<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-43793
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FLOUR CITY INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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<S> <C> <C>
NEVADA 1799 62-1709152
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</TABLE>
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MICHAEL J. RUSSO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FLOUR CITY INTERNATIONAL, INC.
915 RIVERVIEW DRIVE, SUITE ONE
JOHNSON CITY, TENNESSEE 37601
(423) 928-2724
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
WITH COPIES TO:
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WILLIAM J. LOPSHIRE, ESQ. GARY J. KOCHER, ESQ.
MANNING MARDER & WOLFE PRESTON GATES & ELLIS LLP
707 WILSHIRE BOULEVARD, 45TH FLOOR 701 FIFTH AVENUE, SUITE 5000
LOS ANGELES, CALIFORNIA 90017 SEATTLE, WASHINGTON 98104-7078
(213) 624-6900 (206) 623-7580
</TABLE>
Approximate Date of Commencement of Proposed Sale to the Public: as soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 3, 1998
2,000,000 SHARES
LOGO
FLOUR CITY INTERNATIONAL, INC.
COMMON STOCK
All 2,000,000 shares of Common Stock offered hereby (the "Offering") are
being issued and sold by Flour City International, Inc. It is currently
estimated that the initial public offering price per share will be between
$10.00 and $12.00. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price. The Company intends to apply
to have the Common Stock listed on the Nasdaq National Market upon commencement
of the Offering under the symbol "FCIN."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------------
Per Share................................. $ $ $
- ------------------------------------------------------------------------------------------------------------
Total (3)................................. $ $ $
============================================================================================================
</TABLE>
(1) Excludes a non-accountable expense allowance payable to the Representative
of the Underwriters and the value of a warrant to be issued to the
Representative to purchase up to 150,000 shares of Common Stock. The Company
has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $1,175,000.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
300,000 additional shares of Common Stock solely to cover over-allotments,
if any (the "Over-Allotment Option"). If the Over-Allotment Option is
exercised in full, the total Price to Public, Underwriting Discounts and
Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the certificates representing such shares will be made
against payment therefor at the offices of Van Kasper & Company, in San
Francisco, California, on or about May , 1998.
VAN KASPER & COMPANY
MAY , 1998
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE OVER-ALLOTMENT AND STABILIZING TRANSACTIONS AND
THE PURCHASE OF COMMON STOCK TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
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<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus. See "Underwriting."
THE COMPANY
Flour City International, Inc. ("Flour City" or the "Company") is a
worldwide leader in the design, fabrication and installation of custom exterior
wall systems (known as "curtain wall") used in the construction of a wide range
of commercial and governmental buildings. The Company works closely with
architects, general contractors and owners/developers in the development and
construction of highly recognizable mid-rise and high-rise office buildings,
public-use buildings such as courthouses and airport terminals, and other
well-known landmark buildings and uniquely designed structures.
Founded in 1893, the Company is known within the construction industry as a
high quality provider of custom curtain wall systems. As one of the few
remaining full-service custom curtain wall providers following an industry
downsizing during the early 1990's, Flour City is invited to submit proposals on
a significant portion of the building projects which require custom curtain
wall. The Company selectively bids on only those projects which best utilize its
management, design and production capabilities, which, in turn, has enabled the
Company to generate strong financial performance.
The Company is poised to capitalize on the emerging growth trends in the
U.S. office building and governmental construction markets. As the United States
economy has grown, vacancy rates have declined sharply from 18.5% in 1991 to
11.6% in the first quarter of 1997. In certain metropolitan areas, such as
Chicago, San Francisco, Washington, D.C., Boston, Seattle, Minneapolis, and
Phoenix, vacancy rates have dropped below 9% as of the end of the first quarter
of 1997. Nationwide office lease rates are increasing and many new mid-rise and
high-rise office building construction projects are in the development pipeline.
In addition, many public authorities have increased spending on public-use
structures as a result of the aging of many facilities and the growth in tax
receipts generated by an improving domestic economy. The Company will use a
portion of the proceeds of the Offering to increase its project bonding
capabilities, which will allow the Company to undertake more and larger
projects.
The Company participates in projects worldwide and has multiple sales
offices and fabrication facilities strategically located in the United States,
Asia and Mexico. Flour City has several key relationships with major
international architects, developers and general contractors which promote the
Company's participation in desirable projects. These relationships include
alliances with Turner Construction Company ("Turner Construction"), Lehrer
McGovern Bovis, Inc. ("LMB"), Morse Diesel International ("Morse Diesel"), New
World Group ("New World Group"), Pei Cobb Freed and Partners ("Pei Cobb"),
Skidmore Owings & Merrill and Kohn Pedersen & Fox. In addition the Company is
involved in a number of projects on which Bechtel International, Inc.
("Bechtel") serves as a project manager. The Company has bids outstanding in the
United States, Hong Kong, the People's Republic of China (the "PRC"), Israel,
Saudi Arabia and the Philippines.
The Company intends to build on its reputation as a world-wide leader in
the custom curtain wall industry to support continued growth and increased
profitability. The key elements of the Company's strategy to accomplish these
goals are to: (i) selectively target high margin projects; (ii) maintain and
develop key relationships; (iii) exploit its full service, custom capabilities;
(iv) enhance and exploit its position as a low cost manufacturer; and (v)
capitalize on its global presence.
The Company's management and design staff is comprised of some of the most
experienced and knowledgeable personnel in the business. Flour City's current
management team assumed control of the Company's United States operations in
mid-1994, when operations were experiencing losses as a result of the decline in
construction activity which occurred during the early 1990's. Management
refocused the business and instituted cost containment measures and key elements
of its business strategy which returned the operations to profitability in late
fiscal 1996.
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<PAGE> 5
Well-known projects for which Flour City has designed, manufactured and
installed custom curtain wall systems include the Citicorp Center and JFK
Airport Terminal One in New York City, the Rock and Roll Hall of Fame in
Cleveland, the First Interstate Tower in Los Angeles, the Allied Bank Tower
(Fountain Place) in Dallas, the United Airlines Terminal and the International
Terminal at O'Hare Airport in Chicago, the Empire Towers in Bangkok and the IDS
Building in Minneapolis. The Company is currently engaged in several pending
curtain wall projects, including the G.T. International Tower in Manila,
Chapultepec Tower in Mexico City, Sotheby's Expansion in New York, and Cathay
Pacific Terminal in Hong Kong.
RECENT DEVELOPMENTS
As of January 31, 1998 and January 31, 1997, the Company had over $46.6
million and $44.8 million in project backlog, respectively. Since January 31,
1998 the Company has been awarded two project contracts with a combined value of
approximately $14.7 million. At March 15, 1998, the Company had submitted bids
on projects with an aggregate contract value of over $120 million. There can be
no assurance that the Company will be successful in securing any contracts as a
result of these bids, that the projects will be awarded in a timely manner or
that the Company will recognize as revenue the amounts reflected as backlog.
THE OFFERING
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Common Stock offered....................................... 2,000,000 shares
Common Stock outstanding after the Offering................ 6,252,380 shares(1)
Use of proceeds............................................ For the acquisition of and capital
expenditures at curtain wall fabrication
facilities in the PRC, Mexico and the
U.S.; to increase the Company's bonding
facilities; and for working capital and
other general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol..................... FCIN
</TABLE>
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(1) Excludes 500,000 shares of Common Stock reserved for issuance pursuant to
the Company's 1997 Stock Incentive Plan, of which options to purchase
200,000 shares will be granted to employees and directors of the Company
upon the closing of the Offering at an exercise price per share equal to
the initial public offering price. See "Management -- Stock Incentive Plan"
and "Shares Eligible For Future Sale."
Unless otherwise noted, all share amounts, per share data and other
information set forth in this Prospectus (i) have been adjusted to reflect a 1
for 7 reverse stock split effective April 7, 1998, and (ii) assumes no exercise
of the Underwriter's Over-Allotment Option. Unless otherwise indicated by the
context, references herein to the "Company" and "Flour City" include the
consolidated operations of Flour City International, Inc. and its predecessors
and subsidiaries. Historical financial information of the Company herein
presents consolidated results of operations and financial position of the
following entities on and after the dates indicated: Flour City Architectural
Metals (Pacific) Limited, a British Virgin Islands corporation ("FCAM Pacific"),
from May 4, 1993; Flour City Architectural Metals, Inc., a Delaware corporation
("FCAM"), from January 1, 1997; Flour City International, Inc., a Nevada
corporation ("FCI"), from January 17, 1997; and International Forest Industries,
Inc., a Nevada corporation ("IFI"), from May 16, 1997. See "The Company,"
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 1 of Notes to Consolidated
Financial Statements and the Unaudited Pro Forma Financial Information and the
Notes thereto included elsewhere in the Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's strategies, plans, objectives, expectations and
intentions. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of any number of
factors, including the risk factors set forth below and elsewhere in this
Prospectus. The cautionary statements made in this Prospectus should be read as
being applicable to all related forward-looking statements wherever they appear
in this Prospectus.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following financial data present historical information for the Company
for the years ended October 31, 1996 and 1997 and the three months ended January
31, 1997 and January 31, 1998 and pro forma data reflecting consummation of the
acquisitions by the Company of FCAM and FCAM Pacific (the "Business
Combination") and the merger of FCI with IFI (the "Public Merger") as if such
transactions had occurred November 1, 1996. See "The Company," "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," Notes 1 and 13 of Notes to Consolidated Financial
Statements and the Unaudited Pro Forma Financial Information and notes thereto
included elsewhere in this Prospectus.
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<CAPTION>
YEARS ENDED OCTOBER 31, THREE MONTHS ENDED JANUARY 31,
------------------------------ ------------------------------
ACTUAL ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL
1996 1997 1997 1997 1997 1998
------- ------- ---------- ------- ---------- -------
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CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues............................ $ 6,684 $31,875 $35,229 $ 3,717 $ 7,071 $ 6,461
Gross profit........................ 3,018 13,845 14,495 1,411 2,062 3,120
Selling, general and administrative
expenses......................... 1,353 6,165 6,646 968 1,498 1,397
Operating income.................... 1,665 7,986 8,169 474 657 1,815
Other income (expense), net......... (96) (967) (951) 21 37 (720)
Income before minority interest and
income taxes..................... 1,569 7,019 7,218 495 694 1,095
Net income.......................... $ 1,411 $ 5,273 $ 5,471 $ 351 550 $ 809
======= ======= ======= ======= ======= =======
Net income per share:
Basic............................ $ 0.36 $ 1.33 $ 1.38 $ 0.09 $ .14 $ 0.21
======= ======= ======= ======= ======= =======
Diluted.......................... $ 0.32 $ 1.21 $ 1.23 $ 0.08 $ .13 $ 0.19
======= ======= ======= ======= ======= =======
Weighted average shares outstanding:
Basic............................ 3,960 3,960 3,960 3,960 3,960 3,870
Diluted.......................... 4,359 4,359 4,359 4,359 4,359 4,270
OTHER DATA:
Backlog(1).......................... $15,957 $47,228 $47,228 $44,837 $44,837 $46,592
</TABLE>
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<CAPTION>
JANUARY 31, 1998
---------------------
AS
ACTUAL ADJUSTED(2)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 8,570 $ 27,745
Total assets.............................................. 18,848 38,023
Total long-term debt...................................... 0 0
Stockholders' equity...................................... 7,792 26,967
</TABLE>
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(1) Represents revenue anticipated to be recognized in the future on awarded
projects, as evidenced by receipt of a contract executed by the owner or
developer or an executed letter of intent, but on which (i) work has not yet
been initiated or (ii) work is currently in progress. There can be no
assurance that the Company will recognize as revenue the amounts reflected
as backlog. See "Business -- Backlog."
(2) Adjusted for the sale of 2,000,000 shares of Common Stock offered hereby and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
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RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus is
speculative and involves a high degree of risk. In addition to the other
information contained in this Prospectus, the following risk factors should be
considered carefully in evaluating an investment in the Common Stock. This
Prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's strategies, plans,
objectives, expectations and intentions. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of any number of factors, including the risk factors set forth below
and elsewhere in this Prospectus. The cautionary statements made in this
Prospectus should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus.
RISKS RELATING TO THE BUSINESS OF THE COMPANY
Absence of Combined Operating History. In January 1997, FCI acquired FCAM
and FCAM Pacific. Prior to January 1997, FCAM on the one hand, and FCAM Pacific,
on the other, operated as independent entities. There can be no assurance that
the Company will successfully integrate their operations or institute the
necessary controls, systems, and procedures, including accounting and financial
reporting systems, to manage on a profitable basis, any of the operations
individually or collectively, the Asian Companies' (as defined below) operations
collectively, or the entire combined enterprise. While each of the Company's
officers and directors has substantial business experience, they have no
experience in managing all of the different business operations in which the
Company is now engaged. Accordingly, there can be no assurance that the
Company's management group will be able to effectively manage the combined
entity or to effectively implement the Company's internal growth strategy. The
pro forma financial data contained herein cover, in part, periods when the
Company, FCAM and FCAM Pacific were not under common control or management and
may not be indicative of the Company's future financial or operating results.
The inability of the Company to integrate FCAM and FCAM Pacific successfully
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "The Company," "Business -- Strategy,"
"Management" and "Certain Transactions."
Real Estate Development and Construction Industries. The Company's business
is affected by the risks generally inherent to the real estate development and
construction industries, including, without limitation, general market, economic
and political conditions, availability of financing, interest rates, government
regulation, land use, inflation, employment levels, environmental regulations
and fiscal policies and the level of tax collection and disbursement. The real
estate development industry is subject to fluctuations in office and commercial
lease rates, vacancy rates, real estate values and building prices. In addition,
there is a limited amount of land available for commercial mid-rise, high-rise
or campus style development in certain key markets. The foregoing factors (and
thus the commercial development business) have tended to be highly cyclical in
nature. Any economic downturn in the real estate development or construction
industries in markets where the Company is engaged, particularly in the U.S.,
Asia or Latin America or substantial changes in any of the foregoing factors may
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business -- Industry Background."
Fluctuations in Quarterly Results. The Company has experienced, and in the
future expects to continue to experience, substantial variations in its
quarterly results of operations as a result of a number of factors, many of
which are outside the Company's control. The Company's operating results may
vary because of downturns in one or more segments of the construction industry,
changes in economic conditions, the Company's failure to obtain, or delays in
awards of, major projects, the cancellation of or delays in the progress of
major projects for any reason, including the loss of project financing, the
Company's failure to timely replace projects that have been completed or are
nearing completion, or declines in the amount of the Company's billings in
excess of costs and recognized earnings on uncompleted projects. Any of these
factors could cause the Company's results of operations to fluctuate
significantly from period to period, including on a quarterly basis. The
Company's projects are, and in the foreseeable future will continue to be,
awarded by private or governmental entities in a competitive bidding process.
Due to the nature of the bidding and award process, the Company has experienced,
and in the future expects to experience, significant delays in project awards.
These delays have caused and will continue to cause substantial variations in
quarterly results. In
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addition, no assurance can be given that the timing of a project award will be
consistent with the Company's expectations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Fixed Price Contracts. A substantial portion of the Company's projects are
currently performed on a fixed-price basis. The Company attempts to cover
increased costs of anticipated changes in labor, material and service costs of
long-term contracts either through an estimation of such changes, which is
reflected in the original bid price, or through price adjustment clauses.
Despite these attempts, however, the revenue, expense and gross profit realized
from performance of a fixed-price contract will often vary from the estimated
amounts because of unforeseen conditions or changes in job conditions and
variations in labor and equipment rates and productivity over the term of the
contract. These variations and the risks generally inherent in custom curtain
wall manufacturing and installation may result in gross profits realized by the
Company being different from those originally estimated and may result in the
Company experiencing reduced profitability or losses on projects. Depending on
the size of a project, these variations from estimated contract performance
could have a significant effect on the Company's operating results for any
reporting period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Percentage-of-Completion Accounting. The Company recognizes contract
revenues using the percentage-of-completion method. Under this method, estimated
contract revenues generally are accrued based on the percentage that costs to
date bear to total estimated costs. Estimated and actual contract losses are
recognized in full when determined. Accordingly, contract revenues and total
cost estimates are reviewed and revised periodically as work progresses and as
change orders are approved, and adjustments based upon the percentage of
completion are reflected in contract revenues in the period when such estimates
are revised. To the extent that these adjustments result in a reduction or an
elimination of previously reported contract revenues, the Company would
recognize a charge against current earnings, which could be material to the
Company's results of operations. FCAM recognized a charge against current
earnings in the amount of $1.5 million in fiscal 1996 based upon a revision of
estimated costs for two project contracts. There can be no assurance the Company
will not be required to recognize similar charges in future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Concentration of Revenues. The Company has in the past derived, and expects
to continue to derive, a substantial portion of its revenues in any reporting
period from a relatively small number of major projects. On a pro forma basis,
the Company's five largest engagements accounted for 33.4%, 30.5%, 10.7%, 5.4%
and 3.5% of total revenues in fiscal 1997 and 20.2%, 18.9%, 11.7%, 11.6% and
6.1% of total revenues in fiscal 1996. The termination of one or more of the
Company's key projects could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Projects."
Delays in Completion of Construction Projects. Pursuant to the terms of its
custom curtain wall manufacturing and installation agreements, the Company is
required to complete substantially all of its projects by predetermined dates
(subject to limited exceptions). Project contracts often provide that if a
project does not proceed in accordance with a specified schedule due to the
Company's performance, the Company may be required to make penalty payments
according to the extent and timing of the delay or the contract may be
terminated. The Company is also subject to various delay risks, including delays
by general contractors or other subcontractors in obtaining, or their inability
to obtain, zoning and other approvals, unavailability of materials and labor,
possible difficulties with labor unions, ability of general contractors or other
subcontractors to complete work competently and on schedule, surface and
subsurface condition of the land underlying construction sites and other
ordinary risks of construction or force majeure occurrences that may hinder or
delay the successful completion of a particular project. The failure to complete
a particular project on schedule may delay, reduce or eliminate the Company's
projected gross profit or cause losses on a particular project.
Dependence Upon Senior Management and Other Key Personnel. The success of
the Company depends in large part upon the continued efforts, ability and
experience of the Company's management team and other key personnel such as
project managers. The Company has entered into employment agreements with
Messrs. Russo, Tang, Willis and Ulbricht. The loss of any of their services
could have a materially adverse
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<PAGE> 9
effect on the Company's business, results of operations and financial condition.
The Company does not currently maintain key-man life insurance on any of its
senior management or other key personnel. See "Management." The success of the
Company is also dependent upon its ability to locate and hire qualified project
managers who are willing and able to relocate to a particular project site. Any
delay or difficulty in the Company's hiring of qualified project managers could
impair the Company's ability to perform its obligations under existing project
contracts and its ability to secure or undertake new projects. See "Business --
Operations - Project Management."
Dependence Upon Subcontractors and General Contractors. At many of its job
sites, the Company relies upon third party subcontractors for its installation
activities through the use of fixed-price agreements. The Company does not have
any long-term arrangements with subcontractors and there can be no assurance
that the Company will be successful in entering into subcontracting arrangements
in the future on terms acceptable to the Company or at all. The Company also
relies upon each general contractor, and its selected subcontractors, to ensure
timely construction build-out and quality control. The Company's reliance upon
general contractors and subcontractors subjects the Company to a number of other
risks, such as performance delays, inadequacy of installation or construction
undertaken by third parties, financial difficulties of general contractors or
subcontractors, and increased costs if delays or inadequacies occur or
subcontractors need to be replaced. As a result, the Company's business, results
of operations and financial condition is significantly dependent on the
performance of third parties. See "Business -- Operations - Project Execution."
Dependence on Suppliers and Raw Materials. The custom curtain wall business
may, from time to time, experience fluctuating prices and supplies with respect
to raw materials. Aluminum, glass and stone are the principal raw materials
utilized in the construction of the Company's custom curtain walls. In the past,
there have been shortages, and consequently, significant price fluctuations, of
some or all of these supplies in certain markets where the Company manufactures
its products. There can be no assurance that material delays will not occur due
to lack of raw materials or suppliers in the future. The Company's supplier
relationships are typically non-exclusive, and generally terminable by either
party on short notice. The loss or deterioration of the Company's relationship
with a major supplier, an increase in demand by third parties for a particular
supplier's products or materials or delays in obtaining materials could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business -- Operations - Project Execution."
Competition. The custom curtain wall industry is highly competitive. There
are a limited number of monumental custom curtain wall projects that are
available for bidding by the Company at any given time. Custom curtain wall
manufacturers compete not only for desirable projects, but also in many
instances for subcontractors, raw materials and labor. A majority of the
Company's projects are obtained through a blind bidding process which is
generally subject to intense competition. Some of the Company's competitors have
greater financial, marketing and sales resources than the Company. There can be
no assurance that the Company will be successful in winning projects for which
it submits bids or that its growth strategy will be successful. See
"Business -- Competition."
Labor Shortages. The Company has been affected by cyclical trends and other
shortages in labor supply in the U.S. and abroad. There can be no assurance that
the Company will continue to have access to sufficient labor supplies to support
its existing or planned operations. In addition, for approximately two weeks
each year there are labor shortages in the PRC and Hong Kong as a result of the
Chinese New Year during which time the Company follows the customary practice of
temporarily discontinuing operations in these regions. In Mexico, manufacturing
operations generally cease from December 15 until January 3, at a minimum. Any
failure to secure adequate labor supplies could have a material adverse effect
on the Company's business, results of operation and financial condition. See
"Business -- Operations - Project Execution."
Need for Additional Financing; Bonding. The custom curtain wall business is
capital intensive and requires substantial up-front expenditures for materials
and production costs. There can be no assurance that the Company will not need
additional financing, particularly to pursue new projects. The Company may be
required to seek additional funds, directly or through subsidiaries, in the form
of equity or debt financing from a variety of sources, including bank financing.
The availability and terms upon which such financing may be obtained are
material to the Company's operations, and there can be no assurance that such
financing, if
8
<PAGE> 10
available, will be on terms acceptable to the Company. The amount and
sufficiency of the Company's capital is the primary component in the Company's
ability to obtain bonding which is often a prerequisite to securing and
performing custom curtain wall construction contracts. If the Company were
unable to secure sufficient additional financing or bonding facilities, it may
not be able to undertake additional or larger custom curtain wall projects,
which could have a material adverse effect on the Company's ability to pursue
its growth strategy. See "Business -- Strategy."
Management of Growth and Expansion. The Company's growth and expansion will
depend on a number of factors not entirely within the Company's control
including, among others, the risk factors described herein. There can be no
assurance that the Company will be able to effectively manage its expanding
operations (including the much larger number and scale of certain pending or
future projects) or that such growth will materialize or continue, especially in
the recently volatile economies in Asia and Latin America. Failure to
effectively manage the growth of its business could have a material adverse
effect on the Company's results of operations and financial condition.
Interest Rate Fluctuations. The availability and cost of financing has a
direct effect on the construction industry, including the custom curtain wall
segment. Fluctuations in interest rates, therefore, may have a negative impact
on the number of construction projects, particularly those requiring custom
curtain wall. In addition, fluctuations in interest rates may materially
adversely affect the terms of any debt financing available from banks or other
lenders. Higher interest rates could significantly increase the Company's debt
service, if any, and have a material adverse effect on the Company's business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Potential Liability and Insurance. Substantially all of the Company's
contracts with its customers provide that the Company is responsible for
supervising the installation of its projects at each construction site. As a
result, the Company may be liable for property damage or personal injury which
is directly or indirectly attributable to the actions or omissions of the
Company or its designated subcontractors. The occurrence of such an event could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company is generally required to maintain
insurance, including insurance for property damage, personal injury and
employer's liability, under its contracts. Although the Company believes that it
currently maintains adequate third party liability and employer's liability
insurance for each of its projects, successful claims against the Company could
exceed the limits of the Company's insurance and could have a material adverse
effect on the Company's business, financial condition and operating results. In
addition, there can be no assurance that the Company will be able to obtain
insurance for itself or its subcontractors on commercially reasonable terms in
the future. See "Business -- Operations - Project Execution" and
"Business -- Legal Proceedings."
Government Regulations. Many aspects of the Company's operations are
subject to government regulations in the countries in which the Company
operates, including those relating to currency conversion and repatriation,
trade restrictions, taxation of its earnings and earnings of its personnel,
national or regional environmental policies, work-place safety and the Company's
use of local employees and suppliers. In addition, the Company depends on the
demand for its services from the commercial construction industry and,
therefore, is affected by changing taxes, price controls and laws and
regulations relating to the commercial construction industry generally. While
the Company believes it is currently in material compliance with applicable laws
and regulations, including those relating to environmental protection and
occupational safety, the Company cannot determine to what extent future
operations and earnings of the Company may be affected by new legislation, new
regulations or changes in, or new interpretations of, existing regulations. See
"Business."
Litigation. The Company is involved in certain pending environmental and
other litigation. With respect to some of these claims, the Company has a
contractual right of indemnification from Armco, the former parent corporation
of FCAM. No liability has been recorded on the Company's financial statements
with respect to the claims covered thereby. There can be no assurance, however,
that in the event the Company is found liable under these claims that the
indemnities will be sufficient to cover the Company's liability. See "The
Company" and "Business -- Legal Proceedings."
9
<PAGE> 11
Environmental Matters. The Company's operations are generally subject to
federal, state and local laws and regulations in the countries where it has
established manufacturing facilities which relate to storage, handling,
generation, treatment, emissions, release, discharge and disposal of certain
materials, substances and wastes. U.S. federal and state environmental statutes
impose responsibility on the Company for the clean-up of hazardous materials
that have been generated, stored or disposed of by prior owners or operators of
the Company's facilities. In addition, modifications of existing laws and
regulations or the future adoption of new laws and regulations relating to
environmental matters could require expenditures that may have a material
adverse effect on the Company's financial condition or results of operations.
Union Relations. The Company engages workers on a subcontract basis
throughout the U.S. to perform installation services, the majority of whom are
members of the Architectural & Ornamental Ironworkers Union, the International
Union of Operating Engineers and the Glaziers Union (the "Unions"). Although the
Company has historically maintained good relations with the Unions, no assurance
can be given that the Company's satisfactory labor relations will continue or
that its relations will continue without picketing, walk-outs, sit downs,
slow-downs, strikes or the threat of such actions by the Unions. Any such action
could have a materially adverse effect on the Company's business, results of
operations and financial condition.
Adverse Weather and Other Natural Conditions. The Company's timely
performance of its project obligations, including installation, depend in
significant part upon favorable weather conditions. Adverse weather conditions,
including rain, flooding, earthquakes, tornadoes or other natural conditions,
may cause project delays or failures which could materially adversely affect the
Company's operations by reducing productivity in the field installation phase of
a project which could result in a material adverse effect on the Company's
business, results of operations and financial condition.
Adverse Publicity From Failure or Delay. Because many of the Company's
engagements are high-profile, marquee projects, a failure or inability to meet a
project's requirements or a client's expectations with respect to a major
project could damage the Company's reputation and affect its ability to attract
new business. Such a failure could also result in significant financial exposure
to the Company. The inability of the Company to meet a project's requirements,
satisfy client expectations or attract new business could have a materially
adverse effect on the Company's business, results of operations and financial
condition. See "Business -- Operations - Project Execution."
RISKS RELATED TO THE COMPANY'S INTERNATIONAL OPERATIONS
In addition to the risks described above, the Company is subject to the
following risks of doing business in locations outside the U.S.:
Recent Volatility in Asian Economies and Financial and Currencies
Markets. The recent volatility in the Southeast Asian economies and financial
and currencies markets may have a material adverse effect on the Company's
operations and expansion plans in the region. For example, recent interest rate
volatility in Hong Kong and other regional financial markets could negatively
impact Asian real estate property developers who depend upon Asian financial
institutions to finance new construction. In the event of a prolonged economic
crisis, the real estate development and construction industries in which the
Company operates could be disproportionately affected. Continued volatility in
the Southeast Asian economies and financial and currencies markets could have a
material adverse effect on the Company's business, results of operation and
financial condition. See "Business -- Industry Background."
Foreign Exchange Risks. On a pro forma basis, approximately 36% of the
Company's revenues in fiscal 1997 were derived from projects outside the U.S.
Consequently, changes in the value of foreign currencies could significantly
affect the Company's financial condition and results of operations. For example,
in July 1997 the Thai Baht was devalued and allowed to float against the U.S.
dollar and other currencies. As a result, the Company recognized exchange losses
of approximately $1.3 million for its 1997 fiscal year ended October 31, 1997
and approximately $874,000 for its first quarter ended January 31, 1998 in
connection with an ongoing project in Thailand. The Company generally attempts
to mitigate foreign exchange risk by entering into contracts providing for
payment in U.S. dollars instead of the local currency where possible, except for
local currency necessary to pay locally-sourced labor, raw materials or other
costs of operations. Erection services are typically denominated in local
currency. In certain instances aluminum extrusion, glass and other
10
<PAGE> 12
materials may also be denominated in local currency. To the extent that foreign
currencies weaken against the U.S. dollar, the Company may experience
translation losses due to revaluation of accounts payable, accounts receivable
and other asset and liability accounts. There can be no assurance that the
Company will be successful in securing payments in U.S. dollars, or that
fluctuations in foreign currencies and other risks will not have a material
effect on the Company's financial condition or results of operations for any
fiscal period. See "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and
"Business -- Industry Background" and Notes 3 and 16 of Notes to Consolidated
Financial Statements.
Empire Towers Project. The Company has a contract for work to be performed
on the Empire Towers project located in Bangkok, Thailand (the "Empire Towers
Contract") which is denominated in Thai baht. Pursuant to a clause in the Empire
Towers Contract which provides protection for changes in government policy, the
Company has filed claims for change orders to recoup losses resulting from the
devaluation of the baht and has reflected approximately $3.0 million of such
claim as a receivable at January 31, 1998. In January 1998, the counterparty to
the contract did not pay the amount billed on the scheduled payment date and
requested that it be included in the final claim settlement. In March 1998, the
counterparty acknowledged liability for the baht-equivalent of $2.3 million, and
agreed to pay such amount in installments beginning in March 1998 through June
1998. On April 2, 1998, management received an additional acknowledgment from
the counterparty for an additional $686,000 to be paid by July 31, 1998. At
January 31, 1998 the total amounts due to the Company under the Empire Towers
Contract (including exchange loss claims) are the baht-equivalent of $4.2
million. There can be no assurances that the Company will successfully collect
such amounts in a timely manner, if at all. In the event of non-payment, the
Company may be required to seek recourse through legal or other proceedings in
Thailand or other non-U.S. jurisdictions, which could be a lengthy and costly
process. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview" and Note 16 of Notes to Consolidated
Financial Statements.
Political Uncertainties. One of the Company's key manufacturing facilities
is located in the PRC, and the Company intends to increase its manufacturing
base elsewhere in Asia. As a result, the Company's operations and assets are
subject to material political, economic, legal and other uncertainties. Changes
in policies by the PRC or other governments resulting in changes in laws,
regulations, or the interpretation thereof, high rates of inflation, taxation,
restrictions on imports and sources of supply, currency devaluations or the
expropriation of private enterprise could materially adversely affect the
Company. Economic development in such countries may be limited as well by the
imposition of measures intended to control economic conditions, the inadequate
development of an infrastructure and the potential unavailability of adequate
transportation, adequate power and water supplies, satisfactory roads and
communications and raw materials and parts. If for any reason the Company were
required to move its Asian manufacturing operation outside of the PRC, where it
enjoys beneficial labor wage rates, the Company's gross margin and results of
operations could be adversely effected.
Uncertain Legal System and Application of Laws. The legal system of the PRC
and many other Asian nations relating to foreign investments is both new and
continually evolving, and there can be no certainty as to the application of its
laws and regulations in particular instances. The PRC does not have a
comprehensive system of national laws. Enforcement of existing laws or
agreements may be sporadic and implementation and interpretation of laws
inconsistent. Even where adequate law exists, it may not be possible to obtain
swift and equitable enforcement of that law.
The PRC's Recent Turbulent Relations with the U.S. The U.S. in recent years
has considered revocation of the PRC's most favored nation ("MFN") trade status,
which provides the PRC with the trading privileges available generally to
trading partners of the U.S. The U.S. and the PRC have recently been involved in
controversies over the protection in the PRC of foreign intellectual property
rights which threatened to interrupt trade between the countries in 1997.
President Clinton extended the PRC's most favored nation status, and the U.S.
and the PRC reached an agreement that averted a possible trade war and a U.S.
embargo against the importation of certain products manufactured in the PRC.
There can be no assurance that future controversies will not arise that again
threaten the status quo involving trade between the U.S. and the PRC,
11
<PAGE> 13
or that the U.S. will not revoke or refuse to extend the PRC's MFN status. Any
such action could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS RELATING TO THE COMMON STOCK.
Control by Existing Stockholders. Upon completion of this Offering, the
Company's executive officers, directors and significant existing stockholders
will beneficially own approximately 59.6% of the outstanding Common Stock. These
persons, if acting in concert, will be able to determine the outcome of any
matter submitted to a vote of the stockholders, including the election of
directors. See "Principal Stockholders."
Dilution; Dividends. Purchasers of the shares offered hereby will suffer
immediate and substantial dilution of $6.41 per share from the initial public
offering price, assuming an initial public offering price of $11.00 (which
represents the midpoint of the range stated on the cover hereof). See
"Dilution." The Company currently anticipates paying cash dividends on the
Common Stock as determined by the Board of Directors and to the extent the
Company has funds legally available therefor. However, no assurance can be made
that the Company will pay such dividends in the foreseeable future. See
"Dividend Policy."
Volatility of Trading Market; Potential Volatility of Stock Price. There
can be no assurance that an active trading market will develop or be maintained
after this Offering. The initial public offering price of the shares offered
hereby has been determined by negotiations between the Company and the
Representative and may not be indicative of the market price of the shares in
the future. See "Underwriting." The market price of the Company's shares is
likely to be highly volatile. Factors such as fluctuations in the Company's
quarterly operating results, general economic, political and market conditions
in the U.S., Asia and the other markets in which the Company sells or
manufactures, or military conflicts, may have a materially adverse impact on the
price and marketability of the shares. Furthermore, stock markets historically
have experienced systemic volatility which has adversely affected the market
prices of securities of many companies without regard to the operating
performances of such companies. Accordingly, no assurance can be given that the
market price for the shares will not fall below the initial public offering
price. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Shares Eligible for Future Sale. Upon completion of this Offering, the
Company will have 6,252,380 issued and outstanding shares of Common Stock. Of
these shares, the shares offered hereby will be freely tradeable without
restriction or limitation under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by "affiliates" of the
Company, as such term is defined under the Securities Act. The remaining shares
held by affiliates of the Company will be "restricted securities" within the
meaning of Rule 144 adopted under the Securities Act. Sales of such restricted
shares in the public market, or the availability of such shares for sale, could
have a materially adverse effect on the market price of the shares purchased in
this Offering. The Company has reserved 500,000 shares of Common Stock for
issuance under its 1997 Stock Incentive Plan. In connection with the Offering,
the Company is issuing to Van Kasper & Company (the "Representative") a warrant
to purchase 150,000 shares of Common Stock (the "Representative's Warrant"). The
Company intends (and in the case of the Representative's Warrant, is obligated)
to file registration statements under the Securities Act to register the shares
subject to such options and warrant and, upon effectiveness thereof, such shares
will be freely tradeable in the open market (subject to Rule 144 limitations
applicable to affiliates).
Subject to certain exceptions, the Company, its officers and directors and
certain existing stockholders who, in the aggregate, hold 3,997,234 shares of
Common Stock have agreed not to, directly or indirectly, offer, sell, contract
to sell, grant an option for the sale of, or otherwise dispose of any shares or
rights to purchase shares (except for issuances by the Company of options to
purchase shares pursuant to the Company's Stock Incentive Plan) for a period of
180 days after the effective Date of the Offering (the "Lock-up Period") without
the prior written consent of the Representative. Following expiration of the
Lock-up Period, the shares subject to such lock-up will be eligible for sale,
subject to the conditions and restrictions of Rule 144 (unless such securities
are registered under the Securities Act, in which case the conditions and
restrictions of Rule 144 would be applicable only to affiliates). The sale of
substantial shares into the public market in the future could adversely affect
the market price of the Company's stock. See "Shares Eligible for Future Sale"
and "Underwriting."
12
<PAGE> 14
THE COMPANY
Flour City Architectural Metals, Inc., a Delaware corporation ("FCAM"), was
formed in 1893 under the name Flour City Ornamental Iron Company as a specialty
metals fabricator for the architectural industry. Immediately prior to January
1997, FCAM was a wholly-owned subsidiary of Armco, Inc., a publicly traded U.S.
corporation ("Armco"). Effective January 1, 1997, Armco sold all of the stock of
FCAM (the "Armco Sale") to Flour City International, Inc., a Nevada corporation
("FCI"). On January 17, 1997, FCI entered into a share exchange agreement with
the stockholders of Hockley International Limited (which later changed its name
to Flour City Architectural Metals (Pacific) Ltd. ("FCAM Pacific")) pursuant to
which FCAM Pacific became a wholly-owned subsidiary of FCI (the "FCAM Pacific
Acquisition"). The Armco Sale and the FCAM Pacific Acquisition are referred to
herein as the "Business Combination." FCAM Pacific currently serves as a holding
company for the Asian Companies (as defined below). On May 16, 1997, FCI
effected the Public Merger (as defined below).
As used herein, (i) the "Asian Companies" means FCAM Pacific and its
subsidiaries, Wall Art Design & Engineering Co., Ltd., a Hong Kong corporation,
and Mario and Mario Company, Ltd., a Labuan, Malaysia corporation ("MMC"), MMC's
wholly-owned subsidiaries Flour City Architectural Metals (Asia) Ltd., a Hong
Kong corporation ("FCAM Asia"), and Kasion International, Inc., a Texas
corporation ("Kasion International"), Kasion International's wholly-owned
subsidiary, Kasion F.C. Ltd., a Thailand corporation ("KFC") and FCAM Asia's
minority interest in Foshan Weidu Aluminum Window Manufacturing Co., Ltd., a PRC
corporation, and Foshan Weidu Decoration Engineering Co., Ltd., a PRC
corporation, and (ii) the "Public Merger" means the merger on May 16, 1997 of
FCI with and into International Forest Industries, Inc., a Nevada corporation
("IFI"), which had its shares quoted on the National Association of Securities
Dealers, Inc. Over-the-Counter ("OTC") Bulletin Board. IFI was the surviving
corporation following the Public Merger and, in connection therewith, changed
its name to Flour City International, Inc.
FCAM Pacific was incorporated on May 4, 1993 under the laws of the British
Virgin Islands. IFI was incorporated in 1987 under the laws of the State of
Nevada and was formerly known as M.M. Cork Enterprises, Inc. FCI was
incorporated on January 16, 1997 under the laws of the State of Nevada. The
Company's principal executive offices are located at 915 Riverview Drive, Suite
One, Johnson City, Tennessee 37601, and its telephone number is (423) 928-2724.
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby are estimated to be $19.2 million $22.1 million if
the Underwriters' Over-Allotment Option is exercised in full), after deducting
underwriting discounts and estimated offering expenses and assuming an initial
public offering price of $11.00 per share (the midpoint of the range stated on
the cover hereof). The Company intends to use the net proceeds as follows:
approximately $5.0 million to establish or acquire an interest in a curtain wall
fabrication facility in the PRC; approximately $3.0 million for capital
expenditures in connection with its joint venture with Grupo IMSA in Monterrey,
Mexico and at its Johnson City, Tennessee fabrication facility; and the balance
of approximately $11.2 million for working capital and general corporate
purposes. In addition, the increased stockholder's equity resulting from the
Offering will allow the Company to secure more and larger bonding facilities.
