U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
|X| Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended June 30, 1998
|_| Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from ________________
to _________________
Commission file number: 0-19503
BENTLEY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MEGACARDS, INC.
(Former name of registrant)
Missouri 43-1325291
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
9719 Conway Road 63124
St. Louis, Missouri (Zip Code)
Address of principal executive offices)
Registrant's telephone number, including area code 314-569-1659
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 |_|.
On August 17, 1998, the registrant had 2,963,285 outstanding shares of Common
Stock, $.18 par value.
Transitional Small Business Disclosure Format (Mark one): Yes |_| No|X|.
<PAGE>
BENTLEY INTERNATIONAL, INC.
FORM 10-QSB
INDEX
PART I -- CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements....................................1
Consolidated Balance Sheets -- June 30, 1998 and December 31, 1997....1
Consolidated Statements of Operations -- Three Months Ended
June 30, 1998 and 1997 and Six Months Ended June 30, 1998 and 1997...2
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 1998 and 1997...............................................3
Notes to Consolidated Financial Statements...........................4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.............................................13
PART II -- OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds............................19
ITEM 4. Submission of Matters to a Vote of Securities Holders................20
ITEM 6. Exhibits and Reports on Form 8-K.....................................21
SIGNATURE....................................................................23
FINANCIAL DATA SCHEDULE
<PAGE>
PART I -- CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Assets
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
-----------------------------------------
<S>
Current Assets <C> <C>
Cash $ 11,461 $ 9,332
Accounts receivable 4,481 --
Other current assets 48,227 --
Net assets from discontinued segment
(Notes 4 and 8) 2,390,428 2,182,370
- - --------------------------------------------------------------------------------
Total Current Assets 2,454,597 2,191,702
Equipment And Leasehold Improvements 12,292 --
Other Assets 136,936 69,800
- - --------------------------------------------------------------------------------
$ 2,603,825 $2,261,502
================================================================================
Liabilities And Shareholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 145,610 $ 343,393
Notes payable (Note 6) - 320,005
- - --------------------------------------------------------------------------------
Total Current Liabilities 145,610 663,398
- - --------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock, $0.01 par value; 1,000,000
shares authorized, none issued or outstanding - -
Common stock, $0.18 par value; 10,000,000
shares authorized, 2,813,285 shares issued
and outstanding 506,391 506,391
Additional paid-in capital 1,500,178 1,500,178
Retained earnings (deficit) 451,646 (408,465)
- - --------------------------------------------------------------------------------
Total Shareholders' Equity 2,458,215 1,598,104
- - --------------------------------------------------------------------------------
$ 2,603,825 $ 2,261,502
================================================================================
See notes to financial statements.
</TABLE>
1
PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
For The Three Months For The Six Months
Ended June 30, Ended June 30,
----------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 5,861 $ - $ 5,861 $ -
Cost Of Sales - - - -
- - --------------------------------------------------------------------------------
Gross Margin 5,861 - 5,861 -
Selling, General And
Administrative Expenses 85,468 159,673 149,297 197,055
- - --------------------------------------------------------------------------------
Operating Loss (79,607) (159,673) (143,436) (197,055)
Interest Expense (567) (22,340) (8,456) (33,340)
Other Income 131,391 - 131,391 57,026
- - --------------------------------------------------------------------------------
Income (Loss) From
Continuing Operations 51,217 (182,013) (20,501) (173,369)
Income From Discontinued
Operations
(No Tax Effect - Note 4) 475,245 429,998 880,612 743,600
- - --------------------------------------------------------------------------------
Net Income $526,462 $ 247,985 $ 860,111 $ 570,231
================================================================================
Earnings (Loss) Per
Common Share -
Basic
Continuing operations $ 0.02 $ (0.06) $ (0.01) $ (0.06)
Discontinued operations 0.17 0.15 0.31 0.26
- - --------------------------------------------------------------------------------
$ 0.19 $ 0.09 $ 0.31 $ 0.20
================================================================================
Earnings (Loss) Per
Common Share -
Assuming Dilution
Continuing operations $ 0.02 $ (0.06) $ (0.01) $ (0.06)
Discontinued operations 0.16 0.15 0.30 0.26
- - --------------------------------------------------------------------------------
$ 0.18 $ 0.09 $ 0.29 $ 0.20
================================================================================
See notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
For The Six Months
Ended June 30,
---------------------------------
1998 1997
---------------------------------
<S>
Cash Flows From Operating Activities <C> <C>
Net income $ 860,111 $ 570,231
Adjustments to reconcile net income to net cash
provided by (used in) operating activities of
continuing operations:
Income from discontinued operations (880,612) (743,600)
Depreciation and amortization 1,346 -
Net change in assets and liabilities:
(Increase) decrease in accounts receivable (4,482) 48,175
(Increase) decrease in other assets (48,227) 21,000
Increase (decrease) in accounts payable
and other liabilities (197,787) 82,557
- - -------------------------------------------------------------------------------
Net Cash Used In Operating Activities Of Continuing
Operations (269,651) (21,637)
Net cash provided by discontinued operations 390,395 819,434
- - -------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 120,744 797,797
- - -------------------------------------------------------------------------------
Cash Flows From Investing Activities
Net cash used in investing activities
of discontinued operations (22,130) (217,181)
Proceeds from notes receivable - 44,000
Acquisition of subsidiary (Note 3) (80,772) -
- - -------------------------------------------------------------------------------
Net Cash Used In Investing Activities (102,902) (173,181)
- - -------------------------------------------------------------------------------
Cash Flows From Financing Activities
Net proceeds from (payments on) line of credit -
discontinued operations 304,292 (608,725)
Payments on long-term debt -
discontinued operations - (66,867)
Payments on notes payable (320,005) (72,957)
- - -------------------------------------------------------------------------------
Net Cash Used In Financing Activities (15,713) (748,549)
- - -------------------------------------------------------------------------------
Net Increase (Decrease) In Cash 2,129 (123,933)
Cash - Beginning Of Period 9,332 239,017
- - -------------------------------------------------------------------------------
Cash - End Of Period $ 11,461 $ 115,084
===============================================================================
Supplemental Disclosure Of Cash Flow Information
Interest paid - continuing operations $ 20,517 -
Interest paid - discontinued operations 52,311 30,992
- - -------------------------------------------------------------------------------
$ 72,828 $ 30,992
===============================================================================
See notes to financial statements.
</TABLE>
3
<PAGE>
BENTLEY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
The accompanying interim financial statements are unaudited, but, in the opinion
of management, reflect all adjustments (consisting only of normal recurring
accruals) necessary for this presentation. Reference is hereby made to the
consolidated financial statements, including the notes thereto, contained in the
Company's annual Report on Form 10-KSB for the year ended December 31, 1997. The
results of operations for the six-month period ended June 30, 1998 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998.
1. Basis Of Consolidation
The consolidated financial statements include the accounts of Bentley
International, Inc. (the "Company") and its wholly-owned subsidiaries, Windsor
Art, Inc. ("Windsor") (see Note 4), Janco Design, Inc. ("Janco") (see Note 4),
Bentley Information Services, Inc. ("BIS") and Alnick Realty Company, Inc.
("Alnick"). All significant intercompany transactions have been eliminated from
the consolidated financial statements.
2. Earnings (Loss) Per Common Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share and includes the dilutive effects of options, warrants and convertible
securities as if they had been exercised. All earnings per share amounts for all
periods have been presented and, where appropriate, restated to conform to the
Statement 128 requirements.
4
<PAGE>
3. Nature Of Operations
Bentley International, Inc. ("Bentley"), formerly Megacards, Inc., designed,
repackaged and marketed sports picture cards produced by major sports picture
card manufacturers and marketed sports picture card accessories. Megacards, Inc.
became Bentley in June 1996 as the Board of Directors believed that the change
of the Corporate name would better reflect the broadening of the scope of the
business of the Company. Windsor manufactures and distributes decorative mirrors
and framed prints to furniture stores, mass merchants, hotels and designers
throughout the United States. During 1996, Bentley discontinued its Janco
product line of framed prints and mirrors and sold its sports picture card
business segment in order to reduce costs and to improve its liquidity position.
Subsequent to the balance sheet date, the Company sold all of the outstanding
shares of stock of Windsor (see Note 4).
In May 1998, the Company purchased certain assets of a credit reporting agency
for approximately $80,000 and formed Bentley Information Services, Inc. The
acquisition was accounted for as a purchase.
4. Discontinued Operations
On December 27, 1996, Janco discontinued its operations due to historical losses
in an effort to reduce costs and improve overall liquidity of the Company.
Certain assets of Janco consisting of inventory and equipment were sold to a
third party prior to December 31, 1996.
On January 24, 1997, an involuntary bankruptcy case was filed against Janco, and
on February 18, 1997, Janco consented to the involuntary filing, as a Chapter 7
debtor. As reported on Form 8-K, filed by the Company January 26, 1998, the
Bankruptcy Trustee, Bentley, certain shareholders who held promissory notes of
which Janco was the maker and Bentley and Windsor were the guarantors
("Noteholders") and other parties related to such shareholders entered into a
stipulation for settlement agreement pursuant to which Bentley agreed to pay,
subject to court approval of the stipulation agreement to the bankruptcy estate,
$85,000 in exchange for a full release of Bentley, Windsor, certain of Bentley's
shareholders and certain present and past officers and directors from all claims
of the Trustee. In addition, the bankruptcy estate agreed to pay to the
noteholders one- half of the proceeds from the liquidation of certain assets of
Janco, approximately $45,000. The court approved the stipulation agreement on
February 27, 1998. The release of liability of the Company by the Trustee
resulted in a $1,258,838 reduction of the Company's general liabilities. As a
result of the reduction in liabilities and the elimination of the reserves
established to cover potential liability resulting from the termination of
Janco, an extraordinary gain was recognized at December 31, 1997.
In June 1998, the Company adopted a plan to sell its Windsor Art subsidiary.
Accordingly, Windsor Art and Janco (decorative mirror and framed art business
segment) are accounted for as discontinued operations in the accompanying
consolidated financial statements.
5
<PAGE>
Windsor revenues were $3,257,599 and $3,034,546 for the three months ended June
30, 1998 and 1997, respectively, and $6,941,246 and $6,139,917 for the six
months ended June 30, 1998 and 1997, respectively. Janco had no operating
activity in the aforementioned periods. The net assets of Windsor in the
accompanying consolidated balance sheets at June 30, 1998 and December 31, 1997
consisted of the following:
<TABLE>
June 30, December 31,
1998 1997
----------------------------------
<S> <C> <C>
Cash $ 115,073 $ 91,197
Receivables, net 1,978,771 1,886,527
Inventories 2,415,905 1,824,908
Other current assets 96,008 83,621
- - ----------------------------------------------------------------------------
4,605,757 3,886,253
Equipment and leasehold improvements 168,184 190,381
- - ----------------------------------------------------------------------------
4,773,941 4,076,634
- - ----------------------------------------------------------------------------
Current liabilities 2,248,080 1,596,137
Other long-term liabilities 135,513 298,127
- - ----------------------------------------------------------------------------
2,383,593 1,894,264
- - ----------------------------------------------------------------------------
Net assets from discontinued operations $ 2,390,348 $ 2,182,370
============================================================================
</TABLE>
The net operating activity of Windsor after the measurement date through
June 30, 1998 was not significant.
On July 7, 1998, the contract to sell the stock of Windsor was executed. The
sale closed on July 30, 1998 (see Note 8).
5. Stock Dividend And Reverse Stock Split
On July 8, 1996, the Company's Board of Directors authorized a one-for-six
reverse stock split of the Company's common shares, and an increase in the par
value, from $0.03 to $0.18.
On September 3, 1997, the Company's Board of Directors authorized a four-for-one
stock dividend, to be distributed October 22, 1997, to shareholders of record
September 24, 1997, which had the effect of a five-for-one stock split, except
that the par value remained $0.18 per share. All share and per share amounts
have been adjusted retroactively to reflect the stock dividend and reverse stock
split.
6. Notes Payable
Notes payable and long-term debt consist of:
June 30, December 31,
1998 1997
---------------------------------
6
<PAGE>
<TABLE>
<S> <C> <C>
Borrowings under $1,200,000 line of credit
agreement ($2,000,000 in 1997)secured by
business assets of Windsor, bearing interest
at the prime rate plus 1.5%,due December 1,
1998,reflected in net assets
of discontinued operations $1,043,827 $ 730,565
Notes payable - stockholders, secured by
collateral agreement, subordinate to third
party debt, bearing interest at the prime
rate plus 2% paid in March 1998 - 328,975
- - ------------------------------------------------------------------------------
$1,043,827 $ 1,059,540
</TABLE>
==============================================================================
In connection with the sale of Windsor, the credit agreement was amended to
provide that (i) all outstanding indebtedness would be due on September 30,
1998, and (ii) $1,200,000 of the cash proceeds from the sale of Windsor would be
pledged to secure repayment of the indebtedness.
7. Earnings Per Common Share
For the six months ended June 30, 1998 and 1997, the computation of basic and
diluted earnings per common share is as follows:
<TABLE>
1998 1997
---------------------------------
<S>
Numerator for basic and diluted <C> <C>
earnings per share - income
available to common shareholders $ 860,111 $ 570,231
==============================================================================
Denominator:
Weighted average number of
common shares used in basic EPS 2,813,285 2,813,285
Effect of dilutive securities:
Common stock options 169,454 -
- - ------------------------------------------------------------------------------
Weighted number of common shares and dilutive
potential common stock used in diluted EPS 2,982,739 2,813,285
==============================================================================
</TABLE>
For the six months ended June 30, 1997, common stock options were not included
in diluted EPS because their effect was antidilutive.
8. Subsequent Events
Pro Forma Information
The following pro forma consolidated balance sheet of the Company at June 30,
1998 gives effect to the July 30, 1998 sale of stock of Windsor, as if it was
effective at June 30, 1998. The statement gives the effect to the sale under the
assumptions in the accompanying notes to the pro forma financial statements.
The following pro forma consolidated statement of operations of the Company for
the six months ended June 30, 1998 and the year ended December 31, 1997 gives
effect to the sale as if the effective date of the sale was January 1, 1998 and
January 1, 1997,
7
<PAGE>
respectively. The statement gives effect to the sale under the assumptions in
the accompanying notes to the pro forma financial statements.
The pro forma adjustments relate to the sale of Windsor and the issuance of
common stock and warrants of the Company to Interiors, Inc. ("Interiors"), the
acquirer of Windsor. The consideration for the stock of Windsor was: a)
$1,700,000 in cash, b) a $2,000,000 secured promissory note payable over four
years with interest at 8% per annum, and a discount of $500,000 if paid by
September 30, 1998, and c) a $3,300,000 secured, short-term promissory note, due
September 30, 1998 with interest at 8% per annum. The short-term note required a
$300,000 payment on July 30, 1998. The maturity date of the short-term note may
be extended to October 30, 1998, if, on or before September 30, 1998, Interiors
pays the Company (i) all interest accrued on the short-term note through
September 30, 1998, plus (ii) $500,000 to reduce the principal amount of the
short-term note, plus (iii) an extension fee of $100,000, which fee will not
reduce the principal amount of the short-term note. The value of the promissory
notes for purposes of the pro forma adjustments are at face value less the
prepayment discount. The actual valuation of these assets may differ from these
assumptions.
In connection with the purchase of Windsor, Interiors also purchased 150,000
shares of common stock of the Company for 750,000 shares of its common stock and
purchased a warrant to purchase 300,000 shares of common stock of the Company
for an additional 750,000 shares of its common stock. If certain events occur
prior to December 31, 1998, Interiors has the option, but not the obligation, to
reacquire its shares from the Company for $1,625,000 by December 31, 1998. In
addition, if prior to December 31, 1998, Interiors consummates an underwritten
public offering of Interiors stock pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended, in which the aggregate
gross proceeds (before underwriting fees, commissions and discounts) are at
least $15,000,000, then Interiors has the obligation, and not the option, to
repurchase the shares of Interiors for $1,625,000. The value of the Interiors'
stock for purposes of the pro forma adjustments is valued at this discounted
amount.
The pro forma financial statements may not be indicative of the results that
would have actually occurred if the sale had been effective on the dates
indicated or the results that may be obtained in the future. The pro forma
financial statements should be read in conjunction with Form 8-K, dated July 30,
1998, the consolidated financial statements of the Company for the year ended
December 31, 1997 under Form 10KSB and for the six months ended June 30, 1998
under Form 10QSB.
8
<PAGE>
<TABLE>
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Assets
<CAPTION>
As Reported Pro Forma
June 30, Pro Forma June 30,
1998 Adjustments 1998
------------------------------------------------
<S> <C> <C> <C>
Current Assets
Cash $ 11,461 $2,000,000 (2) $2,011,461
Accounts receivable 4,481 - 4,481
Notes receivable - 4,500,000 (3) 4,500,000
Other current assets 48,227 - 48,227
Net assets from
discontinued operations 2,390,428 (2,390,428)(1) -
- - ---------------------------------------------------------------------------------------------
Total Current Assets 2,454,597 4,109,572 6,564,169
Equipment And Leasehold
Improvements 12,292 - 12,292
Marketable Securities - 1,625,000 (3) 1,625,000
Other Assets 136,936 - 136,936
- - ---------------------------------------------------------------------------------------------
Total Assets $ 2,603,825 5,734,572 $8,338,397
=============================================================================================
Liabilities And Shareholders' Equity
Current Liabilities
Accounts payable and
accrued expenses $ 145,610 $ 806,000 (5) $ 951,610
Income taxes payable - 481,000 (5) 481,000
- - ---------------------------------------------------------------------------------------------
Total Current Liabilities 145,610 1,287,000 1,432,610
- - ---------------------------------------------------------------------------------------------
Shareholders' Equity
Preferred stock - - -
Common stock 506,391 27,000 533,391
Additional paid-in capital 1,500,178 1,598,000 (4) 3,098,178
Retained earnings (deficit) 451,646 2,822,572 3,274,218
- - ---------------------------------------------------------------------------------------------
Total Shareholders' Equity 2,458,215 4,447,572 6,905,787
- - ---------------------------------------------------------------------------------------------
Total Liabilities And
Shareholders' Equity $ 2,603,825 $5,734,572 $8,338,397
=============================================================================================
</TABLE>
NOTE: The Pro Forma Consolidated Balance Sheet gives effect to the following pro
forma adjustments:
(1)Represents the elimination of net assets in connection with the sale of
Windsor Art, Inc.
(2)Represents cash proceeds of $2 million from the sale.
(3)Represents promissory notes at discounted value and stock of the purchaser
received at discounted value. The actual value of these assets may differ from
these assumptions.
(4)Represents the issuance of common stock and a warrant for common stock of
Bentley.
(5)Represents accrued bonuses, severance pay and professional fees and the
estimated income tax liability in connection with the gain on sale.
9
<PAGE>
<TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
As Reported Pro Forma
June 30, Pro Forma June 30,
1998 Adjustments 1998
---------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 5,861 $ - $ 5,861
Cost Of Sales - - -
- - ----------------------------------------------------------------------------------------------
Gross Margin 5,861 - 5,861
Selling, General And
Administrative Expenses (149,297) - (149,297)
Interest Income (Expense) (8,456) 240,000 (2) 231,544
Other Income 131,391 - 131,391
- - ----------------------------------------------------------------------------------------------
Income (Loss) From
Continuing Operations (20,501) 240,000 219,499
Discontinued Operations:
Income from discontinued
operations 880,612 880,612 (1) -
Gain on sale of discontinued
segment (net of income taxes
of $481,000) - 2,822,572 (3) 2,822,572
- - ----------------------------------------------------------------------------------------------
Net Income $ 860,111 $ 2,181,960 $3,042,071
==============================================================================================
Earnings (Loss) Per Common Share -
Basic And Diluted (4)
Continuing operations $ (0.06) $ 0.07
Discontinued operations 0.26 0.95
- - ----------------------------------------------------------------------------------------------
$ 0.20 $ 1.02
==============================================================================================
Weighted Average Number
Of Common Shares
Outstanding 2,813,285 2,963,285
==============================================================================================
</TABLE>
NOTE: The Pro Forma Consolidated Statement of Operations for the six-month
period ended June 30, 1998, gives effect to the following pro forma adjustments:
(1)Represents the adjustments necessary to reflect the sale of Windsor as of
January 1, 1998, by eliminating Windsor's results of operations.
(2)Represents interest earned on cash proceeds and notes received in
consideration for the sale of Windsor.
(3)Represents the gain on sale, net of estimated tax, of the discontinued
segment, Windsor.
(4)For the six months ended June 30, 1998, options and warrants were not
included in computing diluted EPS because their effect was antidilutive.
10
<PAGE>
<TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
As Reported Pro Forma
December 31, Pro Forma December 31,
1997 Adjustments 1997
---------------------------------------------------
<S> <C> <C> <C>
Net Sales $ - $ - $ -
Cost Of Sales - - -
- - --------------------------------------------------------------------------------
Gross Margin - - -
Selling, General And
Administrative Expenses (266,860) - (266,860)
Interest Income (Expense) (49,628) 480,000 (2) 430,372
Other Income 42,974 - 42,974
- - --------------------------------------------------------------------------------
Income (Loss) From Continuing
Operations (273,514) 480,000 206,486
Discontinued Operations
Extraordinary gain on
extinguishment of debt 1,174,049 (1,174,049)(1) -
Income from discontinued
operations 1,526,611 (1,526,611)(1) -
Gain on sale of discontinued
segment (net of income taxes
of $481,000) - 2,822,572 (3) 2,822,572
- - --------------------------------------------------------------------------------
Net Income $ 2,427,146 $ 601,912 $ 3,029,058
================================================================================
Earnings Per Common Share - Basic
And Diluted (4)
Continuing operations $ (0.10) $ 0.07
Discontinued operations 0.96 0.95
- - --------------------------------------------------------------------------------
$ 0.86 $ 1.02
================================================================================
Weighted Average Number Of Common
Shares Outstanding 2,813,285 2,963,285
================================================================================
</TABLE>
NOTE: The Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997 gives effect to the following pro forma adjustments:
(1)Represents the adjustments necessary to reflect the sale of Windsor as of
January 1, 1997 by eliminating Windsor's results of operations and all other
similar business segment activity.
(2)Represents interest earned on cash proceeds and note received as
consideration for the sale of Windsor.
(3)Represents the gain on sale, net of tax, of the discontinued segment.
(4)For 1997, options and warrants were not included in computing diluted EPS
because their effect was antidilutive.
11
<PAGE>
9. Contingent Liabilities
Prior to the Annual Meeting of Shareholders on July 2, 1998, two shareholders
delivered notices to Bentley objecting to the sale of Windsor. Windsor
represented substantially all of Bentley's assets. In the notices the objecting
Shareholders stated that they own approximately 117,000 shares of Bentley. Such
notices are required under applicable law to preserve the right of the objecting
shareholders to surrender their shares to Bentley and demand that Bentley pay
the objecting shareholders the fair value of their shares as of the day prior to
the Annual Meeting. As a result of such notices and subsequent notices delivered
to Bentley from such shareholders, Bentley's management believes that such
shareholders have the right to require Bentley to acquire approximately 117,000
of their shares for the fair value thereof as of the day prior to the Annual
Meeting. The objecting shareholders may choose not to exercise their rights.
