<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 1998
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-19450
OAKHURST COMPANY, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 25-1655321
------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
3513 CONCORD PIKE, SUITE 3527, WILMINGTON, DELAWARE
19803
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(Address of principal executive offices)
(Zip Code)
(302) 478-9170
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(Registrant's telephone number, including area code)
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(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of July 1, 1998, 3,212,962 shares of the Registrant's Common Stock,
$0.01 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OAKHURST COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Consolidated Balance Sheets at May 31, 1998 (unaudited)
and February 28, 1997 .............................................................. 3
Consolidated Statements of Operations for the three month periods ended May 31,
1998 and May 31, 1997 (unaudited) ................................................. 4
Consolidated Statement of Stockholders' Equity for the three months
ended May 31, 1998 (unaudited) .................................................... 5
Consolidated Statements of Cash Flows for the three month periods ended May 31,
1998 and May 31, 1997 (unaudited) ................................................. 6
Notes to Financial Statements (unaudited) ........................................... 7
</TABLE>
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<PAGE> 3
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS MAY 31, FEBRUARY 28,
1998 1998
------------ ------------
(Unaudited)
Current assets:
<S> <C> <C>
Cash ............................................................................ $ 96 $ 47
Trade accounts receivable, less allowance of $429 and $461,respectively ......... 4,249 4,026
Other receivables ............................................................... 240 223
Inventories ..................................................................... 5,371 6,167
Other ........................................................................... 141 226
------------ ------------
Total current assets ............................................ 10,097 10,689
------------ ------------
Property and equipment, at cost ..................................................... 1,847 1,782
Less accumulated depreciation ................................................... (1,166) (1,098)
------------ ------------
681 684
------------ ------------
Excess of cost over net assets acquired, net ........................................ 2,226 2,275
Other assets ........................................................................ 371 383
------------ ------------
2,597 2,658
------------ ------------
$ 13,375 $ 14,031
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................ $ 5,515 $ 6,392
Accrued compensation ............................................................ 473 519
Current maturities of long-term obligations ..................................... 632 646
Current maturities of long-term obligations, related parties .................... 88 88
Accrued interest ................................................................ 82 76
Other accrued expenses .......................................................... 165 249
------------ ------------
Total current liabilities ....................................... 6,955 7,970
------------ ------------
Long-term obligations:
Long-term debt .................................................................. 4,797 4,058
Long-term debt, related parties ................................................. 176 198
Other long-term obligations ..................................................... 58 62
------------ ------------
5,031 4,318
------------ ------------
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 3,212,962 and 3,207,053 shares, respectively .................. 32 32
Additional paid-in capital ...................................................... 46,540 46,535
Deficit (Reorganized on August 26, 1989) ........................................ (45,182) (44,823)
Treasury stock, at cost, 207 common shares ...................................... (1) (1)
------------ ------------
Total stockholders' equity ...................................... 1,389 1,743
------------ ------------
$ 13,375 $ 14,031
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 4
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MAY 31, MAY 31,
1998 1997
------------ ------------
<S> <C> <C>
Sales ............................................................................... $ 8,010 $ 8,291
Other income ........................................................................ 32 19
------------ ------------
8,042 8,310
------------ ------------
Cost of goods sold, including occupancy and
buying expenses .................................................................. 6,576 6,799
Operating, selling and administrative expenses ...................................... 1,624 1,567
Provision for doubtful accounts ..................................................... 10 19
Amortization of excess of cost over net assets acquired ............................. 49 49
Interest expense .................................................................... 137 178
Other ............................................................................... -- 12
------------ ------------
8,396 8,624
------------ ------------
Net loss before income taxes ........................................................ (354) (314)
Income tax expense .................................................................. (5) (1)
------------ ------------
Net loss ............................................................................ $ (359) $ (315)
============ ============
Basic and diluted net loss per share ................................................ $ (0.11) $ (0.10)
============ ============
Weighted average number of shares outstanding used in
computing basic and diluted per share amounts .................................... 3,208,936 3,203,611
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 5
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MAY 31, 1998
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
-------------------------- PAID-IN EARNINGS -------------------------
SHARES PAR VALUE CAPITAL (DEFICIT) SHARES COST
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, February 28, 1998 .... 3,207,053 $ 32 $ 46,535 $ (44,823) 207 $ (1)
Net loss for the period ........ (359)
Stock award .................... 5,909 * 5
---------- ---------- ---------- ---------- ---------- ----------
Balances, May 31, 1998 ......... 3,212,962 $ 32 $ 46,540 $ (45,182) 207 $ (1)
========== ========== ========== ========== ========== ==========
</TABLE>
* Rounds to less than one thousand
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 6
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MAY 31, MAY 31,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................... $ (359) $ (315)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ............................ 137 172
Loss on retirement of assets ............................. -- 3
Stock awards ............................................. 5 6
Other changes in operating assets and liabilities:
Accounts receivable ...................................... (223) (623)
Inventories .............................................. 796 113
Accounts payable ......................................... (877) 433
Other ..................................................... (71) (302)
---------- ----------
Net cash used in operating activities of:
Continuing operations ........................................ (592) (513)
Discontinued retail operations ............................... 6 10
---------- ----------
Net cash used in operating activities ........................... (586) (503)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment .......................... (65) --
Other ........................................................ 1 --
---------- ----------
Net cash used in investing activities ........................... (64) --
---------- ----------
Cash flows from financing activities:
Net borrowings under revolving credit agreement .............. 754 735
Principal payments on long-term obligations .................. (55) (116)
---------- ----------
Net cash provided by financing activities ....................... 699 619
---------- ----------
Net increase in cash ............................................ 49 116
Cash at beginning of period ..................................... 47 39
---------- ----------
Cash at end of period ........................................... $ 96 $ 155
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 7
OAKHURST COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 31, 1998
1. INTERIM FINANCIAL STATEMENTS
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 SCPI. Accordingly, Oakhurst controls
approximately 90% of the voting power of SCPI. The accompanying financial
statements reflect this control and include the accounts of SCPI.
