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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number: 0-19450
OAKHURST COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1655321
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1001 Santerre Drive, Grand Prairie, Texas 75050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 660-4499
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $0.01 par value per share Nasdaq SmallCap Market
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value at June 1, 1997 of the voting stock held by non-
affiliates of the registrant: $2,358,570
At June 1, 1997, the registrant had 3,207,053 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. BUSINESS
GENERAL
Oakhurst Company, Inc. ("Oakhurst" or "the Company") was formed as
part of a merger transaction in July 1991, in which Steel City Products, Inc.
("SCPI") became a majority-owned subsidiary of Oakhurst. In accordance with the
merger agreement, Oakhurst owns 10% of the outstanding common stock of SCPI and
all of the SCPI Series A Preferred Stock, with the result that the aggregate
fair market value of SCPI's common stock and Series A Preferred Stock owned by
Oakhurst is equal to approximately 90% of the aggregate fair market value of
all the issued and outstanding capital stock of SCPI; and represents 90% of the
voting stock of SCPI.
Pursuant to the merger, SCPI became a special, limited purpose
subsidiary that concentrates on its historical distribution business, while any
growth and expansion opportunities are expected to be pursued by Oakhurst or
its subsidiaries. Because Oakhurst's ownership of SCPI is primarily in the form
of preferred stock, Oakhurst retains the value of SCPI, and Oakhurst's income
from SCPI is determined by the Series A Preferred stock dividend. This form of
ownership is designed to facilitate the preservation and utilization of SCPI's
net operating loss carry-forwards, which amount to approximately $154 million.
Oakhurst, through SCPI and Dowling's Fleet Service Co., Inc.
("Dowling's), is primarily a distributor of products to the automotive
after-market. Its largest business, which is conducted by SCPI under the trade
name "Steel City Products", is the distribution of automotive parts and
accessories and non-food pet supplies from a facility in Pittsburgh,
Pennsylvania.
In August 1994, Oakhurst acquired all the outstanding capital stock of
Dowling's Fleet Service Co., Inc. ("Dowling's"), a distributor of automotive
radiators based in Mt. Vernon, New York that now operates seven facilities in
New York, Connecticut, New Jersey and Pennsylvania.
In March 1995, Oakhurst formed a wholly-owned subsidiary, Oakhurst
Management Corporation ("OMC"), to coordinate the provision of corporate
administrative services to the Company and its subsidiaries. Certain officers
of the Company and its subsidiaries are paid and are provided benefits by
Oakhurst Management Corporation.
In January 1994, Oakhurst acquired all the outstanding capital stock
of H&H Distributors, Inc., d/b/a Harry Survis ("H&H"), a Pittsburgh-based
company involved in the distribution and installation of automotive
accessories, including stereos, alarms and cellular phones, and in October
1994, Oakhurst acquired all the outstanding capital stock of Puma Products,
Inc., ("Puma"), a distributor of after-market products to the light truck and
van conversion industry from facilities in Grand Prairie, Texas and Elkhart,
Indiana. These two subsidiaries experienced operating losses in fiscal 1997,
and as a result, Oakhurst reached an agreement in June 1997 to sell Puma, and
in April 1997, Oakhurst's Board of Directors decided to sell or otherwise
dispose of H&H.
STEEL CITY PRODUCTS, INC.
BACKGROUND
SCPI was incorporated in West Virginia in 1959, and in 1963 became
known as Heck's, Inc. In 1969, the "Steel City Products" automotive
distribution business was acquired. SCPI was reincorporated in Delaware under
the name Hallwood Industries Incorporated in fiscal 1991. The name was changed
to Steel City Products, Inc. in January 1993.
For many years prior to 1990, Heck's, Inc. operated a Retail Division
consisting of a chain of discount department stores. In September 1990, all of
the assets of the Retail Division were sold to Retail Acquisition Corp.
("RAC"), an unrelated company.
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OPERATIONS
SCPI primarily distributes automotive accessories. These products
include functional and decorative car and truck accessories (such as floor
mats, seat covers, mirrors, running boards and lights), car care products
(including waxes and paints), chemicals (such as antifreeze, windshield washer
fluid and motor oil) and car repair and maintenance items (including spark
plugs, windshield wipers, and air and oil filters). In fiscal 1996, the product
selection was expanded to include selected "hard parts" such as brake rotors,
and in fiscal 1997, SCPI introduced non-food pet supplies to its merchandise
selection, and opened a new Wing-Tech division ("Wing-Tech") that distributes
automotive "wings" or spoilers. Although the pet supplies are not typical of
SCPI's historical merchandise mix, management determined that the availability
of existing customers which sell both pet supplies and automotive accessories,
combined with SCPI's distribution expertise and infrastructure, offered an
opportunity for increased sales. For about twenty-six years, SCPI's operations
have been conducted from the same facility in Pittsburgh. In June 1997, the
Wing-Tech division was sold to the buyer of Puma.
Certain of SCPI's business is performed on a service basis, which
involves visits by its sales personnel to customers' stores to count and
re-order merchandise; generally, these re-orders are transmitted electronically
to SCPI's offices in Pittsburgh and shipments are either made directly to each
of the customers' stores or pre-packed for onward shipment to stores by the
retailers' own distribution centers. Certain customers electronically transmit
their orders to SCPI's headquarters. Because many orders are generated
electronically and are shipped within a few days of receipt, the size of SCPI's
order backlog is not relevant to an understanding of the business. SCPI also
provides price ticketing and associated services to those of its customers who
request such services.
SOURCES OF SUPPLY
SCPI acquires its merchandise from a large number of suppliers, none
of which accounts for more than 15% of its revenues. Many of the products sold
by SCPI carry nationally-advertised brand names, but because of the diversity
and number of suppliers and products carried, the business is not generally
dependent on the continued availability of individual products or continued
dealings with existing supply sources. From time to time, market or seasonal
conditions may affect the availability of certain merchandise, but not to the
extent that the Company believes would materially impact its business.
Steel City generally carries in inventory only those products that its
customers have identified as necessary for their own merchandising needs, and
does not acquire significant quantities of other merchandise.
SEASONALITY
SCPI's automotive business is seasonal, being slower in the early
winter months than at other times of the year. In anticipation of higher sales
volume in the spring and summer, SCPI carries higher automotive inventories,
beginning in February. As is customary in the automotive industry, many
suppliers allow extended payment terms for such inventory build-ups and in
turn, SCPI grants extended payment terms to many of its customers to facilitate
their inventory build-ups.
SCPI's pet supply business is expected to experience somewhat
different seasonal trends from its automotive business, but the effect of this
is not expected to be material until this business develops.
SCPI's needs for working capital are affected by these seasonal
fluctuations (see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources").
CUSTOMER BASE
SCPI's customers include general merchandise retail chains, automotive
specialty stores, supermarket chains, drug stores, hardware stores, variety
stores and other automotive accessory distributors. Most customers are based in
the northeastern United States, although stores operated by some customers are
located outside the northeastern states. There are no foreign sales.
SCPI's customers are continually affected by changes in the retail
environment, including the recent competitive pressures facing regional mass
merchandisers and the growing influence of national automotive
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specialty chains. These have led to fluctuations in the level of business that
SCPI enjoys with individual customers. In recent years, SCPI has lost some
significant customers and has suffered reductions in business as certain
customers have closed stores in the face of competition, have been forced into
bankruptcy, or have reduced their automotive merchandise selection.
Furthermore, some customers have changed their buying practices to acquire
certain merchandise direct from manufacturers rather than through distributors
such as Steel City Products. In its efforts to offset these trends, SCPI has
added new customers, expanded its product offerings to certain customers,
enlarged the territory that it serves and introduced new categories of
products.
An example of the changes discussed above is SCPI's loss in fiscal
1996 of two of its largest customers: Jamesway Corporation ("Jamesway") filed
for bankruptcy in October 1995 and shortly thereafter closed all its stores,
and Forest City Auto Parts, Inc. ("Forest City") informed management in
November 1995 of its decision to change distributors (see table below).
Although SCPI added several new customers during fiscal 1995, 1996 and
1997, and expanded sales to certain existing customers, it has not yet obtained
enough new business to offset all of the lost business and return sales to
historical levels. Management continually attempts to identify new customers,
but there can be no assurance that further customers will be secured. However,
based on present information, management anticipates that SCPI's sales in
fiscal 1998 will be more than those in fiscal 1997, primarily due to new
automotive business and pet supply customers added during the latter part of
fiscal 1997.
Sales attributable to SCPI were approximately $18 million, or 43% of
Oakhurst's consolidated sales, in fiscal 1997. The following table shows sales
to customers that individually have accounted for more than 10% of consolidated
sales during the latest three fiscal years (all of these customers being
attributable to SCPI) (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
February 28, 1997 February 29, 1996 February 28, 1995
<S> <C> <C> <C> <C> <C> <C>
% of % of % of
Sales Total Sales Sales Total Sales Sales Total Sales
----- ----------- ----- ----------- ----- -----------
Forest City -- -- $4,641 10% $6,046 14%
Jamesway -- -- $3,975 8% $4,465 10%
</TABLE>
Jamesway filed for Chapter 11 bankruptcy protection in July 1993,
emerged in January 1995, and continued to be one of SCPI's largest customers
until the second quarter of fiscal 1996, when Jamesway began experiencing new
financial difficulties. In October 1995 Jamesway again filed for bankruptcy
protection and announced that it would close all of its stores.
During the third quarter of fiscal 1996, Forest City informed SCPI
that it had decided to change its source of supply, and sales to Forest City
ended in January 1996.
None of SCPI's business is based on government contracts, and there
are no long-term sales contracts with any customers.
COMPETITION
Both the automotive parts and accessories distribution industry and
the non-food pet supply industry are highly competitive, with several similar
companies operating in SCPI's market place, and many of SCPI's suppliers also
offer their products directly to retailers. Management is unable to quantify
SCPI's relative size in the distribution industry or in relation to its
competitors. SCPI competes on the basis of the breadth of merchandise offered,
price, level of service, order fill rates and order turnaround times.
Management believes that SCPI's long history, good reputation, experienced
management, product variety, pricing, service levels and high order fill rates
enable it to compete favorably with other distributors.
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REGULATION
SCPI's management does not anticipate that existing or known pending
environmental legislation or other regulations will require major capital
expenditures or will affect its operations.
EMPLOYEES
SCPI employs approximately 55 persons, of whom about 45 are employed
in the headquarters office and distribution facility in Pittsburgh. Most of the
others are field personnel. Senior executives, including Bernard Frank (a
founder of Steel City Products in 1947), have many years of service with SCPI
and some are employed under long-term contracts.
The warehouse and certain office employees of SCPI are represented by
Local 636 of the International Brotherhood of Teamsters. SCPI believes that it
has experienced generally good labor relations, and no significant labor
disputes have affected its business in recent years. Renewal negotiations
related to the union agreement have continued beyond its expiration in November
1995.
DOWLING'S FLEET SERVICE CO., INC.
BACKGROUND AND CUSTOMER BASE
Dowling's was established in 1933 and is one of the largest
distributors of automotive radiators and related products in the northeastern
United States. It operates two facilities in each of New York, Connecticut and
New Jersey, and in fiscal 1997 expanded to a seventh facility by the
acquisition of all of the capital stock of G&O Sales Company, a radiator
distributor serving the greater Philadelphia market. Oakhurst acquired all the
capital stock of Dowling's in August 1994 from James Dowling, who owned and
managed the business for many years and who is the son of the founder. Two
long-service employees now manage the business as President and Vice President
under long-term employment agreements.
Most of Dowling's customers are radiator repair shops, which perform
repairs for car dealers, service stations and retail customers. Dowling's has
avoided a multi-level approach, so as to build strong allegiance from its
radiator repair shop customers, and has achieved a high market share in its
markets. There are no foreign sales. Dowling's has a broad customer base, with
no one customer representing a material proportion of consolidated sales.
The radiator replacement market has undergone important changes in
recent years. As manufacturers sought to reduce automobile weight,
aluminum/plastic radiators tended to replace the traditional copper/brass
models as original equipment. Initially, this product changeover extended
radiator lives, so that the replacement market experienced a decrease in
replacement demand. This trend is now reversing, as the aluminum/plastic
products are beginning to reach replacement age. Furthermore, these new
radiators are more difficult to repair than copper/brass, so that the
proportion of replacement to repair has increased. In addition, the number of
radiator models has increased in recent years. For these reasons, management
believes that repair shops have become more dependent on distributors for both
selection and service.
Sales attributable to Dowling's were approximately $14.6 million, or
35% of Oakhurst's consolidated revenues, in fiscal 1997.
SOURCES OF SUPPLY
Dowling's acquires its products from several well-known manufacturers,
and carries both name-brand and generic products. Because of its buying
position and storage facilities, Dowling's is able to obtain competitive
pricing from its suppliers. Dowling's concentrates on offering high quality
products and it purchases the majority of the product it sells from a major
U.S. radiator manufacturer, Modine Manufacturing Company ("Modine"); Dowling's
is believed to be one of Modine's largest U.S. after-market customers.
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SEASONALITY
Dowling's business is seasonal, with higher revenues in the hot summer
months and very cold winter months when automobile radiators are most affected
by extreme temperatures. Changes in weather patterns in Dowling's market area
therefore affect its sales levels.
COMPETITION
Dowling's competes with many other radiator distributors. Demand in
the radiator market was very strong in 1993 and 1994, which led to an increase
in the number of radiator distributors in Dowling's markets. Dowling's
reputation is based on its competitive pricing, quality products, and service
consisting of twice daily delivery to customers. Because of this, Oakhurst
believes that Dowling's is positioned to withstand such competition and to
build upon its historic sales and profits. However, there can be no assurances
that past levels of revenues and profitability can be maintained. In fact,
during fiscal 1996 one of Dowling's locations suffered a significant decline in
sales, due to the nearby opening of a competitor. However, Dowling's
experienced an improved competitive situation in fiscal 1997, with a return to
historical levels of sales and gross margins resulting from an increase in
market share.
REGULATION
Dowling's management does not anticipate that any major capital
expenditures will be required by existing or known pending environmental
legislation or other regulations.
EMPLOYEES
Dowling's employs approximately fifty-five persons, none of whom is
represented by a union. Dowling's believes that its employee relations are
generally good.
DISPOSED OF SUBSIDIARIES - H&H DISTRIBUTORS, INC. AND PUMA PRODUCTS, INC.
Operations in fiscal 1997 and 1996 included those of H&H and Puma. H&H
and Puma were acquired by Oakhurst in fiscal 1995 and fiscal 1996,
respectively.
In fiscal 1997, H&H and Puma experienced operating losses of
approximately $500,000 in the aggregate on sales of approximately $9.4 million.
In April 1997, Oakhurst's Board of Directors made the decision to sell or
otherwise dispose of H&H, and in June 1997, Puma was sold reflecting
management's determination to return the Company to profitability.
ITEM 2. PROPERTIES
SCPI operates its business from a 88,000 square-foot building that it
owns, located in an industrial park in Pittsburgh, Pennsylvania. The original
building was constructed in 1970 and it has been expanded several times.
Dowling's conducts it business from seven leased facilities
aggregating 92,000 square feet, which are located in Mt. Vernon and Hempstead,
New York, in Bridgeport and East Hartford, Connecticut, in Hillside and Lodi,
New Jersey and in Philadelphia, Pennsylvania. In fiscal 1997, Dowling's added
the seventh location in Philadelphia, Pennsylvania, comprising 20,000 square
feet, through an acquisition (see Item 1, Business; Dowling's Fleet Service
Company, Inc. - Background and Customer Base); this location is leased from the
former shareholder.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended February 28, 1997.
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed and traded on the Nasdaq
Small-Cap Market under the symbol OAKC.
The following table sets forth, for the periods indicated, the high
and low bid prices for the Company's Common Stock as reported by Nasdaq:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28, 1997 FISCAL YEAR ENDED FEBRUARY 29, 1996
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
QUARTER HIGH LOW HIGH LOW
First $1.38 $1.00 $3.38 $2.50
Second $1.38 $1.00 $2.50 $1.88
Third $1.31 $1.00 $2.25 $1.38
Fourth $1.31 $1.13 $1.50 $1.13
</TABLE>
The stock price ranges reflect inter-dealer prices without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
There were approximately 3,600 holders of record of Oakhurst's common
stock on June 1, 1997.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and other data of Oakhurst
Company, Inc. and subsidiaries and should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which follows, and with the Consolidated Financial Statements and
related Notes.
<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 26, FEBRUARY 27,
1997 (A) 1996 1995 1994 1993
------------ ------------ ----------- ----------- -----------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales ......................................... $ 41,928 $ 47,339 $ 43,142 $ 32,386 $ 33,584
======== ======== ======== ======== ========
(Loss) income from continuing operations before
income taxes and minority interest ....... $ (5,663) $ (2,158) $ 1,442 $ 786 $ 472
Current income tax (expense) benefit .......... (12) 115 (155) (112) (148)
Deferred income tax expense (b) ............... (3,086) (2,000) (468) (235) (115)
Minority interest in SCPI's loss (income)
attributable to common stockholders ...... -- -- -- -- 533
--------- --------- --------- -------- --------
(Loss) income from continuing operations ...... (8,761) (4,043) 819 439 742
Income (loss) from discontinued
retail operations (c) .................... -- 65 90 -- (44)
--------- --------- --------- -------- --------
Net (loss) income ............................. $ (8,761) $ (3,978) $ 909 $ 439 $ 698
========= ========= ========= ======== ========
PER SHARE AMOUNTS:
(Loss) income from continuing operations ...... $ (2.74) $ (1.27) $ 0.27 $ 0.16 $ 0.27
Income (loss) from discontinued
retail operations ........................ -- 0.02 0.03 -- (0.02)
--------- --------- --------- --------- --------
Net (loss) income ............................. $ (2.74) $ (1.25) $ 0.30 $ 0.16 $ 0.25
========= ========= ========= ========= ========
BALANCE SHEET STATISTICS:
Total assets .................................. $ 15,907 $ 26,117 $ 33,301 $ 18,767 $ 14,632
Long-term obligations ......................... $ 5,716 $ 7,569 $ 6,612 $ 1,429 $ 1,766
Book value per share of common stock .......... $ 0.67 $ 3.41 $ 4.65 $ 4.39 $ 2.20
</TABLE>
(a) Results for fiscal 1997 include an aggregate charge of approximately $3.5
million related to the sale of Puma and to the disposal of H&H, two of the
Company's subsidiaries. The charge primarily consisted of the write-off of
the goodwill associated with the acquisition of such subsidiaries (see Note 2
to the Consolidated Financial Statements).
(b) Results for fiscal 1997 and 1996 include net non-cash deferred tax charges
of $3.1 million and $2 million, respectively, primarily relating to increases
in the Company's valuation of it's deferred tax asset (see Note 6 to the
Consolidated Financial Statements).
(c) In fiscal 1991, SCPI sold its Retain Division to RAC as discussed in Note 7
to the Consolidated Financial Statements. SCPI remained contingently liable for
most mortgage debt, and for many lease obligations of the Retail Division
following the sale. RAC was forced into bankruptcy in March 1991. RAC's
Reorganization Plan (the "RAC Plan") contained provisions for releases in favor
of SCPI together with an injunction against further actions by contingent
creditors against SCPI. Accordingly, SCPI was released from further liability
except for payment of the Creditor Notes, as further described in Note 7 of
the Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Management believes that the corporate structure resulting from the
merger transaction, whereby Steel City Products Inc. ("SCPI") became a special,
limited purpose, majority-owned subsidiary of Oakhurst Company, Inc.
("Oakhurst"), will facilitate capital formation by Oakhurst while permitting
Oakhurst and SCPI to file consolidated tax returns so that both may utilize the
tax benefits (including approximately $150 million of net operating loss
carry-forwards) attributable to SCPI. Through Oakhurst's ownership of SCPI,
primarily in the form of preferred stock, Oakhurst retains the value of SCPI,
and receives substantially all of the benefit of SCPI's operations through
dividends on such preferred stock. Oakhurst's ownership of SCPI facilitates the
preservation and utilization of SCPI's net operating loss carry-forwards.
Until 1994, Oakhurst's principal business, which is conducted by SCPI
under the trade name "Steel City Products", was the distribution of automotive
parts and accessories from a facility in Pittsburgh, Pennsylvania.
In August 1994, Oakhurst acquired all the outstanding capital stock of
Dowling's Fleet Service Co., Inc. ("Dowling's"), a New York-headquartered
distributor of automotive radiators and related products, for an aggregate
purchase price of approximately $4.7 million, all of which has been paid except
for two notes payable to certain executives of Dowling's with a remaining
balance of $374,000. In March 1996, Dowling's acquired all of the outstanding
capital stock of G&O, a radiator distributor based in Philadelphia,
Pennsylvania.
In connection with the acquisition of G&O, Dowling's entered into a
non-competition agreement with the seller that provides for payments of
$315,000 over a three year period, and for payments of 7.5% of the defined
profits of G&O for the next four years. The value of the non-competition
agreement has been discounted using an imputed interest rate of 9.75%, and the
related asset is being amortized over the life of the agreement, which is ten
years.
In January 1994, Oakhurst acquired all the outstanding capital stock
of H&H Distributors, d/b/a Harry Survis ("H&H"), a Pittsburgh-based company
that distributes and installs automotive accessories, including stereos, alarms
and cellular phones, for an aggregate purchase price of $1.4 million. In
October 1994, Oakhurst acquired all of the outstanding capital stock of Puma
Products, Inc. ("Puma"), a Texas-based distributor of after-market products to
the light truck and van conversion industry, for an aggregate purchase price of
approximately $4.2 million that consisted of cash of $1.2 million, notes
payable and an earn-out payable issued to the seller aggregating approximately
$2.3 million, and the issuance of 266,667 shares of Oakhurst's common stock. In
fiscal 1997, these two subsidiaries experienced aggregate losses of
approximately $500,000, and as a result, Oakhurst reached an agreement in June
1997 to sell Puma to its former owner, and in April 1997, Oakhurst's Board of
Directors made the decision to sell or otherwise dispose of H&H. (see
"Management's Discussion and Analysis Significant Events and Trends").
SIGNIFICANT EVENTS AND TRENDS
SCPI SUBSIDIARY
SCPI's customers are continually affected by changes in the retail
environment, including the recent competitive pressures facing regional mass
merchandisers and the growing influence of national automotive specialty
chains. These have led to fluctuations in the level of business that SCPI
enjoys with individual customers. In recent years, SCPI has lost some
significant customers and has suffered reductions in business as certain
customers have closed stores in the face of competition, have been forced into
bankruptcy, or have reduced their automotive merchandise selection.
Furthermore, some customers have changed their buying practices to acquire
certain merchandise direct from manufacturers rather than through distributors
such as SCPI.
In fiscal 1993, SCPI's two then-largest customers filed for bankruptcy
protection. One of the customers closed all its stores in December 1993; the
other, Jamesway Corporation ("Jamesway") reorganized and emerged from Chapter
11 in January 1995. Jamesway continued to be one of SCPI's largest customers
until October 1995,
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when it again filed for protection under the U.S. Bankruptcy Code, and shortly
thereafter closed all its stores. SCPI's results for fiscal 1996 include a
write-off of approximately $150,000 in relation to the balances due from
Jamesway. In the first seven months of fiscal 1996 through September 1995, when
sales to Jamesway ended, SCPI's sales to this customer were approximately $4
million.
In November 1995, Forest City Auto Parts, Inc. ("Forest City")
informed SCPI of its decision to change its source of supply; sales to Forest
City ceased in January 1996. In fiscal 1996, sales to Forest City were
approximately $4.6 million.
In its efforts to offset these trends, SCPI strengthened its sales
team to help identify new customers and better serve existing customers,
expanded its product offerings to certain customers and enlarged the territory
that it serves. In fiscal 1996, SCPI began offering certain "hard parts" such
as brake rotors, and in fiscal 1997, SCPI introduced a new merchandise category
of non-food pet supplies, and began a new division ("Wing-Tech") to distribute
automotive wings (or spoilers). Although the pet supplies are not typical of
SCPI's historical merchandise mix, management determined that the availability
of existing customers which sell both pet supplies and automotive accessories,
combined with SCPI's distribution expertise and infrastructure, offered an
opportunity for increased sales. In June 1997, SCPI sold the Wing-Tech business
to the buyer of Puma.
During fiscal 1996, SCPI added two new large customers (NHD and Ames)
and other new customers, and during fiscal 1997 added other customers and
expanded sales to certain other customers. However, the level of sales to such
customers is currently not sufficient to offset the loss of the Jamesway and
Forest City business. In reaction to the lower sales levels, management
substantially reduced its inventory levels and eliminated certain operating and
overhead expenses in fiscal 1997. During the latter part of fiscal 1997, SCPI
began to ship pet supplies to an existing significant automotive customer,
Giant Eagle, and added a supermarket chain, Kroger, as an automotive customer.
In light of these developments, management expects that sales in fiscal 1998
will exceed those in fiscal 1997, but not in amounts sufficient to return SCPI
to historical levels of sales.
DOWLING'S SUBSIDIARY
During the first half of fiscal 1996, Dowling's was faced with intense
competitive pressures in one of its markets due to the nearby opening of a
competitor that hired five Dowling's employees. Management's efforts to
overcome this competition succeeded in returning sales to historical levels
during the latter part of fiscal 1996. In fiscal 1997 Dowling's experienced an
improved competitive situation and a strengthening of demand in its existing
markets, with a return to historical levels of sales and gross margins.
Dowling's sales levels in the current year in its existing markets reflected an
increase of 17% over fiscal 1996.
In the first quarter of fiscal 1997, Dowling's acquired an existing
radiator distributor in Philadelphia, Pennsylvania for approximately $210,000,
payable half in cash and half in the form of a one year note payable. This
expansion produced further sales increases of approximately $1.1 million.
SUBSIDIARIES HELD FOR SALE - H&H AND PUMA
Despite the opening of new facilities, the introduction of new product
lines, a restructuring of the sales force and increased advertising, sales at
H&H have continued on a downward trend, due principally to reduced demand for
certain categories of car accessories and increased competition in the cellular
phone business, combined with a decrease in the commission rate earned on each
phone activation. Because of management's belief that these trends could not be
reversed, and to end the cash drain on Oakhurst's resources, in April 1997,
Oakhurst's Board of Directors decided to sell or otherwise dispose of this
subsidiary. Management believes that there is no net realizable value relative
to the capital stock of H&H.
At Puma, beginning in the first quarter of fiscal 1996, the strong
retail demand for light trucks and sport utility vehicles had an adverse impact
on sales, because vehicle manufacturers sought to satisfy dealer demand at the
expense of converters, which represented an important segment of Puma's
customers. This situation led to an intensification of competition among
suppliers to the converter market and certain converter customers were lost,
and for the remainder of fiscal 1996 and through 1997 resulted in a downward
sales trend. In response to this
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<PAGE> 12
situation, management during fiscal 1996 opened a second facility in Elkhart,
Indiana, center of the vehicle conversion industry; continued to strengthen its
management and sales team; enlarged its product offering, including the
addition of van products to its wood accessories line; and introduced an
extensive catalog targeted at the restyler and accessories retailer market.
Although sales of certain non-wood accessories increased, sales of wood
accessories continued to reflect a downward trend, and Puma had operating
losses of approximately $270,000 in fiscal 1997. To immediately end the cash
drain on Oakhurst, in June 1997 the Company sold Puma to its former owner,
Anthony N. Puma, in return for the cancellation of $600,000 in acquisition debt
due to him by Oakhurst, the cancellation of future earn-out obligations to Mr.
Puma, the repayment by Mr. Puma of $400,000 in revolving debt owed by Puma
under a credit agreement, the cancellation of Oakhurst's intercompany debts to
Puma, and the payment of $50,000 by Oakhurst to Mr. Puma. The agreement also
provides for Mr. Puma to make a payment to Oakhurst in the event he re-sells
the business, under certain circumstances. The sale eliminates substantial
contingent obligations related to lease and employment agreements with Mr.
Puma.
As a result of the anticipated disposition of these two businesses,
Oakhurst's results for fiscal 1997 include a charge of approximately $3.5
million, of which about $3.1 million represents the write-off of the excess of
costs over net assets acquired (goodwill) relating to their original
acquisition.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING AND LINE OF CREDIT
In addition to cash derived from the operation of its subsidiaries,
Oakhurst's liquidity and financing requirements have been determined
principally by the working capital needed to support each subsidiary's level of
business, together with the need for capital expenditures and the cash required
to repay debt. Each subsidiary's level of working capital needs varies
primarily with the amounts of inventory carried, which can change seasonally,
the size and timeliness of payment of receivables from customers, especially at
SCPI which from time to time grants extended payment terms for seasonal
inventory build-ups; and the amount of credit extended by suppliers.
After reflecting the subsidiary disposals previously discussed, at
February 28, 1997 Oakhurst's remaining debt primarily consisted of (i) a SCPI
term loan of approximately $1.3 million secured by SCPI's real estate, and
revolving debt under a credit agreement with a balance of $3.9 million; (ii)
notes payable of $374,000 that were issued in connection with the fiscal 1995
acquisition of Dowling's (the "DFS Notes"), and a note and non-competition
agreement of $309,000 issued in connection with Dowling's acquisition of G&O;
and (iii) the SCPI Creditor Notes (see below).
