UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
The Quarter Ended June 30, 1997
Commission File Number 0-4186
CONSOLIDATED TECHNOLOGY GROUP LTD.
(Exact name of registrant as specified in its charter)
New York 13-1948169
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
160 Broadway, New York, NY 10038
(Address of principal executive offices) (Zip Code)
(212) 233-4500
(Registrant's telephone number, including area code)
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
---
Number of common shares outstanding as of August 14, 1997: 45,798,692
Purpose of Amendment:
During the six months ended June 30, 1997, the CEO and the Company entered into
a restated employment agreement. The agreement was disclosed in the unaudited
footnotes to the financial statements and was included as an exhibit to the
filing. The disclosure of such agreement as originally filed and the exhibit
itself, indicated that the term of the CEO's retirement compensation period was
20 months from date of retirement when in fact the term of retirement
compensation is 10 years from the date of retirement. Such change is made in the
footnote disclosure and such change is made in the exhibit. Although the
restated employment was disclosed in the footnotes to the financial statements,
it is further referenced in Part II, Item 5, Other Matters, in this amendment.
Additionally, in Part II, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations, it was disclosed that effective
August 15, 1997 the Company has been delisted from trading on the NASDAQ because
it failed to meet the minimum bid requirements of $1 and the minimum net
tangible worth requirement of $1 million and it is further referenced in Part
II, Item 5, Other Matters, in this amendment.
1
<PAGE>
Consolidated Technology Group, Ltd.
10-Q Amendment No. 1
Index
Page
----
Part I: - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 3-4
Consolidated Statements of Operations - Three and Six Months Ended
June 30, 1997 and 1996 5
Consolidated Statement of Shareholders' Equity - Six Months Ended
June 30, 1997 6
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1997 and 1996 7-9
Notes to Consolidated Financial Statements 10-21
Part II - Other Information:
Item 5. Other Matters 22
Item 6. Exhibits and Reports on Form 8-K: 22
2
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
June 30, 1996
1997 Restated
(Unaudited) (footnote 6 & 7)
----------- ----------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 2,793,000 $ 2,748,000
Receivables, net of allowances 20,451,000 20,698,000
Inventories 2,648,000 2,752,000
Loans receivable 112,000 269,000
Prepaid expenses and other current assets 568,000 598,000
Excess of accumulated costs over related billings 904,000 938,000
------- -------
Total current assets 27,476,000 28,003,000
---------- ----------
Property, plant and equipment, net 12,405,000 13,668,000
---------- ----------
Other assets:
Net assets of discontinued segments -- 1,529,000
Capitalized software development costs 666,000 251,000
Goodwill, net 10,255,000 10,553,000
Covenants not to compete, net 275,000 886,000
Customer lists, net 10,318,000 10,775,000
Deferred offering costs 903,000 473,000
Loans receivable, long-term 1,485,000 --
Receivables, related parties 1,003,000 1,296,000
Investments in common stock, long-term 320,000 241,000
Other assets 1,153,000 1,033,000
--------- ---------
Total Other Assets 26,378,000 27,037,000
---------- ----------
Total Assets $66,259,000 $68,708,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
June 30, 1996
1997 Restated
(Unaudited) (footnote 6 & 7)
----------- ----------------
<S> <C> <C>
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 10,815,000 $ 9,167,000
Accrued payroll and related expenses 2,815,000 2,241,000
Accrued interest 689,000 165,000
Income taxes payable 361,000 738,000
Interim billings in excess of costs and estimated profits 1,443,000 1,444,000
Subordinated debt, related parties 924,000 924,000
Current portion of long-term debt 8,829,000 8,466,000
Current portion of subordinated debt 6,215,000 6,269,000
Current portion of capitalized lease obligations 1,351,000 1,331,000
Net current liabilities of discontinued segments 2,046,000 2,629,000
--------- ---------
Total current liabilities 35,488,000 33,374,000
---------- ----------
Long-term liabilities:
Deferred interest 320,000 568,000
Long-term debt 15,728,000 16,468,000
Capitalized lease obligations 2,352,000 2,904,000
Subordinated debt 340,000 312,000
Net liabilities of discontinued segments 4,000 --
----- --
Total long-term liabilities 18,744,000 20,252,000
---------- ----------
Minority interest 13,735,000 12,617,000
----------
Shareholders' equity:
Preferred stock 26,000 26,000
Additional paid-in-capital, preferred stock 91,000 92,000
Common stock (50,000,000 shares authorized, 45,798,692 shares issued and
outstanding as of June 30, 1997 and December 31, 1996) 458,000 458,000
Additional paid-in-capital, common stock 52,006,000 52,005,000
Accumulated deficit (54,309,000) (50,218,000)
Unrealized gain on exchange translation -- 86,000
Net unrealized gain (loss) on long-term investments in common stock 20,000 16,000
------ ------
Total shareholders' equity (1,708,000) 2,465,000
----------- ---------
Total Liabilities and Shareholders' Equity $66,259,000 $68,708,000
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1996
Restated Restated
1997 (footnote 6) 1997 (footnote 6)
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Revenues $31,938,000 $26,705,000 $63,148,000 $52,249,000
Direct Costs 27,263,000 20,983,000 53,632,000 41,050,000
---------- ---------- ---------- ----------
Gross Profit 4,675,000 5,722,000 9,516,000 11,199,000
Selling, General and Administrative 4,896,000 4,865,000 10,316,000 11,758,000
--------- --------- ---------- ----------
Income (Loss) from Operations (221,000) 857,000 (800,000) (559,000)
--------- ------- --------- ---------
Other Income (Expense):
Interest expense (1,129,000) (1,040,000) (2,260,000) (1,950,000)
Other income, net (85,000) 65,000 (4,000) 255,000
Gain (loss) from security sales -- 216,000 -- 253,000
--------- ------- --------- ---------
Total other expense, net (1,214,000) (759,000) (2,264,000) (1,442,000)
----------- --------- ----------- -----------
Income (Loss) from Continuing Operations Before
Income Taxes and Minority Interest (1,435,000) 98,000 (3,064,000) (2,001,000)
Income Tax Benefit (Provision) 472,000 (247,000) (6,000) (322,000)
Minority Interest in (Income) Loss of Subsidiaries 179,000 (21,000) 627,000 733,000
------- -------- ------- -------
Loss from continuing operations (784,000) (170,000) (2,443,000) (1,590,000)
Discontinued Operations (footnote 6):
Loss from operations of discontinued segments (604,000) (142,000) (1,252,000) (814,000)
Loss on disposal of segments (396,000) -- (396,000) --
--------- ------- --------- -------
Net Loss ($1,784,000) ($312,000) ($4,091,000) ($2,404,000)
============ ========== ============ ============
Loss per common share:
Loss from continuing operations ($0.02) ($0.00) ($0.05) ($0.04)
Loss from operations of discontinued segments ($0.01) ($0.00) ($0.03) ($0.02)
Loss on disposal of segments ($0.01) -- ($0.01) --
------- -- ------- --
Net loss per common share ($0.04) ($0.01) ($0.09) ($0.06)
======= ======= ======= =======
Weighted average number of common shares 45,376,336 41,593,106 45,376,336 37,632,489
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
Consolidated Technology Group, Ltd. and Subsidiaries
Consolidated Statement of Shareholders Equity
for the Six Months Ended June 30, 1997
Unaudited
<TABLE>
<CAPTION>
Balance at Net
December 31, Unrealized Unrealized Balance
1996 Conversion Gain on Investment at
Restated of Series A Net Exchange Security June 30,
(footnote 7) Preferred Loss Translation Loss 1997
------------ --------- ---- ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Preferred stock $1.00 par value,
6% Series A, Authorized
77,713 shares:
Shares 22,891 (22) -- -- -- 22,869
Amounts $23,000 -- -- -- -- $23,000
Preferred stock, $1.00 par value,
$3.50 and $.10, Series B and E,
8,000 shares authorized each:
Shares 262 -- -- -- -- 262
Amounts $1,000 -- -- -- -- $1,000
Preferred stock, $1.00 par value,
$8.00 subordinated Series F,
6,000 shares authorized:
Shares 2,700 -- -- -- -- 2,700
Amounts $2,000 -- -- -- -- $2,000
------ -- -- -- -- ------
Total Preferred stock, par $26,000 -- -- -- -- $26,000
Additional paid-in capital
preferred stock $92,000 ($1,000) -- -- -- $91,000
Common stock, $0.01 par value,
50,000,000 shares authorized:
Shares 45,795,828 2,864 -- -- -- 45,798,692
Amounts $458,000 -- -- -- -- $458,000
Additional paid-in capital,
common stock $52,005,000 $1,000 -- -- -- $52,006,000
Accumulated deficit ($50,218,000) -- ($4,091,000) -- -- ($54,309,000)
Unrealized exchange translation $86,000 -- -- ($86,000) -- --
Net unrealized gain on long-term
investments in common stock $16,000 -- -- -- $4,000 $20,000
------- ----- --------- ------ ----- ------
Total shareholders' equity $2,465,000 -- ($4,091,000) ($86,000) $4,000 ($1,708,000)
========== ===== ============ ========= ====== ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996
Restated
1997 (footnote 6)
---- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Loss from continuing operations ($2,443,000) ($1,590,000)
Adjustments to reconcile loss from continuing operations to net cash
provided by (used in) continuing operations:
Depreciation and amortization 3,262,000 3,006,000
Minority interest in net loss of consolidated subsidiaries (627,000) (733,000)
Bad debt expense 977,000 500,000
Loss from equity method investments 104,000 --
Noncash expense from subsidiaries issuance of options and warrants -- 2,229,000
Value of stock issued in lieu of cash payments for services rendered -- 80,000
Consulting charges on option exercise -- 45,000
Gain from security sales -- (253,000)
(Gain) loss on disposal of fixed assets 36,000 (264,000)
Change in assets and liabilities:
(Increase) decrease in assets:
Receivables (2,215,000) (3,041,000)
Inventories 104,000 (279,000)
Prepaid expenses and other current assets 30,000 (414,000)
Excess of accumulated costs over related billings 34,000 (30,000)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,648,000 840,000
Accrued payroll taxes and related expenses 574,000 2,713,000
Accrued interest 276,000 199,000
Income taxes payable (377,000) 293,000
Interim billings in excess of costs and estimated profits (1,000) 58,000
------- ------
Net cash provided by continuing operations 1,382,000 3,359,000
--------- ---------
Loss from discontinued operations (1,648,000) (814,000)
Adjustments to reconcile loss from discontinued operations to net cash
provided by (used in) discontinued operations:
Depreciation and amortization 257,000 425,000
(Gain) loss on disposal of fixed assets -- 120,000
Loss on disposal of segments 396,000 --
Net change in assets and liabilities 82,000 (43,000)
------ --------
Net cash used in discontinued operations (913,000) (312,000)
--------- ---------
Net cash provided by operating activities 469,000 3,047,000
------- ---------
(continued)
</TABLE>
See notes to consolidated financial statements
7
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996
Restated
1997 (footnote 6)
---- ------------
<S> <C> <C>
Cash Flows from Investing Activities:
Increase in other assets (120,000) (102,000)
Capital expenditures (385,000) (1,387,000)
Capitalized software development costs (462,000) (280,000)
Investments in securities (82,000) (550,000)
Proceeds from sale of securities 62,000 854,000
Payments for loans made (141,000) (2,176,000)
Collections for repayment of loans made 228,000 2,078,000
------- ---------
Net cash used in investing activities (900,000) (1,563,000)
--------- -----------
Cash Flows from Financing Activities:
Deferred offering costs (430,000) (188,000)
Net advances from asset based lender 980,000 (1,512,000)
Proceeds from issuance of debt 550,000 9,665,000
Repayment of debt (1,907,000) (2,087,000)
Proceeds from issuance of subordinated debt 115,000 --
Repayment of subordinated debt (141,000) (6,940,000)
Payments on capital lease obligations (691,000) (651,000)
Issuance of common stock -- 913,000
Subsidiaries issuance of common stock 2,000,000 375,000
--------- -------
Net cash provided by (used in) financing activities 476,000 (425,000)
------- ---------
Net Increase in Cash and Cash Equivalents 45,000 1,059,000
Cash and Cash Equivalents at Beginning of Period 2,748,000 1,578,000
--------- ---------
Cash and Cash Equivalents at End of Period $2,793,000 $2,637,000
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest $1,984,000 $1,751,000
========== ==========
Income taxes $383,000 $29,000
======== =======
(concluded)
</TABLE>
See notes to consolidated financial statements
8
<PAGE>
Consolidated Technology Group, Ltd. and Subsidiaries
Consolidated Statement of Cash Flows
Unaudited
Supplemental Disclosures of Non Cash Investing and Financing Activities:
During the Six Month Period Ended June 30, 1997:
(1) - Acquired equipment under capital lease obligations with a net present
value of $140,000.