Although management believes that the fair value of such shares on the day prior
to the Annual Meeting was less than the price at which Bentley stock traded
(because of the size of the blocks of shares compared to average trading
volume), management and legal counsel to Bentley cannot predict the amount any
court may award for the fair value of such shares.
In addition, one of the above-described shareholders and a third shareholder
have objected to the sale of Windsor in manners which Bentley management
believes do not support a valid claim for payment from Bentley of the fair value
of their shares. One of the above-described, objecting shareholders also has an
indirect beneficial interest in approximately 423,000 shares of Bentley which
are owned by a voting trust. Such shares were voted in favor of authorizing the
sale of Windsor. In addition, a third shareholder, who stated that he owns
approximately 98,000 shares, failed to deliver written objection to Bentley of
the sale of Windsor at or prior to the Annual Meeting of Shareholders at which
the vote on the sale was taken. Based on these facts, Bentley's management
believes that none of the shares described in this paragraph are subject to the
rights described in the immediately preceding paragraph. However, management and
legal counsel to Bentley cannot predict whether a court might hold that such
shareholders do have the right to require Bentley to pay such shareholders the
fair value of their shares.
12
PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
The consolidated financial statements include the accounts of Bentley, its
wholly owned, operating subsidiaries, Windsor Art, Inc. ("Windsor") and Bentley
Information Services, Inc., ("BIS") and its wholly-owned, non-operating
subsidiaries, Janco Designs, Inc. ("Janco") and Alnick Realty Company, Inc.
("Alnick"). During the first and second quarters of 1998, Janco and Alnick did
not have any activity, and the consolidated results of operations consist of the
results of the activities of Bentley, Windsor and BIS.
Bentley, which was formerly known as Megacards, Inc., divested itself of its
sports picture card business in 1996 by closing that operation and contributing
all of its assets, except accounts receivable, which were collected and applied
to the repayment of the sports picture card segment's secured debt, to Legends,
L.P., a limited partnership with Quality Baseball Cards, Inc., in which Bentley
is a limited partner owning 30% of the partnership. Windsor, Bentley's primary
operating subsidiary during the second quarter, continued to produce and
distribute framed art and mirrors. Windsor increased its sales, income from
operations and net income during the quarter ended June 30, 1998 as compared to
the corresponding quarter of 1997. In May of 1998, Bentley formed a new
operating subsidiary, BIS, which acquired certain assets of a credit reporting
agency situated in Florida. BIS commenced operations on May 27, 1998, and thus
generated no sales or net income in the corresponding quarter of 1997.
In June of 1998 the Company adopted a plan to sell its operating subsidiary
Windsor in connection with its previously announced plans to expand its
specialty marketing and information management businesses. The Company has
notified more than 2,000 privately owned, credit reporting agencies throughout
the United States of its interest in acquiring such businesses in pursuit of
building an organization that markets credit and background information
nationwide. More than 75 responses have been received, and preliminary
discussions regarding acquisition have commenced with at least five companies.
Management is pursuing acquisition opportunities in this business because
management believes that such businesses produce a very high return on equity,
require little debt, generate substantial cash flow and possess significant
growth potential. There can be no assurance that management's plan will have the
desired results given economic conditions, product and service demands,
competitive pricing and other factors.
On July 30, 1998, pursuant to a Stock Purchase Agreement executed on July 7,
1998, Interiors, Inc. ("Interiors") acquired all of the outstanding shares of
stock of Windsor. The sale resulted in the receipt by Bentley of $2,000,000 in
cash and $5,000,000 in notes. One of the notes received in the transaction
provides for a $500,000 discount if it is prepaid. Simultaneously with the
acquisition of the stock of Windsor, Interiors exchanged 1,500,000 shares of its
Class A Common Stock ("Interiors Stock") for 150,000 shares of common stock of
Bentley, plus a warrant to purchase another 300,000 shares of common stock of
Bentley for $10.00 per share. The Interiors Stock is subject to an escrow to
secure certain indemnifications made by Bentley in connection with the
transaction and, subject to certain conditions, may be bought back by Interiors
for $1,625,000. Details regarding the two transactions are described more
thoroughly in the Company's Form 8-K of July 30, 1998, which is hereby
incorporated by reference. Interiors
13
<PAGE>
Stock trades on the NASDAQ SmallCap Market, under the symbol "INTXA." Interiors
Stock traded for approximately 1 11/16 on the date of the share exchange.
Bentley anticipates using the proceeds from the foregoing transactions in the
following manner. Approximately $800,000 of the proceeds will be used to pay
bonuses and severance pay to employees of Windsor and to pay for professional
expenses associated with the transactions. In addition, prior to the Annual
Meeting of Shareholders on July 2, 1998, two shareholders delivered notices to
Bentley objecting to the sale of Windsor. Such notices are required under
applicable law (when a sale of substantially all of the assets of a company is
about to be authorized) to preserve the right of the objecting shareholders to
surrender their shares to Bentley and demand that Bentley pay the objecting
shareholders the fair value of their shares as of the day prior to the Annual
Meeting. As a result of such notices and subsequent notices delivered to Bentley
from such shareholders, Bentley's management believes that such shareholders
have the right to require Bentley to acquire approximately 117,000 of their
shares for the fair value thereof as of the day prior to the Annual Meeting. The
objecting shareholders may choose not to exercise their rights. Although
management believes that the fair value of such shares on the day prior to the
Annual Meeting was less than the price at which Bentley stock traded (because of
the size of the blocks of shares compared to average trading volume), management
and legal counsel to Bentley cannot predict the amount any court may award for
the fair value of such shares. To the extent not used to satisfy the foregoing,
Bentley intends to use the balance of the proceeds in connection the with
expansion of and acquisitions related to its specialty marketing and
information management businesses.
One of the foregoing described shareholders and a third shareholder also
objected to the sale of Windsor in manners which Bentley management believes do
not support a valid claim for payment from Bentley of the fair value of their
shares. One of the foregoing shareholders also has an indirect beneficial
interest in approximately 423,500 shares of Bentley which are owned by a voting
trust. Such shares were voted in favor of authorizing the sale of Windsor. In
addition, a third shareholder, who stated that he owns approximately 98,000
shares, failed to deliver written objection to the sale of Windsor at or prior
to the Annual Meeting of Shareholders at which the vote on the sale was taken.
Based on these facts, Bentley's management believes that none of the shares
described in this paragraph are subject to the rights described in the
immediately preceding paragraph. However, management and legal counsel to
Bentley cannot predict whether a court might hold that such shareholders do have
the right to require Bentley to pay such shareholders the fair value of their
shares.
Alnick currently has no assets or liabilities. Alnick owned the facility in
which the sports card business was located. The facility was sold in 1996, and
Alnick did not have any activity during 1997 or the first six months of 1998.
Janco experienced operating difficulties in 1996 that led management to decide
to collect Janco's accounts receivable and apply the net proceeds to the
repayment of Janco's senior secured debt. On January 24, 1997, three unsecured
creditors of Janco filed a petition for involuntary bankruptcy. The Company and
Windsor were liable for certain unpaid secured debts of Janco. On January 16,
1998, the Company entered into a settlement agreement with the Bankruptcy
Trustee which required Bentley to pay $85,000 in settlement for all claims
against the Company. In exchange, the Bankruptcy Trustee agreed to pay certain
note holders, all of whom were principal shareholders of Bentley, whose notes
were secured in part by guarantees from the Company and Windsor, one-half of the
proceeds from the liquidation of certain assets of Janco, approximately $45,000.
The court order approving the settlement agreement resulted in the release of
liability of Bentley and Windsor by the Trustee and the Trustee's payment to
certain note holders, resulting in a reduction of Bentley's general liabilities,
as reflected on the
14
<PAGE>
consolidated balance sheet of Bentley and its subsidiaries for December 31,
1997, by approximately $1,259,000. In addition, Bentley recognized approximately
$1,174,000 of extraordinary income as of December 31, 1997, as a result of the
reduction in liabilities and the elimination of the reserves established to
cover potential liabilities resulting from the termination of Janco's
operations.
Results of Operations
The following table presents the results of operations for the six and three
months ended June 30, 1998, and June 30, 1997, for the Company's framed art and
mirrors (Windsor), sports picture cards (Megacards), and marketing information
services (BIS) business segments and for the corporate segment (Bentley):
15
<PAGE>
<TABLE>
-------------------------------------------------------------------------------
Six Months Ended June 30,
in thousands except per share data
- - --------------------------------------------------------------------------------
1998 1997
- - --------------------------------------------------------------------------------
Framed Sports Marketing General Total Framed Sports General Total
Art & Pict. & Corp. Art & Pict. Corp.
Mir. Cards Info. Mir. Cards
(1) Serv. (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
Sales $6,941 $0 $6 $0 $6,947 $6,140 $0 $0 $6,140
Cost of
sales 4,605 0 0 4,605 4,018 0 0 4,018
- - --------------------------------------------------------------------------------
Gross
Margin 2,336 0 6 0 2,342 2,122 0 0 2,122
Selling,
general and
admin. exp. 1,578 0 13 136 1,727 1,467 10 187 1,664
- - --------------------------------------------------------------------------------
Income
(loss)
from ops. 758 0 (7) (136) 615 655 (10) (187) 458
Interest
expense (49) 0 (1) (8) (58) (74) 0 (33) (107)
Other
income
(expense) 172 117 (1) 15 303 162 54 3 218
- - --------------------------------------------------------------------------------
Net Income $881 $117 ($9) $129 $860 $743 $44 ($217) $570
================================================================================
Net income
per common
share $0.31 $0.20
(1) Represents Discontinued Operations
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
Three Months Ended June 30
in thousands except per share data
- - --------------------------------------------------------------------------------
1998 1997
- - --------------------------------------------------------------------------------
Framed Sports Marketing General Total Framed Sports General Total
Art & Pict. & Corp. Art & Pict. Corp.
Mir. Cards Info. Mir. Cards
(1) Serv. (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
Sales $3,257 $0 $6 $0 $3,263 $3,035 $0 $0 $3,035
Cost of
Sales 2,041 0 0 0 2,041 1,945 0 0 1,945
- - --------------------------------------------------------------------------------
Gross
Margin 1,216 0 6 0 1,222 1,090 0 0 1,090
Selling,
general and
admin.exp. 809 0 13 72 894 710 10 150 870
- - --------------------------------------------------------------------------------
Income
(loss)
from ops. 407 0 (7) (72) 328 380 (10) (150) 220
Interest
expense (23) 0 (1) 0 (24) (31) 0 (22) (53)
Other
income
(expense) 91 117 (1) 15 222 81 0 0 81
- - --------------------------------------------------------------------------------
Net Income $475 $117 ($9) $57 $526 $430 ($10) ($172) $248
================================================================================
Net income
per common
share $0.19 $0.09
(1) Represents Discontinued Operations
</TABLE>
16
<PAGE>
Sales
Windsor's sales increased by $223,000 or 7.35% and $801,000 or 13.05% in the
three months and six months ended June 30, 1998, compared to the same periods in
1997. The increases were due to improved marketing and availability of products
in general and some one time orders in the first quarter of 1998. Megacards,
Janco and Alnick did not have any sales revenues in either of the quarters.
The revenues of BIS in the period commencing May 27, 1998, through June 30,
1998, were $5,861. BIS was not in business in the comparable period of 1997.
Cost of Sales and Gross Margin
Windsor's costs of sales increased by $95,000 and $586,000 for the three months
and six months ended June 30, 1998, compared to the same period in 1997. Gross
Margin increased to $1,217,000 and $2,337,000 from $1,090,000 and $2,122,000
during the three month and six month periods of 1998 compared to the same
periods in 1997. As a percentage of sales, Gross Margin improved from 35.91% to
37.37% in the three months ended June 30, 1998, compared to 1997, due to
selective price increases to offset increases in costs, and incremental sales
without a corresponding increase in fixed costs. However, for the six months
ended June 30, 1998, Gross Margin decreased to 33.66% as compared to 34.56% in
1997 due to lower margins on one time orders and special promotions in the
first quarter of 1998.
Operating Expenses
Windsor's selling, general and administrative expenses were $809,000 and
$1,578,000 or 24.84% and 22.74% of sales, for the three months and six months
ended June 30, 1998, as compared to $710,000 and $1,467,000 or 23.39% and
23.90% of sales during the same periods of 1997. During this period advertising
and marketing expenses and variable expenses, such as commissions on sales,
increased but were offset by a decrease in personnel and travel costs.
Other Items
Windsor's interest cost decreased due to lower borrowings. Bentley had no
interest expense in the second quarter because the stockholder notes were paid
off partly in late 1997 and the balance in the first quarter of 1998.
The other income for Windsor results from the amortization of excess of acquired
assets over cost in the second quarter of 1998 and 1997 and a refund of income
taxes in the second quarter of 1998. The other income for Megacards results from
the extinguishment of a liability for payment of lease on a St. Louis retail
location in 1998, while in 1997 the other income was from recovery of
receivables that were previously written off.
Liquidity and Capital Resources
Bentley's cash on hand was $11,000 and $9,000 at June 30, 1998 and 1997,
respectively. During this period the cash generated from discontinued operations
decreased from $819,000 in 1997 to $390,000 in 1998. During 1997 both inventory
and receivables decreased, while in 1998 inventory increased to support the
higher level of sales. During the quarter approximately $81,000 was expended to
acquire the assets of Best Credit Bureau, Inc.
On May 27, 1998, the Company, through BIS, purchased the assets of Best Credit
Bureau, Inc. of Miami, Florida. The Company recently upgraded the computer
software used by BIS, which will allow BIS's clients to access its data base
from personal computers located in the clients' offices. The cost of the upgrade
was approximately $20,000.
17
<PAGE>
As of June 30, 1998, Windsor had a line of credit of $1,200,000 on which Windsor
had borrowed $1,044,000. In connection with the sale of Windsor, the maturity
date of the line of credit was modified. The line of credit matures on September
30, 1998. Management believes that the funds available from the line of credit
and funds generated from operations will be sufficient to meet presently known
requirements.
18
<PAGE>
Derivatives
The Company does not invest in any derivatives. Windsor's line of credit loan is
tied to market rates. The Company's investment portfolio does not include any
derivatives.
Other Factors That May Affect Future Results
Year 2000 Issue - Company
The Company has reviewed its current computer system to identify the systems
that could be affected by the Year 2000 Issue. The Year 2000 Issue is the result
of computer programs being written using two digits rather than four to define
the applicable year.
The Company presently believes that the Year 2000 problem will not pose
significant operational problems for the Company's computer systems.
Year 2000 Issue - Suppliers
Prior to the sale of Windsor, the Company was in the process of contacting its
major suppliers to discuss the Year 2000 Issue. As a result of the sale of
Windsor, this process was discontinued because there are no suppliers. The
Company is investigating the need to contact information service providers of
BIS to discuss the Year 2000 Issue.
PART II -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On July 30, 1998, pursuant to a Securities Purchase and Registration Rights
Agreement between Interiors and Bentley, Interiors acquired the following equity
interests in Bentley for the consideration recited: (i) 150,000 shares of common
stock of Bentley (the "Bentley Stock") for 750,000 shares of Class A Common
Stock of Interiors ("Interiors Stock") and (ii) a warrant to purchase an
additional 300,000 shares of Bentley Stock for $10 per share (the "Bentley
Warrant") for an additional 750,000 shares of Interiors Stock. The Bentley
Warrant will expire at the earlier of 10 years after July 30, 1998, or sixty
days after the last reported sale price per share of Bentley Stock, as reported
on the OTC Bulletin Board or any stock exchange upon which the Bentley Stock is
subsequently listed, exceeds $15 per share. In the event that, on or prior to
December 31, 1998, (i) a $2,000,000, secured, subordinated, long term promissory
note from Interiors to Bentley (the "Long Term Note") has been repaid in full,
(ii) the $1,000,000 in "mezzanine financing", if any, which Interiors may obtain
if a $3,300,000, secured, subordinated, short term promissory note from
Interiors to Bentley (the "Short Term Note") (collectively the Long Term Note
and the Short Term Note are referred to herein as the "Notes") is paid by
September 30, 1998, and (iii) a Consulting Agreement between the former Chief
Executive Officer of Windsor, Windsor and Interiors has been bought out pursuant
to the terms thereof, Interiors has the option, but not the obligation, to
purchase the Interiors Stock owned by Bentley for $1,625,000 by December 31,
1998. In addition, if prior to December 31, 1998, Interiors consummates an
underwritten public offering of Interiors Stock pursuant to a registration
statement declared
19
<PAGE>
effective under the Securities Act of 1933, as amended, in which the aggregate
gross proceeds (before underwriting fees, commissions and discounts) are at
least $15,000,000, then Interiors has the obligation, and not the option, to
repurchase the Interiors Stock for $1,625,000. The Bentley Stock and the Bentley
Warrant to purchase additional Bentley Stock acquired by Interiors were pledged
to secure repayment of the promissory notes executed by Interiors in favor of
Bentley in connection with the purchase of Windsor. The Interiors Stock is
subject to an escrow agreement and voting trust. The Bentley Stock and Bentley
Warrant are also subject to a voting trust. Additional information about the
terms of the promissory notes, the "mezzanine financing", the Consulting
Agreement, the escrow agreement and the voting trusts and the transactions in
general is contained in the Form 8-K filed by the Company for the closing of the
transactions which took place July 30, 1998, and is hereby incorporated by
reference herein.
The Company claims an exemption from registration of the securities sold to
Interiors under Section 4(2) of the Securities Act of 1933 due to the following
facts: (i) the Company is the issuer of the securities; (ii) the Company is a
reporting company regarding which financial and other information of the type
which would be disclosed in a registration statement is publicly available; and
(iii) the purchaser, Interiors, is sophisticated with respect to business and
financial matters.
Item. 4 Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on July 2, 1998. The
following directors were elected to the three director positions of the Company:
(i) Lloyd R. Abrams; (ii) Janet L. Salk; and (iii) Ramakant Agarwal. On the
record date, 2,813,285 shares of Bentley Stock were outstanding and the holders
of 2,137,500 shares, or 75.98 % of the shares of Bentley Stock voted in person
or by proxy, constituting a quorum. There were no broker non-votes. The matters
voted on at the meeting, the number of votes cast for, against, withheld and
abstaining were as indicated in the table below:
To elect directors to serve until the 1999 Annual Meeting and until their
successors are elected and qualified.
FOR AGAINST WITHHELD
Lloyd R. Abrams 2,117,500 0 0
Janet L. Salk 2,117,500 0 0
Ramakant Agarwal 2,117,500 0 0
FOR AGAINST ABSTAIN RESOLUTION
2,117,500 0 20,000 1. To ratify the appointment of Rubin, Brown,
Gornstein & Co. LLP as the Company's independent
public accountants for 1998-99.
2,117,500 20,000 0 2. To approve the sale of the Company's wholly
owned subsidiary, Windsor Art, Inc., which
represents substantially all of the assets of the
Company, to Interiors, Inc. or another party on
the terms described in the Company's Information
Statement dated June 11, 1998, which is hereby
<PAGE>
incorporated by reference, or on such terms as
the Board of Directors shall determine.
2,117,500 20,000 0 3. To amend the Articles of Incorporation on
substantially the terms set out in the Company's
Information Statement dated June 11, 1998, which
is hereby incorporated by reference, to provide
that warrants may be issued, from time to time,
for any authorized stock of the Company, on such
terms and conditions as the Board of Directors
shall determine.
2,117,500 20,000 0 4. To issue common stock and warrants of the
Company to Interiors, Inc. or another party on
the terms described in the Company's Information
Statement dated June 11, 1998, which is hereby
incorporated by reference, or on such terms and
conditions as the Board of Directors shall
determine.
Item. 6 Exhibits and Reports on Form 8-K
(a)Exhibits:
Exhibit No. Description
2.1 Stock Purchase Agreement between Bentley International, Inc. and Interiors,
Inc. dated July 7, 1998, incorporated by reference from the Form 8-K of Bentley
International, Inc. dated effective July 30, 1998.
2.2 Securities Purchase and Registration Rights Agreement between Bentley
International, Inc. and Interiors, Inc. dated July 30, 1998, incorporated by
reference from the Form 8-K of Bentley International, Inc. dated effective July
30, 1998.
4.1 Warrant to Purchase 300,000 shares of Common Stock of Bentley International,
Inc., $0.18 par value, issued to Interiors, Inc., dated July 30, 1998,
incorporated by reference from the Form 8-K of Bentley International, Inc. dated
effective July 30, 1998.
4.2 Amendment to the Articles of Incorporation of Bentley International, Inc.,
dated July 2, 1998, incorporated by reference from the Form 8-K of Bentley
International, Inc. dated effective July 30, 1998.
10 Annexes which are contracts or addenda to contracts dated July 30, 1998, to
the Stock Purchase Agreement between Bentley International, Inc. and Interiors,
Inc., which were listed on the Form 8-K of Bentley dated effective July 30,
1998, are attached hereto in full. Certificates of Authority from officers of
Bentley and Interiors which were also addenda to the Stock Purchase Agreement
are omitted. The annexes listed below are contracts between Bentley
International, Inc. and Interiors, Inc. except where noted:
10.1 Annex A-1 -- $2,000,000 Promissory Note
10.2 Annex A-2 -- $3,300,000 Promissory Note
10.3 Annex B -- Escrow Agreement between U.S. Bank Trust, Bentley
21
<PAGE>
International, Inc. and Interiors, Inc.
10.4 Annex F -- Non-Competition Agreement between Windsor Art, Inc.
and Lloyd R. Abrams
10.5 Annex I -- Consulting Agreement between Windsor Art, Inc.,
Interiors, Inc. and Lloyd R. Abrams
10.6 Annex J -- Pledge Agreement
10.7 Annex K -- Continuing Guaranty between Max and Laurie Munn and
Bentley International, Inc.
10.8 Annex M -- Subordination Language
10.9 Annex N -- Windsor Voting Trust Agreement between Lloyd R.
Abrams and Max Munn as Voting Trustees, Interiors,
Inc. and Bentley International, Inc.
10.10 Annex O -- Bentley Voting Trust Agreement between Lloyd R.
Abrams as Voting Trustee, Interiors, Inc. and
Bentley International, Inc.
10.11 Annex P -- Interiors Voting Trust Agreement between Max Munn
as Voting Trustee, Interiors, Inc. and Bentley
International, Inc.
19 Information Statement of Bentley International, Inc. on Schedule
14C, dated June 11, 1998, which is hereby incorporated by
reference.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Forms 8-K regarding the settlement of bankruptcy proceedings of a subsidiary,
Janco Designs, Inc., were filed effective January 26, 1998 and March 9, 1998 and
a Form 8-K regarding the sale of the Windsor subsidiary to Interiors, Inc. was
filed effective July 30, 1998.