Pending application of the net proceeds as described herein, the Company intends
to invest the net proceeds in short-term, interest-bearing, investment grade
securities.
CAPITALIZATION
The following table summarizes as of January 31, 1998 the actual
capitalization of the Company and the capitalization of the Company as adjusted
to reflect the sale of 2,000,000 shares of Common Stock in the Offering at an
assumed initial public offering price of $11.00 per share (the midpoint of the
range stated on the cover page hereof) and application of the net proceeds
thereof. See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1998
------------------
AS
ACTUAL ADJUSTED
------ --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current portion of long term debt........................... $ -- $ --
====== =======
Long-term debt.............................................. -- --
------ -------
Stockholders' equity:
Common Stock, $.0001 par value, 50,000,000 shares
authorized; 4,252,380 shares issued and outstanding,
6,252,380 shares issued and outstanding, as adjusted... $ -- $ --
Additional paid-in capital................................ 344 19,519
Retained earnings......................................... 7,633 7,633
Unearned compensation..................................... (269) (269)
Cumulative translation adjustment......................... 84 84
Total stockholders' equity............................. 7,792 26,967
------ -------
Total capitalization.............................. $7,792 26,967
====== =======
</TABLE>
DIVIDEND POLICY
The Company currently intends to pay annual cash dividends on the Common
Stock in the amount of $0.02 per share. Future policy with respect to payment of
dividends on the Common Stock will be determined by the Board of Directors based
upon conditions then existing, including the Company's earnings and financial
condition, capital requirements and other relevant factors. See "Risk
Factors -- Dilution; Dividends."
14
<PAGE> 16
PRICE RANGE OF COMMON STOCK
The following table sets forth the range of high and low bid quotations per
share for the Company's Common Stock for the periods indicated as reported by
the OTC Bulletin Board, where the stock trades under the symbol "FCIN." Such
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. The
following prices have been adjusted to reflect the 1 for 7 reverse stock split
expected to be effected prior to consummation of the Offering. See "Prospectus
Summary."
<TABLE>
<CAPTION>
YEAR CALENDAR PERIOD HIGH LOW
- ---- --------------- ------ -----
<S> <C> <C> <C>
1997 Second Quarter (from May 16, 1997)(1)..................... $14.00 $7.00
Third Quarter............................................. 8.75 6.13
Fourth Quarter............................................ 8.75 3.50
1998 First Quarter............................................. 6.56 2.63
</TABLE>
- ---------------
(1) The effective date of the Public Merger. See "The Company."
On April 2, 1998 the closing bid price of the Common Stock as reported on
the OTC Bulletin Board was $4.38 per share. As of March 27, 1998, there were
approximately 106 holders of record of the Common Stock.
DILUTION
The net tangible book value per share of the Common Stock as of January 31,
1998 was approximately $2.23. Net tangible book value per share is equal to the
total tangible assets of the Company, less total liabilities plus negative
goodwill, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale of 2,000,000 shares of Common Stock offered hereby and
the application of the net proceeds therefrom (at an assumed initial public
offering price of $11.00 per share and after deducting the estimated offering
expenses and underwriting discount), the net tangible book value per share of
the Common Stock would have been approximately $4.59. This represents an
immediate increase in net tangible book value of $2.36 per share to the existing
stockholders and an immediate dilution of $6.41 per share to new investors
purchasing Common Stock in the Offering. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Net tangible book value per share as of January 31,
1998(1)................................................ $2.23
Increase per share attributable to new investors.......... 2.36
-----
Net tangible book value per share after the Offering........ 4.59
------
Dilution per share to new investors......................... $ 6.41
======
</TABLE>
The following table summarizes, for the existing stockholders and new
investors, a comparison of the number of shares of Common Stock acquired from
the Company, the percentage ownership of those shares, the total consideration,
the percentage of total consideration and the average price per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... 4,252,380 68.0% $ 100 0.0% $ 0.00
New investors.............. 2,000,000 32.0 22,000,000 100.0 11.00
--------- ----- ----------- -----
Total............ 6,252,380 100.0% $22,000,100 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Excludes 200,000 shares of Common Stock subject to options to be granted to
employees and directors of the Company upon the closing of the Offering at
an exercise price per share equal to the initial public offering price. See
"Management -- Stock Incentive Plan" and "Shares Eligible For Future Sale."
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The historical statement of income and balance sheet data below set forth
the consolidated financial data of the Company as of October 31, 1997, and for
the year ended October 31, 1997, and are derived from the consolidated financial
statements audited by Deloitte & Touche LLP which appear elsewhere in this
Prospectus. The historical statement of income and balance sheet data below set
forth the consolidated financial data of the Company as of October 31, 1996, and
for each of the two years ending October 31, 1995, and October 31, 1996, and are
derived from the consolidated financial statements audited by Deloitte Touche
Tohmatsu which appear elsewhere in this Prospectus. The historical balance sheet
data as of October 31, 1994 and 1995 and statement of income data for the year
ended October 31, 1994 below have been derived from audited consolidated
financial statements of the Company which do not appear herein. The historical
statement of income and balance sheet data below set forth as of and for the
year ended October 31, 1993 are unaudited. The statement of income data for the
three months ending January 31, 1997 and 1998 and the consolidated balance sheet
data as of January 31, 1998 were derived from the unaudited consolidated
financial statements of the Company which, in the opinion of management, include
all adjustments (which consist of only normal, recurring adjustments) necessary
for a fair presentation of the financial condition and results of operations of
the Company. The unaudited pro forma statement of income data for the year ended
October 31, 1997 and three months ended January 31, 1997 present certain
consolidated financial information for the Company as adjusted for the Business
Combination and the Public Merger as if each had occurred on November 1, 1996.
The following data should be read in conjunction with "The Company,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto and the
Unaudited Pro Forma Financial Information and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------------------------------- ----------------------------
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL PRO FORMA ACTUAL PRO FORMA ACTUAL
1993 1994 1995 1996 1997 1997 1997 1997 1998
------ ------ ------ ------ ------- --------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues.............................. $ 354 $3,921 $4,806 $6,684 $31,875 $35,229 $3,717 $ 7,071 $ 6,461
Gross profit.......................... 161 1,440 2,034 3,019 13,845 14,495 1,411 2,062 3,120
Selling, general and administrative
expenses............................ 238 532 1,006 1,353 6,165 6,646 968 1,498 1,397
Non-cash stock compensation expense... -- -- -- -- 57 57 6 6 17
Amortization of negative goodwill..... -- -- -- -- (364) (377) (36) (99) (109)
------ ------ ------ ------ ------- ------- ------ ------- -------
Operating Income (loss)............... (77) 908 1,028 1,666 7,987 8,169 473 657 1,815
Other Income (expense), net........... 0 (42) 65 (97) (967) (951) 21 37 (720)
Income (loss) before minority interest
and income taxes.................... (77) 866 1,093 1,569 7,020 7,218 494 694 1,095
Net Income (loss)..................... ($ 77) $ 818 $ 938 $1,411 $ 5,273 $ 5,471 $ 351 $ 550 $ 809
====== ====== ====== ====== ======= ======= ====== ======= =======
Net Income (loss) per share:
Basic............................... ($0.02) $ 0.21 $ 0.24 $ 0.36 $ 1.33 $ 1.38 $ 0.09 $ .14 $ 0.21
====== ====== ====== ====== ======= ======= ====== ======= =======
Diluted............................. ($0.02) $ 0.19 $ 0.22 $ 0.32 $ 1.21 $ 1.26 $ 0.08 $ .13 $ 0.19
====== ====== ====== ====== ======= ======= ====== ======= =======
Weighted Average Shares outstanding:
Basic............................... 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,960 3,870
Diluted............................. 4,359 4,359 4,359 4,359 4,359 4,359 4,359 4,359 4,270
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
OCTOBER 31, 1998
------------------------------------------ ------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(1)
----- ------ ------ ------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................... ($230) $ 792 $ 50 $1,104 $ 8,511 $ 8,570 $27,745
Total assets.......................................... 425 1,190 4,350 7,571 21,083 18,848 38,023
Total long-term debt.................................. 0 0 0 0 0 0 0
Stockholders' equity.................................. (77) 743 370 1,661 7,674 7,792 26,967
</TABLE>
- ---------------
(1) Adjusted for the sale of 2,000,000 shares of Common Stock offered hereby and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and the related notes thereto and the other
financial information included elsewhere in this Prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of any number of factors, including those
set forth under "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
Until January 1997, the Company's subsidiary, FCAM, was a wholly-owned
subsidiary of Armco. In January 1997, Armco sold all of the stock of FCAM to FCI
(the "Armco Sale") and FCI acquired FCAM Pacific (the "FCAM Pacific
Acquisition") as a wholly owned subsidiary. The Armco Sale and the FCAM Pacific
Acquisition are collectively referred to herein as the "Business Combination."
On May 16, 1997, FCI effected the Public Merger pursuant to which it merged with
and into IFI, with IFI being the surviving corporation. See "The Company" and
"Risk Factors -- Absence of Combined Operating History."
The following discussion sets forth the historical results of operations
and financial condition of the Company for all periods presented as well as the
pro forma operating results of the Company reflecting the results of the
Business Combination as if it had occurred on November 1, 1995. The FCAM Pacific
Acquisition and the Public Merger have both been accounted for as
recapitizations. The Armco Sale was accounted for as a purchase acquisition. As
a result, historical financial information of the Company herein presents
combined results of operations and financial position of the following entities
on and after the date indicated: FCAM Pacific from November 1, 1994; FCAM from
January 1, 1997; FCI from January 17, 1997; and IFI from May 16, 1997. Pro forma
results are not necessarily indicative of the results the Company would have
obtained had these events actually occurred or of the Company's future results.
See "The Company," "Selected Financial Data," "Risk Factors -- Absence of
Combined Operating History," Notes 1 and 13 of Notes to Consolidated Financial
Statements and the Unaudited Pro Forma Financial Information and notes thereto
included elsewhere herein.
From 1992 to 1994, FCAM's operations experienced losses as a result of
industry overcapacity. At the end of 1994, Armco appointed the current
management team, which implemented business practices designed to restore FCAM's
operations to profitability, including overhead cost reductions, project cost
control measures, a more selective approach to project bidding and improvements
in the accuracy of cost estimates for project bids. Management successfully
restored FCAM to profitability in the second half of 1996. See Note 11 of Notes
to Consolidated Financial Statements of FCAM for information on restructing
charges relating to the FCAM restructuring.
The Company has experienced in the past, and expects to experience in the
future, substantial variations in its results of operations in any quarterly or
annual reporting period as a result of numerous factors, many of which are out
of the Company's control. In particular, the Company's operating results may
vary because of downturns in one or more segments of the construction industry,
changes in economic conditions, the Company's failure to obtain or delays in
awards of major projects, the cancellation or delay of major projects, the
Company's failure to timely replace projects that have been completed or are
nearing completion, or declines in the amount of the Company's billings in
excess of costs and recognized earnings on uncompleted projects. Any of these
factors could cause the Company's results of operations to fluctuate
significantly from period to period, including on a quarterly basis. The
Company's projects are, and in the foreseeable future will continue to be,
awarded by private or governmental entities in a competitive bidding process.
Due to the nature of the bidding and award process, the Company has experienced,
and in the future expects to experience, significant delays in project awards.
These delays have caused and will continue to cause substantial variations in
quarterly results. In addition, no assurance can be given that the timing of a
project award will be consistent with the Company's expectations. During fiscal
1997, the Company had two customers, Morse Diesel and THK Real Estate Limited
(the counterparty to the Empire Towers Contract),
17
<PAGE> 19
which each accounted for more than 10% of its consolidated revenues the loss of
either of which would have a material adverse effect on the Company and its
subsidiaries taken as a whole. The Company has an alliance with Morse Diesel
which promotes the Company's participation in desirable projects. See "Risk
Factors -- Fluctuations in Quarterly Results."
The Company's results of operations are affected primarily by (i) the level
of commercial and government sponsored building construction in its principal
markets, (ii) the Company's ability to win project contracts and its accuracy in
project cost estimating, (iii) the Company's success in utilizing its resources
efficiently, (iv) the Company's ability to complete contracts in a timely and
cost-effective manner and (v) the mix of domestic and international operations.
The level of commercial building construction activity is affected by several
factors, including local, regional, national and international economic and real
estate conditions; interest rates; availability of financing; and office
building occupancy rates in metropolitan areas in which the Company markets its
services. The level of government sponsored construction activity is influenced
by the levels of tax revenues, the need for new or upgraded public facilities
such as airports or courthouses and government spending policies and initiatives
designed to stimulate local or regional economies. The Company expects publicly
funded projects will continue to provide a significant portion of its revenues
for the foreseeable future. Due to economic and currency volatility, the Company
anticipates that fewer projects will become available for bid internationally;
however, the Company has submitted several bids on projects, which if awarded
and completed would result in significant revenue over the next two to three
years.
The Company generally obtains projects at a fixed price through competitive
bidding or negotiation. The Company must estimate its costs, including projected
increases in labor and material service contracts. Typically, the Company spends
between $50,000 and $150,000 in the preparation and submission of each project
bid, regardless of the success of winning the bid. This cost is expensed as
incurred. Project duration, when installation is included, generally lasts from
18 to 30 months. See "Risk Factors -- Fixed Price Contracts."
The Company recognizes contract revenues attributable to its design,
fabrication and installation and project management using the
percentage-of-completion method. Under this method, estimated contract revenues
are accrued based on a comparison of total costs incurred to date to total
estimated costs. Estimated contract losses are recognized in full when
determined. Accordingly, contract revenues and total cost estimates are reviewed
and revised periodically as work progresses and as change orders are approved.
Adjustments are based upon the percentage of completion and are reflected in
contract revenues in the period when such estimates are revised. In fiscal 1996,
FCAM had estimate revisions which resulted in additional income of $1.4 million
on one project contract and a charge against current earnings in the aggregate
amount of $1.5 million on two other project contracts primarily resulting from
cost overruns charged to the Company by a then-affiliate. See "Risk
Factors -- Percentage-of-Completion Accounting."
Costs of revenues consist of the cost of the materials, equipment, direct
labor, fringe benefits and indirect costs associated with engineering,
fabrication and installation, including supervisory labor. Other costs not
associated with specific projects including costs associated with sales,
accounting services, project management, estimating, administration, management
information systems and material and supply procurement are included in selling,
general and administrative expenses. Selling, general and administrative
expenses include those expenses incurred for preparation of contract bids,
estimating, sales and marketing, office facilities, project management and
support services. The Company believes that it currently has sufficient
management and administrative resources to support continued growth in revenues
without a proportionate increase in selling, general and administrative
expenses.
Gross profit margins can be positively affected by the level of competitive
bidding, aggressive purchasing of component parts necessary for the fabrication
of the products, the number and scope of contract modifications, and
improvements in operating efficiencies. Generally, margins are not affected by
the mix of private and public sector funded projects. Internationally,
comparatively low labor rates often result in higher gross profit margins than
those realized for projects in the U.S. Gross profit margins can be adversely
affected by a wide range of factors, including construction delays, inefficient
or under-utilization of the Company's resources and weather and construction
site conditions. See "Risk Factors."
Backlog increases as contract commitments are obtained, decreases as
revenues are recognized, and increases or decreases to reflect modifications in
the work to be performed under the contract. The timing of
18
<PAGE> 20
contract commitments, the size of projects and other factors beyond the
Company's control can cause fluctuation in backlog outstanding on any given
date.
Historically, a significant portion of the Company's revenues have been
earned in jurisdictions with no income taxes or lower income tax rates than
those in the U.S. As revenues from U.S. projects increase relative to revenues
from international projects, the Company's overall tax rate will increase.
The Company generally attempts to mitigate foreign exchange risk by
entering into contracts providing for payment in U.S. dollars instead of the
local currency where possible, except for local currency necessary to pay local
for labor, raw materials or other costs of operations. However, the Company
currently has contracts denominated in the Hong Kong dollar, Thai baht and
Philippine peso. Materials and services to perform project contracts are
procured globally. Aluminum extrusion is typically the largest material cost and
is generally denominated in U.S. dollars. Glass purchases are generally
denominated in U.S. dollars unless sourced locally in a foreign locale. The
expenses associated with erection services are generally denominated in local
currency. To the extent that foreign currencies weaken against the U.S. dollar,
the Company will experience translation losses due to the revaluation of
accounts payable, accounts receivable and other asset and liability accounts.
The Company generally attempts to contract to secure compensation for
devaluation of local currencies relative to the U.S. dollar. In these instances,
although the Company may incur translation losses, the Company seeks to offset
such losses by increases in the amount payable to the Company under contract.
There can be no assurance that the Company will be successful in securing such
offset payments, or that fluctuations in foreign currencies and other risks will
not have a material effect on the Company's financial condition or results of
operations for any quarterly or annual reporting period. To the extent the
Company is required to enter into contracts denominated in foreign currencies,
the Company's financial condition and results of operations may be adversely
affected by volatility in such foreign currencies. See "Risk Factors -- Foreign
Exchange Risk."
RESULTS OF OPERATIONS
QUARTER ENDED JANUARY 31, 1998 COMPARED TO QUARTER ENDED JANUARY 31, 1997
Revenues. Revenues increased by 73.8% to $6.5 million in the first quarter
ended January 31, 1998 from $3.7 million in the first quarter ended January 31,
1997. This increase was primarily attributable to the Business Combination.
On a pro forma basis, revenues decreased by 8.6% to $6.5 million in the
first quarter of fiscal 1998 from $7.1 million in the first quarter of fiscal
1997. This decrease was due, predominantly, to the delay in the award of
projects for which the Company had outstanding bids during the last half of
fiscal 1997 combined with a delay in the start of one of the Company's projects
in backlog; the project commenced during the first quarter of 1998. The Company
anticipates that because of the aforementioned delays in project awards, its
fiscal 1998 second quarter revenues will be similarly affected. Since January
31, 1998, the Company has added $14.7 million in new backlog. The Company
anticipates that these recent backlog additions should result in more favorable
revenue comparisons during the fiscal 1998 third and fourth quarters.
Revenues generated from projects located in Asia increased 22.8% to $2.7
million in the first quarter of fiscal 1998 from $2.2 million in the first
quarter of fiscal 1997. This increase was driven primarily by an increase in the
revenue generated under the Empire Towers Contract which provided over 90% of
first quarter revenues for projects located in Asia, and which is expected to be
substantially complete by the end of the third quarter of fiscal 1998.
Revenues generated from projects located in North America decreased by
23.1% to $3.7 million in the first quarter of fiscal 1998 from $4.8 million in
the first quarter of fiscal 1997. This reduction of revenues was primarily
attributable to the substantial completion of a number of North American
projects during 1997 combined with the delays in project awards in 1997.
Gross Profit. Gross profit increased by 121.1% to $3.1 million in the first
quarter of fiscal 1998 from $1.4 million in the first quarter of fiscal 1997.
This increase resulted from the Business Combination, higher
19
<PAGE> 21
margins for recently awarded North American projects and the realization of the
full benefits of cost controls and selective bidding practices implemented by
the Company prior to 1997.
On a pro forma basis, gross profit increased by 51.4% to $3.1 million in
the first quarter of fiscal 1998 from $2.1 million in the first quarter of
fiscal 1997. Pro forma gross profit margin increased to $48.3% in the first
quarter of fiscal 1998 from 29.1% in the first quarter of fiscal 1997. Although
revenues generated by North American projects decreased quarter to quarter, the
gross margin generated by North American projects was 43.3% higher in the first
quarter of fiscal 1998 versus the first quarter of fiscal 1997 due primarily to
the realization of the full benefits of cost controls and selective bidding
practices implemented prior to 1997. Pursuant to the terms of the Empire Towers
Contract, which is denominated in Thai baht, the Company has submitted change
orders to receive increased compensation to recoup losses resulting from the
devaluation of the baht relative to the U.S. dollar. Accordingly, the Company
has recognized additional revenue and gross margin related to the baht
devaluation claims while recognizing an offset in currency exchange losses which
does not impact gross margins. As a result, gross margins were positively
affected and currency exchange losses were negatively affected. Overall, the
project's profitability has remained relatively constant.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 40.0% to $1.4 million in the first quarter
of fiscal 1998 from $1.0 million in the first quarter of fiscal 1997. This
increase was primarily attributable to the Business Combination.
On a pro forma basis, selling, general and administrative expenses
decreased by 6.7% to $1.4 million in the first quarter of fiscal 1998 from $1.5
million in the first quarter of fiscal 1997. This decrease was primarily
attributable to reductions in salary expense.
Other income (expense), net. Other income (expense), net decreased to an
expense of ($720,000) in the first quarter of fiscal 1998 from income of $21,000
in the first quarter of 1997. This decrease resulted primarily from an exchange
rate loss of approximately $874,000 realized as a result of the devaluation of
the Thai baht, which amount was partially offset by change orders submitted by
the Company to compensate for the devaluation of the baht.
Backlog. The Company's backlog increased by 4.0% to $46.6 million as of
January 31, 1998 from $44.8 million at January 31, 1997. At January 31, 1998,
roughly 33.0% of the Company's backlog was associated with projects in the U.S.
while 67.0% was associated with projects in the Philippines, Thailand and Hong
Kong. At January 31, 1998, five project contracts accounted for 86.4% of the
Company's total backlog. Since January 31, 1998, the Company has been awarded
two project contracts with a combined value of approximately $14.7 million.
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996
Revenues. Revenues increased by 376.9% to $31.9 million in fiscal 1997 from
$6.7 million in fiscal 1996. The increase was primarily attributable to the
Business Combination. Revenues generated from projects located in Asia increased
91.8% to $12.8 million in fiscal 1997 from $6.7 million in fiscal 1996. This
increase was driven primarily by an increase in the revenue generated by a
single project which increased to $11.0 million from $4.9 million in fiscal 1997
and 1996, respectively. During fiscal 1996, the Company did not generate any
revenue from North American projects since it had not yet acquired FCAM.
Revenues generated by U.S. projects in fiscal 1997 were $19.1 million, as a
result of the inclusion of FCAM from January 1997 forward.
On a pro forma basis, revenues increased by 45.1% to $35.2 million in
fiscal 1997 from $24.3 million in fiscal 1996. This increase was driven
primarily by an increase in the revenue generated by a single project which
increased to $11.0 million from $4.9 million for fiscal 1997 and 1996,
respectively. In fiscal 1997, pro forma revenues generated from Asian projects
were 36.4% of total pro forma revenues while pro forma revenues generated from
Asian projects for the same period in fiscal 1996 accounted for 27.5% of total
pro forma revenues. Pro forma revenues generated by domestic projects increased
to $22.4 million in fiscal 1997, from $17.6 million in fiscal 1996.
20
<PAGE> 22
Gross profit. Gross profit increased by 358.6% to $13.8 million in fiscal
1997 from $3.0 million in fiscal 1996. The increase was primarily attributable
to the increase in revenues. As a percentage of revenues, gross profit margin
declined to 43.4% in fiscal 1997 from 45.2% in fiscal 1996 primarily because the
Company derived a significant portion of its revenues in fiscal 1996 from one
high-margin project in fiscal 1996 which generated a smaller percentage of
revenues in fiscal 1997.
On a pro forma basis, gross profit increased to $14.5 million in fiscal
1997 from $4.4 million in fiscal 1996. Pro forma gross margin increased to 41.1%
in fiscal 1997 from 18.1% in fiscal 1996. This increase was the result of the
following factors: (i) the revaluation in fiscal 1997 of FCAM contracts in
progress acquired in the Armco Sale to yield margins representing the fair value
of the contracts at that time; (ii) the results in fiscal 1997 of cost
containment practices implemented by the Company's management team during fiscal
1995 and 1996; (iii) the selective targeting in fiscal 1997 of higher-margin
projects on which to bid; (iv) the substantial completion in fiscal 1996 of a
significant number of lower-margin contracts entered into prior to the current
management team's assumption of operations; and (v) an increase in the
percentage of revenues generated from projects located in Asia which have
historically carried higher gross margins.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 351.9% to $6.1 million in fiscal 1997 from
$1.4 million in fiscal 1996. This increase was primarily a result of the
Business Combination. Selling, general and administrative expenses as a percent
of sales decreased to 19.2% in fiscal 1997 from 20.2% in fiscal 1996 due to an
increase in revenues for the period without a proportionate increase in selling,
general and administrative expenses.
On a pro forma basis, selling, general and administrative expenses
increased by 6.3% to $6.6 million in fiscal 1997 from $6.3 million in fiscal
1996. This increase was a result of increases at the Company's operations in
Asia, including expenses associated with the addition of new staff,
establishment of a reserve for accounts receivable associated with a customer's
bankruptcy, increased legal expenses primarily associated with the Armco Sale
and minor increases in other expenses. This increase was partially offset by
decreases in salary and associated expenses within the Company's North American
operations. Selling, general and administrative expenses as a percent of sales
decreased to 18.9% from 25.7% in fiscal 1997 and 1996, respectively. This
decrease resulted from the increase in revenues for the period without a
proportionate increase in selling, general and administrative expenses.
Other operating items. Other operating items include increased operating
income of $258,000 in fiscal 1997 which relates principally to negative goodwill
amortization which resulted from the Business Combination. No such income was
recorded in 1996.
Other income (expense) net increased to ($967,000) in fiscal 1997 from
($96,000) in fiscal 1996. This increase in other expense was caused primarily by
the effect of the devaluation of the Thai Baht that caused a combination of
realized and unrealized exchange losses on payables of KFC denominated in
currencies other than the Thai baht in July 1997. See "Risk Factors -- Foreign
Exchange Risk."
Income taxes. Income taxes increased to $1.8 million in fiscal 1997 from
approximately $150,000 in fiscal 1996. The increase was primarily attributable
to an increase in U.S. income tax as a result of taxation on income earned in
the U.S. as well as U.S. taxation of a portion of the income generated in Asia.
Prior to the Business Combination, the Company was not subject to U.S. income
tax and earned most of its income in jurisdictions with no or relatively low
income tax rates. The Company believes that it will continue to earn a
significant portion of its income outside of the U.S. and that the majority of
its offshore income will not be subjected to U.S. income tax. As revenue from
U.S. projects increases relative to revenues from international projects, the
Company's overall tax rate will increase.
Backlog. The Company's backlog at October 31, 1997 increased to $47.2
million from $16.0 million at October 31, 1996. The increase in backlog was
primarily attributable to the Business Combination. Pro forma backlog as of
October 31, 1997 increased to $47.2 million from $36.7 million as of October 31,
1996. At October 31, 1997, roughly 40.0% of the Company's backlog was associated
with projects in the U.S. while 60.0% was associated with projects in the
Philippines, Thailand and Hong Kong. At October 31, 1997, five project contracts
accounted for 86.2% of the Company's total backlog.
21
<PAGE> 23
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995
Revenues. Revenues increased by 39.1% to $6.7 million in fiscal 1996 from
$4.8 million in fiscal 1995. The increase was primarily attributable to
increased work performed on a single large project. Revenues from this project
totaled $4.9 million and $3.4 million during fiscal 1996 and 1995, respectively.
Pro forma revenues decreased by 14.5% to $24.3 million in fiscal 1996 from
$28.4 million in fiscal 1995. On a pro forma basis, the decrease in revenues
resulted from FCAM's implementation of a more selective approach to bidding and
accepting projects.
Gross profit. Gross profit increased by 48.4% to $3.0 million in fiscal
1996 from $2.0 million in fiscal 1995. The increase was attributable to the
increase in revenues along with a more profitable mix of project contracts. As a
percentage of revenues, gross profit margin increased to 45.2% in 1996 from
42.3% in fiscal 1995 because the Company derived a significant portion of its
revenues from one high-margin project in fiscal 1996 which generated a smaller
percentage of revenues in fiscal 1995.
On a pro forma basis, gross profit increased by 133.7% to $4.4 million in
fiscal 1996 from $1.9 million in fiscal 1995. This profit improvement was
primarily attributable to the following: (i) cost containment practices
implemented by the Company's management team; (ii) an increase in the percentage
of revenues generated from projects in Asia which have historically carried
higher gross margins; and (iii) the selective targeting of higher margin
projects on which to bid and selective bidding practices implemented by the
Company's management team. As a percentage of revenues gross profit margin
increased to 18.1% in fiscal 1996 from 6.6% in fiscal 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 34.5% to $1.4 million in fiscal 1996 from
$1.0 million in fiscal 1995. Selling, general and administrative expenses as a
percent of sales decreased slightly to 20.2% in fiscal 1996 from 20.9% in fiscal
1995.
Pro forma selling, general and administrative expenses decreased by 3.0% to
$6.3 million from $6.4 million in fiscal 1996 and 1995, respectively.
Immediately after his appointment as president of FCAM, Mr. Russo developed a
reorganization plan that included selling, general and administrative expense
spending cuts of over $1.8 million during 1995 and 1996. These spending cuts
were offset by increases in staff and related expenses in the Company's Asian
operations.
Backlog. The Company's backlog at October 31, 1996 was $16.0 million
compared to $22.7 million at October 31, 1995. In both fiscal 1996 and 1995, the
majority of the Company's backlog was associated with one project in Thailand.
The decline in backlog for such period was primarily driven by the progress made
during the 1996 fiscal year on the Thailand project. On a pro forma basis, the
Company's backlog at October 31, 1996 was $36.7 million compared to $39.4
million at October 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently maintains a $1.3 million line of credit with a
commercial bank that is subject to renewal on April 30, 1998. This line of
credit is primarily used to provide letters of credit in connection with the
importation of goods and overdraft facilities. Interest on the overdraft
facility is charged on daily balances at 1.75% per annum over the lender's best
lending rate, which was 10.25% as of January 1998 and is payable monthly in
arrears. In addition, a committment fee of 0.25% per annum is charged on the
undrawn balance of the overdraft facility and is also payable in arrears.
Interest on the import facility varies depending upon the currency. Interest on
the import facility denominated in Hong Kong dollars is charged on a daily basis
at 1.50% over the lender's best lending rate and is payable monthly in arrears.
Interest on the import facility in other currencies is charged on a daily basis
at the board rate published by the Bank. The credit line is secured by a pledge
of Company assets and personal guarantees of certain officers. Upon completion
of the Offering, the Company intends to attempt to secure a larger line of
credit under more favorable terms.
The Company attempts to structure payment arrangements with its customers
to match costs incurred under the project. To the extent the Company is not able
to match costs, it relies on its cash reserves and its credit facility to meet
its working capital needs. As of January 31, 1998, the Company had approximately
22
<PAGE> 24
$75,000 in borrowings under its line of credit. As of January 31, 1998, the
Company had working capital (current assets less current liabilities) of $8.6
million. The Company believes that it has sufficient liquidity through its
present resources to meet its financial needs for the short term and currently
foreseeable future.
The Company's short term cash needs are primarily for working capital to
support operations including receivables and to pay costs incurred in performing
its contracts. Operating activities for such quarter provided cash flows of $2.2
million in the first quarter ended January 31, 1998. In the first quarter,
operating cash flows were higher than net income due to substantial decreases in
accounts receivable and costs, estimated earnings and billings on uncompleted
contracts along with restricted deposits. These cash inflows were partially
offset by an increase in claims receivable and by decreases in accounts payable
and income taxes payable. Investing activities required $418,000 for the quarter
ended January 31, 1998. Financing activities provided cash of approximately
$388,000 from short-term draws on credit facilities during the first quarter.
For certain financial information with respect to the Company's foreign
operations, see Note 9 of Notes to Consolidated Financial Statements.
YEAR 2000 COMPLIANCE
Management of the Company believes that the software packages currently in
use and expected to be in use prior to the year 2000 are year 2000 compliant.
Management does not expect the financial impact of required modifications to
such software, if any, will be material to the Company's financial position,
cash flows or results of operations in any given year.
EFFECT OF INFLATION
During the past three years, the rate of inflation in many of the Southeast
Asian countries in which the Company operates significantly exceeded that of the
U.S. However, the Company generally has been able to reduce the impact of
inflation on profitability by increasing the prices of its products and reducing
operating costs. No assurance can be given that the Company will be able to
minimize the impact of inflation on profitability in the future.
RECENTLY ISSUED ACCOUNTING STANDARDS
Segment information -- In June 1997, the FASB issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which
supersedes portions of SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS No. 131 is effective for the Company commencing in its
year ending October 31, 1999. Company management has not completely assessed the
effects of SFAS No. 131 on its segment reporting, however, it does not currently
believe that there will be significant changes from the information currently
being reported.
Comprehensive income -- In June 1997, the FASB issued SFAS No. 130,
Reporting Comprehensive Income, which becomes effective for the Company
commencing in its year ending October 31, 1999. Company management does not
believe, based on current activities, that adoption of this statement will have
a significant effect on its financial statements except to the extent that
cumulative foreign currency translations are included in comprehensive income.
23
<PAGE> 25
BUSINESS
The following Business section contains forward-looking statements that
inherently involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of any number of factors, including those set forth under "Risk
Factors" and elsewhere in this Prospectus.
COMPANY OVERVIEW
Flour City is one of the world's leading full-service providers of custom
curtain wall in commercial and monumental high-rise construction. The Company
and its predecessors have been involved in the design, fabrication and
installation of custom curtain wall systems in the U.S. since the modern
high-rise emerged over 50 years ago. Some of the most prestigious buildings in
the world are accented by custom curtain wall systems designed, fabricated, and
installed by the Company including: Citicorp Center, JFK Airport Terminal One
and 320 Park Avenue (Mutual of America) in New York City; First Interstate Bank
Tower in Los Angeles; the Rock and Roll Hall of Fame and Key Tower in Cleveland;
Empire Towers in Bangkok; the Allied Bank Tower (Fountain Place) in Dallas; the
United Airlines Terminal and International Terminal at O'Hare Airport in
Chicago; G.T. International Tower in Manila and the IDS Building in Minneapolis.
The Company offers a complete range of custom curtain wall services
including in-house design, engineering, manufacturing, assembly, installation
and project management. The Company actively participates in the architectural
design stage of its projects, and it has excellent marketing and working
relationships with major international architects, including Skidmore Owings &
Merrill, Kohn Pedersen & Fox and Pei Cobb. The Company also has strategic
relationships with several of the most respected international and domestic
developers and project managers, including New World Group, Mitsui, Turner
Construction, LMB and Morse Diesel. In addition, the Company is involved in a
number of projects on which Bechtel serves as a project manager. These
relationships serve to promote the Company's participation in bidding on
desirable projects and allow the Company to leverage its management and
technological expertise with low-cost, localized labor and market knowledge. As
a result, the Company is able to offer a complete range of services, from
initial design through final installation, for unique and sophisticated custom
curtain wall projects.
The decline of activity in the U.S. construction market in the early 1990's
reduced the number of companies that provide a full range of services in
connection with the design and installation of custom curtain wall. After this
industry contraction, the Company remained as one of the few full-service custom
curtain wall companies in the U.S. As a result, the Company is invited to bid on
a large percentage of the commercial custom curtain wall projects which come to
market in the U.S. and overseas. This position allows the Company to target
projects which best utilize the Company's management and production capabilities
which offers the greatest opportunities for attractive margins.
INDUSTRY BACKGROUND
The term "curtain wall" is used to describe the non-load bearing external
walls of modern mid-rise and high-rise buildings, which consist of a combination
of glazing, cladding elements and supports to attach the custom curtain walls to
the main building structure. The curtain wall market is composed of standard and
custom segments. Standard curtain wall typically consists of stock components
which can be manufactured with minimal design and engineering at relatively low
cost and corresponding low margins. Alternatively, custom curtain wall often
includes unique and irregular designs manufactured according to site-specific
requirements, typically at higher margins.
Custom curtain wall defines high-rise and monumental buildings from an
aesthetic and architectural perspective. Custom curtain wall systems also serve
a wide range of practical purposes, including protecting the building interior
from the elements and allowing for cost savings through more efficient heating
and ventilation. The custom curtain wall component of a typical high rise
building will represent between 5% and 15% of the overall cost of the project.
The types of structures which utilize custom curtain wall systems include
mid-rise and high-rise buildings, campus-style buildings, hotels and airport
terminals. Glass and
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glazing technologies utilized in the custom curtain wall industry also have
applications in other structures such as bus and telephone enclosures.
Custom curtain wall panels are produced and assembled in a factory setting
with minimal on-site operation, as opposed to the hand-cladded method of using
bricks and cement to constitute the facade of a building. Custom curtain wall
construction requires expertise in various external building materials,
including marble, granite and other stone, aluminum, steel and precast concrete,
sealed and operable window systems, and systems for securely attaching outside
panels to building superstructures. Custom curtain walls allow repair work to be
carried out to the facade of the building by the replacement of a damaged wall
panel without affecting the entire external facade of the building. The
deterioration and failure of older curtain wall systems have also created demand
for the repair or installation of new custom curtain wall systems to modernize
or refurbish existing buildings and structures.
U.S. DOMESTIC MARKET
Based on estimates by F.W. Dodge, a unit of McGraw-Hill Construction
Information Group ("F.W. Dodge"), the value of the 1997 U.S. construction market
was $125 billion. Based on the Company's internal estimates, the Company
believes that the U.S. custom curtain wall construction segment of the market
had an approximate value in 1997 of $830 million.
The custom curtain wall segment of the construction industry is driven by
several factors. The need for and development of mid-rise, campus style and
high-rise buildings, which drives demand for custom curtain wall systems, is
influenced by the supply and demand of premium office space as well as
industrialization, urbanization, suburbanization and population growth. The
Company believes that decreasing vacancy rates often lead to increased rents,
which in turn contribute to increased private sector construction spending, a
portion of which will utilize custom curtain wall systems.
The U.S. has seen an increased use of custom curtain wall systems in public
sector buildings and buildings with heavy public use, such as the JFK Airport
Terminal One in New York City, the United Airlines Terminal and the
International Terminal at O'Hare Airport in Chicago and the Boston and
Minneapolis Courthouses. The construction of public sector projects is usually
supported by taxation or the need for new or upgraded public facilities. Public
sector buildings tend to be designed for a longer life cycle, which in turn
requires a curtain wall system that can provide superior performance with
limited maintenance. Contracts for installation of custom curtain wall systems
in public sector buildings have presented an area of growth for the Company.
The following table sets forth for the years indicated U.S. office vacancy
rates based upon data from C.B. Commercial Real Estate Group ("CB Commercial")
and the concomitant construction spending based upon data from the U.S. Commerce
Department:
<TABLE>
<CAPTION>
NON-RESIDENTIAL
CONSTRUCTION SPENDING
YEAR VACANCY RATE (IN BILLIONS)
- ---- ------------- ---------------------
<S> <C> <C>
1991 18.5% $164
1992 18.0 156
1993 16.7 163
1994 15.8 174
1995 14.5 194
1996 13.8 201
1997 11.6(1) 207(2)
</TABLE>
- ---------------
(1) Through the first quarter of 1997.
(2) Projected for 1997.
CB Commercial has predicted that overall domestic office vacancy rates will
reach single digits by the end of 1998, a level of vacancy not seen since 1982.
In some metropolitan areas such as San Francisco,
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<PAGE> 27
Washington, D.C., and Boston, vacancy rates have approached a five-year low and
new development projects have commenced.
INTERNATIONAL MARKETS
Southeast Asia. The World Bank forecasts 1998 growth rates for Hong Kong at
4.1%, the Philippines at 3.8%, and Indonesia at 2.0%. Despite the recent
economic volatility, demand for taller, premium office buildings in selected
regions remains strong. For example, according to Richard Ellis Ltd., well known
international property consultants, as of January 1997 the office vacancy rate
in Manila was 4%, with prime office space remaining tight through July 1997.
