1% in the prior year period to 63.1% in the current year. The Company
discounted its selling prices heavily in launching the CENTURY 21 Home
Improvements brand name throughout most of the current year period. While
management is reviewing opportunities for improving margins and has selectively
increased prices in certain markets, effective in July, 1996, it is not
anticipated that margin increases will be completely realized in the third
quarter of 1996 due largely to the backlog of sales orders at discounted prices.
Branch operating expenses increased from 6.7% of contract revenues in the
prior year period to 9.9% in 1996. Branch operating expenses are primarily
fixed costs, and as such, increased in percentage terms largely due to lower
contract revenues. Branch operating expenses increased in dollar terms
approximately $226,000 from the prior year period due mainly to increased
staffing.
Marketing expense increased from 25.4% of contract revenues to 33.9% of
contract revenues. The increase principally reflects the transition to the
CENTURY 21 Home Improvements brand name during which the Company has
experienced a higher cost per appointment as well as lower sales dollars
generated per appointment.
Selling expenses increased to 20.3% of contract revenues as compared to
17.8% in the prior year period. Sales compensation as a percent of contract
revenues, excluding management salaries, decreased slightly. Other selling
expenses, which include sales manager salaries, and training, insurance costs,
recruiting and travel, all of which are primarily fixed expenses in nature,
increased in percentage terms largely due to lower contract revenues.
License and finance fees decreased to 6.5% of contract revenues as compared
to 11.9% in the same period last year. The decrease in percentage terms
reflects the lower license fee rate under the Century 21 License Agreement
partially offset by financing fees under the Company's new customer financing
agreement.
General and administrative expenses increased from 8.2% of contract
revenues in the prior year to 12.3% in the current year. The increase in
percentage terms principally reflects the lower contract revenues in the
period. General and administration expenses increased in dollar terms largely
resulting from higher legal expenses.
While AMRE's ultimate profitability remains management's uppermost
objective, due to the complexity of the transitional and operational issues
facing the Company, management's strategy in the short term is defined in terms
of incremental gains, quarter-over-quarter, rather than in terms of
profitability. In this respect, although the Company was unable to achieve a
satisfactory level of appointments or sales dollars generated per appointment
in its second quarter, the Company's second quarter results were a significant
improvement over the first quarter of 1996, including a 14% increase in the
number of appointments, a 20% increase in sales dollars generated per
appointment, and a 42% increase in the dollar amount of sales orders. In
addition, the Company began to realize the benefits of its new marketing
programs which resulted in a reduction of approximately 22% in its marketing
cost per appointment as compared to the first quarter. Nevertheless, as
mentioned above, the Company expects a significant decline in contract revenues
in the third quarter of 1996 as compared to the prior year period and
therefore, it is unlikely that the Company will return to profitability in the
third quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its liquidity needs with internally
generated funds. Net cash used in operations during the six-month period ended
June 30, 1996 was $21,590,000 principally due to the operating loss. The
Company received proceeds of approximately $15,907,000 from the issuance of
common stock, including the
14
<PAGE> 17
exercise of stock options and the sale of 800,500 shares in a private
placement. Capital expenditures totaled $1,701,000 and consisted primarily of
in-mall kiosk units. In the aggregate, cash and marketable securities totaled
approximately $14,773,000 at June 30, 1996. In connection with the Montgomery
Ward agreement discussed above, the Company received, on August 2, 1996,
approximately $900,000 from the sale of 50,000 shares of AMRE Common Stock and
a Warrant to acquire up to 150,000 additional shares of AMRE Common Stock at an
agreed price of $18 per share (the closing price of AMRE Common Stock on the
New York Stock Exchange on July 17, 1996).
The Company expects it will utilize significant amounts of cash in the last
half of 1996 to complete its transition to the CENTURY 21 Home Improvements
name, including investments to expand the in-mall and Montgomery Ward kiosk
programs, as well as in the integration of the companies resulting from the
mergers. As noted above, AMRE's successful conversion to the CENTURY 21 Home
Improvements brand is not yet complete and remains subject to numerous risks
and uncertainties. Although management is confident that AMRE's business
strategy will be successful over the long term, it is not possible to estimate
when the Company will return to profitability.
The timing of AMRE's return to profitability will materially impact the
Company's liquidity and overall financial condition in the future. Although
management remains confident of AMRE's eventual profitability under the CENTURY
21 Home Improvements name, the Company would be compelled to seek outside
sources for additional working capital should the Company incur continued
material operating losses in future quarters. No assurance can be given that
the Company could obtain additional working capital in the future, if required,
and the failure to maintain adequate liquidity, either through operational
profitability or outside sources, would have a material adverse effect on
AMRE's overall financial condition.
SEASONALITY
Generally, because of the holiday season and weather conditions, the
Company's revenues and net income decline during the cold weather months
(especially in the first quarter). The following table sets forth the
Company's unaudited quarterly financial information:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------
APRIL 2, JULY 2, OCTOBER 1, DECEMBER 31,
-------- ------- ---------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Contract revenues . . . . . . . . . . . . . . $ 74,831 $ 90,209 $ 96,891 $ 77,976
Gross profit . . . . . . . . . . . . . . . . 48,764 60,511 65,066 50,255
Nonrecurring charges . . . . . . . . . . . . -- -- -- 11,800
Operating income (loss) . . . . . . . . . . . (7,067) (2,602) 966 (18,260)
Net income (loss) . . . . . . . . . . . . . . (4,515) $ (1,837) $ 1,110 $ (18,620)
Net income (loss) per share . . . . . . . . . $ (.26) $ (.11) $ .06 $ (1.07)
MARCH 31, JUNE 30,
YEAR ENDED DECEMBER 31, 1996 --------- --------
Contract revenues . . . . . . . . . . . . . . $ 58,601 $ 62,875
Gross profit . . . . . . . . . . . . . . . . 37,216 39,644
Nonrecurring charges . . . . . . . . . . . . 2,500 --
Operating loss . . . . . . . . . . . . . . . (19,015) (12,437)
Net loss . . . . . . . . . . . . . . . . . . $ (18,942) $ (12,094)
Net loss per share . . . . . . . . . . . . . $ (1.05) $ (.63)
</TABLE>
- -------------------
15
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Note 2 of Notes to Consolidated Financial Statements
herein for a discussion of legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) A special meeting of stockholders of the Company was held on April 25,
1996.
(b) Not applicable.
(c) The following proposals were presented to the meeting:
1. A proposal to (a) approve and adopt the Agreement and Plan of
Merger, dated as of October 31, 1995, as amended (the "Merger
Agreement"), among AMRE, AMRE Acquisition, Inc. ("Merger Sub"),
Facelifters Home Systems, Inc., a New York corporation, and
Facelifters Home Systems, Inc., a Delaware corporation
("Facelifters"), pursuant to which Merger Sub will merge with and
into Facelifters (the "Merger"), and (b) in connection with the
consummation of the Merger, the issuance by AMRE of shares of AMRE
common stock, par value $0.01 per share ("AMRE Common Stock"),
whereby each outstanding share of Facelifters common stock, $0.01
par value ("Facelifters Common Stock"), will be converted into one
share of AMRE Common Stock.
Shares voted for approval of the proposal 10,590,776
Shares voted against approval of the proposal 1,385
Shares held by stockholders who abstained 4,570
2. A proposal to approve an amendment to AMRE's Certificate of
Incorporation to increase the number of authorized shares of AMRE in
order to permit the issuance of the additional shares of AMRE Common
Stock to the former holders of Facelifters Common Stock and for
other general corporate purposes.
Shares voted for approval of the proposal 9,947,970
Shares voted against approval of the proposal 642,035
Shares held by stockholders who abstained 6,726
(d) Not applicable.