Oakhurst owns all of the outstanding capital stock of Dowling's Fleet
Service Co., Inc. ("Dowling's") and of Oakhurst Management Corporation ("OMC").
The accompanying consolidated financial statements include the accounts of these
subsidiaries, and all significant intercompany accounts and transactions have
been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
presented. All adjustments made are of a normal, recurring nature.
While the Company believes that the disclosures presented herein are
adequate to make the information not misleading, it is suggested that these
unaudited consolidated financial statements be read in conjunction with the
audited consolidated financial statements for the fiscal year ended February 28,
1998 ("fiscal 1998") as filed in the Company's Annual Report on Form 10-K.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting
comprehensive income and its components. SFAS No. 130 also requires that the
cumulative balance of these items of other comprehensive income be reported
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The Company has adopted SFAS No.
130 in the first quarter ended May 31, 1998 (unaudited) and the adoption did not
have a material impact on the Company's disclosures in its consolidated
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information". SFAS No. 131 establishes
standards for the way public companies report selected information about
operating segments in both quarterly and annual financial statements to their
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. This statement is
not required to be applied to interim financial statements in the initial year
of its application. The Company has not yet determined the effects, if any,
that SFAS No. 131 will have on the disclosures in its consolidated financial
statements.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Oakhurst Company, Inc. ("Oakhurst" or "the Company"), a holding
company, was formed as part of a merger transaction in July 1991, in which Steel
City Products, Inc. ("SCPI") became a special, limited purpose, majority-owned
subsidiary of Oakhurst. Management believes that the corporate structure
resulting from the merger transaction will facilitate capital formation by
Oakhurst while permitting Oakhurst and its subsidiaries to file consolidated tax
returns so that both may utilize the tax benefits (including approximately $154
million of net operating loss carry-forwards) attributable principally 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.
Oakhurst, through its subsidiaries, 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 of non-food pet supplies to
independent retailers from a facility in Pittsburgh, Pennsylvania. Dowling's
Fleet Service Co., Inc. ("Dowling's") is a New York-headquartered distributor of
automotive radiators and related products.
In addition to cash derived from the operations of its subsidiaries,
Oakhurst's liquidity and financing requirements are 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 working capital needs vary primarily with the amount of
inventory carried, which can change seasonally, the size and timeliness of
payment of receivables from customers, especially at the SCPI subsidiary which
from time to time grants extended payment terms for seasonal inventory
build-ups, and the amount of credit extended by suppliers.
At May 31, 1998, Oakhurst's debt primarily consisted of (i) a credit
facility with an institutional lender (the "Credit Facility"), which includes
borrowings of approximately $4.8 million under a revolving credit facility (the
"Revolver"), (ii) debt aggregating $354,000 in connection with Oakhurst's
acquisition of Dowling's and Dowling's acquisition of G&O Sales Company ("G&O"),
and (iii) notes payable with outstanding principal balances aggregating
approximately $522,000 that were issued in connection with the settlement of
certain contingent liabilities related to SCPI's former retail division.
Oakhurst and its subsidiaries have available financing under the
Revolver up to a maximum of $7 million, subject to a borrowing base that is
calculated according to defined levels of the subsidiaries' accounts receivable
and inventories. At May 31, 1998, the borrowing base under the Revolver was $5.5
million. In fiscal 1998, the Revolver was extended to April 1999, and provides
for subsequent renewal terms of one year each upon payment of a renewal fee of
0.5% of the entire line, unless earlier terminated as provided for in the
agreement. Management believes that the Revolver will provide adequate funding
for the Company's working capital requirements for at least the next twelve
months, including seasonal fluctuations, assuming no material deterioration in
current sales levels or gross profit margins.
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 this
Item 2 - "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
-8-
<PAGE> 9
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.
MATERIAL CHANGES IN FINANCIAL CONDITION
At May 31, 1998, there had been no material changes in the Company's
financial condition from February 28, 1998, as discussed in Item 7 of the
Company's Annual Report on Form 10-K for fiscal 1998.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 COMPARED WITH THREE MONTHS ENDED MAY 31, 1997
Consolidated sales in the current year first quarter decreased by
approximately $281,000, or by 3.4% when compared with the prior year. Sales by
Dowling's increased by approximately $15,000, and sales by SCPI decreased by
approximately $296,000. Sales to existing automotive customers decreased by
approximately $580,000, primarily as a result of competitive pressures
encountered by certain of SCPI's customers, and because some customers have
changed their buying practices to obtain certain product lines direct from the
manufacturer. The prior year first quarter also included sales of approximately
$117,000 relating to the "Wing-tech" division that was sold in that quarter.
Partially offsetting these decreases were sales to new automotive customers of
approximately $210,000, and increases of $189,000 in sales of non-food pet
supplies. The increase in sales of non-food pet supplies resulted from expanded
sales to existing pet supply customers, together with sales of $90,000 to new
pet supply customers recently added.
Gross profits were $1.4 million, or 17.9% of sales, in the current year
period compared with $1.5 million, or 18.0% of sales, in the prior year period.
The decrease in gross profits of $58,000 resulted primarily from the lower sales
levels at SCPI.
Operating, selling and administrative expenses increased by $57,000
when compared to the prior year, due primarily to higher operating costs at
Dowling's.
Interest expense decreased by $41,000 when compared to the prior year,
due primarily to SCPI's repayment of a term loan in December 1997.
-9-
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings outstanding against the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter for which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10.1 Robert M. Davies Employment Agreement dated March 1,
1998.
*10.2 Bernard H. Frank Employment Agreement dated April
1, 1998.