During the Six Month Period Ended June 30, 1996:
(1) - A subsidiary of the Company, operating in the Medical Information
Services segment, incurred noncash compensation expense from the issuance of
stock options and warrants to purchase stock with a value of $2,229,000.
(2) - Acquired equipment under capital lease obligations with a net present
value of $340,000.
(3) - Issued stock options and incurred noncash consulting fees of $45,000.
(4) - A subsidiary of the Company issued common stock with a value of $80,000
in lieu of cash payments for services performed.
See notes to consolidated financial statements
9
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(1) Basis of Presentation - In the opinion of the Company, the accompanying
unaudited financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position of
Consolidated Technology Group, Ltd. and Subsidiaries, (the "Company"), as of
June 30, 1997 and December 31, 1996, the statement of changes in shareholders'
equity for the six months ended June 30, 1997, the results of its operations for
the three and six months ended June 30, 1997 and 1996 and the changes in cash
flows for the six months ended June 30, 1997 and 1996.
(2) Accounting Policies - The accounting policies followed by the Company are
set forth in Note 1 to the Company's financial statements in the December 31,
1996 Form 10-K.
(3) Interim Results - The results of operations for the three and six months
ended June 30, 1997 and 1996 are not necessarily indicative of the results to be
expected for the full year.
(4) Loss Per Share - Loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding. For purposes
of computing weighted average number of common shares outstanding the Company
has common stock equivalents consisting of stock options and warrants and Series
"A" Preferred Convertible Stock. The Series "A" Preferred Stock was deemed to be
a common stock equivalent when issued. The common stock equivalents are assumed
converted to common stock, when dilutive. During periods of operations in which
losses were incurred, common stock equivalents were excluded from the weighted
average number of common shares outstanding because their inclusion would be
anti-dilutive.
(5) Industry Segments - During the six months ended June 30, 1997, the Company
discontinued two of its operating subsidiaries, Three Dimensional Products and
Services and Audio Products Manufacturing (see footnote 6), and as a result,
currently classifies its continuing operations into six business segments: (i)
Contract Engineering Services consists of subsidiaries that provide engineers,
designers and technical personnel on a temporary basis pursuant to contracts
with major corporations; (ii) Medical Diagnostics consists of a subsidiary that
performs magnetic resonance imaging and other medical diagnostic imaging
services; (iii) Electro-Mechanical and Electro- Optical Products Manufacturing
consists of subsidiaries that manufacture and sell products such as devices that
measure distance and velocity, instrumentation devices, debit card vending
machines, prepaid telephone calling cards and finger print identification
products; (iv) Medical Information Services consists of subsidiaries that
provide medical information database services, health care industry related
software packages and the SmartCard medical identification cards and related
software program; (v) Telecommunications consists of a subsidiary that, among
other things, installs telephonic network systems and buys and resells local and
long-distance telephone service and (vi) Business Consulting Services consists
of subsidiaries that provide a variety of financial and business related
services. Corporate and Other consists of the operating activities of the
holding company entities. Intercompany transactions represent the consulting
fees that the Business Consulting Services segment charges to the other
segments. Intercompany balances represents amounts that are due the Company and
the Business Consulting Services segment from the business segments for advances
that have been made to the segments and for unpaid consulting fees. Certain
reclassifications have been made from the prior year presentation whereby the
holding company of Trans Global Services, Inc. is presented as a part of the
Contract Engineering Services segment and in the prior year it was included with
corporate and other. Additionally, the prior period segment information has been
restated to reflect the discontinuation of the Three Dimensional Products and
Services and Audio Products Manufacturing segments. Inter segment sales (other
than those with the Business Consulting services segment) and sales outside the
United States are not material. Information concerning the Company's business
segments is as follows:
10
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(5) Industry Segments:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1996
Restated Restated
1997 (footnote 6) 1997 (footnote 6)
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Revenues:
Contract Engineering Services $19,641,000 $14,996,000 $38,890,000 $28,468,000
Medical Diagnostics 7,444,000 7,579,000 15,144,000 15,692,000
Electro-Mechanical and Electro-Optical
Products Manufacturing 818,000 733,000 1,522,000 1,382,000
Medical Information Services 1,741,000 2,375,000 3,313,000 4,936,000
Telecommunications 2,287,000 1,016,000 4,266,000 1,758,000
Business Consulting Services 127,000 82,000 254,000 164,000
Intercompany Transactions (120,000) (76,000) (241,000) (151,000)
---------- ---------- ---------- ----------
Total Revenues $31,938,000 $26,705,000 $63,148,000 $52,249,000
=========== =========== =========== ===========
Gross Profit (Loss):
Contract Engineering Services $1,604,000 $1,460,000 $3,021,000 $2,293,000
Medical Diagnostics 2,649,000 3,256,000 5,677,000 7,097,000
Electro-Mechanical and Electro-Optical
Products Manufacturing (58,000) 142,000 (56,000) 221,000
Medical Information Services 265,000 650,000 422,000 1,312,000
Telecommunications 194,000 193,000 408,000 232,000
Business Consulting Services 127,000 82,000 254,000 164,000
Intercompany Transactions (106,000) (61,000) (210,000) (120,000)
--------- --------- --------- ----------
Total Gross Profits $4,675,000 $5,722,000 $9,516,000 $11,199,000
========== ========== ========== ===========
Income (Loss) from Operations:
Contract Engineering Services $422,000 $207,000 $478,000 ($280,000)
Medical Diagnostics 635,000 1,395,000 1,533,000 3,277,000
Electro-Mechanical and Electro-Optical
Products Manufacturing (359,000) (138,000) (659,000) (352,000)
Medical Information Services (458,000) 11,000 (985,000) (1,861,000)
Telecommunications (280,000) (179,000) (646,000) (451,000)
Business Consulting Services 100,000 66,000 194,000 133,000
Corporate and Other (282,000) (505,000) (715,000) (1,025,000)
--------- --------- --------- -----------
Total Loss from Operations ($222,000) $857,000 ($800,000) ($559,000)
========== ======== ========== ==========
</TABLE>
11
<PAGE>
Consolidated Technology Group, Ltd. and Subsidiaries
Unaudited Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(6) Industry Segments:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1996
Restated Restated
1997 (footnote 6) 1997 (footnote 6)
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Net Income (Loss):
Contract Engineering Services $256,000 $58,000 $158,000 ($494,000)
Medical Diagnostics (66,000) (218,000) 41,000 329,000
Electro-Mechanical and Electro-Optical
Products Manufacturing (402,000) (217,000) (751,000) (421,000)
Medical Information Services (586,000) (127,000) (1,240,000) (2,125,000)
Telecommunications (348,000) (209,000) (783,000) (509,000)
Business Consulting Services 100,000 68,000 194,000 134,000
Corporate and Other (134,000) 475,000 (458,000) 1,496,000
Discontinued Segments (604,000) (142,000) (1,252,000) (814,000)
--------- --------- ----------- ---------
Total Net Loss ($1,784,000) ($312,000) ($4,091,000) ($2,404,000)
============ ========== ============ ============
Depreciation and Amortization:
Contract Engineering Services $94,000 $120,000 $218,000 $235,000
Medical Diagnostics 1,347,000 1,255,000 2,683,000 2,498,000
Electro-Mechanical and Electro-Optical
Products Manufacturing 20,000 16,000 37,000 32,000
Medical Information Services 150,000 111,000 278,000 220,000
Telecommunications 20,000 8,000 37,000 16,000
Business Consulting Services -- 1,000 1,000 1,000
Corporate and Other 4,000 -- 8,000 4,000
----- -- ----- -----
Total Depreciation and Amortization $1,635,000 $1,511,000 $3,262,000 $3,006,000
========== ========== ========== ==========
</TABLE>
12
<PAGE>
Consolidated Technology Group, Ltd. and Subsidiaries
Unaudited Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(6) Industry Segments:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1996
Restated Restated
1997 (footnote 6) 1997 (footnote 6)
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Capital Expenditures:
Contract Engineering Services $87,000 $23,000 $104,000 $41,000
Medical Diagnostics 39,000 183,000 185,000 1,304,000
Electro-Mechanical and Electro-Optical
Products Manufacturing -- -- 7,000 --
Medical Information Services 35,000 15,000 83,000 35,000
Telecommunications -- -- 1,000 --
Business Consulting Services -- -- -- --
Corporate and Other 4,000 2,000 5,000 7,000
----- ----- ----- -----
Total Capital Expenditures $165,000 $223,000 $385,000 $1,387,000
======== ======== ======== ==========
December 31,
1996
June 30, Restated
1997 (footnote 6 & 7)
---- ----------------
Identifiable Assets:
Contract Engineering Services $14,264,000 $13,181,000
Medical Diagnostics 42,654,000 44,638,000
Electro-Mechanical and Electro-Optical
Products Manufacturing 3,456,000 3,389,000
Medical Information Services 7,573,000 8,258,000
Telecommunications 2,706,000 1,655,000
Business Consulting Services 1,948,000 1,754,000
Corporate and Other 44,466,000 49,437,000
Discontinued Segments -- 3,516,000
Intercompany Balances (50,808,000) (57,120,000)
------------ ------------
Total Identifiable Assets: $66,259,000 $68,708,000
=========== ===========
</TABLE>
13
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(6) Discontinued Operations - During the six months ended June 30, 1997, the
Company discontinued the Three Dimensional Products and Services and Audio
Products Manufacturing segments.
(a) Audio Products Manufacturing - On May 20, 1997, pursuant to a Comprehensive
Agreement, (the "WWR Agreement") by and among Mr. Donald L. Shamsie and Malco
Theatres, (the "Purchasers") and WWR Acquisition Corp., a majority owned holding
company of the Company which owned all of the capital stock of WWR Technology,
Inc., ("WWR"), (the "Seller"), the Company sold all of the issued and
outstanding capital stock of WWR, the subsidiary in which all of the operations
of the Audio Products Manufacturing segment operating activities were conducted,
to the Seller for $100,000. As a part of the WWR agreement, the Company was
released as a guarantor on approximately $394,000 in debt obligations owed by
WWR to two lenders. As a result of the sale, the Company received net proceeds
of approximately $62,000 and recorded a gain of approximately $129,000 on the
disposal. The operations of WWR up to the date of the WWR Agreement are
classified as loss from the operations of a discontinued segment. As of December
31, 1996 the assets and liabilities of the Audio Products Manufacturing segment
included in the Company's consolidated balance sheet consisted of the following:
Cash $ 50,000
Accounts receivable, net 336,000
Inventories 386,000
Prepaid and other current assets 10,000
Property, plant and equipment 309,000
Receivables, long-term 7,000
Trademark, net 368,000
Other assets 13,000
------
Total assets 1,479,000
---------
Accounts payable and accrued expenses 1,010,000
Accrued payroll and related expenses 146,000
Accrued interest 4,000
Current portion of long-term debt 541,000
Current portion of capitalized lease obligations 4,000
Capitalized lease obligations 10,000
------
Total liabilities 1,715,000
---------
Net liabilities disposed of $ 236,000
============
Presented in the balance sheet as follows:
Net assets of discontinued segment $687,000
Net current liabilities of discontinued segment 923,000
-------
Net liabilities disposed of $236,000
=======
14
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(b) - Three Dimensional Products and Services - Effective June 30, 1997, (the
Measurement Date"), the Company formulated a plan to discontinue the operations
of all of the subsidiaries operating in the Three Dimensional Products and
Services segment. As a result of the plan, it is estimated that the Company will
incur an additional $250,000 loss from the operations of such the Three
Dimensional Products and Services subsidiaries until the plan is completed,
which is not expected to take longer than one year. The Company has written-off
all assets of the Three Dimensional Products and Services subsidiaries,
consisting primarily of capitalized product development costs and property,
plant and equipment, and has recorded the remaining liabilities, including the
estimated loss to be incurred until the plan is complete, as net liabilities of
a discontinued segment. As a result of the plan, the Company has record a loss
of approximately $525,000 on the planned disposal. The operations of the Three
Dimensional Products and Services segment up to the Measure Date, have been
restated to present the operations of the Three Dimensional Products and
Services segment as a discontinued segment.
