<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended January 31, 1995
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-15994
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LDI CORPORATION
---------------
(Exact name of Registrant as specified in its charter)
Delaware 31-1179824
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4770 Hinckley Industrial Parkway, Cleveland, Ohio 44109
- -------------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 661-5400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None Name of each exchange
---- on which registered: ____________
Securities registered pursuant
to Section 12 (g) of the Act: Common Stock, $.01 par value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 31, 1995, was $13,580,452.
The number of shares outstanding of the registrant's Common Stock,
$.01 par value, as of March 31, 1995, was 6,727,457.
<PAGE> 2
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report on Form
10-K for the fiscal year ended January 31, 1995 as set forth in the pages
attached hereto:
Items 10, 11, 12 and 13
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
LDI CORPORATION
Date: May 26, 1995 By: /S/ FLOYD S. ROBINSON
---------------------
Floyd S. Robinson
President and Chief Executive
Officer
<PAGE> 3
<TABLE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A description of the directors of the Company follows:
<CAPTION>
OFFICES HELD AND DIRECTOR TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
---- --- ------------------- ----- -------
<S> <C> <C> <C> <C>
Scott S. Cowen (1) 48 Dean of the Weatherhead School of 1989 1995
Management at Case Western Reserve
University since July 1984.
Thomas A. Cutter 52 Member of Capstone Management Ltd., a 1986 1995
privately-owned real estate investment
and management company, since October
1994; Vice Chairman and Senior
Executive Vice President of the Company
from February 1989 through May 1994;
Senior Vice President of Leasing
Dynamics, Inc. from December 1983 to
May 1991.
Robert S. Kendall 56 Chairman, President and Director of CPS 1986 1996
Capital, Ltd., a privately-owned
mergers and acquisitions and
institutional investments company,
since September 1994; Chairman of the
Company since February 1989; Chief
Executive Officer of the Company from
February 1989 to July 1994; Chairman
of Leasing Dynamics, Inc. from July
1989 to May 1991.
Michael R. Kennedy 52 Chairman, Chief Executive Officer and 1986 1996
Director of MRK Technologies, Ltd., a
privately-owned computer sales and
service company, since June 1994;
President and Chief Operating Officer
of the Company from February 1989 to
May 1994; Executive Vice President of
Leasing Dynamics, Inc. from February
1972 to May 1991.
</TABLE>
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<TABLE>
<CAPTION>
OFFICES HELD AND DIRECTOR TERM
NAME AGE BUSINESS EXPERIENCE SINCE EXPIRES
---- --- ------------------- ----- -------
<S> <C> <C> <C> <C>
Floyd S. Robinson 48 President and Chief Executive Officer 1994 1997
of the Company since August 1994;
President-Business Equipment Financing
of USL Capital from January 1992 to
July 1994; President and Chief
Operating Officer of Fleet Credit
Corporation from 1986 to January 1992.
Norton W. Rose (2) 66 Vice Chairman and Director of Blue 1994 1997
Coral, Inc., a privately-owned consumer
chemical company, and Chairman and
Director of Premier Travel Partners, a
privately-owned travel management
company, since 1991; Vice President of
Creative Art Activities Inc., a
privately-owned toy company, since
January 1994; Chairman of Action Auto
Rental, Inc., an automobile leasing
company, from November 1991 to January
1993; Vice Chairman of Progressive
Corporation, a liability and casualty
insurance company, from 1985 to August
1990.
<FN>
- ---------------
(1) Mr. Cowen is also a director of American Greetings Corporation,
Cyberex Corporation, FabriCenters of America, Inc., Premier Industrial
Corporation, Society Corporation, Forest City Enterprises, Inc. and
Weatherhead Industries, Inc. and is on the Board of Advisors of
Charles Fradin, Inc./Copley Industries.