16
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.
10.42 Amended and Restated Employment Agreement dated as of February 27, 1996, between AMRE, Inc. and
Robert M. Swartz.
10.43 Form of stock option agreements dated as of October 11, 1995, between AMRE, Inc. and certain
outside directors (Ronald L. Bliwas, Dennis S. Bookshester, Arthur P. Frigo, Jack L. McDonald
and Sheldon I. Stein), which agreements are identical except for the names of the directors.
11. Calculations of weighted average common shares outstanding for the three-month and six-month
periods ended June 30, 1996 and July 2, 1995.
27. Financial Data Schedule.
</TABLE>
- --------------------------
(b) REPORTS ON FORM 8-K: The following current reports on Form 8-K were filed
by the Company during the quarter ended June 30, 1996:
(1) Report dated April 25, 1966, reporting under Item 2, Acquisition of
Assets, Item 5, Other Events and Item 7, Exhibits.
(2) Report dated May 28, 1996, reporting under Item 2, Acquisition of
Assets and Item 7, Exhibits.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMRE, Inc.
DATE: August 12, 1996 /s/ John S. Vanecko
------------------------------------------
John S. Vanecko
Vice President and Chief Financial Officer
(Principal financial officer and
duly authorized officer of registrant)
18
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NUMBER AND DESCRIPTION OF EXHIBIT
- ------- ---------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.
10.42 Amended and Restated Employment Agreement dated as of February 27, 1996, between AMRE, Inc. and
Robert M. Swartz.
10.43 Form of stock option agreements dated as of October 11, 1995, between AMRE, Inc. and certain
outside directors (Ronald L. Bliwas, Dennis S. Bookshester, Arthur P. Frigo, Jack L. McDonald and
Sheldon I. Stein), which agreements are identical except for the names of the directors.
11 Calculations of weighted average common shares outstanding for the three-month and six-month
periods ended June 30, 1996 and July 2, 1995.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
PAGE 1
Exhibit 3.1
STATE OF DELAWARE
4696 [LOGO]
OFFICE OF SECRETARY OF STATE
----------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF AMRE, INC. FILED IN THIS OFFICE ON THE THIRD DAY OF FEBRUARY,
A.D. 1987, AT 10 O'CLOCK A.M.
| | | | | | | | |
[SEAL] /s/ MICHAEL HARKINS
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: |1104307
737034048 DATE: 02/03/1987
<PAGE> 2
CERTIFICATE OF INCORPORATION FILED
OF FEB 3 1987
AMRE, INC. /s/ MICHAEL HARKINS
-------------------
ARTICLE I DEPARTMENT OF STATE
Name
The name of the Corporation is AMRE, Inc.
ARTICLE II
Registered Office and Agent
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE IV
Authorized Capital Stock
The aggregate number of shares which the Corporation shall have
authority to issue is eleven million (11,000,000 shares, of which ten million
(10,000,000) shares shall be Common Stock, par
<PAGE> 3
value of $.01 per share, and one million (1,000,000) shares shall be Preferred
Stock, par value $.10 per share.
The following is a statement of the designations, preferences,
limitations and relative rights in respect to the shares of Common Stock and
Preferred Stock of the Corporation, and of the authority expressly vested in
the Board of Directors of the Corporation to establish series of the Preferred
Stock and to fix by resolution or resolutions the designations and the powers,
preferences and rights of each share of Preferred Stock and the qualifications,
limitations and restrictions thereof which are not fixed by this Certificate of
Incorporation.
A. Common Stock. The Board of Directors is hereby expressly vested
with authority to issue ten million (10,000,000) shares of Common Stock, par
value $.01 per share, from time to time. Shares of Common Stock, upon issuance,
shall be fully paid and nonassessable. Subject to any prior rights and
preferences of the Preferred Stock of any series of the Corporation, such
dividends, payable in cash, stock or otherwise, as may be determined by the
Board of Directors may be declared and paid on the Common Stock from time to
time out of any funds legally available therefor. In the event of liquidation,
dissolution or winding up of the affairs of the Corporation, and subject to any
prior rights and preferences of the Preferred Stock of any series of the
Corporation, the remaining assets and funds of the Corporation shall be
distributed among the holders of the Common Stock according to their respective
shares.
2
<PAGE> 4
B. Preferred Stock. The Board of Directors of the Corporation is
hereby expressly vested with authority to issue one million (1,000,000) shares
of Preferred Stock, par value $.10 per share, from time to time in series, with
such series designation, number of shares in the series, and such powers,
preferences and rights and qualifications, limitations or restrictions thereof
which are not fixed by this Certificate of Incorporation as may be fixed and
determined by resolution or resolutions of the Board of Directors. Shares of
any series of the Preferred Stock, upon issuance, may be redeemable if entitled
to a preference upon any distribution of the Corporation's assets, whether by
dividend or by liquidation, over another class of stock or series of Preferred
Stock of the Corporation. The Board of Directors in establishing a series of
Preferred Stock is hereby authorized to fix and determine:
a. The annual rate of dividend, and if cumulative, the
date from which such dividends would accumulate.
b. The price at and the terms and conditions upon which
shares may be redeemed.
c. The amount payable on shares in the event of involuntary
liquidation.
d. The amount payable on shares in the event of voluntary
liquidation.
e. Sinking fund provisions for the redemption or purchase
of shares.
3
<PAGE> 5
f. The terms and conditions upon which shares may be
converted, if the shares of any series are issued with the privilege of
conversion.
g. Voting rights.
h. The restrictions, if any, on the transfer of the shares
of any series.
Shares of Preferred Stock which have been redeemed or converted, or
which have been issued and reacquired in any manner and retired, shall have the
status of authorized and unissued Preferred Stock and may be reissued by the
Board of Directors as shares of the same or any other series, unless otherwise
provided with respect to any series in the resolution or resolutions of the
Board of Directors creating such series.
C. General Provisions. The Board of Directors, in its discretion,
may issue from time to time authorized but unissued shares for such
consideration as it may determine, and holders of Common Stock and Preferred
Stock shall have no pre-emptive rights, as such holders, to purchase any shares
or securities of any class, including Treasury shares, which at any time may be
issued or sold or offered for sale by the Corporation.
At each election of Directors, every stockholder entitled to vote at
such meeting shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are Directors to be elected.
Cumulative voting of shares of stock of the Corporation, whether Common Stock
or Preferred Stock, is hereby prohibited.
4
<PAGE> 6
No action shall be taken by stockholders of the Corporation by written
consent, and notice to the stockholders of the Corporation shall be required
prior to stockholder action on any matter, which shall be taken by voting on
such matter.
The Corporation shall be entitled to treat the person in whose name any
share or other security is registered as the owner thereof, for all purposes,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or other security on the part of any other person, whether or not
the Corporation shall have notice thereof.
ARTICLE V
Sole Incorporator
The name and mailing address of the sole incorporator is:
Dan Busbee
3600 RepublicBank Tower
Dallas, Texas 75201-3989
ARTICLE VI
Directors
The number of Directors constituting the initial Board of Directors is
three (3); however, hereafter the number of Directors shall be fixed in the
manner provided in the By-Laws of the Corporation at not less than three (3),
nor more than twelve (12). The name and mailing address of each initial
Director who is to serve as a Director until the first annual meeting of the
stockholders or until a successor is elected and qualified is as follows:
5
<PAGE> 7
Name Address
---- -------
Steven D. Bedowitz 4949 West Royal Lane
Irving, Texas 75063
Robert Levin 4949 West Royal Lane
Irving, Texas 75063
Troy L. Dale 4949 West Royal Lane
Irving, Texas 75063
Any director may be removed, with or without cause, by the holders of
the shares then entitled to vote at an election of any such director.
