<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the transition period ________________________ to ________________________
Commission File No. 1-9629
WINSTON RESOURCES, INC.
(Name of small business issuer in its charter)
Delaware 13-3134278
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
535 Fifth Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (212) 557-5000
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on which
Registered
Common Stock, $.01 par value
American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
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 _____
1
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The registrant's revenues for the fiscal year ended December 31, 1996
were $39,390,000.
On March 21, 1997, (i) the aggregate market value of Common Stock held
by non-affiliates of the registrant was approximately $6,190,280 and (ii) there
were 3,177,104 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(i) Part III, Definitive Proxy Statement of the registrant to be
filed with the Commission on or before April 30, 1997, and (ii) Part II,
Item 8, Annual Report to Security Holders for the fiscal year ended
December 31, 1996.
2
<PAGE>
PART I
Item 1. Business
Winston Resources, Inc., a Delaware corporation (the
"Company"), is the successor to a personnel recruitment and placement service
business founded in 1967. The Company and its subsidiaries (collectively, the
"Company" or the "Winston Companies") together provide a wide range of personnel
supply services to businesses, institutions and governmental agencies, through
their own offices and through offices operated by independent franchisees under
licenses from the Company. The Company also provides recruitment advertising
services to businesses and other institutions.
Through its own offices, the Company recruits and places
employees in entry-to-high-level permanent salaried positions in the New York
City metropolitan area (consisting of New York City, Nassau, Suffolk and
Westchester Counties, New York and parts of northern New Jersey and southern
Connecticut) and in the Fort Lauderdale area of Florida. Such services are
provided on a contingent fee basis under which the Company collects a fee only
if it successfully places a job candidate with a client. Through its Fisher-Todd
Associates division, the Company also provides services for business and
industry clients across the United States, recruiting upper level executives on
a retainer fee basis and on a contingency fee basis.
The Company also supplies temporary employees with
professional, secretarial, clerical, medical, allied health, nursing, light
industrial, information technology and word processing skills, to business
clients and governmental agencies in the New York City, Long Island and New
Jersey areas, as well as in Florida's Fort Lauderdale area. Temporary
employees perform services at the client's premises under the client's
supervision and direction. For each temporary employee, the client is
charged an hourly rate that includes the employee's direct labor rate,
associated labor costs (such as payroll taxes and insurance) and a
mark-up to cover the Company's overhead and profit.
In addition to services furnished through its own offices, the
Company licenses independent franchisees to provide personnel services under the
trade names and service marks owned by the Company. Franchisees of the Company
provide permanent placement and executive search services under the name "Roth
Young", permanent personnel recruitment and placement services under the names
"Division 10", "Alpha" and "Winston Personnel" and temporary office support
personnel under the names "Division 10 Temps" and "Alpha Temps" in a total of
seventeen cities and towns across the United States.
The Company does not have any client which accounts for
more than ten percent of its net revenues.
Permanent Recruitment and Placement Services
The Company provides recruitment and placement services for
entry-level to high-level professional and management positions at all salary
levels on a contingent fee basis.
3
<PAGE>
The Company employs placement counselors who specialize in
recruiting and placing job candidates in particular industries or professions.
The Company provides permanent placement services in all major industries,
however, the Company primarily recruits and places personnel with skills in
accounting, finance, office support, information technology and health care
services and recruits and places executives and professionals with skills
in banking, insurance, publishing, real estate, securities, human
resources, marketing and market research, management services, corporate
facilities and architecture, as well as lawyers and paralegals.
The Company creates and maintains a data-base of qualified job
candidates based on interviewing and screening procedures. Upon receiving a job
order from a client, the Company attempts to match the specifications required
by the client with qualified candidates from its data base and also recruits
additional qualified candidates. It then arranges interviews between the client
and qualified candidates. If the Company successfully places a candidate, it
charges a fee as a percentage of the candidate's estimated annual salary for the
first year of his or her employment. The fees are always paid by the employer.
During the year ended December 31, 1996, the Company placed
applicants in permanent positions with approximately 500 clients. Approximately
fifty percent of the Company's contingent fee permanent placement clients during
that year were repeat customers.
Through its Fisher-Todd Associates (executive search)
division, the Company specializes in recruiting executives to meet specific
requirements of clients on both a contingent and retainer basis. Fisher-Todd
Associates specializes in recruiting candidates for upper level executive
positions, generally at salaries in excess of $65,000 per year. The division
employs recruiting specialists who work closely with each client to define
the requirements of the position and establish candidate specifications.
The Company then contacts appropriate candidates who are identified through
extensive research, networking, data base searches and, where required,
advertisements. Such candidates are screened through interviews and other
procedures and those most qualified are referred to the clients. The
Company assists the client in evaluating each candidate, in
determining an appropriate compensation package and, in some cases,
negotiating the final agreement.
Temporary Staffing Services
The Company furnishes to businesses, on a temporary basis, the
services of individuals with accounting, legal and paralegal, banking,
secretarial, clerical, office support, word processing, informational
technology, health care, light industrial and other professional skills.
Temporary staffing assignments usually last from one day to several months, and
often longer. Such assignments are generally made to fill vacancies in a
client's permanent work force or to supplement the client's normal work force to
meet peak work loads, handle special projects or provide special expertise. In
all cases, the work is performed at the client's facilities under the client's
supervision and direction. The client is charged an hourly rate comprised of the
direct labor rate of the personnel provided, associated labor costs (such as
payroll taxes and insurance) and a mark-up to cover the Company's overhead and
profit. All employees on temporary assignment to the Company's clients are on
the Company's payroll only during the periods of their assignments. Clients that
hire a temporary employee on a permanent basis pay a fee to the Company.
4
<PAGE>
By using the Company's temporary staffing services, clients
are able to shift to the Company the cost and inconvenience associated with the
employment of temporary personnel, including advertising, interviewing,
screening, testing, record keeping, payroll taxes and insurance. The Company is
able to absorb such costs more effectively than its clients because its
employees, once recruited, are generally assigned to a succession of temporary
positions with different clients.
The Company screens its temporary personnel through personal
interviews, testing, certificate and licensing verification and other procedures
and maintains continuously updated records on job performance. These procedures
enable it to classify its temporary personnel by preference for job location,
hours of employment and work environment and by suitability for particular types
of assignments. Persons who do temporary work usually are registered with more
than one temporary help firm at any one time.
During 1996, the Company provided the services of temporary
employees to approximately 500 clients each week. The Company estimates that a
majority of the clients to whom it supplied temporary staffing during 1996 were
repeat customers.
Franchise Operations
The Company also has eighteen franchised offices which provide
permanent placement and executive search services under the name "Roth Young",
permanent recruitment and placement services under the names "Division 10",
"Alpha" and "Winston Personnel", and temporary office support personnel under
the names "Division 10 Temps" and "Alpha Temps".
At March 21, 1997, there were fifteen Roth Young, one Division
10, one Division 10 Temps, one Alpha and one Winston franchise in a total of
seventeen cities in the United States, representing a loss of twenty six
franchises since the acquisitions of the franchise programs in 1988.
All franchisees operate their businesses autonomously, subject
to the requirements of their respective franchise agreements.
The agreements provide for monthly payments of royalties to the Company
based on the franchise's cash collections and generally cover a specified term
renewable at the franchisee's option. Each franchisee pays the Company royalties
for the license of the Company's know-how and tradenames. The Company is not
currently actively engaged in the marketing of new franchises and has no current
plans to do so.
Franchisees operating under Roth Young licenses generally
provide permanent placement and executive search services, principally to the
food, drug, hospitality, retail and health care industries, although licensees
are encouraged to expand their services to other industries.
5
<PAGE>
The Company believes that its relationship with its
independent franchisees generally is satisfactory.
Recruitment Advertising
The Company's recruitment advertising division places
recruitment advertisements in publications on behalf of the Company, the
Company's clients and other third parties. The Company believes that the
services offered by this division enhances its competitive position in the
temporary staffing and permanent placement markets by broadening the scope of
the services it offers to clients. For the year ended December 31, 1996, the
Company served approximately 170 clients through this division.
Marketing
The Company's marketing efforts for its temporary staffing
services and for most permanent recruitment and placement services are largely
concentrated within the areas contiguous to its offices. The services of the
Company's executive search division are marketed nationally. The Company relies
primarily on telephone and direct visit solicitation to existing and prospective
clients and, to a lesser extent, on direct mail, and advertising.
Recruiting
The Company recruits qualified applicants for permanent
positions and for temporary employees primarily through direct recruitment,
referrals from other applicants and newspaper advertising.
Competition
The staffing industry is highly competitive, with clients
generally using more than one company to satisfy their personnel requirements.
In the permanent recruitment and placement market, the Company and its
franchisees compete with numerous local and regional firms and, to a lesser
extent, a small number of national firms. In the temporary staffing industry
there is intense competition from national temporary staffing service firms as
well as from local and regional firms. All of the national and many of the
regional firms have substantially greater resources than the Company.
The principal competitive factors in the personnel services
industry are the availability and quality of permanent job applicants and
temporary staff, the level and integrity of the service provided by individual
offices and, to varying degrees, the prices of such services. The Company
believes that its ability to offer a fully integrated personnel service,
providing temporary help, permanent recruitment and placement services,
executive recruitment and recruitment advertising, enhances its competitive
position in those markets.
6
<PAGE>
Regulation
The Company's operations are, in some states, subject to state
laws and regulations which may require employment agencies and/or temporary help
services to be licensed. The principal requirements of such laws and regulations
are satisfactory prior experience and good moral character. The Company has
obtained all necessary licenses and registrations in the states where it
conducts business.
Trademarks and Service Marks
The Company owns a number of trademarks, service marks and
tradenames, including the names, "Winston", "Winston Resources", "Winston
Personnel" (with its logo consisting of a sunburst design and stylized letter
W), "Win-Temps", "Roth Young" and "Division 10", which are registered with the
U.S. Patent and Trademark Office.
Employees
At December 31, 1996, the Company employed approximately 105
permanent employees, including 39 placement counsellors for its permanent
placement services, in its headquarters and branch offices, not including
temporary employees on assignment to clients. The Company is responsible for all
worker's compensation and disability insurance, state and Federal unemployment
taxes, social security taxes, and fringe benefits for its temporary
employees. As a service business, the Company depends to a material degree
on its ability to hire and retain skilled and motivated personnel.
Item 2. Properties
The Company leases a total of approximately 19,000 square feet
in an office building at 535 Fifth Avenue, New York, New York. The lease was
entered into in August 1990 and renegotiated in 1992, 1993 and 1997, and expires
in 2003. The Company also leases office space in Rutherford and Parsippany, New
Jersey, in Westbury, New York and in Fort Lauderdale, Florida, under leases
expiring between 1997 and 2000.
Item 3. Legal Proceedings
The Company and its chairman, Seymour Kugler, are defendants
in an action commenced on or about October 25, 1995 in the United States
District Court, Southern District of New York, by Susan Athwal, a former
employee, whose employment with the Company ended in December 1992. The action,
brought under Title VII of the Civil Rights Act of 1964 as amended, the New York
State Human Rights Law, the New York City Human Rights Law and New York common
law and the Employee Retirement Income Security Act of 1974, alleges a variety
of acts of discrimination. The action seeks an unspecified amount of damages,
including attorneys' fees. The defendants, who have vigorously defended the
allegations, are in the process of mediating the claim with a Federal
court-approved mediator.
7
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of the fiscal year ended December 31, 1996.
Executive Officers of the Registrant
The Company's executive officers are elected by, and serve at
the discretion of the Board of Directors. The following table sets forth
information concerning the present executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Seymour Kugler 60 Chairman of the Board, President and Chief
Executive Officer
Jesse Ulezalka 48 Chief Financial Officer
Alan E. Wolf 52 Vice President
Todd Kugler 31 Vice President
Gregg Kugler 34 Vice President
David Silver 66 Vice President and Secretary
</TABLE>
Mr. Kugler (who is known generally to clients and employees of
the Company as Sy Kaye) founded the Company in 1967 and has been its chief
executive officer since that time.
Mr. Ulezalka has been the Chief Financial Officer of the
Company since August 4, 1995. Prior thereto he was CFO of Consultants for
Architects, Inc. from April 1995 - August 1995; a financial consultant from
April 1994 - April 1995; CFO and Vice President - Finance of ECCO Staffing
Services, Inc. from March 1992 - April 1994; and Vice President Finance and
corporate secretary of Unity Healthcare Holding Co., Inc. from January 1989 -
March 1992.
Mr. Wolf has been a Vice President of the Company since
September 17, 1987 and has been an Executive Vice President of the Company's
permanent placement division since 1974.
Mr. Todd Kugler (who is known generally to clients and
employees of the Company as Todd Kaye) has been with the Company since 1988.
He became a Vice President of both the Company and its temporary staffing
division on November 23, 1995. Mr. Kugler is Sy Kaye's son.
Mr. Gregg Kugler (who is known generally to clients and
employees of the Company as Gregg Kaye) has been with the Company since 1983.
He became a Vice President of the Company on August 12, 1993 and is President
of the Permanent Placement Division. Mr. Kugler is also Sy Kaye's son.
8
<PAGE>
Mr. Silver has been Secretary of the Company since December
31, 1991 and Vice President since 1995. Mr. Silver has been Vice President -
Administration/Human Resources of the Company since November 1987.
9
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Common Stock of the Company is traded principally on the
American Stock Exchange (ticker symbol "WRS"). The following table shows, for
each quarter of the Company's last two fiscal years and through March 21, 1997,
the high and low sales prices of the common stock of the Company as reported on
the American Stock Exchange.
<TABLE>
<CAPTION>
Price Range
------------------------------------
High Low
------- -------
<S> <C> <C>
1997
First Quarter $ 4 1/4 $ 3 1/8
1996
First Quarter $ 1 7/16 $ 1 1/8
Second Quarter 6 1/4 1 1/8
Third Quarter 3 5/16 2 3/4
Fourth Quarter 3 5/8 3
1995
First Quarter $ 2 $ 1 5/16
Second Quarter 2 1/2 1 3/4
Third Quarter 2 1 1/2
Fourth Quarter 1 15/16 1 1/8
</TABLE>
The Company had 128 holders of record of its common stock on
March 21, 1997.
The Company has never paid a cash dividend on the Common Stock
and anticipates that for the foreseeable future, earnings will be retained for
use in its business.
10
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
(In thousands, except for per share data and number of shares)
Combined sales:
By Company offices $39,247 $30,657 $23,822 $17,863 $14,911
By franchise 2,957 4,175 6,403 6,128 8,152
------- ------- ------- ------- -------
Total combined sales 42,204 34,832 30,225 23,991 23,063
------- ------- ------- ------- -------
Net revenue* 39,390 30,989 24,297 18,282 15,471
Income (loss) from operations 1,585 (401)(1) 865 329 (435)
Net income (loss) 1,138 (432)(1) 636 225 (473)
Net income (loss) per common share .34 (.15) .20 .07 (.16)
Weighted average common shares outstanding 3,323,679 2,917,662 3,152,530 3,145,663 2,886,500
<FN>
*Represents sales by Company, income from franchises and other income
(1) Includes one-time write off of Restrictive Covenant Costs and related assets
associated with Franchise operations of $1.1 million
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
Balance Sheet Data:
(In thousands, except for per share data and number of shares)
Working capital $3,248 $ 3,028 $2,201 $1,101 $652
Total assets 8,438 7,146 7,123 5,393 4,984
Long-term debt 51 606 579 - -
Stockholders' equity 3,862 2,654 3,055 2,419 2,190
Stockholders' equity per share 1.22 .91 1.05 .83 .76
</TABLE>
11
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Revenues increased by approximately $8,401,000 or 27% to
$39,390,000 as compared to $30,989,000 in the corresponding period in 1995. The
increase is primarily due to the increase in temporary staffing revenues of 32%
and recruitment advertising revenues of 42%, as compared to the corresponding
period in 1995.
Operating expenses increased approximately 25% as compared to the
corresponding period in 1995. The increase is mainly due to increased
compensation and compensation related costs associated with the increase in
revenues. Additional increases resulted from additions to the sales force as
well as expanded marketing and promotion efforts.
Interest expense decreased during 1996 due mainly to the lower
average balance on borrowings under its credit facility when compared to 1995.
Net income for the twelve month period ended December 31, 1996 was
approximately $1,138,000 or $.34 per common share as compared to a net loss of
approximately $432,000 or ($.15) per common share in the corresponding period
for the prior year. The results are primarily due to increased revenues being
offset by the increase in operating and interest expenses and an income tax
benefit as a result of a reduction in the valuation allowance for a portion
of the deferred tax asset that became realizable. Additionally in 1995, the
Company considered the value of its franchise intangibles and related assets
and determined that an impairment had occurred with respect to the carrying
amounts of those assets. In connection therewith, during 1995 the Company
wrote-off the restrictive covenant costs and related assets associated with
its franchise activities in the amount of $1,122,000.
Liquidity and Capital Resources
Working capital on December 31, 1996 was approximately $3,248,000
as compared to $3,028,000 on December 31, 1995. This increase can be attributed
mostly to revenue improvements resulting in increased receivables. The Company
has no material commitments for capital expenditures during 1997.
Management believes that the Company's credit facility, working
capital and internally generated funds are sufficient to support current
operations and any currently foreseeable increase in activities.
12
<PAGE>
Inflation
To date, the impact of inflation and changing prices on the
Company's business has been minimal. The Company charges its customers fixed
percentages of the salaries and wages of permanent and temporary employees,
which causes its fee income to increase proportionately as salary and wages
increase.
Item 7. Financial Statements and Supplementary Data
WINSTON RESOURCES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report - Ernst & Young LLP.............................................................. 14
Independent Auditors' Report - Richard A. Eisner & Company, LLP............................................... 15
Consolidated Balance Sheet - December 31, 1996................................................................ 16
Consolidated Statements of Operations - Years ended
December 31, 1996 and 1995............................................................................... 17
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1996 and 1995................................................................... 18
Consolidated Statements of Cash Flows - Years
ended December 31, 1996 and 1995......................................................................... 19
Notes to Consolidated Financial Statements.................................................................... 20
</TABLE>
13
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Winston Resources, Inc. and Subsidiaries
We have audited the consolidated balance sheet of Winston Resources, Inc. and
Subsidiaries (the "Company") as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company at
December 31, 1996, and the consolidated results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
March 6, 1997
14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Winston Resources, Inc.