Richard Ellis Ltd. also estimated that as of July 1997 that the vacancy rate in
Hong Kong's most prestigious location, Core Central, was 2.5%. The Company
believes that this continued demand for premium office space will continue to
support increased demand for construction of buildings which utilize custom
curtain wall. While the Company does not believe that all nations in Southeast
Asia will continue to build their infrastructure at the rates seen in the recent
past, the Company believes that the PRC, Hong Kong, and the Philippines may
continue to be significant markets in the coming years. See "Risk
Factors -- Risks Related to International Operations."
Latin America. The increase in economic activity in Latin America, which
started in mid-1996, continues to accelerate, especially in Mexico, Argentina,
Brazil and Peru. The OECD forecasts that economic activity should remain strong
across the region with larger countries likely to experience output growth
through 1998 from 3% to 6%. The Company intends to pursue projects in Latin
America. The stabilization of the Mexican peso and the Company's strategic
alliance with Grupo IMSA should assist the Company in securing custom curtain
wall projects in the growing Latin American construction industry.
Middle East. The Company has recently experienced an increase in bid
activity throughout the Middle East, in particular Israel and Saudi Arabia. To
the extent the demand for custom curtain wall intensifies, the Company's
activity in the region may also increase.
BUSINESS STRATEGY
The Company intends to build on its reputation as a world-wide leader in
the custom curtain wall industry to support continued growth and increased
profitability. The key elements of the Company's strategy to accomplish these
goals are to: (i) selectively target high margin projects; (ii) maintain and
develop key relationships; (iii) exploit its full service, custom capabilities;
(iv) enhance and exploit its position as a low cost manufacturer; and (v)
capitalize on its global presence.
Selectively target high margin projects. The Company's unique mix of
management and technical expertise, familiarity with overseas markets and key
relationships has positioned the Company as one of the few remaining
full-service providers of custom curtain wall systems. As a result, the Company
is invited to bid on a large percentage of the commercial curtain wall projects
which come to market in the U.S. and overseas. This position allows the Company
to target projects which best utilize the Company's management and production
capabilities, offering the greatest opportunity for attractive margins.
Maintain and develop key relationships. The Company has established several
strategic relationships to secure and complete domestic and international
projects. The Company has established relationships worldwide with several of
the world's most respected architects, developers and project managers,
including New World Group, Mitsui, Turner Construction, LMB Morse Diesel,
Skidmore Owings & Merrill, Kohn Pedersen & Fox and Pei Cobb. The Company is
involved in several projects on which Bechtel serves as a project manager. The
Company believes that these strategic relationships enhance its participation in
the bidding process for the most desirable projects worldwide and help to
facilitate smooth project execution.
Exploit full-service, custom capabilities. As one of the few full-service
custom curtain wall companies, the Company provides the entire range of custom
curtain wall services including in-house design, engineering, manufacturing,
assembly, installation and project management. The Company applies its design
expertise to adapt systems to a wide variety of custom curtain wall
applications. General contractors and developers often
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<PAGE> 28
prefer to limit the number of subcontractors on a particular project and favor
full-service providers due to the greater responsibility and accountability they
can provide.
Minimize cost structure. The Company's technological expertise developed
through 50 years of U.S. experience in custom curtain wall applications combined
with the use of local project management and labor allow the Company to minimize
its cost structure and reduce the risk of project delays. During the design
phase, the Company uses proprietary advanced computer aided design ("CAD")
software to decrease design time and minimize raw materials expense. During the
fabrication and installation phases the Company uses local labor and overseas
manufacturing in the most cost-efficient locales. These efficiencies serve to
lower the Company's project costs and to maximize the likelihood of completing
projects with attractive margins.
Capitalize on global presence. With offices in Hong Kong, New York, Dallas,
Chicago and Manila, the Company is positioned to participate in the most active
construction markets in the world, including the U.S., Asia and Latin America.
The Company combines its technological expertise developed in the U.S. with
local management teams to both secure projects and realize cost savings through
design innovation, unique manufacturing strategies and management of local
labor. The Company believes that the international composition of its management
team provides a significant competitive advantage over its largest U.S.
competitors who typically rely on expatriates for senior level project
management.
SALES AND MARKETING
The fostering of strategic relationships in the construction industry
constitutes a key element in marketing the Company's services and products. The
Company seeks to build on its relationships with architects in the early design
phase of projects. By having designs it assisted in creating included in the
project specifications, the Company's prospects of being invited to bid on a
project are maximized and the Company gains a competitive advantage through
familiarity with a project's design. The Company also uses its relationships
with significant developers, contractors and consultants to secure invitations
to bid on monumental custom curtain wall projects worldwide. The Company's
history as one of the oldest custom curtain wall companies in the industry,
combined with its reputation and capabilities as a full service provider of
custom curtain wall systems, enhances its opportunities to selectively bid on
global projects.
The Company's projects are, and in the foreseeable future will continue to
be, awarded by private or governmental entities in a competitive bidding
process. Due to the nature of the bidding and award process, the Company has
experienced, and in the future expects to experience, significant delays in
project awards. These delays have caused and will continue to cause substantial
variations in quarterly results. In addition, no assurance can be given that the
timing of a project award will be consistent with the Company's expectations.
See "Risk Factors -- Fluctuations in Quarterly Results" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's management expertise is extremely valuable in the preparation
of a successful and profitable bid. Management's expertise allows it to
incorporate cost-saving techniques into the manufacturing and installation
phases of projects. After receiving tender documents from the project developer
or general contractor, the Company is typically given four to six weeks to
prepare a bid for the project. After developing a project-specific design, the
Company critiques the design for cost and technical performance. At this stage,
the Company is often able to use its expertise to develop a design that is not
only cost effective but also efficiently manufactured and installed, thereby
reducing the overall custom curtain wall cost to the developer or general
contractor. After finalizing the design, the Company develops comprehensive
material requirements, engineering, manufacturing and installation labor
analysis that is initially reviewed by a department manager and then by senior
management, prior to submission of the Company's project bid.
The selection of a winning bid usually occurs four to six weeks after
submission of the custom curtain wall design bid. Bid price, reputation,
completion schedule and system design are the primary factors considered in
awarding the custom curtain wall contract to the prevailing bidder. The Company
believes that its reputation for providing high quality, technically proficient
products is an invaluable factor in being considered for project awards because
it distinguishes the Company from certain competitors who compete for projects
solely on price. The typical cost incurred by the Company to submit a
comprehensive bid with system design ranges
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<PAGE> 29
from approximately $50,000 to $150,000, regardless of whether the Company's bid
is selected as the winning bid.
OPERATIONS
From the moment a custom curtain wall project contract is awarded, the
Company employs a structured process to attain the highest levels of efficiency
and quality. The Company employs a multi-discipline process to maximize project
success.
Project Management. Upon execution of a letter of intent, the Company
establishes a project management team led by a senior project manager. Design
personnel meet with the production engineering group to review the custom
curtain wall system design. The senior project manager, generally located on
site, maintains direct contact with the general contractor, coordinates the
Company's different departments and oversees the Company's subcontractors. An
engineering job captain supervises the project team engineering staff, maintains
the engineering schedule and communicates with fabrication, assembly, and site
personnel to ensure a "user friendly" design. On site, a superintendent oversees
assembly and installation and provides status reports to the project manager.
Senior management's close involvement in the Company's projects is an integral
component for timely project execution. A typical custom curtain wall project
for the Company lasts approximately 18 to 30 months from commencement through
completion, depending upon size and complexity.
Engineering. The Company's engineering process begins upon the Company's
receipt of architectural drawings for a project for which the Company intends to
bid. Composed of experienced engineers and draftsman, the Company's engineering
group designs a custom curtain wall system that will provide the desired
aesthetic qualities inherent in the architectural drawings, together with the
performance capabilities required by the project specifications, including water
penetration, air filtration and seismic capabilities. During the system design
stage, the Company utilizes its expertise to design a system that not only meets
or exceeds the project specifications, but that can also be efficiently
manufactured and installed. Once the Company has been awarded a project, the
Company's drafters prepare drawings detailing each of the separate unit types
and conditions for the various custom curtain wall systems which are sent to the
architect, general contractor and owner for review and approval. After these
drawings are approved, an independent laboratory procures and tests mock-up
materials. This testing process is designed to ensure that the custom curtain
wall will meet the required performance criteria. Drafting of construction shop
drawings commences immediately after the submission of mock-up drawings, and all
drawings are then submitted to the main contractor. The Company submits
structural design calculations, thermal modeling and other technical information
as part of the shop drawing program and then finalizes fabrication papers,
assembly drawings, and bills of materials. These documents provide the
instructions for the production of a final custom curtain wall and the blueprint
for the procurement process.
To support its engineering and design functions the Company has established
engineering departments in both the U.S. and Asia with experienced technical
staff. The Company is committed to using modern technology and is equipped with
CAD hardware and software to improve the efficiency of the engineering process
and to provide technologically superior designs.
Project Execution. Upon completion and approval of the final curtain wall
design, the Company purchases the necessary raw materials, such as granite,
glass and aluminum. Thereafter, the raw materials are sent to one of the
Company's three fabrication facilities located in Johnson City, Tennessee,
Foshan, PRC or Monterrey, Mexico for fabrication and assembly of the individual
modules comprising the custom curtain wall system. The Company selects the
fabrication facility for any given project based on the location of the project
and its proximity to the particular fabrication facility. If the curtain wall
contract mandates performance testing, the Company will schedule the performance
test to be conducted at an independent third party testing facility. Typical
tests include the use of static and dynamic pressure, air infiltration, water
penetration and proof tests to prove the effectiveness of the materials used for
structural performance against design loads. The Company makes modifications and
the independent laboratory retests materials whenever necessary to ensure that
the specified performance is achieved. The Company then includes all changes
required to ensure that the
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<PAGE> 30
specified performance criteria are satisfied. Thereafter, the Company fabricates
and assembles the modules comprising the custom curtain wall system and prepares
the modules for delivery to the project site.
Once the modules arrive at the project site, they are installed under the
oversight of the Company's project managers and engineers. In the U.S., the
Company often utilizes members of the Architectural and Ornamental Ironworkers
Union or the International Union of Operating Engineers to install the
individual curtain wall modules. Internationally, the Company usually contracts
with third party installation companies for installation services. If third
party installation companies are unavailable, the Company has the ability to
provide its own installation workforce for a given project. Variations in the
scope of work as a project progresses result in additive and deductive work and
changes, thereby changing the amount owed under the contract.
PROJECTS
Recently Completed and Pending Projects. The Company has successfully
completed a considerable number of projects in the U.S. and Asia. Some of the
Company's major completed and pending projects are set forth below (* denotes
pending projects), grouped according to the estimated contract value for the
project:
ESTIMATED CONTRACT VALUE IN EXCESS OF $15 MILLION
<TABLE>
<CAPTION>
COMPLETION
PROJECT LOCATION DATE(1) OWNER/DEVELOPER GENERAL CONTRACTOR
------- -------- ---------- --------------- ------------------
<S> <C> <C> <C> <C>
G.T. International Manila, Philippines 4th Quarter 1999 Philippines Securities C.E. Construction
Tower* Corporation
Empire Towers* Bangkok, Thailand 3rd Quarter 1998 Silom Tower Ltd. Bechtel
Foley Square New York, NY 4th Quarter 1995 Bechtel Park Tower Realty Lehrer McGovern Bovis
Courthouse
Rockwell International Chantilly, VA 3rd Quarter 1995 Rockwell International Clark Construction
</TABLE>
ESTIMATED CONTRACT VALUE BETWEEN $5 TO 15 MILLION
<TABLE>
<CAPTION>
COMPLETION
PROJECT LOCATION DATE(1) OWNER/DEVELOPER GENERAL CONTRACTOR
------- -------- ---------- --------------- ------------------
<S> <C> <C> <C> <C>
Chapultepec Mexico City, Mexico 1st Quarter 2000 ICA Reichmann Chapultepec S.A. de C.V.
Tower*
Cathay Pacific Hong Kong 4th Quarter 1999 Cathay Pacific Airways Ltd. Dragages et Travaux Publics
Terminal* (Hong Kong) Ltd.
Swiss Reinsurance Armonk, NY 3rd Quarter 1998 Swiss Re Company Turner Construction
America Headquarters*
Cleveland Health Cleveland, OH 3rd Quarter 1998 Cleveland Clinic Foundation Turner Construction
Services Center*
New York Psychiatric New York, NY 1st Quarter 1998 State of NY HRH/Hill Construction
Institute* Dormitory Authority
U.C. Davis Medical Davis, CA 4th Quarter 1997 The Regents of the Centex Golden
Center University of California
JFK Terminal One New York, NY 4th Quarter 1997 Terminal One Group Assoc. Morse Diesel International
New York Hospital* New York, NY 2nd Quarter 1997 The New York Hospital Lehrer McGovern Bovis
Minneapolis Courthouse Minneapolis, MN 4th Quarter 1996 Bechtel Park Tower Realty Turner Construction
Courthouse Associates, L.P.
320 Park Avenue New York, NY 3rd Quarter 1996 Mutual Life Insurance Turner Construction
Company
Asian Terminal Hong Kong 4th Quarter 1995 New World Group Hip Hing Construction
Building Company Ltd.("Hip Hing")
</TABLE>
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<PAGE> 31
ESTIMATED CONTRACT VALUE LESS THAN $5 MILLION
<TABLE>
<CAPTION>
COMPLETION
PROJECT LOCATION DATE(1) OWNER/DEVELOPER GENERAL CONTRACTOR
------- -------- ---------- --------------- ------------------
<S> <C> <C> <C> <C>
Sotheby's Expansion* New York, NY 1st Quarter 2000 Sotheby's Barney Skanska USA
Tai Kok Tsui Hong Kong 3rd Quarter 1998 Sino Land Development Ty International
Metro Station* Construction Company Ltd.
Boston Courthouse* Boston, MA 1st Quarter 1998 Bechtel Park Tower Realty Clark Construction
Military Hospital Hong Kong 1st Quarter 1997 Architectural Services China Overseas
Department
Ersha Island Guangzhou, China 4th Quarter 1996 Ultra Metro Consultants Ltd. Guangdong Construction
Company Ltd.
MM Dow World Kansas City, MO 2nd Quarter 1996 Marion Merrell Dow, Inc. Turner Construction
Headquarters Company
Dongguan New World Dongguan, China 1st Quarter 1996 Dongguan New World Garden & Guangdong Construction
Garden & Club Club Company Ltd.
Bausch & Lomb Rochester, NY 1st Quarter 1996 Bausch & Lomb, Inc. Le Chase Construction, Inc.
Headquarters
Arnoff Center for the Cincinnati, OH 4th Quarter 1995 State of Ohio Messer Cargille Associates
Arts Building Commission
Rock and Roll Cleveland, OH 4th Quarter 1995 Rock & Roll Hall of Fame Turner Construction
Hall of Fame Museum, Inc.
Shue Yan College Hong Kong 4th Quarter 1995 Shue Yan College Hip Hing
Bank of China Building Ching Yuan, China 4th Quarter 1995 Bank of China Guangdong Construction
Po Lin Temple Hong Kong 3rd Quarter 1995 Po Lin Temple Hip Hing
Progressive Campus Cleveland, OH 3rd Quarter 1995 Progressive Casualty Whiting-Turner Contracting
East and West Insurance Company Company
Discovery Bay Hong Kong 2nd Quarter 1995 New World Group Hip Hing
IV and V
Sony Plaza New York, NY 1st Quarter 1995 Sony Corp. Structuretone, Inc.
Li Chit Street Hong Kong 1st Quarter 1995 New World Group Hip Hing
</TABLE>
- ---------------
(1) Completion Date means (i) for completed projects, the calendar, as opposed
to fiscal, date on which the Company's employees leave the job site and (ii)
for pending projects, the estimated practical completion date according to
the project contract. Actual completion date may vary from the estimated
practical completion date. See "Risks Factors -- Delays in Completion of
Construction Projects."
STRATEGIC RELATIONSHIPS
The Company has established relationships worldwide with several of the
most respected companies in the construction industry. The Company actively
participates in the architectural design stage of its projects and has excellent
marketing and working relationships with major international architects,
including Skidmore Owings & Merrill, Kohn Pedersen & Fox and Pei Cobb. The
Company also has strategic relationships with several of the most respected
international and domestic developers and project managers, including New World
Group, Mitsui, Turner Construction, LMB and Morse Diesel. These relationships
serve to promote the Company's participation in bidding on desirable projects
and allow the Company to leverage its sophisticated management and technological
expertise with low-cost, localized labor and market knowledge. As a result, the
Company is able to offer a complete range of services, from initial design
through final installation.
Bechtel is one of the largest construction companies in the world and is
playing an active role as construction manager and developer on numerous major
construction projects. The Company has worked with Bechtel on several projects
including the construction of Bechtel's worldwide headquarters in San Francisco,
California and is currently working with Bechtel on the Empire Towers project in
Thailand. See "-- Projects."
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The Company has worked with New World Group on several projects in Hong
Kong and the PRC and intends to build on this relationship in the future. New
World Group is a subsidiary of New World Development. New World Development is
one of the largest real estate developers in Hong Kong and owns one of the
largest land banks in the PRC.
The Company recently established a joint venture with Grupo IMSA for the
fabrication of custom curtain wall in Monterrey, Mexico. Grupo IMSA of Mexico is
a large industrial company involved in the aluminum and construction products
industries. The Company believes that this joint venture will reduce its custom
curtain wall fabrication costs for North American projects and increase its
ability to selectively target and obtain projects throughout Latin America.
COMPETITION
The U.S. and international markets for custom curtain wall construction are
cyclical and dependent on changes in general economic conditions. The curtain
wall industry remains highly competitive with numerous contractors typically
bidding on each available project. The Company encounters competition in the
U.S. and abroad from Benson Industries, Inc., Cupples Products, Glassalum,
Harmon Ltd., a subsidiary of Apogee Enterprises, Inc. and other curtain wall
contractors. The Company's primary competitors in Asia include: Far East
Aluminum Works Co., Ltd., Nippon Light Metals Hong Kong Ltd., Builder's Federal
Hong Kong Ltd., Permasteelisa Holdings Ltd., Tostem Hong Kong Ltd., YKK Hong
Kong Ltd. and Josef Gartner & Co. Ltd. (Hong Kong). The Company regularly faces
competitive bids from one or more of these competitors when bidding for custom
curtain wall contracts. Some of the Company's competitors have greater financial
resources than the Company. Although the level and nature of competition differs
between markets and among products, the Company believes that it competes on the
basis of cost, the quality of its design and workmanship, and on its reputation.
The Company expects its markets to remain highly competitive.
A limited amount of custom curtain wall projects are in development or
under construction at any given time. The Company competes for desirable
projects, financing, subcontractors, and other resources. A significant number
of the Company's projects are obtained through a bidding process, which is
subject to intense competition. There can be no assurance that the Company will
be successful in winning projects or that it will successfully complete future
or existing projects on a profitable basis. See "Risk Factors -- Competition."
BACKLOG
As of January 31, 1998 and January 31, 1997, the Company had over $46.6
million and $44.8 million in project backlog, respectively. Since January 31,
1998, the Company has been awarded two project contracts with a combined value
of approximately $14.7 million. Project backlog represents revenue anticipated
to be recognized in the future on projects awarded, as evidenced by a letter of
intent or contract, but on which (i) work has not yet been initiated or (ii)
work is currently in progress. The typical duration of a project from
commencement to completion ranges from 18 to 30 months depending upon the size
and complexity of a specific project. At March 15, 1998, the Company had
submitted bids on projects with an aggregate contract value of over $120
million. There can be no assurance that the Company will be successful in
securing any contracts as a result of these bids, that the projects will be
awarded in a timely manner or that the Company will recognize as revenue the
amounts reflected as backlog.
BONDING
The Company is dependent upon bonding facilities to obtain custom curtain
wall projects. Domestically, the Company is typically required to provide
payment and performance bonds equal to 100% of the project contract value
awarded. Internationally, the Company is typically required to provide
performance bonds in the amount of 10% of the contract value. Additionally,
international projects often include a 10% to 20% advance payment which is
payable upon execution of the project contract. In these instances, the Company
is also required to provide an advance payment bond equal to the amount of the
advance payment. While there are a limited number of bonding companies qualified
to provide both international and domestic bonding
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<PAGE> 33
facilities, a majority will only provide either domestic or international
bonding. Thus, the Company typically seeks domestic and international bonds from
different sources. The availability and terms of bonding facilities are largely
dependent upon the Company's financial condition and in particular its equity
position. If the Company were unable to secure sufficient bonding facilities
required to satisfy its contractual bonding obligations under existing and
future project contracts it could have a material adverse effect on the
Company's business, financial condition and results of operation. See "Risk
Factors -- Need for Additional Financing; Bonding."
WARRANTIES
The Company typically provides a one to five year material and workmanship
warranty in addition to the pass-through warranties provided by material
suppliers and other vendors on items such as glass and sealant. Historically,
warranty expenses have not had a material impact on the Company's operations or
its financial condition. There can be no assurances that this will continue to
be the case or that disputes over materials or workmanship will not arise in the
future.
EMPLOYEES
As of November 30, 1997, the Company employed approximately 150 people, of
whom approximately 50 were hourly employees and approximately 100 were salaried.
The Company contracts with union labor for curtain wall erection services in the
U.S. The Company considers its relations with its employees to be good. See
"Risk Factors -- Union Relations."
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation in
the ordinary course of its business. The Company does not believe that it is
involved in any litigation, including the proceedings described below, that
will, individually or in the aggregate, have a material adverse effect on its
financial condition, results of operations or cash flow.
During the period FCAM was owned and operated by Armco, FCAM operated
facilities which allegedly generated hazardous substances. Lawsuits involving
these operations have been brought by certain parties, including the U.S.
Environmental Protection Agency ("EPA") and various state agencies, and Armco
and FCAM each have been identified as a potentially responsible party ("PRP") in
connection with certain hazardous waste sites. Pursuant to the terms of the
Armco Sale, Armco agreed to defend, indemnify and hold harmless the Company in
connection with certain lawsuits, including environmental claims associated with
any property owned or operated by, or which constituted a disposal area of,
Armco or FCAM prior to January 1, 1997 (the "Indemnification Agreement"). The
Company believes that to the extent the Company incurs any loss or liability in
connection with any such action, it will be fully compensated therefor pursuant
to the terms of the Indemnification Agreement which has not been contested to
date. No liability has been recorded on the Company's financial statements with
respect to the claims covered thereby because such claims, if any, cannot be
reasonably estimated. There can be no assurance, however, that in the event the
Company is found liable under these claims that the indemnities will be
sufficient to cover the Company's liability.
In January 1994, E.G. Smith and Armco were served with a request for
information in connection with an enforcement action for the cleanup of
hazardous waste at a facility located in Granville, Ohio. E.G. Smith and Armco
were each identified as a PRP in connection with this proceeding. The
Indemnification Agreement provides that Armco will defend, indemnify and hold
harmless the Company for any damages, fines, or penalties in connection with
this matter.
On February 28, 1993, FCAM filed a lawsuit in the Supreme Court of the
State of New York against Sky Lift Corporation ("Skylift") after Skylift
allegedly refused to complete work at a job site and abandoned the project.
Skylift filed a counterclaim seeking $1.7 million plus interest, alleging the
right to compensation for extra work, breach of contract, and other theories of
recovery.
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PROPERTIES
The Company leases approximately 15,000 square feet of space in Johnson
City, Tennessee, which includes its corporate headquarters and engineering
facilities. The lease expires on December 31, 2002. The Company leases 41,000
square feet of space in Piney Flats, Tennessee which is used for fabrication.
The lease expires on May 30, 1998, and the Company intends to exercise its
option to extend this lease for an additional six month period upon expiration.
The Company has the option to renew the lease for two additional six month
terms. The Company leases 2,500 square feet of office space in Jericho, New
York. The lease expires on May 31, 2002. The Company has a 45% interest in a
fabrication facility located in Monterrey, Mexico, which is a joint venture with
Grupo IMSA, S.A. de C.V. The Company has a 30% interest in a fabrication
facility located in Foshan, PRC.
The Company also leases 2,000 square feet of space in Hong Kong which is
the principal executive and administrative office for Asia and is used by the
accounting, purchasing, design departments and by project managers. The lease
expires in January 1999. The Company leases 1,400 square feet of office space in
Hong Kong which is used by the design and engineering departments. The lease
expires in January 1999. The Company leases 2,900 square feet of space in
Bangkok, Thailand which is used as an administrative office. This lease is on a
month to month basis. The Company leases 3,300 square feet of space in Bangkok,
Thailand which serves as a warehouse. This lease is on a month to month basis.
The Company intends to use a portion of the proceeds from the Offering to
establish or acquire a modern fabrication facility in the PRC to meet the
demands of the Asian market for quality curtain wall systems and to satisfy
anticipated future capacity demands. See "Use of Proceeds."
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<PAGE> 35
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
directors, executive officers and certain other significant employees of the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John W.Y. Tang.................. 45 Chairman of the Board and Secretary
Michael J. Russo................ 37 President, Chief Executive Officer and Director
Bryan R. Willis................. 32 Chief Financial Officer
Roger Ulbricht.................. 58 Vice President Business Development and
Technical Service
John M. Sonnenburg.............. 43 Vice President Operations
Michael Kaisersatt.............. 39 Vice President Purchasing and Estimating
Michael Logan................... 55 National Sales Manager
Johnson K. Fong................. 38 Director
</TABLE>
John W. Y. Tang has been the Chairman of the Board of Directors and
Secretary of the Company since January 1997 and has over 10 years in the custom
curtain wall industry. From 1992 to 1997, he was a director of FCAM Asia. From
1990 to 1992, he was a Senior Structural Engineer with Ove Arup & Partners, a
U.K.-based engineering consulting firm. Between 1987 and 1990 he was the
managing director of Brinkley Holding Co., Ltd. a property development company
doing business in Canada. Mr. Tang is a registered professional engineer in
California and the U.S., a registered professional engineer in the Province of
Alberta, Canada, a chartered engineer in the United Kingdom, and a member of the
Institution of Structural Engineers in the United Kingdom. He received his
Masters Degree in Civil Engineering from the University of California at
Berkeley.
Michael J. Russo has been the President and Chief Executive Officer and a
Director of the Company since January 1997 and has over 12 years in the custom
curtain wall industry. Between 1994 and 1997, Mr. Russo served as the President
and Chief Executive Officer of FCAM. From 1991 to 1994, he was the Vice
President of Sales and Marketing of FCAM. Mr. Russo received a Bachelor's Degree
in Mass Communications from Lycoming College.
Bryan R. Willis has been the Chief Financial Officer of the Company since
January 1997. From 1995 to 1997, he was Division Controller of FCAM. Prior to
that, and between 1994 and 1995 he was Supervisor of Financial Planning and
Analysis of Armco Inc. From 1992 to 1994 he was a Financial Analyst for the
Chrysler Corporation. Mr. Willis received a Bachelor's Degree from Southern Utah
University and a Masters Degree in Business Administration from Brigham Young
University.
Roger Ulbricht has been the Vice President of Business and Technical
Services of the Company since January 1997. From 1980 to 1997, he served as Vice
President of Engineering for FCAM and has over 35 years of work experience with
FCAM.
John Sonnenburg has been the Vice President of Operations since January
1997 and has over 20 years in the custom curtain wall industry. From 1995 to
1997, he served as Vice President of Operations for FCAM. From 1992 to 1995, he
was Vice President of Operations for Apex Curtainwalls. He is also a registered
professional engineer in Texas, Louisiana and Tennessee. Mr. Sonnenburg received
a Bachelor's Degree in Civil Engineering from Purdue University.
Michael Kaisersatt has been the Vice President of Purchasing and Estimating
since January 1997 and has over 15 years in the custom curtain wall industry.
From 1995 to 1997 he was the Vice President of Purchasing and Estimating of
FCAM. From 1989 to 1995 he was the Manager of the Glass Department of FCAM.
Michael Logan has been the National Sales Manager of the Company since July
1997 and has over 25 years of experience in the custom curtain wall industry.
From January to July 1997, he was Manager of
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<PAGE> 36
Business Development of the Company. From 1994 to 1996, he was Regional Sales
Manager for FCAM. From 1992 to 1994, Mr. Logan was Vice President of Sales of
Frame Engineering, a privately held curtain wall company.
Johnson K. Fong became a Director of the Company in January 1997. Mr. Fong
has been a partner of the accounting and consulting firm of Anderson & Schwartz
McGuire LLP since 1988. He is a licensed Certified Public Accountant and member
of the American Institute of Certified Public Accountants, California Society of
Certified Public Accountants and the Hong Kong Society of Accountants. Mr. Fong
received a Bachelor's Degree from the University of California at Berkeley.
The officers of the Company serve at the discretion of the Board. Each
director of the Company serves until such director's successor is elected and
qualified or until the director's death, retirement, resignation or removal.
The Company intends to appoint two additional independent directors to its
Board of Directors within three months of the consummation of the Offering.
Directors who are also employees of the Company or one of its subsidiaries will
not receive additional compensation for serving as directors. Each director who
is not an employee of the Company or one of its subsidiaries are paid $5,000 per
year, plus $500 for each Board of Directors' meeting and each committee meeting
they attend (unless a committee meeting is held on the same day as a Board of
Directors' meeting), reimbursement for out-of-pocket expenses incurred in
attending Board and committee meetings and stock options. See
"Management -- Stock Option Plan."
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. Following the Offering, the Board of Directors intends to
establish an audit committee (the "Audit Committee") to make recommendations to
management concerning the engagement of independent public accountants, review
with the independent public accountants the plans and results of the audit
engagement, approve professional services provided by the independent public
accountants, review independence of the independent public accountants, consider
the range of audit and non-audit fees and review the adequacy of the Company's
internal accounting controls.
Compensation Committee. Following the Offering, the Board of Directors
intends to establish a compensation committee (the "Compensation Committee") to
determine compensation of the Company's executive officers and to administer the
Company's 1997 Stock Incentive Plan (the "Plan"). The current executive officer
salaries were set by the Board.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid by the Company to the Company's Chief Executive Officer in
fiscal 1997 (the "Named Executive Officer"). During fiscal 1997, the Company had
no other executive officers whose salary exceeded $100,000. The compensation
numbers below reflect compensation paid by the Company after the consummation of
the Armco Sale and do not reflect compensation paid to Mr. Russo by Armco in
connection with his services to FCAM prior to the Armco Sale.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- OTHER ANNUAL
NAME AND PRINCIPAL POSITION(S) SALARY BONUS COMPENSATION
------------------------------ --------- ------- ------------
<S> <C> <C> <C>
Michael J. Russo........................................... $108,334 $ -- $8,000
President, Chief Executive Officer
and Director
</TABLE>
35
<PAGE> 37
EMPLOYMENT AGREEMENTS
Messrs. Tang, Russo, Willis and Ulbricht have entered into employment
agreements with the Company providing for an annual base salary of $160,000,
$130,000, $100,000 and $105,000, respectively. Each employment agreement is for
a term of five years commencing on January 1, 1997, with the exception of Mr.
Tang's which commences on December 15, 1997. Each of these agreements provides
that, in the event of a termination of employment by the Company without cause,
the employee will be entitled to receive his then current salary and benefits
for a period of six months following date of termination and shall be entitled
to retain all of his Purchase Shares (as defined below) that have vested prior
to the effective date of termination. Each employment agreement contains a
covenant not to compete with the Company and not to solicit business away from
the Company during the term of employment and for one year thereafter. If the
Company undergoes a "change in control," then, under certain circumstances, the
Company may terminate its Repurchase Rights (as defined below) in their entirety
as of the date of the "change in control."
Each employment agreement, other than Mr. Tang's, provides for a stock
purchase right ("Stock Purchase Right") with respect to shares of Common Stock
of the Company in conjunction with a vesting schedule therefor which restricts
any transfers or dispositions of such shares ("Purchase Shares"). Pursuant to
the employment agreements, Messrs. Russo, Willis and UIbricht have exercised
their Stock Purchase Rights and purchased 199,861, 159,889 and 39,972 shares of
Common Stock of the Company, respectively, at an exercise price of $0.00025 per
share. Subject to continued employment by the Company, such shares vest five
years after date of grant and have provisions for accelerated vesting if certain
earnings targets are met. Upon termination of employment, the Company may
repurchase any unvested shares at the exercise price of $0.00025 per share (the
"Repurchase Rights").
STOCK INCENTIVE PLAN
In December 1997, the Company and its stockholders adopted the Company's
1997 Stock Incentive Plan (the "Plan"). The Plan provides a means to attract,
motivate, retain and reward key employees, directors and consultants of the
Company and its subsidiaries and promote the success of the Company. The Plan
provides that the maximum number of shares of Common Stock that may be issued
pursuant to outstanding grants and awards and are available for future grants
and awards under the Plan shall be equal to 500,000 shares plus 10% of any
increase in outstanding shares that occur after December 15, 1997. The maximum
number of shares that may be subject to all awards granted to any individual in
any calendar year is limited to 100,000 shares.
Administration and Eligibility. The Plan provides that it will be
administered by the Board of Directors or a committee appointed by the Board of
Directors. The Board of Directors intends to appoint the Company's Compensation
Committee to administer the Plan after the Offering. The Plan empowers the
Compensation Committee, among other things, to interpret the Plan, to make all
determinations deemed necessary or advisable for the administration of the Plan
and to award to officers and other key employees, directors and consultants of
the Company and its subsidiaries ("Eligible Employees"), as selected by the
Compensation Committee, options, including incentive stock options ("ISOs") as
defined in the Code, stock appreciation rights ("SARs"), shares of restricted
stock, performance shares and other awards valued by reference to Common Stock,
based on the performance of the participant, the performance of the Company or
its Common Stock and/or such other factors as the Compensation Committee deems
appropriate.
Transferability. Generally speaking, options under the Plan are not
transferable other than by will or the laws of descent and distribution, are
exercisable only by the participant, and may be paid only to the participant or
the participant's beneficiary or representatives. However, the Compensation
Committee may establish conditions and procedures under which exercise by and
transfers and payments to certain third parties are permitted, to the extent
permitted by law.
Payment. The Plan permits optionees, with certain exceptions, to pay the
exercise price of options in cash, Common Stock (valued at its fair market value
on the date of exercise), a combination thereof or, if an option award so
provides, by delivering irrevocable instructions to a stockbroker to promptly
deliver the exercise price to the Company upon exercise (i.e., a so-called
"cashless exercise"). Cash received by the
36
<PAGE> 38
Company upon exercise will constitute general funds of the Company and shares of
Common Stock received by the Company upon exercise will return to the status of
authorized but unissued shares.
Term and Exercise Period of Options. The Plan provides that options may be
granted for such terms as the Compensation Committee may determine but not
greater than ten years after the date of the Option. The Plan does not impose
any minimum vesting period, post-termination exercise period or pricing
requirement, although in the ordinary course, customary restrictions such as
vesting periods, exercise periods and repurchase provisions will likely be
imposed. Options will generally be exercisable during the holder's employment by
the Company or by a related company. Generally speaking, options which have
become exercisable prior to termination of employment will remain exercisable
for ninety days thereafter (180 days in the case of disability or death). Such
periods, however, cannot exceed the expiration dates of the Options. The
Committee has the authority to accelerate the exercisability of Options or
(within the maximum ten-year term) extend the exercisability periods.
Non-employee Directors. Under the Plan, each director who is not an
employee (a "Non-Employee Director") will be granted stock options to purchase
20,000 shares of Common Stock upon becoming a director at an exercise price
equal to the market price of the Common Stock on that date. Non-Employee
Directors on the date of the Offering will each be granted stock options to
purchase 20,000 shares of Common Stock on the date of the Offering at the public
offering price. In addition, at the close of trading on the day of the annual
stockholders meeting in each calendar year beginning in the fourth year
following the initial grant, each Non-Employee Director on such date will be
granted stock options to purchase 5,000 shares of Common Stock at an exercise
price equal to the market price of the Common Stock on that date. All
Non-Employee Director options have a 10-year term and will vest in equal annual
installments over a four-year period commencing on the first anniversary of the
grant date. If a Non-Employee Director's services are terminated for any reason
other than the director's death, disability or retirement, any portion of stock
options held by such director that are exercisable will remain exercisable for
three months after such termination of services or until the expiration of the
term of such option, whichever occurs first. If the Non-Employee Director dies,
becomes disabled or retires, stock options held by such director will become
exercisable immediately and remain exercisable for one year after the date of
such termination of services or until the expiration of the term of such option,
whichever first occurs.
Termination, Amendment and Adjustment. The Plan may be terminated by the
Compensation Committee or by the Board of Directors at any time. In addition,
the Compensation Committee or the Board may amend the Plan from time to time,
without the authorization or approval of the Company's stockholders, unless that
approval is required by law, agreement or the rules of any exchange upon which
the stock of the Company is listed. No Option may be granted under the Plan
after December 14, 2007, although options previously granted may thereafter be
amended consistent with the terms of the Plan.
Upon the occurrence of a Change in Control Event (as defined in the Plan),
in addition to acceleration of vesting, an appropriate adjustment to the number
and type of shares or other securities or property subject to an option and the
price thereof may be made in order to prevent dilution or enlargement of rights
under options.
Individual awards may be amended by the Compensation Committee in any
manner consistent with the Plan, including amendments that effectively reprice
options without changes to other terms. Amendments that adversely affect the
holder of an option, however, are subject to his or her consent.
The Plan is not exclusive and does not limit the authority of the Board of
Directors or the Compensation Committee to grant other awards, in stock or cash,
or to authorize other compensation, under any other plan or authority.
Compensation Committee Interlocks and Insider Participation
Prior to the Offering, the Company had no compensation committee or other
committee of the Board performing similar functions. Decisions concerning
compensation of executive officers were made by the
37
<PAGE> 39
Company's Board. No officer or employee of the Company, other than Mr. Tang and
Mr. Russo, participated in deliberations concerning such compensation matters.
CERTAIN TRANSACTIONS
Since November 1, 1994, the Chairman of the Board, Mr. Tang has been
indebted to FCAM (Asia), a subsidiary of the Company, in amounts in excess of
$60,000 under certain loans. Such loans were made in connection with the
start-up and capitalization of the Asian Companies. There are no maturity dates
for these loans and they are not evidenced by a written instrument. The
following table sets forth the largest amount of indebtedness outstanding during
such period, the interest rate and the outstanding balance of such indebtedness
as of January 31, 1998:
<TABLE>
<CAPTION>
LARGEST OUTSTANDING
AMOUNT BALANCE
NAME OF INDEBTEDNESS INTEREST RATE AT JANUARY 31, 1998
---- --------------- ------------- -------------------
<S> <C> <C> <C>
John W.Y. Tang $646,107 0% $127,327
</TABLE>
Since November 1, 1994, Ng Ching Ching Rowena, Mr. Tang's wife, has been
involved in a series of transactions with FCAM (Asia) in which the amount
involved exceeded $60,000. Such transactions consisted of a series of loans from
Ms. Ng to FCAM (Asia) which were used to supplement cash flow since much of FCAM
(Asia)'s cash was used to secure banking facilities in connection with certain
projects, including the Empire Towers project. There are no maturity dates for
these loans and none are evidenced by a written instrument. The following table
sets forth, the largest amount of indebtedness incurred by FCAM (Asia) to Ms. Ng
during this period, the interest rates and the outstanding balance as of January
31, 1998:
<TABLE>
<CAPTION>
LARGEST OUTSTANDING
AMOUNT BALANCE
NAME OF INDEBTEDNESS INTEREST RATE AT JANUARY 31, 1998
---- --------------- ------------- -------------------
<S> <C> <C> <C>
Rowena Ching Ching Ng $282,291 10% $270,667
</TABLE>
In connection with the FCAM (Pacific) Acquisition in January 1997, FCI
issued 1,142,857 shares to the FCAM (Pacific) stockholders in exchange for 100%
of the issued and outstanding shares of FCAM (Pacific). As a result of the FCAM
(Pacific) Acquisition, Mr. Tang received 719,503 shares of common stock of FCI.