27. Financial Data Schedule (EDGAR transmission only).
----------
* Management contract or compensatory plan or arrangement
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
-10-
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and 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: July 10, 1998 By: /s/ Robert M. Davies
----------------------------------
Mr. Robert M. Davies
Chief Executive Officer
Date: July 10, 1998 By: /s/ Mark Auerbach
-----------------------------------
Mr. Mark Auerbach
Chief Financial Officer
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<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
*10.1 Robert M. Davies Employment Agreement dated March 1, 1998.
*10.2 Bernard H. Frank Employment Agreement dated April 1, 1998.
27. Financial Data Schedule (EDGAR transmission only).
</TABLE>
- ----------
* Management contract or compensatory plan or arrangement
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
ROBERT M. DAVIES & OAKHURST COMPANY, INC.
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of this 1st
day of March 1998 by and between OAKHURST COMPANY, INC. (the "Company") and
ROBERT M. DAVIES ("Mr. Davies") upon the following terms and conditions:
1. BACKGROUND. The Company and Mr. Davies entered into a consulting agreement
dated as of May 27, 1997 (the "Consulting Agreement"). The parties now wish
to replace the Consulting Agreement in its entirety with this Agreement.
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. TERM. The term of this Agreement and of Mr. Davies' employment shall
commence as of the date hereof and shall continue through and including
February 28, 2001 (the "Term") unless sooner terminated as provided in
Section 9, below.
4. SERVICES.
(a) Mr. Davies shall provide to the Company the services of a President
and Chief Executive Officer.
(b) In the event that for any reason Mr. Davies is not elected a director
of the Company and as a result is not eligible to be President of the
Company, Mr. Davies shall perform such other tasks and
responsibilities consonant with his experience and abilities as the
Board of Directors shall reasonably request. In addition, Mr. Davies
shall serve as Chairman of the Board of Directors if elected to that
position by the Board.
(c) Mr. Davies shall devote such time to the rendering of such services as
he and a majority of the Board of Directors consider to be appropriate
and commensurate with the responsibilities of those offices and he
shall perform such services subject to the general direction of the
Board of Directors.
(d) No restrictions shall be placed on other activities of Mr. Davies
provided that such activities (i) are not competitive with those of
the Company or any of its affiliates; (ii) do not create a conflict of
interest for Mr. Davies; and (iii) do not interfere with the
fulfillment by Mr. Davies of his obligations under this Agreement.
5. THE BOARD OF DIRECTORS. For purposes of this Agreement, an action or
determination by "a majority of the Board of Directors" shall mean an
action or determination taken and reduced to writing in the good faith
exercise of their discretion by more than half of the directors of the
Company then in office, but (i) with Mr. Davies abstaining from such vote
and (ii) excluding Mr. Davies from the count of the total number of
directors then in office.
6. SALARY. During the Term --
(a) The Company shall pay Mr. Davies a salary of five thousand dollars
$(5,000) per month.
(b) Mr. Davies' salary shall be increased to seven thousand five hundred
dollars $(7,500) per month upon the first to occur during the Term, if
at all, of --
- --------------------------------------------------------------------------------
Page 1 of 7
<PAGE> 2
Robert M. Davies Employment Agreement - continued
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(i) the payment to the Company's joint venture with The Forestal
Group, Inc. and PB-KBB Leasing, Inc. (the "Joint Venture") of the
first transaction fee pursuant to the agreement between the Joint
Venture and a major investment bank (the "Investment Bank"); and
(ii) the consummation of a strategic or structural transaction (as
distinguished from a transaction consisting of a customary
services and/or supply agreement) with a customer.
(c) Mr. Davies' salary shall be further increased to ten thousand dollars
$(10,000) per month if during the Term, a majority of the Board of
Directors determines that the Company has achieved a substantial
realization of the value of the Company's net operating loss
carryforwards.
(d) Mr. Davies' salary shall be paid at the same time and in the same
installments as the salaries of other officers of the Company are
paid.
7. BONUS COMPENSATION.
(a) Definitions. For purposes of this Section 7, the following terms shall
have the following meanings:
(i) "Transaction Fees" shall mean fees received from time to time, if
at all, by the Company from --
(1) the Joint Venture in connection with its agreement with the
Investment Bank; and
(2) any participants, other than the Company, in any
transactions that utilize net operating loss carryforwards
as described in the Agreement dated August 1, 1995 between
the Company, PB-KBB Leasing, Inc. and The Forestal Group,
Inc. as amended June 25, 1997, August 27, 1997 and February
1, 1998.
(ii) "Net Transaction Fees" shall mean Transaction Fees less all
un-reimbursed expenses incurred by the Company in connection with
the generation of Transaction Fees.
(iii) The "30% Bonus" shall mean thirty percent (30%) of the Net
Transaction Fees, subject, however, to the time and amount
limitations set forth in this Section 7, below.
(b) If Net Transaction Fees are generated from time to time by the receipt
by the Company of Transaction Fees, the Company shall pay the 30%
Bonus by a Company check made payable jointly to Mr. Davies and
Bryanston Management Limited (a consultant to the Company pursuant to
a consulting agreement of even date herewith) ("Bryanston") unless
prior to such payment, Mr. Davies and Bryanston shall each request the
Company in a writing signed by each of them to distribute or divide
the 30% Bonus between them in some other manner that they have agreed
upon.
(c) The 30% Bonus shall only be paid by the Company to the extent that
there are Net Transaction Fees and then only with respect to
Transaction Fees that are received by the Company prior to 5:00 p.m.
on the fifth anniversary of the effective date of this Agreement.
(d) The obligation of the Company to pay the 30% Bonus shall continue
during the Term and after the expiration or earlier termination of
this Agreement (subject to Section 7(c), above), except that (i) if
Mr. Davies' employment is terminated by the Company for Cause, no
portion of the 30% Bonus shall be paid to him (whether or not then
accrued) after the date of such a termination; and (ii) the Company
shall have no obligation to make any payment
- --------------------------------------------------------------------------------
Page 2 of 7
<PAGE> 3
Robert M. Davies Employment Agreement - continued
- --------------------------------------------------------------------------------
of the 30% Bonus after it has paid to Mr. Davies and/or Bryanston, in
the aggregate, $2 million on account thereof.