NOTE: THIS REPORT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS OF THE TYPE
DESCRIBED IN THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THE RESULTS OF MANAGEMENT'S PLANS ARE BEYOND THE ABILITY OF
THE COMPANY TO CONTROL. ECONOMIC CONDITIONS, PRODUCT AND SERVICE DEMAND,
COMPETITIVE PRICING AND OTHER FACTORS COULD CAUSE MATERIALLY DIFFERENT RESULTS
FROM THOSE PLANNED BY MANAGEMENT.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
22
<PAGE>
BENTLEY INTERNATIONAL, INC.
(Registrant)
August 19, 1998 By: /s/Lloyd R. Abrams
-------------------
Lloyd R. Abrams, President
and Chief Executive Officer
August 19, 1998 By: /s/Ramakant Agarwal
-------------------
Ramakant Agarwal,
Chief Financial Officer
23
Exhibit 10.1 ANNEX A-1
NON-NEGOTIABLE PROMISSORY NOTE
$2,000,000 ________ ___, 1998
FOR VALUE RECEIVED, Interiors, Inc., a Delaware corporation ("Obligor"),
hereby promises to pay to the order of Bentley International, Inc. ("Holder"),
the principal sum of TWO MILLION DOLLARS ($2,000,000), together with interest
thereon at the rate of eight percent (8%) per annum commencing as of July 7,
1998, without offset or deduction of any kind or nature (whether pertaining to
this Note or to any other agreement by or among the parties hereto), in
accordance with the following schedule: On July 1, 1999 Obligor shall make a
principal payment of $166,666.67 together with accrued interest on the unpaid
principal balance of this Note from July 7, 1998, through July 1, 1999, and
thereafter, Obligor shall make equal quarterly payments of $166,666.67
commencing October 1, 1999, together with accrued interest on the unpaid
principal balance of this Note, until paid in full on April 1, 2002; provided,
however, that Obligor shall have the right, but not the obligation, to pay to
Holder on or prior to September 30, 1998 the sum of $1,500,000.00 together with
all unpaid interest accrued to such date in complete satisfaction of all of
Obligor's obligations under this Note.
If any payment of principal or interest on this Note is due on a Saturday,
Sunday or any day which shall be a day on which banking institutions are
authorized by federal law to close, such payment shall be made on the next
succeeding business day. Interest accrued on the unpaid principal balance of
this Note shall be payable on the dates set forth above. Upon the payment in
full of all unpaid principal of this Note, all accrued and unpaid interest shall
be due and payable forthwith.
Each payment made pursuant to this Note shall be credited first on interest
then due and the remainder on principal; and interest shall thereupon cease to
accrue upon the principal so credited. Obligor reserves the right to prepay all
or any part of the principal of this Note at any time without penalty so long as
any interest then due has been paid in full.
"Event of Default" shall mean the occurrence or existence of any one or
more of the following: (i) failure of Obligor to make any payment of interest or
principal on this Note within five (5) business days after the due date (unless
cured within five (5) business days after Obligor's receipt of notice of the
occurrence thereof (a "Cured Payment Default"), (ii) the failure of Windsor
Art, Inc. ("Windsor"), a wholly-owned subsidiary of Obligor, to make any
required payment under that certain Consulting Agreement dated _____________,
1998, between Windsor and Lloyd R. Abrams (the "Consulting Agreement") (unless
cured, either by Windsor or Obligor as guarantor of Windsor's obligations,
within five (5) business days after Obligor's receipt of notice of the
occurrence thereof), (iii) if Obligor shall become insolvent or file a petition
under any chapter of the United States Bankruptcy Code or a petition to take
advantage of any other bankruptcy or insolvency law; (iv) if a custodian,
receiver or trustee of all or any part of Obligor's property shall be appointed
and not be dismissed within 60 days; (v) if any assignment for the benefit of
Obligor's creditors shall be made; (vi) if Obligor admits in writing its
inability to pay its debts generally as they become due, (vii) failure of
Obligor to make any payment required by Section 8.12(c) of that certain Stock
Purchase
<PAGE>
Agreement dated July 7, 1998, between Obligor and Holder within five (5)
business days of the due date thereof (unless cured by Obligor within five (5)
business days after Obligor's receipt of notice of the occurrence thereof), or
(viii) failure of Obligor to pay the $500.00 penalty as hereinafter provided
with the payment of any Cured Payment Default.
Upon the occurrence of any Event of Default (i) the unpaid principal amount
of and accrued interest on this Note shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Obligor, (ii) the
Interiors Inc., Voting Trust Agreement No. 1 shall terminate, (iii) all monetary
compensation due to Lloyd R. Abrams during the term of the Consulting Agreement
shall become immediately due and payable and (iv) that certain Noncompetition,
Nondisclosure, Nonsolicitation and Intellectual Property Agreement dated of even
date herewith between Windsor and Lloyd R. Abrams shall terminate. In the event
that there are more than two (2) Cured Payment Defaults under this Note, Obligor
shall pay to Holder the sum of $500.00 as a penalty upon the occurrence of each
Cured Payment Default occurring subsequent to the second Cured Payment Default.
Any notice required to be given to Obligor hereunder must be delivered in
accordance with the provisions of Section 11.01 of that certain Stock Purchase
Agreement dated as of July 7, 1998 between Obligor and the Shareholder.
The obligations of Obligor under this Note are secured by that certain
Pledge Agreement between Obligor and Holder of even date herewith.
Principal and interest shall be paid in lawful money of the United States
and shall be made at 9719 Conway Road, St. Louis, Missouri 63124, or at such
other place as Holder shall have designated to Obligor in writing for such
purpose.
This Note and the indebtedness evidenced hereby shall be subordinate in the
manner and to the extent set forth in a Subordination Agreement between Holder
and Obligor's senior, secured lender.
This Note may not be sold, transferred, assigned or pledged or otherwise
disposed of by Holder without the prior written consent of Obligor; provided,
however, that Holder shall be permitted to pledge its right to receive payments
under this Note so long as Holder remains at all times the legal owner of this
Note.
Upon the occurrence of an Event of Default, Obligor agrees to pay, upon
demand, all reasonable expenses of Holder incident to the exercise of Holder's
rights hereunder, including reasonable attorneys' fees.
This Note is being delivered and is intended to be performed in the State
of Missouri, and shall be governed by and construed and enforced in accordance
with the internal laws of the State of Missouri. Each party hereto irrevocably
submits to the jurisdiction of the courts of the State of Missouri and the
United States District Court for
-2-
<PAGE>
the Eastern District of Missouri for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Note and the transactions
contemplated hereby and to the laying of venue in any such court. Each party
hereto irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
INTERIORS, INC.,
a Delaware corporation
By:________________________________
An Authorized Officer
-3-
Exhibit 10.2 ANNEX A-2
NON-NEGOTIABLE PROMISSORY NOTE
$3,300,000 July 30, 1998
FOR VALUE RECEIVED, Interiors, Inc., a Delaware corporation ("Obligor"),
hereby promises to pay to the order of Bentley International, Inc. ("Holder"),
the principal sum of THREE MILLION THREE HUNDRED THOUSAND DOLLARS ($3,300,000),
together with interest thereon commencing as of July 7, 1998, at the rate of
eight percent (8%) per annum, without offset or deduction of any kind or nature
(whether pertaining to this Note or to any other agreement by or among the
parties hereto), in accordance with the following schedule: A payment of THREE
HUNDRED THOUSAND DOLLARS ($300,000) shall be payable on the date hereof. The
remaining balance of this Note and all accrued interest on this Note thereon, as
calculated herein, shall be payable all on September 30, 1998 (the "Maturity
Date"), if not earlier paid by Obligor. The Maturity Date may be extended to
October 30, 1998, if, on or before September 30, 1998, Obligor pays Holder (i)
all interest accrued on this Note through September 30, 1998, plus (ii) FIVE
HUNDRED THOUSAND DOLLARS ($500,000) to reduce the principal amount of this Note,
plus (iii) a fee of ONE HUNDRED THOUSAND DOLLARS ($100,000) (the "Extension
Fee"). Payment of the Extension Fee shall not reduce the principal amount of
this Note.
If any payment of principal or interest on this Note is due on a Saturday,
Sunday or any day which shall be a day on which banking institutions are
authorized by federal law to close, such payment shall be made on the next
succeeding business day. Interest accrued on the unpaid principal balance of
this Note shall be payable on the date set forth above. Upon the payment in full
of all unpaid principal of this Note, all accrued and unpaid interest shall be
due and payable forthwith.
Each payment made pursuant to this Note shall be credited first on interest
then due and the remainder on principal; and interest shall thereupon cease to
accrue upon the principal so credited. Obligor reserves the right to prepay all
or any part of the principal of this Note at any time without penalty so long as
any interest then due has been paid in full.
"Event of Default" shall mean the occurrence or existence of any one or
more of the following: (i) failure of Obligor to make payment of interest and
principal on this Note on or before the Maturity Date, unless cured within two
(2) business days after Obligor's receipt of notice of the occurrence thereof (a
"Cured Default"), (ii) the failure of Windsor Art, Inc. ("Windsor"), a
wholly-owned subsidiary of Obligor, to make any required payment under that
certain Consulting Agreement dated of even date herewith between Windsor and
Lloyd R. Abrams (the "Consulting Agreement") (unless cured, either by Windsor or
Obligor as guarantor of Windsor's obligations, within five (5) business days
after Obligor's receipt of notice of the occurrence thereof), (iii) if Obligor
shall become insolvent or file a petition under any chapter of the United States
Bankruptcy Code or a petition to take advantage of any other bankruptcy or
insolvency law; (iv) if a custodian, receiver or trustee of all or any part of
Obligor's property shall be appointed and not be dismissed within 60 days; (v)
if any assignment for the benefit of Obligor's creditors shall be made; or (vi)
if Obligor admits in writing its inability to pay its debts generally as they
become due.
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Upon the occurrence of any Event of Default described in clauses (i),
(iii), (iv), (v) or (vi) of the preceding sentence, the unpaid principal amount
of and accrued interest on this Note shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Obligor. Upon the
occurrence and during the continuance of an Event of Default under clause (ii),
the Holder may, at its option, by written notice to the Obligor declare all or
any portion of the principal of and interest on this Note to be, and the same
shall forthwith become, immediately due and payable. Upon the occurrence of any
Event of Default (i) the unpaid principal amount of and accrued interest on this
Note shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Obligor, (ii) all monetary compensation due to
Lloyd R. Abrams during the term of the Consulting Agreement shall become
immediately due and payable and (iii) that certain Noncompetition,
Nondisclosure, Nonsolicitation and Intellectual Property Agreement dated of even
date herewith between Windsor and Lloyd R. Abrams shall terminate. Any notice
required to be given to Obligor hereunder must be in writing and delivered via
hand delivery or via facsimile, upon confirmation of transmission of facsimile,
to the following address: Paul, Hastings, Janofsky & Walker LLP, Twenty-Third
Floor, 555 South Flower Street, Los Angeles, California 90071-2371, attention
Arthur L. Zwickel, Esq. (213) 627- 0705.
The obligations of Obligor under this Note are secured by that certain
Pledge Agreement between Obligor and Holder dated of even date herewith.
Principal and interest shall be paid in lawful money of the United States
and shall be made at 9719 Conway Road, St. Louis, Missouri 63124, or at such
other place as Holder shall have designated to Obligor in writing for such
purpose.
This Note and the indebtedness evidenced hereby shall be subordinate in the
manner and to the extent set forth in a Subordination Agreement between Holder
and Obligor's senior, secured lender.
This Note may not be sold, transferred, assigned or pledged or otherwise
disposed of by Holder without the prior written consent of Obligor; provided,
however, that Holder shall be permitted to pledge its right to receive payments
under this Note so long as Holder remains at all times the legal owner of this
Note.
Upon the occurrence of an Event of Default, Obligor agrees to pay, upon
demand, all reasonable expenses of Holder incident to the exercise of Holder's
rights hereunder, including reasonable attorneys' fees.
This Note is being delivered and is intended to be performed in the State
of Missouri, and shall be governed by and construed and enforced in accordance
with the internal laws of the State of Missouri. Each party hereto irrevocably
submits to the jurisdiction of the courts of the State of Missouri and the
United States District Court for
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the Eastern District of Missouri for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Note and the transactions
contemplated hereby and to the laying of venue in any such court. Each party
hereto irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
INTERIORS, INC.,
a Delaware corporation
By:________________________________
An Authorized Officer
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Exhibit 10.3 Annex B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement') is made and entered into as
of the ___ day of July, 1998, by and among Interiors, Inc., a Delaware
corporation ("Buyer"), U.S. Bank Trust, a national association (together with
its successors and assigns, the "Escrow Agent"), and Bentley International,
Inc., a Missouri corporation (the "Shareholder"). For purposes of this Escrow
Agreement, all capitalized terms shall have the meanings ascribed to such terms
in the Stock Purchase Agreement(defined below) unless otherwise defined herein.
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated as of the date
hereof (the 'Stock Purchase Agreement") by and among Buyer and the Shareholder,
Buyer is purchasing all of the issued and outstanding shares of common stock,
par value $1.00 per share (the "Common Stock") of Windsor Art, Inc., a Missouri
corporation (the 'Company").
B. The Stock Purchase Agreement provides that Buyer shall be entitled to
indemnification pursuant to the terms set forth in the Stock Purchase Agreement
for certain Damages resulting from breaches of representations, warranties and
covenants made by the Shareholder in the Stock Purchase Agreement.
C. The Stock Purchase Agreement provides that an escrow account will be
established to secure the indemnification obligations of the Shareholder, and
the execution and delivery of this Escrow Agreement is a condition precedent to
the obligation of Buyer to consummate the transactions contemplated by the Stock
Purchase Agreement.
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Escrow Agreement, and intending to be
legally bound, the parties hereto agree as follows:
1. Escrow.
(a) Shareholder hereby delivers to the Escrow Agent a certificate in the
name of the Escrow Agent representing 1,500,000 shares of the Buyer's Common
Stock (as
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defined in the Stock Purchase Agreement) (the "Escrow Shares') pursuant to
Section 2.03 of the Stock Purchase Agreement, the receipt of which the Escrow
Agent hereby acknowledges. The Escrow Shares shall be deposited in an account
established at the Escrow Agent for receipt of such Escrow Shares (the 'Escrow
Account") and shall be held in such Escrow Account and distributed in accordance
with the terms and provisions of this Escrow Agreement.
(b) Any securities, non-cash dividends or other property distributable in
respect of or in exchange for any of the Escrow Shares, whether by way of stock
dividends, stock splits or otherwise, shall be delivered to the Escrow Agent,
who shall hold such securities, non-cash dividends or other property in the
Escrow Account. Such securities shall be issued in the name of the Escrow Agent
or its nominee and all such securities, cash dividends or other property shall
be considered part of the Escrow Account for purposes hereof.
(c) Buyer shall have the right, in its sole discretion, to direct the
Escrow Agent in writing as to the exercise of any voting rights pertaining to
the Escrow Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions from Buyer, the Escrow Agent
shall not vote the Escrow Shares.
(d) The interest of the Shareholder in the Escrow Account shall not be
assignable or transferable, other than by operation of law. Notice of any such
assignment or transfer by operation of law shall be given to the Escrow Agent
and Buyer, and no such assignment or transfer shall be valid until such notice
is given. In addition, no such assignment shall terminate Shareholder's
obligations under the Voting Agreement between Shareholder and Buyer of even
date herewith.
2. Investment of Escrow Account. Cash dividends distributable in respect of
any of the Escrow Shares, if any, shall be held and invested or reinvested by
the Escrow Agent at the written or oral request of the Shareholder in any of the
following securities:
(a) obligations issued or guaranteed by the United States or any person
controlled or supervised by and acting as an instrumentality of the United
States pursuant to authority granted by Congress; and
(b) certificates of deposit of banks or trust companies, including those of
the Escrow Agent, organized under the laws of the United States of America.
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Such investments shall be made subject to any orders of the Shareholder with
respect thereto, provided that investments of monies in the Escrow Account shall
in any event mature or be redeemable or be subject to liquidation by sale or
otherwise at the option of the Escrow Agent at such time as may be necessary to
make timely disbursements from the Escrow Account. Subject to any such orders
with respect thereto, or in the absence of any orders from the Shareholder, the
Escrow Agent may from time to time sell such investments and reinvest the
proceeds therefrom in other investments of the type described in this Section
maturing or redeemable as aforesaid. Any such investments may be purchased from
the Escrow Agent or any affiliate of the Escrow Agent. The Escrow Account shall
be credited with all proceeds of sale and income from such investment.
3. Term. Subject to indemnification claims made by Buyer against the
Shareholder pursuant to the Stock Purchase Agreement, the term of this Escrow
Agreement shall commence on the date hereof and terminate on the later of (i)
the first anniversary of the Closing Date (the "Anniversary Date")and (ii) the
date on which the last pending claim is resolved and paid or not paid.
4. Claims Against Escrow Account.
(a) If, at any time during the term of this Escrow Agreement, Buyer has
incurred or suffered Damages to for which it is entitled to indemnification
under Article X of the Stock Purchase Agreement, Buyer shall give written notice
of such claim to Shareholder and the Escrow Agent, stating in reasonably
sufficient detail the events or circumstances which are the basis for and amount
of such claim. If Shareholder objects to any such claim, it shall give written
notice of such objection to Buyer and the Escrow Agent within ten (10) days
after the date of receipt of Buyer's notice, and shall state the basis for such
objection. Notwithstanding the foregoing, such ten (10) day period shall be
extended to a twenty (20) day period if within such original ten (10) day period
the Shareholder gives written notice to Buyer and the Escrow Agent that
additional time is necessary to respond to the claim. If no objection to Buyer's
claim is made by the Shareholder within such ten (10) day period, or twenty (20)
day period, as applicable, the claim shall be deemed resolved and shall be paid
by the Escrow Agent pursuant to Section 5 without further mutual instructions
from the parties.
(b) If Shareholder provides timely notice of objection to any claim, Buyer
and Shareholder shall attempt to resolve the dispute and, if they are able to do
so, shall give
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mutual written notice to the Escrow Agent of the resolution of the dispute and
the amount of the claim resolved, if any.
(c) If Buyer and the Shareholder are unable informally to resolve a
disputed claim pursuant to Section 4(b) above within twenty (20) days after the
date of the Shareholder's objection to Buyer's claim, the dispute shall be
settled by a court of competent jurisdiction in the State of Missouri or the
United States District Court for the Eastern District of Missouri. Any final
decision or award of such court shall be treated as a claim resolved under this
Escrow Agreement and shall be final and conclusive on the parties to this Escrow
Agreement and their respective affiliates. The parties hereto agree that any
action or proceeding pursuant to this Escrow Agreement shall be brought in an
appropriate Missouri court or in the United States District Court for the
Eastern District of Missouri, and in connection with such action or proceeding,
the laws of the State of Delaware shall govern. The parties hereto hereby
consent to the jurisdiction of such court. Buyer and the Shareholder may each
respectively appoint such attorneys, accountants and agents to act for them
before the court.
5. Payment of Resolved Claims. Within five (5) days following the day on
which a claim is resolved pursuant to Section 4 above, the Escrow Agent shall
release to Buyer Escrow Shares out of the Escrow Account having a Fair Market
Value equal to the lesser of (i) the amount of any such resolved claim or (ii)
the then current Fair Market Value of all Escrow Shares remaining in the Escrow
Account. For purposes of this Section 5, the "Fair Market Value" of Escrow
Shares shall be the average closing bid price per share of Buyer Common Stock
for the twenty (20) trading days immediately preceding the third trading day
prior to the date that the applicable claim is resolved.
6. Restrictions on Sale of Escrow Shares.
(a) If and to the extent that the Shareholder is distributed Escrow Shares
on the Anniversary Date pursuant to Section 7.1, the Shareholder covenants and
agrees with Buyer that, during the period commencing on the Anniversary Date and
continuing for ten (10) consecutive weeks from the Anniversary Date (the "Lockup
Period"), the Shareholder will not, in any calendar week during the Lockup
Period, sell more than ten percent (10%) of the aggregate number of shares of
Buyer Common Stock which it receives on the Anniversary Date (the "Lockup
Shares"). The Shareholder acknowledges and agrees that Buyer may notify Buyer's
transfer agent of this restriction on the transfer of the Lockup Shares during
the Lockup Period.
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(b) Upon termination of the Escrow Agreement, the parties shall enter into
a Voting Trust Agreement in the form of Exhibit A attached hereto.
7. Release of Escrow Property.
7.1 Immediately after the Anniversary Date, the Escrow Agent shall hold and
distribute the Escrow Shares and all other property then held in the Escrow
Account in accordance with the following:
(a) If there is on that date neither any claim asserted by the Buyer which
has not yet been resolved pursuant to Section 4 hereof (a "pending claim"), nor
any claim of Buyer resolved but not paid, the Escrow Agent shall distribute to
the Shareholder, the Escrow Shares and any other property in the Escrow Account
subject to Section 6(b) above.
(b) If there is on that date any pending claim, or any claim resolved but
not paid, the Escrow Agent shall retain in the Escrow Account for the purpose of
satisfying any such pending or resolved but unpaid claims an amount of cash or
cash equivalents equal to the amount of all pending claims and resolved but not
paid claims. If the cash and cash equivalents in the Escrow Account on the
Anniversary Date are not sufficient to cover all pending claims and claims
resolved but not paid, the Escrow Agent shall retain an amount of Escrow Shares
and/or other property having a Fair Market Value equal to the difference between
(i) the amount of cash in the Escrow Account on the Anniversary Date and (ii)
the total amount of all pending claims and resolved but not paid claims. In
addition to the foregoing, the Escrow Agent shall distribute to the Shareholder
any Escrow Shares and other property which is not retained in the Escrow Account
pursuant to this Section 7.1(b). Upon the written request of either Buyer or the
Shareholder, the Escrow Agent shall sell any Escrow Shares retained in the
Escrow Account pursuant to this Section 7.1(b) (the "Retained Shares") and
retain the proceeds of such sales in the Escrow Account; provided, however,
that, unless Buyer otherwise consents in writing, the Escrow Agent shall not
sell more than ten percent (10%) of the aggregate number of Retained Shares per
week.
7.2 Following the expiration of the term of this Escrow Agreement, as each
pending claim is paid or denied for which an amount was reserved according to
Section 7.1(b) hereof, the Escrow Agent shall distribute to the Shareholder the
balance of the cash and cash equivalents (and, to the extent Escrow Shares have
not been liquidated pursuant to Section 7.1(b) above, Escrow Shares), if any, in
the Escrow Account, subject to Section 6(b) above; provided, however, that
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if at that time there remain other pending claims or resolved but not paid
claims, the Escrow Agent shall continue to hold cash and cash equivalents in an
amount equal to the lesser of (i) the value of all cash and cash equivalents
(and, to the extent Escrow Shares have not been liquidated pursuant to Section
7.1(b) above, Escrow Shares) in the Escrow Account, or (ii) the total amount of
all pending claims or resolved but not paid claims. When no pending claims or
resolved but not paid claims remain, the Escrow Agent shall distribute to the
Shareholder the balance, if any, of the cash and cash equivalents (and, to the
extent Escrow Shares have not been liquidated pursuant to Section 7.1(b) above,
Escrow Shares) in the Escrow Account subject to Section 6(b) above.