As of June 30, 1997 and December 31, 1996 the assets and liabilities of the
Three Dimensional Products and Services segment included in the Company's
consolidated balance sheet consisted of the following.
<TABLE>
<CAPTION>
December 31,
June 30, 1997 1996
------------- ----
<S> <C> <C>
Cash $ 48,000
Accounts receivable, net 100,000
Prepaid and other current assets 11,000
Property, plant and equipment 444,000
Deferred offering costs 115,000
Other assets 350,000
-------
Total assets 1,068,000
---------
Accounts payable and accrued expenses $ 1,224,000 1,007,000
Accrued payroll and related expenses 283,000 343,000
Accrued interest 20,000 1,000
Interim billings in excess of costs and estimated profits 57,000 --
Notes payable, related parties 279,000 295,000
Current portion of long-term debt 175,000 175,000
Current portion of capitalized lease obligations 8,000 43,000
Capitalized lease obligations 4,000 68,000
----- ------
Total liabilities 2,050,000 1,932,000
--------- ---------
Net liabilities to be disposed of $ 2,050,000 $ 864,000
========= ==========
Presented in the balance sheet as follows:
Net assets of discontinued segment -- $ 842,000
Net current liabilities of discontinued segment $ 2,046,000 1,706,000
Net long-term liabilities of discontinued segment 4,000 --
----- ---------
Net liabilities to be disposed of $ 2,050,000 $ 864,000
========= ==========
</TABLE>
(7) Lafayette Settlement Agreement - On December 20, 1996, SIS Capital Corp., a
wholly-owned subsidiary of the Company ("SISC"), entered into an agreement among
SISC, DLB, Inc. ("DLB") and Lafayette Industries, Inc., ("Lafayette"), pursuant
to which SISC and DLB transferred to Lafayette all of the issued and outstanding
common stock of SES Holdings, Corp. ("SESH"), in exchange for a controlling
interest in Lafayette. At the date of the acquisition, SESH was an 80% owned
subsidiary of SISC. Lafayette issued to SISC 1,000 shares of Class A preferred
stock which is convertible at a ratio that will give SISC a 65% ownership of
Lafayette's fully diluted common stock upon stockholder approval of an increase
in the authorized number of common shares of Lafayette. Contemporaneously with
the reverse acquisition, Lafayette issued 1,000 shares of Class B preferred
stock which has a redemption value of $6,750,000. The Series B preferred stock
was issued as payment to SISC for $4,000,000 of subordinated debt due to SISC
and in exchange for the cancellation of $2,750,000 of preferred stock of the
underlying entities of SESH which was held by SISC. Lafayette's prior principal
business, which was principally the manufacture and sale of store fixtures, has
been discontinued.
Lafayette's Form 10-KSB for its year ended December 31, 1996, filed April 15,
1997, included a disclaimer of opinion by Lafayette's independent certified
public accountants. This report disclosed that there was substantial doubt with
respect to Lafayette's ability to continue as a going concern. In addition,
Lafayette's accountants reported that they were unable to obtain written
representations from Lafayette's counsel regarding litigation relating, among
other things, to financial guarantees. Because of material uncertainties on the
part of the Company and SISC with respect to Lafayette's guarantees, pending
litigation, the accuracy of representations and warranties
15
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
made by Lafayette in the December 20, 1996 Stock Purchase Agreement with SISC,
DLB, Inc. ("DLB") and Lewis S. Schiller ("LSS") (the "Agreement"), the accuracy
and completeness of Lafayette's financial statements with respect to material
liabilities, Lafayette's financial condition and other matters, all of which
were brought to the attention of Lafayette by SISC following the discovery
thereof, SISC's and Lafayette's respective boards of directors determined that,
in order to avoid costly and time consuming litigation, Lafayette and SISC would
enter into an agreement providing for, among other things, the following: (a)
Lafayette's transfer to SPECTEC, Inc., ("SPECTEC"), a majority owned subsidiary
of SISC, and to DLB and LSS, as their respective interest appear, of all of
Lafayette's interest in SES Holdings Corp. ("SESH") acquired by Lafayette
pursuant to the Agreement; (b) SISC's transfer (or the transfer to Lafayette by
any other holder) of all of the Class A Convertible Preferred Stock and Series B
Redeemable Preferred Stock of Lafayette issued by Lafayette in consideration of
the purchase of the capital stock of SESH under the Agreement; (c) DLB's and
LSS's waiver of their respective rights, as provided for in the Agreement, to
receive any shares of Lafayette Common Stock; (d) the cancellation of all
obligations for loans and/or advances by Lafayette to SESH or subsidiaries of
SESH and the treatment of the amount of any such loans and/or advances as
additional contributions to capital; (e) the indemnification by SPECTEC of
Lafayette, on a limited basis, from and against any losses or damages resulting
from claims by those investors who purchased from Lafayette 8,000,000 shares of
Lafayette's capital stock in private transactions between December 20, 1996 and
April 21, 1997; and (f) the delivery by SPECTEC to Lafayette of any of such
securities purchased by such investors which were delivered to such investors by
Lafayette. A Settlement Agreement containing the foregoing provisions was
consummated between Lafayette, SISC., DLB, Lewis S. Schiller and SPECTEC as of
April 21, 1997.
At the time of the reverse acquisition, Lafayette's prior operations were
discontinued and the statement of operations for the year ended December 31,
1996 and the three and six months ended June 30, 1997 do not include any
operating activity related to Lafayette. As of December 31, 1996, the assets and
liabilities of Lafayette included in the Company's consolidated balance sheet
consisted of the following
Cash $ 1,020,000
Loans receivable 49,000
Prepaid and other current assets 24,000
Receivables, long-term 441,000
Receivables, related parties 85,000
Other assets 469,000
-------
Total assets 2,088,000
---------
Accounts payable and accrued expenses 1,202,000
Notes payable, related parties 690,000
Current portion of long-term debt 458,000
Convertible debentures 700,000
Current portion of capitalized lease obligations 99,000
------
Total liabilities 3,149,000
---------
Net liabilities disposed of $ 1,061,000
=========
As of December 31, 1996, the Company's investment in Lafayette was in excess of
Lafayette's equity resulting in a reduction in the Company's additional paid-in
capital of $1,061,000. The December 31, 1996 balance sheet has been restated to
conform with the current period presentation whereby the above assets and
liabilities and the decrease in additional paid-in capital were reversed.
(8) - Concentrations of Credit Risk - The Company's segments extend credit to
customers which result in accounts receivable arising from their normal business
activities and do not require its customers to collateralize their payables. The
Company's segments routinely assess the financial strength of its customer and
believe that their accounts receivable credit risk exposure is limited. Such
estimate of the financial strength of such customers may be subject to change in
the near future. Trans Global Services, Inc., (TGS"), which operates in the
Contract Engineering Services segment, has five clients, which when combined,
account for approximately 81% of the total
16
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
revenues of the segment for the six months ended June 30, 1997. These same
clients account for approximately 80% of the outstanding accounts receivable of
TGS. TGS's revenues for the six months ended June 30, 1997 amount to
$38,890,000, or 62%, of the Company's consolidated revenues. TGS's outstanding
accounts receivable amounts to $5,964,000, or 29%, of the Company's consolidated
accounts receivable as of June 30, 1997. Netsmart Technologies, Inc.,
("Netsmart"), which operates in the Medical Information Services segment,
cumulatively, from 1995 through June 30, 1997 has derived approximately $2.5
million, or 13%, of its revenue from one contract and as of June 30, 1997 such
contract is complete and no further revenue is anticipated from this contract.
As of June 30, 1997, the receivable balance due from such contract represents
15% of Netsmart's outstanding receivables. Netsmart's outstanding receivables as
of June 30, 1997 amounts to $2,432,000, or 12%, of the Company's consolidated
accounts receivable as of June 30, 1997. Overall, between these two segments,
six customers represent approximately 50% of the Company's consolidated revenue
for the six months ended June 30, 1997 and approximately 25% of the Company's
consolidated accounts receivable balance at June 30, 1997.
(9) - Employment Agreements
Chief Executive Officer
During the six months ended June 30, 1997, the Company entered into a restated
employment agreement, (the "CEO's Agreement"), with the Company's chief
executive officer, (the "CEO"), whereby the Board of Directors of the Company,
(the "Board"), and the CEO agreed that the prior employment agreements,
(original employment agreement dated January 1988, and certain restated
employment agreements entered into in September 1993, October 1994 and January
1996 did not accurately and properly reflect the intent and prior understanding
and agreement of the parties as to certain matters.
Term of CEO's Agreement:
The term of the CEO's Agreement commenced January 1988, the date of the original
employment agreement, and expires on December 31, 2000. The CEO's Agreement is
subject to termination prior to December 31, 2000 pursuant to certain
termination provisions contained in the agreement.
CEO's Compensation:
Effective September 1996, the CEO's annual salary is $500,000 and shall increase
annually by the greater of 5% or the increase in the cost of living index. A
bonus for each year is payable in an amount equal to 10% of the amount by which
the greater of (A) the Company's consolidated net income before taxes, or, (B)
the Company's consolidated net cash flow calculated as the Company's net income
plus depreciation, amortization and other non-cash items of expense, minus
payments of all principal amounts of outstanding debt, exceeds $600,000..
CEO's Benefits:
The CEO is entitled to four weeks paid vacation and fifteen paid sick days
during each year. The Company will pay for and maintain for the CEO disability
insurance providing for payment to the CEO of a minimum of 60% of his salary.
The Company is also required to pay and maintain for the CEO major medical,
hospitalization, dental and vision insurance and life insurance having a face
value of not less than $2,000,000, the proceeds of which shall be payable to
such beneficiaries as may be designated by the CEO. The Company will maintain
such disability, medical, dental, and vision insurance, at the Company's expense
for a period of 10 years after the expiration or termination of the CEO's
Agreement. The Company provides the CEO with a vehicle and reimburses the CEO
for all costs incurred by the CEO in connection therewith.
CEO's Severance:
In addition to any salary or bonus payable pursuant to the CEO's Agreement, the
CEO is entitled to severance compensation under the following circumstances:
(i) - In the event of the death of the CEO, the Company shall pay to the CEO's
beneficiary the face value of the life insurance policy to be maintained by the
Company.
17
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(ii) - In the event of the permanent disability of the CEO, the Company shall
pay to the CEO, 60% of his then salary for 10 years. In the event of a temporary
disability, (generally 6 months), the Company shall pay to the CEO 100% of his
salary and bonus for the period of the disability.