(e) The 30% Bonus shall be paid within fifteen (15) days after the date
the Company receives Transaction Fees that result in Net Transaction
Fees. For purposes of calculating the Net Transaction Fees from time
to time, the Company may estimate the amount of any un-billed expenses
relating to the Transaction Fees received. In the event that the
Company determines that it has over estimated the amount of such
expenses (and therefore has under paid the 30% Bonus), the Company
shall promptly pay the additional amount of the 30% Bonus due. In the
event that the Company determines that it has under estimated the
amount of such expenses (and has therefore over paid the 30% Bonus),
Mr. Davies shall promptly pay to the Company the amount of such
overpayment upon a written request therefor. If any such amount is not
re-paid, the Company may deduct the same from any additional amount of
the 30% Bonus that may become due. The Company, however, shall only be
entitled to collect once any given over payment.
8. BUSINESS EXPENSES AND USE OF COMPANY EQUIPMENT.
(a) Mr. Davies shall be entitled to be reimbursed, or to the use of a
Company credit card, for reasonable business expenses incurred by him
in the performance of his duties and responsibilities hereunder,
including, but not limited to, 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. Davies' Company credit card charges and expense reports will
be subject to review by the Audit Committee of the Board of Directors.
(b) The Company shall make available in its discretion to Mr. Davies the
use of certain Company-owned office equipment from time to time.
9. TERMINATION.
(a) Termination By the Company. Mr. Davies' employment may be terminated
only by a majority of the Board of Directors and only as follows:
(i) For Cause (as defined below), by written notice to Mr. Davies, in
which event the Company shall pay to him so much of his salary as
was accrued, but not paid at the date of termination.
(ii) Without Cause, by written notice to Mr. Davies, in which event,
the Company shall pay to Mr. Davies his salary at the rate then
in effect that was accrued, but not paid at the date of
termination, and within fifteen (15) days of such termination,
shall pay in a lump sum his salary at the rate then in effect
multiplied by the greater of (1) twenty-four (24); or (2) the
number of whole calendar months remaining in the Term at the date
the notice of termination is given to Mr. Davies. After receipt
of such lump sum payment, upon the request of a majority of the
Board of Directors, Mr. Davies shall resign as a director and
officer of the Company and of any of its subsidiaries.
(iii) "Cause" shall mean any act or acts by Mr. Davies of dishonesty or
fraud or that constitute serious moral turpitude; misconduct of a
material nature or a material breach in connection with the
performance by him of his responsibilities hereunder; or the
failure by Mr. Davies for a substantial period to devote adequate
time to rendering the
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Page 3 of 7
<PAGE> 4
Robert M. Davies Employment Agreement - continued
- --------------------------------------------------------------------------------
services provided for hereunder (other than by reason of his
death or permanent disability.)
(iv) Upon a determination that because of a permanent disability, Mr.
Davies is no longer able to carry out his duties and
responsibilities hereunder, in which event the Company shall
give notice of such termination to Mr. Davies and shall
thereafter continue to pay him his salary at the rate then in
effect for a period of three (3) full calendar months.
(v) Upon the death of Mr. Davies, in which event the Company shall
pay to his legal representative so much of Mr. Davies' salary as
was accrued, but not paid at the date of his death.
(b) Termination By Mr. Davies.
(i) Mr. Davies may resign his employment on sixty (60) days' prior
written notice to the Company, in which event the Company shall
continue to pay him his salary at the rate then in effect for
such sixty-day period; provided however, that in the event that
Mr. Davies gives notice of his resignation within sixty (60)
days after a Change in Control of the Company (as defined
below), the Company shall pay Mr. Davies the amount provided for
under Section 9(a)(ii), above, as if his employment had been
terminated by the Company without Cause on the date Mr. Davies
gave the Company notice of his resignation.
(ii) For purposes of this Section 9(b), a "Change in Control of the
Company" shall mean the acquisition by a person, an entity or a
group of persons or entities of 20% or more of the Company's
voting securities (other than as a result of the exercise by
stockholders of rights under the Company's Shareholders Rights
Plan).
(iii) The Company may deem any such notice given by Mr. Davies as a
resignation by him, effective upon the giving of such notice, of
the Chairmanship of the Board of Directors and of any one or
more of the offices then held by him in the Company and its
subsidiaries.
10. CONFIDENTIAL INFORMATION.
(a) So long as Mr. Davies is an employee and/or director of the Company
and after any or all of such relationships terminate for whatever
reason, Mr. Davies shall (i) not disclose to any person or entity
Confidential Information (as defined below) except in the proper
performance of his duties and responsibilities or except as may be
expressly authorized by the Board of Directors of the Company; and
(ii) shall not use Confidential Information for his own benefit or
for the benefit of any person or entity other than the Company and
its subsidiaries.
(b) For purposes of this Agreement, "Confidential Information" is defined
as including trade secrets, customer names and lists, vendor names
and 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, software, or any other information of the
Company, its parent or of any of their subsidiaries that is not
generally available, or any such information of any third party that
is held by the Company, its parent or any of their subsidiaries under
an obligation of confidentiality. Without limiting the
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Robert M. Davies Employment Agreement - continued
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generality of the foregoing, it is understood and agreed that the
intellectual property, plans, methods and techniques of the Company
or that were disclosed to the Company by a third party that relate to
the realization of the benefits of net loss operating carryforwards
are included within the term Confidential Information.
(c) Mr. Davies's obligation of confidentiality shall not, however, relate
to any information --
(i) that is or becomes generally or widely known through no act or
fault of Mr. Davies;
(ii) that is received by Mr. Davies (without a breach of this or any
other agreement) from a third party with no restrictions as to
its disclosure; or
(iii) that is required to be disclosed pursuant to applicable law, a
court order or a judicial proceeding, including a proceeding to
enforce this Agreement.