8. Escrow Agent.
8.1 The duties of the Escrow Agent hereunder shall be entirely
administrative and not discretionary. The Escrow Agent shall be obligated to act
only in accordance with written or oral instructions received by it as provided
in this Escrow Agreement and is authorized hereby to comply with any orders,
judgments or decrees of any court of competent jurisdiction and shall not be
liable as a result of its compliance with the same.
8.2 As to any legal questions arising in connection with the administration
of this Escrow Agreement, the Escrow Agent may rely absolutely upon the opinions
given to it by its counsel and shall be free of liability for acting in reliance
on such opinions.
8.3 The Escrow Agent may rely absolutely upon the genuineness and
authorization of the signature and purported signature of any party upon any
instruction, notice, release, receipt or other document delivered to it pursuant
to this Escrow Agreement.
8.4 The Escrow Agent may, as a condition to the disbursement of monies as
provided herein, require from the payee or recipient a receipt therefor and,
upon final payment or disposition, a release of the Escrow Agent from any
liability arising out of its execution or performance of this Escrow Agreement,
such release to be in a form reasonably satisfactory to the Escrow Agent.
8.5 The parties agree that the Escrow Agent will be compensated for its
services in accordance with Exhibit B hereto, until termination of this Escrow
Agreement or resignation of the Escrow Agent. Buyer and the Shareholder shall
each pay one-half of the fees and expenses of the Escrow Agent.
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9. Indemnity.
9.1 Buyer and the Shareholder agree to and hereby do waive any suit, claim,
demand or cause of action of any kind which they or it may have or may assert
against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Escrow Agreement, unless such suit,
claim, demand or cause of action is based upon the wilful neglect or gross
negligence or bad faith of the Escrow Agent. They further agree to indemnify the
Escrow Agent against and from any and all claims, demands, costs, liabilities
and expenses, including reasonable counsel fees, which may be asserted against
it or to which it may be exposed or which it may incur by reason of its
execution or performance of this Escrow Agreement. Such agreement to indemnify
shall survive the termination of this Escrow Agreement until extinguished by any
applicable statute of limitations.
9.2 In case any litigation is brought against the Escrow Agent in respect
of which indemnity may be sought hereunder, the Escrow Agent shall give prompt
notice of that litigation to the parties hereto, and the parties upon receipt of
that notice shall have the obligation and the right to assume the defense of
such litigation, provided that failure of the Escrow Agent to give that notice
shall not relieve the parties hereto from any of their obligations under this
Section unless that failure prejudices the defense of such litigation by said
parties. At its own expense, the Escrow Agent may employ separate counsel and
participate in the defense. The parties hereto shall not be liable for any
settlement without their respective consents.
10. Acknowledgment by the Escrow Agent. By execution and delivery of this
Escrow Agreement, the Escrow Agent acknowledges that the terms and provisions of
this Escrow Agreement are acceptable and it agrees to carry out the provisions
of this Escrow Agreement on its part.
11. Resignation or Removal of Escrow Agent; Successors.
11.1 (a) The Escrow Agent may resign as such following the giving of thirty
(30) days' prior written notice to the other parties hereto. Similarly, the
Escrow Agent may be removed and replaced following the giving of thirty (30)
days' prior written notice to the Escrow Agent by the Shareholder or by the
Buyer. In either event, the duties of the Escrow Agent shall terminate thirty
(30) days after the date of such notice (or as of such earlier date as may be
mutually agreeable); and the Escrow Agent shall then deliver the balance of the
Escrow Fund then in its possession to a
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successor Escrow Agent as shall be appointed by the other parties hereto as
evidenced by a written notice filed with the Escrow Agent.
(b) If for any reason any person or entity is unwilling to serve as
successor Escrow Agent and if the other parties hereto are unable to agree upon
a successor or shall have failed to appoint a successor prior to the expiration
of thirty (30) days following the date of the notice of resignation or removal,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent or other appropriate relief; and
any such resulting appointment shall be binding upon all of the parties hereto.
11.2 Every successor appointed hereunder shall execute, acknowledge and
deliver to its predecessor and the other parties hereto, an instrument in
writing accepting such appointment hereunder, and thereupon such successor,
without any further act, shall become fully vested with all the duties,
responsibilities and obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of its successor or any of the parties
hereto, execute and deliver an instrument or instruments transferring to such
successor all the rights of such predecessor hereunder, and shall duly assign,
transfer and deliver all property, securities and monies held by it pursuant to
this Escrow Agreement to its successor. Should any instrument be required by any
successor for more fully vesting in such successor the duties, responsibilities
and obligations hereby vested or intended to be vested in the predecessor, any
and all such instruments in writing shall, on the request of any of the other
parties hereto, be executed, acknowledged and delivered by the predecessor.
11.3 In the event of an appointment of a successor, the predecessor shall
cease to be custodian of any funds, securities or other assets and records it
may hold pursuant to this Escrow Agreement, and the successor shall become such
custodian.
11.4 Upon acknowledgment by any successor Escrow Agent of the receipt of
the then remaining balance of the Escrow Fund, the then acting Escrow Agent
shall be fully released and relieved of all duties, responsibilities and
obligations under this Escrow Agreement.
12. Amendments and Waivers. No amendment, supplement, modification or
waiver of this Escrow Agreement shall be binding unless executed in writing by
the Escrow Agent, Buyer and the Shareholder. No waiver of any of the
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provisions of this Escrow Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. In addition
to the remedies provided in this Escrow Agreement, any party may pursue any and
all remedies now or hereafter existing at law or in equity.
13. Execution Counterparts. This Escrow Agreement may be executed in one or
more counterparts (including by facsimile), each of which shall be regarded as
an original and all of which shall constitute but one and the same instrument.
14. Severability. If any provision of this Escrow Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
therein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
15. Headings. The headings in this Escrow Agreement shall be solely for
convenience of reference and shall in no way define, limit or describe the scope
or intent of any provisions or sections of this Escrow Agreement.
16. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to be sufficiently
given (a) if delivered personally, upon delivery, (b) if delivered by registered
or certified mail (return receipt requested), postage prepaid, upon the earlier
of actual delivery or upon three days after being mailed, and (c) if delivered
by telecopy, upon confirmation of transmission by telecopy, in each case to the
parties at the following address:
(a) As to Buyer: Interiors, Inc. 320 Washington Street Mt. Vernon, New York
10553 Attention: Max Munn Facsimile: (914) 665-1610
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With a copy to: DeAnne H. Ozaki, Esq. Paul, Hastings, Janofsky & Walker LLP 555
South Flower Street, 23rd Floor Los Angeles, California 90071 Facsimile: (213)
627-0705
(b) As to Escrow Agent: U.S. Bank Trust 550 South Hope Street Los Angeles,
California 90071 Facsimile: (213) 533-8736
(c) As to Shareholder: Bentley International, Inc. 9719 Conway Road St.
Louis, Missouri 63124 Facsimile: (314) 569-1512
With a copy to:
Mr. Richard B. Rothman Riezman & Blitz, P.C. 7700 Bonhomme Avenue, Seventh Floor
St. Louis, Missouri 63105 Facsimile: (314) 727-6458
Any of the parties hereto may, by notice given hereunder, designate any further
or different address to which subsequent notices or other communications shall
be sent.
17. Expenses. Except as otherwise provided for herein, each party shall be
responsible for its own costs and expenses with respect to matters involving
this Escrow Agreement.
18. Successors. This Escrow Agreement shall be binding upon, and inure to,
the benefit of the heirs, executors, successors and assignees of the parties
hereto, and no other person shall have any right, benefit or obligation
hereunder.
19. Gender. Words of the masculine gender include the feminine and the
neuter, and when the context so requires, words of the neuter gender may refer
to any gender.
20. Applicable Law. This Escrow Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed on its behalf as of the day and year first above
written.
BUYER:
INTERIORS, INC., a Delaware
corporation
By: _____________________________
An Authorized Officer
ESCROW AGENT:
U.S. BANK TRUST, a national
association
By:
An Authorized Officer
SHAREHOLDER:
BENTLEY INTERNATIONAL, INC., a
Missouri corporation
By: _____________________________
An Authorized Officer
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Exhibit 10.4 Annex F
NONCOMPETITION, NONDISCLOSURE, NONSOLICITATION AND
INTELLECTUAL PROPERTY AGREEMENT
THIS NONCOMPETITION, NONDISCLOSURE, NONSOLICITATION AND INTELLECTUAL
PROPERTY AGREEMENT (this "Agreement") is made and entered into as of this ____
day of July, 1998, by and between WINDSOR ART, INC., a Missouri corporation with
an address at c/o Interiors, Inc., 320 Washington Street, Mt. Vernon, New York
10553- 1017 ("Windsor") and LLOYD R. ABRAMS, residing at 9719 Conway Road, St.
Louis, Missouri 63124, a shareholder ("Shareholder") of Bentley International,
Inc., a Missouri corporation ("Bentley").
RECITALS
WHEREAS, Interiors, Inc., a Delaware corporation ("Interiors"), and Bentley
have entered into a Stock Purchase Agreement dated June ____, 1998 (the "Stock
Purchase Agreement"), pursuant to which Interiors has purchased all of the
issued and outstanding capital stock of Windsor from Bentley.
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, Bentley
agreed to cause Shareholder, and Shareholder agreed, to execute a noncompetition
agreement; and
WHEREAS, Shareholder desires to enter into this Agreement with Windsor;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Stock Purchase Agreement are used herein as therein defined.
2. Books and Records. Shareholder shall immediately surrender to Windsor
all lists, books, records, materials and documents, together with all copies
thereof, and all other property in his possession or under his control, relating
to or used in connection with the past or present business of Windsor or any of
Windsor's affiliates (other than the business of Bentley which does not relate
to the Business (as defined herein)) or subsidiaries, except for copies of any
such documents Shareholder deems reasonably necessary to perform his services
pursuant to that certain Consulting Agreement of even date herewith between
Interiors, Windsor and Shareholder. Shareholder acknowledges and agrees that all
such lists, books and records, including compilations or collections of
customers' names and addresses are the sole and exclusive property of Windsor.
3. Noncompetition. Shareholder will not at any time for a period of five
(5) years from the effective date of this Agreement be or become (a) interested
or engaged in any manner, except in connection with Shareholder's services
pursuant to said Consulting Agreement, directly or indirectly, in any county
and/or city in the United States of America or any county or political
subdivision in any state or country in the world, either alone or with any
person, firm or corporation now existing or hereafter created, in any business,
trade or other enterprise
<PAGE>
substantially similar to or which is or may be competitive with the past,
present or future business of Windsor or any of Windsor's affiliates or
subsidiaries (as such business relates to the manufacture and sale of decorative
accessories) (collectively, the "Business"), or (b) directly or indirectly, a
stockholder, bondholder or officer, director or employee of, or in any manner
associated with, or aid or abet or give information or financial assistance to
any business which is or may be competitive with the Business; provided that the
provisions of this Section 3 shall not be deemed to prohibit a purchase or
ownership by Shareholder, as a passive investment, of not more than five percent
(5%) of the outstanding capital shares of any publicly held corporation.
Shareholder represents and warrants that as of the date hereof, Shareholder does
not own more than five percent (5%) of the outstanding capital shares of any
publicly held corporation engaged in a business which is or may be competitive
with the Business (other than Bentley International, Inc., which upon the sale
of Windsor to Interiors on the date hereof shall cease to be engaged in a
business which is or may be competitive with the Business).
4. Nondisclosure. Other than as required in connection with the fulfillment
of Shareholder's duties under that certain Consulting Agreement between
Interiors, Windsor and Shareholder dated of even date herewith, Shareholder
shall not at any time, either directly or indirectly, disclose or divulge to any
other person, firm or corporation the requirements or prices being charged or
any other confidential information concerning or relating to any of the former
or existing customers of Windsor, any affiliate (other than customers of Bentley
which do not relate to the Business) or subsidiary of Windsor (collectively, the
"Customers") with respect to the Business or any secret, proprietary or
confidential information concerning or relating to the Business (collectively,
"Confidential Information"), and Shareholder will not divert or attempt to
divert any of the Customers or do any act to impair, prejudice or destroy the
goodwill of Windsor with the Customers.
5. Nonsolicitation. Because Shareholder's solicitation of the Customers or
employees of Windsor under certain circumstances would necessarily involve the
use or disclosure of Confidential Information, Shareholder shall not, either
directly or indirectly, at any time for a period of five (5) years from the
effective date of this Agreement (a) call on, solicit or take away, or attempt
to call on, solicit or take away any of the Customers, (b) employ, hire or
solicit employment of any person employed by or providing services to Windsor,
(c) do any act to impair, prejudice or destroy the goodwill of Windsor or to
prejudice or impair the relationship or dealing between Windsor and the
Customers or between Windsor and any of its employees, or (d) assist any other
person, firm or corporation in any such acts; provided, however, that Ramakant
Agarwal (i) shall be permitted to serve as a director of Bentley, (ii) may be
solicited by Bentley to become a full-time employee of Bentley after January 1,
1999 and (iii) may be hired as a full-time employee of Bentley only upon ninety
(90) days' written notice to Windsor.
6. Relief. Shareholder acknowledges that (a) the restrictions contained in
Sections 3, 4 and 5 shall apply in all areas where such application is permitted
by law, (b) the provisions of Sections 3, 4 and 5 are reasonable and necessary
to protect the legitimate interests of Interiors under the Stock Purchase
Agreement, (c) the restrictions contained in Sections 3, 4, and 5 will not
prevent Shareholder from earning or seeking a livelihood, and (d) any violation
of this Agreement by Shareholder would result in irreparable harm to Windsor.
Accordingly, Shareholder consents and agrees that, if he violates any of the
provisions of this Agreement, Windsor shall be entitled to, in addition to other
remedies available to it, an injunction to be issued by any court of competent
jurisdiction restraining him from committing or continuing any violation of this
Agreement, without the need for posting a bond or for any other undertaking,
including without limitation the need to prove the inadequacy of money damages.
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7. Knowledge; Advice of Counsel. Shareholder represents and warrants that
he has read and understands each of the provisions of this Agreement and that he
has sought and obtained the advice of legal counsel before agreeing to be bound
by the terms hereof. Shareholder represents and warrants to Windsor that this
Agreement, subject to any applicable law, is a valid and binding obligation of
Shareholder, enforceable against him in accordance with its terms. Shareholder
acknowledges and agrees that Interiors would not have agreed to enter into the
Stock Purchase Agreement but for the execution, delivery and performance by the
Shareholder of this Agreement.
8. Miscellaneous.
8.1 Notices. All notices and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to be sufficiently given (a) if delivered personally, upon delivery and
(b) if delivered by registered or certified mail (return receipt requested),
upon the earlier of actual delivery or upon three (3) days after being mailed,
postage prepaid, in each case to Shareholder or Windsor at the address set forth
at the beginning of this Agreement. Either party may, by notice given hereunder,
designate any further or different address to which subsequent notices or other
communications shall be sent.
8.2 Successors; Assigns. Windsor may assign its rights and obligations
hereunder to any affiliate of Windsor, or to any person acquiring, by merger,
stock purchase, asset acquisition or otherwise, all or substantially all of the
outstanding capital stock or assets of Windsor or any affiliate of Windsor.
Shareholder shall not assign any rights or obligations under this Agreement
without the prior written consent of the Board of Directors of Windsor. Subject
to the foregoing, the provisions of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Windsor and the heirs,
legal representatives, executors, successors and assigns of Shareholder.
8.3 Severability. If any term or provision of this Agreement is held to be
void or unenforceable by any court of competent jurisdiction, only that
objectionable term or provision shall be deleted herefrom while the remainder of
the term, provision and agreement shall be enforceable. In the event that the
whole or any part of the provisions of Sections 3, 4 or 5 hereof shall be
determined to be invalid by reason of the extent, duration, scope or other
provision set forth therein, the extent, duration, scope or other provision,
those sections shall be reduced so as to cure such invalidity and in its reduced
form the provisions of Sections 3, 4 and 5 shall be enforceable in the manner
contemplated hereby.
8.4 Controversy; Venue. In the event of any controversy, claim or dispute
between the parties arising out of or relating to this Agreement, such
controversy, claim or dispute may be tried solely in the courts of the State of
Missouri or in the United States Federal District Court for the Eastern District
of Missouri, as either party may elect, and both parties hereto irrevocably
consent to the exclusive jurisdiction and venue of such courts. Both parties
irrevocably waive any objection to such jurisdiction and irrevocably waive the
right to seek dismissal or transfer on the grounds lack of in personam
jurisdiction, improper venue, forum non conveniens or similar grounds and agree
that, in addition to any other manner permitted by law, service of process of
any such court may be made upon Windsor and Shareholder by personal delivery, or
by mailing certified or registered mail, return receipt requested, to the
addresses designated in Section 8.1 hereof. The prevailing party shall be
entitled to recover from the
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nonprevailing party reasonable costs and expenses, including without limitation
reasonable attorneys' fees.
8.5 Waiver of Breach. The waiver by Windsor of a breach of any provision of
this Agreement by Shareholder shall not operate or be construed as a waiver of
any subsequent breach by Shareholder.
8.6 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. Furthermore,
facsimiles of signatures may be taken as the actual signatures, and each party
agrees to furnish the others with documents bearing the original signatures
within ten (10) days of the facsimile transmission.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal, substantive laws of the State of Delaware.
8.8 Complete Agreement; Amendments. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements and understandings relating thereto.
This Agreement may not be waived, changed, modified, extended or discharged
orally, but only by a written instrument signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"Shareholder"
________________________________________
Lloyd R. Abrams
WINDSOR ART, INC.
By:_____________________________________
An authorized officer
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Exhibit 10.5 Annex I
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of this ___
day of ________, 1998 by and among WINDSOR ART, INC., a Missouri corporation
with an address of c/o Interiors, Inc., 320 Washington Street, Mt. Vernon, New
York 10553-1017 (the "Company"), LLOYD R. ABRAMS, residing at 9719 Conway Road,
St. Louis, Missouri 63124 ("Consultant"), and INTERIORS, INC., a Delaware
corporation with an address of 320 Washington Street, Mt. Vernon, New York
10553-1017 ("Interiors").
R E C I T A L S
WHEREAS, Interiors and Bentley International, Inc., a Missouri corporation
("Bentley"), have entered into that certain Stock Purchase Agreement dated as of
July 7, 1998 (the "Stock Purchase Agreement") pursuant to which Interiors has
purchased all of the issued and outstanding capital stock of the Company from
Bentley.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Stock Purchase Agreement, that Consultant enter
into a consulting agreement with the Company;
WHEREAS, the Company desires to secure the services of Consultant, and
Consultant desires to furnish his services to the Company, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Defined Terms. Terms used in this Agreement in capitalized form which
are not defined in this Agreement shall have the same definitions as used in the
Stock Purchase Agreement.
2. Consulting Services.
Commencing on the date of this Agreement and continuing (unless terminated
earlier pursuant to Section 7 hereof) until four (4) years from the date of this
Agreement, Consultant shall make himself available at reasonable times and upon
reasonable notice, as requested by the Company or Interiors, to consult with the
Board of Directors and management of each of the Company and Interiors regarding
input and advice on overall strategy for the Company and Interiors and provide
advice and assistance with respect to the business affairs of Interiors and its
subsidiaries.
The Company and Interiors acknowledge and agree that Consultant may be
engaged in other business activities which will limit the frequency and duration
of Consultant's services hereunder. More specifically, the Company and Interiors
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acknowledge that Consultant may establish his primary business headquarters,
from time to time, any where in the world and that Consultant's current primary
business location is in St. Louis County, Missouri. In addition, Company and
Interiors agree that Consultant shall not be required during any month to be out
of town for more than six (6) nights, and that Consultant shall not be required
to expend more than ten (10) hours per week, for forty-eight (48) weeks, during
any calendar year to comply in full with his obligations under this Agreement.
3. Compensation. In consideration of the services to be rendered by
Consultant hereunder, the Company agrees to compensate Consultant as follows:
Cash Compensation. During the term hereof, the Company will pay to
Consultant the following amounts: (i) during the first three years of the term
of this Agreement an aggregate annual fee equal to Two Hundred Thousand Dollars
($200,000.00) in bi-monthly payments equal to $8,333.33, and (ii)during the
last year of the term of this Agreement an aggregate annual fee of Fifty
Thousand Dollars ($50,000) in bi-monthly payments equal to $2,083.33.
Benefits and Expense Allowances. During the term hereof, the Company shall
provide the following benefits and expense allowances to Consultant:
(a) The Company shall provide Consultant and Consultant's family with
coverage under a health insurance policy with benefits equivalent to or better
than those provided by Consultant's current health insurance policy for
Consultant and Consultant's family.
(b) Consultant shall be entitled to a maximum reimbursement of $2,400 per
year for expenses associated with the maintenance of an office in St. Louis,
Missouri, or such other location as Consultant shall designate. All
reimbursements hereunder shall be made within twenty-one (21) days following the
Company's receipt of an expense statement, including, where appropriate, all
original statements of charges and proof of payment.
(c) Commencing August 1, 1998, and the first day of each month thereafter
during the term of this Agreement, Company shall pay to Consultant a Los Angeles
housing allowance in the amount of $2,000 per month so long as that certain
condominium situated in the State of California, which Consultant makes use of,
continues to be owned by the Janet L. Salk Children's Trust. Consultant shall
identify in writing to the Company within three (3) days after the execution of
this Agreement the address of such condominium and shall inform the Company
forthwith in the event such condominium is sold by such trust.
(d) Commencing August 1, 1998, and the first day of each month thereafter
during the term of this Agreement, Company shall pay to Consultant (i) a Los
Angeles automobile allowance in the amount of $450 per month so long as
Consultant and/or a member of Consultant's family maintains an automobile in the
State of California, which Consultant makes use of, and (ii) a St. Louis
automobile allowance in the amount of $150 per month for the automobile
Consultant makes use of at his primary business headquarters. Consultant shall
identify in writing to the Company
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<PAGE>
within three (3) days after the execution of this Agreement the initial
automobiles in each location, and any changes to such initial designation shall
be made in writing to the Company. In addition, within ten (10) days following
the Company's receipt of an expense statement from Consultant regarding any
expense associated with the automobile located in the State of California,
including, without limitation, gas, oil, maintenance, insurance and taxes,
accompanied, where appropriate, with all original statements for such expenses
and proof of payment, Company shall reimburse Consultant for all such expenses.