ARTICLE VII
Duration
Powers of the Board of Directors
The Board of Directors may exercise all such powers and do all such
lawful acts and things as are not by statute, the By-Laws, or this Certificate
of Incorporation directed or required to be exercised and done by the
stockholders.
ARTICLE IX
Liability of Directors
No Director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any breach of the Director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or
6
<PAGE> 8
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the Director derived an improper personal benefit.
ARTICLE X
Amendments
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by the laws of the State of Delaware, and all rights
conferred upon stockholders herein are granted subject to this reservation.
ARTICLE XI
By-Laws
The initial By-Laws of the Corporation shall be adopted by the Board of
Directors. The power to alter, amend or repeal the Corporation's By-Laws and
to adopt new By-Laws, is hereby vested in the Board of Directors, subject,
however, to repeal or change by the affirmative vote of the holders of eighty
percent (80%) of the outstanding shares of capital stock of the Corporation
entitled to vote thereon. Notwithstanding any other provisions of this
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, the holders of at least eighty percent (80%)
of the voting power of all of the then outstanding shares of the voting stock,
voting together as a single class, shall be required to alter, amend, or repeal
this Article.
7
<PAGE> 9
ARTICLE XII
Compromise or Arrangement with Creditors
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three fourths (3/4) in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
the Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
8
<PAGE> 10
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this Certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly, I have hereunto set my hand this 2nd day of February, 1987.
/s/ DAN BUSBEE
----------------------------
Dan Busbee
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Dan Busbee, known to me to be the person whose name is subscribed to the
foregoing instrument, and being by me first duly sworn, declared to me that the
statements therein contained are true and correct and that he executed the
same as his act and deed for the purposes therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 2nd day of February, 1987.
/s/ JEAN D. McCLELLAN
-----------------------------
Notary Public, State of Texas
(SEAL)
My Commission Expires: 3/13/90
-------
RECEIVED FOR RECORD
FEB 5 1987
William M. Honey, Recorder
9
<PAGE> 11
STATE OF DELAWARE
[STATE SEAL]
OFFICE OF SECRETARY OF STATE
------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF AMRE, INC. FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF
SEPTEMBER, A.D. 1987, AT 10 O'CLOCK A.M.
: : : : : : : : : :
/s/ MICHAEL HARKINS
-----------------------------------
Michael Harkins, Secretary of State
[DEPARTMENT OF STATE SEAL] AUTHENTICATION: 1416596
877272026 DATE: 09/29/1987
<PAGE> 12
CERTIFICATE OF AMENDMENT FILED
OF 10 AM
CERTIFICATE OF INCORPORATION SEP 29 1987
OF /s/ MICHAEL HARKINS
AMRE, INC. SECRETARY OF STATE
AMRE, Inc., a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation is hereby
amended by amending the first two paragraphs and Sections A and B of ARTICLE
IV, Authorized Capital Stock, to read as follows:
"The aggregate number of shares which the Corporation shall have
authority to issue is twenty-one million (21,000,000) shares, of which
twenty million (20,000,000) shares shall be Common Stock, par value of
$.01 per share, and one million (1,000,000) shares shall be Preferred
Stock, par value $.10 per share.
The following is a statement of the designations, preferences,
limitations and relative rights in respect to the shares of Common Stock
and Preferred Stock of the Corporation, and of the authority expressly
vested in the Board of Directors of the Corporation to establish series
of the Preferred Stock and to fix by resolution or resolutions the
designations and the powers, preferences and rights of each share of
Preferred Stock and the qualifications, limitations and restrictions
thereof which are not fixed by this Certificate of Incorporation.
A. Common Stock. The Board of Directors is hereby
expressly vested with authority to issue twenty million (20,000,000)
shares of Common Stock, par value $.01 per share, from time to time.
Shares of Common Stock, upon issuance, shall be fully paid and
nonassessable. Subject to any prior rights and preferences of the
Preferred Stock of any series of the Corporation, such dividends,
payable in cash, stock or otherwise, as may be determined by the Board
of Directors may be declared and paid on the Common Stock from time to
time out of any funds legally available therefor. In the event of
liquidation, dissolution or winding up of the affairs of the
Corporation, and subject to any prior rights and preferences of the
Preferred Stock of any series of the Corporation, the remaining assets
and funds of the Corporation shall be distributed among the holders of
the Common Stock according to their respective shares.
B. Preferred Stock. The Board of Directors of the
Corporation is hereby expressly vested with authority to issue one
million (1,000,000) shares of Preferred Stock, par value $.10 per share,
from time to time in series, with such
<PAGE> 13
series designation, number of shares in the series, and such powers,
preferences and rights and qualifications, limitations or restrictions
thereof which are not fixed by this Certificate of Incorporation as may
be fixed and determined by resolution or resolutions of the Board of
Directors. Shares of any series of the Preferred Stock, upon issuance,
may be redeemable if entitled to a preference upon any distributions of
the Corporation's assets, whether by dividend or by liquidation, over
another class of stock or series of Preferred Stock of the Corporation.
The Board of Directors in establishing a series of Preferred Stock is
hereby authorized to fix and determine:
a. The annual rate of dividend, and if cumulative, the
date from which such dividends would accumulate.
b. The price at and the terms and conditions upon which
shares may be redeemed.
c. The amount payable on shares in the event of
involuntary liquidation.
d. The amount payable on shares in the event of voluntary
liquidation.
e. Sinking fund provisions for the redemption or purchase
of shares.
f. The terms and conditions upon which shares may be
converted, if the shares of any series are issued with the privilege
of conversion.
g. Voting rights.
h. The restrictions, if any, on the transfer of the shares
of any series.
Shares of Preferred Stock which have been redeemed or converted, or
which have been issued and reacquired in any manner and retires, shall have the
status of authorized and unissued Preferred Stock and may be reissued by the
Board of Directors as shares of the same or any other series, unless otherwise
provided with respect to any series in the resolution or resolutions of the
Board of Directors creating such series."
-2-
<PAGE> 14
2. The Certificate of Incorporation of the Corporation is hereby
amended by adopting the following as Article XIII:
"ARTICLE XIII
BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this Article XIII.
SECTION A
(1) Except as otherwise expressly provided in Section B of
this Article XIII:
(i) any merger or combination of the Corporation or
any Subsidiary (as hereinafter defined) with (a) any Interested
Stockholder (as hereinafter defined), or (b) any other
corporation (whether or not itself an Interested Stockholder)
which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested
Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $20,000,000 or more; or
(iii) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of transactions)
of any securities of the Corporation or of any Subsidiary to
any Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market
Value of $20,000,000 or more; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on
behalf of any Interested Stockholder or any Affiliate of any
Interested Stockholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the Corporation
with any of its Subsidiaries or any other
-3-
<PAGE> 15
transaction (whether or not with or into or otherwise involving
any Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is
directly or indirectly owned by any Interested Stockholder or
any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least eighty percent
(80% of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (hereinafter in this
Article referred to as the "Voting Stock"), voting together as a single class
(it being understood that, for purposes of this Article, each share of
Preferred Stock shall have the number of votes granted to it pursuant to any
designation of the powers, preferences and rights of any class or series of
Preferred Stock made pursuant to Article IV of this Certificate of
Incorporation (a "Preferred Stock Designation")). Such affirmative vote shall
be required notwithstanding any other Article of this Certificate of
Incorporation, or any provision of law or of any agreement with any national
securities exchange which might otherwise permit a lesser vote or no vote, but
such affirmative vote shall be required in addition to any affirmative vote of
the holders of any particular class or series of the Voting Stock required by
law, this Certificate of Incorporation, or any Preferred Stock Designation.
(2) The term "Business Combination" as used in this
Article shall mean any transaction which is referred to in any one or
more of subparagraphs (i) through (v) of paragraph A(1).