11. NON-COMPETE OBLIGATIONS.
(a) In consideration of the Company's agreement to pay the 30% Bonus as
provided herein, Mr. Davies's obligations with respect to competing
with the Company and soliciting its employees shall be as follows:
(i) Mr. Davies shall not render services or advice, whether for
compensation or without compensation and whether as an
employee, officer, director, consultant, principal or
otherwise, to any person or organization --
(1) that is competitive with the Company's current aftermarket
automobile parts and supplies distribution business or
with any planned business of the Company as to which Mr.
Davies was involved in the planning within a radius of 200
miles of any facility of the Company; or
(2) that is competitive with the consulting services of the
Company relating to certain methods and techniques for the
realization of the benefits of net operating tax loss
carryforwards within the United States.
(ii) Mr. Davies shall not either directly or indirectly as agent or
otherwise in any manner solicit, influence or encourage any
customer, client or associate of the Company to take away or to
divert or direct its business to Mr. Davies or to any person or
entity by or with which Mr. Davies is employed, associated,
affiliated or otherwise related (other than the Company).
(iii) Mr. Davies shall not recruit or otherwise solicit or induce any
person to terminate his or her employment or other relationship
with the Company.
(b) Mr. Davies's obligations under Section 11(a) shall continue so long
as he is an employee of the Company. Such obligations also shall
continue for the following periods after his employment terminates
for whatever reason: with respect to his obligations described in
Section 11(a)(i)(1) and Sections 11(a)(ii) and (iii), above, for a
period of one (1) year; and with respect to his obligations under
Section 11(a)(i)(2), above, for a period of three (3) years.
(c) For purposes of this Section 11, the word "Company" shall include the
Company and any subsidiary of the Company.
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Robert M. Davies Employment Agreement - continued
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12. OUTSTANDING STOCK OPTION AGREEMENTS. Each outstanding stock option
agreement between Mr. Davies and the Company is hereby amended so that from
and after the date hereof any references in such option agreements to the
Consulting Agreement shall, from and after the date hereof, constitute
references to this Agreement.
13. PRORATION. To the extent that Mr. Davies' salary at the rate in effect from
time to time needs to be prorated for a period of less than a full month,
such salary shall be deemed earned on a daily basis and shall be pro rated
based on a 365-day year.
14. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed given to a party either (a) when hand delivered
to such party; (b) when deposited with a courier service with instructions
to provide next-business-day delivery and proof of delivery to such party;
or (c) when sent by facsimile transmission to such party as follows:
If to the Company, at: Oakhurst Company, Inc.
3365 Spruce Lane
Grapevine, Texas 76051
Attention: General Counsel
Facsimile No.: (817) 416-0717
with a copy other
than by facsimile to Joel S. Lever, Esq.
Kurzman & Eisenberg
One North Broadway
White Plains, NY 10601
If to Mr. Davies at: Robert M. Davies
434 North Street
Greenwich, Connecticut 06830
Facsimile No.: (203) 625-9841
with a copy other
than by facsimile to Bryanston Management Limited
82 Powder Point Avenue
Duxbury, Massachusetts 02332
or to such other address of a party as that party shall notify the other
party in the manner provided herein.
15. ENTIRE AGREEMENT ETC.
(a) This Agreement contains the entire understanding of the parties;
supersedes the Consulting Agreement in its entirety from and after the
date hereof; 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 permitted assigns. Because the obligations of Mr.
Davies are personal, this Agreement shall not be assignable by him.
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Robert M. Davies Employment Agreement - continued
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(b) Each provision of this Agreement shall be interpreted and enforced
without the aid of any canon, custom or rule of law requiring or
suggestion construction against the party drafting or causing the
drafting of such provision.
(c) 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.
(d) 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.
(e) The failure by a party to insist upon strict compliance with any term,
covenant or condition, or to exercise any right, contained herein
shall not be deemed a waiver of such term, covenant, condition or
right; and no waiver or relinquishment of any term, covenant,
condition or right at any one or more times shall be deemed a waiver
or relinquishment thereof 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.
16. SEVERABILITY. If any provision or part of a provision of this Agreement is
finally declared to be invalid by any tribunal of competent jurisdiction,
such part shall be deemed automatically adjusted, if possible, to conform
to the requirements for validity, but, if such adjustment is not possible,
it shall be deemed deleted from this Agreement as though it had never been
included herein. In either case, the balance of any such provision and of
this Agreement shall remain in full force and effect. Notwithstanding the
foregoing, however, no provision shall be severed if it is clearly apparent
under the circumstances that either or both of the parties would not have
entered into this Agreement without such provision.
17. SURVIVAL. The termination of Mr. Davies' employment and/or this Agreement
shall not relieve Mr. Davies of his obligations under Section 10
("Confidential Information") or Section 11 ("Non-Compete Obligations")
hereof. In addition, any other obligations of the parties that by their
terms are to be performed or are to have continued effect after the
termination of Mr. Davies' employment or of this Agreement (such as the
provisions for payment of the 30% Bonus) shall survive such expiration or
termination.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving
effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or of any other jurisdiction) that would cause the
application hereto of the laws of any jurisdiction other than the State of
Delaware.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first set forth above.
OAKHURST COMPANY, INC.
By: /s/ Joel S. Lever /s/ Robert M. Davies
----------------------------- -----------------------------
Joel S. Lever ROBERT M. DAVIES
For the Board of Directors
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<PAGE> 1
EXHIBIT 10.2
STEEL CITY PRODUCTS, INC.
BERNARD H. FRANK EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of this 1st day of April
1998 by and between BERNARD H. FRANK (hereinafter referred to as "Mr. Frank")
and STEEL CITY PRODUCTS, INC. (hereinafter referred to as the "Company").