(iii) - The CEO will continue to receive his salary for 10 years, if the CEO's
Agreement is terminated due to any of the following events, (1) upon notice to
the Company by the CEO of the termination of the agreement for any breach or
default by the Company of any of its obligations or covenants under the CEO's
Agreement, provided that any such breach or default is not cured within 30 days
from notice; (2) in the event of a change of control, the CEO may terminate the
CEO's Agreement upon 90 days notice; wherein change of control is defined as the
date on which the Company sells all or substantially all of its assets or sells
more than 50% of the outstanding capital stock of any one or more subsidiaries,
the aggregate gross revenues of which constitute 33.33% or more of the aggregate
gross revenues of the Company on a consolidated basis, merges with or into or
consolidates with any entity, issues to an independent, non-affiliated third
party such number of shares of its outstanding capital stock (or equity or debt
instruments securities convertible into or exchangeable for shares of the
Company's capital stock) as shall equal 25% or more of its total issued and
outstanding shares of capital stock, or the CEO is removed from the Board,
without cause, provided, however, that a change of control shall not be deemed
to occur as a result of or in conjunction with any recapitalization or public
offering of the Company's securities or the occurrence of any of the foregoing
transactions which is approved by the CEO; (3) upon 30 days notice from the CEO
if the CEO is removed from the Board without cause; or (4) upon seven days
notice from the CEO in the event of the entry by a court of competent
jurisdiction of a decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency, or similar law
then in effect or the appointment of a receiver, liquidator, assignee,
custodian, trustee, or sequestrator of the Company or any substantial part of
its property or an order by any such court for the wind-up or liquidation of the
Company's affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency, or similar law is filed against the Company and is
pending for 60 days without a stay or dismissal; or the Company commences a
voluntary case under any such bankruptcy, insolvency, or similar law then in
effect, or makes any general assignment for the benefit of its creditors or
fails generally to pay its debts as such debts become due or takes corporate
action in furtherance of any of the foregoing.
CEO's Retirement:
In the event of the retirement of the CEO, the CEO or his beneficiary will
continue to receive monthly retirement compensation equal to one-twelfth of the
greater of, (A) the CEO's then annual salary; or (B) the average of the annual
salary and bonus of the CEO for each of the five years preceding the year of
retirement, for a period of 10 years from the date of retirement. Retirement
shall be deemed to have occurred at the expiration of the CEO's Agreement, or
any renewal of the CEO's Agreement, or at the mutual consent of the CEO and the
Company.
CEO's Participation in the Future Expansion of the Company:
During the term of the CEO's Agreement, the CEO or his designees shall have the
right to participate in the future expansion of the Company whereby, if the
Company, or any subsidiary of the Company proposes to form a subsidiary for any
purpose, the CEO shall have the right to form or cause to be formed, at the
CEO's sole cost and expense, such subsidiary and, in consideration of the CEO
bearing such cost and expense, the CEO shall receive
18
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10% of the authorized securities of each class and series of such newly formed
subsidiary and the CEO will be deemed to have equitable and beneficial ownership
of 10%of such securities. If subsequent to the formation of such subsidiary, the
subsidiary issues any securities as a dividend, stock split or any other
recapitalization, the CEO shall be entitled to receive his proportionate share
of such securities issued.
CEO's Purchase of 10% of SIS Capital Corp.:
SIS Capital Corp., ("SISC"), is a wholly owned subsidiary of the Company.
Substantially all of the operating subsidiaries of the Company are owned by
SISC. The CEO may, at any time during the term of the CEO's Agreement, upon 10
days notice, purchase up to 10% of the equity securities of SISC (on a fully
diluted basis) for a purchase price equal to the then fair market value of such
securities. The purchase price for such securities shall be payable by delivery
of the CEO's 10 year recourse promissory note, bearing interest at the lowest
rate necessary to avoid imputed interest under the Internal Revenue Code of
1986.
CEO's Profit Sharing Bonus:
In the event of the sale of any subsidiary or the business thereof or any
business combination including any subsidiary or of any securities purchased or
acquired by the Company or any subsidiary thereof as investment securities, the
CEO shall be entitled to a profit-sharing bonus equal to 20% of the gross
profit, if any received as a result of the sale or business combination.
CEO's Expense Reimbursement:
The Company is obligated to reimburse the CEO for all ordinary and necessary
expenses incurred in the performance of his services. In the event that the
Company moves its headquarters from the New York metropolitan area, and the CEO
elects to move, the Company will pay the CEO's moving costs, or if the CEO
elects not to move, the Company will provide the CEO with an office and a staff
in the New York metropolitan area. In the event that the Company establishes
multiple offices, the Company will pay the CEO a housing allowance of $3,500 per
month for as long as more than one office is maintained.
Corporate Secretary
On August 14, 1997, the Company entered into an employment agreement, (the
"Secretary's Agreement"), with the Company's Corporate Secretary. Such agreement
includes the following terms:
Term of Secretary's Agreement:
The term of the Secretary's Agreement is from the date of commencement until
December 31, 2002 and, at the option of the Secretary, may be extended for five
more years. The Secretary's Agreement is subject to termination prior to
December 31, 2002 pursuant to certain termination provisions contained within
the agreement.
Secretary's Compensation:
For 1997 the Secretary's annual salary is $200,000 and shall increase annually
by the greater of 5% or the increase in the cost of living index. A bonus for
each year is payable in an amount equal to 0.5% of the amount by which the
greater of (A) the Company's consolidated net income before taxes, or, (B) the
Company's consolidated net cash flow calculated as the Company's net income plus
depreciation, amortization and other non-cash items of expense, minus payments
of all principal amounts of outstanding debt, exceeds $600,000.
Secretary's Benefits:
19
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Secretary is entitled to three weeks paid vacation and fifteen paid sick
days during each year. The Company will pay for and maintain for the Secretary
disability insurance providing for payment to the Secretary of a minimum of 60%
of her salary. The Company is required to pay and maintain for the Secretary
major medical, hospitalization, dental and vision insurance and life insurance
having a face value of not less than $400,000, the proceeds of which shall be
payable to such beneficiaries as may be designated by the Secretary. The Company
will maintain such disability, medical, dental, and vision insurance, at the
Company's expense for a period of 10 years after the expiration or termination
of the Secretary's Agreement.
Secretary's Severance:
In addition to any salary or bonus payable pursuant to the Secretary's
Agreement, the Secretary is entitled to severance compensation under the
following circumstances:
(i) - In the event of the death of the Secretary, the Company shall pay to the
Secretary's beneficiary the face value of the life insurance policy to be
maintained by the Company.
(ii) - In the event of the permanent disability of the Secretary, the Company
shall pay to the Secretary, 60% of her then salary for 10 years. In the event of
a temporary disability, (generally 6 months), the Company shall pay to the
Secretary 100% of her salary and bonus for the period of the disability.
(iii) - The Secretary will continue to receive her salary for 10 years, if the
Secretary's Agreement is terminated due to any of the following events, (1) upon
notice to the Company by the Secretary of the termination of the agreement for
any breach or default by the Company of any of its obligations or covenants
under the Secretary's Agreement, provided that any such breach or default is not
cured within 30 days from notice; (2) in the event of a change of control, the
Secretary may terminate the Secretary's Agreement upon 90 days notice; wherein
change of control is defined as the date on which the Company sells all or
substantially all of its assets or sells more than 50% of the outstanding
capital stock of any one or more subsidiaries, the aggregate gross revenues of
which constitute 33.33% or more of the aggregate gross revenues of the Company
on a consolidated basis, merges with or into or consolidates with any entity,
issues to an independent, non-affiliated third party such number of shares of
its outstanding capital stock (or equity or debt instruments securities
convertible into or exchangeable for shares of the Company's capital stock) as
shall equal 25% or more of its total issued and outstanding shares of capital
stock, or the Secretary is removed from the Board, without cause, provided,
however, that a change of control shall not be deemed to occur as a result of or
in conjunction with any recapitalization or public offering of the Company's
securities or the occurrence of any of the foregoing transactions which is
approved by the Secretary; (3) upon 30 days notice from the Secretary if the
Secretary is removed from the Board without cause; or (4) upon seven days notice
from the Secretary in the event of the entry by a court of competent
jurisdiction of a decree or order for relief in respect of the Company in an
involuntary case under any applicable bankruptcy, insolvency, or similar law
then in effect or the appointment of a receiver, liquidator, assignee,
custodian, trustee, or sequestrator of the Company or any substantial part of
its property or an order by any such court for the wind-up or liquidation of the
Company's affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency, or similar law is filed against the Company and is
pending for 60 days without a stay or dismissal; or the Company commences a
voluntary case under any such bankruptcy, insolvency, or similar law then in
effect, or makes any general assignment for the benefit of its creditors or
fails generally to pay its debts as such debts become due or takes corporate
action in furtherance of any of the foregoing.
20
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Unaudited Footnotes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Secretary's Retirement:
In the event of the retirement of the Secretary, the Secretary or her
beneficiary will continue to receive monthly retirement compensation equal to
one-twelfth of the greater of, (A) the Secretary's then annual salary; or (B)
the average of the annual salary and bonus of the Secretary for each of the five
years preceding the year of retirement, for a period of 10 years from the date
of retirement. Retirement shall be deemed to have occurred at the expiration of
the Secretary's Agreement, or any renewal of the Secretary's Agreement, or at
the mutual consent of the Secretary and the Company.
Secretary's Participation in the Future Expansion of the Company:
During the term of the Secretary's Agreement, the Secretary or her designees
shall have the right to participate in the future expansion of the Company
whereby, if the Company, or any subsidiary of the Company proposes to form a
subsidiary for any purpose, the Secretary shall have the right to purchase 1% of
the authorized securities of each class and series of such newly formed
subsidiary at a purchase price that is equal to fair market value. The purchase
price for such securities shall be payable by delivery of the Secretary's 10
year recourse promissory note, bearing interest at the lowest rate necessary to
avoid imputed interest under the Internal Revenue Code of 1986. If subsequent to
the formation of such subsidiary, the subsidiary issues any securities as a
dividend, stock split or any other recapitalization, the Secretary shall be
entitled to receive her proportionate share of such securities issued.
Secretary's Profit Sharing Bonus:
In the event of the sale of any subsidiary or the business thereof or any
business combination including any subsidiary or of any securities purchased or
acquired by the Company or any subsidiary thereof as investment securities, the
Secretary shall be entitled to a profit-sharing bonus equal to 1% of the gross
profit, if any, received as a result of the sale or business combination.
Secretary's Expense Reimbursement:
The Company is obligated to reimburse the Secretary for all ordinary and
necessary expenses incurred in the performance of her services. In the event
that the Company moves its headquarters from the New York metropolitan area, and
the Secretary elects to move, the Company will pay the Secretary's moving costs,
including 6 months temporary housing, or if the Secretary elects not to move,
the Company will provide the Secretary with an office and a staff in the New
York metropolitan area. In the event that the Company establishes multiple
offices, the Company will pay the Secretary a housing allowance of $1,000 per
month for as long as more than one office is maintained.
21
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Matters
(a) Restated Employment Agreement with the CEO - During the six months ended
June 30, 1997, the Company and the CEO entered into a restated employment
asgreement. Reference is made herein to the footnotes to the financial
statements and Exhibit 10.1.
(b) Corporate Secretary's Employment Agreement - On August 14, 1997, the Company
entered into an employment agreement with the Company's Corporate Secretary.
Reference is made herein to the footnotes to the financial statements and
Exhibit 10.2
(c) Delisting from the NASDAQ - Effective August 15, 1997, the Company was
delisted from trading on the NASDAQ stock market for failure to meet a minimum
bid requirement of $1 and failure to meet a minimum net tangible worth
requirement of $1 million. Subsequent to the delisting from the NASDAQ stock
market, the Company's stock is traded on the OTCB Electronic Bulletin Board.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 CEO's Employment Agreement.