Historically, SCPI's operations were more profitable than in fiscal
1997 and 1996 and its cash flow was sufficient to fund its own working capital
needs, to repay the scheduled principal reductions required by the Creditor
Notes and Term Loan, and to pay dividends to and make loans to Oakhurst.
In fiscal 1994 and 1995, accumulated cash, along with the addition of
debt under the term loan and credit agreement, was used for acquisitions. In
fiscal 1996 continuing operations provided cash flow of only $125,000. In
fiscal 1997, there was positive cash from operations of $809,000, primarily
resulting from aggressive inventory management at SCPI, but this amount was not
sufficient to satisfy all of the Company's debt service obligations, and the
revolving debt increased by $131,000 in such year.
In March 1996, Oakhurst obtained financing from an institutional
lender, replacing its then existing credit arrangement, that provides a total
facility of $9.5 million, comprising a new SCPI term loan of $1.5 million (the
"Fixed Asset Loan") and a maximum revolving credit facility of $8 million (the
"Revolver") (collectively, the "Credit Facility"), and the amounts outstanding
under the prior term loan and credit agreement were repaid. The Credit Facility
provided a significant increase in financing available to Oakhurst and its
subsidiaries. In connection with the new financing, Oakhurst and its
subsidiaries incurred loan costs and fees of approximately $299,000.
The Credit Facility is secured by the accounts receivable,
inventories, and fixed assets of all of Oakhurst's subsidiaries. Like the term
loan that it replaced, the Fixed Asset Loan is secured by SCPI's building in
Pittsburgh, but provides a more beneficial amortization schedule of twenty-four
monthly principal and interest payments of
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<PAGE> 13
approximately $32,000, with the remaining principal balance due on April 1,
1998. The Fixed Asset Loan provides for prepayment without penalty, and
contains a provision for the release of SCPI's building as collateral in the
event of a refinancing, subject to a right of first refusal by the current
lender to refinance the loan on the same terms as offered by a new lender.
Borrowings under the Credit Facility bear interest at the higher of
the Citibank N.A. base rate plus 1.5%, or $5,000 per month, and borrowings
under the Revolver are subject to a borrowing base that is calculated according
to defined levels of Oakhurst's subsidiaries' accounts receivable and
inventories. The Credit Facility has an initial term of two years, with
automatic renewal terms of one year each upon payment of a renewal fee of 0.5%
thereof, unless earlier terminated as provided for in the agreement, and
contains certain customary restrictive financial and non-financial covenants,
including the maintenance of defined subsidiary and consolidated tangible net
worth levels and consolidated current ratio, and limitations on cash dividends.
Primarily because of the subsidiary disposals, at February 28, 1997
Oakhurst did not meet certain covenants under its Credit Agreement, and has
received waivers from its lender with respect to its compliance with such
covenants. On June 12, 1997, Oakhurst entered into an agreement with the lender
to amend the Credit Facility to reflect the disposals. The agreement
principally reduces the total amount available under the Revolver to $7
million, and amends certain financial covenants, including the elimination of
the consolidated tangible net worth covenant.
The DFS notes bear interest at 6%, and provide for repayment in
quarterly installments of $22,000 each, together with accrued interest thereon,
beginning in June 1996.
The G&O note payable of $105,000 carried interest at 7%, and was paid
in full on the first anniversary of the acquisition date. In connection with
the G&O acquisition, Dowling's entered into a non-competition agreement with
the seller that provides for payments of $315,000 over a three year period, and
for payments of 7.5% of the defined profits of G&O for the next four years. The
value of the non-competition agreement has been discounted using an imputed
interest rate of 9.75%, and the related asset is being amortized over the life
of the agreement, which is ten years.
The creditor notes that were issued by SCPI in connection with the
bankruptcy of Retail Acquisition Corp., (the "Creditor Notes") (see Note 7 to
the consolidated financial statements) are payable in six equal annual
installments through July 1998, subject to certain prepayment criteria in
fiscal 1996 and 1997, which SCPI did not meet in either year. The Creditor
Notes have been discounted using an imputed interest rate of 7.5%.
Management believes that the availability of financing pursuant to the
Credit Facility, together with the steps taken in response to recent operating
losses, will provide adequate funding for the Company's working capital, debt
service and capital expenditure requirements, including seasonal fluctuations,
for at least the next twelve months.
CAPITAL EXPENDITURES
The Company has no outstanding commitments for significant capital
expenditures.
TAX LOSS CARRY-FORWARDS
At February 28, 1997, SCPI and Oakhurst had net operating tax loss
carry-forwards (the "Tax Benefits") of approximately $150 million, which
principally expire in the years 2001 through 2011, and capital losses of
approximately $4 million, which shelter most of SCPI's and Oakhurst's income
from federal income taxes. A change in control of SCPI or Oakhurst in any
three-year period exceeding 50% may lead to the loss of the majority of the Tax
Benefits. In order to reduce the likelihood of such a change of control
occurring, SCPI's and Oakhurst's Certificates of Incorporation include
restrictions on the registration of transfers of stock resulting in, or
increasing, individual holdings exceeding 4.5% of each company's common stock.
Since the regulations governing the Tax Benefits are highly complex
and may be changed from time to time, and since SCPI's and Oakhurst's attempts
to reduce the likelihood of a change of control occurring may not be
successful, management is unable to determine the likelihood of the continued
availability of the Tax Benefits. However, management believes that the Tax
Benefits are currently available in full and intends to take all
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<PAGE> 14
appropriate steps to help ensure that they remain available. Should the Tax
Benefits become unavailable to SCPI or Oakhurst, most future income of any
consolidated affiliate would not be shielded from federal taxation, thus
reducing funds otherwise available for corporate purposes (see Note 6 to the
consolidated financial statements).
As of February 28, 1997, Oakhurst is required to earn approximately
$2.9 million of consolidated taxable income before the expiration of the tax
benefits, to realize the net recorded tax benefit.
FORWARD LOOKING STATEMENTS
From time to time the information provided by the Company or
statements made by its employees may contain so-called "forward looking"
information that involves risks and uncertainties. In particular, statements
contained in Item 1 - "Business" and in this Item 7 - "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are not
historical facts (including, but not limited to statements concerning
anticipated sales, profit levels, customers and cash flows) are forward looking
statements. The Company's actual future results may differ significantly from
those stated in any forward looking statements. Factors that may cause such
differences include, but are not limited to the factors discussed above as well
as the accuracy of the Company's internal estimates of revenue and operating
expense levels. Each of these factors and others are discussed from time to
time in the Company's Securities and Exchange Commission filings.
RESULTS OF OPERATIONS
Operations include the consolidated results for Steel City Products,
Dowling's, Puma and H&H, together with administrative costs of SCPI and
Oakhurst.
FISCAL YEAR ENDED FEBRUARY 28, 1997 COMPARED WITH FISCAL YEAR ENDED FEBRUARY
29, 1996
Consolidated sales decreased by approximately $5.4 million, or by
11.4%, when compared with the prior year. The decrease was primarily caused by
the loss of two of SCPI's largest customers during the prior year. These two
customers accounted for a decrease in sales in the current year of
approximately $8.5 million. Sales to SCPI's existing customers also decreased
by approximately $780,000. Sales of car alarms, stereo accessories and cruise
control equipment decreased by approximately $285,000 due to the lower retail
and wholesale demand, and cellular phone revenues also decreased by
approximately $770,000 because of a lower average commission rate this year
combined with fewer activations due to increased competition in this market.
Sales of light truck and van aftermarket accessories decreased by $915,000, due
primarily to the loss by Puma of two large converter customers in the prior
year.
The addition of new customers by SCPI and of new product lines by SCPI
and H&H together accounted for $2.9 million in new sales, partially offsetting
the sales decreases. Sales of radiators and related products by Dowling's
increased over the prior year by over $3 million, representing an increase of
26%, which is attributed to an improved competitive situation this year in
Dowling's markets, combined with favorable weather in the first quarter, an
increase in market share, and the addition of the Philadelphia G&O facility.
As previously described, Puma was sold in June 1997 and H&H is
expected to be disposed in the second quarter of fiscal 1998, and accordingly,
consolidated sales are expected to be lower in fiscal 1998 than in
fiscal 1997. However, net profits are expected to improve, since these
subsidiaries had net operating losses in fiscal 1997.
Other income decreased by $144,000, due to lower commission income
earned by Puma in the current year, lower auto show revenues earned by SCPI,
due to a smaller show in the current year, and because of interest on a tax
refund from Kentucky in the prior year.
Gross profits were approximately $9.5 million, or 22.6% of sales, in
the current year compared with $10 million, or 21.2% of sales, in the prior
year period, reflecting a decrease of $549,000. Lower levels of sales by all of
the subsidiaries except Dowling's contributed to gross lower profits of
approximately $1.9 million, but this was partially offset by improved gross
margins earned by all of the subsidiaries. The improved gross margin
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<PAGE> 15
performance was due to lower costs on certain product lines, and to the
improved competitive situation in certain of Dowling's markets.
Operating, selling and administrative expenses decreased by $379,000
when compared to the prior year, which primarily reflected management's efforts
to reduce its work force and other expenses in reaction to lower levels of
sales.
There was a decrease of $508,000 in the provision for doubtful
accounts compared with the prior year, when the Company recorded provisions for
the bankruptcies of several customers, including one of SCPI's largest
customers.
Interest expense increased by $197,000 in the current year, due
primarily to higher average borrowings.
Income tax expense increased by approximately $1.2 million in the
current year, due primarily to a higher charge to deferred tax expense in the
current year that resulted from an increase in the valuation allowance of the
deferred tax asset.
FISCAL YEAR ENDED FEBRUARY 29, 1996 COMPARED WITH FISCAL YEAR ENDED FEBRUARY
28, 1995
Compared with fiscal 1995, sales increased by approximately $4.2
million, or 10%. Increased sales of about $7.7 million resulted from the full
year of sales attributable to Dowling's ($4.5 million) and Puma ($3.2 million).
Sales by existing businesses decreased by approximately $3.5 million.
Compared with fiscal 1995, sales attributable to SCPI decreased by
about $2.7 million. SCPI sales increases aggregating $3 million resulted
primarily from the addition of several new customers, together with higher
sales to several existing customers. These sales increases were offset by
decreases at SCPI of $5.7 million, with a reduction in sales to Jamesway of
approximately $490,000, following that customer's bankruptcy in October 1995, a
reduction of $1.4 million in sales to Forest City, following that customer's
decision during the third quarter of fiscal 1996 to change its source of
supply, together with other sales decreases attributable to SCPI's customers in
the Northeast market and certain other smaller SCPI customers that resulted
from intense competitive pressures on those customers and reduced sales of
spring product lines due to a rainy spring season. The remainder of the
decrease resulted from lower sales to other customers that have downsized or
eliminated their automotive departments, have filed bankruptcy, or that have
changed their source of supply.
Sales attributable to H&H decreased by approximately $840,000, despite
the opening of a second location in September 1994. Approximately 65% of the
decrease is attributed to reduced equipment sales and commission revenues
associated with H&H's cellular phone business as a result of increased
competition in fiscal 1996, combined with a reduced commission structure
related to cellular activations. The balance of the reduction is due to lower
sales of car accessories and lower installation fees earned.
Other income decreased by $184,000 compared with fiscal 1995,
principally due to the recovery by SCPI of $175,000 in that year that was
placed in escrow in prior years as part of SCPI's predecessor's bankruptcy.
Consolidated gross profits were $10 million (21.2% of sales), compared
with $10.8 million (24.9% of sales) last year. The decrease in gross profits
resulted from the lower sales levels discussed above, combined with decreases
in gross margins. In addition to the fact that gross margin levels earned by
the newly-acquired businesses are expected to be at somewhat lower levels than
those earned by the Company's traditional businesses, each of the four
operating companies encountered a reduction in gross margins in fiscal 1996
compared with fiscal 1995. SCPI's margin reduction resulted primarily from more
competitive pricing to customers. H&H earned lower gross margins because of
increased promotions and the impact of a lower commission structure on its
cellular phone business. Dowling's was affected by increased competition,
especially in one of its Connecticut markets. Puma lowered pricing to many of
its customers, while absorbing certain manufacturers' price increases.
Operating, selling and administrative expenses increased by $1.7
million. Approximately $1.8 million is attributable to the two businesses
acquired in fiscal 1995. SCPI's operating and selling expenses decreased by
approximately $40,000, along with lower SCPI executive salaries and profit
sharing expenses of approximately
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<PAGE> 16
$300,000. There were higher corporate overheads necessitated by the larger
company, and expenses of approximately $130,000 which related to a registration
statement filing in fiscal 1996.
There was an increase in the provision for doubtful accounts of
$583,000 when compared with fiscal 1995, of which $415,000 is attributable
to SCPI where the provision was increased by $150,000 in connection with the
balances due from Jamesway (one of SCPI's largest customers) at the second
quarter of fiscal 1996, and by $265,000 to provide for the bankruptcies of
several of SCPI's small customers that occurred during fiscal 1996, together
with provisions for several other past due and disputed accounts. Dowling's
also included a provision of approximately $140,000, primarily resulting from
the bankruptcy of a customer in the fourth quarter of fiscal 1996.
Amortization of the excess of costs over net assets acquired
("goodwill") increased by $149,000 compared with fiscal 1995, as a result of
the acquisitions such year.
Interest expense increased by $235,000 principally as a result of the
debt incurred in connection with the acquisitions and higher average levels of
working capital borrowings.
Although there was a loss from continuing operations in fiscal 1996,
compared with income in fiscal 1995, income tax expense increased by $1.3
million because of a charge to deferred tax expense of $2 million in fiscal
1996, that resulted from an increase in the valuation allowance of the deferred
tax asset.
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<PAGE> 17
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<S> <C> <C>
Independent Auditors' Report....................................................... F-1
Consolidated Balance Sheets: February 28, 1997 and February 29, 1996............... F-2
Consolidated Statements of Operations for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28, 1995....................... F-3
Consolidated Statements of Stockholders' Equity for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28, 1995....................... F-4
Consolidated Statements of Cash Flows for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28, 1995....................... F-5
Notes to Consolidated Financial Statements......................................... F-6
Supplementary Financial Data:
Selected Quarterly Financial Data (unaudited) for the fiscal years ended
February 28, 1997 and February 29, 1996......................................... F-19
Financial Statement Schedules for the fiscal years ended February 28,
1997, February 29, 1996 and February 28, 1995:
Schedule II - Valuation and Qualifying Accounts................................ F-21
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
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<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The by-laws of the Company provide for such number of directors as is
determined from time to time by the Board of Directors. There are currently six
directors divided into three classes, each class having a term of three years.
<TABLE>
<CAPTION>
NAME AGE CURRENT TERM EXPIRES DIRECTOR CLASS
SINCE
<S> <C> <C> <C> <C>
John D. Abernathy 59 1997 1994 II
Mark Auerbach 59 1997 1991 II
Bernard H. Frank 76 1997 1995 II
Joel S. Lever 45 1998 1994 III
Anthony N. Puma 33 1998 1995 III
Robert M. Davies 46 1999 1991 I
</TABLE>
Robert M. Davies. Mr. Davies has been Chairman, President and Chief Executive
Officer of the Company since May 1997. Mr. Davies was a Vice President of
Wexford Capital Corporation, which acts as the investment manager to several
private investment funds from 1994 to March 1997. From November 1995 to March
1997 Mr. Davies has also served as Executive Vice President of Wexford
Management LLC, a private investment management company. From September 1993 to
May 1994 he was a Managing Director of Steinhardt Enterprises, Inc., an
investment banking company, and from 1987 to August 1993, he was Executive Vice
President of The Hallwood Group Incorporated, a merchant banking firm. Mr.
Davies is a director of the Company's majority owned subsidiary, Steel City
Products, Inc.
John D. Abernathy. Mr. Abernathy has been Executive Director of Patton Boggs,
L.L.P., a Washington DC law firm, since January 1995. From March 1991 to
February 1994 he was the Managing Director of Summit, Solomon & Feldesman, a
New York City law firm, and from July 1983 until June 1990, Mr. Abernathy was
Chairman and Chief Executive Partner of BDO Seidman, a public accounting firm.
Mr. Abernathy is a director of Barringer Technologies, Inc., a manufacturer of
high sensitivity analytical instruments for chemical sensing and Wahlco
Environmental Systems, Inc., an environmental equipment and services company,
and is also a director of the Company's majority-owned subsidiary, Steel City
Products, Inc..
Mark Auerbach. Mr. Auerbach was Chairman, President and Chief Executive Officer
of the Company from December 1995 to May 1997. He has been Chief Financial
Officer of the Company and its majority owned subsidiary, Steel City Products,
Inc., since December 1995. He has also been Senior Vice President and Chief
Financial Officer since April 1993 of Central Lewmar, L.P., a fine paper
merchant. From September 1992 until April 1993, he was a partner of Marron
Capital, L.P., an investment banking company. Prior to that, he was President,
Chief Executive Officer and Chairman of the Board of Implant Technology, Inc.,
a manufacturer of artificial hip systems, from 1990 to 1992. He is a director
of Pharmaceutical Resources, Inc., a generic drug manufacturer, and of the
Company's majority owned subsidiary, Steel City Products, Inc.. Mr. Auerbach is
a certified public accountant.
Bernard H. Frank. Mr. Frank has been Executive Vice President and Chief
Operating Officer of the Company since May 1994 and is a founder of the
Company's majority owned, publicly traded subsidiary, Steel City Products,
Inc., of which he has been Chief Executive Officer and a director since 1993,
Chairman since 1994 and an executive officer for more than the last five years.
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<PAGE> 19
Joel S. Lever. Mr. Lever has been associated with the law firm of Kurzman &
Eisenberg or its predecessor since 1980, and became a member of the firm in
1984. Mr. Lever specializes in transactional business matters with particular
emphasis on fine arts publishing, distribution and investment, and the sale and
acquisition of commercial real estate entities. Prior to 1980, Mr. Lever was an
Assistant District Attorney for Kings County, New York. Mr. Lever also serves
as a director of the Company's majority-owned subsidiary, Steel City Products,
Inc.
Anthony N. Puma. Mr. Puma is Chairman and founder (in 1988) of Puma Products,
Inc., which was acquired by the Company in October 1994. Before that, Mr. Puma
held various positions with SDI Corporation, a distributor of accessories to
the small truck and van conversion markets. In May 1997, the Company sold Puma
Products back to Mr. Puma.
EXECUTIVE OFFICERS
The following are the names, ages, positions and a brief description of the
business experience during the last five years of the executive officers of the
Company and its subsidiaries, all of whom serve until they resign or are
removed by the Board of Directors that appointed them. The business histories
of Messrs. Auerbach, Davies and Frank are set forth above under the heading
"Directors."
ROGER M. BARZUN (55): Senior Vice President, Secretary and General Counsel. Mr.
Barzun has been Secretary and General Counsel of Oakhurst since August 1991 and
a Senior Vice President since May 1994. He is also Secretary and General
Counsel of SCPI. Mr. Barzun has been a lawyer since 1968 and is a member of the
New York and Massachusetts bars.
JOHN R. RUDA (54): Executive Vice President - Marketing. Mr. Ruda was a
director and an executive officer (most recently as President) of SCPI for more
than five years until his resignation in December 1995, when he was elected to
his current position with Oakhurst. His employment by the Company terminated in
February 1997.
LAURENCE D. FINMAN (38): Vice President. Mr. Finman was Vice President and
Chief Operating Officer of the Company's Puma Products subsidiary since shortly
before its acquisition in October 1994 until September, 1996, when he was
elected President and Chief Operating Officer of Puma Products. In May 1997 the
Company disposed of Puma Products and Mr. Finman resigned as an officer and
employee thereof. In December 1995 Mr. Finman was also elected a Vice President
of the Company. Prior to joining Puma, Mr. Finman held senior management
positions in a family-owned tire distribution business.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities ("Insiders") to file reports of ownership
and certain changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of those reports.
Based solely on a review of those reports and amendments thereto furnished to
the Company during its most recent fiscal year or written representations by
Insiders that no Forms 5 were required to be filed, the Company believes that
during the fiscal year ended February 28, 1997, all Section 16(a) filing
requirements applicable to the Company's Insiders were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
This item contains information about compensation, stock options and awards,
employment arrangements and other information concerning certain of the
executive officers of the Company and of its largest subsidiary, Steel City
Products, Inc. ("SCPI").
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<PAGE> 20
SUMMARY COMPENSATION TABLE
The table below sets forth compensation paid to the Chief Executive Officer,
and to the other most highly compensated executive officers of the Company
whose compensation exceeded $100,000 in fiscal 1997. Also included is
compensation paid to an executive officer of SCPI who is not, however, an
executive officer of the Company.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Other Securities All
Annual Underlying Other
Name and Principal Year Salary Bonus Compensation Options Compensation
- ------------------------------- -------------------- --------------------------------------------------------
Mark Auerbach (1) 1997 100,000 -- -- -- --
Chairman President & 1996 24,000 -- -- 100,000 --
Chief Executive Officer
Bernard H. Frank (2) 1997 50,243 16,000 -- 68,327 13,908 (3)
Executive Vice President 1996 82,775 -- -- -- 19,151
& Chief Operating Officer 1995 100,100 55,779 -- 27,500 21,029
John R. Ruda (4) 1997 100,385 16,000 35,827 --
Senior Vice President - 1996 151,500 -- -- -- 6,847
Marketing 1995 151,525 73,632 -- 15,000 9,103
Laurence D. Finman 1997 101,440 -- -- 20,000 --
Vice President
Terrance W. Allan (5) 1997 126,490 14,000 -- 24,333 --
Executive Vice President 1996 106,160 -- -- 5,000 4,797
SCPI 1995 110,855 21,746 -- 6,000 6,498
</TABLE>>
- -----------------
* Excludes perquisites and other personal benefits if the aggregate
amount of such items of compensation was less than the lesser of
either $50,000 or 10% of the total annual salary and bonus of the
named executive officer.
1. Mr. Auerbach became Chief Executive Officer of the Company in December
1995 and served in that capacity as a consultant to the Company until
May 1997.
2. Mr. Frank, who is also Chairman and Chief Executive Officer of SCPI,
is compensated only by SCPI, except with respect to stock options and
stock awards. Of the 68,327 shares shown as underlying options, 48,327
shares relate to options granted in previous years, but which, under
Securities and Exchange Commission rules, are deemed granted on the
date of their re-pricing in May 1996. See "Ten-Year Option
Re-Pricing," below.
3. This amount consists of $6,504, $5,508 and $1,896 that Mr. Frank
received under three substantially identical agreements amended in
1987 in consideration of the waiver by Mr. Frank of his bankruptcy
claims for annuity rights in SCPI's predecessor's bankruptcy.
4. Mr. Ruda ceased to be an executive officer and employee of the
Company on February 28, 1997. The 35,827 shares shown as underlying
options relate to options granted in previous years, but which, under
Securities and Exchange Commission rules, are deemed granted on the
date of their re-pricing in May 1996. See "Ten-Year Option
Re-Pricing," below.
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<PAGE> 21
5. Mr. Allan is compensated only by SCPI, except with respect to stock
options and stock awards. Of the 24,331 shares shown as underlying
options, 14,331 relate to options granted in previous years,
but which, under Securities and Exchange Commission rules, are deemed
granted on the date of their re-pricing in May 1996. See "Ten-Year
Option Re-Pricing," below.
COMPENSATION AGREEMENTS
Mr. Auerbach. In December 1995 the Company entered into a one-year consulting
agreement with Mr. Auerbach in connection with his appointment as Chairman,
President and Chief Executive Officer of the Company. The agreement provided
for the payment to Mr. Auerbach of $10,000 per month in consulting fees plus
reimbursement of expenses incurred in carrying out his duties and
responsibilities. The agreement also provided for the grant to him of a stock
option to purchase 100,000 shares of Common Stock pursuant to the Company's
1994 Omnibus Stock Plan. The option is exercisable in two equal installments at
$1.25 and $2.50 per share, respectively, on the grant date and the first
anniversary of the grant date. In October 1996 the agreement was amended to
provide that it would continue through June 30, 1997 and that Mr. Auerbach's
compensation for the period from January 1, 1997 through June 30, 1997 would be
$2,500 per month. On May 27, 1997 Mr. Auerbach resigned as President and Chief
Executive Officer, but remained Chief Financial Officer of the Company at his
then current rate of compensation, and Mr. Davies was elected Chairman and
Chief Executive Officer of the Company.
Mr. Frank and Mr. Allan. SCPI has three-year employment agreements with each of
Messrs. Frank and Allan (sometimes hereinafter referred to as the "executive")
commencing September 1, 1993 that provide for base salaries of $100,000 (Mr.
Frank) and $96,200 increasing to $115,050 (Mr. Allan). The agreements provide
for the payment of annual management bonuses based upon the defined profits of
SCPI's operating division, with Mr. Frank entitled to a minimum bonus of
fifteen percent of base salary. The aggregate amount of such management bonuses
payable each year to the executives and to all other SCPI executives is not to
exceed 8% of such defined profits and the allocation thereof is made by the
Compensation Committee of SCPI based on recommendations of Mr. Frank as Chief
Executive Officer of SCPI. Mr. Allan is also entitled to an executive bonus
calculated as a percentage of defined annual profits of SCPI that exceed
$2,000,000. The Agreements were extended in September 1996.
In the event of non-renewal of the agreements, the executive is entitled to an
aliquot portion of the bonuses he would have earned during the year of
non-renewal, since the contract year does not coincide with the fiscal year of
SCPI. The agreements also provide that if the executive's employment terminates
by reason of his death or disability, he is entitled to the greater of two
years' salary (one year for Mr. Allan) or the salary for the balance of the
term of the agreement and the minimum bonus for such period in the case of Mr.
Frank and the management bonus that would otherwise have been paid in the case
of Mr. Allan. If the executive's employment is otherwise terminated without
cause, he is entitled to his salary and bonuses for the greater of one year or
the balance of the term of the agreement.
The agreements provide for car allowances, and the executives are eligible to
participate in all defined contribution plans, survivor and supplemental
benefits, short and long-term disability benefits, and all other benefit plans
and perquisites available now or in the future to the senior executives of
SCPI.
The agreements also provide for certain termination rights in the event of a
change in control of SCPI. Change in control is defined to include certain
changes in the make-up of the SCPI board of directors or a sale of SCPI's
assets or business. Each executive has the right to terminate his employment
within a defined period (ranging up to one year) following a change in control
and (i) to be paid his base salary for a period of up to 24 months following
such termination; (ii) to continue to receive for a like period the benefits
that he is entitled to receive under his agreement and (iii) to be paid 25% of
base salary in lieu of all bonus entitlement. The agreements also provide for
substantially the same payments and benefits in the event the executive's
employment is terminated by SCPI without cause as a result of a change in
control. In the event of any termination other than for cause, or voluntary
resignation in the absence of a change in control, the executive's options
become fully exercisable for a period of seven months following termination. If
a change in control had occurred on June 1, 1997, and if each of Messrs. Frank
and Allan had exercised his rights of termination, payments by SCPI would have
been approximately $525,000 in the aggregate.
-20-
<PAGE> 22
Mr. Frank. Mr. Frank also receives compensation of $13,908 per year, in the
aggregate, under three substantially identical agreements amended in 1987 in
consideration of the waiver by Mr. Frank of his bankruptcy claims for annuity
rights in SCPI's predecessor's bankruptcy. The amended agreements provide for
payments to be made for a period of fifteen years subsequent to January 1988 of
$6,504, $5,508 and $1,896 per year for the three agreements, respectively.
Mr. Ruda. In December 1995, the Company entered into a one-year agreement with
Mr. Ruda in connection with his appointment as Senior Vice President --
Marketing of the Company commencing March 1, 1996. The agreement provided for
the payment to Mr. Ruda of a base salary of $8,333 per month and participation
in all benefits plans made available to employees and for the use of a Company
car. The agreement also provided for a bonus based on revenues achieved by the
Company's subsidiary, Steel City Products, Inc. ("SCPI"), as follows: one
percent of the defined net revenues of SCPI that exceed seventeen million
dollars up to and including $21 million; plus one-half of one percent of the
defined net revenues of SCPI that exceed $21 million up to and including $23
million; plus one-quarter of one percent of the defined net revenues of SCPI
that exceed $23 million; plus one percent of the defined net revenues of SCPI
derived from the sale of pet supplies; plus one-half of one percent of the
defined net revenues derived from new product categories. If Mr. Ruda's
employment were terminated by the Company without cause, the Company was
obliged to pay him in a lump sum his salary for the balance of the term of the
agreement together with any portion of his bonus earned to the date of
termination. Otherwise, the Company was obliged to give Mr. Ruda 60 days notice
of termination unless termination was for cause, in which event his employment
would terminate on the giving of such notice. If Mr. Ruda elected to resign
from the Company, he was obliged to give 60 days notice. On February 28, 1997
the agreement expired by its terms and Mr. Ruda's employment by the Company
ceased.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to the individuals named in the Summary Compensation Table,
above, during the fiscal year ended February 28, 1997. For purposes of this
table, under Securities and Exchange Commission regulations, options re-priced
on May 1, 1996 are considered to have been re-granted on that date.