1. BACKGROUND. Mr. Frank is currently an employee of the Company pursuant to
an agreement dated as of September 1, 1993 (the "Prior Agreement"), which
has been extended beyond its stated expiration. The parties now wish to
enter into this Agreement, which is intended to replace and supersede in
all respects the Prior Agreement.
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. TERM OF EMPLOYMENT.
a. Mr. Frank's employment hereunder shall commence on April 1, 1998 (the
"Commencement Date.")
b. This Agreement shall expire (subject to the provisions of Section 16,
below) on the earlier to occur of (i) a termination of Mr. Frank's
employment pursuant in Section 11, Section 12 or Section 13, below; or
(ii) the close of business on February 29, 2000 (the "Expiration
Date").
4. TITLE, REPORTING RELATIONSHIP & RESPONSIBILITIES.
a. So long as this Agreement is in effect, Mr. Frank shall be elected
Chairman of the Company's Board of Directors, and shall report to the
Board of Directors of the Company.
b. Mr. Frank shall perform all of the customary duties and fulfill all of
the customary responsibilities of a chairman of the board of a
publicly traded corporation. Mr. Frank shall determine in his own
discretion the amount of time that is required for him to fulfill
these duties and responsibilities and he shall carry them out to the
best of his abilities. Nothing herein shall be construed to prevent
Mr. Frank from serving as an officer or director or participating in
the activities of any family, religious, charitable, community service
or political activity so long as such participation does not interfere
with his carrying out his duties and responsibilities hereunder.
5. COMPENSATION. Mr. Frank's compensation shall be as follows:
a. Base Salary. The Company shall pay Mr. Frank a base salary of no less
than $4,167 per month plus such merit increases as the Board of
Directors of the Company shall determine from time to time in its sole
discretion ("Base Salary"). Base Salary shall be
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Bernard H. Frank Employment Agreement
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paid in installments no less frequently than twice monthly at the same
time as other employees of the Company are paid.
b. Deferred Compensation. In recognition of the salary voluntarily
foregone by Mr. Frank since October 1995, the Company shall pay him
deferred compensation of $5,000 per month for 23 months (the "Deferred
Compensation"), commencing with the month of April 1998.
c. Special Bonus. The Board of Directors of the Company's parent in its
sole discretion may grant to Mr. Frank on a quarterly basis a special
bonus (the "Special Bonus") not to exceed, however, $25,000 in any
fiscal year of the Company.
d. Annual Bonus.
i. Subject to the terms hereof, the Company shall pay to Mr. Frank
an annual cash bonus (the "Annual Bonus"), for each calendar year
on the March 15 following the conclusion of each calendar year,
from a bonus pool equal to 8% of the Company's consolidated net
income before interest, taxes, depreciation, LIFO adjustments,
corporate overhead, and inter-company exchanges or charges, and
amortization, prepared in accordance with generally accepted
accounting principles consistently applied and in a manner
consistent with bonus calculations for the calendar year 1997.
The bonus pool shall be divided amongst the Company's executives
by the Compensation Committee of the Company's Board of Directors
based upon the recommendations of the Chairman of the Board of
Directors of the Company.
ii. Unless the Company shall have no earnings for a given calendar
year, Mr. Frank's Annual Bonus shall be not less than 15% of his
Base Salary, unless his employment terminates before the end of a
calendar year, in which event the provisions relating to
termination of employment shall govern the payment of his Annual
Bonus for such year.
6. BENEFITS.
a. Health, Insurance etc. Mr. Frank shall be entitled to the same health
and other benefits as are made available to the Company's senior
officers generally, and on the same terms and conditions.
b. The Company shall furnish Mr. Frank with the use of a Company-leased
automobile with a monthly rental rate not to exceed $500 per month or
a Company-owned automobile that, if leased, would have a monthly lease
rate of no more than $500; or in lieu of either of the foregoing, the
Company shall pay him a monthly automobile allowance of $500. The cost
of all insurance, maintenance and repairs for, and gasoline consumed
by, such automobile shall be paid or reimbursed (as the case may be)
to Mr. Frank other than the cost of gasoline for his personal use of
such automobile.
c. All of the benefits described in this Section 6 are hereinafter
referred to collectively as the "Benefits."
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Bernard H. Frank Employment Agreement
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7. BUSINESS EXPENSE REIMBURSEMENT. Mr. Frank 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 hereunder.
8. INDEMNIFICATION. Mr. Frank shall be indemnified by the Company with respect
to claims made against him as a director, officer and/or employee of the
Company, of its parent, or of any of their subsidiaries (as the case may
be) to the fullest extent permitted by the Company's charter, by-laws and
the law of its state of incorporation.
9. CONFIDENTIAL INFORMATION.
a. During his employment by the Company and after his employment
terminates for whatever reason, Mr. Frank shall not disclose to any
person or entity Confidential Information (as defined below) except in
the proper performance of his duties and responsibilities under this
Agreement or except as may be expressly authorized by the Board of
Directors of the Company and shall not use Confidential Information
for the benefit of any person or entity other than the Company. For
purposes of this Agreement, "Confidential Information" is defined as
including trade secrets, customer names and lists, vendor names and
lists, product costs and selling prices, 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, software, or any other
information of the Company, its parent or of any of their subsidiaries
that is not generally available, or any such information of any third
party that is held by the Company, its parent or any of their
subsidiaries under an obligation of confidentiality.
b. Mr. Frank's obligation of confidentiality shall not, however, relate
to any information --
i. that is or becomes publicly known through no act or fault of Mr.
Frank;
ii. that is received by Mr. Frank (without a breach of this or any
other agreement) from a third party with no restrictions as to
its disclosure; or
iii. that is required to be disclosed pursuant to applicable law, a
court order or a judicial proceeding, including a proceeding to
enforce this Agreement.