(2) Mr. Rose is also a director of Telxon Corporation, Cohesant
Technologies and Specialty Chemical Resources, Inc. Action Auto
Rental, Inc. filed for bankruptcy protection under Chapter 11 of the
Bankruptcy Code on January 28, 1993. A description of the executive
officers of the Company follows:
</TABLE>
<TABLE>
A description of the executive officers of the Company follows:
<CAPTION>
OFFICES HELD AND
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
Robert S. Kendall 56 Chairman, President and Director of CPS Capital, Ltd., a
privately-owned mergers and acquisitions and institutional
investments company, since September 1994; Chairman of the
Company since February 1989; Chief Executive Officer of the
Company from February 1989 to July 1994; Chairman of Leasing
Dynamics, Inc. from July 1989 to May 1991.
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
OFFICES HELD AND
NAME AGE BUSINESS EXPERIENCE
---- --- -------------------
<S> <C> <C>
Floyd S. Robinson 48 President and Chief Executive Officer of the Company since August
1994; President-Business Equipment Financing of USL Capital from
January 1992 to July 1994; President and Chief Operating Officer
of Fleet Credit Corporation from 1986 to January 1992.
Frank G. Skedel 48 Executive Vice President and Chief Financial Officer of the
Company since June 1994; Senior Vice President of the Company
from June 1991 to June 1994; Treasurer of the Company since March
1991; Secretary of the Company since October 1994; Vice President
of the Company from April 1989 to June 1991; President of LDI
Financial Services Corp. from July 1989 until its merger into the
Company in April 1991.
Mont C. Hollingsworth 47 Senior Vice President of the Company since June 1994; Vice
President of the Company from December 1992 to June 1994;
Controller of the Company since December 1992; Vice President and
Controller, Leasing Services Group, from April 1991 to December
1992; Vice President and Controller of Leasing Dynamics, Inc.
from January 1989 until its merger into the Company in April
1991.
Stephen F. Smith 44 Senior Vice President of the Company since October 1994;
International Operations Manager of G.E. Capital (Vendor
Financial Services) from June 1994 to October 1994; Senior Vice
President of Credit and Operations of USL Capital from August
1992 to June 1994; Senior Vice President of Credit of Fleet
Credit Corporation from November 1989 to July 1992.
Richard G. Greece 47 Vice President and Assistant Treasurer of the Company since July
1994; Director and Assistant Treasurer from August 1993 to July
1994; Director of Accounting and Financial Projects from April
1991 to July 1993; Director of Accounting of LDI Financial
Services from June 1990 until its merger into the Company in
April 1991.
John S. Rainsberger 38 Vice President Sales-Leasing Services of the Company since
December 1991; District Sales Manager of Leasing Dynamics, Inc.
from January 1990 until December 1991.
Brian Turnbull 47 Vice President, Technology Services of the Company since December
1992; President and CEO of Servicescope Corporation from November
1990 to October 1992; Senior Vice President, Operations of Mediq
Corporation from January 1987 to October 1990.
</TABLE>
The Company is required to identify any officer or director who failed
to timely file with the Securities and Exchange Commission a required report
relating to ownership and changes in ownership of the Company's equity
securities. Based on material provided to the Company, it believes that during
the year ended January 31, 1995, all such filing requirements were complied
with by its officers and directors, except that the Form 3 filed for Mr.
Robinson upon his joining the Company reported only his initial stock options
and failed to
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include shares of restricted stock awarded to him. This omission
was discovered in the preparation of his annual Form 5, and the restricted
stock was included on that Form.
ITEM 11. EXECUTIVE COMPENSATION
The following information is set forth with respect to the Company's
Chief Executive Officer and certain other persons who served as executive
officers of the Company during the year ended January 31, 1995.