10.2 Corporate Secretary's Employment Agreement.1
10.3 Comprehensive Agreement dated May 20, 1997 between WWR Acquisition,
Corp., Don Shamsie and Malco Theatres relating to the sale of WWR
Technology, Inc. 1
11.1 Calculation of earnings per share. 1
27 Financial Data Schedule (filed only in electronic format with the SEC) (1)
(1) Exhibit is incorporated herein by reference to June 30, 1997 10-Q filed on
August 19, 1997
. . . . . . . . . . . . . . . . . . . . . . . . . .
22
<PAGE>
SIGNATURES
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.
CONSOLIDATED TECHNOLOGY GROUP, LTD.
/S/ President and Director September , 1997
Lewis S. Schiller (Principal Executive Officer)
/S/ Chief Financial Officer September , 1997
George W. Mahoney (Principal Financial and
Accounting Officer)
23
<PAGE>
Consolidated Technology Group Ltd. and Subsidiaries
Index to Exhibits
10Q Amendment #1
June 30, 1997
1. 10.1 CEO's Employment Agreement.
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
RESTATED EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of the 1st day of January, 1997, by and
between LEWIS S. SCHILLER, an individual residing at 208 West 11th Street, New
York, New York 10014 ("Executive"), and CONSOLIDATED TECHNOLOGY GROUP LTD., a
New York corporation with its principal offices at 160 Broadway, New York, New
York 10038 (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, through its wholly-owned or controlled
subsidiaries, is engaged in a variety of businesses, including medical
diagnostic imaging services, contract engineering services, manufacturing,
medical information systems, three-dimensional products and services,
telecommunications and financial advisory and business consulting services; and
WHEREAS, the Executive and the Company were parties to an Employment
Agreement dated January 1988, which was amended by various agreements subsequent
thereto, including that certain Executive Employment Contract and certain
Restated Employment Agreements dated as of September 1, 1993, October 1, 1994
and January 1, 1996 (the "Prior Employment Agreements"); and
WHEREAS, the Board of Directors of the Company (the "Board") and the
Executive have agreed that the Prior Employment Agreements did not and do not
accurately and properly reflect the intent and prior understanding and agreement
of the parties with respect to the matters provided for in Paragraph 6 hereof
and certain other matters; and
WHEREAS, the Board has approved a further amendment and restatement of
the Prior Employment Agreements to correct such inaccuracies and clarify certain
other matters; and
WHEREAS, the Company desires the Executive to continue to serve, and
the Executive is willing to continue to serve, as the Company's Chief Executive
Officer on and subject to the terms set forth in this Agreement;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs the Executive as its Chief
Executive Officer for the Term of this Agreement (as hereinafter defined)
subject to and in accordance with the terms, conditions and provisions of this
Agreement. The Executive shall also serve as an executive officer of such of the
Company's wholly-owned or controlled subsidiaries which shall include any entity
existing as of the date hereof or formed or acquired during the Term hereof,
including corporations, partnerships, limited liability companies, joint
ventures or other entities
Exhibit 10.1 Page 1 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
(each an "Entity" and collectively, the "Entities"), owned or controlled by the
Company or by any Entity owned or controlled by any such Entity (each a
"Subsidiary" and collectively, the "Subsidiaries") to which Executive may be
elected by the board of directors of any such Subsidiary. The Executive shall
also serve in such other positions or capacities, not inconsistent with his
position as Chief Executive Officer of the Company or the provisions of this
Agreement, to which he may be elected by the Board or by the board of directors
of any Subsidiary or to which he may be assigned by the Board from time to time
during the Term hereof. The Company shall, subject to the Executive's consent,
cause the Executive to be nominated and elected to the Board and to the boards
of directors of such of the Subsidiaries as the Board may determine. The
Executive hereby accepts such employment upon and subject to the terms,
conditions and provisions of this Agreement.
2. Executive's Duties and Responsibilities.
(a) During the Term hereof, the Executive will perform all of
the services customarily associated with the position of chief executive officer
including, without limitation, services on behalf of any Subsidiary of which he
may serve as an officer, subject to the policies established by and at the
direction of the Board.
(b) The Executive will devote substantially all of his business
time, attention and efforts to the performance of his duties under this
Agreement during the Term hereof and shall perform such duties diligently, in
good faith and in a manner consistent with the best interests of the Company.
The Executive will use his best efforts at all times during the Term hereof to
preserve, protect, enhance and maintain the trade, business and goodwill of the
Company. Subject to the provisions of subparagraphs 7(b) and (c) hereof, the
Executive will perform his services wherever his services may reasonably be
required, but principally at the principal offices of the Company, which are
currently located at 160 Broadway, New York, New York 10038.
3. Term; Severance.
(a) The term of this Agreement (the "Term") commenced in January
1988 and shall expire on December 31, 2000, subject to earlier termination as
provided in subparagraph 3(b) below. The Executive shall have the right, upon
notice to the Company, not later than sixty (60) days prior to the expiration of
the Term hereof, to extend the Term of this Agreement for up to an additional
five (5) year period commencing on January 1, 2001 (and the "Term" shall include
any such extended period):
(b) This Agreement shall terminate prior to December 31, 2000,
upon the occurrence of any of the following events:
(i) The death of the Executive;
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Exhibit 10.1 CEO's Employment Agreement
(ii) The Permanent Disability, as hereinafter defined, of
the Executive, subject to the provisions of Paragraph 8 of this Agreement;
(iii) Entry of a final judgment by a court of competent
jurisdiction that there has been repeated and deliberate misconduct by the
Executive;
(iv) Entry of a final judgment by a court of competent
jurisdiction that there has been a repeated breach of trust or other repeated
action by which the Executive has obtained a material personal gain (other than
as provided for in this Agreement or consented to by the Board) at the material
expense or to the material detriment of the Company;
(v) Entry of a final judgment by a court of competent
jurisdiction that there has been a failure by the Executive to perform the
customary duties of his position; provided that the Executive is furnished with
notice of such breach from the Company, which notice sets forth with
particularity such alleged failures, and the Executive fails to cure any such
breach within thirty (30) days of such notice. If the alleged breach is of a
type that cannot be cured within thirty (30) days, no breach shall exist under
this subparagraph 3(b)(v) if the Executive has undertaken and is diligently
pursuing such cure;
(vi) Upon notice to the Company by the Executive of the
termination of this Agreement for any breach or default by the Company of any of
its obligations or covenants under this Agreement; provided that any such breach
or default is not cured within thirty (30) days of such notice; or
(vii) In the event of a Change of Control, as hereinafter
defined, during the Term hereof, the Executive may terminate this Agreement upon
ninety (90) days notice to the Company. For purposes of this Agreement, the term
"Change of Control" shall mean the date on which the Company sells all or
substantially all of its assets, sells more than 50% of the outstanding capital
stock of any one or more subsidiaries, the aggregate gross revenues of which
constitute 33-1/3% or more of the gross revenues of the Company on a
consolidated basis, merges with or into or consolidates with any Entity, issues
to an independent, non-affiliated third party such number of shares of its
outstanding capital stock (or equity or debt securities convertible into or
exchangeable for shares of the Company's capital stock) as shall equal twenty
five percent (25%) or more of its total issued and outstanding shares of capital
stock, or Executive is removed from the Board, without cause, provided, however,
that a Change of Control shall not be deemed to occur as a result of or in
connection with any recapitalization or public
Exhibit 10.1 Page 3 of 21
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Exhibit 10.1 CEO's Employment Agreement
offering of the Company's securities or the occurrence of any of the foregoing
transactions which is approved by the Executive. For the purpose of this
subparagraph 3(b)(vii), a merger transaction shall mean the merger or
consolidation of the Company with or into any other Entity; or
(ix) Upon thirty (30) days notice from Executive if
Executive is removed from the Board without cause; or
(x) Upon seven days notice from Executive in the event of
the entry by a court of competent jurisdiction of a decree or order for relief
in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency, or similar law then in effect or the appointment of a
receiver, liquidator, assignee, custodian, trustee, or sequestrator of the
Company or for any substantial part of its property or an order by any such
court for the wind-up or liquidation of the Company's affairs; or a petition
initiating an involuntary case under any such bankruptcy, insolvency, or similar
law is filed against the Company and is pending for sixty (60) days without a
stay or dismissal; or the Company commences a voluntary case under any such
bankruptcy, insolvency, or similar law then in effect, or makes any general
assignment for the benefit of its creditors or fails generally to pay its debts
as such debts become due or takes corporate action in furtherance of any of the
foregoing.
(c) In the event of a Change of Control of any Subsidiary to
which Executive renders services pursuant to this Agreement, or the occurrence
of any event with respect to any such subsidiary under subparagraphs 3(b)(vi) or
3(b)(viii), the Executive shall have the right to resign as an officer and/or
director of such Subsidiary; provided, however, that such resignation shall not
affect the compensation or any benefits payable to the Executive, or any rights
of the Executive pursuant to this Agreement.
4. Compensation. In consideration of the performance by the Executive
of the services to be performed by him under this Agreement during the Term
hereof, the Company will pay to the Executive the following compensation:
(a) (i) An annual salary at the rate of Five Hundred Thousand
Dollars ($500,000), plus the increases thereto hereinafter referred to (the
"Salary") from September 1, 1996 through the remainder of the Term hereof. The
Salary shall be paid to the Executive in equal weekly installments (after the
deduction of all applicable withholding and other required payroll deductions),
in arrears, during the Term hereof. The Salary may be increased at any time and
from time to time by the Board during the Term hereof. The term "Salary" shall
also include all such increases as well as all increases pursuant to
subparagraph 4(a)(ii) below.
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Exhibit 10.1 CEO's Employment Agreement
(ii) Commencing January 1, 1997 and on each January 1
thereafter during the Term hereof, the Executive shall receive an increase in
Salary equal to the greater of (A) five percent (5%) of the Salary in effect for
the year prior to such increase, or (B) the increase, if any, in the Cost of
Living Index, as hereinafter defined. The Company will, on the next payroll date
following the publication of such Cost of Living Index, pay to the Executive all
amounts of such increased salary determined in accordance with the preceding
sentence for the period commencing on the 1st day of January of such year
through such payroll date.
(iii) For purposes of this subparagraph 4(a), the increase
in the Cost of Living Index shall be computed as follows:
(A) The Cost of Living Index, as hereinafter
defined, for each December, commencing with December 1996, shall be compared
with the Cost of Living Index for December of the previous year. The increase in
the Cost of Living Index shall mean the percentage increase in the Cost of
Living Index from the previous December to the December as of which the
computation is made. Such determination shall be made as soon as possible after
publication of the Cost of Living Index for the December as of which the
computation is being made.
(B) The Cost of Living Index shall mean the
"Consumers Price Index for Urban Wage Earners and Clerical Workers (Revised
Series) - New York Metropolitan Area," published by the Bureau of Labor
Statistics of the United States Department of Labor. If the said Cost of Living
Index in the form in which it is published as of the date of this Agreement or
the calculation basis thereof shall be revised or discontinued, the parties
shall attempt in good faith to modify the provisions of this subparagraph
4(a)(ii) on a basis which will provide a method of calculation consistent with
the method described herein for prior years.