Accordingly, the information under the columns entitled "Number of Securities
Underlying Options," "Percent of Total Options Granted to Employees in FY
1997," and "Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Option Term" are all computed on that basis. The expiration
dates of the re-priced options were not affected by the re-pricing.
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term (3)
----------------------------------------- ------------------------------
Percent of
Number of Total Options
Securities Granted to Exercise Expi-
Underlying Employees in Price ration 5% 10%
Name Options Fiscal Year (%) ($) (2) Date ($) ($)
- --------------------- -------------- ---------------- ---------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Auerbach 3,000 (1) 1.69 1.219 05/01/06 2,299 5,828
Bernard H. Frank 20,000 (1) 11.27 1.25 02/27/07 15,722 39,843
20,827* (1) 11.74 2.00 08/29/01 -- 24,180
27,500* (1) 15.50 2.00 04/29/04 -- 31,928
John R. Ruda 20,827* (1) 11.74 2.00 08/29/01 -- 24,180
15,000* (4) 8.46 2.00 04/29/04 -- 17,415
Laurence D. Finman 10,000* 5.64 2.00 02/01/05 -- 11,610
Terrance W. Allan 10,000 (1) 5.64 1.25 02/27/07 7,861 19,921
8,331* (1) 4.70 2.00 08/29/01 -- 9,672
5,000* (4) 2.82 2.00 04/29/04 -- 5,805
1,000* (5) 0.56 2.00 06/19/04 -- 1,161
</TABLE>
- -------------
-21-
<PAGE> 23
* These options were granted in prior years, but were re-priced in May 1996.
See footnote 2, below.
1. This option became exercisable at the date of grant.
2. The original exercise price per share of each option was equal to the
market value on the date of grant. Effective May 1, 1996, the exercise
price per share was reduced to $2.00, in excess of the closing price per
share of the Common Stock on the Nasdaq SmallCap Market on that date
($1.219). See "Ten-Year Option Re-Pricings," below.
3. The "potential realizable value" is calculated based on the term of the
option (ten years) at its date of grant. It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option. However, the
optionee will not actually be able to realize any benefit from the option
unless the market value of the Common Stock in fact increases over the
option price.
4. This option becomes exercisable in three installments of one-third of the
shares, each, from and after the grant date and the following two
anniversaries of the grant date.
5. This option becomes exercisable in four installments of one-fourth of the
shares, each, from and after the grant date and the following three
anniversaries of the grant date.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information based upon the fair market
value per share of the Common Stock at February 27, 1997 ($1.25), the day
closest to the Company's February 28, 1997 fiscal year end on which trades were
made, with respect to stock options held at that date by each of the
individuals named in the Summary Compensation Table, above. The "value" of
unexercised in-the-money options is the difference between the market value of
the Common Stock subject to the options at February 28, 1997 and the exercise
(purchase) price of the option shares. At that date none of the options listed
were in-the-money. During fiscal 1997, there were no option exercises by any of
these individuals.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL YEAR MONEY OPTIONS AT FISCAL YEAR END
END ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Mark Auerbach 123,996 -- 3,000 ----
Bernard H. Frank 68,327 -- -- ----
John R. Ruda 35,827 -- -- ----
Laurence D. Finman 12,500 7,500 -- ----
Terrance W. Allan 26,581 2,750 -- ----
</TABLE>
TEN-YEAR OPTION RE-PRICINGS
The following table sets forth the only re-pricing of options that has occurred
since April 1991 when the Company became a reporting company pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. The new exercise
price, $2.00 per share, was in excess of the $1.219 market price of the
underlying securities at the time of the re-pricing.
-22-
<PAGE> 24
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
NUMBER OF MARKET PRICE TERM
SECURITIES OF UNDERLYING REMAINING AT
UNDERLYING SECURITIES AT EXERCISE PRICE DATE OF RE-
OPTIONS RE- TIME OF RE- AT TIME OF RE- PRICING
DATE OF RE- PRICED PRICING PRICING (IN YEARS)
NAME AND POSITION PRICING (#) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Terrance W. Allan 05/01/96 8,331 1.219 2.750 5.3
05/01/96 5,000 1.219 2.750 8.0
05/01/96 1,000 1.219 3.375 8.1
Roger M. Barzun 05/01/96 8,000 1.219 3.375 8.1
05/01/96 8,000 1.219 3.125 8.8
Laurence D. Finman 05/01/96 10,000 1.219 3.125 8.8
Bernard H. Frank 05/01/96 20,827 1.219 2.75 5.3
05/01/96 27,500 1.219 2.75 8.0
John R. Ruda 05/01/96 20,827 1.219 2.75 5.3
05/01/96 15,000 1.219 2.75 8.0
</TABLE>
The option re-pricing of May 1, 1996 was implemented because the market price
of the Company's common stock had been severely depressed notwithstanding the
dedication and hard work of certain of the Company's key employees, including
certain executive officers, and because those employees had voluntarily agreed
to take salary cuts.
Stock Plans Committee: Robert M. Davies
Joel S. Lever
REPORT ON EXECUTIVE COMPENSATION IN THE 1997 FISCAL YEAR
This report has been prepared by the Compensation Committee and the Stock Plans
Committee of the Board of Directors and addresses the Company's compensation
policies with respect to the Chief Executive Officer and executive officers of
the Company in general for the fiscal year ended February 28, 1997. All members
of the Committees are non-employee directors. The Company has no operating
business of its own, but is a holding company of operating businesses. The
Company has elected to include in the Summary Compensation Table, above,
certain information concerning an executive officer of the Company's largest
subsidiary, Steel City Products, Inc.,("SCPI") who is not, however, an
executive officer of the Company and accordingly, a discussion of his
compensation is included here. Reference is made generally to the information
under the heading "Compensation Agreements," above.
Compensation Policy. The overall intent in respect of executive officers is to
establish levels of compensation that provide appropriate incentives in order
to command high levels of individual performance and thereby increase the value
of the Company to its stockholders, and that are sufficiently competitive to
attract and retain the skills required for the success and profitability of the
Company. The principal components of executive compensation are salary, bonus
and stock options.
Chief Executive Officer's Compensation. The Chief Executive Officer's
consulting fee and stock option grant are the result of a written consulting
agreement that was negotiated between Mr. Auerbach and the Company and that is
described above under the heading "Compensation Agreements." His compensation,
consisting of both cash and stock options, was determined to be appropriate by
the members of the Committees serving at the time based on the non-full-time
nature of the position; the expertise and responsibility that the position
requires; the Chief Executive Officer's prior financial and accounting
experience in former employments; and the subjective judgement of the members
of a reasonable level of compensation.
Other Executive Officers. Mr. Frank is an Executive Officer of the Company, but
receives all of his compensation in his capacity of Chairman and Chief
Executive Officer of SCPI. Mr. Allan is included in the
-23-
<PAGE> 25
Company's proxy disclosures relating to compensation because of his importance
to the success of the Company on a consolidated basis. Prior to December 1995,
Mr. Ruda was an executive officer of SCPI. Each of these and the other
executive officers of the Company is compensated under a written employment
agreement that was reviewed and approved by the Company's Compensation
Committee and in the case of Mr. Allan, by the SCPI Compensation Committee.
Salary. Three of the executive officers are long-term employees of SCPI and its
predecessor, and one of them is a founder of the original business.
Accordingly, the salary of each such executive was based on the level of his
prior salary. As to those and the other executive officers of the Company,
salary levels are also based on the subjective judgement of the members of the
respective Compensation Committees as to the value of the executive's past
contribution and potential future contribution to the business.
Bonuses. Bonuses payable to Messrs. Frank and Allan under their employment
agreements consist of an Annual Management Bonus, and in the case of Mr. Allan,
an additional Annual Executive Bonus. The Annual Management Bonus is paid from
a pool of funds equal to 8% of SCPI's consolidated net income before interest,
taxes, depreciation, LIFO adjustments and amortization, prepared in accordance
with generally accepted accounting principles consistently applied. The amount
of the bonus pool allocation is based on Mr. Frank's recommendations to SCPI's
Compensation Committee. Mr. Frank's recommendations, in turn, are based on his
subjective judgement, formed by over forty years experience with the business,
of the performance of each officer during the preceding year. Mr. Frank is
entitled to a minimum Annual Management Bonus of 15% of salary provided that
SCPI has earnings for the year in question. Bonuses paid in fiscal 1997 related
to earnings in the prior year.
The Annual Executive Bonus for Mr. Allan is equal to 1% of the amount by which
SCPI's consolidated net income (defined in the same manner as for the Annual
Management Bonus) exceeds $2,000,000. SCPI's defined net income did not exceed
the $2,000,000 threshold in fiscal 1997 and accordingly no Annual Executive
Bonuses were paid.
The bonus percentages and amounts contained in the executive's employment
agreements are based on the executive's years of service, his perceived
importance to the profitability of SCPI, and the subjective judgement of
members of the SCPI Compensation Committee as to the best balance between
salary and bonus, and what is fair and reasonable. No bonuses were paid to any
other executive officers of the Company during fiscal 1997.
Stock Options. The Committees believe that stock ownership by executive
officers is important in aligning management's and stockholders' interests in
the enhancement of stockholder value over the long term. The exercise price of
stock option grants to date is equal to the market price of the Common Stock on
the date of grant. The stock option grants made to executive officers (other
than to the Chief Executive Officer) in fiscal 1997 were made in recognition of
the executives' services to the Company during the year and prior years and
were in amounts deemed in the subjective judgement of the Stock Plans Committee
to be appropriate.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code (enacted in 1993) generally disallows a tax deduction to
public companies for compensation over $1 million paid to its chief executive
officer and its four other most highly compensated executives. The Company's
compensation payable to any one executive officer (including potential income
from outstanding stock options) is currently and for the foreseeable future
unlikely to reach that threshold. In addition, because of the significant net
operating loss carryforwards of SCPI, the deductibility of compensation
payments is not currently an issue. However, should circumstances change, the
Compensation Committee will study the matter and make recommendations to the
Board.
The Compensation Committee The Stock Plans Committee:
John D. Abernathy Robert M. Davies
Robert M. Davies Joel S. Lever
-24-
<PAGE> 26
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, no member of the Compensation Committee or Stock Plans
Committee was an employee of the Company or any or its subsidiaries. Mr. Frank
serves on the Compensation Committee of SCPI and is a director of SCPI and of
the Company.
In connection with the acquisition of Puma Products, Inc. in October 1994, the
Company entered into a lease agreement with a partnership controlled by its
founder, Anthony N. Puma, a director of the Company. The lease covers the
25,000 square foot facility used by Puma Products and runs for six years, with
an option to extend for an additional four years. Rent under the lease is $3.25
per square foot and is subject to increases as a result of increases in real
estate taxes and the Consumer Price Index. The financial terms of this lease
were negotiated between the Company and Mr. Puma in connection with the
acquisition of Puma Products and prior to his becoming affiliated with the
Company. In May 1997 the Company sold Puma Products back to Mr. Puma.
The Board of Directors intends that any transactions with officers, directors
and affiliates will be entered into on terms no less favorable to the Company
than could be obtained from unrelated third parties and that they will be
approved by a majority of the directors of the Company who are independent and
disinterested with respect to the proposed transaction. No such transactions
occurred in fiscal 1997.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company and who does not otherwise
receive compensation from the Company receives an annual fee of $10,000, but no
meeting fees, and is entitled to reimbursement for his out-of-pocket expenses
incurred in attending meetings. Non-employee directors receive annual stock
option grants on May 1 each year under the Non-Employee Director Stock Option
Plan covering 3,000 shares of Common Stock, which are immediately exercisable
at an option price equal to the market value on the date of grant.
The following Performance Graph and the foregoing Report of the Compensation
Committee on Executive Compensation in this Item 11 are not and shall not be
deemed incorporated by reference into any filings of the Company with the
Securities and Exchange Commission by implication or by any reference in any
such filings to this Annual report on Form 10-K.
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's cumulative
total stockholder return on Common Stock for the last five years with (i) the
Dow Jones Global US Market Index (a broad market index), and (ii) the Dow Jones
Retailers - Other Specialty Index, a group of companies whose marketing
strategy is focused on a limited product line, such as automotive parts, over
the same period. Both indices are published in the Wall Street Journal.
The returns are calculated assuming the value of an investment in the Company's
stock and each index of $100 on February 28, 1992 and that all dividends were
reinvested; however, the Company paid no dividends during the periods shown.
The graph lines merely connect the beginning and end of the measuring periods
and do not reflect fluctuations between those dates. The historical stock
performance shown on the graph is not intended to, and may not be indicative
of, future stock performance.
[PERFORMANCE GRAPH]
------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
Oakhurst Company, Inc. 100.00 72.73 90.91 122.73 43.16 40.91
DJ Global US 100.00 111.11 119.86 101.29 144.18 197.70
Dow Jones Retailers - Others 100.00 120.29 117.14 105.39 102.71 148.40
------------------------------------------------------------------------------
-25-
<PAGE> 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This item sets forth certain information regarding ownership of the Company's
common stock at June 1, 1997. Except as otherwise indicated in the footnotes,
the Company believes that the beneficial owners of the Common Stock listed in
the tables, based on information furnished by such owners, have sole investment
and voting power with respect to the shares of common stock shown as
beneficially owned by them. The numbers and percentages assume for each person
or group listed the exercise of all stock options held by such person or group
that are exercisable within 60 days of June 1, 1997, in accordance with Rule
13d-3(d)(1) of the Securities Exchange Act of 1934, but not the exercise of
such stock options owned by any other person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth each person known by the Company (other than
management) to own beneficially more than 5% of the outstanding common stock of
the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES OF
OF BENEFICIAL OWNER COMMON STOCK PERCENTAGE OF CLASS
<S> <C> <C>
Fidelity Capital Appreciation Fund (1) 289,000 9.0%
82 Devonshire Street
Boston, Massachusetts 02109
Special Situations Fund, L.P. (2) 289,000 9.0%
153 East 53rd Street
New York, NY 10022
William D. Witter, Inc. 175,400 5.5%
One Citicorp Center
New York, NY 10022
- --------------
</TABLE>
(1) Fidelity Capital Appreciation Fund is a portfolio of the Fidelity Capital
Trust, an investment company registered under the Investment Company Act
of 1940.
(2) By agreement with the Company dated June 25, 1990, as amended, Special
Situations Fund, L.P. (formerly Prudential-Bache Special Situations Fund,
L.P.) agreed not to increase its beneficial ownership of the Common Stock
of the Company or Steel City Products, Inc. ("SCPI") above 8.2% of the
then outstanding shares, except in transactions to which the Company or
SCPI, as the case may be, is a party or under certain other circumstances.
-26-
<PAGE> 28
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding beneficial ownership of
the Common Stock by each director, each individual named in the Summary
Compensation Table in Item 11, above, and by all directors, all such named
individuals, and all executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES OF COMMON STOCK PERCENTAGE OF CLASS
<S> <C> <C>
John D. Abernathy 41,996 (1) 1.30%
Mark Auerbach 126,996 (2) 3.82%
Robert M. Davies 91,996 (3) 2.85%
Laurence D. Finman 32,500 (4) 1.01%
Bernard H. Frank 70,034 (5) 2.14%
Joel S. Lever 72,815 (6) 2.26%
Anthony N. Puma 266,667 (7) 8.33%
Terrance W. Allan 27,331 (8) *
John R. Ruda 8,500 *
All directors and executive
officers as a group, 10 758,995 (9) 21.5%
persons
</TABLE>
- --------------
* Less than 1%
1. This number includes 26,996 shares issuable under outstanding stock
options that are presently exercisable at prices ranging from $1.00 to
$3.375 per share.
2. These shares are issuable under outstanding stock options that are
presently exercisable at prices ranging from $1.00 to $3.375 per
share.
3. This number includes 26,996 shares issuable under outstanding stock
options that are presently exercisable at prices ranging from $1.00 to
$3.37 per share.
4. This number includes 12,500 shares issuable under outstanding stock
options that are presently exercisable at prices ranging from $1.25 to
$2.00 per share.
5. This number includes 68,327 shares issuable under outstanding stock
options that are presently exercisable at prices ranging from $1.25 to
$2.00 per share.
6. This number includes 26,996 shares issuable under outstanding stock
options that are presently exercisable at prices ranging from $1.00 to
$3.375 per share.
7. One-half of these shares may not be sold by Mr. Puma prior to October
1997.
8. This number includes 26,831 shares issuable under outstanding stock
options that are exercisable within 60 days of May 1, 1997 at prices
ranging from $1.25 to $2.00 per share. Mr. Allan is an executive
officer of the Company's subsidiary, Steel City Products, Inc.
9. This number includes 329,642 shares issuable under outstanding stock
options that are exercisable within 60 days of May 1, 1997 at prices
ranging from $1.00 to $3.375 per share.
-27-
<PAGE> 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to information contained under the headings "Compensation of
Directors" and "Compensation Committee Interlocks and Insider Participation" in
Item 11, above.
-28-
<PAGE> 30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report.
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets: February 28, 1997 and February
29, 1996
Consolidated Statements of Operations for the fiscal years
ended February 28, 1997, February 29, 1996 and
February 28, 1995
Consolidated Statements of Stockholders' Equity for the
fiscal years ended February 28, 1997, February 29,
1996 and February 28, 1995
Consolidated Statements of Cash Flows for the fiscal years
ended February 28, 1997, February 29, 1996 and
February 28, 1995
Notes to Consolidated Financial Statements
Supplementary Financial Data:
Selected Quarterly Financial Data (unaudited) for
the fiscal years ended February 28, 1997 and
February 29, 1996
2. The following Financial Statement Schedules for the fiscal years
ended February 28, 1997, February 29, 1996 and February 28, 1995
are submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or the notes thereto.
3. Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as of May 20, 1991 (filed
as Appendix A to the Proxy Statement/Prospectus dated April
16, 1991 of the Company and Steel City Products, Inc).
3.1 Restated and Amended Certificate of Incorporation (filed as
Exhibit 3 to the Company's Quarterly Report on Form 10-K for
the fiscal quarter ended August 31, 1996).
3.2 By-laws (filed as Appendix C to the Proxy
Statement/Prospectus of the Company and Steel City Products,
Inc. dated April 16, 1991).
4.1 Agreement and Plan of Merger dated as of May 20, 1991 (see
Exhibit 2, above).
-29-
<PAGE> 31
+10.1 Form of Option Agreement dated August 29, 1991 with directors
and executive officers (filed as Exhibit 10(b) to the
Company's Annual report on Form 10-K for the fiscal year
ended February 29, 1992).
10.2 Agreement dated June 11, 1991 with Prudential-Bache Special
Situations Fund (filed as Exhibit 10(q) to the Annual Report
on Form 10-K of Steel City Products, Inc. for the fiscal year
ended March 3, 1990).
+10.3 Employment Agreement with Harold Garfinkel dated as of
November 1, 1993 (filed as Exhibit 10.5 to the Company's
Annual Report on Form 10- K for the fiscal year ended
February 26, 1994).
10.4 Agreement between Harold Garfinkel and H&H Distributors, Inc.
dated as of November 1, 1993 (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended February 26, 1994).
10.5 Credit Agreement by and between Steel City Products, Inc. and
Integra Bank Pittsburgh (filed as Exhibit 10.1 to SCPI's
Quarterly Report on Form 10-Q for the period ended August 27,
1994).
10.6 Mortgage and Security Agreement by and between Steel
City Products, Inc. and Integra Bank Pittsburgh (filed as
Exhibit 10.2 to SCPI's Quarterly Report on Form 10-Q for the
period ended August 27, 1994).
10.7 Credit Agreement by and between Oakhurst Capital, Inc. and
Integra Bank Pittsburgh (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
August 27, 1994).
10.8 Pledge and Security agreements between Oakhurst Capital, Inc.
and Integra Bank Pittsburgh (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
August 27, 1994).
10.9 Purchase and Sale Agreement relating to the acquisition of
Dowling's Fleet Service Company, Inc. by Oakhurst Capital,
Inc., also containing employment agreements with James
Dowling, Robert Keane and Joseph Quattrochi (filed as Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
period ended August 27, 1994).
+10.10 Stock Purchase Agreement dated as of October 20, 1994 among
Oakhurst Capital, Inc., Puma Products and Anthony Puma also
containing employment agreements with Anthony Puma and
Laurence Finman (filed as an exhibit to Oakhurst's Form 8-K
filed on October 26, 1994).
10.11 Lease agreements by and between James Dowling and Dowling's
Fleet Service Company, Inc. (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1995).
10.12 Lease agreement by and between Anthony Puma and Puma Products
(filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1995).
+10.13 The 1994 Omnibus Stock Plan with form of option agreement
(filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1995).
-30-
<PAGE> 32
+10.14 The 1994 Non-Employee director Stock Option Plan with form of
option agreement (filed as Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1995).
10.15 Letter agreement dated January 3, 1996 between SCPI and
Integra Bank Pittsburgh amending the Credit Agreement, dated
August 1, 1994 between SCPI and Integra (filed as Exhibit
10.17 to Oakhurst's Registration Statement on Form S-1, file
#333-00173, filed on January 12, 1996).
10.16 Letter agreement dated January 3, 1996 between Oakhurst and
Integra Bank Pittsburgh amending the Credit Agreement, dated
August 1, 1994 between Oakhurst and Integra (filed as Exhibit
10.16 to Oakhurst's Registration Statement on Form S-1, file
#333-00173, filed on January 12, 1996).
10.17 Loan and Security Agreement; Schedule to Loan and Security
Agreement; Secured Promissory Note with FINOVA Capital
Corporation all dated March 28, 1996 (filed as Exhibit 10.17
to the Company's Annual Report on Form 10-K for the fiscal
year ended February 29, 1996).
10.18 Open-End Mortgage between Steel City Products, Inc. and
FINOVA Capital Corporation dated March 28, 1996 (filed as
Exhibit 10.18 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996).
10.19 Consulting Agreement with Bryanston Management, Ltd, dated as
of December 19, 1995 (filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
29, 1996).
+10.20 Consulting Agreement with Mark Auerbach dated as of December
19, 1995 and Options Agreement with Mark Auerbach dated as of
December 19, 1995 (filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
29, 1996).
+10.21 Employment Agreement between Oakhurst Management Corporation
and John R. Ruda dated as of December 19, 1995 filed as
Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996).
+10.22 Employment Agreement and Form of Promissory Note between
Dowling's Fleet Service, Co., Inc. and Joseph B. Quattrochi
dated as of March 1, 1996 - filed herewith
+10.23 Employment Agreement and Form of Promissory Note between
Dowling's Fleet Service, Co., Inc. and Robert M. Keane dated
as of March 1, 1996 - filed herewith
+10.24 Employment Agreement between Laurence D. Finman and Oakhurst
Management Co., dated as of March 1, 1996 - filed herewith
10.25 Non-Competition Agreement between G&O Sales Company and Arthur
Gruber dated as of March 12, 1996 - filed herewith
-31-
<PAGE> 33
10.26 Amendment to Consulting Agreement and Amended Non-Qualified
Stock Option Agreement between Mark Auerbach and Oakhurst
Company, Inc. dated as of October 1, 1996 - filed herewith
+10.27 Stock Purchase and Sale Agreement between Anthony N. Puma,
Puma Products, Inc. and Oakhurst Company, Inc., dated as of
June 10, 1997 - filed herewith
11 Statement of re-computation of per-share earnings - filed
herewith.
21 Subsidiaries at February 28, 1997:
Steel City Products, Inc. - Delaware
H&H Distributors, Inc. - Pennsylvania
Dowling's Fleet Service Company, Inc. - New York
Puma Products, Inc. - Texas
Oakhurst Management Corporation - Texas
23 Consent of Deloitte & Touche LLP - filed herewith.
27 Financial Data Schedule (EDGAR transmission only) - filed
herewith.
- -----------------
+ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the Company's fourth
fiscal quarter ended February 28, 1997.
-32-
<PAGE> 34
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.
OAKHURST COMPANY, INC.
Date: June 12, 1997 By: /s/ ROBERT M. DAVIES
------------------------
Robert M. Davies
President and Chief Executive Officer
(duly authorized officer)
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints each of Robert M. Davies, Bernard H. Frank and
Roger M. Barzun jointly and severally his true and lawful attorneys-in-fact and
agent with full powers of substitution for him and in his name, place and stead
in any and all capacities to sign on his behalf, individually and in each
capacity stated below and to file any and all amendments to this Annual Report
on Form 10-K with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises as fully as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes may lawfully do or cause to be done by
virtue thereof.