New York, New York
We have audited the consolidated statements of operations, stockholders' equity
and cash flows of Winston Resources, Inc. and subsidiaries for the year ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the presentation of
pro forma net (loss), pro forma net (loss) per share and information relating to
the fair value of stock options as discussed in Note 9 to the financial
statements for the year ended December 31, 1995 which was not required to be
disclosed in accordance with Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation".
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements enumerated above present
fairly, in all material respects, the results of operations and cash flows of
Winston Resources, Inc. and subsidiaries for the year ended December 31, 1995 in
conformity with generally accepted accounting principles as then constituted.
Richard A. Eisner & Company, LLP
New York, New York
March 11, 1996
15
<PAGE>
Winston Resources, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,068,000
Accounts receivable--trade, less allowance for doubtful accounts of $109,000 (Note 4) 5,855,000
Prepaid expenses and other current assets 238,000
Securities held available-for-sale 262,000
-----------------
Total current assets 7,423,000
Fixed assets--at cost, less accumulated depreciation and amortization of $855,000
(Note 3) 311,000
Deferred tax asset (Note 6) 460,000
Other assets--security deposits and other assets 244,000
-----------------
Total assets $ 8,438,000
=================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued expenses (Note 5) $ 3,603,000
Capital lease obligations (Note 4) 54,000
Income taxes payable 518,000
-----------------
Total current liabilities 4,175,000
Deferred rent (Note 7) 350,000
Long-term portion of capital lease obligations (Note 4) 51,000
-----------------
Total liabilities 4,576,000
Commitments and contingencies (Note 7)
Stockholders' equity (Note 9):
Preferred stock--$100 par value: authorized 2,000,000 shares,
no shares issued
Common stock--$.01 par value: authorized 10,000,000 shares;
issued and outstanding 3,177,104 shares 32,000
Additional paid-in capital 4,413,000
Accumulated deficit (661,000)
Unrealized gain on securities held available-for-sale, net 78,000
-----------------
Total stockholders' equity 3,862,000
-----------------
Total liabilities and stockholders' equity $ 8,438,000
=================
</TABLE>
See accompanying notes.
16
<PAGE>
Winston Resources, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
----------------------------------------
<S> <C> <C>
Revenue:
Placement fees and related income (Note 1) $ 39,390,000 $ 30,989,000
----------------------------------------
Operating expenses:
Compensation and other benefits (Note 7) 29,414,000 23,204,000
Selling, general and administrative 8,391,000 6,925,000
Amortization of intangibles - 139,000
----------------------------------------
37,805,000 30,268,000
----------------------------------------
Write off of restrictive covenant costs and related assets
associated with franchise activities (Note 2) - 1,122,000
----------------------------------------
Income (loss) from operations 1,585,000 (401,000)
----------------------------------------
Interest expense (187,000) (248,000)
Interest and other income 52,000 217,000
----------------------------------------
(135,000) (31,000)
----------------------------------------
Income (loss) before provision for income taxes 1,450,000 (432,000)
Provision for income taxes (Note 6) 312,000 -
----------------------------------------
Net income (loss) $ 1,138,000 $ (432,000)
========================================
Net income (loss) per common share $.34 $(.15)
========================================
Weighted average number of common stock and common
stock equivalents outstanding 3,323,679 2,917,662
</TABLE>
See accompanying notes.
17
<PAGE>
=======================================================================
=======================================================================
Winston Resources, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED
$.01 PAR VALUE GAIN ON
-------------------------------- SECURITIES
NUMBER ADDITIONAL (ACCUMULATED HELD AVAILABLE
OF SHARES AMOUNT PAID-IN CAPITAL DEFICIT) FOR SALE TOTAL
---------------- --------------- ----------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance--December 31, 1994 2,915,800 $ 29,000 $ 4,393,000 $ (1,367,000) $ - $ 3,055,000
Exercise of common stock
options 5,033 - 3,000 - - 3,000
Net loss - - - (432,000) - (432,000)
Unrealized gain on
securities held
available-for-sale, net - - - - 28,000 28,000
---------- --------------- ----------------- ------------------ -------------------- -----------------
Balance--December 31, 1995 2,920,833 29,000 4,396,000 (1,799,000) 28,000 2,654,000
Exercise of common
stock options 273,060 3,000 115,000 - - 118,000
Net income - - - 1,138,000 - 1,138,000
Retirement of
treasury stock (16,789) - (98,000) - - (98,000)
Unrealized gain on
securities held
available-for-sale, net - - - - 50,000 50,000
---------- --------------- ----------------- ------------------ -------------------- -----------------
Balance--
December 31, 1996 3,177,104 $ 32,000 $ 4,413,000 $ (661,000) $78,000 $ 3,862,000
=========== =============== ================= ================== ==================== =================
</TABLE>
See accompanying notes.
18
<PAGE>
Winston Resources, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,138,000 $ (432,000)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 129,000 269,000
Deferred rent (29,000) (19,000)
Deferred loss recognized - 60,000
Write off of restrictive covenant costs and related assets - 1,122,000
Receipt of marketable securities - (163,000)
Deferred tax benefit (349,000) (111,000)
Changes in assets and liabilities:
(Increase) in accounts receivable (39,000) (1,180,000)
(Increase) decrease in prepaid expenses and other
current assets 66,000 (154,000)
(Increase) decrease in other assets (38,000) 276,000
Increase in liabilities 1,364,000 299,000
----------------------------------------
Net cash provided by (used in) operating activities 2,242,000 (33,000)
----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (87,000) (70,000)
----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment on credit facility debt (1,182,000) (23,000)
Proceeds from exercise of options 20,000 3,000
Repayment of capital leases (69,000) (26,000)
----------------------------------------
Net cash (used in) financing activities (1,231,000) (46,000)
----------------------------------------
Net increase (decrease) in cash 924,000 (149,000)
Cash and cash equivalents--beginning of year 144,000 293,000
----------------------------------------
Cash and cash equivalents--end of year $ 1,068,000 $ 144,000
========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for interest $ 176,000 $ 255,000
Cash payments for income taxes 128,000 219,000
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Capitalization of equipment pursuant to lease obligations -- 83,000
Retirement of treasury stock 98,000 --
</TABLE>
See accompanying notes.
19
<PAGE>
Winston Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BUSINESS ACTIVITY
Winston Resources, Inc. and Subsidiaries (the "Company") provide a wide
variety of temporary staffing specialties, permanent placement services,
executive search recruitment, and recruitment advertising to the
business community.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Winston Resources, Inc. and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
REVENUE RECOGNITION
Permanent placement revenue is recognized when a candidate is accepted for
employment. Provisions are made for estimated losses in realization (principally
due to applicants not remaining in employment for the guaranteed period).
Temporary placement revenue is recognized when the temporary personnel provide
the services. Nonrefundable retainer revenue is recognized according to the
terms of the search contract.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Approximately 98%
of cash at December 31, 1996 is on deposit at one financial institution.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of fixed and intangible assets are provided on the
straight-line and declining balance methods over the estimated useful lives of
the assets.
20
<PAGE>
Winston Resources, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
The Company expenses advertising costs upon the first showing of the
advertisements. Advertising expenses for the years ended
December 31, 1996 and 1995 totaled approximately $711,000 and
$548,000, respectively.
INCOME (LOSS) PER SHARE
Income (loss) per share is computed using the weighted average number of common
shares outstanding and, when dilutive, common stock equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
SECURITIES HELD AVAILABLE-FOR-SALE
The Company has classified its securities as investments available-for-sale
pursuant to Statement of Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." Accordingly, any unrealized
gain or loss on the investments, net of deferred taxes thereon, is recorded as a
separate component of equity.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current year
presentation.
21
<PAGE>
2. WRITE-OFF OF FRANCHISE INTANGIBLES AND RELATED ASSETS
Management periodically evaluates the carrying amount of its long-term assets by
estimating the future cash flows against the carrying value of these assets. In
connection therewith, during the fourth quarter of 1995, the Company wrote-off
all intangible assets associated with the purchase of franchises and certain
related assets (approximately $1,122,000).
3. FIXED ASSETS
Fixed assets consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-------------------
<S> <C> <C>
Furniture, fixtures and equipment $ 857,000 3 to 7 years
Leasehold improvements 309,000 Life of lease
------------------
1,166,000
Less accumulated depreciation and amortization 855,000
------------------
$ 311,000
==================
</TABLE>
At December 31, 1996, fixed assets include approximately $91,000, net of
accumulated depreciation, of telephone equipment, computer equipment and
software under capital leases.
4. FINANCING ARRANGEMENTS
A. CREDIT FACILITY
The Company has a secured credit facility providing for short-term advances
to a maximum of $6,000,000, based on up to 80% of eligible accounts
receivable, as defined. The Company pays interest on advances at the prime
rate (8.25% at December 31, 1996). The credit facility is collateralized by
the accounts receivable of the Company.
The Company previously had a secured credit facility that provided for
advances of $500,000 repayable on April 16, 1998 and additional short-term
advances up to a maximum of $2,000,000, both based on up to 80% of eligible
accounts receivable, as defined. The Company paid interest on advances at a
rate of 2 3/4% above the finance companies' reference rate. The credit
facility was collateralized by substantially all of the assets of the
Company and was paid in full in November 1996.
22
<PAGE>
4. FINANCING ARRANGEMENTS (CONTINUED)
B. CAPITAL LEASE OBLIGATIONS
The Company has leased telephone equipment, software and computer equipment
under capital leases which are included in fixed assets (see Note 3). The
following is a schedule of the future minimum lease payments together with
the present value of the minimum lease payments as of December 31, 1996:
Year ending December 31:
1997 $ 61,000
1998 21,000
1999 21,000
2000 17,000
-----------------
Total 120,000
Less amount representing interest
(effective rates 11% and 15%) 15,000
=================
Present value of the minimum lease payments $ 105,000
=================
Current portion of capital lease obligations $ 54,000
Long-term portion of capital lease obligations 51,000
-----------------
Total $ 105,000
=================
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
Accounts payable--trade $ 1,011,000
Accrued compensation and payroll taxes 1,457,000
Accrued commissions 833,000
Other accrued expenses 302,000
-----------------
Total $3,603,000
=================
23
<PAGE>
6. INCOME TAXES
The provisions for income taxes consists of:
YEAR ENDED DECEMBER 31
1996 1995
---------------- -----------------
Current:
Federal $535,000 $ 79,000
State and local 126,000 32,000
Deferred benefit (349,000) (111,000)
---------------- -----------------
$ 312,000 $ -
================ =================
A reconciliation of the federal statutory tax rate to the actual effective rate
is as follows:
YEAR ENDED DECEMBER 31
1996 1995
---------------- -----------------
Statutory rate 34.0% (34.0)%
State and local income taxes,
net of federal benefit 4.8 5.6
Change in valuation allowance (17.1) 16.4
Permanent differences 1.8 12.0
Other (2.0) -
---------------- -----------------
21.5% 0.0 %
================ =================
The deferred tax asset is comprised of the following at December 31, 1996:
Provision for doubtful accounts $ 44,000
Intangible assets written off 279,000
Accrued rent 140,000
Gain deferred for tax purposes (105,000)
Net operating losses for state and local tax purposes 122,000
Other 55,000
Valuation allowance (75,000)
-----------------
$ 460,000
=================
24
<PAGE>
6. INCOME TAXES (CONTINUED)
During the year ended December 31, 1996, the valuation allowance decreased by
$333,000.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space under noncancelable operating leases which
expire at various dates through 2003. These leases are subject to escalations
for increases in real estate taxes and other expenses.
The aggregate future minimum lease payments required under these leases are as
follows:
Year ending December 31:
1997 $ 603,000
1998 675,000
1999 685,000
2000 679,000
2001 647,000
Thereafter 971,000
-----------------
Total $ 4,260,000
=================
Rental expense under operating leases including escalation charges for
the years ended December 31, 1996 and 1995 approximated $700,000 and
$676,000, respectively.
Pursuant to one of the Company's leases, rent expense charged to operations
differs from rent paid because of the effect of free rent periods and scheduled
rent increases. Accordingly, the Company has recorded deferred rent payable of
$350,000 at December 31, 1996. Rent expense is calculated by allocating total
rental payments, including those attributable to scheduled rent increases, on a
straight-line basis, over the lease term.
25
<PAGE>
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has been released from a portion of its rent obligation on certain
premises which it had been subleasing through 2003 but, in the event of default
by the subleasee, it would remain liable for the balance of the rent obligation,
which at December 31, 1996 aggregated to $596,000.
EXECUTIVE EMPLOYMENT AGREEMENT
An employment agreement with the chief executive officer expiring in August 2002
provides for an annual salary of approximately $446,000 plus incentive bonuses
based on pre-tax income. In addition, the officer is entitled, under certain
circumstances, to termination benefits.
LAWSUITS
There are various lawsuits pending against the Company. In the opinion of
management, after consultation with counsel, the ultimate resolution of these
matters will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.
8. RETIREMENT PLAN
The Company has a defined contribution plan under section 401(k) of the Internal
Revenue Code ("IRC") which provides that eligible employees may make
contributions, subject to IRC limitations. The Company may choose to make
nonelective contributions to the Plan in an amount determined by the Company at
its discretion. The Company made a contribution to the Plan of $25,000 for the
year ended December 31, 1996. No contribution was made for the year ended
December 31, 1995.
9. STOCK OPTION PLANS
During 1996, the stockholders of the Company approved the 1996 Stock Plan (the
"Plan") authorizing a committee of the Board of Directors to issue to officers,
directors, key employees and consultants stock options (both incentive stock
options ("ISOs") which qualify under Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code") and nonqualified options), restricted stock and
directors options. 400,000 shares are issuable under the Plan.
26
<PAGE>
9. STOCK OPTION PLANS (CONTINUED)
In May 1990, the stockholders of the Company approved an Incentive Program (the
"Program") authorizing the issuance to officers, directors, key employees, and
certain consultants of stock options (both incentive stock options ("ISOs")
which qualify under Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code") and nonqualified options), stock appreciation rights
("SARS") (in tandem with stock options or free-standing), restricted stock and
directors' options issuable pursuant to a formula. Up to 575,000 shares are
issuable under the Program either as outright grants or upon exercise of options
or SARS awarded thereunder.
Directors of the Company who are not employees are eligible to participate
solely in the nondiscretionary directors' option portion of the Program. All
administrative powers of the Committee with respect to directors' options may be
exercised, in the discretion of the Board of Directors, by an Alternate
Committee comprised of persons not eligible to receive directors' options, one
of whom must be a director. Moreover, in no event, may the number of shares
subject to directors' options issuable to any qualified director in any year
exceed 25,000.
The selection of participants from among employees and officers and the
determination of the type and amount of awards (except as to the directors'
options) is entirely within the discretion of the Option Committee of the Board
of Directors (the "Committee"). There is no limit on the number or amount of
awards which may be granted to any one person under the Program, except that the
fair market value (determined as of the date of grant) of shares with respect to
which ISOs are first exercisable in any one year as to any participant may not
exceed $100,000.
All options granted have 5 or 10 year terms and vest and become fully
exercisable at the end of 3 years of continued employment.
Restricted stock may be awarded under the Program either at no cost to the
recipient or for such cost as specified by the grant. Unless waived in whole or
in part by the Committee, once a holder of record of restricted stock ceases to
be an employee, officer or director of the Company, all shares of restricted
stock then held and still subject to restriction will be forfeited by such
holder and reacquired by the Company.
27
<PAGE>
9. STOCK OPTION PLANS (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of options valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the company had accounted for its
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1995 and 1996,
respectively: risk-free interest rates ranging from 5.6% to 5.7% and 5.9% to
6.0%; volatility factors of the expected market price of the Company's common
stock of .71 and .75. The weighted-average expected life of the options is 3
years. Dividends are not expected in the future.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
1996 1995
--------------- -----------------
Pro forma net income (loss) $ 979,000 $ (456,000)
Pro forma net income (loss) per share $.30 $(.16)
28
<PAGE>
9. STOCK OPTION PLANS (CONTINUED)
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
EXERCISE
SHARES PRICE
--------------- ---------------------
<S> <C> <C>
Balance at January 1, 1995 424,000 $ .83
Granted 99,350 $ 1.54
Exercised (5,033) $ .51
--------------- ---------------------
Balance at December 31, 1995 (299,211
exercisable at option prices $.375 to $2.20) 518,317 $ .97
Granted 303,500 $ 2.14
Exercised (273,060) $ .43
Cancelled (5,107) $ .43
--------------- ---------------------
Balance at December 31, 1996 (137,759 exercisable at option
prices $.4375 to $2.20) 543,650 $ 1.90
=============== =====================
</TABLE>
The weighted average fair value of options granted during 1996 and 1995 is $1.07
and $.74, respectively. The exercise prices for options outstanding as of
December 31, 1996 ranged from $.4375 to $3.4375. The weighted average remaining
contractual life of those options is 7.8 years.
At December 31, 1996, 147,350 options are available for grant.
29
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by this item is incorporated herein
by reference to the material under the caption "Change in Accountants" in the
Company's 1996 Annual Report to Security Holders to be filed on or before
April 30, 1997.
PART III
Item 9. Directors and Executive Officers of the Registrant
The information required by this item is incorporated herein by
reference to the material under the caption "Election of Directors" in the
Company's definitive Proxy Statement to be filed on or before April 30, 1997
(the "1997 Proxy Statement"). Reference is also made to the information under
the caption "Executive Officers of the Registrant" contained in Part I of this
Report.