(b) (i) A bonus for each calendar year during the Term of this
Agreement (the "Bonus") commencing with the year ending December 31, 1995, equal
to ten percent (10%) of the amount by which the greater of (A) the Company's
consolidated net income before income taxes, determined in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years or (B) the Company's Consolidated Net Cash Flow, as hereinafter
defined, exceeds Six Hundred Thousand Dollars ($600,000). "Consolidated Net Cash
Flow" shall mean (A) consolidated net income, plus (B) depreciation,
amortization and other non-cash items of expense, minus (C) payments of all
principal amounts of then outstanding indebtedness, all determined in accordance
with generally accepted accounting principles applied on a basis consistent with
prior years. The
Exhibit 10.1 Page 5 of 21
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Exhibit 10.1 CEO's Employment Agreement
computation of consolidated net income before income taxes and Consolidated Net
Cash Flow shall be made in a manner consistent with the financial statements
included in the Company's Annual Report on Form 10-K for the year with respect
to which the Bonus is computed; provided, however, that such computation shall
be made without any deduction for the Bonus payable to the Executive pursuant to
this subparagraph 4(b). Such computation shall be made by the Company's
independent auditors, whose determination shall be final, binding and conclusive
on the parties (subject to the provisions of subparagraph 4(b)(iii) hereof)
(ii) The Bonus shall be payable to the Executive on or
before the later of (A) thirty (30) days following the completion of the audited
consolidated financial statements of the Company, or (B) May 1 of each such
year, or (C) within ten (10) days after the final resolution of any disagreement
with respect to the calculation of consolidated net income before income taxes
or Consolidated Net Cash Flow pursuant to subparagraph 4(b)(iii) of this
Agreement. In the event of any termination of this Agreement prior to the end of
any calendar year during the Term hereof, the Company will pay to the Executive
(or, in the case of early termination due to the Executive's death, to his
beneficiary, as hereinafter defined), with respect to the year in which any such
termination occurs, a portion of the Bonus which shall be determined by
calculating the Bonus for the entire year in which such termination occurs and
multiplying such Bonus by a fraction, the numerator of which is the number of
months in such year prior to the month in which such termination occurs and the
denominator of which shall be twelve (12), unless such termination results from
an event or occurrence described in subparagraph 3(b)(iii) of this Agreement, in
which case, notwithstanding any provision of this Agreement to the contrary, the
Company will have no obligation to make any payment of the Bonus to the
Executive for the year in which such termination occurs. As used in this
Agreement, the term "beneficiary" shall mean the person designated by the
Executive by an instrument signed by the Executive, acknowledged before a notary
public and delivered to the Company. In the event that the Executive fails to
designate a beneficiary as provided in the previous sentence, his estate shall
be deemed to be his beneficiary.
(iii) The Company shall deliver to the Executive with each
Bonus payment a report setting forth the calculation of consolidated net income
before income taxes and Consolidated Net Cash Flow for the year with respect to
which such Bonus is paid, computed in accordance with subparagraph 4(b)(i) of
this Agreement. Unless the Executive notifies the Company within fifteen (15)
business days after receipt of said calculations of his disagreement therewith
(which notice shall state with reasonable specificity the reasons for any such
disagreement and the amounts in dispute), such calculations will be final,
binding
Exhibit 10.1 Page 6 of 21
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Exhibit 10.1 CEO's Employment Agreement
and conclusive on the Executive. If there is a disagreement of which the Company
is so notified by the Executive, and the disagreement cannot be resolved by the
Company and the Executive within sixty (60) days following the delivery of such
notice, the items in dispute may be submitted by either the Company or the
Executive to the Company's independent auditors (with a copy being furnished to
the other party). After affording each of the Company and the Executive the
opportunity to present their respective positions (which opportunity shall not
extend for more than ten (10) business days following the submission of such
disputed items to such auditors), the Company's independent auditors shall
determine what changes, if any, are required in the calculations, and such
determination shall be final, binding and conclusive on the Company and the
Executive. The fees, costs and expenses of such independent auditors shall be
borne by the Company.
(iv) The Executive and his duly authorized representatives
shall have the right, at his sole expense, upon reasonable advance notice and
during normal business hours at the Company's offices, to examine and copy the
books and records of the Company relating to its financial statements and/or any
sums payable to Executive under this Agreement.
(c) In the event of a termination of this Agreement pursuant to
subparagraphs 3(b)(i), (ii), (vi), (vii), (viii) or (ix) of this Agreement, the
Executive will be entitled to receive from the Company, in addition to any
Salary and Bonus payable pursuant to this Paragraph 4, and the Company will pay
to the Executive, severance compensation as follows:
(i) In the event of any termination of the Term hereof
pursuant to subparagraph 3(b)(i) of this Agreement, the Company will pay to the
Executive's beneficiary the face value of the life insurance policy to be
maintained by the Company pursuant to subparagraph 5(b) of this Agreement upon
the Company's receipt of the proceeds of such insurance policy. In the event
that the Company fails to maintain such insurance, the Company will pay such
amount in forty-eight (48) equal consecutive monthly installments, the first of
which shall be due and payable on the first day of the first month following the
month in which the Executive's death occurs.
(ii) In the event of the termination of this Agreement
pursuant to subparagraph 3(b)(ii) of this Agreement, the Executive will be
entitled to receive the payments provided for in subparagraph 8(b) of this
Agreement.
(iii) In the event of the termination of this Agreement
pursuant to subparagraphs 3(b)(vi), (vii), (viii) or (ix) of this Agreement, the
Executive, his legal representative or his beneficiary, as the case may be, will
continue to receive
Exhibit 10.1 Page 7 of 21
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Exhibit 10.1 CEO's Employment Agreement
the Executive's then Salary in equal monthly installments, in advance, for a
period of one hundred twenty (120) months from the date of any such termination.
(d) In the event of the sale, during the Term hereof, by the
Company or any Subsidiary of any securities purchased or acquired solely for
investment purposes or in exchange for or in consideration of the performance of
services or as a fee (the "Investment Securities"), or of the stock, business or
assets of the Company or any Subsidiary of the Company, the Executive shall be
entitled to a profit-sharing bonus (the "Profit-Sharing Bonus") equal to twenty
percent (20%) of the gross profit (determined as provided below), if any,
received by the seller in such transaction (the "Seller") as a result of such
sale. In the event of any such sale in which the purchase price is paid in cash
or marketable securities, or a combination of cash and marketable securities,
the Profit-Sharing Bonus shall be paid by delivery to the Executive by the
Seller of cash and/or marketable securities in the same proportion as received
by the Seller. In all other events, the Profit-Sharing Bonus shall be payable in
cash or in such other manner as to which the Executive and the Company may agree
prior to the consummation of such sale. Each Profit-Sharing Bonus shall be
payable by the Seller to the Executive not later than twenty (20) days following
the date of any such sale and each such payment shall be accompanied by a
document, signed by the Chief Financial Officer of the Company, showing the
Seller's adjusted cost basis in the Investment Securities, stock, business or
assets sold, the gross sale price, the gross profit on such sale, which shall be
the Seller's gross sale price less the Seller's adjusted cost basis in the
Investment Securities, stock, business or assets sold (the "Gross Profit"), the
amount of the Profit-Sharing Bonus payable and a description and statement of
the value of each kind of property, other than cash, being delivered in payment
of the Profit-Sharing Bonus (the "Bonus Certificate"). The adjusted cost basis
of the Seller in the Investment Securities, stock, business or assets being
sold, the value of each kind of property, other than cash, received by the
Seller in such sale, the gross sale price and the amount of the Profit-Sharing
Bonus shall be determined by the Company's independent auditors. If the
Executive shall not have disputed the amount of such payment, the accuracy or
completeness of the Bonus Certificate and/or the information set forth in such
Bonus Certificate within thirty (30) days following the receipt of payment of
any Profit-Sharing Bonus under this subparagraph 4(d) and the related Bonus
Certificate, then the information set forth in the Bonus Certificate shall be
conclusive and binding upon the parties. If the Executive desires to dispute the
amount of such payment, the accuracy or completeness of the Bonus Certificate
and/or the information set forth therein, such dispute shall be conducted and
resolved in accordance with the procedures set forth in subparagraph 6(d) of
this Agreement. The Bonus Certificate to which any such dispute relates will be
Exhibit 10.1 Page 8 of 21
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Exhibit 10.1 CEO's Employment Agreement
promptly modified following the resolution of any such dispute to reflect such
resolution.
(e) Attached hereto as Schedule A is a schedule setting forth as
of the date hereof each Investment Security purchased or acquired by the Company
or any Subsidiary of the Company prior to the date hereof, the purchase price of
each such Investment Security, the date or dates of acquisition of each such
Investment Security, and the date of transfer or sale of each such Investment
Security that has been transferred or sold. Each time, subsequent to the date
hereof that the Company or any Subsidiary acquires or otherwise obtains an
Investment Security which is subject to subparagraph 4(d) of this Agreement, the
Company shall prepare and deliver to the Executive a supplement to or an updated
Schedule A which will set forth the date of such supplement or update, the
Investment Security acquired or otherwise obtained (including the type or
designation of such Security, the number of shares of such Security and the date
of purchase or acquisition thereof) and the purchase price of such Security.
Each such supplement or updated Schedule A shall be signed by the Chief
Financial Officer of the Company when delivered to the Executive and, upon
receipt by the Executive, will be countersigned and returned to the Company by
the Executive (unless disputed in accordance with the provisions of subparagraph
6(d) hereof). Notwithstanding any provision in this Agreement to the contrary,
Schedule A attached hereto is binding and conclusive on the parties hereto as to
the Investment Securities, purchase price, and dates of acquisition as set forth
in such Schedule.
(f) In the event of the Retirement (as hereinafter defined) of
the Executive, the Executive or his legal representative or beneficiary, as the
case may be, will continue to receive, as and for retirement compensation, an
amount equal to one-twelfth of the greater of (i) the Executive's Salary for the
year in which Retirement occurs, or (ii) the average of the Executive's Salary
and Bonus for each of the five (5) years immediately preceding the year in which
Retirement occurs, for a period of one-hundred-twenty (120) months from the date
of commencement of such Retirement. The amount calculated pursuant to the
preceding sentence shall be payable, in equal monthly installments, in arrears.
For the purpose of this subparagraph 4(f), "Retirement" shall be deemed to have
occurred at the expiration of the Term or any renewal Term of this Agreement or
upon termination of the employment provided for herein prior to the expiration
of the Term by the mutual consent of the Executive and the Company.
Exhibit 10.1 Page 9 of 21
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Exhibit 10.1 CEO's Employment Agreement
5. Executive Benefits. In addition to the Salary, Bonus and
severance compensation, the Executive will receive the following benefits:
(a) The Executive will be entitled to four (4) weeks paid
vacation and fifteen (15) paid sick days during each calendar year of the Term
hereof commencing with 1994. The Executive will take such vacation at such times
as will not unreasonably interfere with significant activities of the Company
and upon reasonable advance notice to the Company. Any unused vacation or sick
days shall be paid to the Executive by the Company at the end of each year of
the Term hereof based upon Executive's then Salary.
(b) The Company will pay for and maintain for the Executive
during the Term of this Agreement, disability insurance providing for the
payment to the Executive of a minimum of sixty percent (60%) of his Salary for
any "disability" as defined in such disability insurance policy. The Company
will also pay and maintain for the Executive during the Term hereof, major
medical, hospitalization, dental and vision insurance (which insurance will
cover the Executive and members of his immediate family, as defined in the
applicable insurance policies) and life insurance upon the life of the Executive
having a face value of not less than Two Million Dollars ($2,000,000), the
proceeds of which shall be payable to such beneficiary(ies) as shall be
designated by the Executive from time to time during the Term hereof, or, in the
absence thereof, Executive's estate. The Company will maintain such disability,
medical, dental, and vision insurance in effect, at the Company's cost, for a
period of one hundred twenty (120) months after the expiration or termination of
the Term hereof unless this Agreement shall be terminated pursuant to
subparagraphs 3(b), (iii), (iv) or (v) of this Agreement, in which case the
Company will not be obligated to maintain such insurance. During the Term
hereof, any such life insurance policy which the Company is obligated hereby to
maintain will remain the property of the Company; provided, however, upon the
expiration of the Term hereof, the Executive will have the right to have such
life insurance policy assigned to him and the Company shall continue to pay or
reimburse the Executive for all costs therefor. The Company may, at its election
at any time during the Term hereof, obtain and maintain at its cost, a key man
life insurance policy on the Executive's life with the Company as the
beneficiary thereof, and the Executive will cooperate with the Company and its
insurer with respect to obtaining and maintaining in force such insurance
policy.