SECTION B
The provisions of Section A of this Article shall not be limited to any
particular Business Combination, and a Business Combination shall require only
such affirmative vote as is required by law, any other Article of this
Certificate of Incorporation, any Preferred Stock Designation, or any agreement
with any national securities exchange, if, in the case of a Business
Combination that does not involve any cash or other consideration being
received by the stockholders of the Corporation, solely in their respective
capacities as stockholders of the Corporation, the condition specified in the
following paragraph B(1) is met, or, in the case of any other Business
Combination, the conditions specified in either of the following paragraphs
B(1) and B(2) are met:
-4-
<PAGE> 16
(1) The Business Combination shall have been approved by a
majority of the Continuing Directors (as hereinafter defined), it being
understood that this condition shall not be capable of satisfaction
unless there is at least one Continuing Director; or
(2) All of the following conditions shall have been met:
(i) the consideration to be received by holders of
shares of a particular class of outstanding Voting Stock shall
be in cash or in the same form as the Interested Stockholder has
paid for shares of such class of Voting Stock within the
two-year period ending on and including the date on which the
Interested Stockholder became an Interested Stockholder (the
"Determination Date"). If within such two-year period the
Interested Stockholder has paid for shares of any class of
Voting Stock with varying forms of consideration, the form of
consideration to be received per share by holders of shares of
such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting
Stock acquired by the Interested Stockholder within such
two-year period.
(ii) The aggregate amount of the cash and the Fair
Market Value, as of the date (the "Consummation Date") of the
consummation of the Business Combination, of the consideration
other than cash to be received per share by holders of Common
Stock in such Business Combination shall be at least equal to
the higher of the following (it being intended that the
requirements of this paragraph B(2)(ii) shall be required to be
met with respect to all shares of Common Stock outstanding
whether or not the Interested Stockholder has previously
acquired any shares of Common Stock):
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested
Stockholder for any shares of Common Stock acquired by
it within the two-year period immediately prior to the
first public announcement of the proposal of the
Business Combination (the "Announcement Date"), or in
the transaction in which it became an Interested
Stockholder, whichever is higher; plus interest
compounded annually from the Determination Date through
the Consummation Date at the prime rate of interest of
Cullen/Frost Bank of Dallas, N.A.,
-5-
<PAGE> 17
Dallas, Texas (or such other major banks headquartered
in the City of Dallas as may be selected by the
Continuing Directors) from time to time in effect in the
City of Dallas, less the aggregate amount of any cash
dividends paid, and the Fair Market Value of any
dividends paid in form other than cash, on each share of
Common Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding
the amount of interest so payable per share of Common
Stock; or
(b) the Fair Market Value per share of Common
Stock on the Determination Date or Announcement Date,
whichever is higher, plus interest compounded annually
from the Determination Date through the Consummation
Date at the prime rate of interest of Cullen/Frost Bank
of Dallas, N.A., Dallas, Texas (or such other major
banks headquartered in the City of Dallas as may be
selected by the Continuing Directors) from time to time
in effect in the City of Dallas, less the aggregate
amount of any cash dividends paid and the Fair Market
Value of any dividends paid in form other than cash, on
each share of Voting Stock from the Determination Date
through the Consummation Date in an amount up to but not
exceeding the amount of interest so payable per share of
Voting Stock; or
(c) (if applicable) the highest preferential
amount per share to which the holders of shares of such
class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(d) (if applicable) the Fair Market Value per
share of such class of Voting Stock on the Announcement
Date or on the Determination Date, whichever is higher;
or
(e) (if applicable) the price per share equal
to the Fair Market Value per share of such class of
Voting Stock determined pursuant to paragraph
B(2)(ii)(c) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares
of such class of Voting Stock acquired by it within the
two-year period immediately prior to the
-6-
<PAGE> 18
Announcement Date to (2) the Fair Market Value per share
of such class of Voting Stock on the first day in such
two-year period upon which the Interested Stockholder
acquired any shares of such class of Voting Stock.
(iii) After such Interested Stockholder has become an
Interested Stockholder and prior to the Consummation Date of
such Business Combination: (a) except as approved by a majority
of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on the outstanding
Preferred Stock, if any, (b) there shall have been (1) no
reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the
Continuing Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of Common Stock,
unless the failure so to increase such annual rate is approved
by a majority of the Continuing Directors, and (c) such
Interested Stockholder shall have not become the beneficial
owner of any additional shares of Voting Stock except as part of
the transaction which results in such Interested Stockholder
becoming an Interested Stockholder.
(iv) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantage provided by the Corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(v) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations)
shall be mailed to public stockholders of the Corporation at
least thirty (30) days prior to the consummation of such
Business
-7-
<PAGE> 19
Combination (whether or not such proxy or information statement
is required to be mailed pursuant to such Act or subsequent
provisions).
SECTION C
For the purposes of this Article:
(1) A "person" shall mean any individual, firm,
corporation, or other entity.
(2) "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any
one or a group of more than one Continuing Directors) who or
which is the beneficial owner, directly or indirectly, of more
than 20% of the voting power of the outstanding Voting Stock,
and who became a 20% owner of such stock after February 25,
1987. For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph C(2) immediately
above, the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through
application of paragraph C(3) below, but shall not include any
other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(3) A person shall be a "beneficial owner" of any
Voting Stock which:
(i) such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(ii) such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) is beneficially owned, directly or
indirectly, by any other person with which such person
or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares
of Voting Stock.
-8-
<PAGE> 20
(4) "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on February 22, 1984.
(5) "Subsidiary" means any corporation of which a
majority of any class of equity securities is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Interested Stockholder set forth
in paragraph C(2) the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity
securities is owned, directly or indirectly, by the Corporation.
(6) "Continuing Director" means any member of the
Board of Directors of the Corporation (the "Board") who is
unaffiliated with the Interested Stockholder and was a member
of the Board prior to the time the Interested Stockholder became
an Interested Stockholder, and any successor of a Continuing
Director by a majority of the Continuing Directors then on the
Board.
(7) "Fair Market Value" means: (i) in the case of
stock, the highest closing price during the 30-day period
immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange Listed
Stocks; or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or if such stock is not listed
on such exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed; or, if such stock is not listed on
any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any
system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such
stock as determined by the Board in good faith; and (ii) in the
case of property other than cash or stock, the fair market value
of such property on the date in question is determined by the
Board in good faith.
(8) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other
than cash to be received" as used in paragraph B(2)(ii) of this
Article shall include the shares of Common Stock and/or the
shares of any other class of outstanding Voting Stock retained
by the holders of such shares.
-9-
<PAGE> 21
SECTION D
A majority of the total number of authorized directors (whether or not
there exist any vacancies in previously authorized directorships at the time
any such determination as is hereinafter in this Section specified to be made
by the Board) shall have the power to determine, on the basis of information
known to them after reasonable inquiry, all facts necessary to determine
compliance with this Article, including without limitation (1) whether a person
is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or an
Associate of another, (4) whether the applicable conditions set forth in
paragraph B(2) have been met with respect to any Business Combination, and (5)
whether the assets which are the subject of any Business Combination referred
to in paragraph A(1)(ii) have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any Subsidiary in any
Business Combination referred to in paragraph A(1)(iii) has, an aggregate Fair
Market Value of $20,000,000 or more.
SECTION E
Nothing contained in this Article shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
SECTION F
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this
Certificate of Incorporation, or any Preferred Stock Designation, the
affirmative vote of the holders of at least 80% of the voting power of all of
the then outstanding shares of the Voting Stock, voting together as a single
class, shall be required to alter, amend, or repeal this Article."