Item 10. Executive Compensation
The information required by this term is incorporated herein by
reference to the material under the caption "EXECUTIVE COMPENSATION" in the 1997
Proxy Statement.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein
by reference to the material under the caption "ELECTION OF DIRECTORS" in the
1997 Proxy Statement.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by
reference to the material under the caption "ELECTION OF DIRECTORS - Certain
Transactions" in the 1997 Proxy Statement.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
13(a). The following financial statements, financial statement
schedules and exhibits are filed as part of this Report:
13(a)1. Financial Statements
The following consolidated financial statements of Winston
Resources, Inc. and Subsidiaries are included in Part II, Item 7:
30
<PAGE>
Independent Auditors' Report - Ernst & Young LLP
Independent Auditors' Report - Richard A. Eisner & Company, LLP
Consolidated Balance Sheet - December 31, 1996
Consolidated Statements of Operations - Years ended
December 31, 1996 and 1995
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended
December 31, 1996 and 1995
Notes to Consolidated Financial Statements
13(a)2. Exhibits
<TABLE>
Exhibit No. Description
- ----------- -----------
<S> <C>
*3.1.1 Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of Delaware on April
6, 1987 [Registration Statement No. 33-14913, Exhibit 3.1]
*3.1.2 Agreement and Plan of Merger dated as of April 15, 1987, between Winston Resources, Inc. (New York) and the
Company, as filed with the Secretary of State of Delaware on April 20, 1987 [Registration Statement No. 33-14813,
Exhibit 3.2]
*3.1.3 Certificate of Amendment of Restated Certificate of Incorporation of the Company, as filed with the Secretary of
State of Delaware on June 11, 1993 [Form 10-KSB (1993)]
*3.1.4 Composite Copy of Restated Certificate of Incorporation of the Company, as amended [Form 10-K (1987), Exhibit 3.3]
* 3.2 By-laws of the Company, as amended June 11, 1993 [Form 10-KSB (1993)]
* 9 Stockholders' Voting Agreement, dated June 8, 1987, among Seymour Kugler, Alec Peters and Melvin Winograd
[Registration Statement No. 33-14913, Exhibit 9]
<FN>
- --------------------
* Incorporated by reference and not filed herewith.
</TABLE>
31
<PAGE>
<TABLE>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Amended and Restated Employment Agreement, dated January 1, 1997, between the Company and Seymour Kugler
* 10.2 Supplemental Excess Profit Sharing Plan, dated December 12, 1984 [Registration Statement No. 33-14913, Exhibit
10.3]
* 10.3 Incentive Program of the Company [Registration Statement on Form S-8 No. 33-37476, Exhibit 4]
* 10.4 Winston Resources, Inc. 1996 Stock Plan [1996 Proxy Statement, Exhibit A]
* 10.5 Agreement of Lease, dated as of August 8, 1990 (the "Lease"), between Nineteen New York Properties Limited
Partnership, and the Company, as tenant [Form 10-K (1990), Exhibit 10.11]
* 10.6 First Amendment of Lease dated as of March 1, 1992, between Nineteen New York Properties Limited Partnership and
the Company [Form 10-KSB (1992), Exhibit 10.6]
* 10.7 Second Amendment of Lease dated as of January 29, 1993, between Nineteen New York Properties Limited Partnership
and the Company [Form 10-KSB (1992), Exhibit 10.7]
* 10.8 Third Amendment of Lease dated as of February 19, 1993, between Nineteen New York Properties Limited Partnership
and the Company [Form 10-KSB (1992), Exhibit 10.8]
10.9 Fifth Amendment of Lease dated as of March 14, 1997 between 535 Fifth Avenue LLC (the successor in interest to
Nineteen New York Properties Limited Partnership) and the Company, as tenant
10.10 Secured Line of Credit Agreement dated November 4, 1996 between Winston Resources, Inc. and The Bank of New York
10.11 Promissory Note dated November 26, 1996 made by Winston Resources, Inc. in favor of The Bank of New York
<FN>
- --------------------
* Incorporated by reference and not filed herewith.
</TABLE>
32
<PAGE>
<TABLE>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.12 Security Agreement dated as of November 26, 1996 by and among Winston Resources, Inc., WIN-PAY, Inc., Winston
Professional Staffing, Inc., Winston Cosmopoliton, Inc., Roth Young Personnel Services, Inc., Winston Personnel
of Boca Raton, Inc., Winston Personnel Inc. of New Jersey, Winston Staffing Services, Inc. and The Bank of New
York
13 "Change in Accountants" section contained in the 1996 Annual Report to Security Holders of Winston Resources, Inc.
22 Subsidiaries of the Company:
Delta 10, Inc.
(a New Jersey corporation)
Winston Personnel of Boca Raton, Inc.
(a Florida corporation)
Winston Personnel, Inc. of New Jersey
(a New Jersey corporation)
Winston Professional Staffing, Inc.
(a New Jersey corporation)
Winston Staffing Services, Inc.
(a New York corporation)
WIN-PAY, Inc.
(a New York corporation)
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Richard A. Eisner & Company, LLP, independent auditors
27 Financial Data Schedule
13(b). Reports on Form 8-K. No reports on Form 8-K have been filed during the quarters ended December 31, 1996 or
March 31, 1997.
</TABLE>
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 26, 1997
WINSTON RESOURCES, INC.
By: /s/ Seymour Kugler
-----------------------------
Seymour Kugler, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature
---------
<S> <C> <C>
/s/ Seymour Kugler Chairman of the Board and President; March 26, 1997
- --------------------------------- Principal Executive Officer; Director
Seymour Kugler
/s/ Jesse Ulezalka Chief Financial Officer March 26, 1997
- ---------------------------------
Jesse Ulezalka
/s/ Reuben W. Abrams Director March 26, 1997
- ---------------------------------
Reuben W. Abrams
Director March 26, 1997
- ---------------------------------
Martin Fischer
/s/ Alan E. Wolf Director March 26, 1997
- ---------------------------------
Alan E. Wolf
/s/ Martin Wolfson Director March 26, 1997
- ---------------------------------
Martin Wolfson
/s/ Gregg Kugler Director March 26, 1997
- ---------------------------------
Gregg Kugler
/s/ Martin J. Simon Director March 26, 1997
- --------------------------------
Martin J. Simon
</TABLE>
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
<PAGE>
TABLE OF CONTENTS
ARTICLE I EMPLOYMENT AND DUTIES........................... 1
Section 1.1 General......................................... 1
Section 1.2 Required Service................................ 2
ARTICLE II TERM OF EMPLOYMENT.............................. 3
Section 2.1 Term of Employment.............................. 3
ARTICLE III COMPENSATION AND OTHER BENEFITS................. 3
Section 3.1 Compensation and Other Benefits................. 3
Section 3.2 Salary.......................................... 3
Section 3.3 Employment Benefit Plans........................ 5
Section 3.4 Support Services................................ 5
Section 3.5 Relocation...................................... 5
Section 3.6 Travel.......................................... 6
ARTICLE IV TERMINATION OF EMPLOYMENT....................... 6
Section 4.1 Termination for Cause;Resignation Without Good
Reason.......................................... 6
Section 4.2 Termination Without Cause; Resignation for
Good Reason..................................... 7
Section 4.3 Death or Disability............................. 11
ARTICLE V SECRECY AND NONCOMPETITION...................... 11
Section 5.1 Secrecy......................................... 11
Section 5.2 Intellectual Property........................... 12
Section 5.3 Non-Compete Covenant............................ 13
Section 5.4 Injunctive Relief............................... 14
ARTICLE VI ARBITRATION..................................... 14
Section 6.1 Arbitration..................................... 14
ARTICLE VII NOTICES......................................... 16
Section 7.1 Notices......................................... 16
Section 7.2 Addresses....................................... 16
<PAGE>
ARTICLE VIII MISCELLANEOUS................................... 17
Section 8.1 Obligation to Pay............................... 17
Section 8.2 Express Assumption.............................. 17
Section 8.3 Nonassignability by the Executive............... 18
Section 8.4 Entire Agreement; Binding Agreement............. 18
Section 8.5 Severability.................................... 18
Section 8.6 Amendment; Waiver............................... 19
Section 8.7 Governing Law................................... 19
Section 8.8 Supersedes Previous Agreements.................. 19
Section 8.9 Counterparts.................................... 20
Section 8.10 Headings........................................ 20
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of January 1,
1997 (the "Effective Date"), by and between Winston Resources, Inc., a Delaware
corporation (the "Corporation"), and Seymour Kugler, an individual residing at
179 Lefferts Road, Woodmere, New York 11598 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation and the Executive had previously entered
into an Employment Agreement, dated as of May 1, 1987, as amended by Amendment
dated as of March 2, 1992 (as amended, the "Prior Agreement");
WHEREAS, the Corporation and the Executive now desire to amend and
restate the Prior Agreement and the parties further intend that this Amended and
Restated Agreement shall supersede the Prior Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT AND DUTIES
SECTION 1.1 GENERAL.
<PAGE>
The Corporation hereby employs the Executive and the Executive
agrees, upon the terms and conditions herein set forth, to serve as Chairman of
the Board of Directors and Chief Executive Officer of the Corporation with the
titles of Chairman of the Board and President. In such capacity, the Executive
shall report directly to the Board of Directors of the Company (the "Board") and
shall perform such duties in respect of such positions as may be delineated in
the By-Laws of the Corporation, and such other duties, commensurate with the
Executive's titles and positions of Chairman of the Board and Chief Executive
Officer of the Corporation, as may be assigned to the Executive from time to
time by the Board. The Executive shall perform for the Corporation and any of
its subsidiaries such duties as are customarily performed by a corporate officer
having principal executive responsibility for a publicly-held corporation. If
elected or appointed, the Executive shall also serve as a director or officer of
any of the Corporation's subsidiaries or affiliated companies without further
compensation. As used in this Agreement, "Chief Executive Officer" shall mean
the most senior position in the Corporation, irrespective of title.
SECTION 1.2 REQUIRED SERVICE. During the Term hereof, the Executive
shall, unless prevented by ill health, devote his full-time working hours to his
duties hereunder. The Executive shall be responsible for setting his own hours
and performing his services at the offices of the Corporation or at such other
locations as designated by him.
2
<PAGE>
ARTICLE II
TERM OF EMPLOYMENT
SECTION 2.1 TERM OF EMPLOYMENT. The term of employment
hereunder shall commence on the Effective Date, and end on August 14, 2002
(the "Term"), unless sooner terminated as provided herein.
ARTICLE III
COMPENSATION AND OTHER BENEFITS
SECTION 3.1 COMPENSATION AND OTHER BENEFITS. Subject to the
provisions of this Agreement, the Corporation shall pay and provide the
compensation and other benefits described in this Article III to the Executive
during the Term as compensation for services rendered hereunder.
SECTION 3.2 SALARY.
(a) (i) During the fiscal year of the Corporation ending December
31, 1997, the Corporation shall pay the Executive an initial annual salary
("Base Salary") in the amount of $445,638. The annual Base Salary during each
subsequent year of the Term after such fiscal year shall be equal to the initial
Base Salary increased by the greater of (a) three (3%) percent per annum,
compounded or (b) an amount which is determined by multiplying said initial Base
Salary amount by the percentage increase, if any, of the Consumer Price Index
for all Urban Workers (New York - Northern New Jersey) (1967=100), issued by
the
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Bureau of Labor Statistics of the United States Department of Labor (the
"Index") for such subsequent year over the Index for the fiscal year ended
December 31, 1996. Base Salary shall be payable in equal, or as nearly equal as
may be practicable installments not less frequently than bi-weekly. The
Corporation shall be entitled to deduct or withhold all taxes and charges which
the Corporation may be required to deduct or withhold therefrom.
(ii) In addition to the Base Salary provided in Section 3.2(a)(i)
above, the Executive shall be paid an amount of incentive compensation (the
"Incentive Compensation") with respect to each fiscal year of the Corporation
during the Term in an amount which equals the aggregate of the following
percentages of Pre-Tax Income (as hereinafter defined): (A) 6% of Pre-Tax Income
up to $1,000,000; (B) 10% of Pre-Tax Income over $1,000,000 up to $2,000,000;
(C) 20% of Pre-Tax Income over $2,000,000 up to $3,200,000; and (D) 6% of
Pre-Tax Income over $3,200,000, without limitation. For purposes of this
paragraph, "Pre-Tax Income" shall mean the consolidated income before income
taxes and extraordinary charges of the Corporation and its subsidiaries in any
fiscal year (computed without giving effect to the accrual or payment of the
incentive amount described in this paragraph. For purposes of this paragraph,
Pre-Tax Income shall be computed in accordance with generally accepted
accounting principles on a basis consistent with the audited consolidated
financial statements of the Corporation and its subsidiaries for such fiscal
year as distributed to the Corporation's stockholders and, except for the
exclusion of the incentive amount described in this paragraph, after deduction
of all proper operating costs and expenses, including the Base Salary paid to
the Executive during such fiscal year pursuant to this Section 3.2 and any other
compensation, benefits or bonuses paid to the Executive for, or accrued in his
behalf
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with respect to, such fiscal year. The Incentive Compensation determined
in accordance with this paragraph shall be computed and paid to the Executive
not later than the 90th day following the end of each fiscal year in a lump sum
or, at the election of the Executive, in two (2) or more installments on such
dates, not later than the end of the year of determination, and in such amounts
as the Executive may reasonably request.
SECTION 3.3 EMPLOYMENT BENEFIT PLANS. At all times during the
Term, the Executive shall be provided the opportunity to participate in any
other bonus, stock option, incentive compensation, deferred compensation, group
insurance plan, or other plan and program, including pension and welfare plans,
programs and arrangements (the "Plans") that are generally made available to
executives of the Corporation, or as may be deemed appropriate by the
Compensation Committee of the Board. The Executive shall also be entitled to
receive any other benefits for which he is eligible and which the Corporation
may provide for him or for its employees generally.
SECTION 3.4 SUPPORT SERVICES. At all times during the Term, the
Corporation shall provide the Executive with the use of an automobile of his
selection, office space and support services, including secretarial services,
equivalent to those afforded to the Executive immediately prior to the Effective
Date.
SECTION 3.5 RELOCATION. The Corporation shall not, without the
Executive's consent, relocate the Executive's principal place of business to a
location beyond twenty (20) miles from the location of the Executive's principal
place of business immediately prior to the Effective Date.
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SECTION 3.6 TRAVEL. The Corporation shall not, without the
Executive's consent, require the Executive to travel on the Corporation's
business to an extent materially inconsistent with the Corporation's business
travel requirements as applied to the Executive immediately prior to the
Effective Date. The Corporation shall pay or reimburse the Executive for all
reasonable travel and other expenses incurred by the Executive in connection
with the performance of his services under this Agreement, upon presentation of
expense statements, vouchers, and other supporting documentation in such form
and containing such information as the Corporation may from time to time
reasonably request.
ARTICLE 4.
TERMINATION OF EMPLOYMENT
SECTION 4.1 TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD
REASON.
(A) If, prior to the expiration of the Term, the Executive's
employment is terminated by the Corporation for Cause, as defined in Section
4.1(b) hereof, or if the Executive resigns from his employment hereunder without
Good Reason, as defined in Section 4.2(c) hereof, the Executive shall not be
eligible to receive Base Salary under Section 3.2(a) hereof, or to participate
in any Plans under Section 3.4, hereof with respect to future periods after the
date of such termination or resignation, except for the right to receive
benefits which have become vested under any Plan in accordance with the terms of
such Plan. In addition, the Executive shall not be eligible to receive any
Incentive Compensation described in Section 3.2(b) hereof for the Corporation's
fiscal year during which the date of termination or resignation occurs and any
later years.
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(B) Termination for "Cause" shall mean termination of the
Executive's employment with the Corporation by the Board because of (i)
the commission by the Executive of an act of fraud or embezzlement against
the Corporation or any of its subsidiaries, or (2) a felony conviction of
the Executive.
(C) The date of termination of employment by the Corporation
under this Section 4.1 shall be the date specified in a written notice of
termination (which date shall be no earlier than the date of furnishing such
notice), or if no such date is specified therein, the date of receipt by the
Executive of such written notice of termination. The date of resignation under
this Section 4.1 shall be two (2) weeks after receipt by the Corporation of
written notice of resignation, or if no such notice is provided, the date the
Executive ceases to perform his duties hereunder.
SECTION 4.2 TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD
REASON.
(A) Subject to the provisions of Section 4.2(e) hereof, if,
prior to the expiration of the Term, the Executive's employment is terminated by
the Corporation without Cause, and other than as a result of his death or
Disability, or if the Executive resigns from his employment for Good Reason, the
Executive shall be entitled to receive as severance benefits (the "Severance
Benefits") the following: (I) his Base Salary at the annual rate then in
effect immediately prior to such termination or resignation or, as the case may
be, his compensation under Section 3.2(b) through the effective date of such
termination or resignation; (II) the Incentive Compensation the Executive would
have earned, prorated to the effective date of such termination or resignation;
(III) continued coverage for the Term under the Corporation's health and
insurance plans applicable to the Executive immediately prior to
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such termination or resignation or, if any such plan does not permit continued
coverage of the Executive, the Corporation shall arrange to provide a benefit
substantially similar to and no less favorable than the benefits he was entitled
to under such plan; and (IV) a lump sum severance payment equal to 2.99 times
the Executive's "Base Amount," as such term is defined in Section 280G of the
Internal Revenue Code (the "Code") (subject to any applicable payroll or other
taxes and charges required to be withheld computed at the rate for supplemental
payments) provided that in no event shall "Total Payments" (as hereinafter
defined) exceed 2.99 times the Executive's Base Amount. The Executive's Base
Amount shall be determined in accordance with temporary or final regulations
promulgated under section 280G of the Code then in effect, if any. In the
absence of such regulations, if the Executive were not employed by the
Corporation (or the corporation or partnership affiliated with the Corporation
(an "Affiliate") within the meaning of Section 1504 of the Code or a predecessor
of the Corporation) during the entire five calendar years (the "Base Period")
preceding the calendar year in which a Change in Control of the Corporation
occurred, the Executive's average annual compensation for the purposes of such
determination shall be the lesser of (1) the average of the Executive's annual
compensation for the complete calendar years during the Base Period during which
the Executive was so employed or (2) the average of the Executive's annual
compensation for both complete and partial calendar years during the Base Period
during which the Executive was so employed, determined by any compensation
(other than nonrecurring items) includable in the Executive's gross income for
any partial calendar year or (3) the annual average of the Executive's total
compensation for the Base Period during which the Executive was so employed,
determined by dividing such
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total compensation by the number of whole and
fractional years included in the Base Period. Compensation payable to the
Executive by the Corporation or any Affiliate or predecessor of the Corporation
shall include every type and form of compensation includable in the Executive's
gross income in respect of the Executive's employment by the Corporation or any
Affiliate or predecessor of the Corporation, including compensation income
recognized as a result of the Executive's exercise of stock options or sale of
the stocks acquired, except to the extent otherwise provided in temporary or
final regulations promulgated under Section 280G of the Code. For purposes of
this paragraph only a "change in control of the Corporation" shall have the
meaning set forth in Section 280G of the Code and any temporary or final
regulations promulgated thereunder, subject to the limitation stated in
Subsection 5(c) below.