At the time of the FCAM Pacific Acquisition, FCI was a newly formed corporation
with no assets or liabilities. The FCAM Pacific Acquisition was structured so
that FCAM Pacific and FCAM Management owned ninety percent and ten percent of
FCI, respectively.
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<PAGE> 40
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of the Common Stock as of March 31, 1998 by (i) each person who is known to the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) the Named Executive Officer, and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES ----------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
--------------------------- ------------ -------- --------
<S> <C> <C> <C>
John W.Y. Tang(2)...................................... 2,638,176 62.0% 41.5%
Michael J. Russo....................................... 199,861 4.7 3.1
Johnson Fong........................................... -- -- --
Cynthia Lam............................................ 479,668 11.3 7.5
Gold Manor Ltd.
P.O. Box 957
Offshore Corporations Centre
Road Town
Tortola, British Virgin Islands
Mak Yim Hung
Dynamic Choice Enterprises, Inc...................... 479,668 11.3 7.5
Wickams Cay
Road Town
Tortola, British Virgin Islands
All officers and directors as a group (4 persons)...... 2,997,926 66.7% 45.3%
</TABLE>
- ---------------
(1) Unless otherwise indicated, all persons listed have an address c/o the
Company's principal executive offices and have sole voting and investment
power with respect to their shares of Common Stock, except to the extent
authority is shared by spouses under applicable law.
(2) Includes 1,918,674 shares held by Wilson International Ltd., a British
Virgin Islands corporation, of which Mr. Tang is the sole beneficial owner.
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<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation (the "Articles") and by the provisions of applicable
law. A copy of the Articles is included as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $0.0001 per share (the "Common Stock"), and 5,000,000
shares of Preferred Stock with a par value of $0.0001 per share (the "Preferred
Stock"). Upon completion of the Offering, the Company will have outstanding
6,252,380 shares of Common Stock (6,552,380 shares if the Underwriter's
Over-Allotment Option is exercised in full) and no shares of Preferred Stock.
All of the currently issued and outstanding shares of Common Stock are validly
issued, fully paid and nonassessable under the Nevada Revised Statutes ("NRS").
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. There is no cumulative voting.
Holders of Common Stock are entitled to receive ratably any dividends that may
be declared by the Board of Directors of the Company out of legally available
funds. Upon the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive ratably the net assets of the
Company after payment of all debts and liabilities and liquidation preferences
of any outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
PREFERRED STOCK
Shares of unissued Preferred Stock may be issued in one or more series from
time to time with such designations, rights, preferences and limitations as the
Board of Directors may determine. The rights, preferences and limitations of
separate series of Preferred Stock may differ with respect to such matters as
may be determined by the Board of Directors including without limitation, the
rate of dividends, method or nature of payment of dividends, terms of
redemption, amounts payable on liquidation, sinking fund provisions, conversion
rights and voting rights. Such undesignated shares could also be used as an
anti-takeover device by the Company. For example, they could be issued with
"super-voting rights" and placed in the control of parties friendly to the
current management.
CERTAIN PROVISIONS OF NEVADA LAW
The Company is a Nevada corporation and is subject to certain anti-takeover
provisions of the NRS. NRS Sections 78.411 through 78.444 (the "Combination with
Interested Stockholders Statute") prohibit an "interested stockholder," under
certain circumstances, from entering into a "combination" with a Nevada
corporation, unless certain conditions are met. A "combination" includes (a) any
merger or consolidation with an "interested stockholder," or any other
corporation which is or after the merger or consolidation would be, an
"affiliate" or "associate" of the "interested stockholder," (b) certain sales,
leases, exchanges, mortgages, pledges, transfers or other dispositions of assets
of the corporation or of its subsidiary in one transaction or a series of
transactions, to or with an "interested stockholder," or any "affiliate" or
"associate" thereof, having an aggregate market value of 5% or more of the
aggregate market value either of all the assets of the corporation or
representing 10% or more of the earning power or net income of the corporation,
(c) any issuance or transfer, in one transaction or a series of transactions, of
shares of the corporation or its subsidiaries, by the corporation or its
subsidiary to stockholders, having an aggregate market value equal to 5% or more
of the aggregate market value of all the outstanding shares of the corporation,
(d) the adoption of any plan or proposal for the liquidation or dissolution of
the corporation proposed by the "interested stockholder," or any "affiliate" or
"associate" thereof, (e) certain transactions with the "interested stockholder"
or "affiliate" or "associate" thereof which would have the effect of increasing
the proportionate share of outstanding shares of the corporation or of its
subsidiary owned by the "interested stockholder," or any
40
<PAGE> 42
"affiliate" or "associate" thereof, (f) the receipt of benefits by an
"interested stockholder" or any "affiliate" or "associate" thereof, except
proportionately as a stockholder, of any loans, advances, guarantees, pledges or
other financial benefits provided by the corporation. An "interested
stockholder" is a person who is the beneficial owner of 10% or more of the
voting power of the outstanding voting shares of the corporation or is an
"affiliate" or "associate" of the corporation, that beneficially owns (or within
the prior three years, did beneficially own) 10% or more of the voting power of
the then outstanding shares of the corporation. A corporation to which the
statute applies may not engage in a "combination" within three years after the
"interested stockholder" acquired its shares, unless the "combination" or the
"interested stockholder's" acquisition of shares was approved by the board of
directors before the "interested stockholder" acquired the shares. Generally,
the "combination" may be consummated after the three-year period expires unless
the "combination" meets all requirements imposed by the corporation's articles
of incorporation and either (i) the board of directors of the corporation
approved the "combination" prior to the "interested stockholder's" date of
acquiring or purchasing shares (ii) the "combination" is approved by the
affirmative vote of holders of a majority of voting power not beneficially owned
by the "interested stockholder" or any "affiliate" or associate" thereof at a
meeting called no earlier than three years after the "interested stockholder's"
date of acquiring shares.
NRS Sections 78.378 through 78.3793 (the "Control Share Acquisition
Statute") prohibit an acquirer, under certain circumstances, from voting shares
of a target corporation's stock after crossing certain threshold ownership
percentages, unless the acquirer obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations that (i) had 200 or more stockholders of record, 100 of
whom are residents of Nevada and (ii) do business directly or indirectly in
Nevada. The Company does not currently meet the requirements for application of
the Control Share Acquisition Statute. Therefore, it is unlikely that the
Control Share Acquisition Statute will apply to the Company.
LIMITATION OF LIABILITY
The NRS provides that a Nevada corporation may include in its articles of
incorporation a provision indemnifying officers and directors against expenses
including attorney's fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by such person in connection with the suit,
action or proceeding if such person acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the corporation and with
respect to any criminal action or proceeding had no reasonable basis to conclude
that his or her conduct was unlawful. A Nevada corporation may also indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by reason of the fact that such
a person was an officer or director of the corporation if such person acted in
good faith and in a manner which he or she believed to be in the best interests
of the corporation.
To the fullest extent allowable under NRS, the Company's Articles and
Bylaws provide that the Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action or suit whether criminal, civil, administrative or investigative, by
reason of the fact that such a person, his testator or intestate was an officer,
director, of the corporation, or a predecessor of the corporation.
TRANSFER AGENT OR REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Jersey Transfer
and Trust Company, Verona, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering 6,252,380 shares of Common Stock of the
Company will be outstanding (6,552,380 shares upon exercise of the Underwriters'
Over-Allotment Option). Of these shares, 2,148,000 will be available for
unrestricted trading in the public market. None of the remaining outstanding
shares of Common Stock will have been registered under the Securities Act, which
means that they may be resold
41
<PAGE> 43
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144 thereunder.
In general, under Rule 144, if a period of at least one year has elapsed
between the later of the date on which restricted securities were acquired from
the Company or the date on which they were acquired from an affiliate, the
holder of such restricted securities (including an affiliate) is entitled to
sell a number of shares within any three-month period that does not exceed the
greater of (i) 1% of the then outstanding shares of the Common Stock
(approximately 62,524 shares) or (ii) the average weekly reported volume of
trading of the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the Company. Affiliates may sell shares not
constituting restricted securities in accordance with the foregoing volume
limitations and other requirements but without regard to any holding period.
Under Rule 144(k), if a period of at least two years has elapsed between the
later of the date on which restricted securities were acquired from the Company
and the date on which they were acquired from an affiliate, a holder of such
restricted securities who is not an affiliate at the time of the sale and has
not been an affiliate for at least three months prior to the sale is entitled to
sell the shares immediately without regard to volume limitations and other
conditions described above.
The Company has reserved 500,000 shares of Common Stock for issuance under
the Plan. Upon consummation of the Offering, the Company intends to grant
options to purchase 200,000 shares of Common Stock under the Plan to employees
and directors of the Company at an exercise price per share equal to the initial
public offering price on the cover hereof. In addition, in connection with this
Offering, the Company is issuing to the Representatives a warrant to purchase a
number of shares of Common Stock equal to 10% of the shares sold in this
Offering (the "Underwriters"). The Company intends (and in the case of the
Underwriter Warrant, is obligated) to file registration statements under the
Securities Act to register the shares subject to such options and warrant and,
upon effectiveness thereof, such shares will be freely tradeable in the open
market (subject to Rule 144 limitations applicable to affiliates).
The Company and its officers, directors and certain stockholders, who
beneficially own at least 62,524 shares of Common Stock in the aggregate, have
agreed not to sell or otherwise dispose of any shares of Common Stock for a
period of 180 days from the date of this Prospectus without the prior written
consent of the Representative, except that the Company may issue shares of
Common Stock offered hereby, shares of Common Stock issued pursuant to the
exercise of outstanding options and warrants, shares of Common Stock issued
(subject to certain conditions) in connection with acquisitions and options
granted under the Company's stock option plans, so long as none of such options
become exercisable during such period.
No prediction can be made as to the effect, if any, the sale of shares or
the availability of shares for sale will have on the market price for the Common
Stock prevailing from time to time. Nevertheless, sales, or the availability for
sale of, substantial amounts of the Common Stock in the public market could
adversely affect prevailing market prices and the future ability of the Company
to raise equity capital and complete acquisitions for Common Stock.
42
<PAGE> 44
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representative, Van
Kasper & Company (the "Representative"), have severally agreed to purchase from
the Company the number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Van Kasper & Company......................................
---------
Total........................................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby
(other than those subject to the Underwriters' Over-Allotment Option described
below) if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the price to public set forth on the cover page of this Prospectus
and to certain dealers at this price less a concession not in excess of
$ per share. The Underwriters may allot and these dealers may reallot a
concession not in excess of $ per share to certain other dealers. After
the initial offering, the offering price and other selling terms may be changed
by the Representative.
Prior to this offering, there has been no active public market for the
Common Stock. Consequently, the initial public offering price will be determined
through negotiation among the Company and the Representative. Factors to be
considered in making such determination include the prevailing market
conditions, the Company's financial and operating history and condition, its
prospects and the market prices of securities for companies in businesses
similar to that of the Company.
The Company has granted to the Underwriters an option (the "Over-Allotment
Option"), exercisable no later than 45 days after the date of this Prospectus,
to purchase up to 300,000 additional shares of Common Stock at the initial
public offering price, less the Underwriting Discounts and Commissions set forth
on the cover page of this Prospectus, solely to cover over-allotments. To the
extent that the Representative acts to exercise Over-Allotment Option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof as the number of shares of Common Stock to be purchased by it
shown in the above table bears to the total offering, and the Company will be
obligated, pursuant to the option, to sell such shares of Common Stock to the
Underwriters.
In connection with the offering made hereby, the Company has agreed to sell
to the Representative, for nominal consideration, the Representative's Warrant,
which entitles the Representative to purchase from the Company 150,000 shares of
Common Stock. The Representative's Warrant is exercisable, in whole or in part,
at an exercise price of 120% of the initial public offering price at any time
during the four-year period commencing one year after the date of issuance
(which will be on or after the effective date of the Registration Statement of
which this Prospectus is a part), and cannot be transferred for a period of one
year from the date of issuance except to the Underwriters, selling group members
and their officers or partners. The warrant agreement pursuant to which the
Representative's Warrant will be issued will contain provisions providing for
43
<PAGE> 45
adjustment of the exercise price and the number and type of securities issuable
upon exercise of the Representative's Warrant should any one or more of certain
specified events occur. The Representative's Warrant grants to the holders
thereof certain rights of registration for the securities issuable upon exercise
thereof.
At the closing of the Offering, the Company will also pay to the
Representative a non-accountable expense allowance equal to 1.5% of the total
price to public of the shares sold in the Offering.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Representative
has informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.
In connection with the Offering, the Representative may engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, the Representative may reduce that short position
by purchasing Common Stock in the open market. The Representative may also elect
to reduce any short position by exercising all or part of the Over-Allotment
Option. In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
underwriters will engage in such transaction or that such transactions, once
commenced, will not be discontinued without notice.
The Company, all of its executive officers and directors, and certain
beneficial owners of the Common Stock have agreed not to, directly or
indirectly, offer to sell, contract to sell, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable for
shares of Common Stock or any rights to purchase or acquire Common Stock for the
180-day period after the closing of this offering without the prior written
consent of Van Kasper & Company. Van Kasper & Company may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to these lock-up agreements. In addition, the Company has
agreed that for a period of 180 days after the date of this Prospectus, it will
not, without the prior written consent of Van Kasper & Company, issue, offer,
sell, grant options to purchase or otherwise dispose of any equity securities or
securities convertible into or exchangeable for equity securities except for
shares of Common Stock offered hereby, shares of Common Stock issued pursuant to
the exercise of outstanding options and warrants and options granted under the
Company's existing stock option plans so long as none of such options become
exercisable during said 180-day period. Sales of such shares in the future could
adversely affect the market price of the Common Stock. See "Shares Eligible for
Future Sale."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Manning Marder & Wolfe, Los Angeles, California. Certain legal
matters related to the Offering will be passed on for the Underwriters by
Preston Gates & Ellis LLP, Seattle, Washington.
EXPERTS
The consolidated financial statements and related financial statement
schedule of Flour City Architectural Metals (Pacific) Limited as of and for each
of the two years in the period ending October 31, 1996 included elsewhere in
this Prospectus and elsewhere in the registration statement have been audited by
Deloitte Touche Tohmatsu, independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
44
<PAGE> 46
The consolidated financial statements and related financial statement
schedule of Flour City International, Inc. as of and for the year ended October
31, 1997 included elsewhere in this Prospectus and elsewhere in the registration
statement have been audited by Deloitte & Touche LLP, independent auditors as
stated in their reports appearing herein and elsewhere in the registration
statement, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of Flour City Architectural Metals, Inc. as of and
for each of the two years in the period ending December 31, 1996, included
elsewhere in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm given their authority as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement (which
term shall encompass any and all amendments thereto) on Form S-1 (the
"Registration Statement") under the Securities Act with respect to the shares of
Common Stock offered by this Prospectus. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the SEC.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is hereby made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. For further information with
respect to the Company, reference is hereby made to the Registration Statement
and such exhibits and schedules filed as a part thereof, which may be inspected,
without charge, at the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The SEC maintains a web site that contains
reports, proxy and information statements regarding registrants that file
electronically with the SEC. The address of this web site is
(http://www.sec.gov). Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the SEC, upon payment of
the prescribed fees.
45
<PAGE> 47
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Flour City International, Inc. and Predecessor
Flour City Architectural Metals (Pacific) Limited:
Independent Auditors' Report.............................. F-2
Independent Auditors' Report.............................. F-3
Consolidated Balance Sheets............................... F-4
Consolidated Statements of Income......................... F-5
Consolidated Statements of Shareholders' Equity........... F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
Flour City Architectural Metals, Inc.:
Independent Auditors' Report.............................. F-19
Balance Sheets............................................ F-20
Statements of Operations.................................. F-21
Statements of Stockholders' Deficit....................... F-22
Statements of Cash Flows.................................. F-23
Notes to Financial Statements............................. F-24
Unaudited pro forma financial information:
Introduction to Unaudited Pro Forma Financial
Information............................................ F-27
Unaudited Pro Forma Statement of Income................... F-28
Notes to the Unaudited Pro Forma Statements of Income..... F-29
</TABLE>
F-1
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Flour City International, Inc.:
We have audited the accompanying consolidated balance sheet, as restated,
of Flour City International, Inc. (the "Company") as of October 31, 1997, and
the related consolidated statements of income, cash flows and shareholders'
equity for the year ended October 31, 1997, as restated. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements, as restated,
present fairly, in all material respects, the financial position of Flour City
International, Inc. at October 31, 1997, and the results of its operations and
its cash flows for the year ended October 31, 1997 in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Nashville, Tennessee
December 5, 1997
(April 2, 1998 with respect to notes 2 and 15)
F-2
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Flour City Architectural Metals (Pacific) Ltd.:
We have audited the accompanying consolidated balance sheet as restated, of
Flour City Architectural Metals (Pacific) Ltd. and subsidiaries ("FCAM Pacific")
as of October 31, 1996, and the related consolidated statements of income, cash
flows and shareholders' equity for each of the two years in the period ended
October 31, 1996, as restated. These financial statements are the responsibility
of FCAM Pacific's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements, as restated,
present fairly, in all material respects, the financial position of Flour City
Architectural Metals (Pacific) Ltd. and subsidiaries at October 31, 1996, and
the results of their operations and their cash flows for each of the two years
in the period ended October 31, 1996 in conformity with accounting principles
generally accepted in the United States of America.
/s/ DELOITTE TOUCHE TOHMATSU
Hong Kong
June 26, 1997
(April 2, 1998 with respect to Note 2)
F-3
<PAGE> 50
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1996 AND 1997 AND JANUARY 31, 1998
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
------------------------ -----------
1996 1997 1998
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................... $1,401,249 $ 341,825 $ 605,691
Restricted deposits................................. 2,357,346 3,045,817 2,598,106
Accounts receivable, net of allowance for doubtful
accounts of $153,846, $777,625 and $527,188 in
1996, 1997 and 1998............................... 2,317,900 13,401,603 8,840,378
Claims receivable (note 16)......................... -- -- 2,965,859
---------- ----------- -----------
Costs and estimated earnings in excess of
billings on uncompleted contracts................. 258,649 773,537 437,190
Inventories......................................... 563,076 -- --
Note receivable (note 13)........................... -- 1,395,000 1,395,000
Deferred income taxes (note 4)...................... -- 697,285 568,546
Other current assets................................ 108,119 445,116 504,445
---------- ----------- -----------
Total current assets........................... 7,006,339 20,100,183 17,915,215
Property, plant and equipment, net (note 5).............. 170,614 455,027 508,045
Receivable from joint venture corporations (note 8)...... 192,305 177,084 --
Investment in joint venture corporations (notes 2,3 and
6)..................................................... 201,792 193,453 125,546
Other assets............................................. -- 157,344 299,170
---------- ----------- -----------
Total assets................................... $7,571,050 $21,083,091 $18,847,976
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 21,155 $ 3,261,864 $ 2,159,048
Bank borrowings (note 10)........................... 166,141 462,993 75,273
Accrued expenses.................................... 145,626 770,277 603,602
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 4,711,361 5,856,524 5,923,149
Advance from shareholders and directors (note 8).... 42,843 148,339 143,341
Other current liabilities........................... 397,965 285,187 170,734
Income taxes payable (note 4)....................... 56,410 506,530 245,692
Joint venture corporation capital contribution
payable (note 6).................................. 361,246 297,142 23,971
---------- ----------- -----------
Total current liabilities...................... 5,902,747 11,588,856 9,344,810
Minority interests....................................... 7,545 -- --
Negative goodwill (note 13).............................. -- 1,820,642 1,711,403
Commitments and contingencies (note 7)
Stockholders' equity:
Common Stock par value $.0001; authorized 50,000,000
shares; issued 100, 30,516,667 and 4,252,380
shares at October 31, 1996 and 1997 and January
31, 1998.......................................... 100 3,052 425
Additional paid-in capital (note 2)................. -- 528,648 343,775
Retained earnings................................... 1,660,658 6,824,003 7,633,385
Unearned compensation (note 13)..................... -- (286,670) (269,471)
Cumulative translation adjustment (note 3).......... -- 792,060 83,649
Stock subscription receivable (note 13)............. -- (187,500) --
---------- ----------- -----------
1,660,758 7,673,593 7,791,763
---------- ----------- -----------
Total liabilities and shareholders' equity..... $7,571,050 $21,083,091 $18,847,976
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 51
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
AND THREE MONTHS ENDED JANUARY 31, 1997 AND 1998
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED OCTOBER 31, ENDED JANUARY 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................... $4,805,853 $6,684,230 $31,875,264 $3,717,362 $ 6,461,245
Cost of revenues........... 2,772,145 3,665,358 18,030,449 2,305,899 3,341,139
---------- ---------- ----------- ---------- -----------
Gross profit............... 2,033,708 3,018,872 13,844,815 1,411,463 3,120,106
Selling, general and
administrative
expenses................. (1,006,122) (1,353,437) (6,165,380) (968,433) (1,396,898)
Non-cash stock compensation
expense (note 13)........ -- -- (57,330) (5,733) (17,199)
Amortization of negative
goodwill (note 3)........ -- -- 363,865 36,408 109,239
---------- ---------- ----------- ---------- -----------
Operating income........... 1,027,586 1,665,435 7,985,970 473,705 1,815,248
Other income (expense):
Exchange loss (note 3)... -- -- (1,336,678) (12,946) (874,401)
Interest expense......... (1,379) (8,835) (52,131) -- --
Equity in loss of joint
venture corporations
(note 2 and 6)........ (57,935) (234,983) (8,342) -- (67,907)
Interest income.......... -- 66,822 104,494 -- 8,171
Other income............. 124,538 80,537 326,070 33,896 214,023
---------- ---------- ----------- ---------- -----------
Income before minority
interest and income
taxes.................... 1,092,810 1,568,976 7,019,385 494,655 1,095,134
Income taxes (note 4)...... 154,835 148,813 1,752,496 150,000 285,752
---------- ---------- ----------- ---------- -----------
Income before minority
interests................ 937,975 1,420,163 5,266,889 344,655 809,382
Minority interests......... -- (8,974) 5,956 5,895 --
---------- ---------- ----------- ---------- -----------
Net income (note 2)........ $ 937,975 $1,411,189 $ 5,272,845 $ 350,550 $ 809,382
========== ========== =========== ========== ===========
Net income per share (note
2 and 3):
Basic.................... $ .24 $ .36 $ 1.33 $ .09 $ .21
========== ========== =========== ========== ===========
Diluted.................. $ .22 $ .32 $ 1.21 $ .08 $ .19
========== ========== =========== ========== ===========
Weighted Average Shares
Outstanding (note 3):
(in thousands)
Basic.................... 3,960 3,960 3,960 3,960 3,870
========== ========== =========== ========== ===========
Diluted.................. 4,359 4,359 4,359 4,359 4,270
========== ========== =========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 52
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE STOCK
-------------------- PAID-IN RETAINED UNEARNED TRANSLATION SUBSCRIPTION
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION ADJUSTMENT RECEIVABLE
----------- ------ ---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31,
1994................... 100 $ 100 $ -- $ 728,133 $ -- $ -- $ --
Net income............. -- -- -- 937,975 -- -- --
Dividend of $12,966 per
share................ -- -- -- (1,296,601) -- -- --
----------- ------ ---------- ----------- --------- -------- ---------
Balance at October 31,
1995................... 100 100 -- 369,507 -- -- --
Net income for the
year................. -- -- -- 1,411,189 -- -- --
Dividend of $1,200 per
share................ -- -- -- (120,038) -- -- --
----------- ------ ---------- ----------- --------- -------- ---------
Balance at October 31,
1996................... 100 100 -- 1,660,658 -- -- --
Dividend of $1,095 per
share................ -- -- -- (109,500) -- --
Recapitalization in
connection with FCI's
acquisition of FCAM
Pacific (notes 1 and
13).................. 8,999,900 800 (800) -- -- -- --
Employee stock grant
(note 13)............ 1,000,000 100 343,900 -- (344,000) -- --
Compensation expense
(note 13)............ -- -- -- -- 57,330 -- --
Issuance of shares and
recapitalization in
connection with the
Public Merger (notes
1 and 13)............ 20,516,667 2,052 185,548 -- -- -- (187,500)
Net income............... -- -- -- 5,272,845 -- -- --
Translation adjustment... -- -- -- -- -- 792,060 --
----------- ------ ---------- ----------- --------- -------- ---------
Balance at October 31,
1997................... 30,516,667 3,052 528,648 6,824,003 (286,670) 792,060 (187,500)
One for seven reverse
stock split (note
15).................... (26,157,144) (2,616) 2,616 -- -- -- --
Repurchase of shares
(note 13).............. (107,143) (11) (187,489) -- -- -- 187,500
Net income (unaudited)... -- -- -- 809,382 -- -- --
Translation adjustment
(unaudited)............ -- -- -- -- -- (708,411) --
Compensation expense
(unaudited)............ -- -- -- -- 17,199 -- --
----------- ------ ---------- ----------- --------- -------- ---------
Balance at January 31,
1998 (unaudited)....... 4,252,380 $ 425 $ 343,775 $ 7,633,385 $(269,471) $ 83,649 $ --
=========== ====== ========== =========== ========= ======== =========
<CAPTION>
TOTAL
-----------
<S> <C>
Balance at October 31,
1994................... $ 728,233
Net income............. 937,975
Dividend of $12,966 per
share................ (1,296,601)
-----------
Balance at October 31,
1995................... 369,607
Net income for the
year................. 1,411,189
Dividend of $1,200 per
share................ (120,038)
-----------
Balance at October 31,
1996................... 1,660,758
Dividend of $1,095 per
share................ (109,500)
Recapitalization in
connection with FCI's
acquisition of FCAM
Pacific (notes 1 and
13).................. --
Employee stock grant
(note 13)............ --
Compensation expense
(note 13)............ 57,330
Issuance of shares and
recapitalization in
connection with the
Public Merger (notes
1 and 13)............ 100
Net income............... 5,272,845
Translation adjustment... 792,060
-----------
Balance at October 31,
1997................... 7,673,593
One for seven reverse
stock split (note
15).................... --
Repurchase of shares
(note 13).............. --
Net income (unaudited)... 809,382
Translation adjustment
(unaudited)............ (708,411)
Compensation expense
(unaudited)............ 17,199
-----------
Balance at January 31,
1998 (unaudited)....... $ 7,791,763
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 53
FLOUR CITY INTERNATIONAL, INC., AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
AND THREE MONTHS ENDED JANUARY 31, 1997 AND 1998
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED OCTOBER 31, ENDED JANUARY 31,
-------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ 937,975 $1,411,189 $ 5,272,845 $ 350,550 $ 809,382
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization.......... 12,251 43,213 (227,321) (15,200) (32,912)
Non-cash stock compensation............ -- -- 57,330 5,733 17,199
Deferred income taxes.................. -- -- 802,715 150,000 128,739
Minority interests..................... -- 7,545 (7,545) (7,545) --
Equity in loss of joint venture
corporations......................... 57,935 234,983 8,340 -- 67,907
Changes in operating assets and liabilities
net of effects of acquisition:
Restricted deposits.................... -- (2,357,346) (688,471) (896) 447,711
Accounts receivable.................... (934,959) (935,746) (2,033,806) (2,722,526) 4,884,687
Claims receivable...................... -- -- -- -- (2,965,859)
Receivable from affiliates............. (30,210) 77,418 -- -- --
Costs, estimated earnings and billings
on uncompleted contracts, net........ 3,519,081 1,413,163 (6,856,725) 1,147,612 402,972
Inventories............................ -- (563,076) 562,812 70,193 --
Other assets........................... (34,405) (37,529) (291,107) 139,818 (131,400)
Receivable from joint venture.......... -- (192,305) 15,221 (9,488) 177,083
Accounts payable and accrued
expenses............................. (118,796) 80,768 1,909,221 1,304,044 (1,269,491)
Amounts due to joint venture
corporations......................... (58,133) -- -- -- --
Other current liabilities.............. 323,954 (175,738) 136,514 174,405 (114,453)
Income taxes payable................... -- -- 450,120 (56,410) (260,838)
Amounts due to directors............... 65,732 42,843 105,496 (42,843) (4,998)
----------- ---------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities............................... 3,740,425 (997,650) (784,361) 487,447 2,155,729
----------- ---------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment.............................. (87,715) (109,252) (372,242) 67,635 (77,065)
Investment in joint venture
corporations........................... -- (150,346) (64,104) 54,018 (341,078)
Purchase of subsidiary net of cash and
cash equivalent acquired............... -- -- 100 100 --
----------- ---------- ----------- ----------- -----------
Net cash used in investing activities...... (87,715) (259,598) (436,246) 121,553 (418,143)
----------- ---------- ----------- ----------- -----------
Cash flows from financing activities:
Increase in bank borrowings.............. 86,800 328,633 533,670 93,296 387,720
Cash dividends paid...................... (1,296,601) (120,038) (109,487) (109,375) --
----------- ---------- ----------- ----------- -----------
Net cash (used in) provided by financing
activities............................... (1,209,801) 208,595 424,183 202,671 387,720
----------- ---------- ----------- ----------- -----------
Effect of exchange rate changes on cash.... -- -- (263,000) -- (1,086,000)
----------- ---------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.............................. 2,442,909 (1,048,653) (1,059,424) 163,223 263,866
Cash and cash equivalents, beginning of
period................................... 6,993 2,449,902 1,401,249 1,401,249 341,825
----------- ---------- ----------- ----------- -----------
Cash and cash equivalents, end of period... $ 2,449,902 $1,401,249 $ 341,825 1,564,472 $ 605,691
=========== ========== =========== =========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest............................... $ 1,379 $ 8,835 $ 52,132 $ 8,465 17,215
Income taxes........................... 154,835 148,813 477,496 -- 361,441
Significant non-cash financing activities:
Non-cash stock compensation.............. $ -- $ -- $ 344,000 $ 344,000 $ --
=========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 54
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Flour City Architectural Metals (Pacific) Limited ("FCAM Pacific") is
incorporated in the British Virgin Islands and operates through four partly and
wholly owned subsidiaries.
On January 17, 1997, FCAM Pacific was acquired by Flour City International,
Inc. ("FCI"), a Nevada corporation with no assets or operations, in an exchange
of stock. The previous owners of FCAM Pacific became shareholders of 90% of the
common stock of FCI, with the remaining 10% held by management of Flour City
Architectural Metals, Inc. ("FCAM") pursuant to employment agreements.
On January 24, 1997, effective January 1, 1997, FCI acquired FCAM from
Armco, Inc. ("Armco") for $100 (the "Armco Sale").
Effective May 16, 1997, International Forest Industries, Inc. ("IFI"), a
Nevada corporation with nominal assets and operations, acquired FCI in an
exchange of stock with the previous shareholders of FCI acquiring approximately
92% of the common stock of IFI and the existing shareholders of IFI retaining 8%
of its common stock. IFI then changed its name to Flour City International, Inc.
and FCI was merged into it. Flour City International, Inc. and its subsidiaries
and its historical accounting predecessor is herein referred to as the
"Company."
The acquisition of FCAM Pacific by FCI on January 17, 1997 and the
acquisition of FCI by IFI on May 16, 1997 have both been treated as
recapitalizations and the acquisition of FCAM by FCI effective January 1, 1997
has been accounted for as a purchase acquisition. As a result, these financial
statements present FCAM Pacific as the predecessor and continuing entity for
accounting purposes and utilize the FCAM Pacific historical basis of accounting.
The financial statements present results of operations and financial position of
the following entities from the date indicated to January 31, 1998:
<TABLE>
<S> <C>
FCAM Pacific...................................... November 1, 1994
FCAM.............................................. January 1, 1997
</TABLE>
The principal activities of the Company are design, supply and installation
of curtain wall. It operates through subsidiaries and joint venture corporations
principally in the United States ("U.S."), Hong Kong, Thailand, Malaysia and the
Peoples' Republic of China (the "PRC").
The financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") which differ from those used in the statutory accounts of its
subsidiaries. There are no material differences between the U.S. GAAP amounts
and the amounts used in the statutory accounts of the subsidiaries.
2. RESTATEMENT FOR PUBLIC MERGER AND JOINT VENTURE ACCOUNTING
The Company has restated the accompanying financial statements to reflect
the merger of IFI and FCI as a recapitalization versus a reverse purchase
acquisition as previously reported. Additionally, the Company had previously
accounted for investments in the two 30% owned joint ventures under the cost
method and the accompanying financial statements have been restated to account
for these investments under the equity method.
F-8
<PAGE> 55
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the impact of this restatement on the financial statements as
of October 31, 1996 and 1997 and for the years ended October 31, 1997, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
PREVIOUSLY REPORTED AS RESTATED
OCTOBER 31, OCTOBER 31,
------------------------ ------------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investments in joint venture
corporations............................ $ 410,725 $ 410,725 $ 201,792 $ 193,453
Goodwill.................................. -- 1,268,286 -- --
Stockholders' equity...................... 1,869,691 9,159,151 1,660,758 7,673,593
</TABLE>
<TABLE>
<CAPTION>
PREVIOUSLY REPORTED AS RESTATED
YEAR ENDED YEAR END
OCTOBER 31, OCTOBER 31,
------------------------------------ ----------------------------------
1995 1996 1997 1995 1996 1997
-------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amortization of
goodwill............... $ -- $ -- $ (103,885) $ -- $ -- $ --
Equity in loss of joint
venture corporations... -- (98,535) -- (57,935) (234,983) (8,342)
Net income 995,910 1,547,637 5,226,031 937,975 1,411,189 5,272,845
Net income per share(1):
Basic.................. .28 .43 1.28 .24 .36 1.33
Diluted................ .28 .43 1.28 .22 .32 1.21
</TABLE>
- ---------------
(1) The previously reported EPS reflects the Company's one for seven reverse
stock split, effected April 7, 1998.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- The consolidated financial statements
include the assets, liabilities, revenues and expenses of all material
subsidiaries. All material intercompany transactions and balances have been
eliminated.
"Investments in joint venture corporations" are accounted for on the equity
method.
Revenue and cost recognition -- The Company is engaged in various types of
construction under long-term construction contracts. The accompanying financial
statements have been prepared using the percentage-of-completion method of
accounting and, therefore, take into account the cost, estimated earnings and
revenue to date on contracts not yet completed.
The amount of revenue recognized at statement date is the portion of the
total contract price that the cost expended to date bears to the anticipated
final total cost, based on current estimates of cost to complete. Contract cost
includes all direct labor and benefits, materials unique to or installed in the
project, subcontract costs, and allocated indirect construction costs. From time
to time the Company makes claims for additional billings to its customers
because of owner-caused delays, incomplete specifications or similar reasons.
Such claims involve negotiations and sometimes litigation. No revenue is
included for claims until agreement is obtained that such amount is owed.
As the long-term contracts extend over one or more years, revisions in
estimates of cost and earnings during the course of the work are reflected in
the accounting period in which the facts that require the revision become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
Cash and cash equivalents -- Cash and cash equivalents include cash on
hand, cash accounts, interest bearing savings accounts, and time certificates of
deposit with an original maturity of three months or less.
F-9
<PAGE> 56
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Restricted deposits -- Restricted deposits represent funds set aside to
collateralize performance bonds. They represent interest bearing securities
maturing within twelve months from date of purchase. The market value of such
securities approximates cost.
Trade accounts receivable -- In accordance with terms of long-term
contracts, certain percentages of billings are withheld by customers until
completion and acceptance of the contracts. Final payments of all such amounts
withheld which might not be received within a one-year period from October 31,
1997 are $2,825,353. In conformity with trade practice, however, the full amount
of accounts receivable has been included in current assets.
Inventory -- Inventory, consisting principally of aluminium ingots, is
stated at the lower of cost, determined by the weighted average method, or
market.
Property, plant and equipment -- Property, plant and equipment is stated at
cost.
Depreciation and amortization -- Depreciation is provided to write off the
cost of property, plant and equipment over their estimated useful lives, using
the straight line method, at the following rates per annum:
<TABLE>
<S> <C>
Office equipment............................................ 25%
Furniture and fixtures...................................... 20%
Leasehold improvements...................................... 20%
Motor vehicles.............................................. 25%
</TABLE>
Negative goodwill -- Negative goodwill is being amortized over 5 years on
the straight-line method.
Income taxes -- The Company uses an asset and liability approach in
providing for income taxes on all transactions that have been recognised in the
financial statements, in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
deferred taxes be adjusted to reflect the tax rates at which future taxable
amounts will be settled or recognised. The effects of tax rate changes on future
deferred tax liabilities and deferred tax benefits, as well as other changes in
income tax laws, are recognised in net earnings in the period such changes are
enacted. No provision has been made for taxes on undistributed earnings of
foreign subsidiaries to the extent that it is management's intent to permanently
reinvest such earnings and their current taxability is not reasonably foreseen.
Provision for taxes is made on such unremitted earnings to the extent that
management believes they will be taxed at the parent company level.
Foreign currency translation -- The consolidated financial statements of
the Company are presented in U.S. dollars. The majority of the Company's
operations outside the United States are conducted in Hong Kong dollars or Thai
baht.
On consolidation, the financial statements of subsidiaries outside the
United States are translated from the local functional currency into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation." Accordingly, all assets and liabilities are
translated at the exchange rate prevailing at the balance sheet date and all
income and expenditure items are translated at the average rates for each of the
years. Gains or losses from foreign currency transactions are included in net
income.
On July 2, 1997 the Thai Baht was effectively devalued and allowed to float
against the U.S. dollar and other currencies. As a result, an exchange loss of
the equivalent of $1,336,676 was realized and reflected in the statement of
income for the year ended October 31, 1997. The translation of the financial
statements of the Company's Thai subsidiary has resulted in a cumulative
translation adjustment of $792,060 at October 31, 1997.
F-10
<PAGE> 57
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Employee benefits -- The Company does not provide any retirement or
postretirement benefits other than a defined contribution 401k plan.
Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Asset impairment -- The Company assesses impairment of long-lived assets,
in accordance with criteria consistent with the provisions of Financial
Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to Be Disposed Of.
Earnings per share -- Earnings per share have been determined pursuant to
the provisions of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," for all periods presented. Retroactive effect has been
given for the merger and recapitalizations described in note 1 and the one for
seven reverse stock split declared February 24, 1998, as described in Note. 15.
Below is a reconciliation for the three years in the period ended October
31, 1997 and the three months ended January 31, 1997 and 1998, of the difference
between basic weighted average shares outstanding and diluted weighted average
shares outstanding:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
----------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Weighted average shares -- basic......... 3,959,714 3,959,714 3,959,714 3,959,714 3,870,429
Effect of dilutive employee stock
grants................................. 399,714 399,714 399,714 399,714 399,714
--------- ---------- ---------- --------- ---------
Weighted average shares -- diluted....... 4,359,428 4,359,428 4,359,428 4,359,428 4,270,143
--------- ---------- ---------- --------- ---------
</TABLE>
Unaudited interim information -- The unaudited interim financial statements
include all adjustments, consisting only of normal recurring adjustments, which
management considers necessary for a fair presentation of the financial position
and results of operations. The results of operations for the three months ended
January 31, 1998 are not necessarily indicative of the results that may be
expected for a full year.