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>
SIGNATURES TITLES DATE
---------- ------ ----
<S> <C> <C>
/s/ Robert M. Davies Chairman of the Board, June 12, 1997
- ------------------------------------------
Robert M. Davies President and Chief Executive
Officer
/s/ Mark Auerbach Chief Financial Officer June 12, 1997
- ------------------------------------------
Mark Auerbach and Director (principal financial
and accounting officer)
/s/ Bernard H. Frank Chief Operating Officer June 12, 1997
- ------------------------------------------
Bernard H. Frank Director
/s/ John D. Abernathy Director June 12, 1997
- ------------------------------------------
John D. Abernathy
/s/ Joel S. Lever Director June 12, 1997
- ------------------------------------------
Joel S. Lever
/s/ Anthony N. Puma Director June 12, 1997
- ------------------------------------------
Anthony N. Puma
</TABLE>
-33-
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Oakhurst Company, Inc.:
We have audited the accompanying consolidated balance sheets of Oakhurst
Company Inc. and subsidiaries as of February 28, 1997 and February 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended February 28, 1997, February 29, 1996 and
February 28, 1995. Our audits also included the financial statement schedule
listed in the Index at Item 14(a)(2). These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Oakhurst Company, Inc. and
subsidiaries as of February 28, 1997 and February 29, 1996 and the results of
their operations and cash flows for the years ended February 28, 1997, February
29, 1996 and February 28, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 12, 1997
-F1-
<PAGE> 36
OAKHURST COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS FEBRUARY 28, FEBRUARY 29,
1997 1996
-------- --------
<S> <C> <C>
Current assets:
Cash ...................................................................... $ 39 $ 318
Trade accounts receivable, less allowance of $555 and $558, respectively .. 3,882 4,027
Commissions receivable .................................................... -- 230
Other receivables ......................................................... 483 564
Inventories ............................................................... 5,687 8,080
Net assets held for sale (see Note 2) .................................... -- --
Other ..................................................................... 370 467
-------- --------
Total current assets .................................... 10,461 13,686
-------- --------
Property and equipment, at cost ................................................ 2,839 3,216
Less accumulated depreciation ............................................. (1,311) (1,109)
-------- --------
1,528 2,107
-------- --------
Deferred tax asset, less valuation allowance
of $51,300 and $46,800, respectively ...................................... 1,000 4,086
Excess of cost over net assets acquired, net ................................... 2,468 6,035
Other assets ................................................................... 450 203
-------- --------
3,918 10,324
-------- --------
$ 15,907 $ 26,117
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 6,106 $ 5,762
Accrued compensation ...................................................... 394 369
Current maturities of long-term obligations ............................... 953 670
Current maturities of long-term obligations, related parties .............. 88 169
Accrued interest .......................................................... 88 88
Other accrued expenses .................................................... 417 591
-------- --------
Total current liabilities ............................... 8,046 7,649
-------- --------
Long-term obligations:
Long-term debt ............................................................ 5,344 5,857
Long-term debt, related parties ........................................... 286 1,574
Other long-term obligations ............................................... 86 138
-------- --------
5,716 7,569
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.01; authorized 1,000,000 shares, none issued -- --
Common stock, par value $0.01 per share; authorized 14,000,000
shares; issued 3,201,144 and 3,195,235 shares, respectively ............ 32 32
Additional paid-in capital ................................................ 46,529 46,522
Deficit (Reorganized on August 26, 1989) .................................. (44,415) (35,654)
Treasury stock, at cost, 207 common shares ................................ (1) (1)
-------- --------
Total stockholders' equity .............................. 2,145 10,899
-------- --------
$ 15,907 $ 26,117
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-F2-
<PAGE> 37
OAKHURST COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended
February 28, February 29, February 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales ................................................... $ 41,928 $ 47,339 $ 43,142
Other income ............................................ 327 471 655
----------- ----------- -----------
42,255 47,810 43,797
----------- ----------- -----------
Cost of goods sold, including occupancy and
buying expenses ..................................... 32,459 37,321 32,384
Operating, selling and administrative expenses .......... 10,573 10,952 9,243
Provision for doubtful accounts ......................... 102 610 27
Amortization of excess of cost over net assets acquired . 448 439 290
Interest expense ........................................ 843 646 411
Loss on assets held for sale - H&H and Puma (see Note 2) 3,493 -- --
----------- ----------- -----------
47,918 49,968 42,355
----------- ----------- -----------
(Loss) income from continuing
operations before income taxes ...................... (5,663) (2,158) 1,442
----------- ----------- -----------
Current income tax (expense) benefit .................... (12) 115 (155)
Deferred income tax expense ............................. (3,086) (2,000) (468)
----------- ----------- -----------
(3,098) (1,885) (623)
----------- ----------- -----------
(Loss) income from continuing operations ................ (8,761) (4,043) 819
Discontinued retail operations:
Income on disposal, less income tax expense of $0 and
$46 in fiscal 1996 and fiscal 1995, respectively . -- 65 90
----------- ----------- -----------
Net (loss) income ....................................... $ (8,761) $ (3,978) $ 909
=========== =========== ===========
Per share amounts:
(Loss) income from continuing operations ............ $ (2.74) $ (1.27) $ 0.27
Income from discontinued operations ................. -- 0.02 0.03
----------- ----------- -----------
Net (loss) income ................................... $ (2.74) $ (1.25) $ 0.30
=========== =========== ===========
Weighted average number of shares outstanding
used in computing per share amounts ................. 3,200,140 3,194,021 3,076,801
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-F3-
<PAGE> 38
OAKHURST COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in Earnings Treasury
Stock Capital (Deficit) Stock Totals
------- -------- -------- --- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 26, 1994 .............. $ 26 $ 43,904 $(32,585) $(1) $11,344
Net income ................................ 909 909
Deferred tax benefit resulting from a
reduction in the valuation allowance
of the deferred tax asset ............ 1,600 1,600
Exercise of warrants ...................... 3 329 332
Issuance of Common Stock in connection with
the acquisition of Puma Products, Inc. 3 647 650
------- -------- -------- --- -------
Balance at February 28, 1995 .............. 32 46,480 (31,676) (1) 14,835
Net loss .................................. (3,978) (3,978)
Employee stock award ...................... 19 19
Other ..................................... 23 23
------- -------- -------- --- -------
Balance at February 29, 1996 .............. 32 46,522 (35,654) (1) 10,899
Net loss .................................. (8,761) (8,761)
Employee stock award ...................... 7 7
------- -------- -------- --- -------
Balance at February 28, 1997 .............. $ 32 $ 46,529 $(44,415) $(1) $ 2,145
======= ======== ======== === =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-F4-
<PAGE> 39
OAKHURST COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended
February 28, February 29, February 28,
1997 1996 1995
<S> <C> <C> <C>
------- ------- -------
Cash flows from operating activities:
(Loss) income from continuing operations ........................... $(8,761) $(4,043) $ 819
Adjustments to reconcile (loss) income from continuing
operations to net cash (used in) provided by operating activities:
Depreciation and amortization ................................... 1,207 873 596
Deferred tax expense ............................................ 3,086 2,000 514
Loss on assets held for sale .................................... 3,297 -- --
Loss on retirement of assets .................................... 36 37 --
Employee stock award ............................................ 7 19 --
Other ........................................................... -- 23 --
Other changes in operating assets and liabilities:
Accounts receivable ............................................. (255) 1,667 (213)
Inventories ..................................................... 1,102 2,320 (1,051)
Accounts payable ................................................ 760 (2,304) 1,759
Other ........................................................... 330 (467) 68
------- ------- -------
Net cash provided by (used in) operating activities of:
Continuing operations .............................................. 809 125 2,492
Discontinued operations ............................................ (255) (282) (161)
------- ------- -------
Net cash provided by (used in) operating activities: ................... 554 (157) 2,331
------- ------- -------
Cash flows from investing activities:
Additions to property and equipment ................................ (177) (430) (633)
Acquisition of subsidiaries, net of cash acquired .................. (79) -- (5,208)
Loss on assets held for sale ....................................... (196) -- --
Net change in the excess of cost over net assets acquired .......... -- (284) --
Other .............................................................. (25) -- (35)
------- ------- -------
Net cash used in investing activities .................................. (477) (714) (5,876)
------- ------- -------
Cash flows from financing activities:
Net borrowings under revolving credit agreement .................... 693 2,225 1,360
Proceeds from issuance of long-term debt ........................... 1,500 -- 2,560
Repayment of notes payable ......................................... -- (548) (406)
Principal payments on long-term obligations ........................ (2,276) (802) (1,058)
Deferred loan costs ................................................ (273) -- --
Exercise of warrants ............................................... -- -- 332
------- ------- -------
Net cash (used in) provided by financing activities .................... (356) 875 2,788
------- ------- -------
Net (decrease) increase in cash ........................................ (279) 4 (757)
Cash at beginning of period ............................................ 318 314 1,071
------- ------- -------
Cash at end of period .................................................. $ 39 $ 318 $ 314
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for operating activities:
Interest ......................................................... $ 791 $ 903 $ 334
======= ======= =======
Income taxes, net of refunds received ............................ $ (3) $ 9 $ 20
======= ======= =======
</TABLE>
Non-cash investing and financing activities:
Fiscal year ending February 28, 1997: A note payable of $105, and
non-compete agreement with a discounted value of $274 were
issued in connection with the acquisition of a subsidiary (see Note
13). In addition, there were charges relating to the disposal of
two subsidiaries (see Note 2).
Fiscal year ending February 29, 1996:
Capital lease obligations of $76 were incurred in connection with
leases of new equipment.
A note and an earn-out payable totaling $825 were canceled in
connection with the settlement of an arbitration proceeding
involving the former owner of a subsidiary which was acquired in
fiscal 1995, and another earn-out payable was reduced by $400 as a
result of the earnings trends of another subsidiary also acquired
in fiscal 1995.
Fiscal year ending February 28, 1995: Convertible debt of $500, notes
and earn-outs payable totaling $3,300, and discounted restricted
common stock of $650 were issued in connection with the acquisition
of subsidiaries.
The accompanying notes are an integral part of these
consolidated financial statements.
-F5-
<PAGE> 40
OAKHURST COMPANY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Business and Significant Accounting Policies
Basis of Presentation:
Oakhurst Company, Inc. ("Oakhurst" or "the Company"), was formed as a
result of a merger transaction (the "merger") in fiscal 1992 between Steel City
Products, Inc. ("SCPI") and an Oakhurst subsidiary. The merger resulted in a
restructuring of SCPI such that it became a majority-owned subsidiary of
Oakhurst. In accordance with the merger, Oakhurst owns 10% of the outstanding
common stock of SCPI and all of SCPI's Series A Preferred Stock. The merger was
structured such that the aggregate fair market value of SCPI's common stock and
Series A Preferred Stock owned by Oakhurst would be approximately 90% of the
aggregate fair market value of the issued and outstanding common and voting
preferred stock of SCPI. Accordingly, Oakhurst controls approximately 90% of
the voting power of SCPI. The accompanying consolidated financial statements
reflect this control and include the accounts of SCPI.
Oakhurst acquired all of the outstanding capital stock of H&H
Distributors d/b/a Harry Survis, ("H&H"), of Dowling's Fleet Service Co., Inc.
("Dowling's") and of Puma Products, Inc. ("Puma") in January 1994, August 1994
and October 1994, respectively. In March 1995, Oakhurst formed Oakhurst
Management Corporation ("OMC"), a wholly-owned subsidiary, to coordinate the
provision of certain corporate administrative, legal, and accounting services
to the Company and its subsidiaries. In March 1996, Dowling's acquired the
outstanding capital stock of G&O Sales Company ("G&O") (see Note 13). The
accompanying consolidated financial statements include the accounts of these
subsidiaries for the respective periods of ownership, and all significant
intercompany accounts and transactions have been eliminated in consolidation
(see Note 2).
Use of Estimates:
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principals, which requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Business Activities:
The Company's operations through February 28, 1997 consisted of four
subsidiaries primarily engaged in the wholesale distribution trade to the
automotive aftermarket. SCPI is a wholesale distributor operating under the
trade name Steel City Products selling primarily to discount retail chains,
hardware, drug and supermarket retailers and to automotive specialty stores,
based mainly in the Northeastern United States. Dowling's is a wholesale
distributor of automotive radiators and related parts serving mostly radiator
repair shops in the New York, Connecticut, New Jersey and greater Philadelphia,
Pennsylvania markets. H&H is involved in the retail and wholesale distribution
and installation of automotive accessories, including stereos, alarms and
cellular phones, in western Pennsylvania. Puma is wholesale distributor of high
quality truck and van conversion products to automotive and truck converters,
restylers and accessories retailers. Subsequent to February 28, 1997, the
common stock of Puma was sold and Oakhurst's Board of Directors made the
decision to sell or otherwise dispose of the common stock of H&H (see Note 2).
-F6-
<PAGE> 41
Fiscal Year:
The Company's fiscal year ends on the last day of February.
Inventories:
The Company's inventories are stated at the lower of cost or market.
Cost is determined by the last in, first out method (LIFO) for 59% and 56% of
the Company's inventories at February 28, 1997 and February 29, 1996,
respectively, and by the first in, first out (FIFO) method for the remaining
inventories. Had all the Company's inventories been valued using the FIFO
method, they would have been approximately $292,000 and $388,000 higher than
reported at February 28, 1997 and February 29, 1996, respectively.
Property and Equipment:
Depreciation and amortization are computed using the straight-line
method. Estimated useful lives used for computing depreciation and amortization
are: buildings, 15-40 years; building improvements, 5-20 years; leasehold
improvements, 3-5 years; and office furniture, equipment and vehicles, 3-10
years. Depreciation expense was approximately $493,000, $430,000 and $305,000
in fiscal 1997, 1996 and 1995, respectively.
Excess of Costs Over Net Assets Acquired:
The excess of cost over net assets acquired is associated with the
acquisition of Oakhurst's subsidiaries and is amortized over periods ranging
from 15 to 40 years. The unamortized values at February 28, 1997 and February
29, 1996, are net of accumulated amortization of approximately $601,000 and
$816,000, respectively.
In fiscal 1997, the Company adopted the Financial Accounting Standards
Board Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long- Lived Assets to be
Disposed Of", which established accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. In accordance with SFAS No. 121,
SCPI assesses whether its excess of costs over net assets acquired and other
long-lived assets are impaired at each balance sheet date based upon an
evaluation of undiscounted projected cash flow through the remaining
amortization period. If an impairment is determined, the amount of such
impairment is calculated based upon the estimated fair value of the asset. The
adoption of SFAS No. 121 did not have an impact on the Company's carrying value
of such assets.
Revenue Recognition:
Revenues are recognized at the time products are shipped or
installation occurs.
Federal Income Taxes:
Oakhurst accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The standard requires an asset and liability
approach to accounting for income taxes. Deferred tax liabilities and assets
are recognized for the future tax consequences of events that have already been
recognized in the financial statements or tax returns. Net deferred tax assets
are recognized to the extent that management believes that realization of such
benefits is considered more likely than not. Changes in enacted tax rates or
laws may result in adjustments to the recorded deferred tax assets or
liabilities in the period that the tax law is enacted (see Note 6).
-F7-
<PAGE> 42
Stock-Based Compensation:
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Earnings Per Share:
Income per share amounts attributable to common stockholders are
computed on the basis of the weighted average number of outstanding common
shares and common stock equivalents determined by applying the treasury stock
method to stock options and warrants outstanding. Loss per share amounts do not
include common stock equivalents since that would reduce the net loss per
share.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No 128, "Earnings per Share", which
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. This Statement requires restatement of all prior period earnings per
share presented. The basic earnings per share and diluted earnings per share as
defined by SFAS No 128 approximates the historically presented earnings per
share.
Reclassifications:
Certain reclassifications have been made to the prior year financial
statements to conform to the fiscal 1997 presentation.
2. Assets Held for Sale
In June 1997, Oakhurst entered into an agreement to sell the common
stock of Puma. In April 1997, management decided to dispose of H&H. Management
believes that there is no net realizable value relative to H&H's common stock.
Accordingly, the results for fiscal 1997 include a charge related to the
disposal of such subsidiaries representing the net effect of the write-off of
the net assets of the subsidiaries and the related excess of costs over net
assets acquired.
Effective as of May 31, 1997, the former owner of Puma, a director of
Oakhurst, acquired the capital stock of Puma in exchange for his repayment of
the revolving debt attributable to Puma of approximately $400,000, the
cancellation of a note payable and an earn-out to him aggregating $1.2 million,
the forgiveness of Oakhurst's intercompany debts to Puma, and the payment by
Oakhurst of $50,000. The agreement contains mutual releases and provides for a
payment to Oakhurst in the event of a re-sale of Puma's stock within one year,
equal to 12.5% of the excess of any such sales price (including debt assumed by
an acquirer) over $1 million. The buyer of Puma also acquired all of the assets
relating to SCPI's Wing-Tech division for the net book value at May 31, 1997 of
approximately $170,000.
As a result of the sale of Puma, Oakhurst will be relieved of
contingent liabilities in respect of Puma's lease and employment agreement
obligations aggregating approximately $500,000.
-F8-
<PAGE> 43
Puma's and H&H's net assets held for sale at February 28, 1997 consist
of the following:
<TABLE>
<CAPTION>
Assets:
<S> <C>
Cash .................................... $ 99
Trade accounts receivable ............... 451
Commissions receivable .................. 105
Inventories ............................. 1,446
Other current assets .................... 212
Excess of costs over net
assets acquired (goodwill) ............ 3,140
Property and equipment, net ............. 253
Other assets ............................ 122
------
Total assets ................... $5,828
======
Liabilities:
Accounts payable ........................ $ 451
Acquisition debt ........................ 1,200
Accrued compensation .................... 54
Current portion of long-term debt ....... 9
Other current liabilities ............... 54
Long-term obligations, including revolver 567
------
Total liabilities .............. $2,335
======
Net assets ..................... $3,493
======
</TABLE>
3. Property and Equipment
Property and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
February 28, February 29,
1997 1996
------- -------
<S> <C> <C>
Land ................................... $ 170 $ 170
Buildings .............................. 830 830
Leasehold and building improvements .... 520 547
Office furniture, equipment and vehicles 1,319 1,669
------- -------
2,839 3,216
Less accumulated depreciation .......... (1,311) (1,109)
------- -------
$ 1,528 $ 2,107
======= =======
</TABLE>
-F9-
<PAGE> 44
4. Line of Credit and Long-Term Obligations
Long-term obligations, including the present value of the Creditor
Notes (see Note 7), consist of the following (in thousands):
<TABLE>
<CAPTION>
February 28, February 29,
1997 1996
------ ------
<S> <C> <C>
Term loan, due monthly through
April 1998 ............................................... $1,268 $1,663
Revolving Credit Agreement due in April 1998 ................... 3,881 3,750
Creditor Notes, due annually through July 1998 ................. 809 1,064
Dowling's Notes, due quarterly through March 2001 .............. 374 543
G&O acquisition note, due in March 1997 ........................ 105 --
G&O non-compete payments, due monthly through March 1998 ....... 204 --
Capital lease obligations for computer and warehouse equipment,
due monthly through August 2001 .......................... 50 66
Puma acquisition note, due in five annual installments beginning
in March 1998 (see Notes 2 and 13) ....................... -- 600
Puma estimated earn-out, payable in five annual installments
through May 2000 (see Notes 2 and 13) .................... -- 600
Other .......................................................... 66 122
------ ------
6,757 8,408
Less current portion ........................................... 1,041 839
------ ------
$5,716 $7,569
====== ======
</TABLE>
In fiscal 1995, Oakhurst entered into a two year revolving credit
agreement (the "Credit Agreement") that, until its amendment, provided for
maximum borrowings of $3 million, subject to a borrowing base as defined in the
Credit Agreement, and SCPI obtained a four year term loan in the amount of
$2,560,000 (the "Term Loan"), which was secured by a mortgage on SCPI's real
estate, and was guaranteed by Oakhurst and its subsidiaries, supported by a
pledge of the capital stock of Oakhurst's subsidiaries. The Term Loan provided
for monthly repayments beginning in September 1994 and interest at a fixed rate
of 9.25%.
On March 28, 1996, Oakhurst obtained replacement financing from an
institutional lender that provides for a total facility for Oakhurst and its
subsidiaries of $9.5 million, comprising a new SCPI term loan of $1.5 million
(the "Fixed Asset Loan"), and a maximum revolving credit facility of $8 million
(the "Revolver") (collectively, the "Credit Facility"), and the amounts
outstanding under the Term Loan and Credit Agreement were repaid.
Borrowings under the Credit Facility bear interest at the higher of
the Citibank N.A. base rate plus 1.5%, or $5,000 per month, and borrowings
under the Revolver are subject to a borrowing base that is calculated according
to defined levels of Oakhurst's subsidiaries' accounts receivable and
inventories. The Credit Facility has an initial term of two years, with
automatic renewal terms of one year each upon payment of a renewal fee of 0.5%
thereof, unless earlier terminated as provided for in the agreement, and
contains certain restrictive financial covenants, including among other things,
the maintenance of defined subsidiary and consolidated tangible net worth
levels and consolidated current ratios, and limitations on annual cash
dividends.
At February 28, 1997, Oakhurst did not meet certain of its
consolidated covenants, and has received waivers from its lender with respect
to its compliance with such covenants. On June 12, 1997, Oakhurst entered into
an agreement with the lender to amend the Credit Facility to reflect the
disposals. The agreement principally reduces the total amount available under
the Revolver to $7 million, and amends certain financial covenants, including
the elimination of the consolidated tangible net worth covenant.
The Credit Facility is secured by the accounts receivable,
inventories, and fixed assets of Oakhurst and its subsidiaries, contains
certain Revolver prepayment penalties, and provides for the payment of loan
management fees, unused Revolver facility fees and examination fees. Oakhurst
paid closing costs of approximately $299,000 in connection with the Credit
Facility.
-F10-
<PAGE> 45
The Fixed Asset Loan provides for twenty-four monthly principal and
interest payments based on a five year amortization schedule, with the
remaining principal balance due on April 1, 1998. The Fixed Asset Loan provides
for prepayment without penalty, and contains a provision for the release of
SCPI's building as collateral for the Credit Facility in the event of a
refinancing of the Fixed Asset Loan, subject to a right of first refusal by the
current lender to refinance the Fixed Asset Loan on the same terms as offered
by a new lender.
The DFS Notes bear interest at 6% and provide for repayment in
quarterly installments of $22,000 each, together with accrued interest thereon,
beginning in June 1996 (see Note 13).
The G&O Acquisition Note bore interest at 7% and was paid in full in
March 1997, together with accrued interest thereon. The G&O Non-Compete
Agreement provides for 36 monthly payments of $8,750 beginning in March 1996.
The G&O Non-Compete Agreement has been discounted using an imputed interest
rate of 9.75% (see Note 13).
Long-term obligations mature during each fiscal year as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal
------
<S> <C>
1998.......................... $1,041
1999.......................... 5,451
2000.......................... 112
2001.......................... 101
2002.......................... 33
Thereafter.......................... 19
------
$6,757
======
</TABLE>
5. Financial Instruments
Financial instruments at February 28, 1997 consists of
the following (in thousands):
<TABLE>
<CAPTION>
Carrying Fair
Value Value
------ ------
<S> <C> <C>
Cash ............................... $ 39 $ 39
Creditor Notes ..................... $ 809 $ 812
Long-term obligations (the Term Loan
and Credit Agreement) ........... $5,149 $5,149
</TABLE>
The fair values of the instruments were based upon the rate available
to the Company for instruments of the same maturities. The Creditor Notes,
which are non-interest bearing, were discounted using a market rate of 11.75%
to determine current fair value.
6. Income Taxes and Deferred Tax Asset
At February 28, 1997, Oakhurst has, for tax reporting purposes, net
operating tax loss carry-forwards of approximately $150 million which expire in
the years 2001 through 2011, and capital losses of approximately $4 million.
Under SFAS No. 109, Oakhurst records as an asset the future benefit of its net
operating tax loss carry-forwards and other tax benefits.
Fluctuations in market conditions and trends and other changes in the
Company's earnings base, such as subsidiary acquisitions and disposals, warrant
periodic management reviews of the recorded tax asset to determine if an
increase or decrease in the recorded valuation allowance is necessary to reduce
the tax asset to an amount that management believes will more likely than not
be realized. During the year ended February 29, 1996, SCPI experienced
significant changes in its customer base. As a result, management undertook an
-F11-
<PAGE> 46
extensive review and strategic evaluation of SCPI's operations to determine the
impact of this lost business on SCPI's future levels of revenues and profits,
and to evaluate future customer and product opportunities. In addition, the
Company's other operating subsidiaries were evaluated considering the then
current trends and historical operations. These efforts led to an increase of
approximately $2.5 million in the deferred tax asset valuation allowance, with
a corresponding charge to deferred tax expense.
Subsequent to February 28, 1997, the Board of Directors of Oakhurst
made the decision to dispose of Puma and H&H, which led to a further increase
of approximately $4.9 million in the valuation allowance of the deferred tax
asset, with a corresponding charge to deferred tax expense. If future profit
levels exceed current expectations, and economic or business changes warrant
upward revisions in the estimate of the realizable value of net operating tax
loss carry-forwards, the consequent reduction in the valuation allowance would
result in a corresponding deferred tax benefit in future results of operations
to the extent of the aggregate charges of $7.4 million to deferred tax expense
for fiscal 1996 and fiscal 1997, and any benefit in excess of such charge would
be reflected as an addition to paid-in capital. The accounting treatment to
increase paid-in capital results from SCPI's quasi-reorganization accounting in
1990. Any subsequent utilization of the net operating tax loss carry-forwards
is accounted for as a reduction of the deferred tax asset.
In order to realize the net recorded tax benefit at February 28, 1997,
Oakhurst is required to generate approximately $2.9 million of federal taxable
income before the expiration of the tax benefits to realize the net recorded
tax benefit, as adjusted.
The deferred tax effects of temporary differences are not significant,
and current income taxes payable represent state income taxes.
Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended
February 28, February 29, February 28,
1997 1996 1995
------- ------- -----
<S> <C> <C> <C>
Current tax expense (benefit) ......... $ 12 $ (115) $ 623
Current tax benefit from utilization of
net operating tax loss carryforwards -- -- (468)
------- ------- -----
12 (115) 155
Increase in valuation allowance
of the deferred tax asset ........... 4,854 2,482 --
Deferred tax (benefit) expense ........ (1,768) (482) 468
------- ------- -----
Income tax expense .................... $ 3,098 $ 1,885 $ 623
======= ======= =====
</TABLE>
During the fiscal year ended February 29, 1996, SCPI settled a dispute
over a tax refund claimed from the state of Kentucky by SCPI's predecessor, and
accordingly, recorded a refund of approximately $142,000, including
approximately $35,000 in interest.
-F12-
<PAGE> 47
The income tax provision differs from the amount using the statutory
federal income tax rate of 34% applied to income or loss from continuing
operations for the following reasons (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year Ended Year Ended Year Ended
February 28, February 29, February 28,
1997 1996 1995
------- ------- -----
<S> <C> <C> <C>
Tax (benefit) expense at the U.S.
federal statutory rate ........... $(1,925) $ (734) $ 490
State income tax expense (benefit),
net of refunds and federal benefit 7 (75) 95
Increase in deferred tax asset
valuation allowance .............. 4,854 2,482 --
Non-deductible costs ............... 162 212 98
Non-taxable escrow refund .......... -- -- (60)
------- ------- -----
Income tax expense ........... $ 3,098 $ 1,885 $ 623
======= ======= =====
</TABLE>
The availability of the net operating tax loss carry-forwards may be
adversely affected by future ownership changes of SCPI or Oakhurst; at this
time, such changes cannot be predicted. Oakhurst's estimated net operating tax
loss carry-forwards at February 28, 1997 expire as follows (in thousands):
<TABLE>
<C> <C>
2002 .......................... $ 12,000
2003 .......................... 52,000
2004 .......................... 22,000
2005 .......................... 49,000
2006 .......................... 13,000
2010........................... 1,500
2011 .......................... 500
--------
$150,000
========
</TABLE>
7. Discontinued Retail Operations
SCPI disposed of its former Retail Division to an unrelated company,
Retail Acquisition Corp. ("RAC") in September 1990 when RAC acquired
substantially all of the assets of the former division and assumed
substantially all of its liabilities. SCPI remained contingently liable for
certain of these liabilities. In early 1991, SCPI received notices of default
in respect of the leased properties that SCPI had transferred to RAC. In March
1991, RAC was forced into bankruptcy by a group of creditors which included
SCPI. Pursuant to RAC's bankruptcy reorganization plan, which became effective
in September 1992, SCPI participated in a global settlement pursuant to which
SCPI issued $2.5 million of non-interest bearing notes (the "Creditor Notes")
solely for the benefit of contingent creditors. In return, SCPI and Oakhurst
were relieved of any further obligations to contingent creditors, except for
payment on the Creditor Notes.
The Creditor Notes, which are non-interest bearing, are payable in
equal annual installments through July 1998, subject to a prepayment provision
whereby if defined cash flow exceeds $1,000,000 and $1,100,000 in fiscal 1996
and 1997, respectively, holders of Creditor Notes may tender for prepayment a
portion thereof in the amount of the defined excess cash flow, but not to
exceed approximately $400,000 per annum. In fiscal 1996 and in fiscal 1997,
SCPI did not meet the defined criteria for such prepayment. The Creditor Notes
have been discounted using an imputed interest rate of 7.5%. Imputed interest
expense of approximately $56,000, $76,000 and $96,000 is included in results of
continuing operations for fiscal 1997, 1996 and 1995, respectively.
-F13-
<PAGE> 48
Income from the discontinued former Retail Division of $65,000 and
$90,000 for the periods ended February 29, 1996 and February 28, 1995,
primarily reflected decreases in SCPI's reserve for contingent liabilities
relating to the former Retail Division, net of an income tax provision of
$46,000 for fiscal 1995.
8. Stock Options
In fiscal 1995, the Board of Directors and shareholders approved two
stock option plans, the 1994 Omnibus Stock Plan (the "Omnibus Plan") and the
1994 Non-Employee Director Stock Option Plan (the "Director Plan"). Under both
plans, the exercise price of the option granted may not be less than the fair
market value of the common stock on the date of the grant, and the term of the
grant may not exceed ten years.
The Omnibus Plan initially provided for the issuance of a maximum of
350,000 shares of Oakhurst's common stock pursuant to the grant of incentive
stock options to employees of Oakhurst and its subsidiaries, and the grant of
non-qualified stock options, stock or restricted stock to employees,
consultants, directors and officers of Oakhurst and its subsidiaries. In fiscal
1996, the Board of Directors adopted an amendment to the plan whereby the
maximum amount of shares issuable under the Omnibus Plan was increased to
500,000 shares, and such amendment was approved by the shareholders in fiscal
1997.
In fiscal 1995, options covering 313,084 shares were granted at prices
ranging from $2.75 to $3.875. In fiscal 1996, the price of 105,000 of such
options was reduced to $2.00 per share, and a further 129,500 options were
granted at prices ranging from $1.25 to $2.00. In fiscal 1997, 49,500 and 400
options were granted at a prices of $1.25 and $1.16 per share, respectively.
The options generally vest over a four year period and expire ten years from
the date of the grant; however 100,000 of the options granted in fiscal 1996
vested over a one year period, and 49,500 of options granted in fiscal 1997
were immediately exercisable. In fiscal 1997, 21,850 options were forfeited.
Options covering 403,517, 254,959 and 136,234 shares were exercisable at
February 28, 1997, February 29, 1996 and February 28, 1995, respectively. None
of these options have been exercised.
The Director Plan (a "formula plan") provides for the issuance of up
to 100,000 shares of common stock pursuant to options granted to directors who
are not employees of the Company. In April 1994, pursuant to the terms of the
plan, eight non-employee directors were each granted a fully-vested option to
purchase 3,000 shares (24,000 shares in the aggregate) of common stock at $2.75
per share, the market value on the date of the grant, to remain exercisable for
ten years following the grant date. On May 1 of each subsequent year, each
non-employee director holding office on such date receives a fully-exercisable
ten year option to purchase an additional 3,000 shares. Accordingly, in fiscal
1996 and 1997, options to purchase 24,000 and 15,000 shares, respectively, were
granted at $3.375 and $1.22 per share, respectively. During fiscal 1996 and
1997, 6,000 and 9,000 shares, respectively, expired upon certain director's
resignations in those years. None of these options have been exercised.
In fiscal 1992, the Board of Directors granted options to purchase
194,388 shares of Oakhurst's common stock to key employees and to certain
members of the Board of Directors. The exercise price of the options, which was
equal to the market value of the stock at the date of the grant, was $2.75 and
in fiscal 1996, the price of 49,984 of such options was reduced to $2.00 per
share. During fiscal 1997, 1996 and 1995, no options were exercised, and during
fiscal 1997 and 1995, 29,992 and 14,996 options, respectively, were forfeited.
At February 28, 1997, there were 149,400 options outstanding and at fiscal 1996
and 1995, there were 179,392 options outstanding. These options are fully
vested and will remain exercisable through 2001.
In connection with SCPI's predecessor's emergence in fiscal 1990 from
Chapter 11 bankruptcy proceedings, warrants to purchase 366,837 shares of
common stock were issued and were exercisable at a price
-F14-
<PAGE> 49
of $1.00 per share through September 28, 1994. As a result of the merger (see
Note 1), the warrant holders, upon exercise, were entitled to one share each of
SCPI's and Oakhurst's common stock for the aggregate purchase price of $1.00.
During fiscal 1995, 331,622 shares were purchased pursuant to these warrants
and 35,215 warrants expired.