10. NON-COMPETE OBLIGATIONS.
a. Mr. Frank's obligations with respect to competing with the Company and
soliciting its employees shall be as follows:
i. Within the Market Area (as defined below) Mr. Frank shall not
render services or advice, whether for compensation or without
compensation and whether as an employee, officer, director,
principal or otherwise, to any person or organization with
respect to any product, service or process in existence or under
development that is competitive with (1) the business of the
Company on the date hereof; (2) the
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Bernard H. Frank Employment Agreement
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business of the Company in which Mr. Frank was actively engaged
during his employment by the Company or of which he has detailed
knowledge; or with (3) any planned business of the Company in
which Mr. Frank had an active part in the planning or of which he
has detailed knowledge.
ii. Mr. Frank shall not either directly or indirectly as agent or
otherwise in any manner solicit influence or encourage any
customer of the Company to take away or to divert or direct its
business to Mr. Frank or to any person or entity by or with which
Mr. Frank is employed, associated, affiliated or otherwise
related, other than the Company.
iii. Mr. Frank shall not recruit or otherwise solicit or induce any
employee of the Company to terminate his or her employment or
otherwise cease his or her relationship with his or her employer.
b. Mr. Frank's obligations under this Section 10 shall continue (i) so
long as he is an employee of the Company and (ii) after his employment
terminates, (whether by reason of the expiration of this Agreement or
pursuant to Section 11, Section 12 or Section 13, below, or otherwise)
for (x) a period of six months, or (y) for the period, if any, during
which the Company is obligated to continue to pay, or as to which it
has in a lump sum paid, Mr. Frank's Base Salary, whichever period is
longer.
c. Definitions.
i. "Market Area" is defined as an area within a 200 mile radius of
any facility of the Company.
ii. For purposes of this Section 10, the word "Company" shall include
the Company's parent and any subsidiary of the Company or such
parent.
11. TERMINATION BY THE COMPANY: Prior to the Expiration Date, the Company may
terminate Mr. Frank's employment only pursuant to the terms and conditions
contained in this Section 11.
a. Without Cause; Death; Disability. The Company may terminate Mr.
Frank's employment without Cause (as the word "Cause" is defined
below) or by reason of his death or permanent disability by giving Mr.
Frank written notice of such termination. In the event the Company
gives such notice, Company shall do the following:
i. continue to pay to Mr. Frank for each full calendar month in the
period between the date of such termination and the Expiration
Date; or for a period of 12 months, whichever period is longer,
one-twelfth of his Base Salary;
ii. pay to Mr. Frank any Deferred Compensation to which he is
entitled through the Expiration Date, but which has not been paid
to him;
iii. pay to Mr. Frank any Special Bonus awarded to him, but not paid;
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Bernard H. Frank Employment Agreement
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iv. after the end of the calendar year of the Company in which such
termination of employment occurs, pay to Mr. Frank any Annual
Bonus that, but for the termination of his employment, would have
been paid to him for such year, pro-rated, however, for the
number of days during such year that Mr. Frank was an employee of
the Company;
v. provide to Mr. Frank the Benefits for the period during which it
is required to continue to pay him his Base Salary under Section
11(a)(i), above; and
vi. cause all stock options held by Mr. Frank to become exercisable
in full and to remain exercisable until their stated expiration
date (without regard, for such purpose, to the termination of his
employment).
b. Insurance Payments. Any payments made to Mr. Frank under any
disability plans, the premiums for which were not paid by Mr. Frank,
shall serve to reduce the amounts payable under Section 11(a)(i),
above.
c. For Cause. The Company may terminate Mr. Frank's employment for Cause
by giving written notice thereof to Mr. Frank, in which event the
Company shall pay him any Base Salary accrued, but not paid through
the date of such termination; shall continue to pay him the monthly
installments of Deferred Compensation as provided in Section 5(b),
above; and shall pay him any Special Bonus awarded prior to the date
of such termination, but not paid.
d. Definition of Cause. "Cause" shall mean gross or wilful misconduct by
Mr. Frank in connection with his employment; the breach by Mr. Frank
of any material obligation under this Agreement, including, but not
limited to the obligations set forth in Section 9 and Section 10,
above; a material breach in connection with the performance by Mr.
Frank of his employment responsibilities; any act of dishonesty or
fraud; or the commission by Mr. Frank of a felony.
e. Withholdings. All amounts payable to Mr. Frank under this Agreement
shall be subject to such withholdings therefrom as the Company is
legally required to make.
12. RESIGNATION BY MR. FRANK.
a. Mr. Frank may resign his employment with the Company on 30 days' prior
written notice to the Company.
b. The Company may deem any such notice given by Mr. Frank as a
resignation by him, effective upon the giving of such notice, of any
or all directorships and offices then held by him in the Company, its
parent and any of their subsidiaries, but the Company shall
nevertheless continue to pay to Mr. Frank (i) his Base Salary during
the thirty-day notice period; and (ii) the Deferred Compensation until
all twenty-three payments thereof have been made.
c. No Annual Bonus shall be payable to Mr. Frank with respect to the
fiscal year in which he resigns his employment with the Company.
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Bernard H. Frank Employment Agreement
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d. In the event of Mr. Frank's resignation, all stock options then held
by him shall remain in effect until their stated expiration date
(without regard, for such purpose, to the termination of his
employment).
13. CHANGE IN CONTROL.
a. Anything herein to the contrary notwithstanding, if after a Change in
Control (as defined below) either (i) Mr. Frank's employment is
terminated without Cause and other than by reason of his death or
permanent disability; or (ii) Mr. Frank resigns his employment
pursuant to Section 12, above, by written notice given within his 180
days of the effective date of the Change in Control, the Company shall
pay and provide to Mr. Frank the amounts and benefits that it is
required to pay and provide in the case of a termination without Cause
under Section 11(a), above, except that --
i. All payments shall be made in a lump sum within 15 days of the
date of the termination of his employment, and the payment of
Base Salary shall be increased by 25%.
b. A "Change in Control" shall mean any transaction that results in a
sale of substantially all of the assets, business or common stock of
the Company to a third party or entity that is not controlled by the
senior managers of the Company or by a majority of the Board of
Directors of the parent of the Company on the date hereof.
14. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed given by a party when hand delivered to the
other party or when deposited with a delivery service that provides
next-business-day delivery and proof of delivery, addressed to the other
party as follows:
If to the Company: If to Mr. Frank:
At its headquarters address At his most recent residence
attention of the President. address on the books of the
Company.
With a copy to: With a copy to:
Roger M. Barzun Mark Frank, Esq.
General Counsel Aderson, Frank & Steiner
60 Hubbard Street 2320 Grant Building
P.O. Box 767 Pittsburgh, PA 15219
Concord, Massachusetts 01742
or to such other address of a party as such party may by notice hereunder
designate to the other party.
15. SEVERABILITY. If any provision or part of a provision of this Agreement is
finally declared to be invalid by any tribunal of competent jurisdiction,
such part shall be deemed automatically adjusted, if possible, to conform
to the requirements for validity, but, if such adjustment is
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Bernard H. Frank Employment Agreement
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not possible, it shall be deemed deleted from this Agreement as though it
had never been included herein. In either case, the balance of any such
provision and of this Agreement shall remain in full force and effect.
Notwithstanding the foregoing, however, no provision shall be deleted if it
is clearly apparent under the circumstances that either or both of the
parties would not have entered into this Agreement without such provision.
16. SURVIVAL. Notwithstanding the expiration or earlier termination of this
Agreement or of Mr. Frank's employment for any reason, the terms and
conditions of Section 9 and Section 10 and any other obligations of the
parties that by their terms are to be performed or are to have continued
effect after such termination shall survive such expiration or termination.
17. PRORATION. All amounts payable to Mr. Frank hereunder for a period shorter
than the period for which they are described herein shall be pro-rated on a
daily basis using a 365-day year.
18. INJUNCTIVE RELIEF. It is acknowledged and agreed that the Company shall
have the right to bring an action to enjoin any violation by Mr. Frank of
his obligations under Section 9 and Section 10, above, because a suit for
monetary damages alone would be an inadequate remedy.
19. ARBITRATION.
a. 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 18 shall be finally settled by
arbitration held in Pittsburgh, Pennsylvania in accordance with the
provisions of this Section and the rules of commercial arbitration
then followed by the American Arbitration Association or any successor
to the functions thereof.
b. The arbitrator or arbitrators (the "arbitrators") shall be chosen in
accordance with such rules. 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 enforced. 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. Notwithstanding anything in this Section 18 to the
contrary, no arbitrator in any such proceeding shall have authority or
power to (i) modify or alter any express condition or provision hereof
by an award or otherwise; or (ii) award punitive or exemplary damages
for or against any party to any such proceeding.
c. The parties hereto agree that an action to compel arbitration pursuant
to this Agreement may be brought in the appropriate court of the
Commonwealth of Pennsylvania sitting in Pittsburgh, Pennsylvania.
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
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Bernard H. Frank Employment Agreement
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enforcement and for any other remedies that may be necessary to
effectuate such decision or award. Each of the parties hereto hereby
consents to the jurisdiction of the arbitrators and of such court and
waives any objection to the jurisdiction of such arbitrators and
court.
d. Notwithstanding anything contained in this Section 18 to the contrary,
the parties hereby agree that this Section 18 shall not apply to any
action brought by a party seeking an injunction or other equitable
relief.
e. In any controversy, claim or dispute subject to arbitration under the
terms of this Section 18, the parties shall pay the fees and expenses
of the arbitrators in accordance with any decision or award of a
majority of the arbitrators.
20. MISCELLANEOUS.
a. This Agreement --
i. Supercedes and replaces in its entirety the Prior Agreement;
ii. contains the entire understanding of the parties on the subject
matter hereof;
iii. shall not be amended, and no term hereof shall be waived, except
by written agreement of the parties signed by each of them;
iv. shall be binding upon and inure to the benefit of the parties and
their successors, personal representatives and permitted assigns;
v. 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
vi. shall not be assignable by either party without the prior written
consent of the other party, except that the Company may assign
this Agreement to any entity acquiring substantially all of the
stock, business or assets of the Company, provided that the
acquiror assumes all of the Company's obligations hereunder.
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. The word "including" shall mean
including, but not limited to any one or more enumerated items.
c. Each provision of this Agreement shall be interpreted and enforced
without the aid of any canon, custom or rule of law requiring or
suggestion construction against the party drafting or causing the
drafting of such provision.
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
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Page 8 of 9
<PAGE> 9
Bernard H. Frank Employment Agreement
- --------------------------------------------------------------------------------
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.
21. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the domestic laws of the Commonwealth of Pennsylvania
without giving effect to any choice of law or conflict of law provision or
rule (whether of the Commonwealth of Pennsylvania or of any other
jurisdiction) that would cause the application hereto of the laws of any
jurisdiction other than the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
STEEL CITY PRODUCTS, INC.
By: /s/ Joel S. Lever /s/ Bernard H. Frank
--------------------------- -----------------------------
Joel S. Lever BERNARD H. FRANK
Director
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Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 96
<SECURITIES> 0
<RECEIVABLES> 4,678
<ALLOWANCES> 429
<INVENTORY> 5,371
<CURRENT-ASSETS> 10,097
<PP&E> 1,847
<DEPRECIATION> 1,166
<TOTAL-ASSETS> 13,375
<CURRENT-LIABILITIES> 6,955
<BONDS> 5,031
0
0
<COMMON> 32
<OTHER-SE> 1,357
<TOTAL-LIABILITY-AND-EQUITY> 13,375
<SALES> 8,010
<TOTAL-REVENUES> 8,042
<CGS> 6,576
<TOTAL-COSTS> 6,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> (354)
<INCOME-TAX> 5
<INCOME-CONTINUING> (359)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (359)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