(c) The Company will provide the Executive with a late model
luxury automobile during the Term of this Agreement (and/or reimburse the
Executive for all costs incurred by him in connection therewith). In addition,
the Company will pay or reimburse the Executive for the cost of insurance,
gasoline,
Exhibit 10.1 Page 10 of 21
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Exhibit 10.1 CEO's Employment Agreement
service and maintenance of such automobile upon presentation of bills or other
evidences of payment therefor.
(d) The Company agrees that nothing contained in this Agreement
is intended to, or shall be deemed to be a grant to the Executive in lieu of, or
as a limitation upon, any rights and privileges to which the Executive may
otherwise be entitled as an executive employee of the Company or any Subsidiary
under any retirement, pension, profit sharing, insurance, hospitalization or
other employee benefit plan of any type (including, without limitation, any
incentive, profit sharing, bonus or stock option plan), which may now be in
effect or which may hereafter be adopted or instituted by the Company or any
Subsidiary during the Term hereof of which the Executive is an officer or
director, it being understood that the Executive shall have the same rights and
privileges to participate in such Company and Subsidiary benefit plans as any
other officer or executive employee of the Company or any such Subsidiary.
6. Executive's Right to Participate in Future Expansion of the
Company.
(a) From and after January 1988, and through the expiration or
earlier termination of the Term hereof, the Executive or his designees (who or
which, for the purposes of this Paragraph 6, shall be deemed to be included in
the definition of and referred to as the "Executive"), shall have the right to
and benefit of participating in the future growth and expansion of the Company,
as hereinafter provided in this Paragraph 6.
(b) If the Company or any subsidiary of the Company or any
subsidiary of any such Subsidiary, which, for the purposes of this Paragraph 6,
shall include any corporation in which the Company or any such Subsidiary
thereof owns capital stock (any such corporation being hereinafter referred to
in this Paragraph 6 as a "Parent") proposes to form a subsidiary for any purpose
whatsoever including, but not limited to the formation of a subsidiary to
acquire, or to enter into any agreement or other understanding to acquire, by
purchase, merger, consolidation or by or as a result of any other form of
business arrangement (including the establishment of a new business) or
combination (an "Acquisition"), all or any part of any corporation, partnership,
joint venture, proprietorship or other operating business, or any equity
interest in any such business (other than for investment purposes only, for
services rendered or as a fee, as provided for in subparagraph 4(d) hereof),
including, but not limited to, the acquisition of common or preferred stock of
any class or series, or options, warrants, rights or other securities
convertible into or exchangeable for common or preferred stock of any class or
series (each a "Security" or collectively, the "Securities"), the Executive
shall have the right to form or cause to be formed, at his sole cost and
expense, such subsidiary
Exhibit 10.1 Page 11 of 21
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Exhibit 10.1 CEO's Employment Agreement
or subsidiaries (the "Purchaser") and, in consideration of the Executive bearing
such cost and expense, the Executive shall receive, as of the date of the
formation of any such Purchaser, 10% of the authorized Securities of each class
and series of such Purchaser at that date (the "Founder's Securities"). Whether
or not the Founder's Securities of any Purchaser are physically issued on the
date of the formation of any such Purchaser, the Executive shall be deemed to
have equitable and beneficial ownership of 10% of such Founder's Securities as
of the date of formation of any such Purchaser.
(c) If, subsequent to the formation of any such Purchaser, such
Purchaser issues, or agrees to issue, any Securities as a dividend or in respect
of any Securities of such Purchaser then held by the Executive or in connection
with any stock split or other recapitalization, Executive shall, as a security
holder of such Purchaser, be entitled to receive his proportionate share of such
subsequently issued securities (the "Subsequently Issued Securities").
(d) Attached hereto as Schedule B is a schedule as of the date
hereof setting forth the name, state of incorporation and date of formation of
each Purchaser, the capitalization of each Purchaser as of its date of
formation, the Founder's Securities of such Purchaser issued to the Executive,
the cost basis of the Executive in connection with the formation of each such
Purchaser, the Subsequently Issued Securities of each Purchaser, if any, the
Subsequently Issued Securities of each Purchaser owned by Executive, and the
date of ownership of same. Each time, subsequent to the date of this Agreement,
that a new Purchaser is formed, the Executive shall prepare and deliver to the
Company a supplement to or an updated Schedule B which shall set forth the date
of such supplement or update and include the information specified in the
preceding sentence with respect to the new Purchaser. Each such supplement or
updated Schedule B shall be signed by the Executive when delivered to the
Company and, upon receipt by the Company, will be countersigned and returned to
the Executive by the Chief Financial Officer of the Company. Each time,
subsequent to the date hereof, that Subsequently Issued Securities are approved
for issuance by the Board of Directors of a Purchaser, the Company shall prepare
and deliver to the Executive a supplement to or an updated Schedule B which
shall include the information specified above with respect to the Subsequently
Issued Securities. Each such supplement to or updated Schedule B shall be signed
by the Chief Financial Officer of the Company when delivered to the Executive.
If the Executive does not dispute any of the information set forth therein, he
will countersign such supplement or updated Schedule B and return it to the
Chief Financial Officer of the Company and the information set forth therein
will be binding upon the parties hereto. If the Executive disputes any of the
information in such supplement or updated Schedule B, he shall be required to
Exhibit 10.1 Page 12 of 21
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Exhibit 10.1 CEO's Employment Agreement
give notice of such dispute to the Company within such thirty (30) day period
(the "Dispute Notice"). The Dispute Notice shall set forth the specifics of the
Executive's dispute if the Company and Executive shall not have resolved such
dispute within thirty (30) days after the Company's receipt of the Dispute
Notice, the matter shall be submitted to the Company's then independent auditors
for a determination thereof and the decision of such auditors shall be final,
binding and conclusive on the Company, the Parent and the Executive. The fees of
said auditors shall be paid by the Company. The supplement or updated Schedule B
to which the Dispute Notice relates will be promptly modified following the
resolution of any such dispute to reflect such resolution. Notwithstanding any
provision in this Agreement to the contrary, Schedule B attached hereto is
binding and conclusive on the parties hereto with respect to the accuracy of the
information set forth therein.
(e) Notwithstanding the provisions of any subparagraph of this
Paragraph 6, the Executive shall have no entitlement, by virtue of the
provisions of this Agreement, to any debt or equity securities of the Company
which are issued to or in any other manner become the property of any subsidiary
of the Company.
(f) The Executive may, at any time during the Term of this
Agreement, upon ten (10) days notice to the Company, purchase up to ten (10%)
percent of the equity securities of SISC (on a fully diluted basis) for a
purchase price equal to the then fair market value thereof. The purchase price
for such equity securities shall be payable by delivery of Executive's ten (10)
year recourse promissory note, bearing interest at the lowest rate necessary to
avoid imputed interest under the Internal Revenue Code of 1986, as amended,
interest being payable annually and all principal being payable upon maturity of
said note (which note shall be prepayable, in whole or in part at any time,
without premium or penalty). The fair market value of such equity securities
shall be determined by the Company's Chief Financial Officer and a notice of
such determination, specifying the fair market value of such equity securities
signed by the Company's Chief Financial Officer, shall be given to the Executive
within thirty (30) days after the Executive's aforementioned notice and shall be
binding upon Executive unless Executive notifies the Company of his disagreement
with the determination thereof within thirty (30) days after his receipt of such
notice from the Chief Financial Officer. If the Company and the Executive shall
not have resolved such dispute within thirty (30) days after the Company's
receipt of the Executive's notice disagreeing with such determination, the
matter shall be submitted to the Company's then independent auditors for a
determination thereof and the decision of such auditors shall be final, binding
and conclusive on the Company and the Executive.
Exhibit 10.1 Page 13 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
7. Expense Reimbursement.
(a) The Company will reimburse the Executive for all ordinary and
necessary expenses incurred by him in connection with the performance of his
services under this Agreement, subject to and upon receipt by the Company of
invoices or other supporting documentation in accordance with the Company's
expense reimbursement policies as in effect from time to time.
(b) In the event that the Company moves its corporate
headquarters from the New York metropolitan area, the Company will, if the
Executive elects to relocate, pay the Executive's reasonable moving expenses,
including temporary living accommodations for up to six months; provided, that
the Company may not require the Executive to relocate. In the event the Company
so relocates its corporate headquarters and the Executive elects not to
relocate, the Company will provide the Executive, at the Company's cost, with
such offices and staff in a location in the New York metropolitan area as to
which the Company and the Executive may agree.
(c) In the event that the Company establishes multiple offices
and the Executive is required to spend any significant part of his time at more
than one Company office, the Company shall pay to the Executive a housing
allowance of Three Thousand Five Hundred Dollars ($3,500) per month for as long
as more than one Company office is maintained; provided, however, that following
the closing of any such office, the Company will reimburse the Executive for any
costs incurred by him in moving and in terminating any lease obligations and
similar expenses.
8. Disability.
(a) In the event the Executive suffers any temporary disability
during the Term hereof, he shall continue to receive one hundred (100%) percent
of the Salary and Bonus to which he was entitled at the time he became so
disabled for any period of disability not in excess of six (6) consecutive
calendar months. The term "Permanent Disability" as used in this Agreement shall
mean any disability of the Executive for a period in excess of six (6)
consecutive calendar months. For the purpose of this subparagraph 8(a), the
terms "disabled" and "disability" shall mean (i) any physical or mental illness,
injury or other incapacity which, in the opinion of a doctor reasonably
satisfactory to the Company and the Executive or his legal representative,
renders the Executive unable to perform substantially all of his duties under
this Agreement, or (ii) a judicial determination of incompetence. The date that
any such disability shall be deemed to have commenced shall be the date the
Executive first absents himself from work during a continuous period of
disability as determined by the doctor referred to in this subparagraph 8(a) or
the date of judicial determination of incompetence, as the case may be.
Exhibit 10.1 Page 14 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
(b) In the event of a Permanent Disability, the Company shall pay
to the Executive, as disability benefits, one hundred twenty (120) monthly
payments each in an amount equal to sixty percent (60%) of Executive's then
Salary divided by twelve (12), the first of such payments to commence on the
first day of the first month following any such termination of this Agreement as
a result of a Permanent Disability. In the event that such date is a date
subsequent to the date such Permanent Disability is determined, payments for all
prior months in which the Executive was entitled to such payments will be made
together with the first payment made. Such payments shall be reduced by the
amount of all payments which the Executive receives under any disability policy
maintained by the Company.
9. Confidentiality and Non-Disclosure Covenant.
(a) The Executive hereby acknowledges that, in the performance
of his duties pursuant to this Agreement, he may obtain and be entrusted with
unpublished confidential and proprietary information relating to the Company's
and its Subsidiaries' present and proposed businesses and operations, the use or
disclosure of which would materially adversely affect the operations of the
Company or its Subsidiaries, including, without limitation, unpublished material
financial information relating to the Company's and its Subsidiaries' present
and proposed businesses and operations, the cost and pricing of the Company's
and its Subsidiaries' services, the sales and marketing plans and strategies of
the Company and its Subsidiaries, proposed acquisitions by the Company and its
Subsidiaries, and the terms of all material agreements to which the Company or
any Subsidiary is a party. All of such unpublished information that may be
obtained by the Executive shall, for purposes hereof, be referred to as
"Confidential Information". The Executive hereby agrees that, unless the
Confidential Information becomes publicly known other than by reason of any
improper act or omission of the Executive, neither he, nor any entity or person
owned or controlled by him, shall, during or after the Term hereof, use for his
own benefit or for the benefit of others for any purpose and in any manner
whatsoever, divulge to any person, firm, corporation or other entity or
otherwise publish or disclose any Confidential Information, except as necessary
in connection with the performance of the Executive's services under this
Agreement. Notwithstanding the foregoing, the Executive shall not be in breach
of this covenant with respect to any use or disclosure of any Confidential
Information by him which is required as a result of any legal process served
upon him in any judicial or administrative proceeding (provided that, if
possible, the Company shall be given notice in time to enable it to object to
such disclosure) or which was obtained by the Executive from a third party
without such third party's breach of any agreement or obligation of trust. The
term "entity or person owned or controlled by" the Executive or words of like
import shall not include the Company or any of its Subsidiaries.