As described in Note 1, the Company accounts for its stock-based
compensation using the intrinsic value method. There would have been no effect
on the Company's net earnings and earnings per share had the Company used the
fair value method to determine such compensation costs instead of the intrinsic
value method.
The following table summarizes information about stock options
outstanding and exercisable at February 28, 1997:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------- -------------------
Weighted Weighted Weighted
average average average
Range of remaining exercise exercise
exercise price Number contractual price Number price
per share of shares life (years) per share of shares per share
- ------------- --------- ----------- --------- --------- ---------
<C> <C> <C> <C> <C> <C> <C>
$1.16 - $3.88 470,634 7.93 $2.18 403,517 $2.13
$1.22 - $3.38 48,000 8.11 $2.44 48,000 $2.44
$2.00 - $2.75 149,400 4.50 $2.50 149,400 $2.50
------- -------
668,034 600,917
======= =======
</TABLE>
At February 29, 1996, options were exercisable for 476,351 shares at
a weighted average exercise price of $2.57 per share. The corresponding
amounts at February 28, 1995, were 339,626 and $3.00 per share, respectively.
9. Employee Pension Plan
Steel City Products maintains a defined contribution profit-sharing
retirement plan ("the SCP Plan") covering substantially all its employees,
whereby employees may contribute a percentage of compensation, limited to
maximum allowed amounts under the Internal Revenue Code. Through fiscal 1995,
the SCP Plan provided for a 25% matching employer contribution and an annual
discretionary contribution determined by SCPI's Board of Directors. Total
expense related to the SCP Plan was $150,000 for the year ended February 28,
1995. In October 1995, the 25% SCP Plan matching employer contribution was
suspended until further notice.
Through December 31, 1995, Dowling's maintained a profit-sharing plan
for all employees over the age of twenty-one with 1,000 hours of defined
service. Employer contributions to the plan are made on an annual basis at the
discretion of management. Total expense was approximately $29,000 and $8,000 in
fiscal 1996 and fiscal 1995, respectively.
Through December 31, 1995, H&H maintained a defined contribution
profit-sharing retirement plan for all employees over the age of 21 who have
met one year of defined eligibility service. Employer contributions to the plan
were made on an annual basis at the discretion of management. There were no
plan related expenses in fiscal 1996, and such expense was approximately
$12,000 in fiscal 1995.
On June 1, 1995, by amendment to the SCP Plan, Oakhurst and Puma were
incorporated into the SCP Plan, the Plan was renamed the Oakhurst Company
Profit Sharing Plan (the "Profit Sharing Plan"), and on January 1, 1996 H&H and
Dowling's were also incorporated into the Profit Sharing Plan, and Dowling's
merged its former plan's assets and liabilities into the Profit Sharing Plan.
The Profit Sharing Plan covers substantially all persons employed by the
Company and its subsidiaries and provides for discretionary employer
contributions, the level of which, if any, may vary by subsidiary and is to be
determined annually by each
-F15-
<PAGE> 50
company's Board of Directors. In fiscal 1996, there were no discretionary
contributions made. In fiscal 1997, total plan related expense was
approximately $53,000.
10. Leases
The Company leases its corporate office and certain of its
subsidiaries' warehouses under operating leases which expire over the next four
years. Generally, leases are net leases that require payment by the Company of
executory expenses such as real estate taxes, insurance, maintenance and other
operating costs. The leases generally provide for renewal options. Certain of
these leases were with related parties (see Note 15).
Minimum annual rentals for all operating leases having initial non-cancelable
lease terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
1998........................................ $ 548
1999........................................ 534
2000........................................ 266
2001........................................ 86
2002........................................ ------
Total future minimum rental payments $1,434
</TABLE>
Total rent expense for all operating leases amounted to approximately
$703,000, $600,000 and $420,000 for fiscal 1997, 1996 and 1995, respectively.
11. Commitments and Contingencies
SCPI has employment agreements with two senior executives that provide
termination rights in the event of a change in control of SCPI, as defined. The
rights include payments ranging from six to twenty-four months of the
executives' base salaries, along with continuation of benefits and certain
other payments to each executive. Each agreement also provides for
substantially the same provisions in the event that the executive's employment
were to be terminated by SCPI without cause. The agreements were extended in
August 1996 on a year to year basis, and will continue under the same terms
unless a notice of non-renewal is given by either party 90 days prior to the
anniversary date of such renewal.
In fiscal 1996, Oakhurst entered into employment agreements with
certain senior executives of Oakhurst and Dowling's that provide for certain
termination rights in the event that the executive's employment were to be
terminated by Oakhurst without cause. The employment agreements expire between
June 1997 and February 2001.
Management is unaware of any other significant contingencies.
12. Major Customers
Sales to each of those major customers representing individually more
than 10% of Oakhurst's consolidated sales were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
February 28, 1997 February 29, 1996 February 28, 1995
------------------ ------------------- -------------------
% of % of % of
Sales Total Sales Sales Total Sales Sales Total Sales
----- ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Customer "A" -- -- $4,641 10% $6,046 14%
Customer "B" -- -- $3,975 8% $4,465 10%
</TABLE>
-F16-
<PAGE> 51
During the third quarter of fiscal 1996, customer A informed SCPI
that it had decided to change its source of supply, and sales to this customer
ended in January 1996.
In July 1993, one of SCPI's then-largest customers (customer B) filed
for protection under Chapter 11 of the United States Bankruptcy Code. This
customer reorganized and emerged from Chapter 11 in January 1995. Customer B
continued to be one of SCPI's largest customers throughout this period until
the second quarter of fiscal 1996, when management curtailed the level of
credit allowed to such customer after becoming aware that it was experiencing
new financial difficulties. In October 1995, customer B again filed for
protection under the U.S. Bankruptcy Code and announced that it would close all
its stores; the fiscal 1996 provision for doubtful accounts contains a
write-off of approximately $150,000 relating to this customer.
13. Acquisitions and Related Arbitration
In August 1994, Oakhurst acquired all of the outstanding capital stock
of Dowling's. The purchase price of approximately $5.5 million consisted of $4
million in cash, a note payable to the seller of $700,000 that provided for
interest at prime and that was due in two annual installments commencing with
the first anniversary of the closing date, earn-out payments that were
estimated at $300,000 and convertible debt of $500,000 that was issued to
certain executives of Dowling's, which accrued interest at 6% and was due on
August 1, 1997 or was convertible, at the executives' option, to an aggregate
of 120,346 shares of Oakhurst common stock on such date. In addition, Oakhurst
incurred acquisition costs of approximately $290,000.
On March 1, 1996, the convertible debt issued in connection with the
Dowling's acquisition was renegotiated into the form of cash payments made in
March 1996 of approximately $109,000 (including accrued interest), and the
issuance of two long-term notes payable through March 1, 2001 aggregating
$440,000 (the "DFS Notes") (see Note 5). The DFS Notes do not contain a stock
conversion option.
On February 2, 1996, Oakhurst entered into a settlement agreement (the
"Settlement") in connection with an arbitration proceeding that it had
commenced in July 1995 in connection with the acquisition of Dowling's. As a
result of the Settlement, all current and future amounts to be paid by Oakhurst
to the seller pursuant to the purchase and sale agreement were reduced to a sum
of $175,000. Accordingly, the aggregate purchase price of Dowling's was reduced
by approximately $1 million. Pursuant to the Settlement, Oakhurst was also
relieved of accrued and future interest charges on the note payable, and
amounts due under an employment and non-compete agreement.
The cash portion of the purchase price of Dowling's was funded by
Series A Preferred stock dividends of $2.8 million from SCPI (funded by the
Term Loan), by advances from SCPI and by advances under the Credit Agreement
(see Note 4).
In October 1994, Oakhurst acquired all of the outstanding capital
stock of Puma. The purchase price of approximately $4.2 million consisted of
$1.2 million in cash, a note payable to the seller of $600,000 which had
provided for interest at prime plus 1% and which had been due in two annual
installments commencing with the first anniversary of the closing date, a note
payable to the seller, paid in full in fiscal 1996, of approximately $750,000
that provided for interest at prime plus 1%, earn-out payments which were
initially estimated at $1,100,000 and the issuance of 266,667 shares of
Oakhurst's common stock, which was valued at $650,000 and is restricted for up
to three years following issuance. The purchase agreement provided for bonus
earn-out payments to be made to the former shareholder over five years in the
event that earnings exceed historical levels. There were no earn-out payments
made during the term of the agreement. In connection with the sale of Puma (see
Note 2), the remaining obligations under the note payable and earn-out were
canceled.
The cash purchase portion of the acquisition price of Puma was funded
by available cash and by
-F17-
<PAGE> 52
borrowings under the Credit Agreement. In addition, Oakhurst incurred
acquisition costs of approximately $250,000.
On March 28, 1996, Dowling's acquired all of the outstanding capital
stock of G&O, a radiator distributor based in Philadelphia, Pennsylvania. The
purchase price of approximately $210,000 consisted of $105,000 in cash, with
the balance in the form of a note payable to the seller. The note carried
interest at 7%, and was paid in full on the first anniversary of the
acquisition date, together with interest thereon. The seller continues with G&O
under a four year employment agreement.
In connection with the acquisition, Dowling's entered into a
non-competition agreement with the seller that provides for payments of
$315,000 over a three year period, and for payments of 7.5% of the defined
profits of G&O for the next four years. The value of the non-competition
agreement has been discounted using an imputed interest rate of 9.75%, and the
related asset is being amortized over the life of the agreement, which is ten
years. The G&O acquisition did not have an impact on Oakhurst's earnings per
share, and accordingly, pro forma information for G&O has not been presented.
The acquisitions were accounted for using the purchase method of
accounting. In connection with the acquisitions, assets were acquired and
liabilities were assumed as follows (in thousands):
<TABLE>
<CAPTION>
Dowling's Puma G&O
--------- ------ ----
<S> <C> <C> <C>
Fair value of assets acquired.. $7,080 $4,609 $279
Liabilities assumed ........... 1,927 675 67
------ ------ ----
Net assets acquired ........ $5,153 $3,934 $212
====== ====== ====
</TABLE>
14. Corporate Reorganization
Under the merger (see Note 1), SCPI is required for a period of five
years following the merger to issue to Oakhurst (or cancel) such number of
shares of Series A Preferred Stock and/or common stock as shall be necessary,
in accordance with periodic determinations, to maintain Oakhurst's aggregate
stock ownership of SCPI at 90%. Revaluations of SCPI as of February 28, 1995,
February 29, 1996 and February 28, 1997, respectively, have not yet been
completed. Management expects that the revaluations as of the end of the two
most recent fiscal years, when complete, will result in a decrease in the
valuation of SCPI because of changes in the business climate that occurred
primarily during fiscal 1996. Accordingly, Series A Preferred shares
outstanding may be canceled once such valuations are complete.
During fiscal 1993, the cumulative dividends on SCPI's Series A
Preferred Stock exceeded SCPI's net income for that year, thus creating a loss
attributable to SCPI's common stockholders in excess of Oakhurst's minority
interest and, accordingly, Oakhurst reduced to zero the minority interest
liability related to SCPI. At such time as SCPI's cumulative net income
attributable to common stockholders from the effective date of the merger
exceeds the cumulative Series A Preferred Stock dividends in arrears, Oakhurst
will again reflect the appropriate minority interest liability.
The Series A Preferred Stock carries a dividend rate of $0.5228 per
share and has a redemption price and liquidation preference of $5.2282 per
share plus any accumulated dividends in arrears. Through February 28, 1997,
dividends of approximately $6.2 million have accumulated since the effective
date of the merger; of this amount, approximately $3.6 million has been
declared by SCPI's Board of Directors and paid through fiscal 1995.
Approximately $2.6 million of undeclared dividends in arrears was outstanding
as of February 28, 1997.
15. Related Party Transactions
In fiscal 1994, H&H entered into a seven-year lease with Harold
Garfinkel, the President and former
-F18-
<PAGE> 53
owner of H&H, for the principal property from which it conducted its business.
The lease requires annual lease payments of $144,000. H&H paid Mr. Garfinkel
$144,000 in each of fiscal 1997, 1996 and 1995 under this lease.
In fiscal 1995, Puma entered into a six-year lease with Anthony Puma,
the former Chairman of Puma, for the facility from which it conducted its
business. Effective May 31, 1997, Oakhurst sold Puma to Mr. Puma (see Note 2).
The lease required minimum annual lease payments of approximately $80,000. Puma
paid Mr. Puma approximately $80,000 in fiscal 1997 and 1996, respectively, and
$20,000 in fiscal 1995 under this lease.
In fiscal 1995, Dowling's entered into two five-year leases with
James Dowling, for a facility in New York in which Dowling's is headquartered
and operates a warehouse, and for a facility in Connecticut where Dowling's
operates a warehouse. Mr. Dowling is the former owner of Dowling's and was Vice
Chairman of Dowling's until his resignation in fiscal 1996. Both leases have
one option to renew for an additional five years and require aggregate annual
rent payments of $211,000. Dowling's paid Mr. Dowling approximately $122,000 in
fiscal 1995 under these leases.
16. Predecessor Bankruptcy
During fiscal 1995, SCPI recovered funds placed into escrow in prior
years as a part of SCPI's predecessor's bankruptcy in the amount of
approximately $175,000, which amount is included in other income.
SCPI's predecessor emerged from bankruptcy in fiscal 1990.
17. Selected Quarterly Financial Data (Unaudited)
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal 1997 First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Sales .............................. $ 10,892 $ 11,454 $ 10,247 $ 9,335
Gross profit ....................... 2,412 2,577 2,221 2,259
Net loss ........................... (471) (432) (587) (7,271)
Per Share:
Net loss ........................ $ (.15) $ (.13) $ (.18) $ (2.27)
Average number of shares outstanding 3,197,183 3,201,144 3,201,144 3,201,144
Fiscal 1996 First Second Third Fourth
----- ------ ----- ------
Sales .............................. $ 13,026 $ 13,517 $ 11,580 $ 9,216
Gross profit ....................... 2,887 2,827 2,480 1,824
Loss from continuing operations .... (216) (449) (2,420) (958)
Income from discontinued operations -- -- -- 65
Net loss ........................... (216) (449) (2,420) (893)
Per Share:
Loss from continuing operations .. $ (.07) $ (.14) $ (.76) $ (.30)
Net loss ......................... $ (.07) $ (.14) $ (.76) $ (.28)
Average number of shares outstanding 3,190,365 3,195,235 3,195,235 3,195,235
</TABLE>
The net loss in the fourth quarter of fiscal 1997 was primarily caused
by two factors. In April 1997, Oakhurst's Board of Director's decided to
dispose of H&H, and in June 1997, a final agreement was reached to sell the
capital stock of Puma. Accordingly, the fourth quarter results include a charge
of approximately $3.5 million related to such disposals, principally consisting
of a write-off of the unamortized value of the excess of costs over net assets
acquired attributable to these subsidiaries. In addition, the results for the
fourth quarter of fiscal 1997 include a net deferred income tax charge of
approximately $3.1 million relating to an increase in the valuation allowance
of the deferred tax asset, which reflects management's current assessment of
the
-F19-
<PAGE> 54
expected future value of the net tax loss carryforwards.
The net loss in third quarter of fiscal 1996 was primarily caused by a
deferred tax charge of $2 million related to an increase in the valuation
allowance of the deferred tax asset, and by reduced sales and profit levels due
to the loss of a major SCPI customer that filed bankruptcy. The loss in the
fourth quarter of fiscal 1996 was due principally to the loss of certain other
SCPI customers and to increases in the provision for doubtful accounts.
During fiscal 1996, the previous estimate to provide for the disposal
of the discontinued Retail Division was reduced.
-F20-
<PAGE> 55
SCHEDULE II
OAKHURST COMPANY, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at Charged Charges to Balance
beginning to costs other accounts Deductions at end
Description of Period and expenses -describes - describe of Period
===================================================================================================================================
Allowance for doubtful accounts deducted from trade accounts receivable:
Years ended:
<S> <C> <C> <C> <C> <C> <C> <C>
February 28, 1997 $ 558 $ 102 $ - $ 105 (A) $ 555
========== ========= =========== =========== ===========
February 29, 1996 $ 282 $ 610 $ - $ 334 (A) $ 558
========== ========= =========== =========== ===========
February 28, 1995 $ 320 $ 27 $ - $ 65 (A) $ 282
========== ========= =========== =========== ===========
</TABLE>
(A) Amounts were deemed uncollectible.
-F21-
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of May 20, 1991 (filed
as Appendix A to the Proxy Statement/Prospectus dated April
16, 1991 of the Company and Steel City Products, Inc.).
3.1 Restated and Amended Certificate of Incorporation (filed as
Exhibit 3 to the Company's Quarterly Report on Form 10-K for
the fiscal quarter ended August 31, 1996).
3.2 By-laws (filed as Appendix C to the Proxy
Statement/Prospectus of the Company and Steel City Products,
Inc. dated April 16, 1991).
4.1 Agreement and Plan of Merger dated as of May 20, 1991 (see
Exhibit 2, above).
+10.1 Form of Option Agreement dated August 29, 1991 with directors
and executive officers (filed as Exhibit 10(b) to the
Company's Annual report on Form 10-K for the fiscal year
ended February 29, 1992).
10.2 Agreement dated June 11, 1991 with Prudential-Bache Special
Situations Fund (filed as Exhibit 10(q) to the Annual Report
on Form 10-K of Steel City Products, Inc. for the fiscal year
ended March 3, 1990).
+10.3 Employment Agreement with Harold Garfinkel dated as of
November 1, 1993 (filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
26, 1994).
10.4 Agreement between Harold Garfinkel and H&H Distributors, Inc.
dated as of November 1, 1993 (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year
ended February 26, 1994).
10.5 Credit Agreement by and between Steel City Products, Inc. and
Integra Bank Pittsburgh (filed as Exhibit 10.1 to SCPI's
Quarterly Report on Form 10-Q for the period ended August 27,
1994).
10.6 Mortgage and Security Agreement by and between Steel City
Products, Inc. and Integra Bank Pittsburgh (filed as Exhibit
10.2 to SCPI's Quarterly Report on Form 10-Q for the period
ended August 27, 1994).
10.7 Credit Agreement by and between Oakhurst Capital, Inc. and
Integra Bank Pittsburgh (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
August 27, 1994).
10.8 Pledge and Security agreements between Oakhurst Capital, Inc.
and Integra Bank Pittsburgh (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the period ended
August 27, 1994).
10.9 Purchase and Sale Agreement relating to the acquisition of
Dowling's Fleet Service Company, Inc. by Oakhurst Capital,
Inc., also containing employment agreements with James
Dowling, Robert Keane and Joseph Quattrochi (filed as Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
period ended August 27, 1994).
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C>
+10.10 Stock Purchase Agreement dated as of October 20, 1994 among
Oakhurst Capital, Inc., Puma Products and Anthony Puma also
containing employment agreements with Anthony Puma and
Laurence Finman (filed as an exhibit to Oakhurst's Form 8-K
filed on October 26, 1994).
10.11 Lease agreements by and between James Dowling and Dowling's
Fleet Service Company, Inc. (filed as Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1995).
10.12 Lease agreement by and between Anthony Puma and Puma Products
(filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1995).
+10.13 The 1994 Omnibus Stock Plan with form of option agreement
(filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1995).
+10.14 The 1994 Non-Employee director Stock Option Plan with form of
option agreement (filed as Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1995).
10.15 Letter agreement dated January 3, 1996 between SCPI and
Integra Bank Pittsburgh amending the Credit Agreement, dated
August 1, 1994 between SCPI and Integra (filed as Exhibit
10.17 to Oakhurst's Registration Statement on Form S-1, file
#333-00173, filed on January 12, 1996).
10.16 Letter agreement dated January 3, 1996 between Oakhurst and
Integra Bank Pittsburgh amending the Credit Agreement, dated
August 1, 1994 between Oakhurst and Integra (filed as Exhibit
10.16 to Oakhurst's Registration Statement on Form S-1, file
#333-00173, filed on January 12, 1996).
10.17 Loan and Security Agreement; Schedule to Loan and Security
Agreement; Secured Promissory Note with FINOVA Capital
Corporation all dated March 28, 1996 (filed as Exhibit 10.17
to the Company's Annual Report on Form 10-K for the fiscal
year ended February 29, 1996).
10.18 Open-End Mortgage between Steel City Products, Inc. and
FINOVA Capital Corporation dated March 28, 1996 (filed as
Exhibit 10.18 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996).
10.19 Consulting Agreement with Bryanston Management, Ltd, dated as
of December 19, 1995 (filed as Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
29, 1996).
+10.20 Consulting Agreement with Mark Auerbach dated as of December
19, 1995 and Options Agreement with Mark Auerbach dated as of
December 19, 1995 (filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the fiscal year ended February
29, 1996).
+10.21 Employment Agreement between Oakhurst Management Corporation
and John R. Ruda dated as of December 19, 1995 filed as
Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1996).
+10.22 Employment Agreement and Form of Promissory Note between
Dowling's Fleet Service, Co., Inc. and Joseph B. Quattrochi
dated as of March 1, 1996 - filed herewith
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
<S> <C>
+10.23 Employment Agreement and Form of Promissory Note between
Dowling's Fleet Service, Co., Inc. and Robert M. Keane dated
as of March 1, 1996 - filed herewith
+10.24 Employment Agreement between Laurence D. Finman and Oakhurst
Management Co., dated as of March 1, 1996 - filed herewith
10.25 Non-Competition Agreement between G&O Sales Company and
Arthur Gruber dated as of March 12, 1996 - filed herewith
+10.26 Amendment to Consulting Agreement and form of Amended
Non-Qualified Stock Option Agreement between Mark Auerbach
and Oakhurst Company, Inc. dated as of October 1, 1996 -
filed herewith
10.27 Stock Purchase and Sale Agreement between Anthony N. Puma,
Puma Products, Inc. and Oakhurst Company, Inc., dated as of
June 10, 1997 - filed herewith
11 Statement of re-computation of per-share earnings - filed
herewith.
21 Subsidiaries at February 28, 1997:
Steel City Products, Inc. - Delaware
H&H Distributors, Inc. - Pennsylvania
Dowling's Fleet Service Company, Inc. - New York
Puma Products, Inc. - Texas
Oakhurst Management Corporation - Texas
23 Consent of Deloitte & Touche LLP - filed herewith.
27 Financial Data Schedule (EDGAR transmission only) - filed
herewith.
- -----------------
+ Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
JOSEPH B. QUATTROCHI
&
DOWLING'S FLEET SERVICE CO., INC.
Agreement (this "Agreement") dated as of this 1st day of March, 1996 is entered
into by and between DOWLING'S FLEET SERVICE CO., INC. (the "Company") and
JOSEPH B. QUATTROCHI ("Mr. Quattrochi"). The parties entered into an
employment agreement dated as of August 1, 1994, but now wish to amend that
agreement in its entirety. Accordingly the parties agree as follows:
1. THE TERM: Commencement Date: March 1, 1996
Expiration Date: February 28, 2001 unless sooner
terminated as provided below.
2. RESPONSIBILITIES
AND SALARY: During the Term, Mr. Quattrochi shall be elected a
Vice President of the Company and shall devote his
best efforts on a full time basis to carrying out the
responsibilities assigned to him.
Commencing as of January 1, 1996 and continuing during
the Term, the Company shall pay to Mr. Quattrochi a
base salary of not less than seventy-two thousand five
hundred forty dollars ($72,540) per year.
From and after March 1, 1997 for the balance of the
Term, Mr. Quattrochi's salary shall be subject to an
annual review on March 1 of each fiscal year for merit
or other increases in the sole discretion of the Board
of Directors of the Company.
3. BENEFITS: Mr. Quattrochi shall be entitled to the same benefits
as are made available to the Company's other senior
executives and on the same terms and conditions as
such executives.
In lieu of the Company providing to Mr. Quattrochi for
his exclusive use a vehicle leased by the Company, Mr.
Quattrochi has elected to purchase such a vehicle
himself. Accordingly, the Company shall pay to Mr.
Quattrochi one hundred fifty dollars ($150) per week
to cover all the costs associated with such vehicle
including, but not limited to gas, maintenance,
repairs and collision, fire, theft and liability
insurance. All of the benefits in this Paragraph 3
are hereinafter referred to as the "Benefits."
4. INCENTIVE BONUS: Mr. Quattrochi shall be paid the annual incentive
bonus that is described in Exhibit A hereto (the
"Incentive Bonus").
<PAGE> 2
5. BUSINESS
EXPENSES: Mr. Quattrochi shall be reimbursed in accordance with
Company policy from time to time in effect for all
reasonable business expenses incurred by him in the
performance of his duties, including travel from his
residence to the Company's various facilities other
than its headquarters facility.
6. ONE-TIME PAYMENT
& PROMISSORY NOTE: Upon the execution of this Agreement by Mr,
Quattrochi, and in consideration thereof, the
Company's parent, Oakhurst Company, Inc., shall pay
to Mr. Quattrochi the sum of fifty-four thousand two
hundred seventy-five dollars ($54,275) and shall
deliver to Mr. Quattrochi the executed original of
the form of promissory note attached hereto as
Exhibit B.
7. INDEMNIFICATION: Mr. Quattrochi shall be indemnified by the Company
with respect to claims made against him as an officer
and/or employee of the Company and as a director,
officer and/or employee of any affiliate of the
Company to the fullest extent permitted by the
Company's charter, by-laws and the laws of the State
of New York.
8. TERMINATION BY
THE COMPANY: Mr. Quattrochi's employment may be terminated by the
Company only pursuant to the following provisions:
(a) FOR CAUSE For Cause, by written notice to Mr. Quattrochi, in
which event the Company shall pay him his salary
through the date of termination to the extent not
theretofore paid, provided that --
(1) if the nature of such Cause involves
dishonesty, fraud or serious moral
turpitude, such termination shall be
effective upon the giving of such notice,
but
(2) if the nature of such Cause does not involve
dishonesty, fraud or serious moral
turpitude, such termination shall be
effective upon the expiration of thirty (30)
days after the giving of such notice unless
within such thirty-day period, Mr.
Quattrochi has cured the basis of such
Cause, or if a cure is not possible within a
thirty-day period, if he has diligently and
in good faith commenced and thereafter
diligently pursues a cure.
(b) WITHOUT
CAUSE Without Cause, by written notice to Mr. Quattrochi,
in which event the Company shall pay him his salary
(in a lump sum) for the balance of the term of this
Agreement (to the extent not theretofore paid to
him), but in any event not less than six (6) months'
salary, and shall pay him the Incentive Bonus as and
to the extent provided for in Exhibit A.
(c) DEFINITION OF
"CAUSE" "Cause" for purposes of termination by the Company
shall be defined as
<PAGE> 3
any act or acts by Mr. Quattrochi of dishonesty or
fraud or that constitute serious moral turpitude; or
misconduct of a material nature or a material breach
in connection with the performance by him of his
responsibilities hereunder.
(d) DEATH OR
PERMANENT
DISABILITY Upon the death or permanent disability of Mr.
Quattrochi, in which event the Company shall continue
to pay him his salary for a period of six (6) months
after his death or permanent disability, and shall
pay him the Incentive Bonus as and to the extent
provided for in Exhibit A.
9. TERMINATION BY
MR. QUATTROCHI: Mr. Quattrochi may terminate his employment under
this Agreement only pursuant to the following
provisions:
(a) FOR CAUSE For Cause, upon the expiration of thirty (30) days
after giving the Company notice of a breach by it of
this Agreement unless within such thirty-day period,
the Company has cured the basis of such Cause, or if
a cure is not possible within a thirty-day period, if
it has diligently and in good faith commenced and
thereafter diligently pursues a cure. In the event
of a termination by Mr. Quattrochi for Cause, he may
pursue any and all remedies against the Company
available to him under applicable law.
(b) WITHOUT
CAUSE Without Cause, one hundred eighty (180) days after
giving written notice of his resignation to the
Company, in which event the Company may deem such
notice as a resignation by him, effective upon the
giving of such notice, of all of the directorships
and offices then held by him in the Company and its
affiliates, but the Company shall nevertheless
continue to pay to him his salary during such one-
hundred-eighty-day period.
(c) DEFINITION OF
"CAUSE" "Cause" for purposes of termination by Mr. Quattrochi
shall consist of any material breach by the Company
in the performance of any of its obligations set
forth in this Agreement or a material breach of any
statutory obligation to Mr. Quattrochi.
10. NOTICES: Notices that are required or permitted hereunder
shall be given by hand delivery, by delivery to a
courier service providing next-business-day delivery
and proof of delivery or, in the case of the Company,
by facsimile transmission, as follows:
If to the Company: c/o Oakhurst Capital, Inc.
1001 Santerre Drive
Grand Prairie, Texas 75050
Attention: Chief Executive
Officer
Facsimile No.: (214) 660-4465
<PAGE> 4
With a copy to: Roger M. Barzun, General
Counsel
60 Hubbard Street
P.O. Box 767
Concord, Massachusetts 01742
If to Mr. Quattrochi at: Joseph B. Quattrochi
69 Stonelea Place
New Rochelle, NY 10801
or, to such other address of a party as to which that
party shall notify the other parties in the manner
provided herein.