(B) The date of termination of employment by the Corporation
under this Section 4.2 shall be the date specified in a written notice of
termination to the Executive (which date shall be no earlier than the date of
furnishing such notice) or, if no such date is specified therein, the date on
which such notice is given to the Executive. The date of resignation under this
Section 4.2 shall be two weeks after receipt by the Corporation of the written
notice of resignation.
(C) Resignation for "Good Reason" shall mean the Executive's
voluntary termination of employment with the Corporation because of (I) a
reduction, without the Executive's written consent, in the Executive's current
base or aggregate compensation, unless such reduction is generally applicable to
all executives of the Corporation, (II) a reduction without the
Executive's consent, in the Executive's then current responsibilities as
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set forth in Section 1.1 hereof, (III) an election by the Executive to resign
within two years following a Change in Control of the Corporation (as defined in
Section 4.2(f)), or (IV) such other events of hardship as the Board may
determine on a case-by-case basis.
(D) For purposes of this Agreement, "Disability" shall mean
that, as a result of the Executive's incapacity due to physical or mental
illness, the Executive has been unable to substantially perform his normal
duties with the Corporation for six (6) consecutive months and within thirty
(30) days after Notice of Termination is given to the Executive, he has not been
able to resume substantial performance of his normal duties. Any question as to
the existence of Disability shall be determined by a qualified independent
physician selected by the Executive (or, if he is unable to make such selection,
such selection shall be made by any adult member of the Executive's family) and
approved by the Corporation. The written determination of such physician shall
be final and conclusive for purposes of this Amendment.
(E) In the event that the Severance Benefits would not be
deductible in whole or in part in the calculation of Federal income tax owed by
the Corporation or any of its affiliates, or any other person or entity making
such payment or providing such benefit by reason of Section 280G of the Code,
the Severance Benefits shall be reduced until no portion of the Severance
Benefits is not deductible by reason of Section 280G of the Code.
(F) For purposes of Section 4.2(c), "Change in Control" shall
mean (i) the acquisition by a Third Party (as hereinafter defined) of
beneficial ownership of more than fifty percent (50%) of the issued and
outstanding voting securities or, by proxy or otherwise, fifty percent (50%) of
the combined voting power of the Corporation, or (ii) the acquisition
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of all or substantially all of the assets of the Corporation by a Third Party by
purchase, merger, consolidation or other form of transaction. For purposes of
this Section 4.2(f), "Third Party" shall mean any person or group other than the
Corporation and its affiliates; "person" and "beneficial ownership" shall have
the meanings assigned to such terms under Section 13(d) of the Securities
Exchange Act of 1934, as amended; and an "affiliate" of any first person shall
mean a second person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first person.
SECTION 4.3 DEATH OR DISABILITY. If the Executive dies or
suffers Disability prior to the expiration of the Term, for a period of twelve
months thereafter, his Base Salary and Incentive Compensation (determined as the
Incentive Compensation he would have earned had his employment continued) under
Section 3.2(a) and compensation under Section 3.2(b) will be prorated for said
period and paid to him or his beneficiary or estate.
ARTICLE V
SECRECY
SECTION 5.1 SECRECY. The Executive recognizes that the services to
be performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder and his past employment with the Corporation,
he may acquire or has acquired confidential information and trade secrets
concerning the operations of the Corporation, or its subsidiaries or affiliates,
the use or disclosure of which could cause the Corporation
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substantial loss and
damages which could not be readily calculated, and for which no remedy at law
would be adequate. Accordingly, the Executive covenants and agrees with the
Corporation that he will not at any time, except in performance of the
Executive's obligations to the Corporation hereunder, or with the prior written
consent of the Board, directly or indirectly, disclose any secret or
confidential information that he may learn or has learned by reason of his
association with the Corporation, or any predecessors to the business of the
Corporation, or use any such information to the detriment of the Corporation or
any of its subsidiaries or affiliates. The term "confidential information"
includes, without limitation, information not previously disclosed to the public
or to the trade by the Corporation's management with respect to the
Corporation's or any of its subsidiaries' or affiliates', business plans,
prospects and opportunities, the identity of clients, suppliers or customers,
information regarding operational strengths and weaknesses, trade secrets,
know-how and other intellectual property, systems, procedures, manuals,
confidential reports, price lists, marketing plans or strategies, and financial
information. The Executive understands and agrees that the rights and
obligations set forth in this Section 5.1 are perpetual and, in any case, shall
extend beyond the Executive's employment hereunder.
SECTION 5.2 INTELLECTUAL PROPERTY. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Corporation. All business records, papers and documents kept or made by the
Executive relating to the business of the Corporation shall be and remain the
property of the Corporation. Upon the termination of his employment with the
Corporation, or upon the request of the Corporation at any time, the Executive
shall promptly deliver to the Corporation, and shall not, without the consent of
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the Board (which consent shall not be unreasonably withheld), retain copies of,
any written materials not previously made available to the public, records and
documents made by the Executive or coming into his possession concerning the
business or affairs of the Corporation. The Executive may retain records
relating exclusively to the terms and conditions of his employment relationship
with the Corporation. The Executive understands and agrees that the rights and
obligations set forth in this Section 5.2 are perpetual and, in any case, shall
extend beyond the Executive's employment hereunder.
SECTION 5.3 NON-COMPETE COVENANT. During the Term of his employment
by the Corporation, and, in the event that he resigns or departs from its employ
without the approval of its Board of Directors or is discharged for "cause" (as
defined in Section 4.1(b) hereof), the Executive shall not engage, directly or
indirectly, as proprietor, partner, shareholder, director, officer, employee,
agent, consultant, or in any other capacity or manner whatsoever, in any
business activity competitive with the business of the Corporation and any
subsidiary of the Corporation, as constituted during his employment and on the
date of such resignation, departure or discharge (i) in the market area of the
Corporation and any such subsidiary as constituted on the date of his
resignation, departure or discharge for a period of three (3) years after such
date, and (ii) outside of such market area for a period of two (2) years after
such date; provided, that nothing contained in this Section 5.3 shall prevent
the Executive from purchasing or causing or permitting to be purchased for his
direct or indirect benefit securities of any corporation whose securities are
regularly traded on any national securities exchange or in the over-the-counter
market so long as such purchases shall not result in the direct or indirect
beneficial ownership by the
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Executive, at any time while the foregoing
restrictions remain in effect, of more than one percent (1%) of any outstanding
class of equity securities of any corporation engaged, directly or through
subsidiaries, in any business activities competitive with that carried on by the
Corporation.
SECTION 5.4 INJUNCTIVE RELIEF. Without intending to limit the
remedies available to the Corporation, the Executive acknowledges that a breach
of any of the covenants contained in this Article V may result in material
irreparable injury to the Corporation for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of such a breach or threat thereof, the Corporation shall
be entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining the Executive from engaging in activates
prohibited by this Article V, or such other relief as may be required to
specifically enforce any of the covenants in this Article V.
ARTICLE VI
ARBITRATION
SECTION 6.1 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, including, but not limited to, any claim relating to
the validity, interpretation, enforceability or breach of this Agreement, or any
claim or controversy arising out of the employment relationship or the
commencement or termination of that relationship, including, but not limited to,
any claim for breach of covenant, breach of implied covenant, wrongful
termination, constructive discharge or intentional infliction of
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emotional distress, which is not settled by agreement between the parties,
shall be settled by arbitration in New York, New York, before a panel of three
arbitrators, one to be selected by the Corporation, one by the Executive and the
other by the two persons so selected, all in accordance with the rules of the
American Arbitration Association then in effect; provided, however, that the
Corporation shall nevertheless be entitled to seek relief under Article V above
in accordance with Section 5.3 thereof. In consideration of the parties'
agreement to submit to arbitration disputes with regard to this Agreement and
with regard to any alleged tort, contract or other claim arising out of the
employment relationship, and in consideration of the anticipated expedition and
minimization of expense of this arbitration remedy, each party agrees that the
arbitration provisions of this Agreement shall provide it with the exclusive
remedy, except as provided in the preceding sentence, and each party expressly
waives any right it may have to seek redress in any other form except as
provided herein. The parties further agree that the arbitrators acting hereunder
shall be empowered to assess no remedy other than payment of compensatory
damages or an order (including temporary, preliminary of permanent injunctive
relief) enforcing the provisions of Article V above. The expenses of the
arbitration proceeding plus the reasonable attorneys fees and disbursements
incurred by the Executive in connection therewith shall be paid by the
Corporation. Any decision or order of the majority of arbitrators shall be
binding upon the parties hereto and judgment thereon may be entered in the
Supreme Court of the State of New York or any other court having jurisdiction.
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ARTICLE VII
NOTICES
SECTION 7.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if and when (A) delivered
personally, or (B) mailed by United States registered or certified mail (return
receipt requested), (C) sent by nationally recognized overnight courier system,
or (D) sent by telecopier transmission. Any notice by telecopier shall be
followed within five (5) days by written notice, as set forth in any of items
(a) through (c) above.
SECTION 7.2 ADDRESSES.
(A) Any notice given to the Corporation shall be addressed to:
Winston Resources, Inc.
535 Fifth Avenue
New York, NY 10017
Attention: David Silver, Secretary
(B) Any notice given to the Executive shall be addressed to:
Seymour Kugler
179 Lefferts Road
Woodmere, New York 11598
With a copy to:
Newman Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022-4775
Facsimile No.: (212) 371-1084
Attention: Stuart B. Newman, Esq.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 OBLIGATION TO PAY. The Corporation's obligation to pay
the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Corporation may have against the
Executive or anyone else. All amounts payable by the Corporation hereunder shall
be paid without notice or demand. Except as expressly provided herein, the
Corporation waives all rights it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement
in whole or in part. Except as otherwise provided herein, each and every payment
made hereunder by the Corporation shall be final and the Corporation will not
seek to recover for any reason all or part of such payment from the Executive or
any person entitled thereto. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment, and if Executive obtains such other employment, any compensation
earned by Executive pursuant thereto shall not be applied to mitigate any
payment made to the Executive pursuant to this Agreement except to the extent
specifically provided in Section 4.2(a).
SECTION 8.2. EXPRESS ASSUMPTION. The Corporation shall require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation, by written agreement, to assume expressly and agree to perform this
Agreement in the same manner and to the same
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extent that the Corporation would
be required to perform it if no such succession had taken place. As used in this
Agreement, the term "Corporation" shall mean the Corporation as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement required by this Section 8.2 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
SECTION 8.3 NONASSIGNABILITY BY THE EXECUTIVE. Neither this
Agreement nor any right, duty, obligation or interest hereunder shall be
assignable or delegable by the Executive without the Corporation's prior written
consent; provided, however, that nothing in this paragraph shall preclude the
Executive from designating any of his beneficiaries to receive any benefits
payable hereunder upon his death, or the executors, administrators, or other
legal representatives from assigning any rights hereunder to the person or
persons entitled thereto.
SECTION 8.4 ENTIRE AGREEMENT; BINDING AGREEMENT. This
Agreement shall constitute the entire agreement between the Executive and the
Corporation concerning the Executive's employment by the Corporation. This
Agreement shall be binding upon, and inure to the benefit of, the parties
hereto, any successors to or assigns of the Corporation and the Executive's
heirs and the personal representatives of the Executive's heirs and the personal
representatives of the Executive's estate.
SECTION 8.5 SEVERABILITY. If the final determination of a court of
competent jurisdiction declares, after the expiration of the time within which
judicial review (if permitted) of such determination may be perfected, that any
term or provision herein is invalid or unenforceable, (A) the remaining terms
and provisions hereof shall be unimpaired,
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and (B) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision. Any provision in this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof in such jurisdiction, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8.6 AMENDMENT; WAIVER. No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing, signed by the Executive and an authorized officer of
the Corporation. No waiver by either party hereto at any time of any breach by
the other party hereto of compliance with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of any
similar or dissimilar provision or condition at such same or at any prior or
subsequent time.
SECTION 8.7 GOVERNING LAW. All matters effecting this Agreement,
including the validity thereof, are to be governed by, interpreted and construed
in accordance with the laws of the State of New York without regard to conflicts
of law provisions.
SECTION 8.8 SUPERSEDES PREVIOUS AGREEMENTS. This Agreement
supersedes all prior or contemporaneous negotiations, commitments, agreements
and writings with respect to the subject matter hereof (including the Prior
Agreement), all such other negotiations, commitments, agreements and writings
will have no further force or effect, and the parties to
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any such other
negotiations, commitment, agreement or writing will have no further rights or
obligations thereunder. However, this Amendment is in addition to and not in
lieu of any other plan providing for payments to or benefits for the Executive.
SECTION 8.9 COUNTERPARTS. This Agreement may be executed by any
of the parties hereto in counterpart, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one an the same
instrument.
SECTION 8.10 HEADINGS. The headings of paragraphs herein are
included solely for convenience of reference and shall not control the meaning
of interpretation of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Corporation has caused the Agreement to be
signed by its officer pursuant to the authority of its Board of Directors, and
the Executive has executed this Agreement as of the day and year first written
above.
WINSTON RESOURCES, INC.
By:_________________________
Name:____________________
Title:___________________
----------------------------
Executive
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EX-10.9
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EXECUTION ORIGINAL
FIFTH AMENDMENT OF LEASE
THIS FIFTH AMENDMENT OF LEASE (this "Amendment") dated as of the 13th
day of March, 1997, between 535 FIFTH AVENUE LLC, a New York limited liability
company with its office c/o Axiom Real Estate Management, Inc., 545 Fifth
Avenue, New York, New York 10017 ("Landlord") and WINSTON RESOURCES, INC., a
Delaware corporation with its office at 535 Fifth Avenue, New York, New York
10017 ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord or Landlord's predecessor-in-interest, Nineteen New
York Properties Limited Partnership, and Tenant have heretofore entered into an
Agreement of Lease dated as of August 8, 1990, as amended by a First Amendment
of Lease dated as of March 1, 1992, a Second Amendment of Lease dated as of
January 29, 1993, a Third Amendment of Lease dated as of February 19, 1993, a
Fourth Amendment of Lease dated as of April 1, 1994, a letter agreement dated
June 14, 1994, a Storage Space Agreement dated March 29, 1995 and a Storage
Space Agreement dated as of May 28, 1996 (collectively, the "Lease"), pursuant
to which Landlord leased to Tenant and Tenant did hire from Landlord the entire
seventh (7th) floor (the "Seventh Floor Premises"), a portion of the eighth
(8th) floor (the "Existing Eighth Floor Premises") and certain basement and
sub-basement storage space located in the building known as 535 Fifth Avenue,
New York, New York (the "Building"), upon and subject to all of the terms,
covenants and conditions as are more particularly described in the Lease;
WHEREAS, the Existing Eighth Floor Premises was leased by Landlord to
Tenant for a term expiring on February 28, 1997 (the "Existing Eighth Floor
Expiration Date") and Tenant desires to lease from Landlord other space on the
eighth (8th) floor of the Building in substitution thereof and remove its
business operations from the Existing Eighth Floor Premises to such other eighth
(8th) floor premises; and
WHEREAS, the parties hereto desire to modify the Lease in certain
respects to provide for the inclusion therein of such other eighth (8th) floor
space, to be demised to Tenant upon such terms, provisions and conditions as are
more particularly hereinafter set forth.
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NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Defined Terms. All capitalized terms contained in this
Amendment which are not otherwise defined herein shall, for the purposes
hereof, have the same meanings ascribed to them in the Lease.
2. New Eighth Floor Premises. Effective as of the date of the
mutual execution and delivery of this Amendment by the parties hereto (the
"Adjustment Date") and for the remainder of the Term of the Lease there shall
be added to and included in the Premises the following additional space in the
Building, to wit:
A portion of the eighth (8th) floor of the Building
substantially as shown hatched on the floor plan annexed
hereto as Exhibit 1 and made a part hereof (the "New Eighth
Floor Premises"),
so that the term "Premises" as defined in the Lease shall mean collectively, the
Seventh Floor Premises, the New Eighth Floor Premises and, up to and including
the Existing Eighth Floor Expiration Date (as extended pursuant to the terms
hereof), the Existing Eighth Floor Premises. Landlord does hereby lease to
Tenant, and Tenant does hereby hire from Landlord, the New Eighth Floor Premises
subject and subordinate to all superior leases and superior mortgages as
provided in the Lease and upon and subject to all the covenants, agreements,
terms and conditions of the Lease, except to the extent that they are
inappropriate or inapplicable to the New Eighth Floor Premises or are
supplemented by this Amendment.
3. Rent.
1. Effective as of the Adjustment Date, paragraph (iii) of
subsection B of Article 1 of the Lease shall be deemed modified by inserting the
following as subparagraph (k) at the end thereof:
"(k) with respect to the New Eighth Floor Premises,
for the period from the Adjustment Date through and
including the Expiration Date, $170,221.00 per annum,
payable in equal monthly installments of $14,185.08
each."
(b) Notwithstanding anything to the contrary hereinabove set
forth, provided the Lease is in full force and effect and Tenant is not in
material default thereunder (beyond the giving of notice and the expiration of
any applicable grace periods), Tenant shall be entitled to a credit against the
Rent payable with respect to the New Eighth Floor Premises only (exclusive of
the Electrical Inclusion Factor
2
<PAGE>
payable with respect to the New Eighth Floor
Premises) for the period commencing on the Adjustment Date and ending on the
earlier to occur of (i) the six (6) month anniversary of the Adjustment Date or
(ii) the second (2nd) month anniversary of the date Tenant, or anyone claiming
under or through Tenant, first occupies the New Eighth Floor Premises for
business.