4. INCOME TAXES
The Company is not taxed in the British Virgin Islands where FCAM Pacific
is incorporated. The Company's subsidiaries incorporated in Hong Kong are
subject to Hong Kong taxation on their activities conducted in Hong Kong. As
described in Note 1, on January 17, 1997, FCAM Pacific became a subsidiary of a
United States corporation and, as a consequence, became subject to provisions of
the United States income tax code. As a result, the taxing jurisdiction of the
consolidated group changed to the United States effective as of January 17,
1997.
Income is subject to taxation in the various countries in which the Company
and its subsidiaries operate. The components of income before income taxes are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Hong Kong...................................... $ (660,354) $ (713,567) $ (385,235)
Malaysia and Thailand.......................... 1,753,164 2,282,543 3,706,548
United States.................................. -- -- 3,698,072
---------- ---------- ----------
$1,092,810 $1,568,976 $7,019,385
========== ========== ==========
</TABLE>
F-11
<PAGE> 58
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Current:
Hong Kong....................................... $ -- $ -- $ --
Malaysia and Thailand........................... 154,835 148,813 252,496
United States................................... -- -- 697,285
-------- -------- ----------
154,835 148,813 949,781
Deferred -- United States......................... -- -- 802,715
-------- -------- ----------
$154,835 $148,813 $1,752,496
======== ======== ==========
</TABLE>
Deferred taxes consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net operating loss carryforwards in Hong Kong...... $ -- $ 58,696 $ 52,850
Valuation allowance................................ -- (58,696) (52,850)
Basis difference in contracts in process........... -- -- 400,000
Allowance for doubtful accounts.................... -- -- 150,000
Other.............................................. -- -- 147,285
-------- -------- --------
$ -- $ -- $697,285
======== ======== ========
</TABLE>
A valuation allowance has been established for deferred tax assets related
to net operating loss carryforwards in Hong Kong as management believes it is
more likely than not such amounts will not be realized. At October 31, 1997, no
valuation allowance related to other deferred tax assets was recorded as
management believes it is more likely than not such assets will be realized.
The effective tax rate of the Company varied from the statutory rate (the
Hong Kong statutory rate is used through October 31, 1996 and the United States
rate is used thereafter) for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1995 1996 1997
-------- --------- ----------
<S> <C> <C> <C>
Statutory tax rate............................... 16.5% 16.5% 34%
======== ========= ==========
Statutory tax rate applied to income before
taxes.......................................... $180,314 $ 258,881 $2,386,591
State income taxes............................... -- -- 218,576
Profits in foreign subsidiaries taxed at less
than the statutory rate........................ (25,479) (110,068) (658,945)
Negative goodwill amortization................... -- -- (124,000)
Other............................................ -- -- (69,726)
-------- --------- ----------
Income tax provision............................. $154,835 $ 148,813 $1,752,496
======== ========= ==========
</TABLE>
The amount of accumulated earnings of subsidiaries outside of the U.S. at
October 31, 1997 for which U.S. taxes have not been provided as management does
not intend to repatriate such amounts or otherwise cause them to become taxable
is approximately $4,800,000.
F-12
<PAGE> 59
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT -- NET
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1997
-------- ---------
<S> <C> <C>
At cost:
Office equipment.................................... $149,714 $ 369,348
Furniture and fixtures.............................. 70,381 162,376
Leasehold improvements.............................. 14,977 71,590
Motor vehicles...................................... 10,256 14,256
-------- ---------
Total................................................. 245,328 617,570
Less: Accumulated depreciation and amortization....... (74,714) (162,543)
-------- ---------
Net book value........................................ $170,614 $ 455,027
======== =========
</TABLE>
6. INVESTMENT IN JOINT VENTURE CORPORATIONS
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Foshan Weidu Aluminium Window Manufacturing Company,
Ltd.................................................. $ 88,992 $ 79,968
Foshan Weidu Decoration Engineering Company, Ltd....... 112,800 113,485
-------- --------
$201,792 $193,453
======== ========
</TABLE>
The Company, through a subsidiary, owns 30% of each of the above
corporations at October 31, 1997. During 1996, the Company acquired 70% of the
equity of Foshan Weidu Decoration Engineering Company, Ltd. and disposed of 40%
in the same year.
The joint venture capital contribution payable is principally for a
commitment to provide additional capital to Foshan Weidu Decoration Engineering
Company, Ltd.
7. COMMITMENTS AND CONTINGENCIES
The Company leases premises under various operating leases. At October 31,
1997, the Company and its subsidiaries were committed under operating leases
requiring minimum rentals as follows:
<TABLE>
<S> <C>
Year ending October 31:
1998...................................................... $268,758
1999...................................................... 87,100
2000...................................................... 101,948
2001...................................................... 101,948
2002...................................................... 30,303
--------
Total minimum lease payments................................ $590,057
========
</TABLE>
In addition to the above operating lease commitments there is a performance
guarantee of $129,534 outstanding in relation to a construction contract in
progress.
FCAM is a party to legal proceedings incidental to its business. In one
case, FCAM filed suit against a subcontractor for non-performance in the amount
of $1.4 million and the subcontractor has filed a counterclaim against FCAM in
the amount of $1.7 million. There is currently no scheduled date for the
commencement of trial. The Company was named as a party to certain environmental
actions which arose
F-13
<PAGE> 60
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
prior to FCAM's sale by Armco. Armco, pursuant to the sale agreement, agreed to
defend, indemnify, and hold harmless the Company in connection with these
actions. Other litigation to which the Company is a party is immaterial. In the
opinion of management, any ultimate liability with respect to these actions will
not materially affect the financial position, results of operations or cash
flows of the Company.
8. RELATED PARTY TRANSACTIONS
SHAREHOLDERS AND MANAGEMENT
At October 31, 1997, the Company had outstanding loans payable to directors
and shareholders in the amount of $148,339. The loans are unsecured, carry no
interest and have no fixed terms of repayment.
JOINT VENTURE CORPORATIONS
The Company and its subsidiaries have transactions with its 30% owned joint
venture corporations as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Sales to joint venture corporations........ $282,145 $370,408 $110,841
</TABLE>
The Company and its subsidiaries had the following balances with the above
joint ventures:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Amounts receivable from joint venture corporations..... $192,305 $177,084
</TABLE>
9. SEGMENT INFORMATION
The Company operates in one business segment, which is to design, supply
and install curtain wall.
F-14
<PAGE> 61
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
An analysis of revenues, operating profit and identifiable assets by
geographic location as provided for under Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise, is
as follows:
<TABLE>
<CAPTION>
HONG KONG MALAYSIA AND UNITED
AND THE PRC THAILAND STATES CONSOLIDATED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1995
Revenues from third parties............ $1,160,898 $ 3,362,810 $ -- $ 4,523,708
Revenues from joint venture
corporations......................... 282,145 -- -- 282,145
---------- ----------- ----------- -----------
Total revenues....................... 1,443,043 3,362,810 -- 4,805,853
Income (loss) before income taxes...... (669,910) 1,762,720 -- 1,092,810
Identifiable assets.................... 1,442,838 2,907,481 -- 4,350,319
========== =========== =========== ===========
YEAR ENDED OCTOBER 31, 1996
Revenues from third parties............ $1,418,769 $ 4,895,053 $ -- $ 6,313,822
Revenues from joint venture
corporations......................... 370,408 -- -- 370,408
---------- ----------- ----------- -----------
Total revenues....................... 1,789,177 4,895,053 -- 6,684,230
Income (loss) before income taxes...... (713,567) 2,282,543 -- 1,568,976
Identifiable assets.................... 4,877,768 2,693,282 -- 7,571,050
========== =========== =========== ===========
YEAR ENDED OCTOBER 31, 1997
Revenues from third parties............ $1,970,177 $10,736,794 $19,057,452 $31,764,423
Revenues from joint venture
corporations......................... 110,841 -- -- 110,841
---------- ----------- ----------- -----------
Total revenues....................... 2,081,018 10,736,794 19,057,452 31,875,264
Income (loss) before income taxes...... (385,249) 3,706,548 3,698,086 7,019,385
Identifiable assets.................... 1,671,436 7,283,750 12,127,905 21,083,091
========== =========== =========== ===========
</TABLE>
Export sales for the year ended October 31, 1995 were to the PRC in the
amount of $583,965. In subsequent periods, export sales were less than 10% of
total revenues.
10. BANK BORROWINGS
These represent borrowings in the form of bills payable, invoice financing,
and other short-term loans with certain commercial banks.
<TABLE>
<CAPTION>
YEAR ENDED AND AT OCTOBER 31,
------------------------------------
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
Total credit facilities available....... $115,385 $1,282,051 $1,282,051
Total utilized facilities............... $ 86,800 $ 166,141 462,993
Weighted average interest rate on
borrowings at end of year............. 10.50% 10.25% 9.5%
</TABLE>
All the above credit facilities were guaranteed by the Chairman of the
Board of Directors throughout the relevant years. Interest rates in respect of
such facilities are generally based on the banks' prime lending rates and the
credit lines are normally subject to annual review.
F-15
<PAGE> 62
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Details of the customers accounting for 10% or more of total revenues and
accounts receivable for each of the three years ended and at October 31, 1995,
1996 and 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED AND AT
OCTOBER 31,
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Customer A......................................... 14% -- --
Customer B......................................... 70% 76% 34%
Customer C......................................... -- -- 33%
Accounts receivable:
Customer A......................................... 36% 22% --
Customer B......................................... 53% 70% 31%
Customer C......................................... -- -- 6%
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, restricted deposits,
receivable from joint venture corporations, investment in joint venture
corporations, advance from shareholders and amounts due to joint venture
corporations, are reasonable estimates of their fair value because of the
relatively short maturities of these instruments. The carrying value of bank
loans payable approximate fair value as they have variable interest rates.
13. ACQUISITIONS AND RECAPITALIZATIONS
The acquisitions of FCAM Pacific by FCI and FCI by IFI described in Note 1
have both been accounted for as recapitalizations, accordingly, no value has
been attributed to the shares issued and they are treated as being outstanding
for all periods presented for purposes of computing earnings per share.
The net amount paid in the Armco sale was $100 cash. This acquisition has
been accounted for as a purchase. The net amount paid was allocated to the fair
value of the assets, liabilities and contracts assumed, with the excess of fair
value of net assets acquired used to first reduce property, plant and equipment
to zero and then credited to negative goodwill. The allocation of the price was
as follows:
<TABLE>
<S> <C>
Billed accounts receivable.................................. $$7,971,869
Other assets................................................ 251,785
Deferred income taxes....................................... 1,500,000
Note receivable -- Armco.................................... 1,395,000
Payables and other current liabilities...................... (1,447,047)
Billings in excess of cost and estimated earnings on
uncompleted contracts..................................... (7,487,000)
Negative goodwill........................................... (2,184,507)
----------
Net amount paid............................................. $ 100
==========
</TABLE>
The note receivable from Armco is unsecured and is without interest. It is
payable upon the occurrence of the Company either posting a performance bond or
completing and relieving Armco of performance obligations on certain contracts
assumed.
One shareholder of IFI had subscribed to but not paid for 107,143 shares of
IFI common stock for $187,500. This subscription was subject to repurchase by
the Company at the subscription price. In November
F-16
<PAGE> 63
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1997 the Company exercised its repurchase right and the subscription receivable
was cancelled and the shares returned to the Company.
The operating results of FCAM have been included in the Consolidated
Statement of Income from January 1, 1997, the effective date of acquisition. On
the basis of an unaudited pro forma consolidation of the results of operations
as if the acquisition had taken place at November 1, 1995, consolidated revenues
would have been $24,283,000 and $35,229,000 for the years ended October 31, 1996
and 1997, respectively. Consolidated pro forma net income (loss) and diluted net
income (loss) per share would have been $(1,441,000) and $5,471,000 and $(.33)
per share and $1.26 per share for the years ended October 31, 1996 and 1997,
respectively. Such pro forma amounts are not necessarily indicative of what the
actual consolidated results of operations might have been if the acquisition had
been effective at the beginning of fiscal 1996. In computing the pro forma
amounts, no adjustment has been made to retroactively reflect the amounts
allocated to the fair value of the contracts acquired from FCAM on January 1,
1997, as it is not possible to recast what values would have been attributable
to such contracts at November 1, 1995 nor what effect such contracts might have
had on the purchase price of FCAM.
Three employees of the Company, in connection with their employment
agreements effective January 1, 1997, have been granted an aggregate of 142,857
shares of restricted common stock of the Company (399,714 shares after the
merger with IFI). Such shares vest five years after date of grant and have
provisions for accelerated vesting if certain earnings targets are met. The fair
value of the stock issued at the date of grant has been reflected as unearned
compensation and is charged to operations over five years.
14. RECENTLY ISSUED ACCOUNTING STANDARDS
Segment information -- In June 1997, the FASB issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which
supersedes portions of SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS No. 131 is effective for the Company commencing in its
year ending October 31, 1999. Company management has not completely assessed the
effects of SFAS No. 131 on its segment reporting, however, it does not currently
believe that there will be significant changes from the information currently
being reported.
Comprehensive income -- In June 1997, the FASB issued SFAS No. 130,
Reporting Comprehensive Income, which becomes effective for the Company
commencing in its year ending October 31, 1999. Company management does not
believe, based on current activities, that adoption of this statement will have
a significant effect on its financial statements except to the extent that
cumulative foreign currency translations are included in comprehensive income.
15. SUBSEQUENT EVENT -- REVERSE STOCK SPLIT
On February 24, 1998 the Board of Directors declared a 1 for 7 stock split,
effective April 7, 1998. All per share and weighted average share information in
these financial statements have been restated to reflect the effect of such
stock split.
16. SUBSEQUENT EVENTS -- CLAIM RECEIVABLE, BAHT DEVALUATION (UNAUDITED)
The Company has one contract in Thailand denominated in Thai baht which has
been affected by the devaluation of the baht and the resulting economic
difficulties experienced by many Asian Pacific countries, including Thailand. In
July 1997, the government of Thailand changed its policy of pegging the baht to
the U.S. dollar and the baht has deteriorated in value from approximately 25 to
the U.S. dollar at that time to approximately 51 at January 31, 1998.
F-17
<PAGE> 64
FLOUR CITY INTERNATIONAL, INC. AND PREDECESSOR
FLOUR CITY ARCHITECTURAL METALS (PACIFIC) LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Included on the January 31, 1998 consolidated balance sheet is a claim
receivable for the baht equivalent of 2,965,859 which has been recorded pursuant
to a clause in the contract which provides protection to the Company for changes
in government policy. The recording of this claim is in accordance with the
provisions of Statement of Position "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts" issued by the
Accounting Standards Division of the American Institute of Certified Public
Accountants.
Included in accounts receivable at October 31, 1997 is the baht equivalent
of approximately $1,000,000, representing amounts billed to and tentatively
agreed to by the owner for losses incurred by the company to that date. In
January 1998, the owner did not pay the amount billed on its scheduled payment
date and requested that it be included in the final claim settlement.
Accordingly, that amount is included in claims receivable at January 31, 1998.
In March 1998 the Company received a tentative claims agreement from the
owner of the Thai Project acknowledging their liability and intent to pay the
baht equivalent of approximately $2,279,859 relative to the devaluation claim,
to be paid in installments beginning in March 1998 through June 1998. On April
2, 1998, management received an additional written acknowledgment from the owner
for the remaining claim of approximately $686,000 to be paid by July 31, 1998.
At January 31, 1998, total amounts due from this one customer, including
the above claims, denominated in Thai baht, are the baht equivalent of
approximately $4,175,000. In the event of non-payment of any receivables in
Thailand, the Company may be subjected to seeking recourse through legal
proceedings in Thailand or arbitration in an undetermined jurisdiction, either
of which could be a relatively lengthy process.
F-18
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
Board of Directors
Flour City Architectural Metals, Inc.
Johnson City, Tennessee
We have audited the accompanying balance sheets of Flour City Architectural
Metals, Inc. ("FCAM"), as of December 31, 1995 and 1996, and the related
statements of operations, cash flows and stockholders' deficit for the years
then ended. These financial statements are the responsibility of the FCAM's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Flour City Architectural Metals, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
June 4, 1997
F-19
<PAGE> 66
FLOUR CITY ARCHITECTURAL METALS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Note 2)........................ $ 124,528 $ 168,054
Accounts receivable, less allowance for doubtful accounts
of $372,342 and $430,342, respectively (Note 3)........ 9,632,823 7,987,138
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 473,837 185,682
Other current assets...................................... 96,916 64,750
------------ ------------
Total current assets................................... 10,328,104 8,405,624
Property, Plant and Equipment, net (Notes 2 and 4).......... 2,299,649 740,069
------------ ------------
Total............................................. $ 12,627,753 $ 9,145,693
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Accounts payable.......................................... $ 2,178,397 $ 1,218,947
Accrued and other liabilities............................. 1,953,569 798,733
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 3,041,092 3,656,738
Due to Armco and affiliates, net (Note 5)................. 27,953,666 28,346,515
------------ ------------
Total current liabilities.............................. 35,126,724 34,020,933
Commitments and Contingencies (Note 10)
Stockholder's Deficit:
Common Stock, $1 par, 1,000 shares authorized, issued and
outstanding............................................ 1,000 1,000
Additional paid-in capital................................ 1,991,748 1,991,748
Accumulated deficit....................................... (24,491,719) (26,867,988)
------------ ------------
Total stockholders' deficit............................ (22,498,971) (24,875,240)
------------ ------------
Total............................................. $ 12,627,753 $ 9,145,693
============ ============
</TABLE>
See notes to financial statements.
F-20
<PAGE> 67
FLOUR CITY ARCHITECTURAL METALS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Revenues (Notes 2 and 6).................................... $ 22,942,579 $ 17,129,561
Cost of revenues (Notes 2 and 5)............................ (23,394,221) (15,085,547)
------------ ------------
Gross profit (loss)......................................... (451,642) 2,044,014
Selling, general and administrative expenses (Notes 5, 7, 8
and 9).................................................... (5,533,445) (4,641,424)
------------ ------------
Operating income (loss)..................................... (5,985,087) (2,597,410)
Other income................................................ 293,765 221,141
------------ ------------
Net loss.................................................... $ (5,691,322) $ (2,376,269)
============ ============
</TABLE>
See notes to financial statements.
F-21
<PAGE> 68
FLOUR CITY ARCHITECTURAL METALS, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT PAID-IN-CAPITAL DEFICIT
------ ------ --------------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995...................... 1,000 $1,000 $1,991,748 $(18,800,397)
Net loss.................................... -- -- -- (5,691,322)
----- ------ ---------- ------------
Balance, December 31, 1995.................... 1,000 1,000 1,991,748 (24,491,719)
Net loss.................................... -- -- -- (2,376,269)
----- ------ ---------- ------------
Balance, December 31, 1996.................... 1,000 $1,000 $1,991,748 $(26,867,988)
===== ====== ========== ============
</TABLE>
See notes to financial statements.
F-22
<PAGE> 69
FLOUR CITY ARCHITECTURAL METALS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(5,691,322) $(2,376,269)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 167,335 49,218
Provision for losses on contract receivables........... 846,648 624,724
Changes in assets and liabilities:
Decrease in accounts receivable........................ 1,893,394 1,645,685
Decrease in costs and estimated earnings in excess of
billings on uncompleted contracts..................... 833,270 288,155
Decrease in other current assets....................... 1,450,289 32,166
Decrease in accounts payable........................... (1,472,880) (959,450)
Increase in billings in excess of costs and estimated
earnings on uncompleted contracts..................... 318,825 615,646
Decrease in accrued and other liabilities.............. (6,070,417) (1,779,560)
----------- -----------
Net cash used in operating activities.................. (7,724,858) (1,859,685)
Cash flows from investing activities:
Purchase of property and equipment........................ (15,256) (18,481)
----------- -----------
Net cash used in investing activities.................. (15,256) (18,481)
Cash flows from financing activities:
Increase in due to Armco and affiliates................... 7,606,418 1,921,692
----------- -----------
Net cash provided by financing activities.............. 7,606,418 1,921,692
----------- -----------
Net increase (decrease) in cash and cash equivalents........ (133,696) 43,526
Cash and cash equivalents, beginning of year................ 258,224 124,528
----------- -----------
Cash and cash equivalents, end of year...................... $ 124,528 $ 168,054
=========== ===========
Supplemental disclosures of cash flow information:
Significant non-cash investing and financing activity:
Property and equipment transferred at net book value to
another Armco affiliate:
Property and equipment................................. $ -- $(1,528,843)
=========== ===========
Due to Armco and affiliates............................ $ -- $ 1,528,843
=========== ===========
</TABLE>
See notes to financial statements.
F-23
<PAGE> 70
FLOUR CITY ARCHITECTURAL METALS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
1. ORGANIZATION AND BUSINESS
Flour City Architectural Metals, Inc. ("FCAM") was a wholly-owned
subsidiary of Armco, Inc. ("Armco") until January 24, 1997 at which time it was
sold to Flour City International, Inc. ("FCI"). Such sale was effective as of
January 1, 1997. In May 1997, FCI merged into a publicly traded shell
corporation, International Forest Industries, Inc. ("IFI"), which has changed
its name to Flour City International, Inc.
The historical financial statements through December 31, 1996 reflect only
the operations of the business of engineering, designing, fabricating and
installing high-rise curtainwall systems included in the January 1, 1997 sale
mentioned above. Such financial statements are stated on Armco's historical cost
basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and cost recognition -- FCAM is engaged in various types of
construction under long-term construction contracts. The accompanying financial
statements have been prepared using the percentage-of-completion method of
accounting and, therefore, take into account the cost, estimated earnings and
revenue to date on contracts not yet completed.
The amount of revenue recognized at statement date is the portion of the
total contract price that the cost expended to date bears to the anticipated
final total cost, based on current estimates of cost to complete. Contract cost
includes all direct labor and benefits, materials unique to or installed in the
project, subcontract costs, and allocated indirect construction costs. From time
to time FCAM makes claims for additional billings to its customers because of
owner-caused delays, incomplete specifications or similar reasons. Such claims
involve negotiations and sometimes litigation. No revenue is included for claims
until agreement is obtained that such amount is owed.
As the long-term contracts extend over one or more years, revisions in
estimates of cost and earnings during the course of the work are reflected in
the accounting period in which the facts that require the revision become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is recognized in the financial statements.
Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FCAM continuously reviews estimated earnings from construction contracts
and makes necessary adjustments based on current evaluations of the indicated
outcome. In 1996, as a result of those evaluations, additional revenue on one
contract was recorded in the amount of $1,400,000 and additional losses on two
contracts were recorded in the aggregate amount of $1,500,000.
Cash equivalents -- Cash equivalents consist of short-term investments with
original maturities of 90 days or less stated at cost, which approximates market
value.
Property, plant and equipment -- Property, plant and equipment is stated at
cost. Depreciation is provided over the estimated useful lives of the assets
using the straight-line method. FCAM has adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of. The adoption of this
standard had no material effect on FCAM's financial statements.
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. The
statement requires that all existing potential future
F-24
<PAGE> 71
FLOUR CITY ARCHITECTURAL METALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
tax benefits be recognized as deferred tax assets and subjected to an impairment
evaluation based on the likelihood of realization.
3. ACCOUNTS RECEIVABLE
In accordance with terms of long-term contracts, certain percentages of
billings are withheld by customers until completion and acceptance of the
contracts. Final payments of all such amounts withheld which might not be
received within a one-year period from December 31, 1996 are $3,190,683. In
conformity with trade practice, however, the full amount of accounts receivable
has been included in current assets.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Buildings................................................... $ 17,934 $ --
Leasehold improvements...................................... 18,420 18,420
Machinery and equipment..................................... 2,524,335 616,581
Furniture, fixtures and tools............................... 546,778 554,323
---------- ----------
Total............................................. 3,107,467 1,189,324
Less accumulated depreciation............................... 807,818 449,255
---------- ----------
Property, plant and equipment, net.......................... $2,299,649 $ 740,069
========== ==========
</TABLE>
5. RELATED PARTY BALANCES AND TRANSACTIONS
FCAM's operations for 1995 and 1996 were dependent upon the continuing
financial support from Armco through affiliates capital contributions or other
means. A summary of significant related party transactions with Armco and its
affiliates for the years ending December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Purchase of manufacturing materials and labor............... $4,822,290 $2,461,356
Administrative costs........................................ 2,253,765 2,124,039
</TABLE>
Included in FCAM's accounts receivable is $960,000 due from Kasion
Contracting Co. Ltd., a Hong Kong corporation, which became an affiliate in 1997
pursuant to the transactions described in Note 1.
6. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Details of the customers accounting for 10% or more of total revenues for
the years ended December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revenues:
Customer A................................................ 18% 12%
Customer B................................................ 43% 18%
Customer C................................................ -- 16%
Customer D................................................ 14% 13%
Customer E................................................ -- 12%
</TABLE>
F-25
<PAGE> 72
FLOUR CITY ARCHITECTURAL METALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1996
7. LEASES
FCAM leases vehicles and certain equipment under operating leases. Future
minimum lease payments under noncancelable operating leases as of December 31,
1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997................................................... $103,520
1998................................................... 97,584
1999................................................... 34,000
2000................................................... 34,000
2001................................................... 34,000
--------
Total............................................. $303,104
========
</TABLE>
Total rental expense for the years ended December 31, 1995 and 1996
amounted to $403,369 and $315,517, respectively.
8. EMPLOYEE BENEFIT PLAN
FCAM employees participate in a 401(k) plan which provides for FCAM to
match a portion of employee contributions. Amounts charged to expense for the
years ended December 31, 1995 and 1996 were $158,542 and $263,704.
9. INCOME TAXES
There has been no provision for income taxes made for the years ended
December 31, 1995 and 1996 as FCAM experienced significant net operating losses
which were included on Armco's consolidated income tax returns. As a result of
the change in control effective January 1, 1997, net operating loss
carryforwards are restricted as to future use, and accordingly, no deferred tax
asset has been established for such item.
10. LITIGATION
FCAM is a party to legal proceedings incidental to its business. In the
opinion of management, any ultimate liability with respect to these actions will
not materially affect the financial position, results of operations or cash
flows of FCAM.
11. RESTRUCTURING CHARGE
During 1994, plans were developed to significantly reduce FCAM's future
operating costs and expenses and to improve productivity. This restructuring
program principally involved a reduction in the number of staff plus the
consolidation of offices and facilities and the reorganization of support
functions. An analysis of the activity in the reserve established in 1994 is as
follows:
<TABLE>
<S> <C>
BALANCE, January 1, 1995.................................... $ 360,828
Additional amounts provided............................... 437,518
Costs charged against the reserve......................... (360,828)
---------
BALANCE, December 31, 1995.................................. 437,518
Costs charged against the reserve......................... (437,518)
---------
BALANCE, December 31, 1996.................................. $ --
=========
</TABLE>
In connection with the sale of FCAM in 1997 as described in Note 1, Armco
agreed to assume any further liabilities related to this restructuring.
F-26
<PAGE> 73
FLOUR CITY INTERNATIONAL, INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statements of operations of Flour City
International, Inc. (the "Company") for the year ended October 31, 1997 and
three months ended January 31, 1998 is presented to show the effects of the
acquisition of Flour City Architectural Metals, Inc. ("FCAM") acquired as of
January 1, 1997 (the "Armco Sale"), which has been accounted for as purchase
acquisition, assuming the acquisition had occurred on November 1, 1996.
The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been had the transactions in fact occurred on the respective date indicated
above, nor to project the Company's financial position or results of operations
for any future date or period. In the opinion of the Company's management, all
adjustments necessary for a fair presentation have been made. This unaudited pro
forma financial information should be read in conjunction with the accompanying
notes and the financial statements of the Company and the related notes included
elsewhere herein.
F-27
<PAGE> 74
FLOUR CITY INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FCAM
COMPANY NOVEMBER 1, 1996 TO PRO FORMA PRO FORMA
HISTORICAL DECEMBER 31, 1996(A) ADJUSTMENTS COMBINED
---------- -------------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues..................................... $31,875 $3,354 $ -- $35,229
Cost of revenues............................. 18,030 2,704 -- 20,734
------- ------ ---- -------
Gross profit................................. 13,845 650 -- 14,495
Selling, general and administrative.......... 6,116 530 -- 6,646
Non-cash stock compensation expenses......... 57 -- -- 57
Amortization of negative goodwill............ (314) -- (63)(1) (377)
------- ------ ---- -------
Operating income............................. 7,986 120 63 8,169
Exchange loss.............................. (1,337) -- -- (1,337)
Other revenue, net......................... 370 16 -- 386
------- ------ ---- -------
Income before minority interest and income
taxes...................................... 7,019 136 63 7,218
Income taxes................................. 1,753 -- -- 1,753
------- ------ ---- -------
Income before minority interest.............. 5,226 136 63 5,465
Minority interest............................ 6 -- -- 6
------- ------ ---- -------
Net income................................... $ 5,272 $ 136 $ 63 $ 5,471
------- ------ ---- -------
Net income per share:
Basic...................................... $ 1.33 $ 1.38
======= =======
Diluted.................................... $ 1.21 $ 1.26
======= =======
Weighted average shares outstanding:
Basic...................................... 3,960 3,960
======= =======
Diluted.................................... 4,359 4,359
======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31, 1997
------------------------------------------------------------
FCAM
COMPANY NOVEMBER 1, 1996 TO PRO FORMA PRO FORMA
HISTORICAL DECEMBER 31, 1996(A) ADJUSTMENTS COMBINED
---------- -------------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues..................................... $ 3,717 $3,354 $ -- $ 7,071
Cost of revenues............................. 2,306 2,704 -- 5,009
------- ------ ---- -------
Gross profit................................. 1,411 650 -- 2,062
Selling, general and administrative.......... 968 530 -- 1,498
Non-cash stock compensation expenses......... 6 -- -- 6
Amortization of negative goodwill............ (36) -- (63)(1) (99)
------- ------ ---- -------
Operating income............................. 474 120 63 657
Exchange loss.............................. (13) -- -- (13)
Other revenue, net......................... 34 16 -- 50
------- ------ ---- -------
Income before minority interest and income
taxes...................................... 495 136 63 694
Income taxes................................. 150 -- -- 150
------- ------ ---- -------
Income before minority interest.............. 345 136 63 544
Minority interest............................ 6 -- -- 6
------- ------ ---- -------
Net income................................... $ 351 $ 136 $ 63 $ 550
======= ------ ---- =======
Net income per share:
Basic...................................... $ .09 $ .14
======= =======
Diluted.................................... $ .08 $ .13
======= =======
Weighted average shares outstanding:
Basic...................................... 3,960 3,960
======= =======
Diluted.................................... 4,359 4,359
======= =======
</TABLE>
- ---------------
(a) To adjust the statement of operations to include the two months of activity
of FCAM for November and December 1996.
F-28
<PAGE> 75
FLOUR CITY INTERNATIONAL, INC.
NOTES TO THE PRO-FORMA STATEMENTS OF INCOME
(1) To reflect the amortization of negative goodwill in the acquisition of FCAM
over 5 years. No adjustment is made to retroactively reflect the amounts
allocated to the fair value of the contracts in process acquired from FCAM
on January 1, 1997 as it is not possible to recast what values would have
been attributable to such contracts at November 1, 1996, nor what effect
such contracts might have had on the purchase price of FCAM.
F-29
<PAGE> 76
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 13
Use of Proceeds....................... 14
Capitalization........................ 14
Dividend Policy....................... 14
Price Range of Common Stock........... 15
Dilution.............................. 15
Selected Consolidated Financial
Data................................ 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 24
Management............................ 34
Certain Transactions.................. 38
Principal Stockholders................ 39
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 41
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Additional Information................ 45
Index to Financial Statements......... F-1
- --------------------------------------------
UNTIL JUNE , 1998 (25 CALENDAR DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN SHARES OF
THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OF
SUBSCRIPTIONS.
============================================
</TABLE>
======================================================
2,000,000 SHARES
LOGO
FLOUR CITY
INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
VAN KASPER & COMPANY
May , 1998
======================================================
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company's expenses in connection with the offering, other than
underwriting discounts and commissions are set forth below. All of these amounts
are estimates, except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT PAYABLE
BY REGISTRANT
--------------
<S> <C>
SEC Registration Fee........................................ $ 9,356
NASD Filing Fee............................................. 3,260
Nasdaq National Market Listing Fee.......................... 66,875
Blue Sky Fees and Expenses (Including Legal Fees)........... 15,000
Printing Costs.............................................. 200,000
Registrar and Transfer Agent Fees........................... 5,000
Legal Fees and Expenses..................................... 325,000
Underwriter's Nonaccountable Expense Allowance.............. 360,000
Accounting Fees and Expense................................. 175,000
Miscellaneous............................................... 15,509
----------
Total............................................. $1,175,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 78.751 of the Nevada Revised Statutes ("NRS" and the Company's
Articles of Incorporation and Bylaws contain certain provisions for
indemnification of officers and directors of the Company and in certain cases
employees and other persons. The Articles of Incorporation require the Company
to indemnify such persons to the full extent permitted by Nevada law. Each such
person will be indemnified in any proceeding if he acted in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to a criminal action or proceeding,
had no reasonable cause to believe that such person's conduct was unlawful.
Indemnification would cover expenses, including attorney's fees, judgments,
fines and amounts paid in settlement.
The Company's Bylaws also provide that the Company's Board of Directors may
cause the Company to purchase and maintain insurance on behalf of any present or
past officer, director or agent or any other person serving at the request of
the Company insuring against any liability asserted against such person as a
result of their capacity as officer, director or agent or arising out of such
status, whether or not the Company would have the power to indemnify such
person. The Company intends to obtain directors' and officers' liability
insurance.
On January 7, 1998, the Company entered into indemnity agreements with
Messrs. Fong, Russo, Willis and Tang. The indemnity agreements indemnify such
persons against certain liabilities arising out of their service in their
capacities as directors and/or officers and constitute binding agreements of the
Company. The Company may from time to time enter into indemnity agreements with
additional individuals who become officers and/or directors of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On May 16, 1997, International Forest Industries, Inc. ("IFI") merged with
Flour City International, Inc., a private Nevada corporation ("FCI"). Each share
of FCI was exchanged and converted into 2.798 shares of IFI. IFI issued a total
of 3,997,238(1) shares of common stock to FCI in exchange for 1,428,571 shares
of FCI. IFI was the surviving corporation. The issuance of shares to FCI
described above was exempt from the
- ---------------
1 All share numbers and prices per share have been adjusted to reflect a 1 for
7 reverse stock split effective April 7, 1998.
II-1
<PAGE> 78
registration provisions of the Securities Act of 1933, as amended (the "Act") by
virtue of Section 4(2), as transactions by the issuer not involving any public
offering and Regulation D under the Act.
On March 25, 1997, IFI issued 107,143 shares of Common Stock to Mr. Steven
Antebi, a shareholder of IFI in exchange for certain services including
consulting, administrative and corporate structuring. Mr. Antebi was, prior to
the sale of the Company's securities to him, fully informed and advised about
such matters concerning the Company, including its business, financial affairs
and other matters. No underwriters were used in connection with the issuance of
these shares and no commissions were paid to any person. The issuance of shares
to described above was exempt from the registration provisions of the Act by
virtue of Section 4(2). The Company later canceled all of the shares issued to
Mr. Antebi.
On January 17, 1997, FCI entered into a share exchange agreement with the
shareholders of Flour City Architectural Metals (Pacific) Ltd. ("FCAM Pacific").
FCI issued 1,142,857 shares to the FCAM Pacific shareholders in exchange for 14
shares of FCAM Pacific. The issuance of shares to FCAM Pacific's shareholders
described above was exempt from the registration provisions of the Act by virtue
of Section 4(2), as transactions by the issuer not involving any public
offering.
On January 16, 1997, Messrs. Russo, Willis and Ulbricht exercised their
stock purchase rights pursuant to employment agreements and purchased 199,862,
159,890 and 39,972 shares of common stock of FCI, respectively. The exercise
price was $0.00025 per share. The total number of shares issued to Messrs.
Russo, Willis and Ulbricht represented approximately 9% of the issued and
outstanding common stock of FCI. No general forms of advertising were used in
connection with the issuance of the shares. No underwriters were used in
connection with the issuance of these shares and no commissions were paid to any
person. Each purchaser signed an agreement providing that the shares may not be
transferred or sold other than pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration. The sale and
issuance of shares to described above was exempt from the registration
provisions of the Act by virtue of Section 4(2).
In September, 1996, MM Cork Enterprises, Inc. ("MMC"), which later changed
its name to IFI, offered and sold 55,651 shares of its common stock at $4.89 per
share for a total of $272,500 to two individuals and four related entities. The
shares were issued for investment purposes and not with a view to distribution.
The purchasers acquired the shares for their own account. Each purchaser was,
prior to the sale of the Company's securities to him, informed and advised about
such matters concerning the Company, including its business, financial affairs
and other matters. No general forms of advertising were used in connection with
the issuance of the shares. No underwriters were used in connection with the
issuance of these shares and no commissions were paid to any person. The shares
were offered pursuant to Section 4(2) of the Act.
In September, 1996, MMC offered and sold 51,056 shares of common stock to
Mr. Stephan Wingate at $0.19 per share for a total of $10,000. No underwriters
were used in connection with the issuance of these shares and no commissions
were paid to any person. No general forms of advertising were used in connection
with the issuance of the shares. The sale and issuance of shares to Mr. Wingate
was exempt from the registration provisions of the Act by virtue of Section
4(2). On September 30, 1996, MMC and Mr. Wingate entered into a rescission
agreement whereby Mr. Wingate returned the shares purchased to MMC and MMC
returned Mr. Wingate's purchase price.
II-2
<PAGE> 79
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1.1 Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of Flour City
International, Inc.
*3.2 Articles of Merger of International Forest Industries, Inc.,
and Flour City International, Inc.
*3.3 By-laws of Flour City International, Inc.
4.1 Underwriter's Warrant
4.2 Form of Lock-Up Agreement
5.1 Opinion of Manning Marder & Wolfe
*10.1 Share Exchange Agreement between Flour City International,
Inc. and John W. Y. Tang, Gold Manor Limited, Dynamic Choice
Enterprises and Wilson International Limited dated January
17, 1997.