11. PRORATION: To the extent that proration is not otherwise
provided for in this Agreement, all amounts payable
to Mr. Quattrochi under this Agreement shall be
deemed earned on a daily basis and shall be pro rated
based on a 365-day year.
12. ENTIRE
AGREEMENT ETC.: This Agreement together with Exhibit A and Exhibit B
contains the entire understanding of the parties;
shall not be amended except by written agreement of
the parties signed by each of them; shall be binding
upon and inure to the benefit of the parties and
their successors, personal representatives and
assigns; and, as noted above, supersedes and replaces
in its entirety the employment agreement between the
Company and Mr. Quattrochi dated August 1, 1994.
No representation, affirmation of fact, course of
prior dealings, promise or condition in connection
herewith or usage of the trade not incorporated
herein shall be binding on the parties.
No waiver of any term or condition contained herein
shall be binding upon the parties unless made in
writing and signed by the party to be bound thereby.
The words "herein", "hereof", "hereunder", "hereby",
"herewith" and words of similar import when used in
this Agreement shall be construed to refer to this
Agreement as a whole. The word "including" shall
mean including, but not limited to any enumerated
items.
The failure to insist upon strict compliance with any
term, covenant or condition contained herein shall
not be deemed a waiver of such term, nor shall any
waiver or relinquishment of any right at any one or
more times be deemed a waiver or relinquishment of
such right at any other time or times.
The captions of the paragraphs herein are for
convenience only and shall not be used to construe or
interpret this Agreement.
<PAGE> 5
In Witness Whereof, the parties have executed and delivered this Agreement as
of the date first set forth above.
DOWLING'S FLEET SERVICE CO., INC.
By: /s/ Maarten D. Hemsley /s/ Joseph B. Quattrochi
------------------------------------ ------------------------------------
Maarten D. Hemsley JOSEPH B. QUATTROCHI
Chairman of the Board of Directors
<PAGE> 6
EXHIBIT A
EMPLOYMENT AGREEMENT OF JOSEPH B. QUATTROCHI
THE INCENTIVE BONUS
1. INCENTIVE BONUS: For each fiscal year during the Term commencing with the
fiscal year ending February 28, 1997, the Company shall pay to Mr.
Quattrochi the Incentive Bonus, consisting of two portions, as follows:
Twenty thousand dollars ($20,000) (the "Fixed Portion") plus two percent
(2%) of the Operating Profits of the Company (as hereinafter defined) that
exceed the budgeted Operating Profits of the Company for a given fiscal
year (the "Variable Portion").
2. INCENTIVE BONUS PRORATION:
(a) In the event that this Agreement expires, or Mr. Quattrochi's
employment is terminated by the Company for other than Cause prior
to the end of a fiscal year, the Company shall pay to him the Fixed
Portion pro rated for the number of days in the fiscal year then
elapsed and shall pay him any Variable Portion earned for the
period from the beginning of the fiscal year in which such
expiration or termination occurred through the last day of the
fiscal month in which such expiration or termination becomes
effective (the "Short Fiscal Year"), based on the Operating Profits
through such fiscal month end and the budgeted Operating Profits
for such period.
(b) If Mr. Quattrochi shall resign from the Company's employ, no bonus
of any kind shall be payable to him with respect to the fiscal year
in which he gave or was obliged to give his notice of termination
as provided herein, or for any subsequent fiscal year.
3. PAYMENT OF THE INCENTIVE BONUS. The Company shall pay the Incentive Bonus
to Mr. Quattrochi within ninety (90) days after the end of each fiscal
year, except that the Incentive Bonus computed according to Paragraph
2.(a), above, shall be paid within sixty (60) days of the end of the Short
Fiscal Year.
4. DEFINITIONS.
(a) For purposes of this Agreement, "fiscal year" and "fiscal month"
shall refer to the fiscal year and month of the Company being used
on the date hereof. In the event that the fiscal year or month of
the Company is changed for any reason, an equitable adjustment
shall be made so that no portion of the Incentive Bonus that would
otherwise have been payable hereunder shall by reason of such
change become not payable.
(b) For purposes of this Agreement, "Operating Profits" shall be
defined as the net income of the Company for a given period
determined in accordance with generally accepted accounting
principles, consistently applied, before payment or provision for
federal or state income or franchise taxes, and excluding (a) any
amortization of goodwill or other intangibles; (b) any interest
charges related to the purchase of the Company's stock by Oakhurst
Company, Inc.; and (c) charges or allocations by the Company's
parent or an affiliated company except to the extent that such
charges are for items of expense that, had they not been paid by
the Company's parent or a related entity, would have been paid by
the Company (e.g. insurance
<PAGE> 7
premiums and interest on working capital borrowings). For purposes
of the foregoing, inventory shall be valued on a FIFO basis.
END OF EXHIBIT A
<PAGE> 8
EXHIBIT B
EMPLOYMENT AGREEMENT OF JOSEPH B. QUATTROCHI
FORM OF OAKHURST PROMISSORY NOTE
$220,000 MARCH 1, 1996
FOR VALUE RECEIVED Oakhurst Company, Inc. ("Oakhurst") agrees to pay to Joseph
B. Quattrochi or order, (the "Holder") the principal sum of Two Hundred Twenty
Thousand Dollars ($220,000) in twenty (20) quarterly installments of eleven
thousand dollars ($11,000) each on or before the first business day of June,
September, December and March in each year commencing June 1, 1996.
INTEREST. Oakhurst shall pay interest from the date hereof quarterly in
arrears on the unpaid principal balance of this Note from time to time
outstanding at an annual rate of six percent (6%), not compounded.
DEFAULT INTEREST. Any payment of principal or interest not made when due
shall, if not paid before the expiration of any cure periods therefor, bear
interest at the annual interest rate then in effect plus two percentage points.
VOLUNTARY PRE-PAYMENTS. This Note may be prepaid in whole or in part at any
time or from time to time without penalty or premium provided that all
prepayments shall be applied first to any accrued interest and then to any
outstanding principal balance hereof.
MANDATORY PREPAYMENT. All of the outstanding balance of this Note shall become
due and payable in full on the date that Oakhurst sells either (i)
substantially all of the business or assets of, or (ii) more than fifty
percent (50%) of the voting stock of Dowling's Fleet Service Co., Inc. to
anyone other than an affiliate of Oakhurst.
DEFAULT. At the option of the Holder, this Note shall become immediately due
and payable in full without notice or demand upon the occurrence of any one or
more of the following events:
(a) The failure to make any payment of any principal or interest due
hereunder within ten (10) business days after notice of such
failure has been given to Oakhurst; or
(b) The admission by Oakhurst of its inability to pay its debts as they
become due; the insolvency or the appointment of a receiver with
respect to Oakhurst or its property; any assignment of the property
of Oakhurst for the benefit of creditors; or the commencement of
any proceedings under any bankruptcy or insolvency laws by or
against Oakhurst unless such proceeding is dismissed within ninety
(90) days of the filing thereof.
WAIVER OF PRESENTMENT ETC. Oakhurst hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default (except as otherwise expressly provided
herein), or enforcement of this Note. Oakhurst agrees that any delay or
omission on the part of the Holder in exercising any right hereunder shall not
operate as a
<PAGE> 9
waiver of such right, or of any other right hereunder; and a waiver of any
right on one occasion shall not be construed as a bar or a waiver of any such
right on any future occasion.
NOTICES. All notices required or permitted hereunder shall be in writing and
shall be deemed given by a party either (a) when hand delivered to a party; or
(b) when deposited with a delivery service with instructions to provide
next-business-day delivery and proof of delivery, if to Oakhurst at its
corporate offices and if to the Holder at 69 Stonelea Place, New Rochelle, NY
10801 or to such other address of Oakhurst or the Holder as to which it or he
shall notify the other.
OAKHURST COMPANY, INC.
By: /s/ Mark Auerbach Attest: /s/ Roger M. Barzun
-------------------------------- --------------------------------
Mark Auerbach Roger M. Barzun
Chairman & Chief Executive Officer Secretary
END OF EXHIBIT B
<PAGE> 1
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
ROBERT M. KEANE
&
DOWLING'S FLEET SERVICE CO., INC.
Agreement (this "Agreement") dated as of this 1st day of March, 1996 is entered
into by and between DOWLING'S FLEET SERVICE CO., INC. (the "Company") and
ROBERT M. KEANE ("Mr. Keane"). The parties entered into an employment
agreement dated as of August 1, 1994, but now wish to amend that agreement in
its entirety. Accordingly the parties agree as follows:
1. THE TERM: Commencement Date: March 1, 1996
Expiration Date: February 28, 2001 unless
sooner terminated as provided
below.
2. RESPONSIBILITIES
AND SALARY: During the Term, Mr. Keane shall be elected
President and Chief Executive Officer of the Company
and shall devote his best efforts on a full time
basis to carrying out the responsibilities of those
positions.
Commencing as of January 1, 1996 and continuing
during the Term, the Company shall pay to Mr. Keane
a base salary of not less than one hundred twenty-
seven thousand five hundred dollars ($127,500) per
year.
From and after March 1, 1997 for the balance of the
Term, Mr. Keane's salary shall be subject to an
annual review on March 1 of each fiscal year for
merit or other increases in the sole discretion of
the Board of Directors of the Company.
3. BENEFITS: Mr. Keane shall be entitled to the same benefits as
are made available to the Company's other senior
executives and on the same terms and conditions as
such executives.
Mr. Keane shall, in addition, have exclusive use of
an automobile of Mr. Keane's choosing equivalent to
a Lincoln Town Car. The Company shall reimburse to
Mr. Keane or itself pay, as the case may be, all
costs required to maintain and operate such
automobile (except gasoline for private use) and the
costs of collision, fire, theft and liability
insurance in reasonable amounts and with reasonable
deductibles. All of the benefits in this Paragraph
3 are hereinafter referred to as the "Benefits."
4. INCENTIVE BONUS: Mr. Keane shall be paid the annual incentive bonus
that is described in Exhibit A hereto (the
"Incentive Bonus").
5. BUSINESS
EXPENSES: Mr. Keane shall be reimbursed in accordance with
Company policy from time to time in effect for all
reasonable business expenses incurred by him in the
performance of his duties, including travel from his
residence to the Company's various facilities.
Page 1 of 4
<PAGE> 2
6. ONE-TIME PAYMENT
& PROMISSORY NOTE: Upon the execution of this Agreement by Mr, Keane,
and in consideration thereof, the Company's parent,
Oakhurst Company, Inc., shall pay to Mr. Keane the
sum of fifty-four thousand two hundred seventy-five
dollars ($54,275) and shall deliver to Mr. Keane the
executed original of the form of promissory note
attached hereto as Exhibit B.
7. INDEMNIFICATION: Mr. Keane shall be indemnified by the Company with
respect to claims made against him as a director,
officer and/or employee of the Company and as a
director, officer and/or employee of any affiliate
of the Company to the fullest extent permitted by
the Company's charter, by-laws and the laws of the
State of New York.
8. TERMINATION BY
THE COMPANY: Mr. Keane's employment may be terminated by the
Company only pursuant to the following provisions:
(a) FOR CAUSE For Cause, by written notice to Mr. Keane, in which
event the Company shall pay him his salary through
the date of termination to the extent not
theretofore paid, provided that --
(1) if the nature of such Cause involves
dishonesty, fraud or serious moral
turpitude, such termination shall be
effective upon the giving of such notice,
but
(2) if the nature of such Cause does not involve
dishonesty, fraud or serious moral
turpitude, such termination shall be
effective upon the expiration of thirty (30)
days after the giving of such notice unless
within such thirty-day period, Mr. Keane has
cured the basis of such Cause, or if a cure
is not possible within a thirty-day period,
if he has diligently and in good faith
commenced and thereafter diligently pursues
a cure.
(b) WITHOUT
CAUSE Without Cause, by written notice to Mr. Keane, in
which event the Company shall pay him his salary (in
a lump sum) for the balance of the term of this
Agreement (to the extent not theretofore paid to
him), but in any event not less than six (6) months'
salary, and shall pay him the Incentive Bonus as and
to the extent provided for in Exhibit A.
(c) DEFINITION OF
"CAUSE" "Cause" for purposes of termination by the Company
shall be defined as any act or acts by Mr. Keane of
dishonesty or fraud or that constitute serious moral
turpitude; or misconduct of a material nature or a
material breach in connection with the performance
by him of his responsibilities hereunder.
(d) DEATH OR
PERMANENT
DISABILITY Upon the death or permanent disability of Mr. Keane,
in which event the Company shall continue to pay him
his salary for a period of six (6) months after his
death or permanent disability, and shall pay him the
Incentive Bonus as and to the extent provided for in
Exhibit A.
Page 2 of 4
<PAGE> 3
9. TERMINATION BY
MR. KEANE: Mr. Keane may terminate his employment under this
Agreement only pursuant to the following provisions:
(a) FOR CAUSE For Cause, upon the expiration of thirty (30) days
after giving the Company notice of a breach by it of
this Agreement unless within such thirty-day period,
the Company has cured the basis of such Cause, or if
a cure is not possible within a thirty-day period,
if it has diligently and in good faith commenced and
thereafter diligently pursues a cure. In the event
of a termination by Mr. Keane for Cause, he may
pursue any and all remedies against the Company
available to him under applicable law.
(b) WITHOUT
CAUSE Without Cause, one hundred eighty (180) days after
giving written notice of his resignation to the
Company, in which event the Company may deem such
notice as a resignation by him, effective upon the
giving of such notice, of all of the directorships
and offices then held by him in the Company and its
affiliates, but the Company shall nevertheless
continue to pay to him his salary during such one-
hundred-eighty-day period.
(c) DEFINITION OF
"CAUSE" "Cause" for purposes of termination by Mr. Keane
shall consist of any material breach by the Company
in the performance of any of its obligations set
forth in this Agreement or a material breach of any
statutory obligation to Mr. Keane.
10. NOTICES: Notices that are required or permitted hereunder
shall be given by hand delivery, by delivery to a
courier service providing next-business-day delivery
and proof of delivery or, in the case of the
Company, by facsimile transmission, as follows:
If to the Company: c/o Oakhurst Capital, Inc.
1001 Santerre Drive
Grand Prairie, Texas 75050
Attention: Chief Executive
Officer
Facsimile No.: (214) 660-4465
With a copy to: Roger M. Barzun, General
Counsel
60 Hubbard Street
P.O. Box 767
Concord, Massachusetts 01742
If to Mr. Keane at: Robert M. Keane
81 Cricket Lane
Trumbull, Connecticut 06611
or, to such other address of a party as to which that
party shall notify the other parties in the manner
provided herein.
11. PRORATION: To the extent that proration is not otherwise provided for
in this Agreement, all amounts payable to Mr. Keane under
this Agreement shall be deemed earned on a daily basis and
shall be pro rated based on a 365-day year.
Page 3 of 4
<PAGE> 4
12. ENTIRE
AGREEMENT ETC.: This Agreement together with Exhibit A and Exhibit B
contains the entire understanding of the parties;
shall not be amended except by written agreement of
the parties signed by each of them; shall be binding
upon and inure to the benefit of the parties and
their successors, personal representatives and
assigns; and, as noted above, supersedes and
replaces in its entirety the employment agreement
between the Company and Mr. Keane dated August 1,
1994.
No representation, affirmation of fact, course of
prior dealings, promise or condition in connection
herewith or usage of the trade not incorporated
herein shall be binding on the parties.
No waiver of any term or condition contained herein
shall be binding upon the parties unless made in
writing and signed by the party to be bound thereby.
The words "herein", "hereof", "hereunder", "hereby",
"herewith" and words of similar import when used in
this Agreement shall be construed to refer to this
Agreement as a whole. The word "including" shall
mean including, but not limited to any enumerated
items.
The failure to insist upon strict compliance with
any term, covenant or condition contained herein
shall not be deemed a waiver of such term, nor shall
any waiver or relinquishment of any right at any one
or more times be deemed a waiver or relinquishment
of such right at any other time or times.
The captions of the paragraphs herein are for
convenience only and shall not be used to construe
or interpret this Agreement.
In Witness Whereof, the parties have executed and delivered this Agreement as
of the date first set forth above.
DOWLING'S FLEET SERVICE CO., INC.
By: /s/ Maarten D. Hemsley /s/ Robert M. Keane
------------------------------------- ----------------------------------
Maarten D. Hemsley Robert M. Keane
Chairman of the Board of Directors
Page 4 of 4
<PAGE> 5
EXHIBIT A
EMPLOYMENT AGREEMENT OF ROBERT M. KEANE
THE INCENTIVE BONUS
1. INCENTIVE BONUS: For each fiscal year during the Term commencing with
the fiscal year ending February 28, 1997, the Company shall pay to Mr.
Keane the Incentive Bonus, consisting of two portions, as follows:
Twenty thousand dollars ($20,000) (the "Fixed Portion") plus four
percent (4%) of the Operating Profits of the Company (as hereinafter
defined) that exceed the budgeted Operating Profits of the Company for a
given fiscal year (the "Variable Portion").
2. INCENTIVE BONUS PRORATION:
(a) In the event that this Agreement expires, or Mr. Keane's
employment is terminated by the Company for other than Cause
prior to the end of a fiscal year, the Company shall pay to him
the Fixed Portion pro rated for the number of days in the fiscal
year then elapsed and shall pay him any Variable Portion earned
for the period from the beginning of the fiscal year in which
such expiration or termination occurred through the last day of
the fiscal month in which such expiration or termination becomes
effective (the "Short Fiscal Year"), based on the Operating
Profits through such fiscal month end and the budgeted Operating
Profits for such period.
(b) If Mr. Keane shall resign from the Company's employ, no bonus of
any kind shall be payable to him with respect to the fiscal year
in which he gave or was obliged to give his notice of termination
as provided herein, or for any subsequent fiscal year.
3. PAYMENT OF THE INCENTIVE BONUS. The Company shall pay the Incentive
Bonus to Mr. Keane within ninety (90) days after the end of each fiscal
year, except that the Incentive Bonus computed according to Paragraph
2.(a), above, shall be paid within sixty (60) days of the end of the
Short Fiscal Year.
4. DEFINITIONS.
(a) For purposes of this Agreement, "fiscal year" and "fiscal month"
shall refer to the fiscal year and month of the Company being
used on the date hereof. In the event that the fiscal year or
month of the Company is changed for any reason, an equitable
adjustment shall be made so that no portion of the Incentive
Bonus that would otherwise have been payable hereunder shall by
reason of such change become not payable.
(b) For purposes of this Agreement, "Operating Profits" shall be
defined as the net income of the Company for a given period
determined in accordance with generally accepted accounting
principles, consistently applied, before payment or provision for
federal or state income or franchise taxes, and excluding (a) any
amortization of goodwill or other intangibles; (b) any interest
charges related to the purchase of the Company's stock by
Oakhurst Company, Inc.; and (c) charges or allocations by the
Company's parent or an affiliated company except to the extent
that such charges are for items of expense that, had they not
been paid by the Company's parent or a related entity, would have
been paid by the Company (e.g. insurance premiums and interest on
working capital borrowings). For purposes of the foregoing,
inventory shall be valued on a FIFO basis.
END OF EXHIBIT A
Exhibit A Page 1 of 1
<PAGE> 6
EXHIBIT B
EMPLOYMENT AGREEMENT OF ROBERT M. KEANE
FORM OF OAKHURST PROMISSORY NOTE
$220,000 MARCH 1, 1996
FOR VALUE RECEIVED Oakhurst Company, Inc. ("Oakhurst") agrees to pay to Robert
M. Keane or order, (the "Holder") the principal sum of Two Hundred Twenty
Thousand Dollars ($220,000) in twenty (20) quarterly installments of eleven
thousand dollars ($11,000) each on or before the first business day of June,
September, December and March in each year commencing June 1, 1996.
INTEREST. Oakhurst shall pay interest from the date hereof quarterly in
arrears on the unpaid principal balance of this Note from time to time
outstanding at an annual rate of six percent (6%), not compounded.
DEFAULT INTEREST. Any payment of principal or interest not made when due
shall, if not paid before the expiration of any cure periods therefor, bear
interest at the annual interest rate then in effect plus two percentage points.
VOLUNTARY PRE-PAYMENTS. This Note may be prepaid in whole or in part at any
time or from time to time without penalty or premium provided that all
prepayments shall be applied first to any accrued interest and then to any
outstanding principal balance hereof.
MANDATORY PREPAYMENT. All of the outstanding balance of this Note shall become
due and payable in full on the date that Oakhurst sells either (i)
substantially all of the business or assets of, or (ii) more than fifty
percent (50%) of the voting stock of Dowling's Fleet Service Co., Inc. to
anyone other than an affiliate of Oakhurst.
DEFAULT. At the option of the Holder, this Note shall become immediately due
and payable in full without notice or demand upon the occurrence of any one or
more of the following events:
(a) The failure to make any payment of any principal or interest due
hereunder within ten (10) business days after notice of such
failure has been given to Oakhurst; or
(b) The admission by Oakhurst of its inability to pay its debts as
they become due; the insolvency or the appointment of a receiver
with respect to Oakhurst or its property; any assignment of the
property of Oakhurst for the benefit of creditors; or the
commencement of any proceedings under any bankruptcy or
insolvency laws by or against Oakhurst unless such proceeding is
dismissed within ninety (90) days of the filing thereof.
WAIVER OF PRESENTMENT ETC. Oakhurst hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default (except as otherwise expressly provided
herein), or enforcement of this Note. Oakhurst agrees that any delay or
omission on the part of the Holder in exercising any right hereunder shall not
operate as a waiver of such right, or of any other right hereunder; and a
waiver of any right on one occasion shall not be construed as a bar or a waiver
of any such right on any future occasion.
Exhibit B Page 1 of 2
<PAGE> 7
NOTICES. All notices required or permitted hereunder shall be in writing and
shall be deemed given by a party either (a) when hand delivered to a party; or
(b) when deposited with a delivery service with instructions to provide
next-business-day delivery and proof of delivery, if to Oakhurst at its
corporate offices and if to the Holder at 81 Cricket Lane, Trumbull,
Connecticut 06611 or to such other address of Oakhurst or the Holder as to
which it or he shall notify the other.
OAKHURST COMPANY, INC.
By: /s/ Mark Auerbach Attest: /s/ Roger M. Barzun
------------------------------ ----------------------------------
Mark Auerbach Roger M. Barzun
Chairman & Chief Executive Officer Secretary
END OF EXHIBIT B
Exhibit B Page 2 of 2
<PAGE> 1
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
LAURENCE D. FINMAN
&
OAKHURST MANAGEMENT CORPORATION
Agreement (this "Agreement") is dated as of the 1st day of March 1996 and is
made by and between OAKHURST MANAGEMENT CORPORATION (the "Company") and
LAURENCE D. FINMAN ("Mr. Finman"). Mr. Finman having entered into an
employment agreement dated as of October 25, 1994 (the Old Employment
Agreement) with Puma Products, Inc., the parties now wish to amend the same in
its entirety. Therefore it is hereby agreed as follows:
1. TERM. Commencement Date: March 1, 1996
Termination Date: February 28, 1998 unless
sooner terminated as
provided below.
2. RESPONSIBILITIES. Mr. Finman as an employee of the Company shall
serve as a Vice President of the Company's
parent, Oakhurst Company, Inc. ("Oakhurst"), and
as Vice President and Chief Operating Officer of
the Company's sister corporation, Puma Products,
Inc. ("Puma"), and shall devote his full time and
best efforts to carrying out the customary
responsibilities of those positions.
3. SALARY. During the term of this Agreement, the base
salary paid to Mr. Finman shall not be less than
eight thousand three hundred thirty-four dollars
($8,334) per month, and shall be subject to
annual review for merit or other increases in the
sole discretion of the board of directors of
Oakhurst on each March 1 during the Term.
4. BONUSES. Mr. Finman shall be eligible for an annual
incentive bonus (the "Incentive Bonus") as
provided in EXHIBIT A, which is attached hereto
and made part hereof relating to the business of
Puma and such additional bonus, if any, relating
to his responsibilities as a Vice President of
Oakhurst as its Board of Directors shall
determine in their sole and absolute discretion.
5. NON-DISCLOSURE During his employment by the Company and
thereafter, Mr. Finman shall not disclose to any
person, firm or corporation any financial, trade,
technical or technological secrets, any details
of the organization or business affairs, any
names of past or present customers or suppliers
of the Company, Oakhurst and/or their affiliates
or any other information relating to the business
of the Company, Oakhurst or their affiliates
except in the performance of his duties and
responsibilities hereunder.
6. BENEFITS. Mr. Finman shall be entitled to the same health
and other benefits (including participation in
any savings, profit sharing, 401(k) or other
plans) as are made available to the Company's
employees generally and on the same terms and
conditions, and shall be entitled to three weeks
of vacation per year.
<PAGE> 2
7. BUSINESS
EXPENSES. Mr. Finman shall be reimbursed in accordance with
Company policy from time to time in effect for
all reasonable business expenses incurred by him
in the performance of his duties.
8. INDEMNIFICATION. Mr. Finman shall be indemnified by the Company
and Oakhurst with respect to claims made against
him as an officer and/or a director of Oakhurst,
of the Company and/or of any affiliate of
Oakhurst to the fullest extent permitted by their
charters, by-laws and the laws of their state of
incorporation.
9. TERMINATION BY
THE COMPANY. Mr. Finman's employment may be terminated by the
Company only pursuant to the following
provisions:
(a) FOR CAUSE For Cause by written notice to Mr. Finman, in
which case the Company shall pay him his salary
accrued, but not paid through the date of
termination; provided however --
(i) that if the nature of such Cause
involves dishonesty, fraud or
serious moral turpitude, such
termination shall be effective upon
the giving of such notice; but
(ii) if the nature of such Cause does not
involve dishonesty, fraud or serious
moral turpitude, such termination
shall be effective upon the
expiration of thirty (30) days after
the giving of such notice unless
within such thirty-day period, Mr.
Finman has cured the basis of such
Cause, or if a cure is not possible
within a thirty-day period, if he
has diligently and in good faith
commenced to effect such cure.
(b) WITHOUT
CAUSE Without Cause by written notice to Mr. Finman, in
which case the Company shall pay him his salary (in a
lump sum) for the balance of the term of this
Agreement, but in any event not less than six (6)
months' salary, and payment of the Incentive Bonus
when, as and to the extent provided for in EXHIBIT A.
(c) DEATH OR
PERMANENT
DISABILITY Upon the death or permanent disability of Mr. Finman,
in which case the Company shall pay him his salary
for a period of six (6) months after his death or
permanent disability and shall pay him the Incentive
Bonus when, as and to the extent provided for in
EXHIBIT A.
(d) DEFINITION
OF "CAUSE" "Cause" for purposes of termination by the Company
shall be defined as any act or acts by Mr. Finman of
dishonesty or fraud or that constitute serious moral
turpitude; or misconduct of a material nature or a
material breach in connection with the performance by
him of his responsibilities hereunder.
<PAGE> 3
10. TERMINATION BY
MR. FINMAN. Mr. Finman may terminate his employment under
this Agreement only pursuant to the following
provisions:
(a) FOR CAUSE For Cause upon the expiration of thirty (30) days
after giving the Company notice of a breach by it
of this Agreement unless within such thirty-day
period, the Company has cured the basis of such
Cause, or if a cure is not possible within a
thirty-day period, if it has diligently and in
good faith commenced to effect such cure and
completes the same. In the event of a
termination by Mr. Finman for Cause, he may
pursue any and all remedies against the Company
available to him under applicable law.
(b) WITHOUT
CAUSE Without Cause ninety (90) days after giving
written notice of termination to the Company, in
which event the Company, Oakhurst, Puma and any
of their affiliates may deem any such notice
given by Mr. Finman as a resignation by him,
effective upon the giving of such notice, of all
of the directorships and offices then held by him
in the Company, Oakhurst, Puma and any of their
affiliates, but the Company shall nevertheless
continue to pay to him his salary during such
ninety-day period.
(c) DEFINITION
OF "CAUSE" "Cause" for purposes of termination by Mr. Finman
shall consist of any breach by the Company in the
performance of any of its obligations set forth
in this Agreement or breach of any statutory
obligation to Mr. Finman.
11. NOTICES. Notices that are required or permitted hereunder
shall be given by hand delivery, by delivery to a
courier service providing next day delivery and
proof of receipt, or if to the Company,
(including the copies to Messrs. Hemsley and
Barzun) by facsimile transmission, as follows:
If to the Company at: Oakhurst Company, Inc.
1001 Santerre Drive
Grand Prairie, Texas 75050
Fax No.: (214) 660-4465
With a copy to: Maarten D. Hemsley
82 Powder Point Avenue
Duxbury, Massachusetts 02332
Fax No.: (617) 934-0843
and to:
Roger M. Barzun
60 Hubbard Street
Concord, Massachusetts 01742
Fax No.: (508) 287-4276
If to Mr. Finman at his most recent residence
address in the records of the Company;
<PAGE> 4
or, to such other address of a party as to which
that party shall notify the other parties in the
manner provided herein.
12. PRORATION. To the extent that proration is not otherwise
provided for in this Agreement, all amounts
payable to Mr. Finman under this Agreement shall
be deemed earned on a daily basis and shall be
pro rated based on a 365-day year.