<TABLE>
<CAPTION>
I. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------
AWARDS
---------------------------
OTHER RESTRICTED
YEAR ANNUAL STOCK OPTIONS/ ALL OTHER
ENDED SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
NAME AND PRINCIPAL POSITION (1) JAN. 31 ($) ($) ($)(2) ($) (#) ($)(5)
--------------------------------- --------- -------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Floyd S. Robinson 1995 188,970 50,000 53,172 54,375 (3) 250,000(4) - 0 -
President and Chief Executive
Officer
Robert S. Kendall 1995 173,131 - 0- N/A - 0 - - 0 - 53,318
Chairman of the Board and 1994 371,153 65,025 N/A - 0 - 10,000 6,189
former Chief Executive Officer 1993 275,000 337,450 N/A - 0 - - 0 - 17,470
Frank G. Skedel 1995 160,000 50,000 27,322 - 0 - - 0 - 5,098
Executive Vice President and 1994 160,000 46,000 N/A - 0 - 10,000 4,701
Chief Financial Officer 1993 160,000 49,500 N/A - 0 - - 0 - 15,059
John S. Rainsberger 1995 172,352 16,817 N/A - 0 - - 0 - 2,565
Vice President--Sales
Mont C. Hollingsworth 1995 100,275 37,500 N/A - 0 - - 0 - 2,578
Senior Vice President and 1994 93,934 21,000 N/A - 0 - 10,000 2,506
Controller 1993 98,798 19,000 N/A - 0 - - 0 - 8,325
Benjamin W. Cannon 1995 122,195 129,000 N/A - 0 - - 0 - 6,025
Former Vice President and 1994 199,236 31,000 N/A - 0 - 10,000 5,115
General Counsel 1993 168,152 23,250 N/A - 0 - - 0 - 10,876
William G. Zenallis 1995 160,000 30,986 N/A - 0 - - 0 - 5,083
Vice President--National Sales 1994 168,101 36,074 N/A - 0 - 10,000 5,022
1993 159,660 - 0 - N/A - 0 - - 0 - 12,374
<FN>
- ----------
(1) Because of executive changes during the year ended January 31, 1995,
more than five officers are included in this table. Messrs.
Robinson and Kendall both served as Chief Executive Officer during the
year. Messrs. Skedel, Rainsberger and Hollingsworth are the next
three highest paid persons who were executive officers at the end of
the fiscal year. Messrs. Cannon and Zenallis were executive officers
during the year and would have been among the five highest paid
executive officers if they had remained as executive officers at the
end of the year. Because Messrs. Robinson and Rainsberger were not
executive officers of the Company during the fiscal years ended
January 31, 1994 or 1993, no information is provided for them as to
those years.
</TABLE>
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(2) The amount set forth in this column for Mr. Robinson consists almost
entirely of relocation expenses of Mr. Robinson and his family paid or
reimbursed by the Company. The amount for Mr. Skedel represents club
membership expenses paid or reimbursed by the Company. Certain other
executive officers were reimbursed for club membership expenses and
other business perquisites in amounts that are less than the reporting
thresholds established by the Securities and Exchange Commission.
(3) Consists of 15,000 shares of restricted stock, which will vest on July
19, 1995. The value of the shares is calculated at the value on
January 31, 1995.
(4) The options were granted to Mr. Robinson on July 19, 1994 and have an
exercise price of $3.75 per share. They will vest in 20% installments
on July 19 in each of the years 1995 through 1999, except that they
will vest 100% upon any change in control (as defined) of the Company.
(5) Consists of amounts contributed by the Company under the LDI
Corporation Retirement Savings Plan and the LDI Corporation Pension
Plan and Trust, except that the amount for Mr. Kendall includes
severance payments to Mr. Kendall of $52,877 during the year ended
January 31, 1995 (see "Employment Agreements and Arrangements with
Respect to Severance Compensation" in this Item 11).
<TABLE>
<CAPTION>
II. OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- -------------------------------------------------------------------------------- ------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME (1) GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------- ------------ ------------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Floyd S. Robinson 250,000 100% $3.75 7/19/2003 $447,625 $1,072,125
<FN>
(1) No options were granted during the year ended January 31, 1995 to any
of the other persons named in the Summary Compensation Table.