Exhibit 10.1 Page 15 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
(b) The Executive agrees that his violation or threatened
violation of any of the provisions of this Paragraph 9 may cause immediate and
irreparable harm to the Company. In the event of any breach or threatened breach
of said provisions, the Company shall be entitled to seek all available
equitable remedies therefor including, without limitation, preliminary and
permanent injunctions by a court of competent jurisdiction prohibiting Executive
from any violation or threatened violation of these provisions and compelling
the Executive to comply with these provisions. This Paragraph 9 shall not affect
or limit, and the equitable remedies provided in this subparagraph 9(b) shall be
in addition to, any other remedies available to the Company at law. The
provisions of this Paragraph 9 shall survive the termination or expiration of
the Term of this Agreement.
10. Representations and Warranties of the Executive. The Executive
represents and warrants to the Company as follows:
(a) All action on the part of the Executive necessary for the
authorization, execution, delivery and performance of this Agreement by him and
the consummation of the transactions contemplated hereby, has been taken and
this Agreement constitutes a valid and legally binding obligation of the
Executive, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other laws
affecting generally the enforcement of creditors' rights and by general
principles of equity.
(b) The authorization, execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
will not result in any violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, a default under any provision
of any instrument, judgment, order, writ, decree or agreement to which the
Executive is a party or by which he is bound.
(c) There is no action, suit, proceeding, or investigation
pending, or to the knowledge of the Executive, currently threatened against the
Executive, in any way relating to the validity of this Agreement or the right of
the Executive to enter into or to consummate this Agreement and the transactions
contemplated hereby.
11. Representations and Warranties of the Company. The Company
represents and warrants to the Executive as follows:
(a) All action on the part of the Company, SISC and each
Subsidiary necessary for the authorization, execution, delivery and performance
of this Agreement by them and the consummation of the transactions contemplated
hereby, has been
Exhibit 10.1 Page 16 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
taken and this Agreement constitutes a valid and legally binding obligation of
the Company, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other laws
affecting generally the enforcement of creditors' rights and by general
principles of equity.
(b) The authorization, execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
will not result in any violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, a default under any provision
of any instrument, judgment, order, writ, decree or agreement to which the
Company, SISC or any Subsidiary is a party or by which any of them is bound.
(c) There is no action, suit, proceeding, or investigation
pending, or to the knowledge of the Company, currently threatened against the
Company, SISC or any Subsidiary, in any way relating to the validity of this
Agreement or the right of the Company to enter into or to consummate this
Agreement and the transactions contemplated hereby.
12. Arbitration. Except for any action under this Agreement for
injunctive or other equitable relief and except as otherwise expressly provided
in subparagraphs 4(b), 6(d) and 6(f) of this Agreement, all disputes,
controversies and differences between the parties hereto arising under this
Agreement which the parties hereto are unable to settle amicably shall be
resolved in New York, New York, by binding arbitration in accordance with the
rules then in force of the American Arbitration Association. The arbitration
shall be held before three arbitrators, one of which shall be selected by each
of the Executive and the Company and one of which shall be selected by the other
two arbitrators, and the decision of such arbitrators shall be deemed to be
final. Judgment upon any award or decision rendered by such arbitrators may be
entered or enforced in any court, domestic or foreign, having jurisdiction
thereof. The arbitrators shall not, except as provided in subparagraph 14(f) of
this Agreement, have any authority to modify or amend any express provisions of
this Agreement.
13. Agreements with Affiliates. The Executive may enter into
employment agreements with affiliates of the Company (the "Affiliate
Agreements"). To the extent that, for any year during the Term hereof that the
aggregate annual salary paid to Executive pursuant to the Affiliate Agreements
does not exceed the Salary payable to Executive pursuant to this Agreement for
such year, such aggregate salary received by the Executive under such Affiliate
Agreements shall reduce the Salary payable pursuant to this Agreement on a
dollar for dollar basis. If, for any year during the Term hereof that the
aggregate annual salary
Exhibit 10.1 Page 17 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
paid to Executive pursuant to the Affiliate Agreements exceeds the Salary
payable pursuant to this Agreement for such year, no Salary shall be paid by the
Company to the Executive pursuant to this Agreement for such year; provided,
however, that in such event the Executive shall not be required to refund any
Salary (or salary or other compensation received by him pursuant to any
Affiliate Agreement) paid to him during such year. Any bonuses or other
non-salary compensation or benefits paid to Executive pursuant to the Affiliate
Agreements shall not affect in any way the Salary, Bonus, or other benefits
payable to Executive pursuant to this Agreement.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement of the
Company and the Executive with respect to the subject matter hereof and
supersedes all prior written or prior or contemporaneous oral understandings or
agreements, including the Prior Employment Agreements and any other employment
agreements or understandings between the Company and the Executive with respect
to the subject matter covered in this Agreement. This Agreement may not be
modified or amended, nor may any right be waived, except by a writing which
expressly refers to this Agreement, states that it is intended to be a
modification, amendment or waiver and is signed by both parties hereto in the
case of a modification or amendment or by the party granting the waiver. No
course of conduct or dealing between the parties hereto and no custom or trade
usage shall be relied upon to vary the terms of this Agreement. The failure of a
party to this Agreement to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement.
(b) Any notice, demand or other communication (collectively,
the "Notices") required or permitted by or with respect to the provisions of
this Agreement shall be given in writing and delivered by hand, overnight
courier or messenger service, against a signed receipt or acknowledgment of
receipt, or mailed by registered or certified mail, return receipt requested, or
sent by telecopier or similar means of communication if receipt is acknowledged
or if transmission is confirmed by mail as provided in this subparagraph 14(b),
to the parties at their respective addresses set forth at the beginning of this
Agreement or by telecopier to the Executive at (212) 675- 4720 or to the Company
at (212) 233-5023, with notice to the Company being sent to the attention of the
individual who executed this Agreement on behalf of the Company. Either party
may, by notice given in accordance with the terms hereof, change the person,
address or telecopier number to which Notice should be sent. All such Notices
shall be deemed given when personally delivered or transmitted as aforesaid, or,
if mailed as aforesaid, on the fifth (5th) business day after mailing or on
Exhibit 10.1 Page 18 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
the day actually received, if earlier, except for a notice of a change of
person, address or telecopier number which shall be effective only upon receipt.
(c) Except as specifically set forth in this subparagraph,
neither party hereto may assign this Agreement or his or its rights, benefits or
obligations hereunder without the written consent of the other party; except
that the rights of the Executive set forth in Paragraphs 4 and 6 hereof may be
assigned to designated purchasers and shall inure to the benefit of the
Executive's heirs, administrators, executives, personal representatives,
successors and permitted assigns. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their heirs,
administrators, executors, personal representatives, successors and permitted
assigns. Nothing contained herein is intended to confer upon any person or
entity, other than the parties hereto, and their respective heirs,
administrators, executors, personal representatives, successors or permitted
assigns or, in the case of the Executive, his designated purchasers under
Paragraphs 4 and 6 hereof, any rights, benefits, obligations, remedies or
liabilities under or by reason of this Agreement.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully performed therein, without regard to the conflicts of laws
principles thereof. By their execution hereof, the Company and the Executive
hereby consent and irrevocably submit to the in personam jurisdiction of the
American Arbitration Association tribunal located in the City, County and State
of New York or, with respect to Paragraph 9, the Federal or state courts
situated in New York County, New York, which shall have sole jurisdiction as to
such matters, and agree that any process in any action commenced in such
tribunal or court under this Agreement may be served upon it or him personally,
by certified or registered mail, return receipt requested, or by Federal Express
or other courier service, with the same full force and effect as if personally
served upon it or him in New York City. Each of the parties hereto hereby waives
any claim that the jurisdiction of any such tribunal is not a convenient forum
for any such action and any defense of lack of in personam jurisdiction with
respect thereto. In the event of any arbitration proceeding pursuant to
Paragraph 9 hereof, the arbitrator shall have the right to assess reasonable
counsel fees and disbursements.
(e) The parties hereto hereby agree that, at any time and from
time to time during the Term hereof, upon the reasonable request of the other
party hereto, they shall do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, such further acts, deeds,
assignments, transfers, conveyances, other documents and
Exhibit 10.1 Page 19 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
assurances as may be reasonably required to more effectively consummate this
Agreement and the transactions contemplated thereby or to confirm or otherwise
effectuate the provisions of this Agreement.
f) If any term or provision of this Agreement, or the
application thereof to any person or circumstance, is finally determined by a
court or arbitration tribunal to any extent to be illegal, invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
illegal, invalid or unenforceable, shall not be affected thereby and each term
and provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted hereunder and by law.
(g) During and after the Term hereof, the Company shall defend,
indemnify and hold the Executive harmless from any and all claims, causes of
action, liabilities, damages, costs or expenses (including, without limitation,
attorneys' fees and disbursements) incurred by the Executive based upon or in
connection with the performance of his services under this Agreement to the
fullest extent permitted by the laws of the State of New York (and, with respect
to indemnification by SISC or a Subsidiary, the laws of the jurisdiction of
incorporation of SISC or any such Subsidiary) and of the By-Laws of the Company,
SISC or any such Subsidiary, as the case may be. In the event that, under
applicable law, the Company is not permitted to defend the Executive or pay the
costs of defense as provided in this subparagraph 14(g) unless the Executive
undertakes to reimburse the Company in the event that any such payment is
unlawful, then, in such event, the Company may condition such defense or payment
on receipt of an appropriate reimbursement agreement from the Executive. This
provision will survive the expiration or termination of the Term of this
Agreement.
(h) The headings in this Agreement are for convenience of
reference only and shall not affect in any way the construction or
interpretation of this Agreement.
[SIGNATURES FOLLOW]
Exhibit 10.1 Page 20 of 21
<PAGE>
Exhibit 10.1 CEO's Employment Agreement
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
CONSOLIDATED TECHNOLOGY GROUP LTD.
By:__________________________________
George W. Mahoney
Chief Financial Officer
-------------------------------------
Lewis S. Schiller
Exhibit 10.1 Page 21 of 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS
FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,793,000
<SECURITIES> 320,000
<RECEIVABLES> 21,864,000
<ALLOWANCES> 1,413,000
<INVENTORY> 2,648,000
<CURRENT-ASSETS> 27,476,000
<PP&E> 39,546,000
<DEPRECIATION> 27,141,000
<TOTAL-ASSETS> 69,259,000
<CURRENT-LIABILITIES> 35,488,000
<BONDS> 0
<COMMON> 458,000
0
26,000
<OTHER-SE> (2,192,000)
<TOTAL-LIABILITY-AND-EQUITY> 66,259,000
<SALES> 1,522,000
<TOTAL-REVENUES> 63,148,000
<CGS> 1,578,000
<TOTAL-COSTS> 53,632,000
<OTHER-EXPENSES> 10,316,000
<LOSS-PROVISION> 977,000
<INTEREST-EXPENSE> 2,260,000
<INCOME-PRETAX> (2,437,000)
<INCOME-TAX> 6,000
<INCOME-CONTINUING> (2,443,000)
<DISCONTINUED> (1,921,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,091,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