3. The amendments of the Certificate of Incorporation herein
certified have been duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
-10-
<PAGE> 22
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment to be signed by Steven D.
Bedowitz, the Chairman of its Board of Directors and President, and attested by
Bernard M. Lane, its Secretary, this 23rd day of September, 1987.
AMRE, Inc.
By: /s/ STEVEN D. BEDOWITZ
----------------------
Steven D. Bedowitz
Chairman of the Board, President
ATTEST:
/s/ BERNARD M. LANE
- -------------------
Bernard M. Lane
Secretary
-11-
<PAGE> 23
State of Delaware PAGE 1
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "AMRE, INC.", FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY OF
APRIL, A.D. 1996, AT 6 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ EDWARD J. FREEL
-----------------------------------
[SEAL] Edward J. Freel, Secretary of State
AUTHENTICATION: 7922776
2116513 8100 DATE: 04-25-96
960120611
<PAGE> 24
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 06:00 PM 04/25/1996
960120611 - 2116513
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMRE, INC.
AMRE, Inc., a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation is hereby
amended by amending the first paragraph and Section of A of ARTICLE IV,
Authorized Capital Stock, to read as follows:
"The aggregate number of shares which the Corporation shall
have authority to issue is forty-one million (41,000,000) shares, of
which forty million (40,000,000) shares shall be Common Stock, par value
of $.01 per share, and one million (1,000,000) shares shall be Preferred
Stock, par value $.10 per share.
A. Common Stock. The Board of Directors is hereby expressly
vested with authority to issue forty million (40,000,000) shares of
Common Stock, par value $.01 per share, from time to time. Shares of
Common Stock, upon issuance, shall be fully paid and nonassessable.
Subject to any prior rights and preferences of the Preferred Stock of
any series of the Corporation, such dividends, payable in cash, stock or
otherwise, as may be determined by the Board of Directors may be
declared and paid on the Common Stock from time to time out of any funds
legally available therefor. In the event of liquidation, dissolution or
winding up of the affairs of the Corporation, and subject to any prior
rights and preferences of the Preferred Stock of any series of the
Corporation, the remaining assets and funds of the Corporation shall be
distributed among the holders of the Common Stock according to their
respective shares.
2. The amendment increases the number of shares of $0.01 par
value Common Stock that Corporation is authorized to issue from 20,000,000 to
40,000,000.
3. The amendments of the Certificate of Incorporation herein
certified have been duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment to be signed by Robert M.
Swartz, President and Chief Executive Officer this 25th day of April, 1996.
AMRE, Inc.
By: /s/ ROBERT M. SWARTZ
-------------------------------------
Robert M. Swartz
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.42
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of February 27, 1996, (the "date of this
Agreement"), by and between AMRE, Inc., a Delaware corporation ("AMRE"), and
Robert M. Swartz, of Dallas, Texas ("Swartz").
W I T N E S S E T H:
WHEREAS, AMRE wishes to continue to employ Swartz as its President and
Chief Executive Officer; and
WHEREAS, Swartz wishes to continue his employment in such capacity;
NOW, THEREFORE, in consideration of the covenants and mutual
agreements contained herein, AMRE and Swartz agree as follows:
1. Employment. AMRE agrees to employ Swartz as its President
and Chief Executive Officer and Swartz agrees to serve in such capacity on the
terms and conditions hereinafter set forth.
2. Term.
(a) Term of Agreement. The term of this Agreement shall commence
on February 27, 1996, and shall be a "rolling" two year period such that Swartz
shall have a period of employment with AMRE that automatically and continuously
extends for two years as each day of employment occurs. However, the term of
this Agreement is subject to termination in accordance with the provisions of
Paragraphs 5 and 6.
(b) Term of Employment. The period from February 27, 1996, to the
date on which Swartz's employment is terminated pursuant to paragraph 5 or
paragraph 6 is hereinafter referred to as the "Term of Employment".
3. Services. During the Term of Employment, Swartz will devote
his full business time to the business and affairs of AMRE and such other
members of the AMRE Group as the Board of Directors of AMRE may direct, and
shall use his reasonable best efforts, skills and abilities to promote the
interests of AMRE provided, however, that Swartz may from time to time engage
in such other pursuits, including (without limitation) personal legal,
financial and business affairs, provided, in each case, that such pursuits do
not interfere with the proper performance of his duties and obligations under
the terms hereof and do not create any actual or potential conflict of
interest. For the purposes of this Agreement, the term "AMRE Group" means all
corporations or other business organizations, with respect to any one of which
AMRE possesses the ability, directly or through any intervening medium, to
elect a majority of the Board of Directors (or persons filling similar
functions).
<PAGE> 2
4. Compensation and Benefits.
(a) Salary. During the Term of Employment, AMRE shall pay
to Swartz such annual salary as the Board of Directors of AMRE from time to
time may determine, but such annual salary shall in no event be less than
$300,000 per year. AMRE agrees to pay Swartz's annual salary to Swartz in
accordance with the usual and customary procedures for the payment of
compensation to salaried employees of AMRE, but in any event to make such
payment in not less than monthly installments.
(b) Additional or Incentive Compensation. Swartz shall
participate in an incentive compensation plan during each fiscal year of AMRE
which shall provide for an annual bonus opportunity of at least 100% of
Swartz's annual salary.
(c) Provision of Automobile Allowance. During the Term of
Employment, AMRE shall provide Swartz with a monthly automobile allowance of
$750.00.
(d) Employee Benefits (General). During the Term of
Employment, Swartz shall be entitled to receive all benefits and perquisites
ordinarily provided to executive officers of AMRE, including protection under
an officer's and director's liability insurance policy and eligibility to
participate in all employee welfare benefit plans or employee pension benefit
plans (within the meaning of the Employee Retirement Income Security Act of
1974) from time to time maintained by AMRE. Swartz shall be entitled to
participate in all such plans or programs on terms no less favorable than those
generally available to executive officers of AMRE and at a level of
participation commensurate with his position as President and Chief Executive
Officer of AMRE and with his level of compensation.
(e) Payment of COBRA and Life Insurance Conversion
Premiums. Until such date as Swartz and his dependents shall have become
covered and eligible for medical and dental insurance benefits under an AMRE
sponsored plan, AMRE shall reimburse Swartz the sum of (1) such amount as is
equal to the premium paid by Swartz to continue the group health and dental
insurance coverage following his termination of employment from Recognition
International Inc. and (2) such cash amount as is sufficient to provide Swartz
after satisfaction of all federal, state and local income taxes attributable to
the reimbursements provided in (1) and (2) of this sentence, a net amount equal
to such premium reimbursements before any such taxes. Until such date Swartz
shall have become covered and eligible for Executive Supplemental Life
Insurance as provided for in paragraph 4(f), AMRE shall reimburse Swartz the
sum of (1) such amount as is equal to the premium paid by Swartz for coverage
under any individual policy he shall have converted from the group term life
insurance policy under which he participated while employed at Recognition
International Inc. and
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<PAGE> 3
(2) such cash amount as is sufficient to provide Swartz, after satisfaction of
all federal and state income taxes attributable to such reimbursements provided
in (1) and (2) of this sentence a net amount equal to such premium
reimbursements before any such taxes.
(f) Executive Supplemental Life and Disability Insurance.
During the Term of Employment, in addition to all other group term life or
disability benefits provided under any AMRE sponsored group life insurance
plan, AMRE shall maintain, at no cost (except recognition, if applicable, of
imputed income for tax purposes) to Swartz, Executive Supplemental Life
Insurance in an amount equal to 300% of Swartz's annual salary and Executive
Long Term Disability Insurance which will provide a benefit equal to 75% of
Swartz's monthly base salary. The types of policies, the identity of the
carriers and the exact terms, limitation, underwriting specifications and
benefits of each of such coverages shall be no less favorable than the
coverages provided by AMRE to its other executive officers. Any coverage for
Swartz by the insurance described in this paragraph 4(f) shall be subject to
Swartz meeting the insurance carrier's underwriting requirements. AMRE shall
arrange for and submit such application or other information required with
respect to such insurance coverage promptly upon the commencement of the Term
of Employment.