*10.2 Stock Purchase Agreement between Flour City International,
Inc., Armco, Inc., and Flour City Architectural Metals,
Inc., dated as of January 1, 1997
*10.3 Agreement and Plan of Merger by and among Flour City
International, Inc. and International Forest Industries,
Inc., dated as of April 4, 1997
*10.4 Flour City International, Inc. 1997 Stock Incentive Plan and
Form of Nonqualified Stock Option Agreement
*10.5 Form of Indemnification Agreement
*10.6 Employment Agreement between Flour City Architectural
Metals, Inc. and Michael J. Russo dated January 17, 1997
*10.7 Employment Agreement by and between Flour City Architectural
Metals (Asia) Limited and John W. Y. Tang dated December 15,
1997
*10.8 Ground and Building Lease Agreement dated December 20, 1993,
Consent and Assumption of Lease dated May 27, 1997
*10.9 Lease Agreement between Douglas Dynamics, LLC and Flour City
Architectural Metals, Inc. dated as of January 1, 1997
*10.10 Asset Transfer Agreement between Flour City Architectural
Metals, Inc., and Douglas Dynamics, LLC dated as of January
1, 1996
*10.11 Manufacturing Agreement between Flour City Architectural
Metals, Inc., and Douglas Dynamics, LLC dated as of January
1, 1997
+*10.12 Agreement between Flour City Architectural Metals, Inc., and
Turner Construction Company dated December 4, 1996
+*10.13 Purchase Order #32895-1243 for U.C. Davis Medical Center in
Sacramento, California
+*10.14 Trade Contract between Swiss Re Investors, Inc., and Flour
City Architectural Metals, Inc., dated May 19, 1997
10.15 Employment Agreement by and between Flour City Architectural
Metals, Inc. and Roger Ulbricht dated January 16, 1997
10.16 Employment Agreement by and between Flour City Architectural
Metals, Inc. and Bryan R. Willis dated January 16, 1997
10.17 Banking Facility Agreement between the Hongkong and Shanghai
Banking Corporation Ltd., and Kasion Contracting Co., Ltd.
dated July 24, 1997
+10.18 Curtain Wall Contract between THK Real Estate Limited and
Kasion F.C. Limited dated June 15, 1995
11.1 Flour City International, Inc. Earnings Per Share
*21.1 List of subsidiaries (See "The Company" in Part I of the
Registration Statement)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte Touche Tohmatsu
23.3 Consent of Manning Marder & Wolfe (included in Exhibit 5.1)
*24.1 Power of Attorney (see signature page)
*27.1 Financial Data Schedule
</TABLE>
II-3
<PAGE> 80
+ These exhibits omit certain confidential information which has been filed
separately with the Commission.
- ---------------
* Previously filed
+ Portions of this exhibit have been omitted and filed separately with the
Secretary subject to a request for confidential treatment pursuant to Rule 406
promulgated under the Securities Act.
(b) FINANCIAL STATEMENT SCHEDULES:
Report of Deloitte & Touche LLP, Independent Auditors
Report of Deloitte Touche Tohmatsu, Independent Auditors
Schedule II Valuation and Qualifying Account
ITEM 17. UNDERTAKINGS
The Company will provide to the Underwriters at the closing or closings
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities under the Securities Act of 1933
(the "Act") may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the issuer has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Company will, for determining liability under the Act, treat the
information omitted from the prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in the form of prospectus
filed by the Company under Rule 424(b)(1), or (4) or 497(h) under the Act as
part of this Registration Statement as of the time the Commission declared it
effective.
For determining liability under the Act, the Company will treat each
post-effective amendment that contains a form of prospectus as a new
registration statement, for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona
fide offering of those securities.
II-4
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, in the City of Johnson City, State of
Tennessee, on the 3rd day of April, 1998
FLOUR CITY INTERNATIONAL, INC.
By: /s/ BRYAN R. WILLIS
------------------------------------
Bryan R. Willis,
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities indicated below on the 3rd day of April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chief Executive Officer, President
- -------------------------------------------------------- and Director
Michael J. Russo (Principal Executive Officer)
/s/ BRYAN R. WILLIS Chief Financial Officer
- -------------------------------------------------------- (Principal Financial and
Bryan R. Willis Principal Accounting Officer)
* Director
- --------------------------------------------------------
John W.Y. Tang
* Director
- --------------------------------------------------------
Johnson K. Fong
* By: /s/ BRYAN R. WILLIS
- --------------------------------------------------------
Attorney-in-fact
</TABLE>
II-5
<PAGE> 82
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Flour City International, Inc.
We have audited the financial statements of Flour City International, Inc.
as of October 31, 1997 and for the year then ended, and have issued our report
thereon dated December 5, 1997 (included elsewhere in this Registration
Statement). Our audit also included the financial statement schedule listed in
Item 16 of this Registration Statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
December 5, 1997
S-1
<PAGE> 83
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Flour City Architectural Metals (Pacific) Ltd.
We have audited the financial statements of Flour City Architectural Metals
(Pacific) Ltd. as of October 31, 1995 and 1996 and for each of the two years in
the period ended October 31, 1996, and have issued our report thereon dated June
26, 1997 (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in Item 16 of this Registration
Statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE TOUCHE TOHMATSU
Hong Kong
June 26, 1997
S-2
<PAGE> 84
SCHEDULE II
FLOUR CITY INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1995:
Allowance for Uncollectible
Accounts included under balance
sheet caption "Accounts
receivable"....................... $ -- $ -- $ -- $ -- $ --
Year ended October 31, 1996:
Allowance for Uncollectible
Accounts included under balance
sheet caption "Accounts
receivable"....................... -- 153,846 -- -- 153,846
Year ended October 31, 1997:
Allowance for Uncollectible
Accounts included under balance
sheet caption "Accounts
receivable"....................... 153,846 623,779 -- -- 777,625
</TABLE>
S-3
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ----------- -------------
<C> <S> <C>
1.1 Underwriting Agreement......................................
3.1 Amended and Restated Articles of Incorporation of Flour City
International, Inc. ........................................
*3.2 Articles of Merger of International Forest Industries, Inc.,
and Flour City International, Inc. .........................
*3.3 By-laws of Flour City International, Inc. ..................
4.1 Underwriter's Warrant.......................................
4.2 Form of Lock-Up Agreement
5.1 Opinion of Manning Marder & Wolfe...........................
*10.1 Share Exchange Agreement between Flour City International,
Inc. and John W. Y. Tang, Gold Manor Limited, Dynamic Choice
Enterprises and Wilson International Limited dated January
17, 1997....................................................
*10.2 Stock Purchase Agreement between Flour City International,
Inc., Armco, Inc., and Flour City Architectural Metals,
Inc., dated as of January 1, 1997...........................
*10.3 Agreement and Plan of Merger by and among Flour City
International, Inc. and International Forest Industries,
Inc., dated as of April 4, 1997.............................
*10.4 Flour City International, Inc. 1997 Stock Incentive Plan and
Form of Nonqualifed Stock Option Agreement..................
*10.5 Form of Indemnification Agreement...........................
*10.6 Employment Agreement between Flour City Architectural
Metals, Inc. and Michael J. Russo dated January 17, 1997....
*10.7 Employment Agreement by and between Flour City Architectural
Metals (Asia) Limited and John W. Y. Tang dated December 15,
1997........................................................
*10.8 Ground and Building Lease Agreement dated December 20, 1993,
Consent and Assumption of Lease dated May 27, 1997..........
*10.9 Lease Agreement between Douglas Dynamics, LLC and Flour City
Architectural Metals, Inc. dated as of January 1, 1997......
*10.10 Asset Transfer Agreement between Flour City Architectural
Metals, Inc., and Douglas Dynamics, LLC dated as of January
1, 1996.....................................................
*10.11 Manufacturing Agreement between Flour City Architectural
Metals, Inc., and Douglas Dynamics, LLC dated as of January
1, 1997.....................................................
+*10.12 Agreement between Flour City Architectural Metals, Inc., and
Turner Construction Company dated December 4, 1996..........
+*10.13 Purchase Order #32895-1243 for U.C. Davis Medical Center in
Sacramento, California......................................
+*10.14 Trade Contract between Swiss Re Investors, Inc., and Flour
City Architectural Metals, Inc., dated May 19, 1997.........
10.15 Employment Agreement by and between Flour City Architectural
Metals, Inc. and Roger Ulbricht dated January 16, 1997......
10.16 Employment Agreement by and between Flour City Architectural
Metals, Inc. and Bryan R. Willis dated January 16, 1997.....
10.17 Banking Facility Agreement between the Hongkong and Shanghai
Banking Corporation Ltd., and Kasion Contracting Co., Ltd.
dated July 24, 1997.........................................
+10.18 Curtain Wall Contract between THK Real Estate Limited and
Kasion F.C. Limited dated June 15, 1995.....................
11.1 Flour City International, Inc. Earnings Per Share...........
*21.1 List of subsidiaries (See "The Company" in Part I of the
Registration Statement).....................................
23.1 Consent of Deloitte & Touche LLP............................
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ----------- -------------
<C> <S> <C>
23.2 Consent of Deloitte Touche Tohmatsu.........................
23.3 Consent of Manning Marder & Wolfe (included in Exhibit
5.1)........................................................
*24.1 Power of Attorney (see signature page)......................
*27.1 Financial Data Schedule.....................................
</TABLE>
- ---------------
* Previously filed
+ Portions of this exhibit have been omitted and filed separately with the
Secretary subject to a request for confidential treatment pursuant to Rule
406 promulgated under the Securities Act.
<PAGE> 1
EXHIBIT 1.1
EXHIBIT A
FLOUR CITY INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
May __, 1998
VAN KASPER & COMPANY
As Representative of the
Several Underwriters
600 California Street, Suite 1700
San Francisco, California 94108
Ladies and Gentlemen:
Flour City International, Inc., a Nevada corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several Underwriters named in Schedule I hereto (each, an "Underwriter"
and collectively, the "Underwriters") an aggregate of 2,000,000 shares (the
"Firm Shares") of its authorized but unissued Common Stock, par value $0.0001
per share (the "Common Stock"). The Company also proposes to grant to the
Underwriters an option to purchase up to 300,000 additional shares of Common
Stock (the "Option Shares") for the sole purpose of covering over-allotments,
if any, in connection with the sale of the Firm Shares. The Firm Shares and
any Option Shares purchased pursuant to this Agreement are collectively
referred to below as the "Shares." Van Kasper & Company is acting as
Representative of the several Underwriters and in that capacity is referred to
in this Agreement as the "Representative."
The Company hereby confirms its agreement with the several
Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to and agrees with each Underwriter as follows:
(a) A registration statement (Registration No. 333-43793)
on Form S-1 under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the Shares, including such amendments to such registration
statement as may have been required to the date of this Agreement, has been
prepared by the Company under and in conformity with the provisions of the
Securities Act and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission to
be effective under the Securities Act, either (A) if the Company relies on Rule
434 under the Securities Act, a Term Sheet (defined below) relating to the
Shares, that identifies the Preliminary Prospectus (defined below) that it
supplements and contains such information as is required or permitted by Rules
434, 430A and 424(b) of the Rules and Regulations or (B) if
<PAGE> 2
the Company does not rely on Rule 434 under the Securities Act, a prospectus in
the form most recently included in an amendment to such registration statement
(or, if no such amendment has been filed, in such registration statement), with
such changes or insertions as are required by Rule 430A of the Rules and
Regulations or permitted by Rule 424(b) of the Rules and Regulations, and in
the case of either (i)(A) or (i)(B) of this sentence, as has been provided to
and approved by the Representative prior to the execution of this Agreement, or
(ii) if such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Securities Act, an
amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the
Representative prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto, any information omitted therefrom
pursuant to Rule 430A of the Rules and Regulations and included in the
Prospectus (defined below) and further including all filings or other documents
incorporated therein, as well as any additional registration statement filed in
connection with the offering of the Shares pursuant to Rule 462(b) under the
Securities Act; the term "Preliminary Prospectus" means each prospectus subject
to completion filed with such registration statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective and further including all filings or documents incorporated
therein); and the term "Prospectus" means the following, including any filings
or documents incorporated therein:
(A) if the Company relies on Rule 434 under the
Securities Act, the Term Sheet relating to the Securities that is first filed
pursuant to Rule 424(b)(7) under the Securities Act, together with the
Preliminary Prospectus identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434
under the Securities Act, the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Securities Act; or
(C) if the Company does not rely on Rule 434
under the Securities Act and if no prospectus is required to be filed pursuant
to Rule 424(b) under the Securities Act, the prospectus included in the
Registration Statement;
provided that if any revised prospectus that is provided to the Underwriters by
the Company for use in connection with the offering of the Shares differs from
the prospectus on file with the Commission at the time the Registration
Statement became or becomes, as the case may be, effective, whether or not the
revised prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall mean such
revised prospectus (including all filings and documents incorporated therein)
from and after the time it is first provided to the Underwriters for such use.
The term "Term Sheet" as used in this Agreement means any term sheet that
satisfies the requirements of Rule 434 under the Securities Act. Any reference
in this Agreement to the "date" of a Prospectus that includes a Term Sheet
means the date of such Term Sheet.
-2-
<PAGE> 3
(b) No order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any Preliminary
Prospectus or the Prospectus has been issued and no proceedings for that
purpose are pending or, to the best knowledge of the Company, threatened or
contemplated by the Commission; no stop order suspending the sale of the Shares
in any jurisdiction has been issued and no proceedings for that purpose are
pending or, to the best knowledge of the Company, threatened or contemplated,
and any request of the Commission for additional information (to be included in
the Registration Statement, any Preliminary Prospectus or the Prospectus or
otherwise) has been complied with.
(c) As used in this Agreement, the word "subsidiary"
means any corporation, partnership, limited liability company or other entity
of which the Company directly or indirectly owns 50% or more of the equity or
that the Company directly or indirectly controls. The subsidiaries of the
Company (the "Subsidiaries") and the jurisdiction of incorporation of each
Subsidiary is listed on Exhibit A hereto. The Company has no subsidiaries
other than the Subsidiaries listed on Exhibit A hereto; except as set forth on
Exhibit A, the Company owns 100 percent of the issued and outstanding stock of
each of the Subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest of any type, kind or nature. Exhibit
B hereto lists each entity in which the Company or any Subsidiary holds an
equity interest, whether as shareholder, partner, member, joint venturer or
otherwise. Except as set forth on Exhibit B, neither the Company nor any
Subsidiary has any equity interest in any person. The Company and each of its
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full power (corporate and other) and authority to own or
lease its properties and conduct its business as described in the Registration
Statement and the Prospectus and as is currently being conducted by it and is
duly qualified as a foreign corporation and in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect
on the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company and its Subsidiaries, taken as a whole
(a "Consolidated Material Adverse Effect")). The Company and each of its
Subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
federal, state, local and other governmental or regulatory authorities that are
material to the conduct of its or their business, all of which are valid and in
full force and effect. Each contractual joint venture in which the Company or
any Subsidiary is involved and, to the Company's best knowledge, each
participant therein is operating in compliance with the terms of its joint
venture agreement.
(d) When any Preliminary Prospectus was filed with the
Commission it (i) contained all statements required to be contained therein and
complied in all respects with the requirements of the Securities Act, the Rules
and Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder (the "Exchange
Act Rules and Regulations") and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
-3-
<PAGE> 4
When the Registration Statement or any amendment thereto was or is declared
effective (the "Effective Date"), it (i) contained or will contain all
statements required to be contained therein and complied or will comply in all
respects with the requirements of the Securities Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations and
(ii) did not or will not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading. When the Prospectus or any Term Sheet that is a part thereof or
any amendment or supplement to the Prospectus is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or part thereof or such
amendment or supplement is not required to be so filed, when the Registration
Statement or the amendment thereto containing such amendment or supplement to
the Prospectus was or is declared effective) and on the Closing Date (defined
below) and any date on which Option Shares are to be purchased, the Prospectus,
as amended or supplemented at any such time, (i) contained or will contain all
statements required to be contained therein and complied or will comply in all
respects with the requirements of the Securities Act, the Rules and Regulations
and the Exchange Act Rules and Regulations and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (d) do not apply to statements or omissions made
in any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein.
(e) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there has not
been any material loss or interference with the business of the Company or any
of its Subsidiaries from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any court or governmental action, order or
decree, or any changes in the capital stock or, except in the ordinary course
of its business, long- term debt of the Company or any of its Subsidiaries, or
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company, or any material change, or a development known to the
Company that might cause or result in a Consolidated Material Adverse Effect,
whether or not arising from transactions in the ordinary course of business, in
each case other than as may be set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and since such dates, except in the ordinary course of
business, neither the Company or any of its Subsidiaries has entered into any
material transaction not described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(f) There is no agreement, contract, license, lease or
other document required to be described in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) or to be filed as an exhibit to the Registration
Statement which is not described or filed as required. All contracts described
in the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), if any, are in full force and effect on the date
hereof, and neither the Company nor any of its direct or indirect
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<PAGE> 5
subsidiaries nor, to the best knowledge of the Company, any other party, is in
material breach of or default under any such contract.
(g) The authorized and outstanding capital stock of the
Company is set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and the description of the
capital stock therein conforms with and accurately describes the rights set
forth in the instruments defining the same. The Shares are duly authorized and
will, when issued in accordance with the terms of this Agreement and against
payment therefor, be validly issued, fully paid and non-assessable, and the
issuance of the Shares is not subject to any preemptive or similar rights.
(h) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. All
of the issued shares of capital stock or other equity interests of each
Subsidiary have been duly and validly authorized and issued, are fully paid and
non-assessable, have been issued in compliance with all applicable laws,
including securities laws, were not issued in violation of or subject to any
preemptive or other rights to subscribe for or purchase such securities and are
directly or indirectly owned by the Company, except as otherwise set forth in
the Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus. The description of the Company's stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted or exercised thereunder, set forth in the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus),
accurately and fairly present the information required to be shown with respect
to such plans, arrangements, options and rights. Other than this Agreement,
the "Warrant Agreement" (as defined in Section 1(bb) below) and the options and
warrants to purchase Common Stock described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no options, warrants or other rights outstanding to subscribe for or
purchase any shares of the Company's capital stock. There are no preemptive
rights applicable to any shares of capital stock of the Company. There are no
options, warrants or other rights outstanding to subscribe for or purchase any
shares of the capital stock or registered capital of any Subsidiary and no
Subsidiary is subject to any obligation, commitment, plan, arrangement or court
or administrative orders with respect to the same. There are no preemptive
rights applicable to any shares of capital stock or registered capital of the
Subsidiaries. There are no restrictions upon the voting or transfer of any of
the Firm Shares or Option Shares pursuant to the Company's certificate of
incorporation, as amended to date ("Certificate of Incorporation"), bylaws or
other governing documents or any agreement to which the Company is a party or
by which it may be bound. Except as is provided in the Warrant Agreement and
for the Shares, neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights, other than those which have been waived, for or relating to the
registration of any securities of or issued by the Company.
(i) The Company has full right, power and authority to
enter into and perform its obligations under this Agreement and the Warrant
Agreement and to issue, sell and deliver the
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<PAGE> 6
Shares. This Agreement and the Warrant Agreement have each been duly
authorized, executed and delivered by the Company and constitute the valid and
binding agreements of the Company, and each is enforceable against the Company
in accordance with its terms except insofar as enforceability may be affected
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except insofar as the indemnification and
contribution provisions of Section 7 of this Agreement and Section 3(f) of the
Warrant Agreement hereof may be affected by public policy concerns.
(j) Neither the Company nor any of its Subsidiaries is,
nor with the giving of notice or lapse of time or both would be, in violation
of or in default under, nor will the execution or delivery of this Agreement or
the Warrant Agreement or the consummation of the transactions contemplated by
this Agreement or the Warrant Agreement result in a violation of or constitute
a breach of or a default (including without limitation with the giving of
notice, the passage of time or otherwise) under the Certificate of
Incorporation, bylaws or other governing documents of the Company or any of its
Subsidiaries or any obligation, agreement, covenant or condition contained in
any bond, debenture, note or other evidence of indebtedness or in any contract,
indenture, mortgage, deed of trust, loan agreement, lease, license, joint
venture or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of its or their properties may be bound
or affected. The Company has not incurred any liability, direct or indirect,
for any finders' or similar fees payable on behalf of the Company or the
Underwriters in connection with the transactions contemplated by this
Agreement. The performance by the Company of its obligations under this
Agreement and the Warrant Agreement will not violate any law, ordinance, rule
or regulation or any order, writ, injunction, judgment or decree of any
governmental agency or body or of any court having jurisdiction over the
Company or any of its direct or indirect subsidiaries or any of its or their
properties, or result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of the Company or any of its
Subsidiaries. Except for permits and similar authorizations required under the
Securities Act, the Exchange Act or under state securities or Blue Sky laws of
certain jurisdictions and for such permits and authorizations that have been
obtained, no consent, approval, authorization or order of any court,
governmental agency or body, financial institution or any other person is
required in connection with the consummation of the transactions contemplated
by this Agreement or the Warrant Agreement.
(k) Each of the Company and its Subsidiaries owns, or has
valid rights to use, all items of real and personal property which are material
to the business of the Company and its Subsidiaries, taken as a whole, free and
clear, except as described in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), of all liens, encumbrances and claims that might materially
interfere with the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and its Subsidiaries, taken
as a whole, and subject to such exceptions that do not adversely affect the
present or prospective business of the Company or its Subsidiaries.
(l) Each of the Company and its Subsidiaries, taken as a
whole, owns or possesses adequate rights to use all material patents, patent
rights, inventions, trade secrets, know-how, trademarks, service marks,
tradenames and copyrights described or referred to in the
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<PAGE> 7
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) as owned by or used by any
of them, or which are necessary for the conduct of its or their business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus); and
the Company has not received any express notice of infringement of or conflict
with asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Consolidated Material Adverse Effect.
(m) There is no litigation or governmental proceeding to
which the Company or any of its Subsidiaries is a party or to which any
property of the Company or any of its Subsidiaries is subject which is pending
or, to the best knowledge of the Company, is threatened or contemplated against
the Company or any of its Subsidiaries that might have a Consolidated Material
Adverse Effect, that might prevent consummation of the transactions
contemplated by this Agreement or the Warrant Agreement or that is required to
be disclosed in the Registration Statement or Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) and are not so
disclosed.
(n) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus), the
Company nor any of its Subsidiaries is in violation of any law, order,
ordinance, rule or regulation, or any order, writ, injunction, judgment or
decree of any governmental agency or body or of any court, to which it or its
properties (whether owned or leased) may be subject, which violation might have
a Consolidated Material Adverse Effect.
(o) The Company has not taken and shall not take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in, under
the Exchange Act, the Exchange Act Rules and Regulations or otherwise, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares. No bid or purchase by the Company
and, to the best knowledge of the Company, no bid or purchase that could be
attributed to the Company (as a result of bids or purchases by an "affiliated
purchaser" within the meaning of Regulation M under the Exchange Act) for or of
the Common Stock, any securities of the same class or series as the Common
Stock or any securities convertible into or exchangeable for or that represent
any right to acquire the Common Stock is now pending or in progress or will
have commenced at any time prior to the completion of the distribution of the
Shares.
(p) Each of Deloitte & Touche LLP and Deloitte Touche
Tohmatsu, whose report appears in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) is, and during the periods covered by its report in the
Registration Statement was, independent accountants as required by the
Securities Act and the Rules and Regulations. The historical and pro forma
financial statements and schedules included in the Registration Statement, each
Preliminary Prospectus and the Prospectus present fairly (or, if the Prospectus
has not been filed with the Commission, as to the
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<PAGE> 8
Prospectus, will present fairly) the financial condition, results of
operations, cash flows and changes in stockholders' equity of the Company and
its subsidiaries at the dates and for the periods indicated, and the historical
and pro forma financial statements and schedules included in the Registration
Statement present fairly the information required to be stated therein in all
material respects. Such financial statements and schedules have been prepared
in accordance with U.S. generally accepted accounting principles applied on a
consistent basis throughout the periods presented, except as may be stated
therein. All accounts receivable (net of any allowance for doubtful accounts)
shown on the Company's most recent financial statements included in the
Registration Statement, including but not limited to those relating to the
Empire Towers and GT International projects, are good and the Company expects
to collect all such accounts receivable in the ordinary course of business.
The selected and summary financial and statistical data included in the
Registration Statement and the Prospectus present fairly (or, if the Prospectus
has not been filed with the Commission, as to the Prospectus, will present
fairly) the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(q) The historical and any pro forma financial or other
information and related notes included in the Registration Statement, each
Preliminary Prospectus and the Prospectus comply (or, if the Prospectus has not
been filed with the Commission, as to the Prospectus, will comply) in all
material respects with the requirements of the Securities Act and the Rules and
Regulations and present fairly the historical and pro forma information shown,
as of the dates and for the periods covered by such information. Such pro
forma information, including any related notes and schedules, has been prepared
on a basis consistent with the historical financial statements and other
historical information, as applicable, included in the Registration Statement,
the Preliminary Prospectus and the Prospectus (if filed with the Commission),
except for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis to give effect to historical and, if
applicable, proposed transactions described in the Registration Statement, each
Preliminary Prospectus and the Prospectus (if filed with the Commission).
(r) The books, records and accounts of the Company and
its Subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and its
Subsidiaries. The systems of internal accounting controls maintained by the
Company and its Subsidiaries are sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (x) to
permit preparation of financial statements in conformity with U.S. generally
accepted accounting principles and (y) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(s) The Company has delivered to Van Kasper & Company the
written agreement of each of its officers and directors and, to the knowledge
of the Company at the date of this Agreement, the beneficial owners of one
percent or more of the Common Stock (assuming
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<PAGE> 9
for this purpose that all options and convertible securities held by each
beneficial owner, but not by any other person, have been exercised or exchanged
for or converted into Common Stock) (collectively, the "Holders") to the effect
that each of the Holders will not, for a period of 180 days following the date
of this Agreement, without the prior written consent of Van Kasper & Company,
offer, sell, grant any option to purchase, contract to sell, or otherwise
dispose of any Common Stock or options or convertible securities exercisable
or exchangeable for, or convertible into, Common Stock or any rights to
purchase or acquire Common Stock, or announce any offer to do so.
(t) No labor disturbance by the employees of the Company
or any of its Subsidiaries exists, or, to the knowledge of the Company, is
imminent, contemplated or threatened; and the Company is not aware of an
existing, imminent or threatened labor disturbance by the employees of any
principal suppliers, manufacturers, contractors or others which such
disturbance might be expected to result in any Consolidated Material Adverse
Effect. Except as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), no collective bargaining
agreement exists with any of the Company's employees or those of its
Subsidiaries and, to the best knowledge of the Company, no such agreement is
imminent.
(u) Each of the Company and its Subsidiaries has filed
all federal, state, local and foreign tax returns which are required to be
filed or has requested extensions thereof and has paid all taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
to the extent that the same have become due and payable. No tax assessment or
deficiency has been made or proposed against the Company or any of its
Subsidiaries nor has the Company or any of its Subsidiaries received any notice
of any proposed tax assessment or deficiency. All tax liabilities of the
Company and its Subsidiaries are adequately provided for on the books of the
Company.
(v) Except as set forth in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no outstanding loans, advances or guaranties of indebtedness by the Company
or any of its Subsidiaries to or for the benefit of any of (i) its
"affiliates," as such term is defined in the Rules and Regulations, (ii) except
for immaterial advances in the ordinary course of business, any of the officers
or directors of any of its direct or indirect subsidiaries, or (iii) any of the
members of the families of any of them, in each case, required to be set forth
in the Prospectus (or, if the Prospectus is not in existence, in the most
recent Preliminary Prospectus), under the Securities Act or Rules and
Regulations.
(w) Neither the Company nor any of its Subsidiaries has
directly or indirectly, at any time within the last five years: (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution, in violation of applicable law; (ii) made any payment to
any local, state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or allowed by all applicable laws; or (iii) violated any applicable
provision of the Foreign Corrupt Practices Act of 1977, as amended.
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<PAGE> 10
(x) Neither the Company nor any of its Subsidiaries has
any liability, absolute or contingent, relating to: (i) public health or
safety; (ii) worker health or safety; or (iii) product defect or warranty (all
except as would not reasonably be expected to have a Consolidated Material
Adverse Effect or as are disclosed in the Registration Statement and Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus)).
(y) The Company has not distributed and will not
distribute prior to the Closing Date or on or prior to any date on which the
Option Shares are to be purchased, as the case may be, any prospectus or other
offering material in connection with the offering and sale of the Shares other
than the Preliminary Prospectus(es), the Prospectus, the Registration Statement
and any other material which may be permitted by the Securities Act and the
Rules and Regulations.
(z) Subject to official notice of issuance, the Shares
have been approved for inclusion for listing on the Nasdaq National Market.
(aa) The Company is not now, and intends to conduct its
affairs in the future in such a manner so that it will not become, an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
(bb) The "Warrants" (as defined in the Warrant Agreement,
dated as of the date hereof, between the Company and Van Kasper & Company (the
"Warrant Agreement")) have been duly and validly authorized by all requisite
corporate action of the Company and, when issued and delivered against payment
therefor as provided in Section 3(m) below, will be valid and binding
obligations of the Company in accordance with their terms; the "Warrant Shares"
(as defined in the Warrant Agreement) have been duly and validly reserved and
authorized for issuance upon exercise of the Warrants and when so issued
against payment therefor as provided in the Warrant Agreement will be validly
issued, fully paid and non-assessable; and no person has any preemptive rights
with respect to the Warrants or the Warrant Shares.
(cc) The Company and each of its Subsidiaries is in
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) for which the Company or any of its Subsidiaries
would have any liability has occurred; neither the Company nor any of its
Subsidiaries has incurred or expects to incur liability under (1) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan" or
(2) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company or any of its
Subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the
loss of such qualification.
(dd) Except as set forth in the Prospectus (or if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
has to the best knowledge of the
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<PAGE> 11
Company been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, hazardous wastes or
hazardous substances by the Company or any of its Subsidiaries (or any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or its Subsidiaries in violation of
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit; there has to
the best knowledge of the Company been no material spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or caused
by the Company or any of its Subsidiaries or with respect to which the Company
or any of its direct or indirect subsidiaries have knowledge; and the terms
"hazardous wastes," "toxic wastes" and "hazardous substances" shall have the
meanings specified in any applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
(ee) The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for; and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not cause a Consolidated Material Adverse
Effect.
(ff) Each certificate signed by any officer of the Company
or any of its Subsidiaries, as amended in writing from time to time, and
delivered to the Representative or Underwriters' counsel shall be deemed to be
a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(gg) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
neither the Company nor any Subsidiary has entered into any transaction with
any affiliate of the Company other than an arm's length transaction, and all
such transactions required to be described in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) have been described therein.
(hh) No former officer, director or stockholder of
Industrial Forest Industries, Inc. (each, an "IFI Person") has participated in
the business of the Company in any manner, including serving as an officer,
director or consultant of or to the Company, after the date of the "Public
Merger" (as such term is defined in the Prospectus).
2. PURCHASE, SALE AND DELIVERY OF SHARES
(a) On the basis of the representations,
warranties, covenants and agreements of the Company contained in this Agreement
and subject to the terms and conditions
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<PAGE> 12
set forth in this Agreement, the Company agrees to sell to the several
Underwriters, and each of the Underwriters agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $___ per share [7.5%
DISCOUNT], the respective number of Firm Shares set forth opposite the name of
such Underwriter on Schedule I to this Agreement (subject to adjustment as
provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint)
covenants and agreements of the Underwriters contained in this Agreement and
subject to the terms and conditions set forth in this Agreement, the Company
grants an option to the several Underwriters to purchase from the Company,
severally and not jointly, all or any portion of the Option Shares at the same
price per share as the Underwriters are to pay for the Firm Shares. This
option may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
(but not more than once) on or before the 45th day after the date of the
Prospectus upon written or telecopied notice by the Representative to the
Company setting forth the aggregate number of Option Shares as to which the
several Underwriters are exercising the option and the settlement date. The
Option Shares shall be purchased severally, and not jointly, by each
Underwriter, if purchased at all, in the same proportion that the number of
Firm Shares set forth opposite the name of the Underwriter in Schedule I to
this Agreement bears to the total number of Firm Shares to be purchased by the
Underwriters under Section 2(a) above, subject to such adjustments as the
Representative in their absolute discretion shall make to eliminate any
fractional shares. Delivery of certificates for the Option Shares, and payment
therefor, shall be made as provided in Section 2(c) and Section 2(d) below.
Nothing contained in this Section 2 shall relieve any defaulting Underwriter of
its liability, if any, to the Company or to the remaining Underwriters for
damages occasioned by its default hereunder.
(c) Delivery of the Firm Shares and payment
therefor, less the nonaccountable expense allowance provided for in Section
4(a)(ii) of this Agreement, shall be made at the office of Van Kasper & Company,
600 California Street, Suite 1700, San Francisco, California 94108 (or at such
other location as is agreed by the parties), at 6:30 a.m., San Francisco time,
on the third business day after the date of this Agreement, or at such time on
such other day, not later than seven full business days after such third
business day, as shall be agreed upon in writing by the Company and the
Representative, or as provided in Section 7(h) of this Agreement. The date and
hour of delivery and payment for the Firm Shares are referred to in this
Agreement as the "Closing Date." As used in this Agreement, "business day" means
a day on which the Nasdaq National Market is open for trading and on which banks
in New York and California are open for business and not permitted by law or
executive order to be closed.
(d) If the option granted by the Company in
Section 2(b) above is exercised, delivery of the Option Shares and payment
therefor, less the applicable portion, if any, of the nonaccountable expense
allowance provided for in Section 4(a)(ii) of this Agreement, shall be made at
the office of Van Kasper & Company, 600 California Street, Suite 1700, San
Francisco, California 94108 (or at such other location as is agreed by the
parties), at 6:30 a.m., San Francisco time, on the date specified by the
Representative (which shall be three business
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<PAGE> 13
days after the exercise of the option, but not in excess of the period of time
specified in the Rules and Regulations).
(e) Payment of the purchase price for the Shares
by the several Underwriters shall be made at the election of the Representative
by (i) certified or official bank check or checks drawn in next-day funds,
payable to the order of the Company, or (ii) wire transfer of immediately
available funds to such account of the Company as the Company shall advise the
Representative in writing at least three business days prior to the Closing
Date, in the case of the Firm Shares, or three business days prior to the
purchase of the Option Shares. Such payment shall be made upon delivery of
certificates for the Shares to the Representative for the respective accounts
of the several Underwriters. Certificates for the Shares to be delivered to
the Representative shall be registered in such name or names and shall be in
such denominations as the Representative may request at least two business days
before the Closing Date, in the case of Firm Shares, and at least one business
day prior to the purchase of the Option Shares, in the case of the Option
Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at the offices of ____________________, New
York, New York, not less than one full business day prior to the Closing Date
or, in the case of the Option Shares, by 3:00 p.m., New York time, on the first
business day preceding the date of purchase.
It is understood that the Representative, individually and not on
behalf of the Underwriters, may (but shall not be obligated to) make payment to
the Company for Shares to be purchased by any Underwriter whose check shall not
have been received by the Representative on the Closing Date or any later date
on which Option Shares are purchased for the account of such Underwriter. Any
such payment shall not relieve such Underwriter from any of its obligations
hereunder.
(f) It is understood that the several
Underwriters propose to offer the Shares for sale to the public as soon as the
Representative deems it advisable to do so. The Firm Shares are to be
initially offered to the public at the public offering price set forth (or to
be set forth) in the Prospectus. The Representative may from time to time
thereafter change the public offering price and other selling terms.
(g) The information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), the legend respecting stabilization set forth on the inside
front cover page and the statements set forth under the caption "Underwriting"
in any Preliminary Prospectus and in the final form of Prospectus filed
pursuant to Rule 424(b) constitute the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement.
3. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, if not effective at the time
of execution of this Agreement, to become effective as promptly as possible.
If the Registration Statement has become or becomes
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<PAGE> 14
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Company will file the Prospectus, properly
completed (and in form and substance reasonably satisfactory to the
Underwriters) pursuant to Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the Representative of such timely filing.
The Company will not file the Prospectus, any amended Prospectus, any amendment
(including post-effective amendments) to the Registration Statement or any
supplement to the Prospectus without (i) advising the Representative of and, a
reasonable time prior to the proposed filing of such amendment or supplement,
furnishing the Representative with copies thereof and (ii) obtaining the prior
consent of the Representative to such filing. The Company will prepare and file
with the Commission, promptly upon the request of the Representative, any
amendment to the Registration Statement or supplement to the Prospectus that
may be necessary or advisable in connection with the distribution of the Shares
by the Underwriters and use its best efforts to cause the same to become
effective as promptly as possible.
(b) The Company will promptly advise the Representative
(i) when the Registration Statement becomes effective, (ii) when any
post-effective amendment thereof becomes effective, (iii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
and (v) of the receipt by the Company of any notification with respect to the
suspension of the registration, qualification or exemption from registration or
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order or suspension and, if
issued, to obtain as soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date,
deliver to the Representative and to Underwriters' counsel a signed copy of the
Registration Statement as originally filed and of each amendment thereto filed
prior to the time the Registration Statement becomes effective and, promptly
upon the filing thereof, a signed copy of each post-effective amendment, if
any, to the Registration Statement (together with, in each case, all exhibits
thereto unless and to the extent previously furnished to the Representative)
and all documents filed by the Company with the Commission under the Exchange
Act and deemed to be incorporated by reference into any Preliminary Prospectus
or the Prospectus and will also deliver to the Representative, for distribution
to the several Underwriters, a sufficient number of additional conformed copies
of each of the foregoing (excluding exhibits) so that one copy of each may be
distributed to each Underwriter, (ii) as promptly as possible deliver to each
of the Representative and send to the several Underwriters, at such office or
offices as the Representative may designate, as many copies of the Prospectus
as the Representative may reasonably request and (iii) thereafter from time to
time during the period in which a prospectus is required by law to be delivered
by an Underwriter or a dealer, likewise send to the Underwriters as many
additional copies of the Prospectus and as many copies of any supplement to the
Prospectus and of any amended Prospectus, filed by the Company with the
Commission, as the Representative may reasonably request for the purposes
contemplated by the Securities Act.
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<PAGE> 15
(d) If at any time during the period in which a
prospectus is required by law to be delivered by an Underwriter or a dealer any
event shall occur as a result of which it is necessary to supplement or amend
the Prospectus in order to make the Prospectus not misleading or so that the
Prospectus will not omit to state a material fact necessary to be stated
therein, in each case at the time the Prospectus is delivered to a purchaser of
the Shares, or if it shall be necessary to amend or to supplement the
Prospectus to comply with the Securities Act or the Rules and Regulations, the
Company will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended Prospectus so that the Prospectus as so supplemented
or amended will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein not
misleading and so that it then will otherwise comply with the Securities Act
and the Rules and Regulations. If, after the public offering of the Shares by
the Underwriters commences and during such period, the Underwriters propose to
vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, the Representative will advise the Company in writing
of the proposed variation and if, in the opinion either of counsel for the
Company or counsel for the Underwriters, such proposed variation requires that
the Prospectus be supplemented or amended, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Shares may be sold by the
Underwriters to use the Prospectus, as from time to time so amended or
supplemented, in connection with the sale of the Shares in accordance with the
applicable provisions of the Securities Act and the Rules and Regulations for
such period.
(e) The Company will cooperate with the Representative
and Underwriters' counsel in the qualification or registration of the Shares
for offer and sale under the securities or blue sky laws of such jurisdictions
as the Representative may designate and, if applicable, in connection with
exemptions from such qualification or registration and, during the period in
which a Prospectus is required by law to be delivered by an Underwriter or a
dealer, in keeping such qualifications, registrations and exemptions in effect;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports and other
documents as are or may be required to continue such qualifications,
registrations and exemptions in effect for so long a period as the
Representative may reasonably request for the distribution of the Shares.
(f) During a period of five years commencing with the
date of this Agreement, the Company will promptly furnish to the Representative
and to each Underwriter who may so request in writing copies of (i) all
periodic and special reports furnished by it to shareholders of the Company,
(ii) all information, documents and reports filed by it with the Commission,
Nasdaq National Market, any securities exchange or the NASD, (iii) all press
releases and material news items or articles in respect of the Company, its
products or affairs released or prepared by the Company (other than promotional
and marketing materials disseminated solely to customers and potential
customers of the Company in the ordinary course of business) and (iv) any
additional information concerning the Company or its business which the
Representative may reasonably request.