(c) It is expressly understood and agreed by the parties hereto
that the Rent (inclusive of the Electrical Inclusion Factor) set forth in
subparagraphs (g) - (i) of paragraph (iii) of subsection B of Article 1 of the
Lease, as restated below, shall be deemed payable with respect to the Seventh
Floor Premises only:
"(g) for the period
commencing August 1, 1996 through July 31,
1998, Three Hundred Ninety-Nine Thousand Two
Hundred Thirty-One and 38/100 ($399,231.38)
Dollars per annum, payable in equal monthly
installments of Thirty-Three Thousand Two
Hundred Sixty-Nine and 28/100 ($33,269.28)
Dollars each;
(h) for the period
commencing August 1, 1998 through July 31,
2000, Four Hundred Twelve Thousand Seven
Hundred Thirteen and 78/100 ($412,713.78)
Dollars per annum, payable in equal monthly
installments of Thirty-Four Thousand Three
Hundred Ninety-Two and 82/100 ($34,392.82)
Dollars each; and
(i) for the period
commencing August 1, 2000 through the
Expiration Date, Four Hundred Thirty-Nine
Thousand Six Hundred Eighty and 38/100
($439,680.38) Dollars per annum, payable in
equal monthly installments of Thirty-Six
Thousand Six Hundred Forty and 03/100
($36,640.03) Dollars
each;".
(d) It is expressly understood and agreed by the parties
hereto that the Rent (inclusive of the Electrical Inclusion Factor) set forth in
subparagraph (j) of paragraph (iii) of subsection B of Article 1 of the Lease,
as amended and restated below, shall be deemed payable with respect to the
Existing Eighth Floor Premises only:
"(j) with respect to the Existing Eighth Floor
Premises, for the period from July 1, 1993 through and
including the Relocation Date (as hereinafter defined),
Fifty-Nine Thousand Two Hundred Thirty-Two and 00/100
($59,232.00) Dollars per annum, payable in equal monthly
installments of Four Thousand Nine Hundred Thirty-Six and
3
<PAGE>
00/100 ($4,936.00) Dollars each;".
4. Escalations.
(a) Separate computations of the escalations in the Rent under
Article 28 of the Lease shall be made with respect to each of the Seventh Floor
Premises, the Existing Eighth Floor Premises and the New Eighth Floor Premises.
(b) For the purposes of such computation as the same respects
the New Eighth Floor Premises, subsection B of Article 1 of the Lease shall be
deemed amended as of the Adjustment Date by inserting the following definitions,
which shall be applicable to the New Eighth Floor Premises only:
"(xx) 'New Eighth Floor Premises Base Tax Year' shall
mean the Tax Year 1997/1998.
(xxi) 'Tenant's New Eighth Floor Premises Proportionate
Share' shall mean two and one-tenth percent (2.1%),
which proportionate share was computed by dividing
the number of rentable square feet deemed to be in
the New Eighth Floor Premises by 265,646, which is
the number of rentable square feet deemed to be in
the Building.
(xxii) 'New Eighth Floor Premises Base Labor Year' shall mean
the calendar year 1997.
(xxiii) 'New Eighth Floor Premises Base Energy Year' shall
mean the calendar year 1997.
(xiv) 'New Eighth Floor Premises Labor Rate Factor' shall
mean 5,491.
(xxv) 'New Eighth Floor Premises Labor Rate Multiple' shall
mean one (1)."
(c) It is expressly understood and agreed by the parties hereto
that the definitions set forth in paragraphs (iv), (vi), (vii), (viii), (ix),
(x), (xi) and (xii) of subsection B of Article 1 of the Lease shall be
applicable with respect to the Seventh Floor Premises only and that the
definitions set forth in paragraphs (xiv) through (xix) of subsection B of
Article 1 of the Lease shall be applicable with respect to the Existing Eighth
Floor Premises only. In addition, Landlord and Tenant expressly agree and
acknowledge that the terms, conditions and provisions of Article 40 of the Lease
shall be deemed to be inapplicable with respect to the
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<PAGE>
New Eighth Floor Premises.
5. Electricity.
(a) Landlord shall redistribute electrical energy in amounts
sufficient to service all of Tenant's electrical needs within the New Eighth
Floor Premises, including the air-cooling units located therein, as specified in
the Engineering Plans (as hereinafter defined). The provisions of subsection H
of Article 29 of the Lease shall be applicable with respect to the New Eighth
Floor Premises. In applying the terms, conditions and provisions of such
subsection to the New Eighth Floor Premises, the term "Electrical Inclusion
Factor" shall be deemed to mean, as the same respects the New Eighth Floor
Premises, $16,473.00 per annum. Notwithstanding the provisions of Article 29 of
the Lease to the contrary, Landlord agrees that it shall not increase the
Electrical Inclusion Factor for the New Eighth Floor Premises during the twelve
(12) month period immediately following the Adjustment Date.
6. Heating. Landlord shall furnish adequate heat to the New Eighth
Floor Premises on business days from 8:00 A.M. to 6:00 P.M. as and when
required by law.
7. Second Additional Security Deposit. Tenant shall deposit with
Landlord on the date of the execution and delivery of this Amendment by Tenant,
the amount of $18,827.22 in cash (the "Second Additional Security Deposit") as
additional security for the faithful performance and observance by Tenant of the
terms, conditions and provisions of the Lease, including, without limitation,
the surrender of possession of the Premises to Landlord as provided therein. The
Second Additional Security Deposit shall be added to and held as part of the
Security Deposit subject to and in accordance with the provisions of paragraph 6
of the Second Amendment of Lease. Notwithstanding the provisions of paragraph 6
of the Third Amendment of Lease to the contrary, Tenant agrees that Landlord
shall continue to hold the Additional Security Deposit made by Tenant with
respect to the Existing Eighth Floor Premises following the surrender of such
space to Landlord, which shall be held and applied in accordance with paragraph
6 of the Second Amendment of Lease.
8. Condition of the New Eighth Floor Premises. Tenant acknowledges that
it has examined the New Eighth Floor Premises and except for the work to be
performed by Landlord in accordance with Schedule A annexed hereto and made a
part hereof, accepts the New Eighth Floor Premises in its condition and state of
repair existing as of the date of this Amendment and further agrees that
Landlord shall have no other obligation to perform any work or make any
installations in order to prepare the New Eighth Floor Premises for Tenant's
occupancy. Landlord
5
<PAGE>
hereby represents that as of the date hereof, Landlord is
not in receipt of written notice from any governmental authority that the New
Eighth Floor Premises are in violation of law. The New Eighth Floor Premises
shall be prepared by Tenant for Tenant's occupancy in accordance with Schedules
B, C and D annexed hereto and made a part hereof and in accordance with all
other terms, conditions and provisions contained in the Lease as modified
hereby.
9. Extension of the Existing Eighth Floor Premises Term.
Notwithstanding the provisions of the Lease to the contrary, effective as of the
Adjustment Date, the Existing Eighth Floor Premises Expiration Date shall be
extended from February 28, 1997 to the date on which Tenant relocates its
business operations from the Existing Eighth Floor Premises to the New Eighth
Floor Premises in accordance with paragraph 10 of this Amendment (the
"Relocation Date"). For the period from March 1, 1997 through the Relocation
Date or earlier termination of the Lease, Tenant shall continue to pay the Rent
as shall have been payable by Tenant for the Existing Eighth Floor Premises
during the month of February, 1997 and shall continue to pay all items of
additional rent or other escalation payments (with all base years as presently
contained in the Lease) as presently provided in the Lease, pro-rated through
the Relocation Date or such earlier date that the Lease may be terminated
pursuant to law or under the Lease.
10. Relocation to New Eighth Floor Premises. Within fifteen (15) days
following the date that Tenant's Initial Alteration to the New Eighth Floor
Premises is substantially completed, Tenant shall move its business operations
conducted within the Existing Eighth Floor Premises to the New Eighth Floor
Premises at Tenant's expense (including, without limitation, the relocation of
all of Tenant's furniture, fixtures, equipment and other personal property) and
upon failure of Tenant to so move to the New Eighth Floor Premises, Landlord
may, as Tenant's agent, remove Tenant from the Existing Eight Floor Premises to
the New Eighth Floor Premises.
11. Release. Provided and upon the condition Tenant relocates from the
Existing Eighth Floor Premises and surrenders possession thereof in the
condition required under the Lease (as modified hereby), effective as of the
Relocation Date, Tenant and Landlord shall be deemed to have mutually released
each other, and their respective successors and assigns of and from any and all
claims, damages, obligations, liabilities, actions and causes of action, of
every kind and nature whatsoever arising in connection with the Existing Eighth
Floor Premises, except that nothing herein contained shall be deemed to
constitute a release or discharge of Tenant with respect to (a) any obligation
under the Lease with respect to the Existing Eighth Floor Premises which may
arise after such release but which arises solely from matters occurring prior
thereto, (b) any uncured defaults by Tenant which exist on the date of such
release, (c) all third
6
<PAGE>
party claims in tort relating to matters arising during
the Term of the Lease, (d) all Rent, additional rent and all other amounts
payable with respect to the Existing Eighth Floor Premises which accrue prior to
the effective date of such release which are not then ascertainable or billed.
12. Brokerage. Landlord and Tenant each covenant, represent and warrant
to the other that it neither consulted nor has had any dealings or
communications with any broker or agent with regard to the New Eighth Floor
Premises or this Amendment other than Newmark & Company Real Estate, Inc. and
Henry F. Kessler Company, Inc. (collectively, the "Broker"). Landlord shall pay
the Broker a commission in connection with the transactions contemplated by this
Amendment pursuant to a separate agreement between Landlord and the Broker.
Landlord and Tenant each agree to indemnify, defend and save the other harmless
from and against all cost, expense (including attorney's fees and disbursements)
or liability for any compensation, commissions or charges claimed by any broker
or agent other than the Broker with whom such party has dealt in connection with
the New Eighth Floor Premises or this Amendment. The provisions of this
paragraph 12 shall survive the expiration or earlier termination of the Lease.
13. Non-Disturbance Request. Landlord shall request a "non-disturbance
agreement" for the benefit of Tenant, from the holder of the existing first
mortgage on the Building with respect to the New Eighth Floor Premises and this
Amendment, but the failure to obtain such agreement shall not affect the
validity of this Amendment or the Lease and shall not give rise to any liability
on the part of Landlord.
14. Miscellaneous.
(a) Except as modified by this Amendment, the Lease and all
covenants, agreements, terms and conditions thereof shall remain in full force
and effect and are hereby in all respects ratified and confirmed. Tenant hereby
confirms that Landlord is not in default under any provisions of the Lease, that
there are no presently existing claims, counterclaims or defenses with respect
to the Lease and, to the extent any such claims, counterclaims and/or defenses
may exist or may have existed, Tenant hereby agrees to waive the same.
(b) The covenants, agreements, terms and conditions contained
in this Amendment shall bind and inure to the benefit of the parties hereto and,
except as otherwise provided in the Lease as hereby supplemented, their
respective successors and assigns.
7
<PAGE>
3. This Amendment may not be changed orally but only
by a writing signed by the party against whom enforcement thereof is sought.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
535 FIFTH AVENUE LLC
By: Axiom Real Estate Management, Inc.
its authorized agent
By: /s/ Abraham Gelber
Abraham Gelber, General Manager
WINSTON RESOURCES, INC., Tenant
By: /s/ David Silver
Name: David Silver
Title: Vice President/Secretary
8
<PAGE>
EXHIBIT 1
Floor Plan of New Eighth Floor Premises
<PAGE>
SCHEDULE A
LANDLORD'S WORK
A. Landlord shall, at its sole cost and expense and without charge to
Tenant, perform the following work in the New Eighth Floor Premises, all of
which shall be of design and capacity of the building standard adopted by
Landlord for the Building (collectively, "Landlord's Work"):
1. Install two (2) package air cooling units in the New
Eighth Floor Premises, including the main branch leading from such units up to
the point of connection into the New Eighth Floor Premises, which installation
shall not be considered part of the work subject to "Landlord's Contribution" as
set forth in Schedule B of this Amendment; provided, however, any ductwork
connecting such unit to the New Eighth Floor Premises shall be installed by
Tenant as part of Tenant's Initial Alteration;
2. Install missing radiators, as necessary;
3. Install replacement windows (which installation shall
be completed on or prior to the substantial completion of Tenant's Initial
Alteration); and
4. Provide Tenant with a Form ACP5, as necessary for
Tenant to perform Tenant's Initial Alteration.
B. Tenant acknowledges that all or portions of Landlord's Work may be
performed after the Adjustment Date. Accordingly, Tenant agrees to cooperate
with Landlord and/or Landlord's agents during the performance of such work for
the purpose of assisting Landlord in the completion of the same.
C. The parties hereto acknowledge that the air-cooling units to be
installed by Landlord shall meet the specifications set forth in the mechanical
plans for the New Eighth Floor Premises prepared by Landlord's engineer, HHF
Design Consulting Limited, entitled "535 Fifth Avenue, Suite 800", Drawings M-1,
M-2, E-1, SP1 and SP2 dated January 24, 1997, as the same may be revised from
time to time (collectively, the "Engineering Plans").
<PAGE>
SCHEDULE B
TENANT'S INITIAL ALTERATION
I. Tenant shall perform or cause the performance of Alterations in and
to the New Eighth Floor Premises to prepare same for Tenant's initial occupancy
thereof (" Tenant's Initial Alteration"). All Alterations to be performed by
Tenant shall be, at a minimum, of a quality and standard equivalent to the
standards for construction set by Landlord, from time to time, for the Building,
and shall be subject to the prior approval of Landlord as set forth in Article 3
of the Lease. Tenant shall submit to Landlord or, at Landlord's direction,
Landlord's Consultant, complete and detailed architectural, mechanical and
engineering plans and specifications prepared by an architect or engineer
licensed in the State of New York and reasonably approved by Landlord, which
plans and specifications shall be stamped and certified by such architect or
engineer, showing Tenant's Initial Alteration, which plans and specifications
shall be prepared by Tenant, at Tenant's own cost and expense. Tenant's plans
and specifications shall include all information necessary to reflect Tenant's
requirements for the design and installation of any ductwork, heating,
electrical, plumbing and other mechanical systems and all work necessary to
connect any non-standard facilities to the Building's base mechanical,
electrical and structural systems. Tenant's submission shall include not less
than three (3) sets of sepias and five (5) sets of black and white prints.
II. Tenant shall not perform work which would (a) require changes to
structural components of the Building or the exterior design of the Building,
(b) require any material modification to the Building's mechanical installations
or other Building installations outside the New Eighth Floor Premises, (c) not
be in compliance with all applicable laws, rules, regulations and requirements
of any governmental department having jurisdiction over the Building and/or the
construction of the New Eighth Floor Premises, including but not limited to, the
Americans with Disabilities Act of 1990, or (d) be incompatible with the
Certificate of Occupancy for the Building. Any changes required by any
governmental department affecting the construction of the New Eighth Floor
Premises shall be performed at Tenant's sole cost.
III. At the time that Tenant submits its plans and specifications to
Landlord for Landlord's approval, such plans and specifications must be
transmitted to Landlord with a cover letter specifically stating that "the
enclosed plans and specifications are being transmitted to Landlord for its
review and approval pursuant to the terms of the Lease." Landlord or Landlord's
Consultant shall
<PAGE>
respond to Tenant's request for approval of any plans and
specifications described in subsection A above within seven (7) business days
following the submission of such plans and specifications prepared in accordance
with the terms hereof. In the event Landlord or Landlord's Consultant shall
disapprove of all or a portion of any of Tenant's plans and specifications, such
disapproval shall be set forth in writing and shall include the reasons therefor
in reasonable detail, in which event Tenant shall revise such plans and
specifications and resubmit same to Landlord within seven (7) business days
thereafter, time being of the essence. Landlord or Landlord's Consultant shall
respond to Tenant's request for consent of any such revised plans within five
(5) business days following resubmission. The approval of plans and
specifications by Landlord or Landlord's Consultant (hereinafter referred to as
the " Final Plans") together with Tenant's satisfactory compliance with the
requirements set forth in items (1) through (4) of Schedule C annexed hereto,
shall be deemed an authorization for Tenant to proceed with Tenant's Initial
Alteration, which shall be performed in accordance with the provisions of
Article 3 of the Lease and Schedule D of this Amendment. Tenant shall reimburse
Landlord for any reasonable third-party consultant fees incurred in connection
with Tenant's Initial Alteration, but in no event greater than $2,000.00.
Neither the recommendation or designation of an architect or engineer nor the
approval of the final plans and specifications by Landlord or Landlord's
Consultant shall be deemed to create any liability on the part of Landlord with
respect to the design or specifications set forth in the Final Plans.