(g) Vacation. Notwithstanding any provision of any
vacation plan described in paragraph 4(d), Swartz shall accrue paid vacation at
the rate of 10 hours of paid vacation for each calendar month he is employed
during the Term of Employment, subject to a maximum accrual of 120 hours at any
time. Vacation may be taken whenever accrued. Hours of vacation accrued for
any period of less than a full calendar month shall be prorated.
(h) Annual Physical Examination. During the Term of
Employment, to the extent not covered by any insurance plan maintained by AMRE,
AMRE shall reimburse Swartz for the cost of one comprehensive annual physical
examination during each calendar year by a physician of Swartz's choosing.
(i) Expenses. AMRE shall pay or reimburse Swartz upon
submission of vouchers by him, for all entertainment, travel, meal, hotel
accommodation and miscellaneous expenses reasonably incurred by him in the
interest of AMRE's business and in accordance with current AMRE policy during
the Term of Employment.
5. Termination of Employment Other Than in Connection With a
Change of Control of AMRE.
(a) Termination by AMRE for Good Cause. AMRE may
terminate Swartz's employment at any time for Good Cause only upon compliance
with the requirements of this paragraph 5(a). "Good Cause" for termination by
AMRE shall mean only (i) the willful engagement by Swartz in misconduct which
is materially injurious to
3
<PAGE> 4
AMRE, monetarily or otherwise, (ii) Swartz's physical or mental disability, if
such disability results in Swartz receiving permanent disability payments
pursuant to a group or individual disability insurance policy maintained by
AMRE on behalf of Swartz or (iii) Swartz's death. For purposes of this
paragraph 5(a), no act or failure to act on Swartz's part shall be considered
"willful" unless done, or omitted to be done, in bad faith and without
reasonable belief that the action or omission was in the best interest of AMRE.
Notwithstanding the foregoing, Swartz shall not be deemed to have been
terminated for Good Cause within the meaning of clause (i) of the preceding
sentence without (i) reasonable notice to Swartz setting forth the reason for
AMRE's intention to terminate for Good Cause, (ii) an opportunity for Swartz,
together with his counsel, to be heard before the Board of Directors of AMRE
and (iii) written notice from the Board of Directors of AMRE finding that in
the good faith opinion of such Board Swartz was guilty of the conduct set forth
above and specifying the particulars thereof in detail. In the event of
termination of Swartz's employment in accordance with the conditions of this
paragraph 5(a), the Term of Employment shall end, all of Swartz's obligations
pursuant to this Agreement (except for those provided in paragraphs 7 and 9, if
termination is for a reason other than death) shall end and AMRE's obligations
to pay compensation and benefits to Swartz pursuant to paragraph 4 shall cease
on the effective date of termination.
(b) Termination by AMRE Other Than for Good Cause. AMRE
may terminate Swartz's employment at any time for any reason other than Good
Cause upon providing not less than 30 days' prior written notice to Swartz
specifying the effective date of termination. If AMRE terminates Swartz's
employment other than for Good Cause under paragraph 5(a) prior to the public
announcement of, or actual or deemed knowledge of AMRE of, any actual or
proposed transaction which results, directly or indirectly, in a Change of
Control of AMRE, as defined in paragraph 6(d), the Term of Employment shall end
on the effective date of termination, but AMRE shall provide, as a severance
benefit to Swartz and as liquidated damages for breach by AMRE of its otherwise
applicable obligations hereunder, each of the following: (i) within three days
of the effective date of termination, a lump sum cash payment equal to the sum
of all accrued vacation pay and monthly cash payments which would, except for
the termination, have been paid to Swartz as salary under paragraph 4(a)
through the then remaining two year term of this Agreement as contemplated in
paragraph 2(a), (ii) not later than the date on which incentive compensation
for the fiscal year in which Swartz's termination of employment occurs (the
"current fiscal year") would be paid to Swartz if he were employed on the last
day of the current fiscal year, an amount equal to the product of (A) the
incentive compensation which would have been paid to Swartz if he were still
employed on the last day of the current fiscal year and (B) a fraction, the
numerator of which is the number of days in the current fiscal year through the
effective
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<PAGE> 5
date of termination and the denominator of which is 365; (iii) within three
days of the effective date of termination, a lump sum cash payment equal to the
sum of the automobile allowance monthly payments described in paragraph 4(c)
which would, except for the termination, have been paid to Swartz through the
then remaining two year term of this Agreement as contemplated in paragraph
2(a) and (iv) continuation of all life, health and disability insurance
benefits then in effect and described in paragraph 4 through the then remaining
two year term of this Agreement as contemplated in paragraph 2(a).
(c) Substantial Change in Conditions, Authority or
Responsibilities. If AMRE, during the Term of Employment, but prior to the
public announcement of, or actual or deemed knowledge of AMRE of, any actual or
proposed transaction which results, directly or indirectly, in a Change of
Control of AMRE, as defined in paragraph 6(d), makes any substantial change in
Swartz's employment conditions, authority or job responsibilities which would
constitute "Good Reason", within the meaning of paragraph 6(b), if a Change of
Control of AMRE had then occurred, then Swartz may elect to terminate his
employment in accordance with the procedures set forth in paragraph 6(a) and
such employment will be deemed terminated by AMRE without Good Cause and the
provisions of paragraph 5(b) shall apply.
(d) Termination by Swartz. Swartz may terminate his
employment at any time on or after the effective date of this Agreement upon
providing 30 days' prior written notice to AMRE stating the effective date of
termination. In any such event, all obligations of AMRE to Swartz under this
Agreement and all obligations of Swartz to AMRE (except those provided for in
paragraphs 7 through 9) shall cease and the Term of Employment shall end on the
effective date of termination.
(e) Mitigation. AMRE's termination of Swartz's
employment under paragraph 5(b) or 5(c) shall immediately relieve Swartz of all
obligations under this Agreement (except for those provided in paragraphs 7
through 9), shall not obligate Swartz to seek other employment and shall not be
construed to require the application of any compensation which Swartz may earn
in any such other employment to reduce AMRE's obligation to provide severance
benefits and liquidated damages as provided herein. Swartz's right to receive
severance benefits and liquidated damages hereunder shall not be subject to
voluntary or involuntary sale, pledge, hypothecation, transfer or assignment by
Swartz, nor shall Swartz, by virtue of such right, acquire any right, title or
interest in particular assets of AMRE and such right shall be no greater than
the right of any unsecured general creditor of AMRE.
5
<PAGE> 6
6. Change of Control of AMRE. In the event of a Change of
Control of AMRE, the following provisions of this Agreement shall apply
notwithstanding any other terms or conditions of this Agreement:
(a) Termination of Employment by Swartz for Good Reason.
Swartz's employment may be terminated by Swartz during the two year
period subsequent to the date immediately prior to the date on which
the Change of Control of AMRE occurred for Good Reason if, (i) within
90 days of the date of occurrence of a triggering event, Swartz
notifies AMRE in writing of his intention to treat such event as Good
Reason, (ii) within 30 days following receipt of such notice provided
for in (i), AMRE fails to cure the triggering event, and (iii) within
60 days following the expiration of the 30-day period described in
(ii), Swartz voluntarily terminates his employment by giving written
notice to AMRE.