Warrants. On the date hereof, Consultant shall be granted a warrant (the
"Warrant") to purchase an aggregate of Fifty Thousand (50,000) shares of Class A
Common Stock of Interiors, at the average closing market price of such shares
for the five (5) trading days after the effective date of this Agreement. In
addition, Consultant shall have the right to grant to employees of the Company
an aggregate of Forty Thousand (40,000) warrants to purchase shares of Class A
Common Stock of Interiors on terms and conditions substantially identical to the
terms and conditions of the Warrant. Such grant(s) shall be made within 30 days
of the date hereof.
The foregoing consulting fee, benefits, expense allowances and warrants shall be
Consultant's sole compensation for all services rendered by Consultant
hereunder.
4. Expenses. The Company shall reimburse Consultant for expenses incurred
by him during the term of this Agreement (including travel-related expenses) in
the performance of his duties as a consultant for the Company; provided,
however, that the Company shall not be obligated to reimburse Consultant for any
expenses which have not been approved in advance by the Company.
5. Use of Automobile and Condominium. Consultant hereby agrees that (i) the
automobile designated by Consultant for use in the State of California pursuant
to Section 3.2(d) hereof and (ii) the condominium designated by Consultant
pursuant to Section 3.2(c) hereof shall, during the term hereof, be made
available for use by Max Munn and Laurie Munn and such other senior executives
of the Company and Interiors as Consultant shall approve of in advance when not
in use by Consultant. Consultant shall have no obligation to maintain the
condominium or the automobile referred to in this Section 5, and at such time as
either or both are sold, the rights granted pursuant to this Section 5 shall
lapse with respect to such one or both of them that has or have been sold. In
any event the Company and Interiors agree to indemnify, reimburse and hold
Consultant and the owner or owners of such automobile and condominium harmless
from any and all damages and/or liability to the extent such damages and/or
liability arise from the use of such automobile or condominium by Max Munn,
Laurie Munn, and such other senior executives of the Company and Interiors to
the extent such damages and/or liability are not covered by any policy of
insurance maintained by the Company, Interiors, Max Munn, Laurie Munn, any such
senior executive, or Consultant.
6. Guaranty of Obligations. Interiors hereby irrevocably and
unconditionally guarantees to Consultant full and indefeasible payment of the
obligations of the Company to Consultant under this Agreement (the "Guaranteed
Obligations"). In the event that the Company fails to timely make any payment of
any Guaranteed Obligations, Interiors shall promptly cause such payment to be
made.
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7. Termination.
7.1 Termination for Cause. Consultant understands and agrees that this
Agreement may be terminated by the Company for "cause" upon written notice to
Consultant in the manner set forth in Section 10.3 below. "Cause" shall mean
willful misconduct on the part of Consultant, which shall include only (i) fraud
with respect to the Company or Interiors occurring after the date of this
Agreement and (ii) conviction of a felony or theft. In the event of any
termination pursuant to this Section 7.1, the obligations of Consultant under
Section 8 hereof shall expressly survive such termination unless there is a
Default under either of the Promissory Notes, in which case the provisions of
Section 8 hereof shall lapse and be of no further force or effect upon the
occurrence of such Default.
7.2 Death. In the event of the death of Consultant during the Term, the
Company shall pay, or cause to be paid, to any one or more beneficiaries
designated by Consultant pursuant to notice to the Company or, failing such
designation, to Consultant's estate, the fees provided for herein through the
date on which Consultant's death occurs plus an amount equal to the lesser of
the amount that would have been payable to Consultant for the twelve (12) months
following Consultant's death if the remaining term of this Agreement is in
excess of twelve (12) months or the aggregate amount that would have been
payable to Consultant for the remainder of the term of this Agreement pursuant
to Section 3.1 of this Agreement.
7.3 Disability. In the event that Consultant shall become, by reason of
physical or mental disability, incapable of performing his duties and services
in accordance with the provisions of this Agreement, and such incapacity(ies)
shall continue for a period of sixty (60) days, the Company shall have the right
to terminate this Agreement by giving him written notice of such termination
and, thereafter, this Agreement shall immediately terminate. In the event of
such termination, the Company shall continue to pay, or cause to be paid, to
Consultant the fees provided for herein through the date such termination occurs
plus an amount equal to the lesser of the amount that would have been payable to
Consultant for the twelve (12) months following Consultant's termination if the
remaining term of this Agreement is in excess of twelve (12) months or the
aggregate amount that would have been payable to Consultant for the remainder of
the term of this Agreement pursuant to Section 3.1 of this Agreement.
7.3 Termination by Consultant.This Agreement may be terminated immediately
by Consultant upon written notice to the Company in the manner set forth in
Section 10.3 below. In the event of such termination, the Company shall have no
further obligation to compensate Consultant under this Agreement and Consultant
shall have no further obligations to the Company or Interiors hereunder.
7.4 Termination Upon Buyout. On or prior to December 31, 1998, the Company
shall have the right, but not the obligation, to terminate this Agreement by
paying to Consultant on or before such date the sum of Five Hundred Twenty-Five
Thousand Dollars ($525,000) plus all amounts then due but unpaid; provided,
however, that the Company may not exercise its rights pursuant to this Section
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7.5 Unless Interiors has repurchased the Buyer Shares pursuant Section 8.13
of the Stock Purchase Agreement. In the event of such payment and termination,
the Company shall have no further obligation to compensate Consultant under this
Agreement, including, without limitation, continuance of the benefits provided
for in Section 3 hereof and Consultant shall have no further obligations to the
Company or Interiors hereunder.
7.6 Certain Liability of Interiors. In the event of a Default under either
of the Promissory Notes, Interiors shall forthwith assume and become primarily
liable for all obligations of the Company hereunder, including without
limitation, all compensation and benefits provided for in Section 3 hereof until
Interiors has signed all documents and taken all actions reasonably required to
allow Bentley to reacquire all of the outstanding stock of Windsor free and
clear of all liens and encumbrances.
7.7 No Additional Compensation. Except as expressly provided in this
Section 7, Consultant acknowledges and agrees that he will not be entitled to
any additional compensation as a result of the termination of this Agreement or
his services hereunder.
7.8 Effect of Termination. Upon termination or expiration of this
Agreement, Consultant shall immediately surrender to the Company all lists,
books, records, materials and documents, together with all copies thereof, and
all other property in his possession or under his control, relating to or used
in connection with the past or present business of the Company, or any affiliate
or subsidiary of the Company. Consultant acknowledges and agrees that all such
lists, books, records, materials and documents, including without limitation
compilations or collections of suppliers', contractors', employees' and
customers' names and addresses, are the sole and exclusive property of the
Company.
8. Nondisclosure; Ownership and Protection of Proprietary Rights.
8.1 Nondisclosure. Consultant understands and agrees that, in the course of
his relationship with the Company, he may acquire confidential information and
trade secrets concerning the Company's operations, future plans, methods of
doing business, projected and historical sales, marketing, costs, production,
growth and distribution, and that it would be extremely damaging to the Company
if such information were disclosed to a competitor or made available to any
other person or corporation. In view of the nature of the consulting
relationship with the Company contemplated herein, Consultant agrees that,
during the term of this Agreement and thereafter, any and all confidential
information, including, without limitation, any customer lists, customer
information or addresses, trade secrets, prices being charged, information
relating to governmental relations, discoveries, practices, processes, methods
or products, whether patentable or not, concerning the business of the Company
or any confidential information concerning or relating to any former or existing
suppliers, contractors, employees or customers of the Company or any corporation
or business entity that is controlling, controlled by, under common control with
or otherwise affiliated with the Company (collectively, the "Customers"), with
respect to the past, present or future business of the Company, or any affiliate
or subsidiary of the Company or any secret, proprietary or confidential
information concerning or relating to the past, present or future business of
the Company, or any affiliate or subsidiary of the Company
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(collectively, "Confidential Information") that Consultant has acquired or may
acquire from any such corporation or business entity or the Company, shall be
maintained by him in confidence and shall not be disclosed or divulged to any
third party without the prior written consent of the Board of Directors of the
Company. Consultant further agrees that he will not utilize such Confidential
Information on his own behalf or on behalf of others at any time during the term
of this Agreement or thereafter. Consultant agrees that he will not divert or
attempt to divert any of the customers or do any act to impair, prejudice or
destroy the goodwill of the Company with the Customers. The Consultant and the
Company acknowledge that they have entered into and agreed to be bound by a
Noncompetition, Nondisclosure, Nonsolicitation and Intellectual Property
Agreement, dated of even date herewith.
8.2 Ownership of Intellectual Property. Consultant acknowledges and agrees
that all intellectual property (including without limitation all ideas,
concepts, inventions, plans, developments, software, data, configurations,
materials (whether written or machine-readable), designs, drawings,
illustrations and photographs, which may be protectable, in whole or in part,
under any patent, copyright, trademark, trade secret or other intellectual
property law), developed, created, conceived, made or reduced to practice during
the term of this Agreement which (a) relate to the current, future or potential
business of the Company, (b) result from the duties or work performed by
Consultant hereunder, or (c) are developed during working time or using the
Company's equipment, supplies, facilities, resources, materials or information,
shall be the sole and exclusive property of the Company and Consultant shall and
hereby does assign all right, title and interest in and to such intellectual
property to the Company.
8.3 Nonsolicitation. Because Consultant's solicitation of the Customers of
the Company, or any affiliate of the Company, under certain circumstances would
necessarily involve the use or disclosure of Confidential Information,
Consultant shall not, either directly or indirectly, at any time during the term
of this Agreement and for a period of three (3) years from the date of
termination or expiration of this Agreement (a) call on, solicit or take away,
or attempt to call on, solicit or take away, any past or present Customers of
the Company, or any affiliate of the Company, (b) employ, hire or solicit the
employment of any person employed by the Company, or any affiliate of the
Company, (c) do any act to impair, prejudice or destroy the goodwill of the
Company, or any affiliate of the Company, or to prejudice or impair the
relationship or dealing between the Company, or any affiliate of the Company,
and the Customers or (d) assist any other person, firm or corporation in any
such acts; provided that Consultant's post-termination obligations under this
Section 8.3 shall not apply if this Agreement is terminated by Consultant as a
result of an uncured, material breach of this Agreement by the Company or
bankruptcy of the Company; and further provided, however, that Ramakant Agarwal
(i) shall be permitted to serve as a director of Bentley, (ii) may be solicited
by Bentley or Consultant to become a full-time employee of Bentley after January
1, 1999 and (iii) may be hired as a full-time employee of Bentley only upon
ninety (90) days' written notice to Company.
8.4 Noncompetition. Consultant shall not, at any time during the term of
this Agreement, be or become (a) interested or engaged in any manner, directly
or indirectly, in any county and/or city in the United States of America or any
county or political subdivision in any state or country in the world, either
alone or with
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any person, firm or corporation now existing or hereafter created, in any
business, trade or other enterprise substantially similar to or which is or may
be directly or indirectly competitive with the past, present or future business
of the Company or Interiors (as such business relates to the manufacture and
sale of decorative accessories) (the "Business") or (b) directly or indirectly,
a stockholder, bondholder or officer, director or employee of, or in any manner
associated with, or aid or abet or give information or financial assistance to
any business which is or may be competitive with the Business; provided that
nothing contained in this Section 8.4 shall prevent Consultant from acquiring or
holding, as a passive investment, not more than five percent (5%) of the
outstanding capital shares of any publicly held corporation engaged in such
business. Consultant represents and warrants that as of the date hereof,
Consultant does not own more than five percent (5%) of the outstanding capital
shares of any publicly held corporation engaged in a business which is or may be
competitive with the Business other than Bentley International, Inc., which upon
the sale of Company to Interiors on the date hereof shall cease to be engaged in
a business which is or may be competitive with the Business.
8.5 Survival. Subject to the following provisions, the provisions of this
Section 8 shall survive the termination of this Agreement, irrespective of the
reason therefor; provided, however, that in the event of a Default under either
of the Promissory Notes, the above provisions of this Section 8 shall lapse and
be of no further force or effect.
8.6 Relief. Consultant acknowledges that (a) the services to be rendered by
him are of a special, unique and extraordinary character and it would be very
difficult or impossible to replace such services, (b) the provisions of Section
8 are reasonable and necessary to protect the legitimate interests of the
Company, (c) the restrictions contained in Section 8 will not prevent Consultant
from earning or seeking a livelihood, (d) the restrictions contained in Section
8 shall apply in all areas where such application is permitted by law and (e)
any violation of this Agreement by Consultant would result in irreparable harm
to the Company. Accordingly, Consultant consents and agrees that, if he violates
any of the provisions of this Agreement, the Company shall be entitled to, in
addition to other remedies available to it, an injunction to be issued by any
court of competent jurisdiction restraining him from committing or continuing
any violation of this Agreement, without the need to post any bond or for any
other undertaking, including without limitation proving the inadequacy of money
damages.
8.7 In the event that the whole or any part of the provisions of Section 8
hereof shall be determined to be invalid by reason of the extent, duration,
scope or other provision set forth therein, the extent, duration, scope or other
provision of that section shall be reduced so as to cure such invalidity and in
its reduced form the provisions of Section 8 shall be enforceable in the manner
contemplated hereby. Subject to the provisions of Section 8.5, the provisions of
this Section 9 shall survive the termination of this Agreement, irrespective of
the reason therefor.
9. Miscellaneous.
9.1 Waiver of Breach. Neither party's failure to enforce any provision or
provisions of this Agreement shall be deemed or in any way construed as a waiver
of any such provision or provisions, nor prevent that party thereafter from
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enforcing each and every provision of this Agreement. The rights granted the
parties herein are cumulative and shall not constitute a waiver of any party's
right to assert all other legal remedies available to it under the
circumstances.
9.2 Successors; Assigns. The Company shall be entitled to assign its rights
and obligations hereunder. Consultant shall not assign any of his rights or
obligations under this Agreement without the prior written consent of the Board
of Directors of the Company. Subject to the foregoing, the provisions of this
Agreement shall be binding upon and inure to the benefit of the heirs, legal
representatives, executors, successors and assigns of Consultant and the
Company.
9.3 Notices. All notices and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to be sufficiently given (a) if delivered personally, upon delivery and
(b) if delivered by registered or certified mail (return receipt requested),
postage prepaid, upon the earlier of actual delivery or upon three (3) days
after being mailed, in each case to Consultant or the Company at the address set
forth at the beginning of this Agreement. Either party may, by notice given
hereunder, designate any further or different address to which subsequent
notices or other communications shall be sent.
9.4 Severability. If any term or provision of this Agreement is held to be
void or unenforceable by any court of competent jurisdiction, only that
objectionable term or provision shall be deleted herefrom while the remainder of
the term, provision and agreement shall be enforceable.
9.5 Governing Law. Each party hereto irrevocably submits to the
jurisdiction of the courts of the State of Missouri and the United States
District Court for the Eastern District of Missouri for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Agreement and
the transactions contemplated hereby and to the laying of venue in any such
court. Each party hereto irrevocably waives any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum. This Agreement shall be governed by and construed in accordance with the
internal, substantive laws of the State of Missouri.
9.6 Attorneys' Fees. In the event any litigation or other proceeding
("Proceeding') is initiated by any party against any other party to enforce,
interpret or otherwise obtain judicial or quasi-judicial relief in connection
with this Agreement, the prevailing party or parties in such proceeding shall be
entitled to recover from the unsuccessful party or parties all costs, expenses
and reasonable attorneys' fees relating to or arising out of such Proceeding
(whether or not the Proceeding results in a judgment), including any
post-judgment or post-award Proceeding, including, without limitation, one to
enforce any judgment or award resulting from any such Proceeding. Any such
judgment or award shall contain a specific provision for the recovery of all
such subsequently incurred costs, expenses and reasonable attorneys fees.
9.7 Counterparts. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one (1) and the same instrument. Furthermore,
facsimiles of signatures may be taken as the actual signatures, and each party
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<PAGE>
agrees to furnish the other with documents bearing the original signatures
within ten (10) days of the facsimile transmission.
9.8 Complete Agreement; Amendments. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any prior agreements and understandings relating thereto.
This Agreement may not be waived, changed, modified, extended or discharged
orally, but only by a written instrument signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
The "Company'
WINDSOR ART, INC.
By:_________________________________
An Authorized Officer
"Consultant"
___________________________________
Lloyd R. Abrams
"Interiors"
INTERIORS, INC.
By:_________________________________
An Authorized Officer
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Exhibit 10.6 Annex J
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") dated as of ________ ___, 1998 is
made by Interiors, Inc., a Delaware corporation (the "Pledgor"), in favor of
Bentley International, Inc., a Missouri corporation ("Secured Party").
R E C I T A L S
A. Pledgor is the beneficial owner of (i) all of the issued and outstanding
shares of common stock, $1.00 par value ("Common Stock"), of Windsor Art, Inc.,
a Missouri corporation ("Windsor") (collectively, the "Windsor Shares") (ii)
150,000 shares of common stock, $.18 par value ("Bentley Common Stock"), of
Bentley International, Inc., a Missouri corporation ("Bentley") (together with
the Windsor Shares, the "Pledged Shares"), and (iii) a warrant to purchase up to
300,000 shares of Bentley Common Stock (collectively, the "Pledged Warrants").
B. The certificates representing the Windsor Shares and the Bentley Common
Stock are registered in the names of the Trustees and Trustee, respectively, of
The Windsor Art, Inc. Voting Trust No. 1 (the "Windsor Voting Trust") and The
Bentley International, Inc. Voting Trust No. 1 (the "Bentley Voting Trust").
C. On the date hereof, Pledgor has executed two Promissory Notes (the
"Notes"), the first in the aggregate principal amount of $2,000,000 and the
second in the aggregate principal amount of $3,300,000 in favor of Secured
Party.
D. It is a condition precedent to the Stock Purchase Agreement between
Pledgor and Secured Party dated as of July 7, 1998 (the "Stock Purchase
Agreement") that Pledgor pledge the Pledged Shares and the Pledged Warrants as
collateral for the Notes and as security for the indemnification obligations of
Buyer pursuant to Section 10.02(b) of the Stock Purchase Agreement, pursuant to
the terms set forth in this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and to satisfy the
condition precedent in the Stock Purchase Agreement, Pledgor hereby agrees as
follows:
SECTION 1. Pledge. Pledgor hereby pledges to Secured Party, and grants to
Secured Party a security interest in, the following (the "Pledged Collateral"):
the Pledged Shares and the certificate(s) representing the Pledged Shares,
including without limitation the Voting Trust Certificates issued by the
Trustees and Trustee, respectively, of the Windsor Voting Trust and the Bentley
Voting Trust; the Pledged Warrants and the certificate(s) representing the
Pledged Warrants; all dividends or other distributions on or in respect of the
Pledged Shares (including without limitation the Voting Trust Certificates
issued by the Trustees and Trustee, respectively, of the Windsor Voting Trust
and the Bentley Voting Trust)and the Pledged Warrants; and all proceeds of any
and all of the Pledged Shares and the Pledged Warrants (including without
limitation (i)shares of Bentley Common Stock issued upon exercise of the Pledged
Warrants and (ii) the Voting Trust Certificates issued by the Trustees and
Trustee, respectively, of the Windsor Voting Trust and the Bentley Voting
Trust).
SECTION 2. Security for Obligations. Subject to Section 13 hereof, this
Agreement secures the payment of all obligations of Pledgor now or hereafter
existing under the Notes, the indemnification obligations of Pledgor under
Section 10.02(b) of the Stock Purchase Agreement and all obligations of Pledgor
now or hereafter existing under this Agreement (collectively, the "Pledgor
Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Collateral shall (in the case of the
Pledged Shares, the Voting Trust Certificates and the Pledged Warrants delivered
herewith, upon the execution hereof) be delivered to and held by, Riezman &
Blitz, P.C. (the "Agent") for the benefit of Secured Party pursuant hereto and
shall be in suitable form for transfer, either duly endorsed in blank or
accompanied by assignments or stock powers duly executed authorizing transfer
thereof pursuant to the terms of this Agreement reasonably satisfactory to
Secured Party. Secured
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<PAGE>
Party shall have the right, at any time after Pledgor shall have failed to fully
perform or pay any of the Pledgor Obligations (a "Default") and such Default
shall be continuing, to transfer to or to register in the name of Secured Party
or any of its nominees any or all of the Pledged Collateral.
SECTION 4. Representations and Warranties. Pledgor represents and warrants
to Secured Party as follows:
(a) Pledgor is the sole legal and beneficial owner of the Pledged
Collateral, free and clear of any lien, security interest, option, charge or
other encumbrance or claims except for the security interest created by this
Agreement and the legal interests created by the Windsor Voting Trust and the
Bentley Voting Trust.
(b) This Agreement has been duly executed and delivered by Pledgor and
constitutes a legal, valid and binding obligation of Pledgor, enforceable
against Pledgor in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general principles of equity.
(c) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
Pledgor, or (ii) for the exercise by Secured Party of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with the disposition of the Pledged Collateral by laws affecting the offering
and sale of securities generally).
SECTION 5. Further Assurances. Pledgor agrees that, from time to time, at
its expense, it will promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce the rights and remedies of Secured Party hereunder with
respect to any Pledged Collateral or to carry out the provisions and purposes
hereof.
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<PAGE>
SECTION 6. Voting Rights; Ability to Exercise Pledged Warrants.
Subject to any voting agreement or voting trust between Pledgor and Secured
Party, so long as no Default shall have occurred and be continuing, Pledgor
shall be entitled to exercise any and all voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof (including shares of
Bentley Common Stock issued upon exercise of the Pledged Warrants) for any
purpose not inconsistent with the terms of this Agreement.
Upon the occurrence and during the continuance of a Default, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 6(a) shall cease, and all
such rights shall thereupon become vested in Secured Party, which shall
thereupon have the sole right to exercise such voting and other consensual
rights.
During the term of this Agreement, Pledgor shall have the right to exercise the
Pledged Warrants at any time prior to the expiration thereof upon the terms set
forth in the certificate(s) representing the Pledged Warrants. Pursuant to
Section 1 hereof and the terms of the Bentley Voting Trust, any shares of
Bentley Common Stock and any Voting Trust Certificates issued upon exercise of
the Pledged Warrants shall remain subject to this Agreement.
SECTION 7. Transfers and Other Liens. Pledgor agrees that it will not (i)
sell or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral owned by it, or (ii) create or permit to exist any lien or
other encumbrance upon or with respect to any such Pledged Collateral, except
for the security interest under this Agreement and the legal interests created
by the Bentley Voting Trust and the Windsor Voting Trust.
SECTION 8. Secured Party Appointed Attorney-in-Fact. Pledgor hereby
appoints Secured Party as its attorney-in-fact, with full authority in the place
and stead of Pledgor and in the name of Pledgor or otherwise, at any time, upon
the occurrence and during the continuance of any Default, to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement.
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<PAGE>
SECTION 9. Secured Party May Perform. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement.
SECTION 10. Remedies upon Default. If any Default shall have occurred and
be continuing, Secured Party may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights of a secured party on default under the Missouri
Uniform Commercial Code in effect at that time, and Secured Party may also sell
the Pledged Collateral or any part thereof in accordance with the provisions
thereof.