IV. Landlord agrees to reimburse Tenant for the cost of Tenant's Initial
Alteration, as approved by Landlord or Landlord's Consultant, (provided the same
are substantially complete within six (6) months of the date Tenant obtains its
building permit) to the extent of the lesser of (i) $164,730.00 or (ii) the
actual cost to Tenant for Tenant's Initial Alteration (" Landlord's
Contribution"). Landlord hereby agrees that up to fifteen (15%) percent of
Landlord's Contribution may be applied by Tenant to (a) the fees of Landlord's
Consultant, (b) the cost of installing telephone and computer wiring and cabling
in the Premises and (c) the following "soft" costs incurred by Tenant in
connection with Tenant's Initial Alteration: architectural and engineering fees
and filing fees. Provided this Lease is in full force and effect and Tenant is
not in material default hereunder (following the giving of notice and the
expiration of any applicable grace periods), Landlord's Contribution shall be
paid by progress payments as follows: on or before the first (1st) day of each
calendar month, Tenant may submit to each of Landlord and Landlord's Consultant
an application and certificate for payment (standard AIA Form G702) for that
portion of Tenant's Initial Alteration previously completed, which application
and certificate for payment must be accompanied by (i) all information and
documents required thereunder and (ii) a partial lien waiver executed by the
general contractor (the " General Contractor") and its subcontractors employed
in connection with Tenant's Initial Alteration covering
B-2
<PAGE>
work previously paid for
out of prior progress payments. Provided Landlord's architect verifies in
writing that the work described in any such application and certificate for
payment has been completed in accordance with the Final Plans, Landlord, on or
about the thirtieth (30th) day of such calendar month shall remit to Tenant
ninety percent (90%) of the amount so requisitioned by Tenant or such other
amount as is approved by Landlord, based on the portion of Tenant's Initial
Alteration which has been completed, with ten (10%) percent to be retained until
final payment of Landlord's Contribution is due pursuant to the terms of this
Subsection IV. Provided this Lease is in full force and effect and Tenant is not
in default hereunder, Landlord shall pay the balance of Landlord's Contribution
to Tenant within thirty (30) days of submission by Tenant of (a) paid receipts
(or such other proof of payment as Landlord shall reasonably require) for work
done in connection with Tenant's Initial Alteration, (b) a written statement
from Tenant's architect or engineer that the work described on any such invoices
has been completed in accordance with the Final Plans, (c) a lien waiver
executed by the general contractor employed by Tenant in connection with
Tenant's Initial Alteration, (d) proof reasonably satisfactory to Landlord that
Tenant has complied with all of the conditions set forth in this Schedule B (as
applicable), which shall include, without limitation, submission of all of the
items described on Schedule D annexed hereto and made a part hereof and (e) two
(2) complete sets of "as-built" Final Plans.
B-3
<PAGE>
SCHEDULE C
REQUIREMENTS FOR
"CERTIFICATES OF FINAL APPROVAL"
1. All required Building Department Forms must be properly filled out and
completed by the approved architect/engineer of record or Building
Department expeditor, as required.
2. All forms are to be submitted to the Landlord for the owner's review
and signature prior to submission of final plans and forms to the New
York City Building Department, as required.
3. All pertinent forms and filed plans are to be stamped and sealed by a
licensed architect and/or professional engineer, as required. All
inspections are to be performed by the architect/engineer of record
unless approved otherwise by the Landlord.
4. A copy of all approved forms, permits and approved Building Department
plans (stamped and signed by the New York City Building Department) are
to be submitted to the building office prior to start of work.
5. Copies of all completed inspection reports and Building Department
Sign-offs are to be submitted to the building office immediately
following completion of construction, as required.
6. All claims, violations or discrepancies with improperly filed plans,
applications, or improperly completed work shall become the sole
responsibility of the applicant to resolve, as required.
7. All changes to previously approved plans and applications must be filed
under an amended application, as required. The Landlord reserves the
right to withhold approvals to proceed with changes until associated
plans are properly filed with the New York City Building Department, as
required.
8. The architect/engineer of record accepts full responsibility for any
and all discrepancies or violations with all local laws and building
codes having jurisdiction over the work which arise out of errors or
omissions in such architect's or engineer's work.
9. The Landlord reserves the right to reject any and all work requests and
new work applications that are not properly filed or accompanied by
approved plans and building permits.
<PAGE>
Checklist of "Certificates of Final Approval" required to be furnished
by Tenant pursuant to Article 3 (Alterations) of Lease.
These forms must be furnished by the Architect/ Engineer of
record or Building Department expeditor (filing agency) and approved by the
Landlord prior to submitting all plans and forms to the New York City Building
Department for final approval.
These forms must be furnished in order for Tenant to receive
"Landlord's Contribution."
Form Description
- ----- * PW-1 Building Notice Application (Plan work
approval application)
- ----- * PW-1B Plumbing/Mechanical Equipment
Application and Inspection Report
- ----- * PW-1 Statement Form B
- ----- * TR-1 Amendment Controlled Inspection
Report
- ----- * TR-1 Amendment Controlled Inspection
Report
- ----- PW-2 Building Permit Form (All Disciplines)
- ----- B Form 708 Building Permit "Card"
- ----- * TR-1 Certification of Completed Inspection and
Certified Completion Letter by
Architect/Engineer of record or Building
Department expeditor
- ----- PW-3 Cost Affidavit Form
- ----- * PW-6 Revised Certificate of Occupancy for
change in use (if applicable)
C-2
<PAGE>
* These items must be perforated (with the date and New York City
Building Department Stamp) to signify New York City Building Department
Approval. All forms must bear proper approvals and sign-offs prior to
authorization given by the Landlord to proceed with the work.
C-3
<PAGE>
SCHEDULE D
TENANT ALTERATION WORK AND NEW CONSTRUCTION
CONDITIONS AND REQUIREMENTS
1. No Alterations are permitted to commence until original Certificates of
Insurance required from Tenant's general contractor (the "General
Contractor") and all subcontractors complying with the attached
requirements are on file with the Building office.
2. All New York City Building Department applications with assigned BN#
and permits must be on file with the Building office prior to starting
work. A copy of the building permit must also be posted on the job site
by the General Contractor. The General Contractor shall make all
arrangements with Landlord's expeditor for final inspections and
sign-offs prior to substantial completion.
3. The General Contractor shall comply with all Federal, State and local
laws, building codes, OSHA requirements, and all laws having
jurisdiction over the performance and handling of the Alterations.
4. The existing "Class E" fire alarm system (including all wiring and
controls), if any, must be maintained at all times. Any additions or
alterations to the existing system shall be coordinated with the
Building office as required. All final tie-in work is to be performed
by Landlord's fire alarm vendor and coordinated by the General
Contractor. All costs for the tie-ins are reimbursable to Landlord by
Tenant.
5. All wood used, whether temporary or not, such as blocking, form work,
doors, frames, etc. shall be fire rated in accordance with the New York
City Building and Fire Code requirements governing this work.
6. Building standby personnel (i.e. Building operating engineer and/or
elevator operator), required for all construction will be at Landlord's
discretion. Freight elevators used for overtime deliveries must be
scheduled in writing with Landlord at least 24 hours in advance, as
required. All costs associated are reimbursable to Landlord by Tenant.
7. The General Contractor shall comply with the Rules and Regulations of
the Building elevators and the manner of handling materials, equipment
and debris to avoid conflict and interference with Building
operations. All bulk deliveries or removals will be made prior to
8:00 a.m. and after 5:00 p.m. or
<PAGE>
on weekends, as required.
8. No exterior hoisting will be permitted. All products or materials
specified are to be assembled on-site, and delivered to the site in
such a manner so as to allow unobstructed passage through the
Building's freight elevator, lobbies, corridors, etc. The General
Contractor will be responsible for protection of all finished spaces,
as required.
9. All construction personnel must use the freight elevator at all times.
Any and all tradesman found riding the passenger elevators without
prior approval from Landlord will be escorted out of the Building and
not be allowed re-entry without written approval from the Building
office.
10. During the performance of Alterations, Tenant's construction
supervisor or job superintendent must be present on the job site at
all times.
11. During the performance of Alterations, all demolition work shall be
performed after 6:00 p.m. during the week or on weekends. This would
include carting or rubbish removal as well as performing any operations
that would disturb other Building tenants or other occupants (drilling,
chopping, grinding, recircuiting, etc.).
12. No conduits or cutouts are permitted to be installed in the floor slab
without prior written approval from Landlord. Landlord reserves the
right to restrict locations of such items to areas that will not
interfere with the Building's framing system or components. No conduits
or cutouts are permitted outside of Tenant's Premises.
13. Plumbing connections to Building supply, waste and vent lines are to be
performed after normal working hours, and coordinated with the Building
manager, and are to include the following minimum requirements:
A. Separate shutoff valves for all new hot and/or cold water supply
lines (including associated access doors).
B. Patch and repair of existing construction on floor below,
immediately following completion of plumbing work (to be
performed after normal working hours, as required).
14. The General Contractor must coordinate all work to occur in public
spaces, core areas and other tenant occupied spaces with Landlord, and
perform all such work after normal working hours (to include associated
patch and repair work). The General Contractor shall provide all
required protection of
D-2
<PAGE>
existing finishes within the affected area(s).
15. The General Contractor must perform all floor coring, drilling or
trenching after normal business hours, and obtain Landlord's permission
and approval of same prior to performing such work.
16. Convector mounted outlets and associated conduits, wiring, boxes, etc.,
shall be located and installed in areas where they will not hinder the
operation or maintenance of existing fan coil units or prevent removal
or replacement of access panels or removable covers.
17. The General Contractor shall be responsible for all final tests,
inspections and approvals associated with all modifications, deletions
or additions to Building Class "E" systems and equipment.
18. Recircuiting of existing power/lighting panels and circuits affecting
Building and/or tenant operations are to be performed after normal
business hours and coordinated with the Building office in advance, as
required.
19. All burning and welding to be performed in occupied or finished areas
shall be performed after normal business hours and coordinated with the
Building office in advance, as required. Proper ventilation of the work
area will be required in order to perform this work.
20. The General Contractor shall provide Axiom Real Estate Management,
Inc. and the Building office with all approved submittal and closeout
documents as well as all required final inspections and Building
Department sign-offs just prior to or immediately following
completion of construction.
21. Any and all alterations to the Building sprinkler system (including
draining of system) are to be performed after normal business hours and
coordinated with the Building office, as required. All costs associated
with the shut down, drain and refill of the sprinkler system are
reimbursable to Landlord.
22. The General Contractor shall be responsible for any and all daily
cleanup required to keep the job site clean throughout the entire
course of the Alterations. No debris shall be allowed to accumulate in
any public spaces.
23. The General Contractor shall be responsible for proper protection of
all existing finishes and construction for Alterations to be performed
in common Building areas. All Alterations to be performed in occupied
areas outside of the Premises shall be performed after normal business
hours and coordinated with the Building office, as required.
D-3
<PAGE>
24. The General Contractor shall perform any and all hoisting associated
with the Alterations after normal business hours. The General
Contractor will obtain all required permits and insurance to perform
work of this nature. The General Contractor shall specify hoisting
methods and provide all required permits and insurance to Axiom Real
Estate Management, Inc. and the Building office prior to commencement
of Alterations.
25. Union labor shall be used by all contractors and subcontractors
performing any and all Alterations within the Building. All contractors
and subcontractors shall perform all work in a professional manner, and
shall work in close harmony with one another as well as with the
Building management and maintenance personnel.
26. The General Contractor shall forward complete copies of all approved
contractor submittal, and Building and Fire Department sign-offs and
Statement of Responsibility forms, to the Building office immediately
following completion of construction.
INSURANCE REQUIREMENTS
LIABILITY LIMITATIONS
A. Comprehensive or Commercial General Liability Insurance written on an
occurrence basis, to afford protection of $3,000,000 combined single
limit for personal injury, bodily injury and/or death and Broad Form
property damage arising out of any one occurrence; and which insurance
shall include coverage for premises-operations (including explosion,
collapse and underground coverage), elevators, contractual liability,
owner's and contractor's protective liability, and completed operations
liability.
B. Comprehensive Auto Liability Insurance covering the use of all owned,
non-owned and hired vehicles providing bodily injury and property
damage coverage, all on a per occurrence basis, at a combined single
limit of $1,000,000.
C. Worker's Compensation Insurance providing statutory benefits for
contractor's employees and Employer's Liability Coverage in an amount
not less than $100,000/$500,000/$100,000.
D. Property coverage damage to or loss of use of contractor's equipment.
D-4
<PAGE>
CERTIFICATE HOLDER
535 Fifth Avenue LLC
c/o Axiom Real Estate Management, Inc.
545 Fifth Avenue
New York, New York 10017
ADDITIONAL INSUREDS
535 Fifth Avenue LLC
c/o Axiom Real Estate Management, Inc.
545 Fifth Avenue
New York, New York 10017
Salomon Brothers Realty Corp.
7 World Trade Center, 29th Floor
New York, New York 10048
Westhill Equities LLC and
Zeus Property LLC
each having an address at
c/o Emmes Realty Advisors LLC
420 Lexington Avenue, Suite 2702
New York, New York 10170
Emmes Realty Advisors LLC
420 Lexington Avenue, Suite 2702
New York, New York 10170
Nineteen New York Properties Limited Partnership
c/o Axiom Real Estate Management, Inc.
545 Fifth Avenue
New York, New York 10017
Four New York Properties LLC,
1626 New York Associates, L.P. and
Winthrop Financial Associates Limited Partnership
each having an address at
c\o First Winthrop Corporation
One International Place
Boston, Massachusetts 02110
First Winthrop Corporation
D-5
<PAGE>
One International Place
Boston, Massachusetts 02110
Axiom Real Estate Management, Inc.
545 Fifth Avenue
New York, New York 10017
In addition to listing each of the Additional Insured parties, as noted above,
the Certificate of Insurance, general liability form, shall state that "The
General Aggregate limit applies separately to each project."
The name and address of the Additional Insureds shall appear on the Certificate
of Insurance. The insurance agent's address and telephone number is also
required.
D-6
<PAGE>
THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
530 FIFTH AVENUE, NEW YORK, N.Y. 10036
Winston Resources, Inc.
535 Fifth Avenue
New York, New York 10017 November 4, 1996.
Attention: Sy Kaye
Chief Executive Officer
Gentlemen:
The Bank of New York (the "Bank") is pleased to confirm that it holds available
a $6,000,000 secured line of credit to Winston Resources, Inc. (the "Borrower").
Extensions of credit under this line of credit shall be evidenced by, shall be
payable as provided in, and shall bear interest at the rate specified in, a
promissory note of the Borrower in the form included with this letter.
All obligations of the Borrower to the Bank with respect to this line of credit
shall be unconditionally guaranteed, jointly and severally, by Winston Personnel
of Boca Raton, Inc., WIN-PAY, Inc., Winston Personnel Inc. of New Jersey,
Winston Professional Staffing, Inc., Winston Staffing Services, Inc., Winston
Cosmopolitan, Inc., Winston Franchise Corp., and Roth Young Personnel Services,
Inc. (the "Guarantors" also referred to herein as the "Subsidiaries"). The
guarantees to be furnished to the Bank by the Subsidiaries are included with
this letter.
All obligations of the Borrower to the Bank with respect to this line of credit
shall be secured pursuant to a security agreement granting the Bank a first
priority security interest in all of the Borrower's accounts receivable. All
obligations of the Guarantors to the Bank with respect to this line of credit
shall be secured pursuant to a security agreement granting the Bank a first
priority security interest in all of the Guarantors' accounts receivable. The
form of security agreement to be furnished to the Bank is included with this
letter.
Notwithstanding the foregoing, the aggregate amount of credit outstanding under
this line of credit at any time shall not exceed (A) 80% of the aggregate amount
of the "eligible accounts receivable" of the Borrower and the Subsidiaries
generated in connection with the placement of
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<PAGE>
temporary employees and (B) 50% of
the aggregate amount of the "eligible accounts receivable" generated by the
Borrower and it's subsidiaries in connection with the placement of permanent
employees and (C) 80% of the "eligible accounts receivable" generated by Winston
Advertising Agency ( a division of Winston Resources, Inc.). "Eligible accounts
receivable" shall mean all accounts receivable except those that are more than
90 days past due (120 days past due for receivables due from hospitals) . As
long as the Bank shall hold the line of credit available, within 15 days of the
end of each month, the Borrower shall provide the Bank with a borrowing base
certificate in the form annexed hereto.
For so long as the line of credit is held available, the Borrower shall deliver
to the Bank, within 15 days after the end of each month, an aging schedule of
the accounts receivables of the Borrower and the Subsidiaries, in each case as
of the last business day of such month and in form and content satisfactory to
the Bank.
As long as the Bank shall hold the line available, the Borrower shall provide
the Bank with copies of all documents, including, but not limited to the
Borrower's financial statements, required to be filed with the Securities and
Exchange commission within 5 business days of such filing. The Borrower and
Subsidiaries shall provide the Bank with such other financial information as the
Bank shall from time to time reasonably request.
As you know, this line of credit is cancellable at any time by the Borrower or
the Bank and any extension of credit under this line of credit is subject to the
Bank's satisfaction, at the time of such extension of credit, with the condition
(financial or otherwise), business, prospects and operations of the Borrower and
each of the Guarantors. Unless cancelled earlier as provided in the first
sentence of this paragraph, this line of credit shall be held available until
October 31, 1997.
Very Truly Yours,
THE BANK OF NEW YORK
By: /s/ Sanjay Shirali
Sanjay Shirali
Vice President
By: /s/ Ronald R. Reedy
Ronald R. Reedy
Vice President
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<PAGE>
WINSTON RESOURCES, INC.
BORROWING BASE CERTIFICATE
FOR THE MONTH ENDED:
1. TOTAL TEMPORARY PLACEMENT ACCOUNTS RECEIVABLE $______________
a. INELIGIBLE HOSPITAL A/Rs. (greater than
120 DAYS PAST DUE) $______________
b. INELIGIBLE NON-HOSPITAL (greater than
90 DAYS PAST DUE) $______________
c. ELIGIBLE A/Rs. (l-a+b) $______________
d. ADVANCE RATE : 80% $______________
e. MAXIMUM TEMP A/Rs AVAILABLE $______________
2. TOTAL PERMANENT PLACEMENT ACCOUNTS RECEIVABLE $______________
a. INELIGIBLE A/Rs. $______________
b. ELIGIBLE A/Rs. (1-a) $______________
c. ADVANCE RATE : 50% $______________
d. MAXIMUM PERM A/Rs. AVAIL $______________
3. TOTAL ADVERTISING ACCOUNTS RECEIVABLE $______________
a. INELIGIBLE A/Rs.(>90 DAYS PAST DUE) $______________
b. ELIGIBLE A/Rs.(3-a) $______________
c. ADVANCE RATE : 80% $______________
d. MAXIMUM ADVERTISING A/Rs AVAILABLE $______________
C. TOTAL MAXIMUM A/R AVAILABILITY
1e + 2d + 3d $______________
D. LOANS OUTSTANDING $______________
e. EXCESS/ (SHORTFALL) $______________
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<PAGE>
For the purpose of inducing Bank of New York to grant loans, we hereby certify
that the foregoing statement of collateral is true and correct as of the date of
this report, and is acceptable collateral in accordance with the terms of all
agreements with the Bank of New York.