(b) Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of one or more of the
following events subsequent to the public announcement of, or actual
or deemed knowledge of AMRE of, any actual or proposed transaction
which results, directly or indirectly, in a Change of Control of AMRE
(each of which shall be a "triggering event"):
(i) the assignment to Swartz of any duties
inconsistent in any respect with Swartz's position (including
status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by
paragraph 1 of this Agreement, or any other action by AMRE
which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by AMRE promptly after receipt
of notice thereto given by Swartz;
(ii) any failure by AMRE to comply with any of the
provisions of paragraph 4 of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by AMRE promptly after
receipt of notice thereof given by Swartz, unless AMRE agrees
to fully compensate Swartz for any such reduction;
(iii) Swartz is required to locate his office more
than 50 miles from the current location of AMRE's principal
office, excluding business travel reasonably consistent with
the amount of travel required of him prior to such relocation;
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<PAGE> 7
(iv) any purported termination by AMRE of
Swartz's employment otherwise than as expressly permitted by
this Agreement;
(v) any failure of any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of
AMRE to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that AMRE would be
required to perform it if no such succession had taken place;
or
(vi) AMRE's request that Swartz perform an
illegal, or wrongful act in violation of AMRE's code of
conduct policies.
(c) Severance Benefit on Termination by Swartz for Good Reason.
Upon termination of Swartz's employment by Swartz pursuant to paragraph 6(a) or
by AMRE for a reason other than Good Cause subsequent to the public
announcement of, or AMRE's actual or deemed knowledge of, any actual or
proposed transaction which results, directly or indirectly, in a Change of
Control of AMRE, all obligations of AMRE to Swartz under this Agreement and all
obligations of Swartz to AMRE (except those provided for in paragraphs 7
through 9) shall cease and the Term of Employment shall end and AMRE shall pay
to Swartz, (i) within 10 days of such termination of employment, the sum of (A)
all accrued vacation pay and (B) an amount equal to 299% of Swartz's annual
salary on the date prior to the Change of Control and (ii) not later than the
date on which incentive compensation for the fiscal year in which Swartz's
termination of employment occurs (the "current fiscal year") would be paid to
Swartz if he were employed on the last day of the current fiscal year, an
amount equal to 299% of the amount Swartz would be entitled to pursuant to
paragraph 5(b)(ii) if he had been terminated for a reason other than Good Cause
pursuant to paragraph 5(b) on the day preceding the Change of Control of AMRE.
In the event the cash settlement payment payable under this paragraph 6(c),
either alone or together with any other payments which Swartz has the right to
receive from AMRE, would constitute an "excess parachute payment" (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended), such cash
settlement amount shall be increased to an amount sufficient to provide Swartz,
after satisfaction of all federal excise taxes and federal and state income
taxes attributable to such increases in amount, a net amount equal to such cash
settlement amount calculated as described above and before any such excise tax.
(d) Definition of Change of Control of AMRE. For the purpose of
this Agreement, a "Change of Control of AMRE" shall be deemed to have occurred:
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<PAGE> 8
(i) When any "person" as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and as used in Sections 13(d) and 14(d) thereof, including a "group"
as defined in Section 13 (d) of the Exchange Act, excluding any
employee benefit plan sponsored or maintained by AMRE or any
subsidiary of AMRE (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to
time), of securities of AMRE representing:
(A) 30% or more of the combined voting power of AMRE's
then outstanding securities with respect to the
election of the directors of AMRE; or
(B) 20% or more of such combined voting power if such
person thereby becomes the largest stockholder of
AMRE; or
(ii) When, during any period of 24 consecutive months, the
individuals who, at the beginning of such period, constitute the Board
of Directors of AMRE (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof, provided,
however, that a director who was not a director at the beginning of
such 24-month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director was
elected by, or on the recommendation of or with the approval of, at
least a majority of the directors who then qualified as Incumbent
Directors either actually (because they were directors at the
beginning of such 24-month period) or by prior operation of this
provision; or
(iii) The occurrence of a transaction requiring stockholder
approval of the acquisition of AMRE by an entity other than AMRE or a
50% or more owned subsidiary of AMRE through purchase of assets, or by
merger, or otherwise, except in the case of a transaction pursuant to
which, immediately after the transaction, AMRE's stockholders
immediately prior to the transaction own at least 60% of the combined
voting power of the surviving entity's then outstanding securities
with respect to the election of the directors of such entity solely by
reason of such transaction.
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<PAGE> 9
7. Restrictions on Investments and Competing Activities.
(a) Except to the extent permitted by the last sentence
of this paragraph 7(a) and by paragraph 7(b), during the Term of Employment,
Swartz will not hold or acquire (whether by purchase, gift or otherwise) any
direct or beneficial interest in any securities (debt or equity) of, or any
other interest in, any corporation (domestic or foreign) or any other business
organization engaged, directly or indirectly, in any business competitive with
that conducted by AMRE or any member of the AMRE Group nor will Swartz himself
(whether in an individual capacity or as a member of a partnership or
otherwise) engage, directly or indirectly, in any business competitive with
that conducted by AMRE or any member of the AMRE Group. The restrictions on the
investment activities of Swartz, set forth in the first sentence of this
subparagraph (a), do not apply to investments in debt securities of any
corporation, if such debt securities are traded on a national securities
exchange, or to investments in equity securities of any corporation, if such
equity securities are traded on a national securities exchange, provided that
the aggregate holdings (direct and beneficial) of Swartz, his spouse and minor
children in equity securities of such corporation do not, at any time, equal 1%
or more of the outstanding equity securities of such corporation.
(b) Swartz agrees that, in addition to the restrictions
imposed by paragraph 7(a), he will conduct his respective investment activities
in strict compliance with any and all reasonable policies with respect thereto
now or hereafter established by AMRE (and any other member of the AMRE Group
that employs Swartz), and Swartz further agrees to render, and cause to be
rendered, any and all such reports with respect thereto as may be required by
AMRE or any such other member of the AMRE Group. The foregoing
notwithstanding, an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by Swartz promptly after receipt of notice of
any failure to comply with such policies shall not constitute a violation of
the provisions of this subparagraph.
8. Confidentiality. Swartz agrees and acknowledges that the
trade secrets of AMRE and the AMRE Group, as such secrets may exist from time
to time, are valuable, special and unique assets of AMRE and the AMRE Group,
and that access to and knowledge of such secrets are essential to the
performance of Swartz's duties hereunder. Swartz will not, in whole or in
part, for his own purposes or for the benefit of any person, firm, corporation
or other entity (except AMRE or any member of the AMRE Group) disclose to any
person, firm, corporation, association or any other entity, any such trade
secrets or any other confidential or secret information with respect to the
business of AMRE or the AMRE Group (including, without limitation, any such
information with respect to customers), nor will Swartz make use of any such
trade secrets or other confidential or secret information for his own purposes
or
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<PAGE> 10
for the benefit of any person, firm, corporation or other entity (except AMRE
or any member of the AMRE Group) under any circumstances during or after the
Term of Employment; provided, however, that after the Term of Employment these
restrictions shall not apply to such trade secrets or confidential or secret
information which are then in the public domain (so long as Swartz was not
responsible, directly or indirectly, for permitting such trade secrets or
confidential or secret information to enter the public domain without AMRE's
consent).
9. Covenants Not to Solicit or Interfere. For a period of 12
months from the effective date of Swartz's termination of employment, Swartz
will not compete with AMRE or any member of the AMRE Group in the business of
AMRE or the AMRE Group in any geographic area in which AMRE (or such member of
the AMRE Group) is actively engaged in such business on the date Swartz's
employment hereunder terminates. The term "compete", as used herein, means to
engage in competition, directly or indirectly (including, without limitation,
to conduct the business of AMRE or the AMRE Group for any customer with which
Swartz had any significant business contacts during his employment hereunder),
either as a proprietor, partner, employee, agent, consultant, director,
officer, controlling stockholder or in any other capacity or manner whatsoever.