SECTION 11. Amendments, Etc. No amendment or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by Pledgor and Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 12. Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered in accordance
with the provisions of Section 11.01 of the Stock Purchase Agreement.
SECTION 13. Continuing Security Interest; Transfer of Notes. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) remain in full force and effect until performance or payment in full of the
Pledgor Obligations, provided, however, that subject to claims for
indemnification asserted by Secured Party which have not been resolved pursuant
to Section 14 hereof and are pending on the first anniversary of the date hereof
(the "Anniversary Date"), Secured Party shall have no security interest in the
Pledged Collateral after the Anniversary Date with respect to Pledgor's
indemnification obligations under Section 10.02(b) of the Stock Purchase
Agreement, (ii) be binding upon Pledgor, its successors and assigns, and
(iii) inure, together with the rights and remedies of Secured Party hereunder,
to the benefit of Secured Party and its successors, transferees and assigns
(including assignees of the Notes or rights to payments thereunder).
SECTION 14. Indemnification Claims.
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<PAGE>
(a) If, at any time during the term of this Agreement, Secured Party has
incurred or suffered Damages for which it is entitled to indemnification under
Article X of the Stock Purchase Agreement, Secured Party shall give written
notice of such claim to Pledgor, stating in reasonably sufficient detail the
events or circumstances which are the basis for and amount of such claim. If
Pledgor objects to any such claim, it shall give written notice of such
objection to Secured Party within ten (10) days after the date of receipt of
Secured Party's notice, and shall state the basis for such objection.
Notwithstanding the foregoing, such ten (10) day period shall be extended to a
twenty (20) day period if within such original ten (10) day period Pledgor gives
written notice to Secured Party that additional time is necessary to respond to
the claim. If no objection to Secured Party's claim is made by Pledgor within
such ten (10) day period, or twenty (20) day period, as applicable, the claim
shall be deemed resolved.
(b) If Secured Party provides timely notice of objection to any claim,
Secured Party and Pledgor shall attempt to resolve the dispute and, if they are
able to do so, shall agree in writing as to the amount of the claim resolved, if
any.
(c) If Secured Party and the Pledgor are unable informally to resolve a
disputed claim pursuant to Section 14(b) above within twenty (20) days after the
date of the Pledgor's objection to Secured Party's claim, the dispute shall be
settled by a court of competent jurisdiction in the State of Missouri or the
United States District Court for the Eastern District of Missouri. Any final
decision or award of such court shall be treated as a claim resolved under this
Agreement and shall be final and conclusive on the parties to this Agreement and
their respective affiliates.
(d) Unless Pledgor pays a resolved claim in full within five (5) days after
the date such claim is resolved pursuant to the foregoing provisions of this
Section 14, Agent shall pay the resolved claim without further mutual
instructions from the parties as follows. Agent shall release, assign, transfer
and deliver to Secured Party Pledged Collateral having a Fair Market Value equal
to the lesser of (i) the amount of any such resolved claim or (ii) the then
current Fair Market Value of all Pledged Collateral held by Agent. For purposes
of this Section 14(d), the "Fair Market Value" of any Pledged Shares which
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<PAGE>
are publicly traded shall be the average closing bid price per share of such
Pledged Shares for the twenty (20) trading days immediately preceding the third
trading day prior to the date that the applicable claim is resolved and the
"Fair Market Value" of any other Pledged Collateral shall be the fair market
value of such Pledged Collateral as of the date the applicable claim is resolved
determined by an appraiser designated by Agent, in Agent's absolute discretion.
The Secured Party shall pay for such appraisal, and the cost of such appraisal
shall be added to the applicable resolved claim which the Agent is paying
pursuant to the provisions of this Section 14(d).
SECTION 15. Reinstatement. This Agreement shall continue to be effective or
be reinstated, as the case may be, if at any time any amount received by Secured
Party in respect of the Pledgor Obligations is rescinded or must otherwise be
restored or returned by Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of Pledgor or upon the appointment of
any intervenor or conservator of, or trustee, receiver, manager or similar
official for, Pledgor, all as though such payments had not been made.
SECTION 16. Governing Law; Jurisdiction; Venue. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Missouri. Each party hereto irrevocably submits to the jurisdiction of the
courts of the State of Missouri and the United States District Court for the
Eastern District of Missouri for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Agreement and the transactions
contemplated hereby and to the laying of venue in any such court. Each party
hereto irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Pledgor and
Secured Party may each respectively appoint such attorneys, accountants and
agents to act for them before the court.
SECTION 17. Agent.
(a) The duties of the Agent hereunder shall be entirely administrative and
not discretionary. The Agent shall be obligated to act only in accordance with
written or oral instructions received by it as provided in this Agreement and is
authorized hereby to comply with any orders, judgments or decrees of any court
of competent
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<PAGE>
jurisdiction and shall not be liable as a result of its compliance with the
same.
(c) As to any legal questions arising in connection with the administration
of this Agreement, the Agent may rely absolutely upon the opinions given to it
by its counsel and shall be free of liability for acting in reliance on such
opinions.
(d) The Agent may rely absolutely upon the genuineness and authorization of
the signature and purported signature of any party upon any instruction, notice,
release, receipt or other document delivered to it pursuant to this Agreement.
(e) The Agent may, as a condition to the disbursement of monies as provided
herein, require from the payee or recipient a receipt therefor and, upon final
payment or disposition, a release of the Agent from any liability arising out of
its execution or performance of this Agreement, such release to be in a form
reasonably satisfactory to the Agent.
(f) Pledgor and the Secured Party shall each pay one-half of the reasonable
legal fees for services provided pursuant to this Agreement by the Agent.
SECTION 18. Indemnity.
(a) Pledgor and Secured Party agree to and hereby do waive any suit, claim,
demand or cause of action of any kind which they or it may have or may assert
against the Agent arising out of or relating to the execution or performance by
the Agent of this Agreement, unless such suit, claim, demand or cause of action
is based upon the wilful neglect or gross negligence or fraud of the Agent. They
further agree to indemnify the Escrow Agent against and from any and all claims,
demands, costs, liabilities and expenses, including reasonable counsel fees,
which may be asserted against it or to which it may be exposed or which it may
incur by reason of its execution or performance of this Agreement. Such
agreement to indemnify shall survive the termination of this Agreement until
extinguished by any applicable statute of limitations.
(b) In case any litigation is brought against the Agent in respect of which
indemnity may be sought hereunder, the Agent shall give prompt notice of that
litigation to the parties hereto, and the parties upon
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<PAGE>
receipt of that notice shall have the obligation and the right to assume the
defense of such litigation, provided that failure of the Agent to give that
notice shall not relieve the parties hereto from any of their obligations under
this Section unless that failure prejudices the defense of such litigation by
said parties. At its own expense, the Agent may employ separate counsel and
participate in the defense. The parties hereto shall not be liable for any
settlement without their respective consents. IN WITNESS WHEREOF, Pledgor and
Secured Party have executed, or caused this Agreement to be duly executed and
delivered on its behalf, as of the date first above written.
PLEDGOR:
INTERIORS, INC., a
Delaware corporation
By:
An Authorized Officer
SECURED PARTY:
BENTLEY INTERNATIONAL, INC., a
Missouri corporation
By:
An Authorized Officer
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Exhibit 10.7 Annex K
CONTINUING GUARANTY
THIS CONTINUING GUARANTY (this "Guaranty") dated as of _______ ___, 1998,
is executed and delivered by Max Munn and Laurie Munn, his wife ("Guarantors")
in favor of Bentley International, Inc., a Missouri corporation ("Beneficiary").
(i) Guaranty. Guarantors irrevocably and unconditionally guarantee to
Beneficiary full and indefeasible payment of all indebtedness owed by Interiors,
Inc., a Delaware corporation ("Obligor"), to Beneficiary under (i) that certain
promissory note dated of even date herewith, in the principal amount of
$2,000,000 and (ii) that certain promissory note dated of even date herewith, in
the principal amount of $3,300,000 (collectively, the "Notes"), including all
principal and interest (including any interest which, but for the application of
the provisions of the United States Bankruptcy Code, would have accrued on such
amounts), when and as the same shall become due and payable, whether at
maturity, acceleration, or otherwise; it being the intent of Guarantors that
this is a guaranty of payment (the "Guaranteed Obligations"). This Guaranty is a
continuing guaranty. In the event that Obligor fails to timely make any payment
of any Guaranteed Obligations, Guarantors immediately shall cause such payment
to be made. Guarantors agree that a separate action may be brought against
Guarantors, and each of them, whether such action is brought against Obligor or
whether Obligor is joined in such action. Guarantors agree that Beneficiary
shall be under no obligation to marshal any assets of Obligor in favor of
Guarantors, or any of them, or against or in payment of any or all of the
Guaranteed Obligations.
(ii) Joint and Several Obligation. The obligations of Guarantors under this
Guaranty are joint and several.
(iii) Waivers. To the maximum extent permitted by law, Guarantors waive:
(1) notice of acceptance hereof; (2) notice of any adverse change in the
financial condition of Obligor or of any other fact that might increase
Guarantors'
<PAGE>
risk hereunder; (3) notice of presentment for payment, demand, protest, and
notice thereof as to the Notes; (4) all other notices and demands to which
Guarantors might otherwise be entitled; (5) the right by statute or otherwise to
require Beneficiary to institute suit against Obligor or to exhaust any rights
and remedies which Beneficiary has or may have against Obligor; (6) any defense
arising by reason of any disability or other defense (other than the defense
that the Guaranteed Obligations shall have been fully indefeasibly paid) of
Obligor or by reason of the cessation from any cause whatsoever of the liability
of Obligor in respect thereof; (7) any rights to assert against Beneficiary any
defense (legal or equitable), set-off, counterclaim, or claim which Guarantors
may now or at any time hereafter have against Obligor or any other party liable
to Beneficiary, whether or not arising directly or indirectly from the present
or future lack of perfection, sufficiency, validity, or enforceability of the
Guaranteed Obligations or any security therefor; (8) any defense arising by
reason of any claim or defense based upon an election of remedies by
Beneficiary; and (9) the benefit of any statute of limitations affecting
Guarantor's liability hereunder.
(iv) Releases. Guarantors consent and agree that, without notice to or by
Guarantor and without affecting or impairing the obligations of Guarantor
hereunder, Beneficiary may, by action or inaction: (a) compromise, settle,
extend the duration or the time for the payment of, or discharge the performance
of, or may refuse to or otherwise not enforce the Notes; (b) release all or any
one or more parties to the Notes; or (c) release or substitute any Guarantor, if
any, of the Guaranteed Obligations, or enforce, exchange, release, or waive any
security for the Guaranteed Obligations or any other guaranty of the Guaranteed
Obligations, or any portion thereof.
(v) Restriction on Transfer of Assets. Guarantors covenant and agree with
Beneficiary that they shall not transfer or convey any of their assets for less
than the fair market value thereof unless and until the Guaranteed Obligations
have been satisfied in full.
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<PAGE>
(vii) Financial Condition of Obligor. Guarantors agree to keep informed of
Obligor's financial condition.
(ix) Miscellaneous.
(a) Any provision of this Guaranty which is prohibited or unenforceable
under applicable law, shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. This
Guaranty constitutes the entire agreement between Guarantors and Beneficiary
pertaining to the subject matter contained herein. This Guaranty may not be
altered, amended, or modified, nor may any provision hereof be waived or
noncompliance therewith consented to, except by means of a writing executed by
both Guarantor and Representative. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(b) Each party hereto irrevocably submits to the jurisdiction of the courts
of the State of Missouri and the United States District Court for the Eastern
District of Missouri for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Guaranty and the transactions contemplated
hereby and to the laying of venue in any such court. Each party hereto
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) All notices and other communications under or in connection with this
Guaranty shall be in writing and shall be deemed given (i) if delivered
personally, upon delivery, (ii) if delivered by registered or certified mail
(return receipt requested), upon the earlier of actual delivery or three days
after being mailed, or (iii) if given by facsimile, upon confirmation of
transmission by facsimile, in each case to the parties at the following
addresses:
If to Guarantors addressed to:
c/o Interiors, Inc.
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<PAGE>
320 Washington Street
Mt. Vernon, New York 10553-1017
Facsimile: (914) 665-5469
Attention: Mr. Max Munn
With copies to:
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 627-0705
Attention: Arthur L. Zwickel, Esq.
If to the Shareholder, addressed
to:
Mr. Lloyd R. Abrams, Pres.
Bentley International, Inc.
9719 Conway Road
St. Louis, MO 63124
Facsimile: 314-569-1512
With a copy to:
Richard B. Rothman, Esq.
Riezman & Blitz, P.C.
7700 Bonhomme Ave. 7th Floor
St. Louis, MO 63105
Facsimile: 314-727-6458
IN WITNESS WHEREOF, Guarantors have executed and delivered this Guaranty as
of the date set forth in the first paragraph hereof.
LAURIE MUNN
"Guarantor"
MAX MUNN
"Guarantor"
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<PAGE>
STATE OF ________ )
) SS.
COUNTY OF ______ )
On this _____ day of __________, 1998, before me personally appeared LAURIE
MUNN, to me known to be the person described in and who executed the foregoing
instrument, and acknowledged that she executed the same as her free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
My Commission Expires: _______ _______________________
Notary Public
STATE OF ________ )
) SS.
COUNTY OF ______ )
On this _____ day of __________, 1998, before me personally appeared MAX
MUNN, to me known to be the person described in and who executed the foregoing
instrument, and acknowledged that he executed the same as his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
My Commission Expires: _______ _______________________
Notary Public
APPROVED:
Bentley International, Inc.
By:
An Authorized Officer
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Exhibit 10.8 Annex M
SUBORDINATION
1. Payment of the Promissory Note will be subordinate and subject to the
prior payment in full in cash of all of Buyer's Indebtedness (including
Indebtedness of the Company) to any senior, secured lender ("senior
indebtedness").
2. Upon any payment, distribution or other transfer of the assets of Buyer
to creditors upon any dissolution, winding-up, liquidation, reorganization,
arrangement, composition, adjustment or readjustment or similar proceeding of
Buyer, then:
(a) the holders of senior indebtedness shall be entitled to receive payment
in full in cash of all senior indebtedness, before any payment or distribution
of assets of Buyer is made on account of or applied to the Promissory Note; and
(b) any payment or distribution of assets of Buyer to which the holder of
the Promissory Note would be entitled will be paid or delivered by any person
making such payment or distribution directly to the holders of the senior
indebtedness, for application to the payment of all the senior indebtedness to
the extent necessary to pay the senior indebtedness in full.
3. Following any payment default on the senior indebtedness and at all
times thereafter, all senior indebtedness shall first be paid in full in cash,
or provision for such payment shall be made in a manner satisfactory to the
holders of the senior indebtedness, before any payment is made on the Promissory
Note.
4. Such other customary subordination provisions as the holders of senior
indebtedness may reasonably request.
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Exhibit 10.9 Annex N
THE WINDSOR ART, INC.
VOTING TRUST AGREEMENT NO. 1
THIS VOTING TRUST AGREEMENT (the "Agreement") is made and entered into this
____ day of July, 1998, by and among LLOYD R. ABRAMS and MAX MUNN as voting
trustees (in such capacity, the "Voting Trustees"), INTERIORS, INC., a Delaware
corporation, the "Shareholder," and BENTLEY INTERNATIONAL, INC., a Missouri
corporation ("Bentley").
W I T N E S S E T H:
WHEREAS, Shareholder entered into on July 7, 1998, a Stock Purchase
Agreement (the "Stock Purchase Agreement") with Bentley to acquire all of the
issued and outstanding shares (the "Shares") of common stock, par value $1.00
per share ("Common Stock") of WINDSOR ART, INC., a Missouri corporation
("Windsor"); and
WHEREAS, pursuant to the terms of the Stock Purchase Agreement Shareholder
has agreed that the Shares shall be registered in the names of the Voting
Trustees and held pursuant to the terms and provisions of this Agreement until
certain indebtedness of Shareholder and Windsor is paid in full; and
WHEREAS, the Voting Trustees are willing to serve as Trustees with respect
to the Shares of Common Stock of Windsor as herein provided.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Shares to be Held in Trust.
(a) Establishment of Voting Trust. Shareholder and the Voting Trustees
hereby establish and constitute this voting trust (the "Voting Trust") with
respect to the Shares of Common Stock of Windsor to be sold and transferred
pursuant to the Stock Purchase Agreement (such Shares of Common Stock of Windsor
hereinafter are referred to collectively as the "Trust Shares"). The Voting
Trust shall be administered on the terms set forth in this Agreement. The Voting
Trust may be referred to as "The Windsor Art, Inc. Voting Trust No. 1" without
reference to the date of this Agreement.
(b) Actions to be Taken. At the Closing described in the Stock Purchase
Agreement, the following actions shall be taken by each of the parties hereto:
(i) Shareholder shall instruct Bentley and Windsor in writing that all
certificates evidencing Shares of Common Stock of Windsor to be issued in
connection with the Closing pursuant to the Stock Purchase Agreement shall
be issued to and in the name of the Voting Trustees pursuant to this
Agreement.
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Bentley shall cause such certificates to be so issued and delivered to
the Voting Trustees. The Voting Trustees hereby are authorized to receive
and to hold, in the name of the Voting Trustees, for the benefit of
Shareholder (subject to the rights of Bentley as stated herein, in the
Stock Purchase Agreement and in that certain Pledge Agreement (the "Pledge
Agreement") of even date herewith between Shareholder and Bentley ), the
Trust Shares.
(ii) Immediately following the receipt of the Trust Shares, the Voting
Trustees shall (a) issue to Interiors a voting trust certificate in the
form of Exhibit A attached hereto (the "Voting Trust Certificate")
evidencing the number of Trust Shares held by the Voting Trustees, (b)
deliver possession of all certificates representing the Trust Shares to
Riezman & Blitz, P.C., the "Agent," so designated in the Pledge Agreement
and (c) execute in blank and deliver to the Agent the irrevocable stock
power attached hereto as Exhibit B.
(iii) Immediately following the receipt of the Voting Trust
Certificate, Interiors shall (a) deliver possession of the Voting Trust
Certificate to the Agent and (b) shall execute and deliver to the Agent the
irrevocable stock power attached hereto as Exhibit B.
(c) Voting Securities Subsequently Acquired. The parties hereto acknowledge
that, if any additional voting securities of Windsor are issued with respect to
or in exchange for the Trust Shares, whether by reason of a stock split, stock
dividend, share exchange, merger, consolidation or similar transaction,
certificates representing such additional voting securities shall be delivered
to the Voting Trustees, who shall, in turn, deliver the same to the Agent along
with executed irrevocable stock powers with respect to such additional voting
securities in form and substance equivalent to Exhibit B, and such additional
voting securities shall constitute "Trust Shares" hereunder. The Voting Trustees
shall execute and deliver one or more Voting Trust Certificates to Shareholder
to represent Shareholder's interest in such additional voting securities, which
Shareholder, in turn, shall deliver forthwith to Agent along with executed
irrevocable stock powers with respect to such additional Voting Trust
Certificates in form and substance equivalent to Exhibit B. For purposes of this
Agreement, 'voting securities" shall mean any equity securities of Windsor (or
any corporate successor, including any entity which acquires the capital stock
of Windsor or assets of Windsor in consideration for voting securities) which
may be entitled by law to vote at any time with respect to any matter, whether
or not such equity securities are accorded voting rights under the Articles of
Incorporation of Windsor (or such successor).
(d) Legend. All certificates representing the Trust Shares, and all
warrants and options exercisable for equity securities which shall become Trust
Shares as set forth herein, shall bear a legend substantially to the effect that
"The shares of stock of the corporation [represented hereby/receivable upon
exercise hereof] are subject to the terms of The Windsor Art, Inc. Voting Trust
Agreement No. 1, as the same may be amended and/or restated from time to time, a
copy of which is on file with the corporation."
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2. Voting Trust Shares.
(a) Power to Vote Trust Shares. Subject to the provisions of this
Agreement, the Voting Trustees shall have the power to vote the Trust Shares
with respect to any matter, for or against, on which the Trustees shall agree.
(b) Matters on Which Trust Shares May Be Voted. Subject to the provisions
of this Agreement, the Voting Trustees, as such, shall have full power and
discretion to vote the Trust Shares for the election of directors of Windsor and
on any and all other matters with respect to which holders of the voting
securities of Windsor are entitled to vote (including but not limited to
amendments of Windsor's Articles of Incorporation, mergers, consolidations,
share exchanges, dissolution of Windsor, acquisitions of business, issuances of
securities or sales or other dispositions of all or substantially all of the
assets or stock of Windsor or any subsidiary thereof), whether such matters are
considered in a meeting of such holders or in a unanimous written consent to be
executed by them.
(c) Special Matters Regarding Voting of Trust Shares. The foregoing
provisions of this Agreement notwithstanding, until there is a "Default"
(hereinafter defined), the Voting Trustees shall vote all the Trust Shares in
such manner as may be necessary (i) to provide that Windsor's Board of Directors
shall consist of two members, one designated by Shareholder and the other
designated by Bentley and (ii) to authorize and allow Windsor and Shareholder to
effect (A) financing based on the assets of Windsor within the limits set forth
in the Stock Purchase Agreement, (B) "Mezzanine Financing" as defined in and
subject to the limits set forth in the Stock Purchase Agreement. Anything herein
to the contrary notwithstanding, upon and after any Default (i) under either of
the Promissory Notes between Shareholder and Bentley executed on even date
herewith as part of the consideration for the Shares pursuant to the Stock
Purchase Agreement or (ii) under that certain Consulting Agreement between
Windsor and Lloyd R. Abrams executed as of even date herewith, Lloyd R. Abrams
(or his successor Trustee hereunder) shall become the sole Trustee of this
Voting Trust and any other Trustee of the Voting Trust shall cease to act in
such capacity, and Lloyd R. Abrams (or his successor Trustee hereunder) shall
have the sole right and power, in his absolute discretion, to vote the Trust
Shares as described above in Section 2(a) and Section 2(b) on any and all
matters with respect to which holders of the voting securities of Windsor are
entitled to vote (including but not limited to amendments of Windsor's Articles
of Incorporation and Bylaws). For purposes of this Agreement the term "Default"
as used herein shall mean (a) any failure by Shareholder to make any payment of
interest or principal with respect to either of the Promissory Notes when the
same is due or within any grace period provided for in such Promissory Notes,
(b) any other Default as such term is defined in either of such Promissory Notes
or (c) any failure by Windsor to make any payment of any amount under the
Consulting Agreement when the same is due or within any grace period provided
for in such Consulting Agreement.
3. Voting Trustees.
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(a) Any individual acting as one of the Voting Trustees shall have the
right to resign as a Voting Trustee hereunder during his lifetime at any time by
notice delivered to the other Voting Trustee, Bentley and Shareholder, such
resignation to be effective at such time as a successor Voting Trustee accepts
this Agreement pursuant to Section 3(c).