We further certify that all withholding taxes, unemployment taxes and sales tax
payments are current.
WINSTON RESOURCES, INC.
BY:______________________
Title:
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<PAGE>
Ex-10.11
<PAGE>
PROMISSORY NOTE
$6,000,000 November 26, 1996
FOR VALUE RECEIVED, WINSTON RESOURCES, INC., a corporation formed under
the laws of the State of New York with offices located at 535 Fifth Avenue, New
York, New York (the "Borrower"), hereby promises to pay to the order of THE BANK
OF NEW YORK (the "Bank") at its 48 Wall Street, New York, New York office, the
principal sum of SIX MILLION DOLLARS ($6,000,000) or the aggregate unpaid
principal amount of all advances made by the Bank to the Borrower (which
aggregate unpaid principal amount shall be equal to the amount duly endorsed and
set forth opposite the date last appearing on the sheet attached to this note),
whichever is less.
Each advance hereunder (an "Advance") shall bear interest, at the
Borrower's option, at a rate per Annum equal to (a) the Alternate Base Rate (as
hereinafter defined), or b) such rate (a "Eurodollar Rate") as is equal to,
during each Eurodollar Interest Period (as hereinafter defined), the sum of
2-1/2% plus the quotient of LIBOR (as hereinafter defined) for such Eurodollar
Interest Period divided by 1.00 minus the Eurodollar Reserve (as hereinafter
defined), which Eurodollar Rate shall change on the effective date of any change
in the Eurodollar Reserve, but, in each case, in no event in excess of the
maximum rate permitted by law. Any advance hereunder which shall not be paid
when due shall bear interest at a rate per annum equal to the Alternate Base
Rate plus 2%, but in no event in excess of the maximum rate permitted by law.
Interest shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
If no advances are outstanding under this note at the time a request
for an Alternate Base Rate Advance is made, such advance shall be in a minimum
amount of $50,000 or an integral multiple thereof. Eurodollar Rate Advances
shall be in a minimum amount of $100,000 or an integral multiple thereof.
As used in this note:
(a) "Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (i) the prime commercial lending rate of the Bank
as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate, and (ii) the Federal Funds Rate in effect on such day plus 1/2%;
(b) "Alternate Base Rate Advance" shall mean any Advance
which bears interest at the Alternate Base Rate;
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<PAGE>
(c) "Business Day" shall mean (i) any day other than a day on
which commercial banks in New York, New York are required or permitted by law to
close and (ii) with respect to Eurodollar Rate Advances, any day specified in
clause (i) of this definition which is also a day on which commercial banks are
open for domestic and international business, including dealings in Dollar
deposits, in London, England and New York, New York;
(d) "Dollar" and "$" shall mean lawful money of the
United States of America;
(e) "Eurodollar Interest Period" shall mean, with respect to
any Eurodollar Rate Advance, a period selected by the Borrower on not less than
three Business Days, prior irrevocable notice to the Bank commencing on the date
such Eurodollar Rate Advance is made and ending 1, 2, or 3 months thereafter;
provided, however, that (i) any Eurodollar Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to the immediately
succeeding Business Day unless such Business Day falls in another calendar month
(in which case such Eurodollar Interest Period shall end on the immediately
preceding Business Day), (ii) no Eurodollar Interest Period shall end after the
date until which the line of credit under which Advances may be made is held
available to the Borrower, (iii) if any Eurodollar Interest Period begins on a
day for which there is no numerically corresponding day in the calendar month
during which such Eurodollar Interest Period is to end, such Eurodollar Interest
Period shall end on the last Business Day of such calendar month, and (iv) no
Eurodollar Interest Period shall be less than one month;
(f) "Eurodollar Rate Advance" shall mean any Advance
which bears interest at a Eurodollar Rate;
(g) "Eurodollar Reserve" shall mean the aggregate of the rates
(expressed as a decimal) of reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) under any regulation
promulgated by the Board of Governors of the Federal Reserve System (or any
other governmental authority having jurisdiction over the Bank) as in effect
from time to time, dealing with reserve requirements prescribed for eurocurrency
funding (including, without limitation, any reserve requirements with respect to
"Eurocurrency liabilities" under Regulation D of the Board of Governors of the
Federal Reserve System);
(h) "Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with the members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York, or if such rate is not so
published for any day which is a Business Day, the average of quotations for
such day on such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank;
(i) "LIBOR" shall mean, with respect to any Eurodollar Rate
Advance, the rate per annum quoted by the Bank at approximately 11:00 a.m.
London, England time two Business Days prior to the first day of the Eurodollar
Interest Period relating thereto for the offering by
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<PAGE>
the Bank to prime
commercial banks in the London interbank Eurodollar market of Dollar deposits in
immediately available funds for a period equal to such Eurodollar Interest
Period and in an amount equal to the amount of such Eurodollar Rate Advance; and
(j) "Maturity Date" shall mean, with respect to any Eurodollar
Rate Advance, the last Business Day of the Eurodollar Interest Period applicable
to such Eurodollar Rate Advance.
Each Alternate Base Rate Advance shall be payable ON DEMAND and may be
prepaid in whole at any time or in part from time to time. Each Eurodollar Rate
Advance shall be payable on the Maturity Date of such Eurodollar Rate Advance
and the Borrower shall not have the right to prepay such Eurodollar Rate
Advance.
Interest on each Alternate Base Rate Advance shall be payable monthly
on the first day of each month, and at maturity. Interest on each Eurodollar
Rate Advance shall be payable on the Maturity Date thereof. Upon any prepayment
of Alternate Base Rate Advances, the Borrower shall pay interest on the amount
so prepaid to the date of such prepayment.
If any payment hereof becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day; provided, however, that in the case of a payment in respect of the
principal amount of a Eurodollar Rate Advance, if such next succeeding Business
Day falls in another calendar month, such payment shall be due on the
immediately preceding Business Day. If the date for any payment of principal is
so extended, interest thereon shall be payable for the extended time.
The Borrower agrees to indemnify the Bank and to hold the Bank harmless
from and against all losses and expenses that the Bank may sustain or incur (a)
if the Borrower makes any payment of the principal of any Eurodollar Rate
Advance on a day other than the Maturity Date thereof or (b) if the Borrower,
for any reason whatsoever, fails to complete a borrowing of any Eurodollar Rate
Advance on the date specified therefor after notice thereof has been given and
the Bank has determined to make such Eurodollar Rate Advance (including, without
limitation, in each case, any interest payable by the Bank to lenders of funds
obtained by the Bank in order to make or maintain such Eurodollar Rate Advance).
In the event that the Bank shall determine at any time that the
Eurodollar Rate cannot reasonably be determined for any Interest Period elected
by the Borrower, or that deposits of the relevant amount and term are not
available in the London interbank market or that the rate at which deposits are
offered to the Bank in the relevant market will not accurately reflect the cost
to the Bank of making or maintaining the requested advance at the Eurodollar
Rate, or that by reason of any change in applicable law or regulation or
interpretation thereof it has become unlawful for the Bank to make advances at
the Eurodollar Rate; then the Bank shall give the Borrower written notice of
such condition. Following such notice, no advance shall be available hereunder
at the Eurodollar Rate until the Bank has given the Borrower written notice of
the termination of such condition, and if any applicable law or regulation so
requires, any advances
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<PAGE>
then outstanding at the Eurodollar Rate shall immediately
begin bearing interest at the Alternate Base Rate.
In the event that any applicable law, treaty or governmental regulation
(whether now or hereafter in effect), or any change therein or in the
interpretation or application thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall (a) subject the Bank
to any tax of any kind whatsoever with respect to this note or any Eurodollar
Rate Advance or change the basis of taxation of payments to the Bank of
principal, interest, fees or any other amount payable under this note (except
for changes in the rate of tax on the overall net income of the Bank by the
jurisdiction in which the Bank maintains its principal office), (b) impose,
modify or hold applicable any reserve, special deposit, assessment or similar
requirement against assets held by, or deposits in or for the account of,
advances or loans by, or other credit extended by, any office of the Bank,
including (without limitation) pursuant to Regulation D of the Board of
Governors of the Federal Reserve System, or (c) impose on the Bank or the London
interbank Eurodollar market any other condition with respect to this note or any
Eurodollar Rate Advance, and the result of any of the foregoing is to increase
the cost to the Bank of making or maintaining any Eurodollar Rate Advance by an
amount that the Bank deems to be material or to reduce the amount of any payment
(whether of principal, interest or otherwise) in respect of any Eurodollar Rate
Advance by an amount that the Bank deems to be material, then, in any such case,
the Borrower shall promptly pay to the Bank, upon its demand, such additional
amount as will compensate the Bank for such additional cost or such reduction,
as the case may be; provided, however, that the foregoing shall not apply to
increased costs which are reflected in a Eurodollar Rate.
Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive of any government or any agency, instrumentality
or authority thereof, or any change therein or in the interpretation or
application thereof, shall make it unlawful for the Bank (or the office or
branch where the Bank makes or maintains any Eurodollar Rate Advance) to
maintain any Eurodollar Rate Advance, the Borrower shall, if any Eurodollar Rate
Advance is then outstanding, promptly upon request from the Bank, either prepay
such Eurodollar Rate Advance, together with accrued interest on the amount
prepaid to the date of prepayment, or, at the Borrower's option, convert such
Eurodollar Rate Advance into an Alternate Base Rate Advance. If any such
prepayment or conversion of any Eurodollar Rate Advance is made on a day that is
not the Maturity Date thereof, the Borrower shall also pay to the Bank, upon the
Bank's request, such amount or amounts as may be necessary to compensate the
Bank for any loss or expense sustained or incurred by the Bank in respect of
such Eurodollar Rate Advance as a result of such prepayment or conversion,
including (without limitation) any interest or other amounts payable by the Bank
to lenders of funds obtained by the Bank in order to make or maintain such
Eurodollar Rate Advance.
A certificate of the Bank setting forth such amount or amounts as shall
be necessary to compensate the Bank as specified in the immediately preceding
four paragraphs, submitted by the Bank to the Borrower, shall be conclusive
absent manifest error, and the obligations of the
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<PAGE>
Borrower under the immediately
preceding four paragraphs shall survive payment of this note and all Advances.
If any of the following events shall occur with respect to any Obligor
(which term shall include the Borrower, any guarantor hereof or any hypothecator
of any collateral securing this note): (1) failure of any Obligor in the
performance of any of such Obligor's covenants herein or in any instrument,
document or agreement delivered in connection herewith; (2) default by any
Obligor in the payment or performance of any Obligation (which term shall
include any and all present or future obligations or liabilities of such Obligor
to the Bank, whether incurred by such Obligor as maker, indorser, drawer,
acceptor, guarantor accommodation party, counterparty, purchaser, seller or
otherwise, and whether due or to become due, secured or unsecured, absolute or
contingent, joint and/or several, and howsoever and whensoever acquired by the
Bank); (3) failure to pay when due any other indebtedness for borrowed money,
acceleration of the maturity of such indebtedness or the occurrence of any event
which with notice or lapse of time, or both, would permit acceleration of such
indebtedness; (4) if the Obligor is an individual, the death or incompetence of
such Obligor; (5) if the Obligor is not an individual, the dissolution, merger
or consolidation of, or the sale or disposal of all or substantially all of the
assets, of the Obligor without the prior written consent of the Bank; (6) the
financial condition or credit standing of any Obligor shall be or become
materially impaired in the sole opinion of the Bank or any of its officers; (7)
commencement of any proceeding, procedure or other remedy supplemental to the
enforcement of, a judgment against any Obligor; (8) any representation or
warranty made by any Obligor or any financial or other statement of any Obligor
delivered to the Bank by or on behalf of any Obligor proves to be untrue,
incorrect or incomplete when made or delivered; (9) the death of the insured
under any life insurance policy held as collateral by the Bank for the
obligations of any Obligor with respect to this note, or the non-payment of any
premiums on any such life insurance policy; (10) the validity or enforceability
of this note, any guarantee hereof or any other document delivered in connection
herewith shall be contested or declared null and void or any Obligor shall deny
it has any liability or obligation under or with respect to this note, any
guarantee hereof or any other document delivered by it in connection herewith;
or (11) any Obligor shall make payment on account of any indebtedness
subordinated to the indebtedness evidenced by this note in contravention of the
terms of such subordination; then all outstanding Eurodollar Rate Advances,
together with accrued interest thereon, shall become due and payable forthwith,
upon declaration to that effect by the Bank, without notice to Borrower or any
Obligor, anything contained herein or in any other document, instrument or
agreement to the contrary notwithstanding. The loan evidenced by this note and
accrued interest thereon shall become immediately and automatically due and
payable, without presentment, demand, protest or notice of any kind, upon the
commencement by or against any Obligor of a case or proceeding under any
bankruptcy, insolvency or other law relating to the relief of debtors, the
readjustment, composition or extension of indebtedness or reorganization or
liquidation.
If the Bank shall make a new Advance on a day on which the Borrower is
to repay an Advance, the Bank shall apply the proceeds of the new Advance to
make such repayment and only the amount by which the amount being advanced
exceeds the amount being repaid shall be made available to the Borrower in
accordance with the terms of this note.
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<PAGE>
The Borrower hereby authorizes the Bank to accept telephonic
instructions from an authorized representative of the Borrower to make an
Advance or receive a payment hereof, and to endorse on the schedule attached
hereto the amount of all Advances and all principal payments hereof received by
the Bank, the interest rate applicable to each Advance and the Maturity Date of
each Eurodollar Rate Advance.
The Bank is hereby authorized to charge the Borrower's deposit
account(s) maintained at the Bank for each principal prepayment hereof on the
date made, and for each principal payment and for each interest payment due
hereunder on the due date thereof. The Bank will credit the Borrower's deposit
account maintained at the Bank in the amount of each Advance on the date of such
Advance, which credit will be confirmed to the Borrower by standard advice of
credit or notation on the deposit account statement sent to the Borrower. The
Borrower agrees that the actual crediting of the amount of any Advance to the
Borrower's deposit account shall constitute conclusive evidence that such,
Advance was made, and neither the failure of the Bank to endorse on the schedule
attached hereto the amount of any Advance, the interest rate applicable to any
Advance or the Maturity Date of any Eurodollar Rate Advance, nor the failure of
the Bank to forward an advice of credit to the Borrower, shall affect the
Borrower's obligations hereunder.
All advances hereunder are secured pursuant to the terms of a security
agreement executed by the Borrower in favor of the Bank of even date herewith as
such agreement may be amended or modified from time to time, and the Bank and
each other holder of this note are entitled to all the benefits thereof.
All payments hereof shall be made in lawful money of the United States
of America and in immediately available funds.
The Borrower does hereby forever waive presentment, demand, protest,
notice of protest and notice of nonpayment or dishonor of this note.
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<PAGE>
Schedule to
Promissory Note - WINSTON RESOURCES, INC.
Date of Amount of Type of Maturity Date Interest Amount of Aggregate Unpaid
Advance Advance Advance* of Advance** Rate*** Payment Principal Amount
- ------- -------- -------- ------------- -------- -------- ----------------
- -------------------------------------
* Insert "Alternate Base Rate" (or "ABR") or "Eurodollar Rate", as
applicable.
** only applicable for Eurodollar Rate Advances.
*** For Alternate Base Rate Advances, insert "ABR". For Eurodollar Rate
Advances, insert the actual interest rate.
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<PAGE>
The Borrower hereby agrees to pay all costs and expenses incurred by
the Bank incidental to or in any way relating to the Bank's enforcement of the
obligations of the Borrower hereunder or the protection of the Bank's rights
hereunder, including, but not limited to, reasonable attorneys' fees and
expenses incurred by the Bank.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Bank of any right,
remedy or power hereunder preclude any other or future exercise thereof or the
exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank or
allowed it by law or other agreement shall be cumulative and not exclusive the
one of any other, and may be exercised by the Bank from time to time.
Every provision of this note is intended to be severable; if any term
or provision of this note shall be invalid, illegal or unenforceable for any
reason whatsoever, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired.
THE BORROWER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF, BASED UPON, OR IN ANY WAY CONNECTED TO, THIS NOTE.
THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND INTERPRETED AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
WINSTON RESOURCES, INC.
By: /s/ Seymour Kugler
SEYMOUR KUGLER
Print Name
Title: CHAIRMAN & CEO
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<PAGE>
EX-10.12
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of November 26 1996 among WINSTON
RESOURCES, INC., a Delaware corporation (the "Borrower"), each of the
corporations identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (each, individually, a "Subsidiary Guarantor" and,
collectively, the "Subsidiary Guarantors") and THE BANK OF NEW YORK (the
"Bank").
The Borrower has executed a Promissory Note in the face amount of
$6,000,000 payable to the Bank dated of even date herewith (as amended,
supplemented or otherwise modified and in effect from time to time, the "Note,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) , providing subject to the terms and conditions thereof, for
Advances to be made by the Bank to the Borrower in an aggregate principal amount
not exceeding $6,000,000 at any one time outstanding.
The Subsidiary Guarantors propose to enter into a Guaranty Agreement
dated as of November _, 1996 (as amended, supplemented or otherwise modified and
in effect from time to time, the "Guaranty"), under which the Subsidiary
Guarantors jointly and severally guarantee to the Bank the prompt payment in
full when due of the principal and interest on the Advances made by the Bank to
the Borrower under the Note.
To induce the Bank, in its discretion, to extend credit under the Note,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Borrower and the Subsidiary Guarantors (each
sometimes referred to hereafter as an "Obligor" and, collectively, as the
"Obligors") have agreed to enter into this agreement to secure their respective
obligations under the Note and the Guaranty.
Accordingly, the parties hereby agree as follows:
l. Security Interest. Each Obligor hereby grants the Bank a
security interest (the "Security Interest") and a lien in all of the
following property now owned or at any time hereafter acquired by it, or in
which it now has or at any time in the future may acquire any right, title or
interest (the "Collateral"):
All accounts originated by the Obligor in the course of its
recruitment and placement advertising, permanent placement and temporary
staffing services operations, excluding accounts due from franchisees of the
Obligor ("Receivables"), including all accounts receivable, instruments,
documents, chattel paper, contract and other rights related to such Receivables
and associated therewith, and the proceeds thereof and all additions, accessions
and substitutions to or for the Collateral.