13. ENTIRE
AGREEMENT ETC. This Agreement together with EXHIBIT A contains
the entire understanding of the parties except as
otherwise expressly contemplated herein;
supersedes in its entirety the Old Employment
Agreement; shall not be amended except by written
agreement of the parties signed by each of them;
and shall be binding upon and inure to the
benefit of the parties and their successors,
personal representatives and assigns.
No representation, affirmation of fact, course of
prior dealings, promise or condition in
connection herewith or usage of the trade not
incorporated herein shall be binding on the
parties.
No waiver of any term or condition contained
herein shall be binding upon the parties unless
made in writing and signed by the party to be
bound thereby.
In witness whereof, the parties have executed and delivered this Agreement as
of the date first set forth above.
OAKHURST MANAGEMENT CORPORATION
By: /s/ Maarten D. Hemsley /s/ Laurence D. Finman
------------------------------ ------------------------------
Maarten D. Hemsley LAURENCE D. FINMAN
President
-----------------------------------------
<PAGE> 5
CONSENT OF PUMA PRODUCTS, INC.
EMPLOYMENT AGREEMENT BETWEEN
LAURENCE D. FINMAN & OAKHURST MANAGEMENT CORPORATION
DATED AS OF MARCH 1, 1996
Puma Products, Inc. hereby consents and agrees to the terms of that certain
Employment Agreement dated as of March 1, 1996 by and between Laurence D.
Finman and Oakhurst Management Corporation to the extent that they relate to
and describe the obligations and rights of Puma Products, Inc.
PUMA PRODUCTS, INC.
By: /s/Anthony N. Puma
---------------------------
Anthony N. Puma
President
----------------------------------------
CONSENT OF OAKHURST COMPANY, INC.
EMPLOYMENT AGREEMENT BETWEEN
LAURENCE D. FINMAN & OAKHURST MANAGEMENT CORPORATION
DATED AS OF MARCH 1, 1996
Oakhurst Company, Inc. hereby consents and agrees to the terms of that certain
Employment Agreement dated as of March 1, 1996 by and between Laurence D.
Finman and Oakhurst Management Corporation to the extent that they relate to
and describe the obligations and rights of Oakhurst Company, Inc.
OAKHURST COMPANY, INC.
By: /s/ Mark Auerbach
---------------------------
Mark Auerbach
Chairman & Chief Executive Officer
<PAGE> 6
EXHIBIT A
EMPLOYMENT AGREEMENT BETWEEN
LAURENCE D. FINMAN & OAKHURST MANAGEMENT CORPORATION
1. INCENTIVE BONUS. For each fiscal year during the term of this
Agreement commencing with the fiscal year ending February 28, 1997,
Puma shall pay to Mr. Finman the Incentive Bonus, which shall be equal
to the sum of: (a) four percent (4%) of the Operating Profits of Puma
(as hereinafter defined) in excess of one million dollars ($1,000,000)
(the "Threshold Amount"); and (b) one percent (1%) of the amount of
the Operating Profits in excess of the Threshold Amount if, but only
if, the Operating Profits of Puma in a such fiscal year exceed one
million five hundred thousand dollars ($1,500,000).
2. INCENTIVE BONUS PRORATION.
(a) For any other period of less than a full fiscal year that
this Agreement is in effect by reason of the expiration of
this Agreement or the termination by the Company of Mr.
Finman's employment for other than Cause prior to the end of
a fiscal year, he shall be entitled to the Incentive Bonus
calculated for the period from the beginning of the fiscal
year in which such expiration or termination occurred through
the last day of the fiscal month in which such expiration or
termination became effective (the "Short Fiscal Year") as if
such period were a complete fiscal year, with a proportional
adjustment in the Threshold Amount.
(b) If Mr. Finman shall resign from the Company's employ, no
bonus of any kind shall be payable with respect to the fiscal
year in which he gave or was obliged to give his notice of
termination as provided herein, or for any subsequent fiscal
year.
3. PAYMENT OF THE INCENTIVE BONUS. Puma shall pay the Incentive Bonus to
Mr. Finman within ninety (90) days after the end of each fiscal year,
except that the Incentive Bonus computed according to Paragraph 2.(a),
above, shall be paid within sixty (60) days of the end of the Short
Fiscal Year.
4. DEFINITIONS.
(a) For purposes of this Agreement, "fiscal year" and "fiscal
month" shall refer to the fiscal year and month of Puma being
used at the date as of which this Agreement becomes
effective. In the event that the fiscal year or month of
Puma is changed for any reason, an equitable adjustment shall
be made so that no portion of the Incentive Bonus that would
otherwise have been payable hereunder shall by reason of such
change become not payable.
(b) For purposes of this Agreement, "Operating Profits" shall be
defined as the net income of Puma for a given period
determined in accordance with generally accepted accounting
principles, consistently applied, before payment or provision
for federal or state income taxes, other than franchise
taxes, and excluding (a) any amortization of goodwill or
other intangibles; (b) incentive bonuses payable to other
members of Puma's senior management; (c) any one-time gains
or losses not of an operating nature; and (d) charges or
credits by the Company or an affiliated company except to the
extent that such charges or credits are for items of expense
or income that, had they not been paid or received by a
related entity, would have been paid or received by Puma
(e.g. insurance premiums and interest on working capital
borrowings). For purposes of the foregoing, inventory shall
be valued on a FIFO basis.
END OF EXHIBIT A
<PAGE> 1
EXHIBIT 10.25
NON-COMPETITION AGREEMENT
G & O SALES COMPANY
&
ARTHUR GRUBER
Agreement (this "Agreement") dated as of this 12 day of March, 1996 by and
between Arthur F. Gruber ("Mr. Gruber"), G & O Sales Company (the "Company")
and Dowling's Fleet Service Co., Inc. ("DFS") is being entered into in
connection with that certain Stock Purchase Agreement (the "Purchase
Agreement") between Mr. Gruber and DFS, and that certain Employment Agreement
(the "Employment Agreement") between Mr. Gruber and the Company, all of even
date herewith, and is made on the terms and conditions set forth below.
BACKGROUND
Contemporaneously with the execution of this Agreement, Mr. Gruber is selling
all of the outstanding capital stock of the Company to DFS, and DFS is
providing to Mr. Gruber and his counsel certain confidential financial
information concerning DFS. In that connection, the parties wish to provide
that Mr. Gruber will not disclose and confidential information of the Company
or DFS and will not compete with the business that he is selling or with the
business of DFS.
THEREFORE, for and in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, it is hereby agreed as follows:
1. COVENANT NOT TO COMPETE AND NOT TO SOLICIT EMPLOYEES. For a period
commencing with the date hereof and ending on the later to occur of (i)
the tenth anniversary of the date hereof or (ii) the fifth anniversary of
the date that Mr. Gruber's employment by the Company ceases, for whatever
reason --
(a) Mr. Gruber shall not engage directly or indirectly in any of the
businesses carried on by the Company or DFS in the Market Area (as
defined below).
(i) Notwithstanding the foregoing, ownership of less than 1% of the
outstanding stock of any publicly traded corporation shall not be
deemed to be engagement solely by reason thereof in any of its
businesses.
(ii) The "Market Area" shall mean the Counties (as defined in
Annex A) as well as the area comprised within a circle having a
one-hundred-fifty (150) mile radius with a center located at any
facility then operated or in the future operated by the Company,
by any subsidiary of the Company or by DFS.
(b) Mr. Gruber shall not directly or indirectly solicit any employee of
the Company or DFS to leave their employment with such companies or
solicit any of them to become employees of any business or entity with
which Mr. Gruber is involved.
(c) Mr. Gruber shall not cause or attempt to cause any licensor, customer,
or supplier, of the Company from maintaining the same business
relationships with the Company after the date hereof as it maintained
with the Company prior to the date hereof. Mr. Gruber will use
reasonable efforts to refer all customer inquiries relating to the
business of the Company to the Company or to DFS from and after the
date hereof.
<PAGE> 2
2. COMPENSATION. As compensation for his agreement not to compete contained
herein, the Company shall pay to Mr. Gruber the following amounts:
(a) Three hundred fifteen thousand dollars ($315,000) in monthly
installments as follows:
(i) four thousand three hundred seventy five dollars ($4,375)
shall be paid on the Closing Date;
(ii) eight thousand seven hundred fifty dollars ($8,750) shall be
paid on the first business day of each month for thirty-five
consecutive months commencing April 1, 1996; and
(iii) four thousand three hundred seventy five dollars ($4,375)
shall be paid on the first business day of the month
immediately following such thirty-fifth month; and
(b) Seven and one-half percent (7.5%) of the Defined Profits (as defined
below) of the Business (as defined in Annex A) for each of the four
(4) fiscal years of DFS commencing with its fiscal year that begins
March 1, 1996 (each a "Fiscal Year"). Payment of any amount due for a
Fiscal Year shall be made within ninety (90) days after the end of
such Fiscal Year. Each payment (or if no payment is due, a statement
to that effect) shall be sent to Mr. Gruber accompanied by an
accounting in the name of DFS that shows the calculation of Defined
Profits (or lack thereof) for the Fiscal Year in question.
(c) "Defined Profits" of the Business shall mean the pre-tax operating
profits of the Business prepared on a consistent basis plus any salary
and car allowance payments made to Mr. Gruber and plus any charge
against operating profits of the Company resulting from the payments
provided for in Section 2.1, above. DFS shall maintain such records
and books of account as are reasonably necessary to calculate Defined
Profits on a Fiscal Year basis.
(d) In calculating pre-tax operating profits --
(i) all sales made by the Business shall be credited, less
applicable costs of sale, commissions and other operating
expenses;
(ii) the Business shall not be charged any overhead expenses by
DFS except the appropriate portion of the costs of any field
salesman or field manager of DFS that has immediate
responsibility for the Business;
(iii) a charge will be made for interest costs related to net
working capital borrowings of the Business if borrowed from
DFS at the interest rate paid by DFS for such funds; and
(iv) operating expenses of the Company shall be apportioned in
the same ratio as sales made by the Business bear to all
sales made by the Company, with appropriate adjustment in
the event that this Section 2.4.4 creates unintended
inequities for either Mr. Gruber or the Company.
<PAGE> 3
(e) Audit of Amounts Payable.
(i) Mr. Gruber may at his own expense not more frequently than once
in each Fiscal Year and once with in the Fiscal Year immediately
following the last Fiscal Year with respect to which payments are
to be made to Mr. Gruber under Section 2.2, above, perform or
cause to be performed an audit of the books and records of the
Company relating to the computation of Defined Profits (or lack
thereof) during the prior Fiscal Year. For such purpose, G&O
shall provide to Mr. Gruber or his representative performing such
audit reasonable access during normal business hours to such
books and records, with the right to make copies thereof at his
expense.
(ii) Notwithstanding the foregoing however, if the payment made
by the Company with respect to an audited Fiscal Year was more
than five percent (5%) below the amount that should have been
paid for such Fiscal Year, the Company shall pay Mr. Gruber's
actual out-of-pocket expenses incurred in auditing such Fiscal
Year.
3. BREACH BY THE COMPANY.
(a) In the event that the Company fails to pay when due any amount that is
due and owing under this Agreement, and such failure continues for
more than five (5) days after written notice of such failure has been
given to the Company as provided herein, then the entire unpaid
balance required to be paid during the term of this Agreement, other
than amounts payable under Section 2.2, above, shall thereupon become
due and payable in full.
(b) In the event that the Company or DFS breaches any of its payment
obligations or breaches any other material term or condition under the
Purchase Agreement or the Employment Agreement, and such breach
continues beyond the expiration of any cure periods applicable to such
breach, then all amounts that are payable to Mr. Gruber during the
term of this Agreement, other than amounts payable under Section 2.2,
above, shall become immediately due and payable in full upon written
demand by Mr. Gruber given to the Company.
(c) In the event that Mr. Gruber is required to commence legal proceedings
in order to collect any amount due him under this Agreement, the
Company shall reimburse to him the reasonable costs thereof, including
the reasonable fees and disbursements of his counsel in connection
therewith.
4. CONFIDENTIALITY.
(a) During the period set forth in Section 1, above, Mr. Gruber shall use
reasonable efforts to maintain the confidentiality of, and shall not
disclose to any person, firm or corporation or use for his own benefit
or the benefit of any other person Confidential Information (as
defined below).
(b) In the event that Mr. Gruber is requested or required (by oral
question or request for
<PAGE> 4
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose
any Confidential Information, he will notify DFS promptly of the
request or requirement so that DFS may seek, at its own expense, an
appropriate protective order in its own or in Mr. Gruber's name, or
so that it may waive compliance with the provisions of this Section.
(c) If, in the absence of a protective order or the receipt of a waiver
hereunder, Mr. Gruber is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand
liable for contempt, he may disclose the Confidential Information to
the tribunal; provided, however, that he shall use commercially
reasonable efforts to obtain, at the request of DFS, an order or other
assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as DFS shall
designate.
(d) For purposes of this Agreement, "Confidential Information" means any
information concerning the businesses and/or affairs of the Company,
DFS or any of their affiliates however acquired by Mr. Gruber that is
not generally available to the public, including, but without
limitation thereto, trade secrets, customer lists, vendor lists,
business plans, marketing plans, non-public financial data, product
specifications and designs, the existence, nature, substance, progress
and results of research and development projects, concepts,
inventions, discoveries, formulae, processes, drawings, documents,
records, or software.
5. SEVERABILITY. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Agreement is invalid or
unenforceable, the parties agree that the court making the determination
of invalidity or un-enforceability shall have the power to reduce the
scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with 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, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
6. NOTICES. All notices required or permitted under this Agreement shall be
in writing and shall be deemed given either (a) when hand delivered to a
party; (b) when deposited with a courier service with instructions to
provide next-business-day delivery and proof of delivery; or (c) (in the
case of notice to the Company or DFS) when sent by facsimile transmission
as follows:
If to Mr. Gruber at: With a copy to:
c/o The Fairmont James D. Epstein, Esq.
41 Conshohocken State Road Pepper, Hamilton & Scheetz
Bala Cynwyd, Pennsylvania 19004 3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
Fax No.: (215) 981-4750
Tel. No.: (215) 981-4368
If to DFS at: With a copy to:
Dowling's Fleet Service Co., Inc. Maarten D. Hemsley
389 East Third Street 82 Powder Point Avenue
Mt. Vernon, NY 10550 Duxbury, Massachusetts 02332
Attention: President Fax No.: (617) 934-0843
Fax No.: (914) 668-5097 Tel. No.: (617) 934-2219
Tel. No.: (914) 668-4557
and to
Roger M. Barzun
60 Hubbard Street P.O. Box 767
Concord, Massachusetts 01742
Fax No.: (508) 287-4276
Tel. No.: (508) 287-4275
<PAGE> 5
or to such other address of a party as such party may by notice hereunder
designate to the other parties.
7. MISCELLANEOUS.
(a) This Agreement together with Annex A contains the entire understanding
of the parties on the subject matter hereof except as otherwise
expressly contemplated herein; shall not be amended except by written
agreement of the parties signed by each of them; shall be binding upon
and inure to the benefit of the parties and their successors, personal
representatives and permitted assigns; may be executed in one or more
counterparts each of which shall be deemed an original hereof, but all
of which shall constitute but one and the same agreement; and shall
not be assignable by a party without the prior written consent of the
other parties.
(b) The words "herein", "hereof", "hereunder", "hereby", "herewith" and
words of similar import when used in this Agreement shall be construed
to refer to this Agreement as a whole.
(c) Each party and his or its counsel has reviewed this Agreement.
Accordingly, the normal rule of construction that any ambiguities and
uncertainties are to be resolved against the party preparing an
agreement will not be employed in the interpretation of this
Agreement; rather the Agreement shall be construed as if all parties
had jointly prepared it.
(d) No representation, affirmation of fact, course of prior dealings,
promise or condition in connection herewith or usage of the trade not
expressly incorporated herein shall be binding on the parties.
(e) The failure to insist upon strict compliance with any term, covenant
or condition contained herein shall not be deemed a waiver of such
term, nor shall any waiver or relinquishment of any right at any one
or more times be deemed a waiver or relinquishment of such right at
any other time or times.
(f) The captions of the paragraphs herein are for convenience only and
shall not be used to construe or interpret this Agreement.
(g) The recitals set forth in "Background", above, are incorporated herein
and made a part hereof as the agreements of the parties as fully and
with the same force and effect as if reiterated herein in full.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
G & O SALES COMPANY
By: /s/ Robert M. Keane /s/ Arthur F, Gruber
------------------------------- -------------------------------
Robert M. Keane ARTHUR F. GRUBER
President
DOWLING'S FLEET SERVICE CO., INC.
By: /s/ Robert M. Keane
-------------------------------
Robert M. Keane
President
<PAGE> 7
ANNEX A
TO THE
NON-COMPETITION AGREEMENT BETWEEN
G & O SALES COMPANY, DOWLING'S FLEET SERVICE CO., INC. & ARTHUR GRUBER
1. The "Business" shall mean the sale of automotive heat exchange equipment
and other products used in connection therewith (including but not
limited to radiators, heaters and air conditioning parts) (the
"Products") as follows:
(a) by the Company or DFS (i) to those customers in the Counties
that were being serviced by the Company immediately prior to
September 30, 1995 (the "Counties"); and (ii) to those
customers in the Counties that are first serviced by the
Company or DFS after September 30, 1995; and
(b) by the Company to customers that are not in the Counties but
that were being serviced by the Company immediately prior to
September 30, 1995;
2. The term Business, however, shall not include sales of Products by the
Company or DFS to those customers in the Counties that were being
serviced by DFS immediately prior to September 30, 1995.
3. In computing the amount of the sales of the Products for any period, the
aggregate of actual sale prices of all Products whether for wholesale,
retail, cash or credit or otherwise shall be included, but the following
shall be excluded: (i) full or partial credits for returns; (ii) cash or
credit refunds to customers on transactions (but not in excess of the
actual selling price of the Product); (iii) amounts collected and paid to
any governmental authority for any sales or excise tax; (iv) freight
and/or insurance to the extent either of them is invoiced separately to a
customer; and (v) the amount of any discount on sales to employees.
4. The Counties:
<TABLE>
Pennsylvania Counties New Jersey Counties
--------------------- -------------------
<S> <C> <C> <C>
Philadelphia Bucks Camden Burlington
Montgomery Delaware Salem Gloucester
Chester Lancaster Cape May Atlantic
Berks Lehigh Mercer Hunterdon
Carbon Schuykill Cumberland
Northampton Lebanon
York Delaware Counties
-----------------
New Castle
Kent
</TABLE>
<PAGE> 1
EXHIBIT 10.26
AMENDMENT TO CONSULTING AGREEMENT
MARK AUERBACH & OAKHURST COMPANY, INC.
THIS AMENDMENT AGREEMENT (this "Agreement") is made effective as of the 1st day
of October 1996 by and between OAKHURST COMPANY, INC. (the "Company") and MARK
AUERBACH ("Mr. Auerbach") upon the following terms and conditions:
1. BACKGROUND. Effective December 19, 1995 the parties entered into a
consulting agreement (the "Consulting Agreement"). The parties now wish
to amend the consulting Agreement in the following respects:
(a) Section 1. "Term" shall be amended in its entirety to read as
follows:
"1. TERM:
(a) The term of this Agreement shall commence on December 19,
1995 and shall continue through June 30, 1997 (the
"Term").
(c) During the last six calendar months of the Term, upon the
request of the Company, Mr. Auerbach shall resign his
Chairmanship of the Board of Directors and any or all of
the officer positions with the Company and its
subsidiaries. Any such resignations, however, shall not
relieve the Company of its obligation to continue to pay
Mr. Auerbach the consulting fee provided for herein
through end of the Term."
(b) Subsection (a) of Section 2. "Services" shall be amended to read as
follows:
"2. SERVICES:
(a) Mr. Auerbach shall provide to the Company such of the
services of a Chairman of the Board of Directors, a Chief
Executive Officer, a Chief Financial Officer and/or a
financial consultant as the Board of Directors of the
Company shall request. Mr. Auerbach shall devote such
time to the rendering of such services as is appropriate
and commensurate with the responsibilities of those
positions and he shall perform such services at such
times and at such places as he shall deem necessary and
appropriate."
(c) Section 3. "Consulting Fee" shall be amended in its entirety to read
as follows:
"3. CONSULTING FEE: The Company shall pay Mr. Auerbach a
consulting fee of ten thousand dollars ($10,000) per month
through December 31, 1996 and thereafter until the expiration
of the Term, shall pay him a consulting fee of twenty-five
hundred dollars ($2,500) per month. Consulting fees shall be
paid in twice-monthly installments by Company check."
(d) Section 5. "Business Expenses" shall be amended in its entirety to
read as follows:
"5. BUSINESS EXPENSES: Mr. Auerbach shall be entitled to be
reimbursed or to use a Company credit card for reasonable
business expenses incurred in the performance of his
consulting services hereunder, including, but without
limitation thereto, travel from his office and/or residence to
the Company's facilities, all in accordance with policies
established for the Company by the Board of Directors from
time to time. Mr. Auerbach's Company credit card charges and
expense reports will be subject to review by a member of the
Audit Committee of the Board of Directors."
<PAGE> 2
2. OPTION AGREEMENT. The parties shall execute the "Amended
Non-Qualified Stock Option Agreement" attached hereto as Annex A in
order to amend in its entirety the option agreement executed by the
parties prior hereto in the form of Exhibit A to the Consulting
Agreement.
3. BOARD REQUEST. In accordance with Section 2 of the Consulting
Agreement, as amended hereby, it is the request of the Board of
Directors that for the period from the date hereof through December
31, 1996, Mr. Auerbach performs the services generally associated
with the title of Chairman of a Board and thereafter shall perform
such services described in such Section 2 as are requested by the
Board of Directors.
4. NO OTHER CHANGES. Except as amended hereby, the Consulting
Agreement shall remain in full force and effect as originally
written.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first set forth above.
OAKHURST COMPANY, INC.
By: /s/ Robert M. Davies /s/ Mark Auerbach
---------------------------------- ------------------------------
Robert M. Davies Mark Auerbach
Chairman, Compensation Committee
<PAGE> 3
ANNEX A
OAKHURST COMPANY, INC.
AMENDED NON-QUALIFIED STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
Grantee: MARK AUERBACH
Grant Date: DECEMBER 19, 1995
Option Shares: 100,000
Date All Shares are Exercisable: DECEMBER 19, 1996
Last Day to Exercise Option: DECEMBER 19, 2005
- --------------------------------------------------------------------------------
This Amended Non-Qualified Stock Option Agreement (the "Amended Option
Agreement") dated as of the Grant Date set forth above is made between Oakhurst
Company, Inc. and you, MARK AUERBACH, and evidences the amendment in its
entirety of the original option agreement covering the non-qualified stock
option to purchase the number of Option Shares of the Company's Common Stock,
$0.01 par value, per share, set forth above at the per-share option prices set
forth below.
This Option, as amended, has been granted pursuant to a Consulting Agreement
dated December 19, 1995, as amended as of October 1, 1996, between you and the
Company (the "Amended Consulting Agreement") and shall be governed by the terms
of the 1994 Omnibus Stock Plan of the Company (the "Plan").
5. Exercisability and Option Exercise Price.
(a) The Option Shares shall become exercisable in two (2) equal
installments, as follows:
(i) 50,000 shares from and after the Grant Date at a
per-share option exercise price of one dollar and
twenty-five cents ($1.25); and
(ii) 50,000 shares from and after December 19, 1996 at a
per-share option exercise price of two dollars
($2.00).
(b) You may purchase any one or more of the Option Shares that
become exercisable at a given date from that date through and
including the Last Day to Exercise Option, set forth above.
6. Exercises. For an exercise to be effective, the Company must receive
from you:
(a) A written notice directed to the Secretary of the Company,
signed by you stating the Option Grant Date and the number of
whole Option Shares you wish to purchase; and
(b) Payment for the Option Shares either (a) by cashier's or
certified check; or (b) with the consent of the Stock Plans
Committee of the Board of Directors, by the transfer to the
Company of Company common stock having a fair market value
equal to the purchase price of the Option Shares being
purchased, all according to the rules and regulations of such
Committee.
7. Issuance of Option Shares.
(a) You will have no rights as a shareholder of the Company with
respect to any Option Shares purchased under this Option
until a certificate representing such shares has been issued
and delivered to you.
(b) The Company will not be obligated to deliver a certificate
for any Option Shares to you unless --
(i) Provision acceptable to the Company has been made for
the payment of any federal, state and local taxes
that are due or that are required to be withheld by
the Company because of the
<PAGE> 4
purchase of the Option Shares; and
(ii) There has been compliance with all federal and state
laws and regulations that the Company deems
applicable, and all other legal matters in connection
with the issuance and delivery of the Option Shares
have been approved by the Company's counsel.
8. Non-Transferability. Except as expressly otherwise provided in the
Plan, this Option is exercisable only by you during your lifetime. In
addition, this Option may not be assigned or transferred except by
will or according to the laws of descent and distribution in the
absence of a will.
9. Ambiguities. In the case of any ambiguity creating a conflict between
the terms of this Amended Option Agreement and the Plan, the
provisions of this Amended Option Agreement shall take precedence.
10. Adjustments. As provided in the Plan, the number and kind of shares
issuable under this Amended Option Agreement and the per-share option
prices will be adjusted to account for reorganizations, mergers,
recapitalization, or the like.
In Witness Whereof, the parties have executed this Amended Option Agreement as
of the Grant Date.
OAKHURST COMPANY, INC. GRANTEE
BY: /s/ Robert M. Davies /s/ Mark Auerbach
-------------------------- -------------------------
Robert M. Davies Mark Auerbach
Stock Plans Committee
<PAGE> 1
EXHIBIT 10.27
STOCK PURCHASE AND SALE AGREEMENT
ANTHONY N. PUMA, PUMA PRODUCTS, INC. & OAKHURST COMPANY, INC.
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as of
this 3rd day of June, 1997, by and among Anthony N. Puma, an individual,
("Puma"); Puma Products, Inc., a Texas corporation, (formerly known as LBI
Corp.) ("PPI"); and Oakhurst Company Inc., a Delaware corporation, (formerly
known as Oakhurst Capital, Inc.) ("Oakhurst"), which owns all of the
outstanding capital stock of PPI. Puma, PPI and Oakhurst are each referred to
in this Agreement as a "Party" and collectively as the "Parties."
1 BACKGROUND. As of October 20, 1994, Oakhurst, Puma and PPI entered into
a Stock Purchase Agreement pursuant to which Oakhurst acquired all of
the capital stock of PPI (the "October 1994 Purchase Agreement.") This
Agreement contemplates transactions, among others, in which Oakhurst
will sell to Puma, and Puma will purchase from Oakhurst all of the
outstanding capital stock of PPI (the "PPI Shares") and PPI will
purchase all of the outstanding capital stock of Oakhurst Trading Corp.,
a Texas corporation ("OTC"), (the "OTC Shares"); and the Parties will
resolve all outstanding debts, and obligations between and among them.
2 THE CONSIDERATION. The consideration to be paid for the PPI Shares and
the OTC Shares shall consist of the payments to be made hereunder, the
documents to be executed and delivered by Puma, PPI and/or Oakhurst and
the agreements, releases, representations, warranties, covenants and
mutual promises herein, contained.
3 THE CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall be deemed to be May 31, 1997 and is
hereinafter referred to as the "Closing Date."
4 DELIVERIES AT THE CLOSING. At the Closing the following will take
place:
4.1 The PPI Shares and the OTC Shares. Oakhurst will deliver (a) to
Puma a stock certificate or certificates representing the PPI
Shares; (b) to PPI a stock certificate or certificates
representing the OTC Shares in the case of each of (a) and (b),
endorsed in blank or accompanied by duly executed assignment
documents executed in blank; and (c) to Puma a check payable to
him or his order in the amount of $50,000.
4.2 $600,000 Promissory Note. Puma will deliver to Oakhurst that
certain Amended and Restated Promissory Note dated February 1,
1996 in the original principal amount of $600,000 marked "Paid in
Full."
4.3 OTC Stock & Debt. Puma will deliver to Oakhurst a check payable
to Oakhurst, or order, in the amount of $10.00, representing the
purchase price of the OTC shares. Immediately after the Closing,
Puma will cause OTC to pay the entire amount of the inter-company
debt owed by OTC to Oakhurst in the amount of $170,095 by
delivery to Oakhurst of certified or cashier's check payable to
Oakhurst or order.
- --------------------------------------------------------------------------------
Page 1 of 18
<PAGE> 2
Stock Purchase and Sale Agreement - continued
- --------------------------------------------------------------------------------
4.4 Change of OTC Name. Within twenty-four hours after the Closing,
Puma will cause OTC to change its name to one that does not
contain the name "Oakhurst." Nothing in this Agreement shall be
construed as an authorization to PPI or Puma to use the name
"Oakhurst" for any purpose.
4.5 Finova Debt. Puma will cause PPI to deliver to Oakhurst or its
designee a cashier's or certified check payable to Finova Capital
Corporation ("Finova"), or order, in the amount of $400,576.51,
representing the outstanding balance due Finova Capital
Corporation from PPI under that certain Loan and Security
Agreement dated March 28, 1996 among Finova, Oakhurst, PPI and
others.