</TABLE>
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<TABLE>
<CAPTION>
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
AT JANUARY 31, 1995 (#) AT JANUARY 31, 1995 ($)
---------------------------------------- -----------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Floyd S. Robinson - 0 - 250,000 - 0 - - 0 -
Robert S. Kendall - 0 - - 0 - - 0 - - 0 -
Frank G. Skedel 27,410 13,250 - 0 - - 0 -
John S. Rainsberger 9,560 9,890 - 0 - - 0 -
Mont C. Hollingsworth 13,592 9,575 - 0 - - 0 -
Benjamin W. Cannon - 0 - - 0 - - 0 - - 0 -
William G. Zenallis 7,880 9,470 - 0 - - 0 -
</TABLE>
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee of the
Company receives an annual director's fee of $16,000 ($32,000 for the
Chairman). In addition, each such director receives $1,000 ($2,000 for the
Chairman) for attendance at each meeting of the Board and each meeting of a
committee thereof not held in conjunction with a Board meeting, plus
reimbursement of expenses incurred in attending any such meeting.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS WITH RESPECT TO SEVERANCE COMPENSATION
The Company has entered into an employment agreement with Mr. Robinson
providing for an annual base salary of $350,000, a bonus of $50,000 payable
upon commencement of his employment and a guaranteed bonus of $100,000 in
respect of the fiscal year ended January 31, 1995. For subsequent fiscal
years, Mr. Robinson will be entitled to participate in a bonus plan providing
for an annual bonus based upon performance goals to be determined by the Board
of Directors, such bonus not to exceed the amount of the base salary. The
agreement also provides for Mr. Robinson to be granted options to purchase a
total of 750,000 shares of common stock. One third of the options were granted
on July 19, 1994, and the remaining options will be granted in equal
installments on July 19, 1995 and 1996 at the market value of the common stock
on those dates. If Mr. Robinson's employment is terminated other than for
cause (as defined), he will be entitled to continuation of his base salary and
medical benefits for a period of one year.
The Company has entered into employment agreements with each of
Messrs. Skedel and Hollingsworth which provide for severance compensation
aggregating between $100,000 and $300,000 depending on the circumstances under
which the individual terminates his employment with the Company. The
individual will also receive medical and dental benefits so long as payments of
severance compensation continue or until the individual receives similar
benefits from a new employer. The Company had a similar employment agreement
with Jerry E. Kish, former Executive Vice President and Chief Financial
Officer, under which the Company is paying Mr. Kish severance compensation in
the aggregate amount of $300,000 and is maintaining medical and dental
benefits.
The Company has entered into severance agreements with each of Messrs.
Kendall, Kennedy and Cutter. These agreements provide for monthly payments of
severance compensation to continue through November 1996 for each of Messrs.
Kennedy and Cutter and through January 1997 for Mr. Kendall. Payments of
severance compensation are contingent upon the former officer fulfilling
certain obligations and upon the Company not being in violation of any
covenants, representations or warranties under any of its loan
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agreements. The aggregate amount of severance paid and payable to each of them
under these agreements is $450,000.
The Board of Directors approved a severance plan in connection with
the Company's reduction in work force announced and implemented during the year
ended January 31, 1995. Employees who were designated between March 1 and June
30, 1994 to be part of the reduction received severance payments based on their
tenure with the Company and level of responsibility. The amounts of such
severance payments were equal to four weeks' pay for each year of service with
respect to senior managers and senior directors; two weeks' pay for each year
of service with respect to supervisors and managers; and one week's pay for
each year of service with respect to non-executives and non-exempt personnel.