(b) Subject to the terms of Section 2(c) of this Agreement, in the event of
the resignation, death or inability of one of the Voting Trustees to serve for
any reason, the successor to such Voting Trustee shall be an individual
appointed in accordance with the provisions of this Section 3(b). In the event
the trusteeship originally occupied by Lloyd R. Abrams (the "Bentley
Trusteeship") becomes vacant, Bentley within ten (10) days of its receipt of
notice of such vacancy shall appoint another individual to as a Voting Trustee
hereunder who shall occupy the Bentley Trusteeship and shall for purposes of
this Agreement be deemed Lloyd R. Abrams' successor; and in the event the
trusteeship originally occupied by Max Munn (the "Interiors Trusteeship")
becomes vacant, Interiors within ten (10) days of its receipt of notice of such
vacancy shall appoint another individual to as a Voting Trustee hereunder who
shall occupy the Interiors Trusteeship and shall for purposes of this Agreement
be deemed Max Munn's successor.
(c) Any person appointed as a successor Voting Trustee hereunder shall
become a Voting Trustee only upon written acceptance of this Agreement and the
rights, powers, duties and obligations of the Voting Trustees hereunder, and the
delivery of such acceptance to the acting Voting Trustee (if any), Bentley and
Shareholder. Each successor Voting Trustee shall have the same rights, powers,
duties and obligations as the Voting Trustee whom such successor succeeds.
4.Cash Dividends; Shareholder Materials. During the term of this Agreement,
the Voting Trust Certificate holder shall continue to remain entitled to receive
any cash and in kind dividends declared and paid with respect to the Trust
Shares (except in kind dividends of voting securities), and any informational
materials distributed by Windsor to all holders of voting securities of the
Windsor. The Voting Trustees shall be solely responsible for the delivery of
such informational materials and cash and in kind dividends to the Voting Trust
Certificate holder.
5. Termination.
(a) This Agreement and the Voting Trust created herein shall terminate upon
the earlier to occur of the following: (i) the execution of an instrument by all
parties to this Agreement terminating this Agreement; (ii) at such time as the
Promissory Notes have been paid in full and all obligations under the Consulting
Agreement have either been paid in full or satisfied; or (iii) at such time as
the Voting Trust Certificate has been acquired by Bentley pursuant to the Pledge
Agreement.
(b) Upon termination of this Agreement and the Voting Trust created herein
upon the occurrence of an event recited in Section 5(a)(i) or Section 5(a)(ii)
above, Shareholder shall surrender to the then acting Voting Trustees
Shareholder's Voting Trust Certificate, duly
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endorsed for transfer. The Voting Trustees shall as soon as practicable
thereafter cause to be distributed to Shareholder, free from trust, one or more
certificates representing the Trust Shares to which Shareholder (or
Shareholder's assignee) is entitled, which certificates shall not contain the
legend recited in Section 1(d) hereof.
(c) Upon termination of this Agreement and the Voting Trust created herein
upon the occurrence of the event recited in Section 5(a)(iii) above, Bentley
shall surrender to the then acting Voting Trustees the Voting Trust Certificate,
duly endorsed for transfer. The Voting Trustees shall as soon as practicable
thereafter cause to be distributed to Bentley, free from trust, one or more
certificates representing the Trust Shares to which Bentley (or Bentley's
assignee) is entitled, which certificates shall not contain the legend recited
in Section 1(d) hereof.
6. Transfer and Distribution of Trust Shares. Except as expressly provided
in this Agreement and in the Pledge Agreement, no party to this Agreement shall
have the right or power to sell, pledge, give, assign or transfer in any other
manner the Voting Trust Certificate or any of the Trust Shares or any interest
in either. Each party hereto agrees that any transfer of the Voting Trust
Certificate or Trust Shares shall be in accordance with all applicable federal
and state securities laws.
7. Compensation of Voting Trustees. The Voting Trustees shall receive no
compensation for their services as Voting Trustees hereunder, but this provision
shall not limit in any way the compensation or benefits which a Voting Trustee
may receive in his or her capacity as an officer, director, consultant or
attorney of any of the parties to this Agreement.
8. Liability of Voting Trustees. Subject to the terms of this Agreement, it
is the intention of the parties that the Voting Trustees have unfettered
discretion to vote the Trust Shares as they deem appropriate. No Voting Trustee
shall be liable to Shareholder or any other person for any loss arising out of
or in connection with his or her voting of any of the Trust Shares or any other
action or inaction as Voting Trustees hereunder, unless such loss was caused by
a Voting Trustee's gross negligence or willful misconduct. The Voting Trustees
may consult with counsel of their choice, and shall have full and complete
authorization and protection for any action taken or suffered by the Voting
Trustees under this Agreement in good faith and in accordance with the opinion
of such counsel. No Voting Trustee acting hereunder shall be required to give a
bond or other security for the faithful performance of its duties as such.
9. Dissolution. In the event of the dissolution or total or partial
liquidation of the Windsor, whether voluntary or involuntary, the Voting
Trustees shall receive the moneys, securities, rights or property to which the
Voting Trust Certificate holders deposited hereunder are entitled and shall
distribute the same among the registered holders of Voting Trust Certificates in
proportion to their respective interests therein, subject to the provisions of
the Pledge Agreement. Upon such distribution, all further obligations or
liability of the Voting Trustees in respect of such moneys, securities, rights
or property so received shall cease.
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10. Non-Disqualification. Nothing herein contained shall disqualify a
Voting Trustee from voting for it or any of its employees, officers, directors,
shareholders or affiliates to serve or from having any such persons serve
Windsor or any of its subsidiaries or affiliates as an officer or director or in
any other capacity and from voting for any of its employees, officers,
directors, shareholders or affiliates to receive and having any such persons
receive compensation for such services.
11. Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (i) if
delivered personally, upon delivery, (ii) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (iii) if given by facsimile, upon
confirmation of transmission by facsimile, in each case to the parties at the
following addresses:
In the case of the Voting Trustees, to:
Lloyd R. Abrams Max Munn
9719 Conway Road Interiors, Inc.
St. Louis, Missouri 63124 320 Washington Street
Mt.Vernon, NY 10553-1017
Facsimile: (314) 569-1512 Facsimile: (914) 665-5469
In the case of Shareholder to:
Interiors, Inc.
320 Washington Street
Mt. Vernon, NY 10553-1017
Attn: Max Munn
Facsimile: (914) 665-5469
In the case of Bentley to:
Bentley International, Inc.
9719 Conway Road
St. Louis, Missouri 63124
Attn: Lloyd R. Abrams
Facsimile: (314) 569-1512
In the case of any notice to Max Munn or Shareholder a copy shall be sent also
to:
Paul, Hastings, Janofsky & Walker LLP
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Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Attention: Arthur L. Zwickel, Esq.
Facsimile: (213) 627-0705
In the case of any notice to Lloyd R. Abrams or Bentley a copy shall be sent
also to:
Richard B. Rothman
Riezman & Blitz, P.C.
7700 Bonhomme Ave. 7th Floor
St. Louis, MO 63105
Facsimile: (314) 727-6458
12. Amendment. This Agreement may be amended or modified in whole or in
part only by a document in writing signed by the Voting Trustees and each other
party against whom such amendment or modification is to be enforced.
13. Counterparts. This Voting Trust Agreement may be executed in one or
more counterparts, each of which shall constitute an original, and all of which
taken together shall constitute one instrument.
14. Severability. If any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality or enforceability of the remaining
provisions of this Agreement and any other application thereof shall not in any
way be affected or impaired thereby.
15. Headings. The headings in this Agreement are inserted for convenience
only and in no way alter, amend, modify, limit or restrict the contractual
obligations of the parties hereto.
16. Binding Effect. This Agreement shall be binding on, inure to the
benefit of, and be enforceable by and against the Voting Trustees, the other
parties hereto, and their respective heirs, personal representatives,
distributees, successors and assigns.
17. Governing Law, Jurisdiction and Venue. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Missouri.
Each party hereto irrevocably submits to the jurisdiction of the courts of the
State of Missouri and the United States District Court for the Eastern District
of Missouri for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and the transactions contemplated hereby and
to the laying of venue in any such court. Each party hereto irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
___________________________________ ___________________________________
Lloyd R. Abrams, as a Voting Trustee Max Munn, as a Voting Trustee
BENTLEY INTERNATIONAL, INC. INTERIORS, INC.
By:________________________________ By:_________________________________
Lloyd R. Abrams, President Max Munn, President
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Windsor Art, Inc. Voting Trust Agreement No. 1
THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY BE TRANSFERRED ONLY
IF REGISTERED UNDER APPLICABLE SECURITIES LAW OR IF AN EXEMPTION THEREFROM IS
AVAILABLE.
No. 1 100 Shares
Windsor Art, Inc.
a Missouri corporation
Voting Trust Certificate
This certifies that:
(1) certificates representing One Hundred (100) shares of Common Stock of
Windsor Art, Inc.., a Missouri corporation ("Company"), have been deposited with
the undersigned, as Voting Trustees under the Windsor Art, Inc. Voting Trust
Agreement No. 1 (the "Voting Trust Agreement"), dated as of July 30, 1998, among
Lloyd R. Abrams and Max Munn, as Voting Trustees, and the other parties thereto,
including the person named in the immediately succeeding paragraph; and
(2) Interiors, Inc., a Delaware corporation or the registered assigns
thereof, is entitled to all of the benefits arising from the deposit of such
shares, subject to the terms and conditions set forth in the Voting Trust
Agreement.
Subject to the limitations set forth in the Voting Trust Agreement, and
subject to limitations imposed by applicable law from time to time (if any),
this certificate and the rights of the registered holder may be transferred on
the records maintained by the Voting Trustees under the Voting Trust Agreement.
In the event of such a transfer, the Voting Trustees shall cause appropriate
evidence thereof to be endorsed hereon or shall, in the discretion of the Voting
Trustees, cause another certificate (or additional certificates) to be issued in
replacement for this certificate to reflect the transfer appropriately.
IN WITNESS WHEREOF, the undersigned Voting Trustees have executed this
certificate this _____ day of ________, _____.
___________________________ ____________________________
Lloyd R. Abrams, Voting Trustee Max Munn, Voting Trustee
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Windsor Art, Inc. Voting Trust Agreement No. 1
IRREVOCABLE STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, the undersigned do hereby sell, assign and transfer
unto ____________________________ _______ shares of the of common stock, par
value $1.00 per share ("Common Stock"), of WINDSOR ART, INC. (the "Company")
represented by Stock Certificate No.________ and all of the undersigned's
right, title and interests in and to that certain Voting Trust Certificate No.1
(issued pursuant to the terms and provisions of the Windsor Art, Inc. Voting
Trust Agreement No. 1), both certificates being attached hereto, being all of
the Common Stock of the Company owned by the undersigned, and do hereby
irrevocably constitute and appoint _____________________ as attorney to transfer
the said stock on the books of the Company and surrender the Voting Trust
Certificate as provided in the said Voting Trust Agreement in connection
therewith with full power of substitution in the premises. Dated: _________
____, ____
____________________________ ____________________________
Lloyd R. Abrams, Voting Trustee Max Munn, Voting Trustee
Being the Voting Trustees under the Windsor Art, Inc. Voting Trust Agreement No.
1
In the Presence Of:
______________________________
Interiors, Inc.
By: __________________________
Max Munn, President
In the Presence Of:
_____________________________
-10-
Exhibit 10.10 Annex O
THE BENTLEY INTERNATIONAL, INC.
VOTING TRUST AGREEMENT NO. 1
THIS VOTING TRUST AGREEMENT (the "Agreement") is made and entered into this
____ day of ________, 1998, by and among LLOYD R. ABRAMS as voting trustee (in
such capacity, the 'Voting Trustee"), INTERIORS, INC., a Delaware corporation
(the "Shareholder") and BENTLEY INTERNATIONAL, INC., a Missouri corporation
("Bentley").
W I T N E S S E T H:
WHEREAS, Shareholder has entered into on even date herewith, a Securities
Purchase and Registration Rights Agreement (the "Securities Purchase Agreement")
with Bentley to acquire One Hundred Fifty Thousand (150,000) shares (the
"Shares") of the common stock ("Common Stock"), $0.18 par value, of Bentley and
a warrant (the "Warrant") to purchase an additional Three Hundred Thousand
(300,000) shares of the Common Stock; and
WHEREAS, pursuant to the terms of the Securities Purchase Agreement
Shareholder has agreed that the Shares shall be registered in the name of the
Voting Trustee and held pursuant to the terms and provisions of this Agreement
until certain indebtedness of Shareholder to Bentley is paid in full and until
the Shares are sold by Shareholder; and
WHEREAS, Shareholder has further agreed that any additional shares of the
Common Stock Shareholder acquires through the exercise of the Warrant shall be
registered in the name of the Voting Trustee and held pursuant to the terms and
provisions of this Agreement until such indebtedness of Shareholder to Bentley
is paid in full and until the additional shares are sold by Shareholder; and
WHEREAS, the Voting Trustee is willing to serve as Trustee with respect to
the Shares as herein provided.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Shares to be Held in Trust.
(a) Establishment of Voting Trust. Shareholder and the Voting Trustee
hereby establish and constitute this voting trust (the "Voting Trust") with
respect to the Shares to be sold and transferred pursuant to the Securities
Purchase Agreement and the Warrant (such Shares hereinafter are referred to
collectively as the "Trust Shares"). The Voting Trust shall be administered on
the terms set forth in this Agreement. The Voting Trust may be referred to as
"The Bentley International, Inc. Voting Trust No. 1" without reference to the
date of this Agreement.
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(b) Actions to be Taken. At the Closing described in the Securities
Purchase Agreement or upon the acquisition of Trust Shares through any exercise
of the Warrant, the following actions shall be taken by each of the parties
hereto:
(i) Shareholder shall instruct Bentley in writing that all
certificates evidencing Shares to be issued in connection with the Closing
pursuant to the Securities Purchase Agreement or evidencing Trust Shares
Shareholder acquires through any exercise of the Warrant shall be issued to
and in the name of the Voting Trustee pursuant to this Agreement. Bentley
shall cause such certificates to be so issued and delivered to the Voting
Trustee. The Voting Trustee hereby is authorized to receive and to hold, in
the name of the Voting Trustee, for the benefit of Shareholder (subject to
the rights of Bentley as stated herein, in the Securities Purchase
Agreement and in that certain Pledge Agreement (the "Pledge Agreement") of
even date herewith between Shareholder and Bentley), the Trust Shares.
(ii) Immediately following the receipt of any Trust Shares, the Voting
Trustee shall (a) issue to Interiors a voting trust certificate in the form
of Exhibit A attached hereto (the "Voting Trust Certificate") evidencing
the number of Trust Shares received by the Voting Trustee, (b) deliver
possession of all certificates representing the Trust Shares to Riezman &
Blitz, P.C. (the "Agent") so designated in the Pledge Agreement and (c)
execute in blank and deliver to the Agent the irrevocable stock power
attached hereto as Exhibit B; provided, however, that if immediately
following the receipt of any Trust Shares the Pledge Agreement shall no
longer be in force or effect, the Voting Trustee shall retain all
certificates representing the Trust Shares pursuant to the provisions of
this Agreement and shall not execute and deliver such stock power.
(iii) Immediately following the receipt of the Voting Trust
Certificate, Interiors shall (a) deliver possession of the Voting Trust
Certificate to the Agent and (b) shall execute and deliver to the Agent the
irrevocable stock power attached hereto as Exhibit B; provided, however,
that if immediately following the receipt of any Trust Shares the Pledge
Agreement shall no longer be in force or effect, Interiors shall retain the
Voting Trust Certificate pursuant to the provisions of this Agreement and
shall not execute and deliver such stock power.
(c) Voting Securities Subsequently Acquired. The parties hereto acknowledge
that, if any additional voting securities of Bentley are issued with respect to
or in exchange for the Trust Shares, whether by reason of a stock split, stock
dividend, share exchange, merger, consolidation or similar transaction,
certificates representing such additional voting securities shall be delivered
to the Voting Trustee, who shall, in turn, deliver the same to the Agent along
with executed irrevocable stock powers with respect to such additional voting
securities in form and substance equivalent to Exhibit B, and such additional
voting securities shall constitute "Trust Shares" hereunder; provided, however,
that if immediately following the receipt of such additional
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voting securities the Pledge Agreement shall no longer be in force or effect,
the Voting Trustee shall retain all certificates representing such additional
voting securities pursuant to the provisions of this Agreement and shall not
execute and deliver such stock powers. The Voting Trustee shall execute and
deliver one or more Voting Trust Certificates to Shareholder to represent
Shareholder's interest in such additional voting securities, which Shareholder,
in turn, shall deliver forthwith to Agent along with executed irrevocable stock
powers with respect to such additional Voting Trust Certificates in form and
substance equivalent to Exhibit B; provided, however, that if immediately
following the receipt of such additional voting securities the Pledge Agreement
shall no longer be in force or effect, Interiors shall retain the Voting Trust
Certificates pursuant to the provisions of this Agreement and shall not execute
and deliver such stock powers. For purposes of this Agreement, "voting
securities" shall mean any equity securities of Bentley (or any corporate
successor, including any entity which acquires the capital stock of Bentley or
assets of Bentley in consideration for voting securities) which may be entitled
by law to vote at any time with respect to any matter, whether or not such
equity securities are accorded voting rights under Articles of Incorporation of
Bentley (or such successor).
(d) Legend. All certificates representing the Trust Shares, and all
warrants and options exercisable for equity securities which shall become Trust
Shares as set forth herein, shall bear a legend substantially to the effect that
"The shares of Securities of the corporation [represented hereby/receivable upon
exercise hereof] are subject to the terms of The Bentley International, Inc.
Voting Trust Agreement No. 1, as the same may be amended and/or restated from
time to time, a copy of which is on file with the corporation."
2. Voting Trust Shares.
(a) Power to Vote Trust Shares. Subject to the provisions of this
Agreement, the Voting Trustee shall have the power to vote the Trust Shares with
respect to any matter, for or against.
(b) Matters on Which Trust Shares May Be Voted. Subject to the provisions
of this Agreement, the Voting Trustee, as such, shall have full power and
discretion to vote the Trust Shares for the election of directors of Bentley and
on any and all other matters with respect to which holders of the voting
securities of Bentley are entitled to vote (including but not limited to
amendments of Bentley's Articles of Incorporation, mergers, consolidations,
share exchanges, dissolution of Bentley, acquisitions of business, issuances of
securities or sales or other dispositions of all or substantially all of the
assets or Securities of Bentley or any subsidiary thereof), whether such matters
are considered in a meeting of such holders or in a unanimous written consent to
be executed by them.
3. Voting Trustee.
(a) The Voting Trustee shall have the right to resign as Voting Trustee
hereunder during his lifetime at any time by notice to Bentley and the Voting
Trust Certificate
<PAGE>
holders, such resignation to be effective at such time as a successor Voting
Trustee accepts this Agreement pursuant to Section 3(c).
(b) In the event of the resignation, death or inability of the Voting
Trustee to serve for any reason, the successor to the Voting Trustee shall be
the person appointed by the Voting Trustee to serve as successor to the Voting
Trustee. Upon the death of the Voting Trustee without his having appointed a
successor, the Board of Directors of Bentley shall by resolution duly adopted
name a successor Voting Trustee.
(c) Any person appointed as a successor Voting Trustee hereunder shall
become a Voting Trustee only upon written acceptance of this Agreement and the
rights, powers, duties and obligations of the Voting Trustee hereunder, and the
delivery of such acceptance to the preceding Voting Trustee (if then living) and
the Voting Trust Certificate holders. Each successor Voting Trustee shall have
the same rights, powers, duties and obligations as the Voting Trustee whom such
successor succeeds.
4. Cash Dividends; Shareholder Materials. During the term of this
Agreement, the Voting Trust Certificate holders shall continue to remain
entitled to receive any cash and in kind dividends declared and paid with
respect to the Trust Shares (except in kind dividends of voting securities), and
any informational materials distributed by the Company to all holders of voting
securities of the Company. The Voting Trustee shall be solely responsible for
the delivery of such informational materials and cash and in kind dividends to,
and the division thereof among, the Voting Trust Certificate holders.
5. Termination. This Agreement and the Voting Trust created herein shall
terminate upon the execution of an instrument by all the parties to this
Agreement terminating this Agreement.
6. Transfer and Distribution of Trust Shares.
(a) In the event any Voting Trust Certificate holder transfers all or part
of the Trust Shares relating to his, her, or its Voting Trust Certificate to an
Affiliate (as defined below) of the transferor, or to a person who immediately
prior to the transfer is a holder of Voting Trust Certificates, then upon the
Voting Trustee's receipt of a duly endorsed Voting Trust Certificate specifying
the number of Trust Shares being transferred, the Voting Trustee shall issue to
such transferee one or more Voting Trust Certificates representing such
transferee's interest in the transferred Trust Shares, and shall issue to such
transferor one or more new Voting Trust Certificates representing the
untransfered Trust Shares. The foregoing notwithstanding, so long as the Pledge
Agreement is in force and effect no Voting Trust Certificate shall be
transferable except pursuant to the provisions of the Pledge Agreement. For
purposes of this Agreement, the term "Affiliate" shall mean and include any of
the following:
<PAGE>
(i) any family member of a transferor which is described in
Section 267(c)(4) of the Internal Revenue Code of 1986 as presently in
effect ("Family Member");
(ii) any trust of which the transferor or a Family Member of the
transferor is a Trustee or a material beneficiary;
(iii) if the transferor is a trust, any beneficiary thereof; or
(iv) any corporation, partnership, limited partnership, limited
liability company or other entity in which the transferor or any
Family Member of the transferor has a material financial interest.
Each party hereto agrees that any transfer of Voting Trust Certificates shall be
in accordance with all applicable federal and state securities laws.
(b) In the event any Voting Trust Certificate holder proposes to transfer
all or part of the Trust Shares underlying his, her, or its Voting Trust
Certificate in a bona fide sale or charitable gift to a person who is not an
Affiliate of the transferor, and who immediately after the transfer will not own
more than two and one-half percent (2.5%) of the outstanding voting securities
of Bentley, then upon the Voting Trustee's receipt of a duly endorsed Voting
Trust Certificate specifying the number of Trust Shares being transferred and a
statement in reasonable detail describing the terms of the proposed transfer and
the transferor's certificate that the proposed transferee is not an Affiliate,
the Voting Trustee shall cause to be issued to such transferee one or more
certificates representing the Trust Shares so transferred, and shall issue to
such transferor one or more new Voting Trust Certificates representing the
untransfered Trust Shares. Such transferee shall take the transferred Trust
Shares free from the provisions of this Agreement. The foregoing
notwithstanding, so long as the Pledge Agreement is in force and effect no Trust
Shares shall be transferable except pursuant to the provisions of the Pledge
Agreement. Each party hereto acknowledges and agrees that any sale or transfer
of Trust Shares pursuant to this Section 6(b) shall be in accordance with
applicable federal and state laws. It is the intention of the parties hereto
that Trust Shares transferable pursuant to this Section 6(b) shall be
transferable by any party hereto without limitation or restriction other than
those limitations or restrictions imposed by this Agreement and the applicable
federal and state securities laws .