4.6 UCC Release Forms. Oakhurst will deliver to Puma UCC-3 forms
executed by Finova relating to all liens imposed by Finova on the
assets of PPI.
4.7 Sub-Lease Amendment. Oakhurst and PPI will each execute and
deliver to the other, and Puma will cause Anthony N. Puma #2
Ltd., a Texas Limited Partnership, to consent to, an amendment in
substantially the form of Exhibit A to that certain Sub-Lease
Agreement dated as of February 1, 1995 between Oakhurst and PPI
relating to the premises occupied by Oakhurst at 1001 Santerre
Drive, Grand Prairie, Texas.
4.8 Assignment of Certain Intellectual Property Rights and Transfer
of Stock. PPI will execute and deliver, and Oakhurst will cause
Oakhurst Holdings, Inc., a wholly-owned subsidiary of Oakhurst
("OHI"), to execute and deliver that certain Assignment of
Intellectual Property Rights and Transfer of Stock substantially
in the form of Exhibit B pursuant to which OHI sells, assigns and
transfers to PPI all of OHI's right, title and interest in and to
the trade names "Puma Products, Inc." and "Puma Products," and in
payment therefor, PPI assigns to OHI that certain stock
certificate representing two hundred ninety (290) shares of OHI
capital stock.
4.9 Termination of Corporate Services Agreement. PPI will execute
and deliver, and Oakhurst will cause Oakhurst Management
Corporation, a wholly-owned subsidiary of Oakhurst, to execute
and deliver that certain Corporate Services Termination Agreement
in substantially the form of Exhibit C.
4.10 Automobile Leases. Oakhurst, Puma and PPI shall execute and
deliver the Automobile Assignment, Assumption and Guaranty
Agreement in substantially the form of Exhibit D.
5 RE-SALE OF PPI.
5.1 In the event that on or before 5:00 p.m. Central Time on the
first anniversary of the Closing Date, substantially all of the
outstanding capital stock, assets or business of PPI
- --------------------------------------------------------------------------------
Page 2 of 18
<PAGE> 3
Stock Purchase and Sale Agreement - continued
- --------------------------------------------------------------------------------
are sold in an arm's length transaction for a Purchase Price (as
defined below) that is in excess of one million dollars
($1,000,000), Puma shall pay to Oakhurst within thirty (30) days
after the consummation of such sale, twelve and one-half percent
(12.5%) of the difference between the Purchase Price and such one
million dollars.
5.2 For purposes of Section 5.1 -
(a) The "Purchase Price" shall mean the consideration received
by the seller of such capital stock, assets or business
plus the indebtedness for money borrowed of PPI (a) that
is on the books of PPI at the time of the sale, in the
case of a sale of substantially all of the capital stock
of PPI, or (b) that is assumed by the purchaser in the
case of a sale of substantially all of the assets or
business of PPI; and
(b) Any consideration paid and any debt on the books of PPI or
that is assumed by any purchaser that relates to the
current business of OTC and that is included in any such
sale shall not be counted as part of the Purchase Price.
5.3 Any transfer by Puma to an entity with which he is affiliated or
any sale that is not an arm's length transaction shall not be
considered a sale for purposes of this Section 5. In addition,
any series of related or similar transactions by which all or
substantially all of the capital stock, assets or business of PPI
are sold shall all be deemed to have been consummated on the date
the first of such transactions is consummated.
6 CERTAIN RELEASES.
6.1 Oakhurst Debt. By the execution hereof, PPI hereby releases
Oakhurst from and against any and all amounts owing from Oakhurst
to PPI on the Closing Date.
6.2 October 1994 Purchase Agreement. Each of Puma, Oakhurst and PPI
by the execution hereof hereby releases, remises, acquits and
forever discharges each other Party and each of the other Party's
heirs, administrators, personal representatives, successors and
assigns, of and from any and all claims, demands, losses,
damages, actions or causes of action, known or unknown, now
existing or hereafter existing, relating to, or arising out of
the October 1994 Purchase Agreement, it being the intent of the
parties that neither Oakhurst, PPI nor Puma shall have any
obligation to the other arising out of the October 1994 Purchase
Agreement after the Closing.
6.3 The Operations of PPI. Except to the extent expressly otherwise
provided for in this Agreement, by the execution hereof each of
Puma and PPI on the one hand, and Oakhurst on the other hand
hereby releases, remises, acquits and forever discharges the
other and each of the other's consultants, officers and directors
acting in any capacity for Oakhurst, for PPI or for both, and the
other's heirs, administrators, personal representatives,
successors and assigns, of and from any and all claims, demands,
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losses, damages, actions or causes of action, known or unknown,
now existing or hereafter existing, relating to, or arising out
of the business and operations of PPI on and prior to the Closing
Date.
6.4 Each Party represents and warrants to each other Party that such
Party has not assigned and will not assign any claim released
herein.
6.5 Nothing in this Section 6 shall be construed as (a) an admission
of any kind or nature for any purpose by any Party to this
Agreement; (b) a waiver by any Party of any right of such Party
arising under this Agreement; or (c) the release or waiver by PPI
of any amounts owed to it by a subsidiary of Oakhurst, or the
release or waiver by any subsidiary of Oakhurst of any amounts
owed to it by PPI.
7 COVENANTS. The Parties agree as follows with respect to the period
following the Closing.
7.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at
the sole cost and expense of the requesting Party.
7.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand of a person or entity that is not a Party hereto in
connection with (a) any transaction contemplated under this
Agreement, or (b) any fact, situation, circumstance, status, or
condition existing on or prior to the Closing Date involving PPI,
each of the other Parties will cooperate with him or it and his
or its counsel in such contest or defense, make available
personnel, and provide such testimony and access to books and
records as shall be reasonably necessary in connection with such
contest or defense. The contesting or defending Party shall
reimburse to the other Party or Parties the out-of-pocket
expenses (but not the overhead type expenses) incurred in
rendering such cooperation unless the contesting or defending
Party is entitled to indemnification therefor hereunder.
7.3 Confidentiality. Each Party will treat and hold in confidence
the confidential information of the other Party, except such
information as becomes generally available to the public without
a breach of this Section 7.3 by such Party or as is received from
a person or entity who is not a party to this Agreement without a
restriction as to its disclosure.
7.4 Taxes. Oakhurst will pay all taxes that become due after the
Closing Date that relate to the operations and business of PPI
prior to the Closing Date, and Puma will pay all
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Stock Purchase and Sale Agreement - continued
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taxes that become due after the Closing Date that relate to the
operations and business of PPI on and subsequent to the Closing
Date. For purposes of ensuring compliance with this covenant,
each Party shall have reasonable access to the relevant books and
records of the other Party.
7.5 Insurance. Effective on the Closing, Oakhurst shall cancel all
insurance coverage relating to PPI or Puma that were carried
under Oakhurst's master policy, and the refund of any premiums as
a result of such cancellations shall be remitted by Oakhurst to
PPI to the extent that the refunded premiums had been charged to
PPI prior to the Closing Date. It shall be the responsibility of
Puma and/or PPI to arrange for such insurance coverage as they
may determine for the period from and after the Closing Date.
7.6 401(k) Plan. PPI's 401(k) Plan is operated as a separate plan
under a single Oakhurst Plan Identification Number. Oakhurst
will cause the plan document to be amended to separate the Puma
401(k) Plan from that of Oakhurst and its other subsidiaries.
PPI will cooperate with Oakhurst in achieving such separation and
will reimburse to Oakhurst the actual out-of-pocket costs
incurred by Oakhurst after the Closing Date for (a) per-
participant administration charges billed to Oakhurst by the plan
administrator, and (b) reasonable legal fees, if any, incurred by
Oakhurst in amending the plan document and otherwise implementing
this Section 7.6. Notwithstanding the foregoing, such out-of-
pocket expenses shall not exceed $1,000 in the aggregate.
7.7 PPI Losses. The Parties recognize that Oakhurst files its tax
returns on a consolidated basis and will do so as well for the
1996 tax year. The Parties also agree that for the 1996 tax year
and for the duration of the 1997 tax year prior to the Closing
Date, PPI has lost money. Subject to the requirements of the
Internal Revenue Code for consolidated tax returns, to the extent
that the losses of PPI are available for use by PPI after the
Closing Oakhurst will not interfere with PPI's use thereof.
8 REPRESENTATIONS AND WARRANTIES OF OAKHURST. Oakhurst represents and
warrants to Puma that the statements contained in this Section 8 are
correct and complete as of the date hereof (except as otherwise noted)
and will be correct and complete at the Closing Date.
8.1 Organization of Oakhurst. Oakhurst is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Delaware.
8.2 Authorization of Transaction. Oakhurst has full power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of Oakhurst, enforceable in
accordance with its terms and conditions. Oakhurst need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or
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Stock Purchase and Sale Agreement - continued
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governmental agency in order to consummate the transactions
contemplated by this Agreement other than those already given,
made or obtained as of the date hereof.
8.3 PPI Shares& OTC Shares. At the Closing Date, Oakhurst will hold
of record and own beneficially all of the PPI Shares and the OTC
Shares free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act of 1933 and state
securities laws), taxes, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. The entire authorized capital stock of PPI consists of
10,000 shares, no par value, of which 1,000 shares are issued and
outstanding, and the entire authorized capital stock of OTC
consists of 1,000 shares, of which 1,000 shares are issued and
outstanding. No shares of either PPI or OTC are held in
treasury. All of the issued and outstanding shares of PPI and of
OTC have been duly authorized, are validly issued, fully paid,
and non-assessable. Except as provided for in this Agreement, in
the case of the Puma Shares since the acquisition by Oakhurst of
the PPI Shares in October 1994 and in the case of OTC since its
incorporation (a) no options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require either of such
companies to issue, sell, or otherwise cause to become
outstanding any of its capital stock have been created, and (b)
no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of either company
have been entered into.
8.4 Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to
which Oakhurst is subject or any provision of its charter or
bylaws.
8.5 Brokers' Fees. Oakhurst has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for
which Puma or PPI could become liable or obligated.
8.6 Taxes. Oakhurst has paid all taxes that were due on or before
the Closing Date and that are payable with respect to PPI.
8.7 Operation of the Business of PPI. The Parties note that Mr. Puma
has been a senior executive of PPI since its acquisition by
Oakhurst in October 1994 and has been a director of Oakhurst
since August 1995. Other than those matters that Puma (a) is
aware of, (b) carried out, or (iii) that he caused to be carried
out, and other than this Agreement, to the actual knowledge of
the other directors of Oakhurst, since February 28, 1997, the
date of the most recent consolidated financial statements of
Oakhurst and its subsidiaries, no material transaction has been
entered into by PPI, or has occurred
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Stock Purchase and Sale Agreement - continued
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with respect to PPI that is not in the ordinary course of PPI's
business and consistent with its past practice.
9 REPRESENTATIONS AND WARRANTIES OF PUMA. Puma represents and warrants to
Oakhurst that the statements contained in this Section 9 are correct and
complete as of the date hereof (except as otherwise noted) and will be
correct and complete at the Closing Date.
9.1 Authorization and Financing of Transaction. Puma has full power
and authority to execute and deliver this Agreement and to
perform his obligations hereunder and has the financial resources
necessary to make the payments to Oakhurst provided for herein.
This Agreement constitutes his valid and legally binding
obligation, enforceable in accordance with its terms and
conditions. Puma need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
Person, government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
9.2 Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to
which Puma is subject.
9.3 Brokers' Fees. Puma has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which
Oakhurst could become liable or obligated.
9.4 Oakhurst. Puma has not taken any action to pledge or attempt to
pledge the credit of Oakhurst or to otherwise incur any liability
for or on behalf of Oakhurst.
10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Representations and
warranties of Puma and Oakhurst shall survive the Closing hereunder
(even if the other Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and
shall continue in full force and effect for a period of two (2) years
after the Closing Date except for any representation or warranty
regarding taxes, which shall survive the Closing Date for the applicable
statute of limitations. Notwithstanding the foregoing, the agreements
of the Parties shall survive without limitation if they are to be
performed after the Closing Date.
11 INDEMNIFICATION PROVISIONS.
11.1 Each Party. Each Party hereby agrees to indemnify the other
Party from and against any claim released in this Agreement by
such Party as well as from any right or demand that may now or
hereafter be asserted by such Party or by any person or entity
claiming through such Party in connection with any claim released
by such Party.
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11.2 Indemnification For the Benefit of Oakhurst. In the event that
Puma or PPI breaches this Agreement or Puma breaches any of his
representations, warranties or covenants contained herein, and
provided that Oakhurst makes a written claim for indemnification
against Puma or PPI, or both, then each of Puma and PPI agrees to
indemnify Oakhurst from and against the entirety of any Adverse
Consequences that Oakhurst may suffer through and after the date
of the claim for indemnification (including any Adverse
Consequences Oakhurst may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in
the nature of, or caused by such breach. Puma also agrees to
indemnify Oakhurst from and against the entirety of any Adverse
Consequences Oakhurst may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the conduct by Puma
of the business of PPI after the Closing Date.
11.3 Indemnification For the Benefit of Puma. In the event that
Oakhurst breaches this Agreement or any of its representations,
warranties and covenants contained herein, and provided that Puma
makes a written claim for indemnification against Oakhurst, then
Oakhurst agrees to indemnify Puma from and against the entirety
of any Adverse Consequences Puma may suffer through and after the
date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach.
11.4 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for
breach of this Agreement or of any representation, warranty, or
covenant contained herein. Puma hereby agrees that he will not
make any claim for indemnification against Oakhurst by reason of
the fact that he has been and may continue to be a director,
officer, and employee of PPI or any subsidiary thereof.
11.5 The term "Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
11.6 All claims for indemnity arising out of a breach of a
representation or warranty shall be made within the survival
period set forth in Section 10, above.
12 MISCELLANEOUS.
12.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the
subject matter of this Agreement prior to the Closing without the
prior written approval of Oakhurst and Puma; provided,
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however, that Oakhurst may make any public disclosure that it
believes in good faith is required by applicable law or by any
listing or trading agreement concerning its publicly-traded
securities (in which case Oakhurst will advise Puma thereof prior
to making the disclosure).
12.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
12.3 Entire Agreement. This Agreement (including the Exhibits
referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.
12.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of
Oakhurst and Puma.
12.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together will constitute one and the same instrument.
12.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and will be deemed
given to a Party either (a) when hand delivered to such Party or
(b) when deposited with a courier service with instructions to
provide next-business-day delivery and proof of delivery to such
Party, if to Puma at his last residence address on the books of
PPI prior to the Closing Date; if to Oakhurst at its headquarters
address attention of the President; and if to PPI, at its
headquarters address, attention of the President. Any Party may
change his or its own address to which notices, requests,
demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein
set forth.
12.8 The words "herein," "hereof," "hereunder," "hereby," "herewith"
and words of similar import when used in this Agreement shall be
construed to refer to this Agreement as a whole. The word
"including" shall mean including, but not limited to any
enumerated items.
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12.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas
without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Texas.
12.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by Oakhurst, PPI and Puma. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend
to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
12.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of
the offending term or provision in any other situation or in any
other jurisdiction. Notwithstanding the foregoing, however, no
provision shall be severed if it is clearly apparent under the
circumstances that the Parties would not have entered into this
Agreement without such provision.
12.12 Expenses. Each of Oakhurst and Puma will bear its or his own
costs and expenses (including legal and accounting fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
12.13 Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part
hereof.
13 ARBITRATION. Except as otherwise provided below, this Agreement and any
controversy, claim or dispute between the Parties directly or indirectly
concerning this Agreement or the breach hereof or the subject matter
hereof, including questions concerning the scope and applicability of
this Section 13 shall be finally settled by arbitration held in Dallas,
Texas in accordance with the provisions of this Section 13 and the rules
of commercial arbitration then followed by the American Arbitration
Association or any successor to the functions thereof.
13.1 The Party shall choose the arbitrators in accordance with the
rules of commercial arbitration then followed by the American
Arbitration Association or any successor to the functions
thereof.
13.2 A majority of the arbitrators shall have the right and authority
to determine how their decision or determination as to each issue
or matter in dispute may be implemented or
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Stock Purchase and Sale Agreement - continued
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enforced. Notwithstanding anything herein to the contrary, no
arbitrator in any such proceeding shall have authority or power
to (a) modify or alter any express condition or provision hereof
by an award or otherwise; (b) award punitive or exemplary damages
for or against any Party to any such proceeding; or (c) award any
damages expressly excluded under this Agreement. Any decision or
award of a majority of the arbitrators shall be final and
conclusive on the Parties to this Agreement, and there shall be
no appeal therefrom other than for fraud or willful misconduct.
13.3 The Parties hereto agree that an action to compel arbitration
pursuant to this Agreement may be brought in the appropriate
court of the State of Texas. Application may also be made to
such court for confirmation of any decision or award of a
majority of the arbitrators, for an order of enforcement and for
any other remedies which may be necessary to effectuate such
decision or award. The Parties hereto hereby consent to the
jurisdiction of the arbitrators and of such court and waive any
objection to the jurisdiction of such arbitrators and court.
13.4 Notwithstanding anything contained herein to the contrary, the
Parties hereby agree that this Section 13 shall not apply to any
action brought by a Party in connection with a claim for
injunction or other equitable relief.
13.5 Each of the Parties to any controversy, claim or dispute subject
to arbitration under the terms of this Section 13 shall pay fees
and expenses in accordance with any decision or award of a
majority of the arbitrators thereunder.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
OAKHURST COMPANY, INC. PUMA PRODUCTS, INC.
By: /s/ Robert M. Davies By: /s/ Anthony N. Puma
-------------------------- --------------------------------------
Robert M. Davies Anthony N. Puma
Chairman & President Chairman
/s/ Anthony N. Puma
--------------------------------------
Anthony N. Puma
(an Individual)
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EXHIBIT A
SUB-LEASE AMENDMENT AGREEMENT
THIS SUB-LEASE AMENDMENT AGREEMENT (this "Agreement") is entered into as of
this 3rd day of June, 1997, by and between Puma Products, Inc., a Texas
corporation, (formerly known as LBI Corp.) ("PPI"), and Oakhurst Company Inc.,
a Delaware corporation, (formerly known as Oakhurst Capital, Inc.)
("Oakhurst").
1 BACKGROUND. Oakhurst and Puma entered into a Sub-Lease Agreement dated
February 1, 1995 relating to approximately nine hundred square feet of
office space situated at 1001 Santerre Drive, Grand Prairie, Texas (the
"Sub-lease"). The parties now wish to amend the Sub-lease.
2 CONSIDERATION. The parties are entering into this Agreement for and in
consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged.
3 AMENDMENT. Sub-section (a) of Section 2.01 of the Sublease is hereby
amended in its entirety to read as follows:
"(a) This Sub-lease shall terminate at such time as the Main Lease
shall terminate for whatever reason. In addition, this Sublease
may be terminated as follows:
(i) Puma may terminate this Sub-lease effective ninety (90)
days after giving written notice of termination to
Oakhurst; and
(ii) Oakhurst may terminate this Sub-lease effective ninety
(90) days after giving written notice of termination to
Puma.
4 It is acknowledged and agreed that each of PPI and Oakhurst has
performed all of the obligations to be performed by it prior to the date
hereof under the Sublease, including, but not limited to the
reimbursement to PPI by Oakhurst of the actual expenses of remodeling
the subleased premises as provided for in Section 2.02 of the Sub-lease.
5 In all other respects, the Sub-lease shall remain as originally written.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
OAKHURST COMPANY, INC. PUMA PRODUCTS, INC.
By: /s/ Robert M. Davies By: /s/ Anthony N. Puma
------------------------------ ---------------------------------
Robert M. Davies Anthony N. Puma
Chairman & President Chairman
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<PAGE> 14
The foregoing amendment to the Sub-Lease Agreement dated February 1, 1995 is
hereby consented to as of the date of such amendment:
ANTHONY N. PUMA #2 LTD., A TEXAS LIMITED PARTNERSHIP
("Landlord")
By: /s/ ANTHONY N. PUMA
------------------------------------
Anthony N. Puma
General Partner
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EXHIBIT B
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS AND TRANSFER OF STOCK
THIS ASSIGNMENT OF INTELLECTUAL PROPERTY AND TRANSFER OF STOCK is made as of
the 3rd day of June 1997 by and among Oakhurst Holdings, Inc., a Delaware
corporation, ("OHI") and Puma Products, Inc., a Texas corporation, (formerly
known as LBI Corp.) ("PPI") in connection with that certain Stock Purchase and
Sale Agreement between OHI's parent, Oakhurst Company, Inc., PPI and Anthony N.
Puma dated as of June 3, 1997.
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby
acknowledged C
1 OHI hereby sells, assigns and transfers to PPI all of OHI's right, title
and interest in and to the trade names "Puma Products, Inc." and "Puma
Products" (the "Trade Names.")
2 PPI hereby sells, assigns and transfers to OHI that certain stock
certificate representing two hundred ninety (290) shares of OHI capital
stock and delivers the same to OHI endorsed in blank or accompanied by
an assignment thereof executed in blank.
3 The parties hereby cancel that certain license agreement between them
relating to the Trade Names dated August 16, 1995.
OAKHURST HOLDINGS, INC. PUMA PRODUCTS, INC.
By: /s/ Maarten D. Hemsley By: /s/ Anthony N. Puma
-------------------------------- --------------------------------
Maarten D. Hemsley Anthony N. Puma
President Chairman
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EXHIBIT C
CORPORATE SERVICES TERMINATION AGREEMENT
PUMA PRODUCTS, INC. -- OAKHURST MANAGEMENT CORPORATION
THIS CORPORATE SERVICES TERMINATION AGREEMENT (this "Agreement") is made
effective as of the 3rd day of June 1997, by and between PUMA PRODUCTS, INC.
and OAKHURST MANAGEMENT CORPORATION.
In consideration of the covenants of the parties hereto and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1 Effective on the date hereof, the parties hereby agree to the
termination of the Corporate Services Agreement dated as of March 27,
1995 between them (the "Services Agreement.")
2 The Company acknowledges receipt in full of all amounts owing to it
under the Services Agreement through the date hereof.
3 By the execution hereof, each party hereby releases, remises, acquits
and forever discharges the other party and the other party's officers,
directors, shareholders, heirs, administrators, personal
representatives, successors and assigns, of and from any and all claims,
demands, losses, damages, actions or causes of action, known or unknown,
now existing or hereafter existing, relating to, or arising out of the
Services Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date and year first above
written.
OAKHURST MANAGEMENT CORPORATION PUMA PRODUCTS, INC.
By: /s/ Maarten D. Hemsley By: /s/ Anthony N. Puma
------------------------ ----------------------
Maarten D. Hemsley Anthony N. Puma
President Chairman
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EXHIBIT D
AUTOMOBILE ASSIGNMENT, ASSUMPTION AND GUARANTY AGREEMENT
THIS AUTOMOBILE ASSIGNMENT, ASSUMPTION AND GUARANTY AGREEMENT (this
"Agreement") is entered into as of this 3rd day of June, 1997, by and between
Anthony N. Puma ("Puma") and Puma Products, Inc., a Texas corporation,
(formerly known as LBI Corp.) ("PPI"), on the one hand, and Oakhurst Company
Inc., a Delaware corporation, (formerly known as Oakhurst Capital, Inc.)
("Oakhurst") on the other hand.
1 BACKGROUND. Oakhurst is the "Lessee" under that certain automobile lease
between Banc One Texas Leasing Corporation (as assignee) and Oakhurst
dated December 15, 1994 relating to the lease of a 1995 Lexus
automobile, Model SC400, that is currently being used by Puma (the
"Lexus Lease") and is also "Lessee" under that certain automobile lease
between Oakhurst and ARD/Industrial Power Inc. dated September 18, 1995
(subsequently assigned to General Motors Acceptance Corporation)
relating to a 1997 Isuzu Van presently used by PPI (the "Isuzu Lease")
(collectively, the "Leases.") In connection with the sale by Oakhurst
of the capital stock of PPI to Puma, the parties wish to provide for the
transfer of the Leases and the obligations of the "Lessee," as defined
therein, to PPI and the guaranty thereof by Puma.
2 CONSIDERATION. The parties are entering into this Agreement for and in
consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged.
3 ASSIGNMENT. Oakhurst, PPI and Puma will use commercially reasonable
efforts to obtain the consent of each lessor under the Leases to the
complete assignment thereof to PPI and the termination of Oakhurst's
obligations thereunder.
4 ASSUMPTION. Whether or not either or both of the assignments referred
to in Section 3, above, are obtained by the parties, from and after the
date hereof, PPI hereby agrees to assume and to perform in a complete and
timely manner any and all of Oakhurst's obligations under each of the
Lexus Lease and the Isuzu Lease.
5 GUARANTY.
5.1 Puma hereby guarantees the due, prompt and complete performance
by PPI of the obligations of the Lessee under each of the Lexus
Lease and the Isuzu Lease. It shall not be a pre-condition to
the enforcement by Oakhurst of Puma's guaranty obligations
hereunder to have first instituted any proceeding against PPI, or
to have pursued any other remedy that it may have against PPI for
failure to perform its obligations under either or both of the
Leases, it being understood and agreed that the guaranty by Puma
hereunder is a guaranty of payment, not of collection, and is in
no way conditional or contingent.
5.2 The foregoing guaranty by Puma shall remain in full force and
effect with respect to each of the Lexus Lease and the Isuzu
Lease until such time, if at all, as Oakhurst has no further
liability under such lease.
- --------------------------------------------------------------------------------
Page 17 of 18
<PAGE> 18
Stock Purchase and Sale Agreement - continued
- --------------------------------------------------------------------------------
5.3 The foregoing guaranty obligations of Puma shall not be impaired
by the insolvency, bankruptcy, reorganization or any similar
proceedings affecting PPI.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
OAKHURST COMPANY, INC. PUMA PRODUCTS, INC.
By: /s/ Robert M. Davies By: /s/ Anthony N. Puma
------------------------- -------------------------------
Robert M. Davies Anthony N. Puma
Chairman & President Chairman
/s/ Anthony N. Puma
------------------------------------
Anthony N. Puma
(an Individual)
- --------------------------------------------------------------------------------
Page 18 of 18
<PAGE> 1
EXHIBIT 11
Exhibit 11 - COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OUTSTANDING SHARES
INCLUDING COMMON
STOCK EQUIVALENTS
------------------
<S> <C>
Fiscal year ended February 28, 1997 ......... 3,200,147
Fiscal year ended February 29, 1996 ......... 3,195,721
Fiscal year ended February 28, 1995 ......... 3,076,801
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OUTSTANDING SHARES
OF COMMON STOCK
------------------
<S> <C>
Fiscal year ended February 28, 1997 ......... 3,200,140
Fiscal year ended February 29, 1996 ......... 3,194,021
Fiscal year ended February 28, 1995 ......... 2,815,424
</TABLE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
CONTINUING OPERATIONS
--------------------------
TOTAL (000)'S PER SHARES
----------- -----------
<S> <C> <C>
Fiscal year ended February 28, 1997 .... $ (8,761) $ (2.74)
Fiscal year ended February 29, 1996 .... $ (4,043) $ (1.27)
Fiscal year ended February 28, 1995 .... $ 819 $ 0.27
</TABLE>
<TABLE>
<CAPTION>
NET INCOME (LOSS)
ATTRIBUTABLE TO COMMON
STOCKHOLDERS
--------------------------
TOTAL (000'S) PER SHARE
----------- ----------
<S> <C> <C>
Fiscal year ended February 28, 1997 .... $ (8,761) $ (2.74)
Fiscal year ended February 29, 1996 .... $ (3,978) $ (1.25)
Fiscal year ended February 28, 1995 .... $ 909 $ 0.30
</TABLE>
Note: Income per share amounts attributable to common stockholders are
computed on the basis of the weighted average number of outstanding
common shares and common stock equivalents determined by applying the
treasury stock method to stock options and warrants outstanding. Loss
per share amounts do not include common stock equivalents since that
would reduce the net loss per share.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-00173 of Oakhurst Company, Inc. on Form S-3 and Registration Statement No.'s
33-83040, 33-83038 and 33-83180 of Oakhurst Company, Inc. on Form S-8 or our
report dated June 12, 1997, appearing in the Annual Report on Form 10-K of
Oakhurst Company, Inc. for the year ended February 28, 1997.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 39
<SECURITIES> 0
<RECEIVABLES> 4,437
<ALLOWANCES> 555
<INVENTORY> 5,687
<CURRENT-ASSETS> 10,461
<PP&E> 2,839
<DEPRECIATION> 1,311
<TOTAL-ASSETS> 15,907
<CURRENT-LIABILITIES> 8,046
<BONDS> 5,716
0
0
<COMMON> 32
<OTHER-SE> 2,113
<TOTAL-LIABILITY-AND-EQUITY> 15,907
<SALES> 41,928
<TOTAL-REVENUES> 42,255
<CGS> 32,459
<TOTAL-COSTS> 32,459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 102
<INTEREST-EXPENSE> 843
<INCOME-PRETAX> (5,663)
<INCOME-TAX> 3,098
<INCOME-CONTINUING> (8,761)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,761)
<EPS-PRIMARY> (2.74)
<EPS-DILUTED> 0
</TABLE>