The amounts of severance payments to executive officers were considered on a
case-by-case basis. Affected employees were also entitled to continued medical
and dental benefits. Payments of severance were made in lump sums, except for
the senior managers, who received their severance amounts in bi-weekly
payments, and executives, who received their amounts as determined on a
case-by-case basis.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1995, certain
information with regard to the beneficial ownership of the Company's common
stock by each holder of more than five percent of the Company's outstanding
common stock, each director of the Company, each of the current executive
officers of the Company set forth in the Summary Compensation Table and all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF AMOUNT PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS
---------------- ---------------------- --------
<S> <C> <C>
Floyd S. Robinson 15,000 (2) *
Scott S. Cowen 15,633 (3)(4) *
Thomas A. Cutter 876,900 (5)(6) 13.03%
Robert S. Kendall 1,122,168 (5)(7) 16.68%
Michael R. Kennedy 1,011,262 (5)(8) 15.03%
Norton W. Rose 2,500 (4) *
Frank G. Skedel 33,348 (9) *
Mont C. Hollingsworth 17,437 (9) *
John S. Rainsberger 9,560 (9) *
Dimensional Fund Advisors Inc. 419,876 (10) 6.24%
Olympus Private Placement Fund, L.P. 1,574,803 (11) 18.97%
The TCW Group, Inc. 579,500 (12) 8.61%
Tweedy, Browne Company L.P. and Related Parties 496,100 (13) 7.37%
All Directors and executive
officers as a group (12 persons) 3,106,003 (14) 45.73%
<FN>
* Less than 1%
(1) Beneficial ownership includes having or sharing voting power or dispositive power of the securities.
(2) Consists of shares of restricted stock, all of which will vest on July 19, 1995.
</TABLE>
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(3) Includes 10,500 shares issuable upon the exercise of options to
purchase common stock. Also includes 1,050 shares held by Marjorie
Cowen, his spouse, as to which shares Mr. Cowen disclaims any
beneficial ownership.
(4) Does not include shares issuable upon the exercise of options to
purchase common stock granted pursuant to the Stock Option Plan for
Non-Employee Directors to be submitted to the stockholders for
approval at the 1995 Annual Meeting of Stockholders.
(5) Messrs. Kendall, Kennedy and Cutter and certain other stockholders of
the Company are parties to a Stockholders Agreement (the "Stockholders
Agreement") pursuant to which the parties thereto have agreed to vote
all of the shares held by them in the same manner as a majority of the
shares held by Messrs. Kendall, Kennedy and Cutter. An aggregate of
3,351,520 shares of common stock, or approximately 49.82% of the
shares outstanding, are subject to the Stockholders Agreement.
(6) Includes 766,964 shares held by Margaret Cutter, his spouse, and
49,215 shares held by a foundation of which Mr. Cutter is trustee, as
to all of which shares he disclaims any beneficial ownership.
(7) Includes 1,050,000 shares held by CPS Capital, Ltd., of which Mr.
Kendall is the principal member. Also includes 56,471 shares held by
a foundation of which Mr. Kendall is trustee, as to which shares he
disclaims beneficial ownership.
(8) Includes 8,000 shares held by a foundation of which Mr. Kennedy is
trustee. Does not include 96,906 shares held of record by National
City Bank as trustee of an irrevocable trust established by Mr.
Kennedy for the benefit of his children. Mr. Kennedy disclaims
beneficial ownership of all of such shares.
(9) Includes shares held under the LDI Corporation Retirement Savings
Plan. Also includes 27,410 shares of common stock issuable to Mr.
Skedel, 13,592 shares issuable to Mr. Hollingsworth and 9,560 shares
issuable to Mr. Rainsberger upon the exercise of options to purchase
common stock granted pursuant to the LDI Corporation Employee Stock
Option Plan, which options are exercisable within 60 days of March 31,
1995.
(10) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 419,876
shares, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which
Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. This information is as of
December 31, 1994 and was obtained from a Schedule 13G field by
Dimensional with the Securities and Exchange Commission on or about
February 9, 1995.
(11) Consists of shares issuable upon the exercise of outstanding warrants
to purchase common stock.
(12) This information was obtained from a Schedule 13G filed by The TCW
Group, Inc. with the Securities and Exchange Commission on or about
February 10, 1995.
(13) This information was obtained from a Schedule 13G filed by Tweedy,
Browne Company L.P., TBK Partners, L.P. and Vanderbilt Partners, L.P.
with the Securities and Exchange Commission on or about August 12,
1993.