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<PAGE> 16
(g) As soon as practicable, but not later than the 45th
day following the end of the fiscal quarter first ending after the first
anniversary of the Effective Date, the Company will make generally available to
its securities holders and furnish to the Representative an earnings statement
or statements in accordance with Section 11(a) of the Securities Act and Rule
158 thereunder.
(h) The Company agrees that, without the Representative's
prior written consent, the Company will not, and will not allow the Holders to,
in each case directly or indirectly, issue, sell, offer, contract to sell,
grant any option to purchase or otherwise dispose of any shares of Common
Stock, or any securities convertible into, exchangeable for or exercisable for
Common Stock or any rights to purchase or acquire Common Stock, for a period of
180 days following the date of this Agreement, excluding only (i) the sale of
the Shares to be sold to the Underwriters pursuant to this Agreement and (ii)
the grant of options to purchase Common Stock (provided that none of such
options are or become exercisable during such 180-day period) or the issuance
of shares of Common Stock upon the exercise in accordance with of options
previously granted under the Company's presently authorized stock option plans
as described in the Prospectus or in documents incorporated therein, or upon
the exercise in accordance with their terms of previously granted warrants
which are described in the Prospectus or in documents incorporated therein.
(i) The Company will establish and maintain all financial
control and financial reporting systems customary for well- established public
companies, including but not limited to adequate management information and
reporting systems, and will employ and maintain, with adequate staffing levels
at headquarters and at each significant Subsidiary or significant functional
division, and at each level of responsibility, an employee staff of well
trained and highly qualified financial professionals.
(j) The Company will apply the net proceeds from the
offering received by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(k) The Company will, and at all times for a period of at
least five years after the date of this Agreement, unless such securities are
then listed on a national securities exchange, use its best efforts to cause
the Common Stock (including the Shares) to be included for listing on the
Nasdaq National Market, and the Company will comply with all registration,
filing, reporting and other requirements of the Exchange Act and the Nasdaq
National Market which may from time to time be applicable to the Company.
(l) The Company will use commercially reasonable efforts
to maintain insurance of the types and in the amounts which it deems adequate
for its business consistent with insurance coverage maintained by companies of
similar size and engaged in similar businesses including, but not limited to,
general liability insurance covering all real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against.
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<PAGE> 17
(m) In accordance with the Warrant Agreement, which the
Company has executed and delivered, the Company agrees, upon its receipt of the
purchase price therefor (as specified in the Warrant Agreement), to deliver to
Van Kasper & Company (individually and not as the Representative of the
Underwriters) on the Closing Date and simultaneously with completion of the
purchase and sale of the Firm Shares and on the date the Option Shares are
purchased by the Underwriters pursuant to Section 2 of this Agreement, Warrants
(in the form attached as Exhibit A to the Warrant Agreement) representing the
right to purchase 150,000 shares of Common Stock at a price equal to 120% of the
offering price per share to the public as set forth or to be set forth on the
Cover Page of the Prospectus or in the Term Sheet.
(n) The Company will issue no press release prior to or
within 70 days after the Closing Date without prior consultation with the
Representative with respect to the contents thereof.
(o) Within a reasonable time after the Closing Date, the
Company shall supply to the Representative and its counsel, at the Company's
cost, up to six bound volumes as requested by such counsel each containing all
material documents relating to the offering of the Shares.
4. FEES AND EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with: the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus, any drafts of each of
them and any amendments or supplements to any of them; the duplication or, if
applicable, printing (including all drafts thereof) of this Agreement, the
Agreement Among Underwriters, any Selected Dealer Agreements, the Warrant
Agreement, the Preliminary Blue Sky Survey and any Supplemental Blue Sky
Survey, the Underwriters' Questionnaire and the Power of Attorney and the
duplication and printing (including of drafts thereof) of any other
underwriting documents and material (including but not limited to marketing
memoranda and other marketing material) in connection with the offering,
purchase, sale and delivery of the Shares; the issuance and delivery of the
Shares under this Agreement to the several Underwriters, including all
expenses, taxes, duties, fees and commissions on the purchase and sale of the
Shares and Nasdaq National Market, brokerage and transaction levies with
respect to the purchase and, if applicable, the sale of the Shares (x) incident
to the sale and delivery of the shares by the Company to the Underwriters and
(y) incident to the sale and delivery of the Shares by the Underwriters to the
initial purchasers thereof; the cost of printing all stock certificates; the
Transfer Agent's and Registrar's fees; the fees and disbursements of counsel
for the Company; all fees and other charges of the Company's independent public
accountants and any other experts named in the Prospectus; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus(es) and the
Prospectus, the agreements and other documents and instruments referred to
above and any amendments or supplements to any of the foregoing; NASD filing
fees; the cost of qualifying or registering the Shares (or obtaining exemptions
from qualification or registration) under the laws
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<PAGE> 18
of such jurisdictions as the Representative may designate (including filing
fees in connection with such state securities or blue sky qualifications,
registrations and exemptions) and preparing the preliminary and any final Blue
Sky Memorandum (including fees and disbursements of Underwriters' counsel in
connection therewith which fees and disbursements shall not exceed $15,000 in
the aggregate without prior approval of the Company) and all such fees and
costs shall be paid on or prior to the Closing Date; all fees and expenses in
connection with qualification of the Shares for inclusion for listing on the
Nasdaq National Market; the Company's share of roadshow expenses; and all other
expenses incurred by the Company in connection with the performance of its
obligations hereunder. Except as provided in this section 4, the Underwriters,
including the Representative, shall bear all expenses incurred by it in
connection with the offering, including (but not limited to) the expenses of
its own counsel.
(ii) In addition to its obligations under Section
4(a)(i) above, the Company agrees to pay the Representative a non-accountable
expense allowance equal to 1.5% of the public offering price of the Shares.
Such allowance shall be paid to the Representative as provided in Sections 2(c)
and 2(d) of this Agreement.
(iii) In addition to its obligations under Section
7(a) of this Agreement, the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any loss, claim, damage or liability described in
Section 7(a) of this Agreement, it will reimburse or advance to or for the
benefit of the Underwriters, and each of them, on a monthly basis (or more
often, if requested) for all legal and other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse or
advance for the benefit of the Underwriters for such expenses or the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of
any such interim reimbursement payments or advances are so held to have been
improper, the Underwriters receiving the same shall promptly return such
amounts to the Company together with interest, compounded daily, at the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Bank of America, NT&SA, San Francisco,
California (the "Prime Rate"), but not in excess of the maximum rate permitted
by applicable law. Any such interim reimbursement payments or advances that
are not made to or for the Underwriters within 30 days of a request for
reimbursement or for an advance shall bear interest at the Prime Rate, but not
in excess of the maximum rate permitted by applicable law, from the date of
such request until the date paid.
(b) In addition to their obligations under Section 7(b)
of this Agreement, the Underwriters severally and in proportion to their
obligation to purchase Firm Shares as set forth on Schedule I hereto, agree
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
loss, claim, damage or liability described in Section 7(b) of this Agreement,
they will reimburse or advance to or for the benefit of the Company on a
monthly basis (or more often, if requested) for all legal and other expenses
incurred by the Company in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial
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<PAGE> 19
determination as to the propriety or enforceability of the Underwriters'
obligation to reimburse or advance for the benefit of the Company for such
expenses and the possibility that such payments or advances might later be held
to have been improper by a court of competent jurisdiction. To the extent that
any portion, or all, of any such interim reimbursement payments or advances are
so held to have been improper, the Company shall promptly return such amounts
to the Underwriters together with interest, compounded daily, at the Prime
Rate, but not in excess of the maximum rate permitted by applicable law. Any
such interim reimbursement payments or advances that are not made to the
Company within 30 days of a request for reimbursement or for an advance shall
bear interest at the Prime Rate, but not in excess of the maximum rate
permitted by applicable law, from the date of such request until the date paid.
(c) Any controversy arising out of the operation of the
interim reimbursement and advance arrangements set forth in Sections 4(a)(iii)
and 4(b) above, including the amounts of any requested reimbursement payments
or advance, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the indemnifying parties, shall be settled
by arbitration conducted under the provisions of the Constitution and Rules of
the Board of Governors of the New York Stock Exchange, Inc. or pursuant to the
Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. If the
party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to the demand or
notice is authorized to do so. Any such arbitration will be limited to the
interpretation and obligations of the parties under the interim reimbursement
and advance provisions contained in Sections 4(a)(iii) and 4(b) above and will
not resolve the ultimate propriety or enforceability of the obligation to
indemnify for or contribute to expenses that is created by the provisions of
Section 7 of this Agreement.
(d) If the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 5 of this Agreement is not satisfied, or because of any
termination pursuant to Section 8(b) of this Agreement, or because of any
refusal, inability or failure on the part of the Company to perform any
material covenant or agreement set forth in this Agreement or to comply with
any provision of this Agreement other than by reason of a default by any of the
Underwriters, the Company agrees to reimburse the Representative upon demand
for, or pay directly, all out-of-pocket expenses (including fees and
disbursements of counsel) that shall have been incurred by the Representative
in connection with investigating, preparing to market or marketing the Shares
or otherwise in connection with this Agreement or the offering of the Shares.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase and pay for the Shares shall be
subject, to the reasonable satisfaction of the Representative, to the accuracy
as of the date of execution of this Agreement, the Closing Date and the date on
which the Option Shares are to be purchased, as the case may be, of the
representations and warranties of the Company set forth in this Agreement, to
the accuracy of the statements of the Company and its officers made in any
certificate delivered pursuant to this Agreement, to the performance by the
Company of all of its obligations to be
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<PAGE> 20
performed under this Agreement at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may be, to the
satisfaction of all conditions to be satisfied or performed by the Company at
or prior to that date and to the following additional conditions:
(a) The Registration Statement shall have become
effective (or, if a post-effective amendment is required to be filed pursuant
to Rule 430A under the Act, such post-effective amendment shall become
effective and the Company shall have provided evidence satisfactory to the
Representative of such filing and effectiveness) not later than 5:00 p.m., New
York time, on the date of this Agreement or at such later date and time as the
Representative may approve in writing and, at the Closing Date or, with respect
to the Option Shares, the date on which such Option Shares are to be purchased;
no stop order suspending the effectiveness of the Registration Statement or any
qualification, registration or exemption from qualification or registration for
the sale of the Shares in any jurisdiction shall have been issued and no
proceedings for that purpose shall have been instituted or threatened; and any
request for additional information on the part of the Commission shall have
been complied with to the reasonable satisfaction of the Representative and
Underwriters' counsel.
(b) The Representative shall have received from Preston
Gates & Ellis LLP, counsel for the Underwriters, an opinion, dated as of the
Closing Date or, if applicable, the date on which the Option Shares are to be
purchased, and the Company shall have furnished such counsel with all documents
which they may reasonably request for the purpose of enabling them to pass upon
such matters.
(c) The Representative shall have received on the Closing
Date and on any later date on which Option Shares are purchased, as the case
may be, the opinion of Manning Marder & Wolfe, counsel for the Company,
addressed to the Underwriters and dated as of the Closing Date or such later
date, with reproduced copies or signed counterparts thereof for each of the
Underwriters, covering the matters set forth in Annex A to this Agreement and
in form and substance reasonably satisfactory to the Representative.
(d) The Representative shall be satisfied that there has
not been any material change in the market for securities in general or in
political, financial or economic conditions as to render it impracticable in
the Representative's sole judgment to make a public offering of the Shares, or
a material adverse change in market levels for securities in general (or those
of environmental companies in particular) or financial or economic conditions
which render it inadvisable to proceed.
(e) The Representative shall have received on or before
the Closing Date and on any later date on which Option Shares are purchased a
certificate, dated as of the Closing Date or such later date, as the case may
be, and signed by the President and the Chief Financial Officer of the Company
stating that:
(i) the representations and warranties of the
Company set forth in Section 1 of this Agreement are true and correct with the
same force and effect as if expressly made at and as of the Closing Date or
such later date, and the Company has complied with all the
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<PAGE> 21
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date or such later date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or are threatened under the Securities Act;
and
(iii) (A) the respective signers of the certificate
have carefully examined the Registration Statement in the form in which it
originally became effective and the Prospectus and any supplements or
amendments to any of them and, as of the Effective Date, the statements made in
the Registration Statement and the Prospectus were true and correct in all
material respects and neither the Registration Statement nor the Prospectus
omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, (B) since the Effective
Date, no event has occurred that should have been set forth in an amendment to
the Registration Statement or a supplement or amendment to the Prospectus that
has not been set forth in such an amendment or supplement, (C) since the
respective dates as of which information is given in the Registration Statement
in the form in which it originally became effective and the Prospectus
contained therein, there has not been any Consolidated Material Adverse Effect
or any development involving a prospective Consolidated Material Adverse
Effect, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company or any of its direct or indirect subsidiaries has entered
into any material transaction not referred to in the Registration Statement in
the form in which it originally became effective and the Prospectus contained
therein, (D) there are not any pending or known threatened legal proceedings to
which the Company or any of its direct or indirect subsidiaries is a party or
of which property of the Company or any of its direct or indirect subsidiaries
is the subject which are material and which are not disclosed in the
Registration Statement and the Prospectus and (E) there are not any license
agreements, contracts, leases or other documents that are required to be filed
as exhibits to the Registration Statement that have not been filed as required.
(f) The Representative shall have received from Deloitte
& Touche LLP a letter or letters, addressed to the Underwriters and dated as of
the Closing Date and any later date on which Option Shares are purchased,
confirming that they are independent accountants with respect to the Company
within the meaning of the Securities Act and the applicable Rules and
Regulations thereunder and, based upon the procedures described in their
letter, referred to below, delivered to the Representative concurrently with
the execution of this Agreement (the "Original Letter"), but carried out to a
date not more than five business days prior to the Closing Date or such later
date on which Option Shares are purchased, (i) confirming, to the extent true,
that the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date, as the case may be, and
(ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since the date of the
Original Letter or to reflect the availability of more recent financial
statements, data or information. Such letters shall not disclose any change,
or any development involving a prospective change, in or affecting the
business, properties or condition (financial or otherwise), results of
operations or
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<PAGE> 22
prospects of the Company or any of its direct or indirect subsidiaries which,
in the Representative's sole judgment, makes it impractical or inadvisable to
proceed with the public offering of the Shares or the purchase of the Option
Shares as contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). In addition, the
Representative shall have received from Deloitte & Touche LLP, on or prior to
the Closing Date, a letter addressed to the Company and made available to the
Representative for the use of the Underwriters stating that their review of the
Company's system of internal controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's consolidated
financial statements as of October 31, 1997, or in delivering their Original
Letter, did not disclose any weaknesses in internal controls that they
considered to be a material weaknesses.
(g) Prior to the Closing Date, the Shares shall have been
designated national market system securities, duly authorized for listing on
the Nasdaq National Market upon official notice of issuance.
(h) On or prior to the Closing Date, you shall have
received from all Material Holders executed agreements covering the matters
described in Section 1(s) of this Agreement.
(i) On or prior to the Closing Date, the Company shall
have entered into the Warrant Agreement, substantially in the form filed as
Exhibit 4.1 to the Registration Statement; and on the Closing Date,
concurrently with the purchase and sale of the Firm Shares and on the date any
Option Shares are purchased pursuant to this Agreement, the Company shall have
issued, sold and delivered the Warrants to the Representative.
(j) The Company shall have furnished to the
Representative such further certificates and documents as the Representative
shall reasonably request (including certificates of officers of the Company),
as to the accuracy of the representations and warranties of the Company set
forth in this Agreement, the performance by the Company of its obligations
under this Agreement and the other conditions concurrent and precedent to the
obligations of the Underwriters under this Agreement. Counsel to the
Representative shall provide a written memorandum to the Company identifying
closing documents which such counsel deems necessary for the Underwriters'
review, not less than two business days before the Closing Date.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement will be in compliance with the provisions of
this Agreement only if they are reasonably satisfactory to the Representative.
The Company will furnish the Representative with such number of conformed
copies of such opinions, certificates, letters and documents as the
Representative shall reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
time being of the essence, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Representative and
Underwriters' counsel, this Agreement and all obligations of the Underwriters
hereunder may be
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<PAGE> 23
canceled by the Representative at, or at any time prior to, the Closing Date or
(with respect to the Option Shares) prior to the date upon which the Option
Shares are to be purchased, as the case may be. Notice of such cancellation
shall be given to the Company in writing or by telephone or telecopy confirmed
in writing. Any such termination shall be without liability of the Company to
the Underwriters (except as provided in Section 4 or Section 7 of this
Agreement) and without liability of the Underwriters to the Company (except to
the extent provided in Section 7 of this Agreement).
6. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to sell and deliver the Shares required to be delivered as and
when specified in this Agreement shall be subject to the condition that, at the
Closing Date or (with respect to the Option Shares) the date upon which the
Option Shares are to be purchased, no stop order suspending the effectiveness
of the Registration Statement shall be in effect and no proceedings therefor
shall be pending or threatened by the Commission.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person (including each partner or officer thereof)
who controls any Underwriter within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise provided below, settlement
expenses and fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon, in
whole or in part, (i) any breach of any representation, warranty, covenant or
agreement of the Company in this Agreement, (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement in the form originally filed or in any amendment thereto (including
the Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (iv) any untrue statement or alleged untrue statement
of a material fact contained in any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the
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<PAGE> 24
Company filed in any jurisdiction in order to qualify or register the Shares
under the securities or Blue Sky laws thereof or to obtain an exemption from
such qualification or registration or filed with the Commission or any
securities association, the Nasdaq National Market, or any securities exchange,
or the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that (1) the indemnity agreements of the Company contained in this
Section 7(a) shall not apply to any such losses, claims, damages, liabilities
or expenses if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Underwriter through the Representative specifically for use in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
such amendment thereof or supplement thereto and (2) the indemnity agreement
contained in this Section 7(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchased the Shares that
are the subject thereof (or to the benefit of any person controlling such
Underwriter) if the Company can demonstrate that at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) (excluding the documents incorporated
therein by reference) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), unless the failure is the result of noncompliance by the Company
with Section 3 of this Agreement. The indemnity agreements of the Company
contained in this Section 7(a) and the representations and warranties of the
Company contained in Section 1 of this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Shares. This indemnity agreement shall be in addition to any liabilities which
the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees
to indemnify and hold harmless the Company, each of its officers who signs the
Registration Statement, each of its directors, each other Underwriter and each
person (including each partner or officer thereof) who controls the Company or
any such other Underwriter within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or other federal or state statute,
law or regulation or at common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, settlement expenses and fees and disbursements of counsel) incurred
by the respective indemnified parties in connection with defending against any
such losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding that may be brought against,
the respective indemnified parties, in each case arising out of or based upon
(i) any breach of any representation, warranty, covenant or agreement of the
indemnifying Underwriter in this Agreement, (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (including the Prospectus as part thereof) or any post-effective
amendment thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading
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<PAGE> 25
or (iii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus or the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, but in each case under clauses (ii) and (iii) above,
as the case may be, only if such statement or omission was made in reliance
upon and in conformity with information furnished in writing to the Company by
or on behalf of such indemnifying Underwriter through the Representative
specifically for use in the Registration Statement, in any Preliminary
Prospectus or the Prospectus or any such amendment thereof or supplement
thereto; provided, however, this indemnity shall not inure to the benefit of
any Underwriter if the alleged or actual untrue statement or omission in the
Preliminary Prospectus is corrected in the Prospectus (or the Prospectus as
amended or supplemented) and the failure to deliver the Prospectus to the
aggrieved person was not the result of non-compliance by the Company under
Sections 3(c) or (d). The Company acknowledges and agrees that the matters
described in Section 2(g) of this Agreement constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in the Registration Statement, any Preliminary Prospectus or the Prospectus.
The indemnity agreement of each Underwriter contained in this Section 7(b)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Shares. This indemnity agreement shall be
in addition to any liabilities which each Underwriter may otherwise have.
(c) Each person or entity indemnified under the
provisions of Sections 7(a) and 7(b) above agrees that, upon the service of a
summons or other initial legal process upon it in any action or suit instituted
against it or upon its receipt of written notification of the commencement of
any investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
Sections, it will, if a claim in respect thereunder is to be made against the
indemnifying party or parties under this Section 7, and give written notice
(the "Notice") of such service or notification to the party or parties from
whom indemnification may be sought hereunder within ten (10) calendar days
after receipt by them of written notice of the commencement of any actions
against them. No indemnification provided for in Sections 7(a) or 7(b) above
shall be available to any person who fails to so give the Notice if the party
to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related,
but only to the extent such party was materially prejudiced by the failure to
receive the Notice, and the omission so to notify such indemnifying party or
parties shall not relieve such indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or
otherwise than on account of Sections 7(a) and 7(b). Any indemnifying party
shall be entitled at its own expense to participate in the defense of any
action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(the "Notice of Defense") to the indemnified party, to assume (alone or in
conjunction with any other indemnifying party or parties) the entire defense of
such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the
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<PAGE> 26
indemnifying party or parties, by counsel chosen by such indemnifying party or
parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses or rights available to such
indemnified party or parties different from or in addition to those available
to the indemnifying party or parties, then separate counsel for and selected by
the indemnified party or parties shall be entitled to conduct, at the expense
of the indemnifying parties, the defense of the indemnified parties to the
extent determined by such counsel to be necessary to protect the interests of
the indemnified party or parties, and (ii) provided, further, that the
indemnifying party shall not be liable for the fees and expenses of more than
one separate counsel, reasonably approved by the indemnifying party, for all of
the indemnified parties, plus, if applicable, local counsel in each
jurisdiction. In addition, in any event, the indemnified party or parties
shall be entitled to have counsel selected by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of Defense
and, unless separate counsel is to be chosen by the indemnified party or
parties as provided above, the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under Sections 7(a) through
7(c) for any legal or other expenses subsequently incurred by the indemnified
party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear and pay the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear and
pay such other expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after receipt of
the Notice, no Notice of Defense has been given, the indemnifying party or
parties shall be responsible for any legal or other expenses incurred by the
indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding.
(d) In order to provide for just and equitable
contribution in any action in which a claim for indemnification is made
pursuant to this Section 7 but is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right to appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 7 provides for indemnification in such case, each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, liabilities and
expenses referred to in Section 7(a) or 7(b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each party in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Underwriters shall be deemed to be in the same respective proportions as
the total proceeds from the offering
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<PAGE> 27
of the Shares, net of the underwriting discounts, received by the Company and
the total underwriting discount retained by the Underwriters bear to the
aggregate public offering price of the Shares. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by a party and the
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this Section
7(d) and to the considerations referred to in the third sentence of the first
paragraph of this Section 7(d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities, or actions in respect
thereof, referred to in the first sentence of this Section 7(d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, preparing to defend or defending
against any action or claim which is the subject of this Section 7(d).
Notwithstanding the provisions of this Section 7(d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by that Underwriter. For purposes of this
Section 7(d), each person who controls an Underwriter within the meaning of the
Securities Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company within the meaning of the Securities
Act, each officer of the Company who signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the immediately preceding and immediately
following sentences. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute in this Section
7(d) are several in proportion to their respective underwriting obligations and
not joint.
Each party or other entity entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 7(c) above). This Section 7(d) shall not be
operative as to any Underwriter to the extent that the Company is entitled to
receive or has received indemnity under this Section 7.
(e) The Company shall not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not such Underwriter or any person who controls such Underwriter
within the meaning of Section 15 of the Securities Act is a party to such
claim, action, suit or proceeding) unless such settlement, compromise or
consent includes an
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<PAGE> 28
unconditional release of each such Underwriter and each such controlling person
from all liability arising out of such claim, action, suit or proceeding.
(f) No Underwriter shall, without the consent of the
Company, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Company is a party to such claim, action, suit or proceeding), which consent
shall not be unreasonably withheld, unless such settlement, compromise or
consent includes an unconditional release of the Company, each of its officers
who signed the Registration Statement, each of its directors and each person
who controls the Company within the meaning of Section 15 of the Securities
Act, from all liability arising out of such claim, action, suit or proceeding.
(g) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(iii), 4(b) and 4(c) and this
Section 7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections
4(a)(iii), 4(b) and 4(c) and this Section 7 of this Agreement fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement, each Preliminary Prospectus and the Prospectus as
required by the Securities Act, the Rules and Regulations, the Exchange Act and
the rules and regulations of the Commission under the Exchange Act. The
parties are advised that federal or state policy, as interpreted by the courts
in certain jurisdictions, may be contrary to certain provisions of Sections
4(a)(iii), 4(b) and 4(c) and this Section 7 of this Agreement and, to the
extent permitted by law, the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under Sections 4(a)(iii), 4(b) or 4(c) or this Section 7 of this
Agreement and further agree not to attempt to assert any such defense.
(h) SUBSTITUTION OF UNDERWRITERS. If for any reason one
or more of the Underwriters fails or refuses (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 5 or Section 9 of this Agreement) to purchase and pay for the number of
Firm Shares agreed to be purchased by such Underwriter or Underwriters, the
Company shall immediately give notice thereof to the Representative and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by the Representative of such notice to purchase, or procure one or
more other Underwriters to purchase, in such proportions as may be agreed upon
among the Representative and such purchasing Underwriter or Underwriters and
upon the terms set forth herein, all or any part of the Firm Shares that such
defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail to make such arrangements with respect to all
such Shares, the number of Firm Shares that each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis to absorb the remaining Shares that the
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<PAGE> 29
defaulting Underwriter or Underwriters agreed to purchase; provided, however,
that the non-defaulting Underwriters shall not be obligated to purchase the
Shares that the defaulting Underwriter or Underwriters agreed to purchase if
the aggregate number of such Shares exceeds 10% of the total number of Firm
Shares that all Underwriters agreed to purchase under this Agreement. If the
total number of Firm Shares that the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance with the
two preceding sentences, the Company shall have the right, within 24 hours next
succeeding the first 24-hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to the Representative for
purchase of such Shares on the terms set forth in this Agreement. In any such
case, either the Representative or the Company shall have the right to postpone
the Closing Date determined as provided in Section 2(c) of this Agreement for
not more than seven business days after the date originally fixed as the
Closing Date pursuant to said Section 2(c) in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made.
If neither the non-defaulting Underwriters nor the Company makes
arrangements within the time periods provided in the first three sentences of
the first paragraph of this Section 7(h) for the purchase of all the Firm
Shares that the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter (except as provided in Section 4 or Section 7 of this Agreement)
and without any liability on the part of any non-defaulting Underwriter to the
Company (except to the extent provided in Section 7 of this Agreement).
Nothing in this Section 7(h), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability, if any, to the Company or any
non-defaulting Underwriter for damages occasioned by its default under this
Agreement. The term "Underwriter" in this Agreement shall include any persons
substituted for an Underwriter under this Section 7(h).
8. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) If the Registration Statement has not been declared
effective prior to the date of this Agreement, this Agreement shall become
effective at such time, after notification of the effectiveness of the
Registration Statement has been released by the Commission, as the
Representative and the Company shall agree upon the public offering price and
the purchase price of the Shares. If the public offering price and the purchase
price of the Shares shall not have been determined prior to 5:00 p.m., New York
time, on the fifth full business day after the Registration Statement has
become effective, this Agreement shall thereupon terminate without liability on
the part of the Company to the Underwriters (except as provided in Section 4 or
Section 7 of this Agreement) or the Underwriters to the Company (except as set
forth in Section 7 of this Agreement). By giving notice before the time this
Agreement becomes effective, the Representative may prevent this Agreement from
becoming effective without liability of any party to the other party, except
that the Company shall remain obligated to pay costs and expenses to the extent
provided in Section 4 and Section 7 of this Agreement. If the Registration
Statement has been declared effective prior to the date of this Agreement, this
Agreement shall become effective upon execution and delivery by the
Representative and the Company.
(b) This Agreement may be terminated by the
Representative in its absolute discretion by giving written notice to the
Company at any time on or prior to the Closing Date or,
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<PAGE> 30
with respect to the purchase of the Option Shares, on or prior to any later
date on which the Option Shares are to be purchased, as the case may be, if
prior to such time any of the following has occurred or, in the
Representative's opinion, is likely to occur: (i) after the respective dates as
of which information is given in the Registration Statement and the Prospectus,
any material adverse change or development involving a prospective adverse
change in or affecting particularly the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
its direct and indirect subsidiaries, taken as a whole, whether or not arising
in the ordinary course of business, occurs which would, in the Representative's
sole judgment, make the offering or the delivery of the Shares impracticable or
inadvisable; or (ii) if there shall have been the engagement in hostilities or
an escalation of major hostilities by the United States or the declaration of
war or a national emergency by the United States on or after the date hereof,
or any outbreak of hostilities or other national or international calamity or
crisis or change in economic or political conditions, if the effect of such
outbreak, calamity, crisis or change in economic or political conditions on the
financial markets of the United States would, in the Representative's sole
judgment, make the offering or delivery of the Shares impracticable or
inadvisable; or (iii) if there shall have been suspension of trading in
securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, or limitations on prices (other than limitations on
hours or numbers of days of trading) for securities on either such exchange or
system; or (iv) if there shall have been the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Representative's sole judgment has or may have a Consolidated Material Adverse
Effect; or (v) if there shall have been the declaration of a banking moratorium
by federal, New York or California state authorities; or (vi) if there shall
have been the taking of any action by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in the
Representative's sole judgment has a material adverse effect on the securities
markets in the United States; or (vii) existing international monetary
conditions shall have undergone a material change which, in your sole judgment,
makes the offering or delivery of the Shares impracticable or inadvisable. If
this Agreement shall be terminated pursuant to this Section 8, there shall be
no liability of the Company to the Underwriters (except pursuant to Section 4
and Section 7 of this Agreement) and no liability of the Underwriters to the
Company (except to the extent provided in Section 7 of this Agreement).
9. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing and, if to the Underwriters, shall
be mailed, telecopied or delivered to Van Kasper & Company, 600 California
Street, Suite 1700, San Francisco, California 90024, Attention: Syndicate
Manager (telecopier: (415) 397-2744); and if to the Company, shall be mailed,
telecopied or delivered to it at 915 Riverview Drive, Suite One, Johnson City,
Tennessee 37601 (telecopier: (423) 928-0216) Attention: President. All
notices given by telecopy shall be promptly confirmed by letter.
10. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This
Agreement shall inure to the benefit of the Company and the several
Underwriters and, with respect to the provisions of Section 4 and Section 7 of
this Agreement, the several parties (in
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<PAGE> 31
addition to the Company and the several Underwriters) indemnified under the
provisions of Section 4 and Section 7, and their respective personal
representatives, successors and assigns. Nothing in this Agreement is intended
or shall be construed to give to any other person, firm or corporation any
legal or equitable remedy or claim under or in respect of this Agreement or any
provision contained herein. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Shares from
the several Underwriters.
11. GENERAL. Notwithstanding any provision of this Agreement to
the contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless
of (a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company or their respective directors or officers and (c) delivery and
payment for the Shares under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of Sections
3(f)-3(n) of this Agreement shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument, and may be delivered by facsimile transmission.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS,
OF THE STATE OF CALIFORNIA.
12. AUTHORITY OF THE REPRESENTATIVE. In connection with this
Agreement, the Representative will act for and on behalf of the several
Underwriters, and any action taken under this Agreement by the Representative,
as representative of the several Underwriters, will be binding on all the
Underwriters.
[Remainder of page left intentionally blank]
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<PAGE> 32
If the foregoing correctly sets forth your understanding, please so
indicate by signing in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement among the Company and the
several Underwriters.
Very truly yours,
FLOUR CITY INTERNATIONAL, INC.
By: ____________________________________
Michael J. Russo
President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the
date first above written.
On their own behalf and on behalf of each of the several Underwriters
named in Schedule I hereto.
VAN KASPER & COMPANY
By: ____________________________________
David H. Horwich
Senior Vice President
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<PAGE> 33
SCHEDULE I
UNDERWRITERS
<TABLE>
<S> <C>
Number of Firm Underwriters Shares to be Purchased:
Van Kasper & Company . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . ==========
</TABLE>
I-1
<PAGE> 34
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF COUNSEL FOR THE COMPANY
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of Nevada; each of [U.S. and
Foreign Subsidiaries] has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of formation;
(ii) The Company and each Subsidiary has the corporate power to
own, lease and operate its properties and to conduct its business as described
in the Prospectus;
(iii) The Company and each Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure so to qualify
would not have a Consolidated Material Adverse Effect on such entity;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the captions "Capitalization"
and "Description of Capital Stock" as of the dates stated therein; the issued
and outstanding shares of capital stock (or other securities) of the Company
and each Subsidiary have been duly and validly authorized and issued, are fully
paid and nonassessable and have not been issued in violation of any statutory,
or, to the best knowledge of such counsel, other preemptive right or other
rights to subscribe for or purchase securities or in violation of any
applicable federal or state securities laws; and except as reflected on Exhibit
A to the Underwriting Agreement, the Company directly or indirectly owns all of
the issued and outstanding equity securities of each of its Subsidiaries and,
to such counsel's actual, current knowledge, there are no outstanding options,
warrants or other rights to acquire any equity securities of any Subsidiary;
(v) The Shares will, upon issuance and delivery against payment
therefor in accordance with the terms of the Agreement, be duly authorized,
validly issued, fully paid and nonassessable and will not have been issued in
violation of any statutory, or, to the best knowledge of such counsel, other
preemptive right or other rights to subscribe for or purchase securities and
have been duly approved for listing on the Nasdaq National Market subject only
to official notice of issuance thereof;
(vi) The Company has corporate power to enter into the Agreement
and to issue, sell and deliver the Shares to the Underwriters.
(vii) The Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming
A-1
<PAGE> 35
its due authorization, execution and delivery by the Representative, is the
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except insofar as the indemnification and
contribution provisions of the Agreement may be limited by public policy
concerns and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by general equitable principles;
(viii) We have been informed by the staff of the Securities and
Exchange Commission that the Registration Statement has become effective under
the Securities Act and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act;
(ix) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements and
supporting schedules included therein, as to which such counsel need express no
opinion), as of the effective date of the Registration Statement, complied as
to form in all material respects with the requirements of the Securities Act
and the applicable Rules and Regulations;
(x) The terms and provisions of the capital stock of the Company
conform in all material respects to the description thereof contained in the
Registration Statement and Prospectus, and the forms of certificates evidencing
the Common Stock comply with Nevada law;
(xi) The information in the Prospectus under the captions "Risk
Factors," "Business - Legal Proceedings," "Description of Capital Stock" and
"Shares Eligible for Future Sale," to the extent it constitutes matters of law
or legal conclusions, has been reviewed by such counsel and is correct in all
material respects;
(xii) The description in the Registration Statement and the
Prospectus of the Articles of Incorporation and Bylaws of the Company and of
statutes and, to the best knowledge of such counsel, contracts are accurate in
all material respects and fairly present in all material respects the
information required to be presented by the Securities Act and the Rules and
Regulations;
(xiii) To the best knowledge of such counsel, there are no
agreements, contracts, licenses, leases or documents of a character required to
be described or referred to in the Registration Statement or Prospectus or to
be filed as an exhibit to the Registration Statement that are not described or
referred to therein or filed as required;
(xiv) The execution and delivery of the Agreement and the Warrant
Agreement do not, and the Company's performance of the Agreement and the
Warrant Agreement and the consummation of the transactions contemplated by each
of them will not, conflict with, violate or result in the material breach of
or a material default (including without limitation with the giving of notice,
the passage of time or otherwise) under any of the terms and provisions of the
Company's Articles of Incorporation or Bylaws or, to the undersigned's actual
current
A-2
<PAGE> 36
knowledge, any contract, indenture, mortgage, deed of trust, loan agreement,
lease, license, joint venture or, without limitation, other agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
its or their properties are bound or any law, ordinance, rule or regulation or,
to the best knowledge of such counsel, any order, writ, injunction, judgment or
decree of any governmental agency or body or of any court or arbitration
tribunal having jurisdiction over the Company or any Subsidiary or over any of
its or their properties; provided, however, that no opinion need be rendered
concerning state securities or Blue Sky laws;
(xv) No authorization, approval or consent or other order of any
governmental authority or agency is necessary in connection with the
consummation of the transactions contemplated by the Agreement or the Warrant
Agreement, except such as have been obtained under the Securities Act, are
necessary under the Securities Act in connection with the registration for
resale of the Warrant Shares or as may be required under state securities or
Blue Sky laws in connection with the purchase and the distribution of the
Shares by the Underwriters or the registration and sale of the Warrant Shares;
(xvi) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or any
Subsidiary of a character which are required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or the
applicable Rules and Regulations, other than those described therein;
(xvii) To the best knowledge of such counsel, neither the Company nor
any Subsidiary is presently in breach of, or in default under, any bond,
debenture, note or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license or, without limitation,
other agreement or instrument to which the Company or any Subsidiary is a party
or by which any of its or their properties are bound which breach or default,
individually or in the aggregate, is reasonably likely to result in a
Consolidated Material Adverse Effect.
(xviii) To the best knowledge of such counsel, except as set forth in
the Registration Statement and Prospectus, no holders of Common Stock or,
except as is provided in the Warrant Agreement, other securities of the Company
have unexercised registration rights with respect to any securities of the
Company;
(xix) The Warrant Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Representative, is the valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles;
(xx) The Warrants have been duly and validly authorized and
constitute valid and binding obligations of the Company enforceable in
accordance with their terms (except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles); the Warrant
Shares have been duly and validly reserved and authorized for issuance upon
exercise of the Warrants
A-3
<PAGE> 37
against payment therefor as provided in the Warrant Agreement (including, as
provided in the Warrant Agreement, by surrender of Warrants) and, when so
issued, will be validly issued, fully paid and nonassessable; and to the best
knowledge of such counsel no stockholder has any statutory or, to the best
knowledge of such counsel, other preemptive rights or other rights to subscribe
for or purchase with respect to the Warrants or the Warrant Shares;
In addition, such counsel shall state that such counsel has
participated in the preparation of the Registration Statement and Prospectus,
including participating in conferences with officers and other representatives
of the Company, the independent public accountants of the Company, the
Representative and counsel to the Underwriters, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed and, although they have not independently verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of such counsel
that caused them to believe that, at the time the Registration Statement became
effective, the Registration Statement (except as to financial statements and
supporting schedules contained therein, as to which such counsel need express
no opinion) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or any later date on
which the Option Shares are to be purchased, as the case may be, the Prospectus
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
A-4
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FLOUR CITY INTERNATIONAL, INC.
Pursuant to the provisions of the Nevada Revised Statutes Section
78.403 the undersigned corporation hereby adopts the following Amended and
Restated Articles of Incorporation to its Articles of Incorporation to supersede
the original Articles of Incorporation.
ARTICLE I
NAME. The name of the corporation is Flour City International, Inc.
ARTICLE II
DURATION. The corporation shall exist perpetually or until dissolved
according to law.
ARTICLE III
PURPOSE. The purpose of this corporation is to engage in any lawful act
or activity for which a corporation may be organized under the Nevada Business
Corporation Act other than the banking business or the trust company business.
ARTICLE IV
CAPITALIZATION. A. Number and Par Value of Shares. The Corporation is
authorized to issue fifty million (50,000,000) shares of common stock with a par
value of one hundredth of a cent ($.0001 ) per share. All of the shares of
common stock shall be of the same class, without preference or distinction. The
Corporation is authorized to issue five million (5,000,000) shares of preferred
stock with a par value of one hundredth of a cent ($.0001 ) per share.
B. Preferred Stock. The preferred stock may be issued in one or more
series. The Board of Directors is authorized to fix the number of any such
series of preferred shares, and to determine the designation of any such series.
The Board of Directors is further authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
and issued series of preferred shares, and within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any such series subsequent to the issue of shares of that series.