(c) Upon termination of this Agreement and the Voting Trust created herein,
each holder of a Voting Trust Certificate shall surrender to the then acting
Voting Trustee all of such holder's Voting Trust Certificates, duly endorsed for
transfer. The Voting Trustee shall as soon as practicable thereafter cause to be
distributed to such holder, free from trust, one or more certificates
representing the Trust Shares to which such holder is entitled, which
certificates shall not contain the legend contained in Section 1(d) hereof.
(d) The Voting Trustee shall have no right or power to sell, pledge, give,
assign or transfer in any other manner any Voting Trust Certificate or any of
the Trust Shares or
<PAGE>
any interest in either, except in accordance with the provisions of this
Agreement and the Pledge Agreement.
7. Compensation of Voting Trustee. The Voting Trustee shall receive no
compensation for his services as Voting Trustee hereunder, but this provision
shall not limit in any way the compensation or benefits which a Voting Trustee
may receive in his or her capacity as an officer, director, consultant or
attorney of any of the parties to this Agreement.
8. Liability of Voting Trustee. Subject to the terms of this Agreement, it
is the intention of the parties that the Voting Trustee have unfettered
discretion to vote the Trust Shares as the Voting Trustee deems appropriate. No
Voting Trustee shall be liable to Shareholder or any other person for any loss
arising out of or in connection with his or her voting of any of the Trust
Shares or any other action or inaction as Voting Trustee hereunder, unless such
loss was caused by a Voting Trustee's gross negligence or willful misconduct.
The Voting Trustee may consult with counsel of his choice, and shall have full
and complete authorization and protection for any action taken or suffered by
the Voting Trustee under this Agreement in good faith and in accordance with the
opinion of such counsel.
9. Dissolution. In the event of the dissolution or total or partial
liquidation of the Bentley, whether voluntary or involuntary, the Voting Trustee
shall receive the moneys, securities, rights or property to which the Voting
Trust Certificate holders deposited hereunder are entitled and shall distribute
the same among the registered holders of Voting Trust Certificates in proportion
to their respective interests therein, subject to the provisions of the Pledge
Agreement. Upon such distribution, all further obligations or liability of the
Voting Trustee in respect of such moneys, securities, rights or property so
received shall cease.
10. Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (i) if
delivered personally, upon delivery, (ii) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (iii) if given by facsimile, upon
confirmation of transmission by facsimile, in each case to the parties at the
following addresses:
a. If to Shareholder, addressed to:
Interiors, Inc.
320 Washington Street
Mt. Vernon, New York 10553-1017
Facsimile: (914) 665-5469
Attention: Mr. Max Munn
With copies to:
<PAGE>
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 627-0705
Attention: Arthur L. Zwickel, Esq.
b. If to the Voting Trustee and Bentley, addressed to:
Mr. Lloyd R. Abrams, President
Bentley International, Inc.
9719 Conway Road
St. Louis, MO 63124
Facsimile: (314) 569-1512
With a copy to:
Richard B. Rothman, Esq.
Riezman & Blitz, P.C.
7700 Bonhomme Ave. 7th Floor
St. Louis, MO 63105
Facsimile: (314) 727-6458
11. Amendment. This Agreement may be amended or modified in whole or in
part only by a document in writing signed by the Voting Trustee and each other
party against whom such amendment or modification is to be enforced.
12. Counterparts. This Voting Trust Agreement may be executed in one or
more counterparts, each of which shall constitute an original, and all of which
taken together shall constitute one instrument.
13. Severability. If any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality or enforceability of the remaining
provisions of this Agreement and any other application thereof shall not in any
way be affected or impaired thereby.
14. Headings. The headings in this Agreement are inserted for convenience
only and in no way alter, amend, modify, limit or restrict the contractual
obligations of the parties hereto.
15. Binding Effect. This Agreement shall be binding on, inure to the
benefit of, and be enforceable by and against the Voting Trustee, the other
parties hereto, and their respective heirs, personal representatives,
distributees, successors and assigns.
<PAGE>
16. Governing Law, Jurisdiction and Venue. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of Missouri.
Each party hereto irrevocably submits to the jurisdiction of the courts of the
State of Missouri and the United States District Court for the Eastern District
of Missouri for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and the transactions contemplated hereby and
to the laying of venue in any such court. Each party hereto irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
___________________________________
Lloyd R. Abrams, Voting Trustee
BENTLEY INTERNATIONAL, INC. INTERIORS, INC.
By:________________________________ By:_________________________________
Lloyd R. Abrams, President Max Munn, President
<PAGE>
Bentley International, Inc. Voting Trust Agreement No. 1
THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY BE TRANSFERRED ONLY
IF REGISTERED UNDER APPLICABLE SECURITIES LAW OR IF AN EXEMPTION THEREFROM IS
AVAILABLE.
No. 1 150,000 Shares
Bentley International, Inc.
a Missouri corporation
Voting Trust Certificate
This certifies that:
(1) certificates representing One Hundred Fifty Thousand (150,000) shares
of Common Stock of Bentley International, Inc.., a Missouri corporation
("Company"), have been deposited with the undersigned, as Voting Trustee under
the Bentley International, Inc. Voting Trust Agreement No. 1 (the "Voting Trust
Agreement"), dated as of July 30, 1998, among Lloyd R. Abrams, as Voting
Trustee, and the other parties thereto, including the person named in the
immediately succeeding paragraph; and
(2) Interiors, Inc., a Delaware corporation or the registered assigns
thereof, is entitled to all of the benefits arising from the deposit of such
shares, subject to the terms and conditions set forth in the Voting Trust
Agreement.
Subject to the limitations set forth in the Voting Trust Agreement, and
subject to limitations imposed by applicable law from time to time (if any),
this certificate and the rights of the registered holder may be transferred on
the records maintained by the Voting Trustee under the Voting Trust Agreement.
In the event of such a transfer, the Voting Trustee shall cause appropriate
evidence thereof to be endorsed hereon or shall, in the discretion of the Voting
Trustee, cause another certificate (or additional certificates) to be issued in
replacement for this certificate to reflect the transfer appropriately.
IN WITNESS WHEREOF, the undersigned Voting Trustee has executed this
certificate this ____ day of ___________, _____.
___________________________
Lloyd R. Abrams, Voting Trustee
<PAGE>
Bentley International, Inc. Voting Trust Agreement No. 1
IRREVOCABLE STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, the undersigned do hereby sell, assign and transfer
unto ____________________________ _______ shares of the of Common Stock, par
value $0.18 per share ("Common Stock"), of BENTLEY INTERNATIONAL, INC. (the
"Company") represented by Stock Certificate No. ________ and all of the
undersigned's right, title and interests in and to that certain Voting Trust
Certificate No.____ (issued pursuant to the terms and provisions of the Bentley
International, Inc. Voting Trust Agreement No. 1), both certificates being
attached hereto, being all of the Common Stock of the Company owned by the
undersigned, and do hereby irrevocably constitute and appoint
_____________________ as attorney to transfer the said stock on the books of the
Company and surrender the Voting Trust Certificate as provided in the said
Voting Trust Agreement in connection therewith with full power of substitution
in the premises. Dated: ________ ___, _____
____________________________
Lloyd R. Abrams, Voting Trustee
Being the Voting Trustee under the Bentley International, Inc. Voting Trust
Agreement No. 1
In the Presence Of:
______________________________
Interiors, Inc.
By: __________________________
Max Munn, President
In the Presence Of:
_____________________________
Exhibit 10.11 Annex P
INTERIORS, INC.
VOTING TRUST AGREEMENT NO. 1
THIS VOTING TRUST AGREEMENT (the "Agreement") is made and entered into this
____ day of July, 1998, by and among MAX R. MUNN as voting trustee (in such
capacity, the "Voting Trustee"), BENTLEY INTERNATIONAL, INC., a Missouri
corporation (the "Shareholder") and INTERIORS, INC., a Delaware corporation
("Interiors").
W I T N E S S E T H:
WHEREAS, Shareholder has entered into a Securities Purchase and
Registration Rights Agreement dated July ___, 1998 (the "Securities Purchase
Agreement") with Interiors to acquire One Million Five Hundred Thousand
(1,500,000) shares (the "Shares") of the common stock ("Common Stock"), of
Interiors; and
WHEREAS, Interiors has entered into a Stock Purchase Agreement dated July
7, 1998 (the "Stock Purchase Agreement") with Shareholder to acquire One Hundred
(100) shares (the "Windsor Shares") of the common stock (the "Windsor Common
Stock"), of Windsor Art, Inc. ("Windsor"); and
WHEREAS, pursuant to the terms of the Stock Purchase Agreement Shareholder
has agreed that the Shares shall be registered in the name of the Voting Trustee
and held pursuant to the terms and provisions of this Agreement; and
WHEREAS, the Voting Trustee is willing to serve as Trustee with respect to
the Shares as herein provided.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Shares to be Held in Trust.
(a) Establishment of Voting Trust. Shareholder and the Voting Trustee
hereby establish and constitute this voting trust (the "Voting Trust") with
respect to the Shares to be sold and transferred pursuant to the Securities
Purchase Agreement (such Shares hereinafter are referred to collectively as the
"Trust Shares"). The Voting Trust shall be administered on the terms set forth
in this Agreement. The Voting Trust may be referred to as "The Interiors, Inc.
Voting Trust No. 1" without reference to the date of this Agreement.
(b) Actions to be Taken. At the Closing described in the Securities
Purchase Agreement, the following actions shall be taken by each of the parties
hereto:
(i) Shareholder shall instruct Interiors in writing that all
certificates evidencing Shares to be issued in connection with the Closing
pursuant to the
<PAGE>
Securities Purchase Agreement shall be issued to and in the name of
the Voting Trustee pursuant to this Agreement. Interiors shall cause such
certificates to be so issued and delivered to the Voting Trustee. The
Voting Trustee hereby is authorized to receive and to hold, in the name of
the Voting Trustee, for the benefit of Shareholder (subject to the rights
of Interiors as stated herein, in the Securities Purchase Agreement), the
Trust Shares.
(ii) Immediately following the receipt of the Trust Shares, the Voting
Trustee shall (a) issue to Shareholder a voting trust certificate in the
form of Exhibit A attached hereto (the "Voting Trust Certificate")
evidencing the number of Trust Shares held by the Voting Trustee, and (b)
deliver possession of all certificates representing the Trust Shares to
Shareholder.
(c) Voting Securities Subsequently Acquired. The parties hereto acknowledge
that, if any additional voting securities of Interiors are issued with respect
to or in exchange for the Trust Shares, whether by reason of a stock split,
stock dividend, share exchange, merger, consolidation or similar transaction,
certificates representing such additional voting securities shall be delivered
to the Voting Trustee, and such additional voting securities shall constitute
"Trust Shares" hereunder. The Voting Trustee shall execute and deliver one or
more Voting Trust Certificates to Shareholder to represent Shareholder's
interest in such additional voting securities. For purposes of this Agreement,
"voting securities" shall mean any equity securities of Interiors (or any
corporate successor, including any entity which acquires the capital stock of
Interiors or assets of Interiors in consideration for voting securities) which
may be entitled by law to vote at any time with respect to any matter, whether
or not such equity securities are accorded voting rights under Articles of
Incorporation of Interiors (or such successor).
(d) Legend. All certificates representing the Trust Shares, and all
warrants and options exercisable for equity securities which shall become Trust
Shares as set forth herein, shall bear a legend substantially to the effect that
"The shares of Securities of the corporation [represented hereby/receivable upon
exercise hereof] are subject to the terms of The Interiors, Inc. Voting Trust
Agreement No. 1, dated July ____, 1998, as the same may be amended and/or
restated from time to time, a copy of which is on file with the corporation."
2. Voting Trust Shares.
(a) Power to Vote Trust Shares. Subject to the provisions of this
Agreement, the Voting Trustee shall have the power to vote the Trust Shares with
respect to any matter, for or against.
(b) Matters on Which Trust Shares May Be Voted. Subject to the provisions
of this Agreement, the Voting Trustee, as such, shall have full power and
discretion to vote the Trust Shares for the election of directors of Interiors
and on any and all other matters with respect to which holders of the voting
securities of Interiors are entitled to vote (including but not limited
2
<PAGE>
to amendments of Interiors' Articles of Incorporation, mergers, consolidations,
share exchanges, dissolution of Interiors, acquisitions of business, issuances
of securities or sales or other dispositions of all or substantially all of the
assets or Securities of Interiors or any subsidiary thereof), whether such
matters are considered in a meeting of such holders or in a unanimous written
consent to be executed by them.
3. Voting Trustee.
(a) The Voting Trustee shall have the right to resign as Voting Trustee
hereunder during his lifetime at any time by notice to Interiors and the Voting
Trust Certificate holders, such resignation to be effective at such time as a
successor Voting Trustee accepts this Agreement pursuant to Section 3(c).
(b) In the event of the resignation or inability of the Voting Trustee to
serve for any reason, the successor to the Voting Trustee shall be the person
appointed by the Voting Trustee to serve as successor to the Voting Trustee.
Upon the death of the Voting Trustee without his having appointed a successor,
the Board of Directors of Interiors shall by resolution duly adopted name a
successor Voting Trustee.
(c) Any person appointed as a successor Voting Trustee hereunder shall
become a Voting Trustee only upon written acceptance of this Agreement and the
rights, powers, duties and obligations of the Voting Trustee hereunder, and the
delivery of such acceptance to the preceding Voting Trustee (if then living) and
the Voting Trust Certificate holders. Each successor Voting Trustee shall have
the same rights, powers, duties and obligations as the Voting Trustee whom such
successor succeeds.
4. Cash Dividends; Shareholder Materials. During the term of this
Agreement, the Voting Trust Certificate holders shall continue to remain
entitled to receive any cash and in kind dividends declared and paid with
respect to the Trust Shares (except in kind dividends of voting securities), and
any informational materials distributed by the Company to all holders of voting
securities of the Company. The Voting Trustee shall be solely responsible for
the delivery of such informational materials and cash and in kind dividends to,
and the division thereof among, the Voting Trust Certificate holders.
5. Termination. This Agreement and the Voting Trust created herein shall
terminate upon the execution of an instrument by all parties to this Agreement
terminating this Agreement.
6. Transfer and Distribution of Trust Shares.
(a) In the event any Voting Trust Certificate holder transfers all or part
of the Trust Shares relating to his, her, or its Voting Trust Certificate to an
Affiliate (as defined below) of the transferor, or to a person who immediately
prior to the transfer is a holder of Voting Trust Certificates, then upon the
Voting Trustee's receipt of a duly endorsed Voting Trust Certificate
3
<PAGE>
specifying the number of Trust Shares being transferred, the Voting Trustee
shall issue to such transferee one or more Voting Trust Certificates
representing such transferee's interest in the transferred Trust Shares, and
shall issue to such transferor one or more new Voting Trust Certificates
representing the untransfered Trust Shares. For purposes of this Agreement, the
term "Affiliate" shall mean and include all of the following:
(i) any family member of a transferor which is described in
Section 267(c)(4) of the Internal Revenue Code of 1986 as presently in effect
("Family Member");
(ii) any trust of which the transferor or a Family Member of the transferor
is a Trustees or a material beneficiary;
(iii) if the transferor is a trust, any beneficiary thereof; and
(iv) any corporation, partnership, limited partnership, limited liability
company or other entity in which the transferor or any Family Member of the
transferor has a material financial interest.
Each party hereto agrees that any transfer of Voting Trust Certificates shall be
in accordance with all applicable federal and state securities laws.
(b) In the event any Voting Trust Certificate holder proposes to transfer
all or part of the Trust Shares, subject to the Escrow Agreement of even date
herewith, underlying his, her, or its Voting Trust Certificate, then upon the
Voting Trustee's receipt of a duly endorsed Voting Trust Certificate specifying
the number of Trust Shares being transferred and a statement in reasonable
detail describing the terms of the proposed transfer and the transferor's
certificate that the proposed transferee is not an Affiliate, the Voting Trustee
shall cause to be issued to such transferee one or more certificates
representing the Trust Shares so transferred, and shall issue to such transferor
one or more new Voting Trust Certificates representing the untransfered Trust
Shares. Such transferee shall take the transferred Trust Shares free from the
provisions of this Agreement. Each party hereto acknowledges and agrees that any
sale or transfer of Trust Shares pursuant to this Section 6(b) shall be in
accordance with applicable federal and state laws. It is the intention of the
parties hereto that Trust Shares transferable pursuant to this Section 6(b)
shall be transferable by any party hereto without limitation or restriction
other than those limitations or restrictions imposed by applicable federal and
state securities laws.
(c) Upon termination of this Agreement and the Voting Trust created herein,
each holder of a Voting Trust Certificate shall surrender to the then acting
Voting Trustee all of such holder's Voting Trust Certificates, duly endorsed for
transfer. The Voting Trustee shall as soon as practicable thereafter cause to be
distributed to such holder, free from trust, one or more certificates
representing the Trust Shares to which such holder is entitled, which
certificates shall not contain the legend contained in Section 1(d) hereof.
4
<PAGE>
(d) The Voting Trustee shall have no right or power to sell, pledge, give,
assign or transfer in other manner any Voting Trust Certificate or any of the
Trust Shares or any interest in either.
7. Compensation of Voting Trustee. The Voting Trustee shall receive no
compensation for his services as Voting Trustee hereunder, but this provision
shall not limit in any way the compensation or benefits which a Voting Trustee
may receive in his or her capacity as an officer, director, consultant or
attorney of any of the parties to this Agreement.
8. Liability of Voting Trustee. Subject to the terms of this Agreement, it
is the intention of the parties that the Voting Trustee have unfettered
discretion to vote the Trust Shares as the Voting Trustee deems appropriate. No
Voting Trustee shall be liable to Shareholder or any other person for any loss
arising out of or in connection with his or her voting of any of the Trust
Shares or any other action or inaction as Voting Trustee hereunder, unless such
loss was caused by a Voting Trustee's gross negligence or willful misconduct.
The Voting Trustee may consult with counsel of his choice, and shall have full
and complete authorization and protection for any action taken or suffered by
the Voting Trustee under this Agreement in good faith and in accordance with the
opinion of such counsel.
9. Dissolution. In the event of the dissolution or total or partial
liquidation of Interiors, whether voluntary or involuntary, the Voting Trustee
shall receive the moneys, securities, rights or property to which the Voting
Trustee Certificate holders deposited hereunder are entitled and shall
distribute the same among the registered holders of Voting Trust Certificates in
proportion to their respective interests therein. Upon such distribution, all
further obligations or liability of the Voting Trustee in respect of such
moneys, securities, rights or property so received shall cease.
10. Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (i) if
delivered personally, upon delivery, (ii) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (iii) if given by facsimile, upon
confirmation of transmission by facsimile, in each case to the parties at the
following addresses:
a. If to Interiors, addressed to:
Interiors, Inc.
320 Washington Street
Mt. Vernon, New York 10553-1017
Facsimile: (914) 665-5469
Attention: Mr. Max Munn
With copies to:
5
<PAGE>
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 627-0705
Attention: Arthur L. Zwickel, Esq.
b. If to the Shareholder, addressed to:
Mr. Lloyd R. Abrams, Pres.
Bentley International, Inc.
9719 Conway Road
St. Louis, MO 63124
Facsimile: 314-569-1512
With a copy to:
Richard B. Rothman, Esq.
Riezman & Blitz, P.C.
7700 Bonhomme Ave. 7th Floor
St. Louis, MO 63105
Facsimile: 314-727-6458
11. Amendment. This Agreement may be amended or modified in whole or in
part only by a document in writing signed by the Voting Trustee and each other
party against whom such amendment or modification is to be enforced.
12. Counterparts. This Voting Trust Agreement may be executed in one or
more counterparts, each of which shall constitute an original, and all of which
taken together shall constitute one instrument.
13. Severability. If any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or unenforceable
in any respect, the validity, legality or enforceability of the remaining
provisions of this Agreement and any other application thereof shall not in any
way be affected or impaired thereby.
14. Headings. The headings in this Agreement are inserted for convenience
only and in no way alter, amend, modify, limit or restrict the contractual
obligations of the parties hereto.
15. Binding Effect. This Agreement shall be binding on, inure to the
benefit of, and be enforceable by and against the Voting Trustee, the other
parties hereto, and their respective heirs, personal representatives,
distributees, successors and assigns.
6
<PAGE>
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
___________________________________
Max R. Munn, Voting Trustee
BENTLEY INTERNATIONAL, INC. INTERIORS, INC.
By:________________________________ By:_________________________________
Lloyd R. Abrams, President Max Munn, President
7
<PAGE>
Exhibit A to
Interiors, Inc. Voting Trust Agreement No. 1
THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY BE TRANSFERRED ONLY
IF REGISTERED UNDER APPLICABLE SECURITIES LAW OR IF AN EXEMPTION THEREFROM IS
AVAILABLE.
No.__________________ ___________________ Shares
Interiors, Inc.
a Delaware corporation
Voting Trust Certificate
This certifies that:
(1) certificates representing _______ shares of Common Stock of Interiors,
Inc., a Delaware corporation ("Company"), have been deposited with the
undersigned, as Voting Trustee under the Interiors, Inc. Voting Trust Agreement
No. 1 (the "Voting Trust Agreement"), dated as of July ____, 1998, among Max R.
Munn, as Voting Trustee, and the other parties thereto, including the person
named in the immediately succeeding paragraph; and
(2) Bentley International, Inc., a Missouri corporation or the registered
assigns thereof, is entitled to all of the benefits arising from the deposit of
such shares, subject to the terms and conditions set forth in the Voting Trust
Agreement.
Subject to the limitations set forth in the Voting Trust Agreement, and
subject to limitations imposed by applicable law from time to time (if any),
this certificate and the rights of the registered holder may be transferred on
the records maintained by the Voting Trustee under the Voting Trust Agreement.
In the event of such a transfer, the Voting Trustee shall cause appropriate
evidence thereof to be endorsed hereon or shall, in the discretion of the Voting
Trustee, cause another certificate (or additional certificates) to be issued in
replacement for this certificate to reflect the transfer appropriately.
IN WITNESS WHEREOF, the undersigned Voting Trustee has executed this
certificate this ____ day of July, 1998.
___________________________
Max R. Munn, Voting Trustee
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,461
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,454,597
<PP&E> 12,500
<DEPRECIATION> 209
<TOTAL-ASSETS> 2,603,825
<CURRENT-LIABILITIES> 145,610
<BONDS> 0
0
0
<COMMON> 506,391
<OTHER-SE> 1,500,178
<TOTAL-LIABILITY-AND-EQUITY> 2,603,825
<SALES> 5,861
<TOTAL-REVENUES> 137,252
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,456
<INCOME-PRETAX> (20,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,501)
<DISCONTINUED> 880,612
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 860,111
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.29
</TABLE>