It is the desire and intent of the parties that the provisions of this
paragraph 9 shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if, and to the extent that, any portion of this paragraph
9 shall be adjudicated to be invalid or unenforceable, this paragraph 9 shall
be deemed amended to delete therefrom or reform the portion thus adjudicated to
be invalid or unenforceable, such deletion or reformation to apply only with
respect to the operation of this paragraph 9 in the particular jurisdiction in
which such adjudication is made.
10. Injunctive Relief. Swartz acknowledges and agrees that
a breach or threatened breach of the provisions of paragraphs 7, 8 or 9 may
cause irreparable injury to AMRE and any member of the AMRE Group, and that, as
a result of such breach AMRE, or any member of the AMRE Group, as the case may
be, shall be entitled, among and in addition to other remedies available at law
or in equity, to an injunction restraining Swartz from continuing the activity
causing such breach. Such remedy shall not be exclusive and shall be in
addition to any other remedy AMRE or any such member of the AMRE Group may be
entitled.
11. Miscellaneous.
(a) Notices. Any notice required or permitted to be given under
this Agreement shall be deemed to have been received when delivered in person
or mailed, postage prepaid, by certified mail addressed, in the case of Swartz,
to his last known residence as
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provided by him to AMRE, or, in the case of AMRE, to its principal office.
(b) Benefits and Obligations. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by AMRE and its
respective successors and assigns, and Swartz, his heirs, assigns or legal
representatives; provided, however, that the obligations of Swartz contained
herein may not be delegated or assigned.
(c) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and may only be amended by an agreement in writing signed by all of the parties
hereto.
(d) Waiver. The failure of any party hereto to insist, in any one
or more instances, upon performance of any of the terms and conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any right
granted hereunder or of the future performance of any such term, covenant or
condition.
(e) Severability. In the event that any portion of this
Agreement may be held to be invalid or unenforceable for any reason, the
parties hereto agree that said invalidity or unenforceability shall not affect
the other portions of this Agreement and that the remaining covenants, terms
and conditions or portions thereof shall remain in full force and effect and
any court of competent jurisdiction may so modify the objectionable provision
as to make it valid and enforceable.
(f) Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
(g) Captions. The captions contained in this Agreement are for
the convenience of AMRE and Swartz and shall not be deemed or construed as in
any way limiting or extending the language of the provisions to which such
captions refer.
(h) Termination of Employment Agreement. This Agreement replaces
and is substituted for that certain Employment Agreement made as of June 1,
1995, by and between AMRE and Swartz, which Employment Agreement is hereby
terminated and is of no further force or effect.
* * *
11
<PAGE> 12
IN WITNESS WHEREOF, AMRE has caused this Agreement to be executed by
its officer thereunto duly authorized, and Swartz has hereunto set his hand,
all as of the day, month and year first above written.
AMRE, INC.
By: /s/ JOHN D. SNODGRASS
-----------------------------------
John D. Snodgrass
Chairman of the Board
/s/ ROBERT M. SWARTZ
---------------------------------------
Robert M. Swartz
12
<PAGE> 1
EXHIBIT 10.43
AMRE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made as of the 11th day of October,
1995, between AMRE, Inc., a Delaware corporation (the "Company"), and Ronald L.
Bliwas, (the "Optionee").
In recognition of the Optionee's services as a director of the Company,
the Company has, as of the date first above written, granted to the Optionee a
stock option, and the Optionee has accepted the option. Therefore, in
consideration of the mutual covenants herein contained, the parties hereto
agree as follows:
I. GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. The Company has granted to the Optionee an
option (the "Option") to purchase an aggregate of 20,000 shares of common
stock, $0.01 par value, of the Company at a price of $4.50 per share (the
"Exercise Price"), subject to the terms and conditions hereinafter set forth.
The Option is a non-qualified option and is not intended to constitute an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended.
1.2 Vesting of Option. The Option shall become exercisable on
October 11, 1996, the anniversary date of the granting of the Option, if the
Optionee continues to serve as a director of the Company on said date. All or
any part of the shares with respect to which the right to purchase has vested
may be purchased at the time of such vesting or at any time or times thereafter
during the term of the Option.
1.3 Term of Option. The term of the Option is ten years from the
date of the granting of the Option, subject to earlier termination as provided
in Section II hereof.
1.4 Exercise of Option. The Option may be exercised by giving
written notice to the Company, addressed to its corporate headquarters,
attention of the Secretary, specifying the number of shares to be purchased,
accompanied by payment in full of the Exercise Price, either in cash or by
check, bank draft or money order.
<PAGE> 2
1.5 Restrictions on Exercise. If at any time the Company
determines, in its discretion, that the listing, registration or qualification
of the shares subject to the Option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, is necessary or desirable as a condition of, or in connection
with, the issue or purchase of shares subject to the Option, the Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
II. TERMINATION OF SERVICES AS A DIRECTOR
2.1 Termination Before the Option Becomes Exercisable. If the
Optionee ceases to serve as a director of the Company for any reason whatsoever
before the date that the Option shall first have become exercisable, then the
Option shall immediately terminate and all rights with respect thereto shall be
forfeited.
2.2 Death. If the Optionee ceases to be a director of the Company
by reason of death, the personal representatives, heirs, legatees or
distributees of the Optionee, as appropriate, shall have the right at any time
or times during the term of the Option to exercise the Option to the extent
that the Option was exercisable prior to the date of death and had not been so
exercised.
III. MISCELLANEOUS
3.1 Nontransferability of Option. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option, or the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
3.2 Changes in Capital Structure. In the event that the number of
shares of common stock of the Company shall be changed by reason of stock
splits, combinations of shares, recapitalizations, mergers, consolidations or
stock dividends, the number of shares then subject to the Option shall be
proportionately adjusted so as
2
<PAGE> 3
to reflect such change; and, in such event, the Exercise Price shall be
proportionately increased or decreased, as the case may be, all to prevent
dilution or enlargement of the rights of the Optionee. No adjustment provided
for in this Paragraph 3.2 shall require the issuance of any fractional shares.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMRE, INC.
By: /s/ ROBERT M. SWARTZ
----------------------------
Robert M. Swartz
President
OPTIONEE:
/s/ RONALD L. BLIWAS
--------------------------------
Ronald L. Bliwas
3
<PAGE> 1
EXHIBIT 11
AMRE, INC.
COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
JUNE 30, JULY 2,
1996 1995
-------- -------
<S> <C> <C>
Common Stock outstanding . . . . . . . . . . . . 19,214 17,128
Common Stock equivalents . . . . . . . . . . . . -- --
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . . 19,214 17,128
====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
-----------------------
JUNE 30, JULY 2,
1996 1995
-------- -------
<S> <C> <C>
Common Stock outstanding . . . . . . . . . . . . 18,663 17,118
Common Stock equivalents . . . . . . . . . . . . -- --
------ ------
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . . 18,663 17,118
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,269
<SECURITIES> 3,504
<RECEIVABLES> 10,310
<ALLOWANCES> 918
<INVENTORY> 5,908
<CURRENT-ASSETS> 34,011
<PP&E> 25,972
<DEPRECIATION> 16,798
<TOTAL-ASSETS> 53,852
<CURRENT-LIABILITIES> 47,602
<BONDS> 5,762
<COMMON> 201
3,121
0
<OTHER-SE> (2,834)
<TOTAL-LIABILITY-AND-EQUITY> 53,852
<SALES> 62,875
<TOTAL-REVENUES> 62,875
<CGS> 22,231
<TOTAL-COSTS> 22,231
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 328
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> (12,044)
<INCOME-TAX> 50
<INCOME-CONTINUING> (12,094)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,094)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