<PAGE>
Terms used in this Section which are defined in the Uniform Commercial Code as
enacted and in effect in the State of New York (the "Code") are used as so
defined in the Code.
2. Obligations. This Agreement and the Security Interest
shall secure the following obligations (the "Obligations"):
(a) Any and all obligations of the Borrower under the
Note or under any other agreement or instrument executed and delivered
pursuant thereto;
(b) Any and all obligations of each Subsidiary
Guarantor under the Guaranty or under any other agreement or instrument
executed and delivered pursuant thereto; and
(c) Any and all other liabilities and obligations of every
kind and nature whatsoever of any Obligor to the Bank under the Note, the
Guaranty or otherwise, whether such liabilities and obligations be direct or
indirect, absolute or contingent, secured or unsecured, now existing or
hereafter arising or acquired, due or to become due.
3. Financing Statements and Other Action. Each Obligor will do all
lawful acts which the Bank deems necessary or desirable to protect the Security
Interest or otherwise to carry out the provisions of this Agreement, including,
but not limited to, the execution of Uniform Commercial Code financing,
continuation, amendment and termination statements and similar instruments in
form satisfactory to the Bank and will promptly pay on demand any filing fees or
other costs in connection with the filing or recordation of such statements and
instruments. Each Obligor irrevocably appoints the Bank as its attorney-in-fact
during the term of this Agreement, to do all acts which it may be required to do
under this Agreement, such appointment being deemed to be a power coupled with
an interest.
4. Places of Business. Each Obligor warrants that its principal place
of business, chief executive office and the place where the records concerning
its accounts and contract rights are located is set forth on Schedule 1 to this
Agreement. None of the Collateral is evidenced by a promissory note or other
instrument. Each Obligor will keep its principal place of business and chief
executive office and the office where it keeps its records concerning its
accounts and contract rights at the location therefor specified in Schedule 1
or, upon 30 days' prior written notice to the Bank, at any other locations in a
jurisdiction where all actions required by this Agreement shall have been taken
with respect to the Collateral. Each Obligor will hold and preserve its records
concerning its accounts and contract rights and will permit representatives of
the Bank at any time during normal business hours, upon reasonable notice, to
inspect and make abstracts from such records.
5. Encumbrances. Each Obligor warrants that it has title to the
Collateral purportedly owned by it and that there are no sums owed or claims,
liens, security interests or other encumbrances (collectively, "Liens") against
the Collateral. Each Obligor will notify the Bank of any Liens against the
Collateral, will defend the Collateral against any Liens adverse to the Bank,
and will not create, incur, assume, or suffer to exist now or at any time
throughout the
<PAGE>
duration of the term of this Security Agreement, any Liens
against the Collateral, whether now owned or hereafter acquired, except Liens in
favor of the Bank.
6. Maintenance of Collateral. Each Obligor shall preserve
the Collateral for the benefit of the Bank. Without limiting the generality
of the foregoing, each Obligor:
(a) shall not (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, any of
the Collateral, or (ii) create or permit to exist any Lien upon or with respect
to any of the Collateral, except for the security interest under this Agreement;
(b) shall preserve all beneficial contract rights to the
extent commercially reasonable;
(c) in conjunction with, and at the direction of,
the Bank, shall take commercially reasonable steps to collect all accounts;
and
(d) shall pay all taxes, assessments or other charges on the
Collateral when due, unless the amount or validity of such taxes, assessments or
charges are being contested in good faith by appropriate proceedings and
reserves have been provided on its books with respect thereto in conformity with
generally accepted accounting principles.
7. Additional Provisions concerning the Collateral.
(a) Each Obligor authorizes the Bank to file, without the
signature of the Obligor, where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral. The
Bank may file a photographic or other reproduction of this Agreement in lieu of
a financing or continuation statement in any filing office where it is
permissible to do so.
(b) Except as otherwise provided in this subsection, each
Obligor shall continue to collect, at its own expense, all amounts due or to
become due to such Obligor under the Receivables. In connection with such
collections, the Obligor may take (and, at the Bank's direction, shall take)
such action as the obligor or the Bank may deem necessary or advisable to
enforce collection of the Receivables; provided, however, that the Bank shall
have the right upon the failure of the Obligors to pay any obligation when
becoming or made due to notify the account debtors or Obligors under any
Receivables of the assignment of such Receivables to the Bank and to direct such
account debtors or Obligors to make payment of all amounts due or to become due
to the Obligor thereunder directly to the Bank and, upon such notification and
at the expense of the obligor, to enforce collection of any such Receivables,
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Obligor might have done. After the
Obligor's failure to pay any obligation when due, (i) all amounts and proceeds
(including instruments) received by the Obligor in respect of the Receivables
shall be received in trust for the benefit of the Bank hereunder, shall be
segregated
<PAGE>
from other funds of the Obligor, and shall be forthwith paid over to
the Bank in the same form as so received (with any necessary endorsement) to be
held as cash collateral and either (A) released to the Obligor so long as all
obligations to the Bank have been paid, or (B) if the obligations have not been
paid, applied as provided by Section 8 (b), and (ii) the obligor shall not
adjust, settle or compromise the amount or payment of any Receivable, release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
(c) Upon the failure of the Obligors to pay any obligation
when becoming or made due, each Obligor hereby irrevocably appoints the Bank the
Obligor's attorney-in-fact, with full authority in the place and stead of the
Obligor and in the name of the Obligor or otherwise, from time to time in the
Bank's discretion, to take any action and to execute any instrument which the
Bank may deem necessary or advisable to accomplish the purposes of this
Agreement (subject to the rights of the Obligor under subsection (b) of this
section), including, without limitation:
(i) To ask, demand, collect, sue for,
recover, compromise, receive and give acquittance and receipts for moneys
due and to become due under or in connection with the Collateral;
(ii) To receive, endorse and collect any drafts
or other instruments, documents and chattel paper in connection therewith; and
(iii) To file any claims or take any action or
institute any proceedings which the Bank may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce rights of the
Bank with respect to any of the Collateral.
(d) If an Obligor fails to perform any agreement contained
herein, the Bank may itself perform, or cause performance of, such agreement or
obligation, and the costs and expenses of the Bank incurred in connection
therewith shall be payable by the Obligor and shall be fully secured hereby.
(e) The powers conferred on the Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon the
Bank to exercise any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Bank shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding, (i) each
Obligor shall remain liable under any contracts and agreements relating to the
Collateral, to the extent set forth therein, to perform all of its obligations
thereunder, to the same extent as if this Agreement had not been executed; (ii)
the exercise by the Bank of any of its rights hereunder shall not release any
Obligor from any of its obligations under the contracts and agreements relating
to the Collateral; and (iii) the Bank shall not have any obligation or liability
by reason of this
<PAGE>
Agreement under any contracts and agreements relating to the
collateral, nor shall the Bank be obligated to perform any of the obligations or
duties of any Obligor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
8. Remedies. Upon failure of the Obligors to pay any
obligations when due, by acceleration or otherwise:
(a) the Bank may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the Code
(whether or not the Code applies to the affected Collateral), and also may (i)
require each Obligor to, and each Obligor hereby agrees that it will at its
expense and upon request of the Bank forthwith, assemble all or part of the
Collateral as directed by the Bank and make it available to the Bank at a place
to be designated by the Bank which is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Bank's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Bank may deem commercially reasonable. Each Obligor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Bank shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Bank may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and any such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) Any cash held by the Bank as Collateral and all cash
proceeds received by the Bank in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Bank, be held by the Bank as Collateral for, and/or then or any time
thereafter be applied in whole or in part by the Bank against, all or any part
of the obligations in such order as the Bank shall elect. Any surplus of such
cash or cash proceeds held by the Bank and remaining after payment in full of
all the obligations shall be paid over to the Obligor or Obligors entitled
thereto as their interests may appear or to whomsoever else may be lawfully
entitled to receive such surplus.
(c) The Bank may exercise any and all rights and remedies of
any Obligor under or in connection with the Collateral, including, without
limitation, any and all rights of such Obligor to demand or otherwise require
payment of any amount under, or performance of any provision of, any account,
contract or agreement.
(d) All payments received by any Obligor under or in
connection with the Collateral shall be received in trust for the benefit of the
Bank, shall be segregated from other funds of the Company and shall be forthwith
paid over to the Bank in the same form as received (with any necessary
endorsement).
<PAGE>
9. Payment of Taxes, Charges Etc. The Bank, at its option, after notice
to the Obligors, may discharge any taxes, charges, assessments, security
interests, liens or other encumbrances upon the Collateral or otherwise protect
the value thereof. All such expenditures incurred by the Bank shall become
payable by the Obligors to the Bank upon demand, and shall bear interest at an
annual rate equal at all times to the Bank's Prime Rate, and shall be secured by
the Collateral.
10. Duties with Respect to Collateral. The Bank shall have no duty to
any Obligor with respect to the Collateral other than the duty to use reasonable
care in the safe custody of any of the Collateral in its possession. Without
limiting the generality of the foregoing, the Bank, although it may do so at its
option, shall be under no obligation to any Obligor to take any steps necessary
to preserve rights in the Collateral against other parties.
11. Waivers. To the extent permitted by law, each Obligor hereby waives
demand for payment, notice of dishonor or protest and all other notices of any
kind in connection with the Obligations except notices required hereby, by law
or by any other agreement between the Obligors and the Bank. The Bank may
release, supersede, exchange or modify any collateral or security which it may
from time to time hold and may release, surrender or modify the liability of any
third party without giving notice hereunder to any Obligor. Such modifications,
changes, renewals, releases or other actions shall in no way affect the
Obligors' obligations hereunder.
12. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (1) remain in full
force and effect until the payment in full of the Obligations and all other
amounts payable under this Agreement; (2) be binding upon each Obligor, its
successors and assigns; and (3) inure to the benefit of, and be enforceable by,
the Bank and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (3), the Bank may assign or otherwise
transfer all or any portion of its rights and obligations (including, without
limitation, all or any portion of the Advances owing to it and the Note held by
it) to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to the
Bank herein or otherwise. Upon the later of the payment in full of the
Obligations and all other amounts payable under this Agreement, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Obligors. Upon any such termination, the Bank will, at the
Obligors' expense, execute and deliver to the Obligors such documents as the
Obligors shall reasonably request to evidence such termination.
13. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Obligors and the Bank and their respective
successors and assigns.
14. Severability of Provisions. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in
<PAGE>
any other jurisdiction.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW.
16. Jury Trial Waiver. THE BANK AND THE OBLIGORS HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREIN. FURTHER, EACH OBLIGOR HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE BANK, OR COUNSEL TO THE BANK, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH
OBLIGOR ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ACCEPT THIS AGREEMENT BY,
INTER ALIA, THE PROVISIONS OF THIS SECTION. NO OFFICER OF THE BANK HAS AUTHORITY
TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
17. Submission to Jurisdiction. EACH OBLIGOR HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK COUNTY
FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OBLIGOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.
WINSTON RESOURCES, INC. WINSTON PERSONEL OF BOCA RATON, INC.
By: /s/ Seymour Kugler By: /s/ Seymour Kugler
SEYMOUR KUGLER SEYMOUR KUGLER
Print name Print name
Title: CHAIRMAN & CEO Title: CHAIRMAN & CEO
<PAGE>
WIN-PAY INC. WINSTON PERSONNEL INC. OF
NEW JERSEY
By: /s/ Seymour Kugler By: /s/ Seymour Kugler
SEYMOUR KUGLER SEYMOUR KUGLER
Print name Print name
Title: CHAIRMAN & CEO Title: CHAIRMAN & CEO
WINSTON PROFESSIONAL WINSTON STAFFING SERVICES INC.
STAFFING, INC.
By: /s/ Seymour Kugler By: /s/ Seymour Kugler
SEYMOUR KUGLER SEYMOUR KUGLER
Print name Print name
Title: CHAIRMAN & CEO Title: CHAIRMAN & CEO
WINSTON COSMOPOLITAN, INC. WINSTON FRANCHISE CORPORATION
By: /s/ Seymour Kugler By: /s/ Seymour Kugler
SEYMOUR KUGLER SEYMOUR KUGLER
Print name Print name
Title: CHAIRMAN & CEO Title: CHAIRMAN & CEO
ROTH YOUNG PERSONNEL SERVICES, INC.
By: /s/ Seymour Kugler
SEYMOUR KUGLER
Print name
Title: CHAIRMAN & CEO
Continuation of signature page to security agreement dated November 26 1996
<PAGE>
SCHEDULE 1
TO
Security Agreement
ADDRESSES OF PRINCIPAL PLACES OF BUSINESS
WINSTON RESOURCES, INC. WINSTON PERSONNEL OF
BOCA RATON, INC.
Address: 535 FIFTH AVENUE Address: 2300 GLADE ROAD
NEW YORK, NEW YORK 10017-3663 BOCA RATON, FLORIDA 33431
Fax No.: (212) 573-9836 Fax No.: (212) 573-9836
WIN-PAY, INC.
Address: ONE EAST 44TH STREET Address: 301 ROUTE 17 NORTH
NEW YORK, NEW YORK 10017-3663 RUTHERFORD, NEW JERSEY 07070
Fax No.: (212) 573-9836 Fax No.: (212) 573-9836
WINSTON PROFESSIONAL STAFFING, WINSTON STAFFING SERVICES
INC. SERVICES INC.
Address: 301 ROUTE 17 NORTH Address: 535 FIFTH AVENUE
RUTHERFORD, NEW JERSEY 07070 NEW YORK, NEW YORK 10017-3663
Fax No.: (212) 573-9836 Fax No.: (212) 573-9836
WINSTON COSMOPOLITAN, INC WINSTON FRANCHISE
CORPORATION
Address: 535 FIFTH AVENUE Address: 535 FIFTH AVENUE
NEW YORK, NEW YORK 10017-3663 NEW YORK, NEW YORK 10017-3663
Fax No.: (212) 573-9836
ROTH YOUNG PERSONNEL SERVICES, INC.
Address: 535 FIFTH AVENUE
NEW YORK, NEW YORK 10017-3663
Fax No.: (212) 573-9836
EXHIBIT 13
<PAGE>
Change In Company's Accountaints.
(a) Previous Independent Accountants
(i) On May 1, 1996, upon consultation with the Audit Committee of the
Board of Directors, the Company replaced Richard A. Eisner &
Company, LLP as its independent accountants for the fiscal year
ending December 31, 1996.
(ii) The reports of Richard A. Eisner & Company, LLP on the financial
statements of the Company for the prior two fiscal years contained
no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or
accounting principles.
(iii) The Board of Directors of the Company participated in and approved
the decision to change independent accountants.
(iv) In connection with its audits for the prior two fiscal years and
through May 1, 1996, there were no disagreements with Richard A.
Eisner & Company, LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure, which disagreements if not resolved to the
satisfaction of Richard A. Eisner & Company, LLP would have
caused them to make reference thereto in their report on the
financial statements for such years.
(v) During the Company's prior two fiscal years and through May 1,
1996, Richard A. Eisner & Company, LLP had not advised the
Company with respect to items described in Regulation S-B,
Item 304(a)(l)(iv)(B).
(vi) The Company requested that Richard A. Eisner & Company, LLP
furnish it with a letter addressed to the Securities and
Exchange Commission (the "Commission") stating whether or
not it agrees with the above statements.
(b) New Independent Accountants
(i) The Company simultaneously engaged Ernst & Young, LLP as
its new independent accountants for the fiscal year ending
December 31, 1996.
(ii) Other than as described above, the Company had not consulted
with Ernst & Young, LLP on (A) applications or accounting
principles to a specified transaction, either completed or
proposed, (B) the type of auditing opinion that might be
rendered on the Company's financial statements, and neither
a written report was provided to the Company nor oral advice
was provided that Ernst & Young concluded was an important
factor considered by the Company in reaching a decision as
to the accounting, auditing or financial reporting issue
or (C) any matter that was either the subject of a
disagreement or a reportable event as such terms are
defined in Regulation S-B Item 304(a)(1)(iv).
<PAGE>
EXHIBIT 23.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-37476) pertaining to shares of common stock of Winston Resources,
Inc. issuable pursuant to its Incentive Program of our report dated March 6,
1997 with respect to the consolidated financial statements included in the
annual report on Form 10-KSB of Winston Resources, Inc. for the year ended
December 31, 1996.
ERNST & YOUNG LLP
New York, New York
March 26, 1997
<PAGE>
EXHIBIT 23.2
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 No. 33-37476) of Winston Resources, Inc. (the "Company"),
with respect to shares of Common Stock of the Company issuable pursuant
to its Incentive Program, of our report dated March 11, 1996 on the
financial statements for the year ended December 31, 1995 (which report
indicates that we did not audit the presentation of pro forma net loss,
pro forma net loss per share and informaton relating to the fair value
of stock options as presented in Note 9 to the financial statements)
included in the Annual Report on Form 10-KSB of the Company for the
year ended December 31, 1996.
Richard A. Eisner & Comnpany, LLP
New York, New York
Dated: March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
FINANCIAL DATA SCHEDULES
FOR THE YEAR ENDED DECEMBER 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1068000
<SECURITIES> 262000
<RECEIVABLES> 5964000
<ALLOWANCES> 109000
<INVENTORY> 0
<CURRENT-ASSETS> 7423000
<PP&E> 1166000
<DEPRECIATION> 855000
<TOTAL-ASSETS> 8438000
<CURRENT-LIABILITIES> 4175000
<BONDS> 0
0
0
<COMMON> 33000
<OTHER-SE> 3829000
<TOTAL-LIABILITY-AND-EQUITY> 8438000
<SALES> 39390000
<TOTAL-REVENUES> 39390000
<CGS> 0
<TOTAL-COSTS> 29414000
<OTHER-EXPENSES> 8391000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135000
<INCOME-PRETAX> 1450000
<INCOME-TAX> 312000
<INCOME-CONTINUING> 1138000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1138000
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