(14) Includes shares held under the LDI Corporation Retirement Savings
Plan. Includes 52,402 shares of common stock issuable to all
executive officers as a group upon the exercise of options to purchase
common stock granted pursuant to the LDI Corporation Employee Stock
Plan, which options are exercisable within 60 days of March 31, 1995.
The address of each of the persons shown in the preceding table who are
the beneficial owners of more than five percent of the outstanding shares of
the Company's outstanding common stock, as of March 15, 1995, is as follows:
Mr. Kendall and CPS Capital, Ltd., Suite 1510, 1801 East Ninth Street,
Cleveland, Ohio 44114;
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<PAGE> 11
Mr. Kennedy, 30700 Carter Street, Solon, Ohio 44139; Mr. Cutter, 29299 Clemens
Road, Suite 1K, Westlake, Ohio 44145; Olympus Private Placement Fund, L.P.,
Metro Center, One Station Place, Stamford, Connecticut 06902; Dimensional Fund
Advisors Inc., 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401;
The TCW Group, Inc., 865 South Figueroa Street, Los Angeles, California 90017;
and Tweedy, Browne Company L.P., 52 Vanderbilt Avenue, New York, New York
10017.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended January 31, 1995, the Company leased office,
warehouse and operations space from NCP Ltd. ("NCP"), an Ohio limited
partnership, the general partners of which are Messrs. Kendall, Kennedy and
Cutter and Jay J. Ross, a former officer of the Company. Jerry E. Kish, a
former officer and director of the Company, was a partner of NCP until January
1, 1995, at which date he surrendered his partnership interest back to NCP.
The Company made rental payments to NCP of $355,000 for the year ended January
31, 1995. The Company paid $40,000 to NCP for the year ended January 31, 1995,
for building maintenance, consulting services and building management fees. In
connection with the consolidation of the Company's facilities and the sale of
certain of its noncore businesses, all of the leases from NCP have been
terminated, and the Company has no remaining commitments to NCP for rentals
with respect to facilities.
On May 31, 1994, the Company sold to the predecessor of MRK
Technologies, Ltd. ("MRK") substantially all of the assets of a subsidiary and
a division of the Company engaged in the businesses of selling computer systems
and software and related equipment, network connectivity products and related
services. Mr. Kennedy is the Chairman and Chief Executive Officer and one of
the principal members of MRK. The purchase price paid by MRK for the assets
consisted of cash and short-term notes in the aggregate amount of approximately
$8.5 million and a subordinated note in the original principal amount of $2
million payable in installments through 1999. The note is subordinated to
certain commercial financing arrangements of MRK, is guaranteed by Mr. Kennedy
and is secured by Mr. Kennedy's pledge to the Company of shares of the Company
held by him. The unpaid principal amount of the note at March 31, 1995 was
$1.5 million. In connection with the sale, the Company leased to MRK certain
furniture, fixtures and equipment used in the business. The lease provides for
aggregate rentals of approximately $796,000 over a term of thirty-six months
and gives MRK the option to purchase the leased equipment at the end of the
lease term for a nominal amount.
On March 31, 1994, the Company sold to Open Software, Inc.
substantially all of the assets of the Company's open systems software
distribution business. The purchase price consisted of $100,000 in cash and
certain percentage amounts based on software revenues during the three months
following the closing. Mr. Kennedy was the Chairman and Chief Executive
Officer and one of the principal stockholders of Open Software, Inc., which is
now a part of MRK. Michael T. Joseph, who was Senior Vice President of the
Company immediately prior to the sale, was the President and Chief Operating
Officer of Open Software, Inc.
During the year ended January 31, 1995, the Company purchased computer
equipment for lease to its customers and acquired other products and services
from MRK. The aggregate amount of these purchases was $5.3 million, for which
the Company owed MRK $145,000 at January 31, 1995. In addition, the Company
sold $180,000 of goods and services to MRK during the year. At January 31,
1995, the Company was owed approximately $375,000 from MRK for goods and
services and custodial funds held by MRK.
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