C. Assessment of Shares. The capital stock of the Corporation, after
the amount of the consideration for the issuance of shares, as determined by the
Board of Directors, has been
<PAGE> 2
paid, is not subject to assessment to pay the debts of the Corporation and no
stock issued as fully paid may ever be assessed, and the Articles of
Incorporation cannot be amended in this respect.
D. CUMULATIVE VOTING. Cumulative voting by any shareholder is denied.
ARTICLE V
BYLAWS. Provisions for the regulation of the internal affairs of the
corporation shall be set forth in the Bylaws. Bylaws may be adopted, amended or
repealed by the Board of Directors.
ARTICLE VI
PRE-EMPTIVE RIGHTS. No holder of shares of the capital stock of any
class of the corporation shall have any pre-emptive or preferential rights of
subscription to any shares of any class of stock of the corporation, whether now
or hereafter authorized, or to any obligations convertible into stock of the
corporation, issued or sold. The term "convertible obligations" as used herein
shall include any notes, bonds or other evidences of indebtedness to which are
attached or with which are issued warrants or other rights to purchase stock of
the corporation.
ARTICLE VII
REGISTERED OFFICE AND RESIDENT AGENT. The address of the Corporation's
registered office is 502 East John Street, Carson City, Nevada 89706. The name
of the resident agent is CSC Services of Nevada, Inc. The address of the
resident agent is 502 East John Street, Carson City, Nevada 89706.
ARTICLE VIII
DIRECTORS. The number of directors which shall constitute the Board of
Directors of the corporation may vary as prescribed by the by-laws provided that
there is at least one Director.
The names and addresses of the Directors serving on the Board of
Directors, as of the date hereof, are as follows:
<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
John W. Y. Tang 915 Riverview Drive, Suite One, Johnson City, Tennessee 37601
Michael J. Russo 915 Riverview Drive, Suite One, Johnson City, Tennessee 37601
Johnson K. Fong 915 Riverview Drive, Suite One, Johnson City, Tennessee 37601
</TABLE>
ARTICLE IX
AMENDMENT TO ARTICLES OF INCORPORATION. These Articles of
2
<PAGE> 3
Incorporation may be amended only in accordance with Nevada Revised Statute
78.390.
ARTICLE X
BUSINESS COMBINATIONS. The Board of Directors of the corporation, when
evaluating any offer of another party to (a) make a tender or exchange offer for
any equity security of the corporation, (b) merge or consolidate the corporation
with another corporation, or (c) purchase or otherwise acquire all or
substantially all of the properties and assets of the corporation, may, in
connection with the exercise of its judgment in determining what is in the best
interests of the corporation and its stockholders, give due consideration to (i)
all relevant factors, including without limitation the social, legal,
environmental and economic effects on the employees, customers, suppliers and
other affected persons, firms and corporations, and on the communities and
geographical areas in which the corporation and its subsidiaries operate or are
located and on any of the businesses and properties of the corporation or any of
its subsidiaries, as well as such other factors as the directors deem relevant,
and (ii) not only the financial consideration being offered in relation to the
then current market price for the corporation's outstanding shares of capital
stock, but also in relation to the then current value of the corporation in a
freely negotiated transaction and in relation to the Board of Directors'
estimate of the future value of the corporation (including the unrealized value
of its properties and assets) as an independent going concern.
ARTICLE XI
DIRECTORS' AND OFFICERS' LIABILITY. The corporation shall indemnify to
the fullest extent permitted by law any person made or threatened to be made a
party to any action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate is or
was a director or officer of the corporation or any predecessor of the
corporation or serves or served any other enterprise as a director or officer at
the request of the corporation or any predecessor of the corporation. No
amendment or repeal of this Article XI applies to or has any affect on the
liability or alleged liability of any director or officer of this corporation
for or with respect to any acts or omissions of the director or officer
occurring prior to the amendment or repeal, except as otherwise required by law.
ARTICLE XII
INDEMNITY AGREEMENTS. The Board of Directors is authorized on behalf of
the corporation to authorize and approve indemnity agreements between the
corporation and each director and each officer, in form and content acceptable
to the board, which agreements shall provide that the corporation shall
indemnify (and advance expenses to) the indemnitee to the fullest extent
permitted by applicable law as such law may be in effect at the time any such
indemnification under any such agreement may be sought, no later than 30 days
after a written demand has been made therefor, against all expenses, judgments,
fines, penalties, excise taxes and amounts paid in settlement for claims with
respect to events relating to indemnitee's service
3
<PAGE> 4
with or for the corporation, and which agreements shall provide that in any
proceeding to enforce the obligation to indemnify such person, the corporation
shall have the burden to establish that such indemnification is prohibited;
provided, however, that such agreements shall, in form and content acceptable to
the board, exclude from indemnification a judgment or other final adjudication
adverse to indemnitee that established (a) that his or her acts were committed
in bad faith or were the result of deliberate dishonesty, or (b) that he or she
in fact gained a financial advantage to which he or she was not legally
entitled, in which event the amount of the indemnification shall be reduced by
the amount of such financial advantage gained.
ARTICLE XIII
ADOPTION OF AMENDED AND RESTATED ARTICLES. These above Amended
and Restated Articles of Incorporation have been consented to and adopted by a
majority of the stockholders entitled to vote thereon. Michael J. Russo, as
President, and Bryan R. Willis, as Assistant Secretary of Flour City
International, Inc. have been authorized to execute the foregoing certificate by
the unanimous written consent of the Directors on February 19, 1998, and the
foregoing certificate sets forth the Articles of Incorporation as amended and
restated as of the date of the certificate.
IN WITNESS WHEREOF, Flour City International, Inc., has caused
this certificate of Amended and restated Articles of Incorporation to be signed
by its President and Assistant Secretary this __th day of February 1998.
--------------------------
Michael J. Russo
President
--------------------------
Bryan R. Willis
Assistant Secretary
4
<PAGE> 5
STATE OF TENNESSEE )
)
) SS.:
COUNTY OF WASHINGTON )
On ______________________, personally appeared before me, a Notary
Public in and for the State and County aforesaid, Mike Russo, and Bryan R.
Willis, President and Assistant Secretary of Flour City International, Inc.,
personally known to me, or demonstrated to me on the basis of satisfactory
evidence, to be the persons whose names are subscribed to the above instrument
in the said capacities, who acknowledged that they executed the said instrument.
---------------------------
Notary Public
5
<PAGE> 1
EXHIBIT 4.1
WARRANT AGREEMENT
May __, 1998
Van Kasper & Company
600 California Street, Suite 1700
San Francisco, CA 94108
Ladies and Gentlemen:
Flour City International, Inc., a Nevada corporation (the "Company"),
hereby agrees, on the terms and subject to the conditions of this Warrant
Agreement (the "Agreement"), to sell and deliver to Van Kasper & Company
("VKCO") individually and not as Representative of the underwriters referred to
in the "Underwriting Agreement" (defined below), warrants to purchase a number
of shares of the "Common Stock" (defined below) equal to 7.5% (seven and
one-half percent) of the aggregate number of shares (excluding "Option Shares"
(defined in the Underwriting Agreement)) of the Common Stock sold to the
underwriters pursuant to the Underwriting Agreement. VKCO agrees, on the terms
and subject to the conditions of this Agreement, to purchase such warrants from
the Company.
Each of the warrants will be exercisable by the "Holder" thereof
(defined below), as to all or any lesser number of shares of the Common Stock
covered by the Holder's warrants, at the "Exercise Price'" per share (defined
below), at any time and from time to time beginning at 9:00 a.m., San Francisco
time, on the day that begins one year after the Effective Date (defined below)
and ending at 5:00 p.m., Los Angeles time, on the day that is five years after
the Effective Date. The warrants shall be evidenced by instruments in the form
of Exhibit A hereto (those instruments and all instruments issued after the
date hereof in replacement thereof are referred to below as the "Warrants").
The purchase price of the Warrants shall be $0.01 (one cent) for each
share of Common Stock purchasable as of the Closing Time on exercise of the
Warrants. The delivery of the Warrants and payment of the purchase price of
the Warrants are to be made on the "Closing Date" (defined in the Underwriting
Agreement), at the offices of VKCO at 600 California Street, Suite 1700, San
Francisco, CA 94108, or such other time and place as may be agreed upon among
the Company and VKCO (the date(s) of such purchase of the Warrants is referred
to in this Agreement as the "Closing Time").
1. Definitions. As used in this Agreement, the following terms,
unless the context otherwise clearly requires, shall have for all purposes the
following respective meanings, and capitalized terms used herein without
definition shall have the meanings ascribed to them in the Underwriting
Agreement:
(a) The term "Common Stock" refers to the Common Stock,
par value $0.0001 per share, of the Company, and all other shares of any class
or classes (however
<PAGE> 2
designated) of the common equity of the Company, now or hereafter authorized,
the holders of which by operation of law shall have the right, without
limitation as to amount, either to all or to a part of the balance of current
dividends and liquidating dividends and distributions after the payment of
dividends and distributions on any shares entitled to preference and the
holders of which ordinarily, in the absence of contingency, shall be entitled
to vote for the election of the directors of the Company (even though the right
so to vote has been suspended by the occurrence of such a contingency), other
than those directors of the Company (constituting a portion of the Board of
Directors) who, pursuant to the Certificate of Incorporation or other charter
documents of the Company, are then to be elected by a designated class or
series of the capital stock of the Company.
(b) "Convertible Securities" shall mean any indebtedness,
shares of stock or other rights granted by the Company (other than Options)
convertible into or exchangeable for Common Stock.
(c) "Effective Date" shall mean the date on which the
Securities and Exchange Commission shall have declared the Registration
Statement effective.
(d) The term "Exercise Price" refers to the per share
purchase price of the Warrant Shares subject to this Warrant Agreement. The
Exercise Price shall initially be [ ] per share (120% of the initial per
share price to the public of the shares of Common Stock sold pursuant to the
Underwriting Agreement), subject to adjustment as provided in Section 6 below.
(e) The term "Holder," when used with respect to the
Warrants or the Warrant Shares, means the person registered on the books and
records of the Company as being the holder of record of the Warrants or the
Warrant Shares, as the case may be, and, so long as VKCO holds of record any
Warrants or Warrant Shares, it shall be included in the definition of "Holder,"
and any action to be taken or approval to be given by the Holders shall, unless
otherwise provided in this Agreement, require the action by, or approval of,
the Holder or Holders of at least that number of Warrants and Warrant Shares
which in the aggregate shall constitute a majority of all Warrant Shares issued
or issuable under this Agreement.
(f) "Options" shall mean any warrants, options or,
without limitation, other rights granted by the Company to purchase Common
Stock or Convertible Securities.
(g) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities, whether pursuant to Section 6 below or
otherwise.
(h) The term "Prospectus" refers to the prospectus which
is part of the Company's Registration Statement on Form S-1 in the form first
filed with the Securities and Exchange Commission (the "Commission") pursuant
to Rule 424(b) of the applicable rules and
-2-
<PAGE> 3
regulations (the "Rules and Regulations") of the Commission under the
Securities Act of 1933, as amended (the "Act").
(i) The term "Registration Statement" refers to the
Company's Registration Statement on Form S-1 (No. 333-43793), as amended, when
it first became effective under the Act.
(j) The term "Warrant Shares" refers to the shares of
Common Stock (or Other Securities) issued or issuable upon the exercise, in
whole or in part, of any of the Warrants.
2.1 Representations and Warranties. The Company represents and
warrants to VKCO as follows:
(a) Corporate Action. The Company has all requisite
power and authority, and has taken all necessary action, to enter into and
perform all of its obligations under this Agreement, to issue and deliver the
Warrants and to authorize and reserve for issuance, and upon payment from time
to time of the Exercise Price in accordance with the terms of this Agreement,
to issue and deliver the Warrant Shares; and this Agreement has been duly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (i) as such enforceability may be subject to
or limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws or equitable principles now or hereafter in effect relating to or
affecting creditors' rights generally (collectively, the "Recognized Defenses")
and (ii) insofar as the indemnification and contribution provisions hereof may
be limited under federal and state securities laws and the public policies
underlying such laws.
(b) Outstanding Common Stock. The outstanding shares of
Common Stock have been duly and validly authorized and issued and are fully
paid and non-assessable and free of preemptive rights. The Warrant Shares (i)
are duly authorized by the Company's Certificate of Incorporation, (ii) have
been duly and validly authorized to be issued and adequately reserved by the
Board of Directors of the Company, (iii) will, when issued and delivered to the
Holders pursuant to this Agreement, be duly and validly issued, fully paid and
non-assessable and free and clear of all liens, charges, encumbrances or rights
of others except for those which may be created by the Holder, and (iv) and
have been approved for listing, upon official notice of issuance, on the Nasdaq
National Market. The holders of outstanding shares of capital stock of the
Company are not entitled to any preemptive or similar rights to subscribe for
or purchase Warrant Shares or other shares of capital stock of the Company and,
except as otherwise set forth or incorporated by reference in the Prospectus,
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of capital stock of the Company.
(c) No Violation. None of the execution or delivery of
this Agreement, the consummation of the transactions contemplated by this
Agreement or compliance with the terms and provisions of this Agreement will
(i) conflict with or constitute a breach of, or a default (or
-3-
<PAGE> 4
default with notice, the passage of time or otherwise) under any bond,
debenture, note or other evidence of indebtedness or any indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which any of them is bound or to which any
of their respective property or assets is subject, (ii) result in the
imposition of a lien on any properties of the Company or any of its
subsidiaries or an acceleration of indebtedness of the Company or any of its
subsidiaries or (iii) result in a violation of any law, administrative
regulation or order of any court or governmental agency or authority applicable
to the Company or any of its subsidiaries or to any of their respective
properties or assets. No consent, approval, authorization or other order of
any regulatory body, administrative agency or other governmental body is
required for the valid issuance and sale of the Warrant Shares to VKCO or the
other transactions contemplated by this Agreement, except for registration
under the federal securities laws and for permits and similar authorizations
required under state blue sky laws or similar laws.
(d) Underwriting Agreement. All representations and
warranties made by the Company in Section 1 of the Underwriting Agreement,
dated May __, 1998, by and among the Company and VKCO, as Representative of the
several underwriters named therein (the "Underwriting Agreement"), are and will
be at and as of the Closing Time true and correct and are hereby incorporated
by reference into this Agreement as if such representations and warranties were
set forth in full herein.
2.2 Representations and Warranties of VKCO. VKCO represents and
warrants to the Company that it has all requisite corporate power and corporate
authority, and has taken all necessary corporate action, to enter into and
perform all of its obligations under this Agreement and that this Agreement has
been duly authorized, executed and delivered by it and constitutes its legal,
valid and binding agreement, enforceable against it in accordance with its
terms, except (i) as such enforceability may be subject to or limited by the
Recognized Defenses and (ii) insofar as the indemnification and contribution
provisions hereof may be limited under federal and state securities laws and
the public policies underlying such laws.
3. Compliance with the Act.
(a) Transferability of Warrants. Until May __, 1999,
VKCO agrees that the Warrants may not be transferred, sold, assigned or
hypothecated except: (i) to its successors in a merger or consolidation or
other business combination; (ii) to purchasers of all or substantially all of
its assets; (iii) to any officers of VKCO; (iv) by operation of law; or (v) as
permitted below in this Section 3. VKCO further agrees that the Company shall
have no obligation to effect any transfer of the Warrants during the time
period referred to above, unless the transferee, purchaser, assignee or
pledgee, as the case may be, has executed an agreement obligating the
transferee to comply with all terms and conditions of this Warrant Agreement
applicable to the transferor.
-4-
<PAGE> 5
(b) Transferability of Warrant Shares.
(i) Except as otherwise provided in this Section
3(b), each certificate for Warrant Shares initially issued upon the exercise of
any Warrants shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The Shares represented by this certificate are
subject to the conditions specified in a Warrant Agreement,
dated May __, 1998, among the Company and Van Kasper &
Company. Except to the extent permitted by the Warrant
Agreement, no transfer, sale, pledge, hypothecation,
encumbrance or other disposition of the shares represented by
this certificate shall be valid or effective until registered
under the Securities Act of 1933, as amended (or, if
applicable, a successor law thereto) or the Company has been
presented with satisfactory evidence that such shares will be
transferred in a transaction exempt from such registration and
until any applicable conditions contained in the Warrant
Agreement have been fulfilled. A copy of the Warrant
Agreement is on file at the offices of Flour City
International, Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the
provisions of the Warrant Agreement."
(ii) Each certificate evidencing Warrant Shares
issued upon any transfer, sale, pledge, assignment, hypothecation or other
disposition of any Warrant Shares shall bear the restrictive legend set forth
in Section 3(b)(i), unless in the opinion of counsel to such Holder reasonably
satisfactory to the Company such legend is not required in order to ensure
compliance with the Act.
(iii) Notwithstanding the foregoing provisions of
this Section 3(b), the restrictions imposed by subsections (i) and (ii) of this
Section upon the transferability of the Warrant Shares and the legend
requirements of Section 3(b)(i) shall terminate as to any particular Warrant
Shares (A) when and so long as the transfer, sale, pledge, hypothecation,
encumbrance or other disposition thereof, shall have been registered under the
Act or (B) when the Holder or Holders of any Warrants or Warrant Shares has
delivered to the Company the written opinion of counsel to such Holder or
Holders, which shall be reasonably satisfactory to the Company, stating that
such legend is not required in order to ensure compliance with the Act.
Whenever the restrictions imposed by this Section shall terminate as to any
Warrant Shares, as provided above, the Holder thereof shall be entitled to
receive from the Company, at the Company's expense, a new certificate
representing such Warrant Shares not bearing the restrictive legend set forth
in Section 3(b)(i).
(c) Demand Registration. At any time after the day that
begins one year after the Effective Date and on or before the end of the day
that is five years after the Effective Date, upon written, or telegraphic or
telephonic notice followed as soon as practicable by written confirmation
thereof, from any Holder or Holders (the "Requesting Holders") of that number
of Warrants and/or Warrant Shares which in the aggregate shall constitute a
majority of all Warrant
-5-
<PAGE> 6
Shares issued or issuable under this Agreement (excluding Warrant Shares which
have been previously sold, transferred or otherwise disposed of in a registered
public offering, pursuant to Rule 144 under the Act, as such rule may be
amended from time to time, or pursuant to Regulation S under the Act, as such
Regulation may be amended from time to time, or which in the opinion of both
counsel to the Company and counsel to the Requesting Holders may otherwise then
be publicly sold without registration under the Act), that such Holder or
Holders request the registration under the Act of any of the Warrant Shares,
the Company shall (i) immediately give notice to the other Holders and afford
them the opportunity to participate in the registration statement and (ii) as
promptly as possible after the receipt of such notice from the Requesting
Holders, but in any event within 60 days of the receipt of such notice, and
solely at its cost and expense, file a registration statement with respect to
the offering and sale or other disposition of the Warrant Shares with respect
to which it shall have received such notice. Such registration statement may,
if the Company satisfies the applicable requirements, be made on Form S-3. If
a registration requested pursuant to this Section 3(c) is an underwritten
registration, the Company and other holders of securities of the Company may
include securities in such registration without the written consent of the
Holders of the Warrant Shares for which registration has been requested
pursuant to this Section 3(c) if, but only if, the managing underwriters of
such registration advise the participating Holders of Warrant Shares in writing
that in their opinion such inclusion will not materially affect the successful
marketing of the Warrant Shares. The Holders shall not be deemed to have
effected a demand registration pursuant to this Section 3(c) unless and until
the registration statement is declared effective. The Company shall be
obligated to file only one registration statement pursuant to this Section 3(c)
which becomes effective, whether or not the registration statement at the time
it becomes effective covers all or a portion of the Warrant Shares.
(d) Piggyback Registration. If, at any time during the
period commencing on the day that begins one year from the Effective Date and
ending at the end of the day that is six years after the Effective Date, the
Company shall propose to register any shares of Common Stock or Other
Securities (but excluding any shares or securities being registered pursuant to
Form S-8 or Form S-4 or any successor form to either of them), the Company
shall (i) give each Holder written notice, or telecopy and telephonic notice
followed as soon as practicable by written confirmation thereof, of such
proposed registration at least 20 business days prior to the filing of such
registration statement and (ii) upon written notice, or telecopy or telephonic
notice followed as soon as practicable by written confirmation thereof, given
to the Company by any Holder within 15 days after the giving of such written
confirmation or written notice by the Company, the Company shall include or
cause to be included in any such registration statement all or such portion of
the Warrant Shares as such Holder may request; provided, however, that the
Company may at any time withdraw or cease proceeding with any such registration
if it shall at the same time withdraw or cease proceeding with the registration
of the Common Stock or Other Securities originally proposed to be registered;
and provided, further, that in connection with any registered public offering
involving an underwriting, the managing underwriter may (if in its reasonable
opinion marketing factors so require) limit the number of securities (including
any Warrants or Warrant Shares) included in such offering (other than
securities of the Company). In the event of any such limitation, the total
number of Warrant Shares to be offered for the account of the Holders
participating in the registration shall be reduced pro rata in
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<PAGE> 7
proportion to the respective number of shares requested to be included therein
to the extent necessary to reduce the total number of shares proposed to be
registered to the number of shares recommended by the managing underwriter;
provided, however, that if the amount or kind of securities to be offered for
the accounts of Holders shall be reduced in accordance with this sentence, the
Company shall not be permitted to include securities of any persons (other than
the Company) unless the Holders are permitted to participate on a pro rata
basis with other selling securityholders.
(e) Company's Obligations in Registration. If any Holder
timely elects to participate in an offering by including Warrant Shares in a
registration statement pursuant to Section 3(c) or (d) above, the Company shall
use its best efforts to effect such registration to permit the sale of Warrant
Shares in accordance with the intended method or methods of disposition thereof
and, without limitation, pursuant thereto the Company shall:
(i) notify the Holders as to the filing of the
registration statement and of all amendments or supplements thereto filed prior
to the effective date thereof;
(ii) use its best efforts to cause any
registration statement filed under the Act pursuant to Section 3(c) or (d)
above to become effective at the earliest possible date after the filing
thereof and to comply with all applicable rules and regulations of the
Commission in connection therewith; provided, that before filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents which would be incorporated or deemed to be incorporated by reference
in the registration statement after the initial filing of any registration
statement, the Company will furnish to the Holders, their respective counsel
and the underwriters, if any, to be engaged in connection with the offering and
sale by the Company (for purposes of this Section 3(e) and Section 3(f), the
"Underwriters"), copies of all such documents proposed to be filed, which
documents will be subject to the review of the Holders, their respective
counsel and the Underwriters, and the Company will not file any registration
statement, or amendment thereto, or any prospectus or any supplement thereto
relating in whole or in part to the Holders' Warrant Shares (including such
documents incorporated or deemed to be incorporated by reference) to which the
Holders or the Underwriters, if any, shall reasonably object;
(iii) notify the Holders immediately, and confirm
the notice in writing, (1) when the registration statement or any
post-effective amendment thereto becomes effective, (2) when a prospectus or
prospectus supplement or post-effective amendment has been filed, (3) of any
request by the Commission for amendments, supplements or additional information
related to a registration statement or prospectus or otherwise, (4) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose known to the Company, (5) of
the receipt by the Company of any notification with respect to the suspension
of qualification of the Warrant Shares for sale in any jurisdiction or of the
initiation, or the threatening, of any proceedings for that purpose known to
the Company, (6) of the receipt of any comments from the Commission or any
state regulatory authority, (7) of the happening of any event which requires
the making of any changes in a registration statement or the related prospectus
or any prospectus supplement so that such documents will not contain
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<PAGE> 8
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and (8) of the determination of the Company that a post-effective
amendment to a registration statement would be necessary or appropriate;
(iv) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Warrant Shares for sale in any jurisdiction,
at the earliest possible moment;
(v) if reasonably requested by the Underwriters,
if any, or the Holders, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the Holders and the Underwriters,
if any, agree should be included therein relating to the sale and distribution
of the Warrant Shares, including, without limitation, information with respect
to the number of Warrant Shares being sold to such Underwriters, the purchase
price being paid therefor by such Underwriters and with respect to any other
terms of the underwritten offering of the Warrant Shares to be sold in such
offering; make all required filings of such prospectus supplement or post-
effective amendment as soon as notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment; and supplement or amend
any registration statement if reasonably requested by the Holders or any
Underwriter of Warrant Shares covered by such Warrant Shares;
(vi) furnish to each of the Holders whose Warrant
Shares have been included therein, their respective counsel and each
Underwriter, if any, without charge, at least one manually executed copy of any
registration statement (including all amendments thereto) and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(vii) during the time when a prospectus is required
to be delivered under the Act in connection with the distribution of the
Warrant Shares, comply so far as it is able with all requirements imposed upon
it by the Act, as now and hereafter amended, and by the Rules and Regulations
promulgated by the Commission thereunder, as from time to time in force, so far
as necessary to permit the continuance of sales of or dealings in the Warrant
Shares. If at any time when a prospectus relating to the Warrant Shares is
required to be delivered under the Act any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Holders, the prospectus relating to the Warrant Shares as then amended or
supplemented includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or if it is necessary at any time to amend
such prospectus to comply with the Act, the Company will use its best efforts
promptly to prepare and file with the Commission an appropriate amendment or
supplement in form and substance reasonably satisfactory to the Holders;
(viii) make generally available to its security
holders as soon as practicable, but not later than 15 months following the
effective date (and each other deemed
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<PAGE> 9
effective date) of such registration statement, an earnings statement or
statements of the Company and any subsidiaries it may then have covering a
period of at least 12 months beginning after the effective date of the
registration statement (but in no event commencing later than 90 days after
such date), which shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 promulgated thereunder;
(ix) prepare and promptly file with the Commission
such amendments and post-effective amendments to each registration statement as
may be necessary to keep such registration statement continuously effective for
a period of nine months; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be timely filed
pursuant to Rule 424 under the Act; and comply with the provisions of the Act
with respect to the disposition of all Warrant Shares covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition as set forth in such registration statement or
supplement to such prospectus; and in these regards the Company shall not be
deemed to have used its best efforts to keep a registration statement effective
during the applicable period if it unreasonably takes any action that would
result in any Holder whose Warrant Shares have been included therein not being
able to sell such Warrant Shares at any time during such period or for more
than 30 days, whether or not consecutive, in such period;
(x) deliver to each of the Holders, their
respective counsel and the Underwriters, if any, without charge, as many copies
of the prospectus or prospectuses (including each preliminary prospectus) and
any amendment or supplement thereto as such persons may reasonably request; and
the Company consents to the use of any such prospectus or any amendment or
supplement thereto by the Holders and each of the Underwriters, if any, in
connection with the offering and sale of the Warrant Shares covered by such
prospectus or any amendment or supplement thereto;
(xi) prior to any public offering of Warrant
Shares, register or qualify or cooperate with the Holders, the Underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Warrant Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as the Holders or any Underwriter reasonably requests in writing;
keep each such registration or qualification (or exemption therefrom) effective
during the period the applicable registration statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Warrant Shares covered by
the applicable registration statement; provided, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(xii) cooperate with the Holders and the
Underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Warrant Shares to be sold, which certificates shall
not bear any restrictive legends; and enable such Warrant Shares to
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<PAGE> 10
be in such denominations and registered in such names as the Underwriters may
request at least two business days prior to any sale of Warrant Shares to the
Underwriters;
(xiii) use its best efforts to cause the Warrant
Shares covered by the applicable registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the Holders and the Underwriters, if any, to consummate the
disposition of such Warrant Shares;
(xiv) enter into such agreements in form and
substance reasonably acceptable to the Company and its counsel (including an
underwriting agreement) and take all such other actions in connection therewith
as may be necessary to expedite or facilitate the disposition of such Warrant
Shares and, in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration: (1) make such representations and warranties to the Holders with
respect to the business of the Company and any subsidiaries it may then have,
the registration statement, the prospectus (and, if applicable, prospectus
supplement) and documents, if any, incorporated or deemed to be incorporated by
reference in the registration statement (and, if applicable, prospectus
supplement), in each case in such form, substance and scope as are reasonably
requested by the Holders and confirm the same if and when requested; (2) obtain
opinions of counsel to the Company and updates thereof addressed to the Holders
with respect to the matters referred to in the preceding clause (1) in such
form, scope and substance as are reasonably requested by the Holders; (3) in
the case of an underwritten offering, enter into an underwriting agreement in
form, scope and substance as is customary in underwritten offerings and obtain
(a) opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
Underwriters) addressed to the Underwriters covering the matters customarily
covered in opinions requested by underwriters in underwritten offerings and
such other matters as may be reasonably requested by the Underwriters and (b)
obtain opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably satisfactory to
the Holders) addressed to the Holders covering matters reasonably requested by
the Holders (whether or not such matters are different from, or in addition to,
the matters described in subclause (a) of this subsection (xiv)(3); (4) obtain
"comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial data is or is
required to be included in the registration statement), addressed to the
Holders and each of the Underwriters, if any, such letters to be in customary
form and covering matters of the type customarily covered in "comfort" letters
to underwriters in connection with underwritten offerings; (5) if an
underwriting agreement is entered into, the same shall set forth in full the
indemnification and contribution provisions and procedures of Section 3(f)
hereof (or such other indemnification and contribution provisions as shall be
acceptable to the Holders and the Underwriters of such underwritten offering)
with respect to all parties to be indemnified pursuant to said section; and (6)
the Company shall deliver such documents and certificates as may be requested
by the Holders and the Underwriters, if any, to evidence the continued validity
of the representations and warranties made pursuant to clause (1) above and to
evidence compliance with any customary conditions contained in the underwriting
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<PAGE> 11
agreement or other agreement entered into by the Company. Each of the above
shall be done at each closing under such underwriting or similar agreement or
as and to the extent required thereunder;
(xv) make available for inspection by a
representative of the Holders or any Underwriter participating in any
disposition pursuant to such registration statement and any attorney or
accountant retained by the Holders or such Underwriter, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries and cause the officers, directors and employees of and independent
accountants and attorneys for the Company and its subsidiaries personally to
meet with and to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with any
registration of Warrant Shares; provided, that any records, information or
documents that are designated by the Company in writing as confidential shall
be kept confidential by such persons unless (i) disclosure of such records,
information or documents is required by court or administrative order, (ii)
disclosure of such records, information or document is, in the opinion of
counsel to the Holders or to any Underwriter, required pursuant to the
requirements of the Act or (iii) such records, information or documents are
otherwise publicly available;
(xvi) pay all costs and expenses incident to the
performance of the Company's obligations under Sections 3(c) and (d) above and
under this Section 3(e) (collectively "Registration Expenses"), including
without limitation the fees and disbursements of the Company's auditors, legal
counsel, any special legal counsel (including one legal counsel for the
Holders) and legal counsel (including, if applicable, legal counsel to the
Underwriters) responsible for qualifying the Warrant Shares under state
securities or blue sky laws, all filing fees and printing expenses, all
expenses in connection with the transfer and delivery of the Warrant Shares,
all expenses in connection with the qualification or registration of the
Warrant Shares under applicable state securities or blue sky laws of such
states as are designated by the Holders (or obtaining exemptions from such
qualification or registration under state securities or blue sky laws) and, if
applicable, the fee of the National Association of Securities Dealers, Inc. in
connection with its review; provided, that in no event shall Registration
Expenses include any underwriting discounts, commissions or fees or the fees of
more than one counsel retained by the Holders or the fees, except with respect
to such state securities blue sky matters, of legal counsel retained by the
Underwriters in connection with the sale of Warrant Shares pursuant to Section
3(c) or 3(d) above; and
(xvii) in connection with the filing of a
registration statement pursuant to Section 3(c) or (d) above, use its best
efforts to obtain indemnification of the Holders by the Underwriter to the same
extent said Underwriter provides indemnification to the Company.
As used in this Section 3(e), the term "Holders" refers only to those
Holders who have timely elected to sell Warrants Shares in an offering.
(f) Indemnification.
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<PAGE> 12
(i) The Company shall indemnify and hold harmless
VKCO, the Holders and any underwriter (as defined in the Act) for VKCO and/or
the Holders, and each person, if any, who respectively controls (within the
meaning of Section 15 of the Act) VKCO or any of the Holders or such
underwriter against any losses, claims, damages, liabilities (or actions in
respect thereof) and expenses whatsoever (including, but not limited to, any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), joint or several, to which VKCO the Holders or such underwriter or
such controlling person becomes subject, under the Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or other federal or state
statute, law or regulation, at common law or otherwise, specifically including
but not limited to losses, claims, damages or liabilities (or actions in
respect thereof) or expenses related to negligence on the part of any such
indemnified party, insofar as any such loss, claim, damage, liability or
expense (or actions in respect thereof) (1) arises out of or is based upon any
breach of any representation, warranty or covenant of the Company in this
Agreement or upon any untrue statement or alleged untrue statement of any
material fact contained in (A) Section 2 of this Agreement, (B) any
registration statement covering the Warrant Shares as originally filed or in
any amendment thereof, in the prospectus contained therein or in an amendment
or supplement thereto or (C) in any application or other document, or any
amendment or supplement thereto (in this Section collectively called
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify or register the Warrant Shares under the securities or blue
sky laws thereof (or to obtain exemptions from such qualifications or
registration requirements) or filed with the Commission or any securities
association or securities exchange, or (2) arises out of or is based upon the
omission or alleged omission to state in any of the documents described in
subclauses (1)(A), (B) or (C) above, a material fact required to be stated
therein or necessary to make the statements therein not misleading, and agrees
to reimburse each such indemnified person, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be obligated to indemnify in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon, and in conformity with, written
information furnished to the Company by the indemnified person specifically for
use therein. The Company will not, without the prior written consent of VKCO
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not VKCO is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes, without payment by VKCO, an unconditional release of all
indemnified parties from all liability arising out of such claim, action, suit
or proceeding, satisfactory in form and substance to VKCO.
(ii) Any Holder that includes all or a part of
such Holder's Warrant Shares in a registration statement pursuant to Sections
3(c) or (d) above agrees to indemnify and hold harmless the Company and each of
its directors and officers who have signed any such registration statement, any
other Holder of Warrant Shares included in such registration statement and any
underwriter (as defined in the Act) for the Company or the Holders of Warrant
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<PAGE> 13
Shares, and each person, if any, who controls (within the meaning of Section 15
of the Act) the Company or such underwriter to the same extent as the indemnity
by the Company in Section 3(f)(i), but only with respect to any untrue
statement or alleged untrue statement or omission or alleged omission, if any,
made in such registration statement, or any amendment or supplement thereto, or
in any application in reliance upon, and in conformity with, written
information furnished by the indemnifying Holder to the Company or such
controlling person expressly for use in the registration statement, or any
amendment or supplement thereto, or any such application, as the case may be.
If any action shall be brought in respect of which indemnity may be sought
against any of the Holders, such Holder(s) shall have the rights and duties
given to the indemnifying party, and the persons so indemnified shall have the
rights and duties given to the indemnified party, by the provisions of Section
3(f)(iii) below;
(iii) If any action is brought against a person in
respect of which indemnity may be sought hereunder against an indemnifying
party, such person shall promptly notify the indemnifying party in writing of
the institution of such action (but the failure to so notify shall not affect
the indemnification and other rights provided for herein except to the extent,
if any, that the indemnifying party is prejudiced by the failure to so give or
timely give such notice) and the indemnifying party shall assume the defense of
the action, including the employment of counsel satisfactory to the indemnified
person and payment as incurred of all fees and expenses related thereto. The
indemnified person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified person unless (1) the employment of such counsel and the payment of
fees and expenses thereof shall have been authorized in writing by the
indemnifying party in connection with the defense of the action, (2) the
indemnifying party shall have failed promptly after notice by such indemnified
person to assume the defense of such action or proceeding and to employ counsel
satisfactory to the indemnified person in any such action or proceeding or (3)
the named parties to any such action or proceeding (including any impleaded
parties) include both such indemnified person and the indemnifying party, and
such indemnified person shall have been advised by counsel that there may be
legal defenses or rights available to such indemnified person which are
different from or additional to those available to the indemnifying party (in
which case, if such indemnified person notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (together with appropriate local counsel) at any time for such
indemnified person. Anything in this paragraph to the contrary
notwithstanding, the indemnifying party shall not be liable for any settlement
of any claim or action effected without its written consent. The indemnity
agreements contained in this Section shall remain in full force and effect
regardless of any investigation made by or on behalf of any indemnified person
and shall survive any termination of this Agreement. The indemnifying party
agrees promptly to notify the indemnified party of the commencement of any
litigation or proceedings against the indemnifying party or any of its officers
or directors in connection with any registration statement referred to in
Section 3(c) or (d) above.
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<PAGE> 14
(iv) If the indemnification provided for in items
(i), (ii) and (iii) of this Section 3(f) from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable, by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate
to reflect not only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the indemnifying party
and indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, the
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations Set forth in subparagraph (iii) of this
Section 3(f), any legal or other fees or expenses incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this
subparagraph (iv) of this Section 3(f) were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable and other considerations referred to in this paragraph. If the full
amount of the contribution specified in this subparagraph (iv) of this Section
3(f) is not permitted by law, then such indemnified person shall be entitled to
contribution from the indemnifying party to the full extent permitted by law.
Notwithstanding the provisions of this Section 3(f)(iv), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Warrant Shares of such Holder were sold to the public
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission. No party found guilty
of fraudulent misrepresentation (within the meaning of Section 1 l(f) of the
Act) shall be entitled to contribution from any party who was not found guilty
of such fraudulent misrepresentation.
(v) Whenever any indemnifying or contributing
party is requested by the indemnified party or the party entitled to
contribution to make a payment pursuant to the forgoing provisions of this
Section 3(f), such payment will be made within five business days after the
request and, if not so paid, the amount due will thereafter bear interest at
ten percent per annum, compounded annually (but not in excess of the maximum
amount permitted by law).
4. Exercise of Warrants.
(a) Exercise of Warrants. The Warrants may be exercised
from time to time and in full or in part by the Holder thereof by surrender of
the Warrants, with the Election to Purchase attached thereto duly executed by
such Holder, to the Company at its offices at 915 Riverview Drive, Suite One,
Johnson City, Tennessee 37601, or at such other office or agency as
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<PAGE> 15
the Company may from time to time designate in writing to each Holder,
accompanied by payment, in cash or by cashier's check payable to the order of
the Company or as provided in Section 4(c), in the amount obtained by
multiplying the number of Warrant Shares designated by the Holder in the
Election to Purchase by the Exercise Price per share. Exercise of any Warrant
shall constitute an acknowledgment by the purchasing Holder that it will not
dispose of the Warrant Shares acquired upon such exercise except in compliance
with Section 3(b) hereof and the Act. Upon any partial exercise of the
Warrants, the Company at its expense will forthwith issue and deliver to the
purchasing Holder a new Warrant, in the name of such Holder and for the number
of Warrant Shares equal to the number of shares called for by the surrendered
Warrant (after giving effect to any adjustment therein as provided in Section 6
below) minus the number of such Warrant Shares (after giving effect to such
adjustment) purchased by the Holder pursuant to such exercise.
(b) Company to Reaffirm Obligations. On the date of any
exercise of any Warrants (except that if, on that date, the stock transfer
books of the Company are closed, in which case on the next succeeding date on
which such stock transfer books are open) the Holder exercising the same shall
be deemed to have become, and thereafter shall be considered, a holder of
record of the shares of Common Stock purchased upon such exercise for all
purposes. Holders of Warrants shall have no rights of share ownership until
they exercise their Warrants. The Company will, at the time of any exercise of
any Warrant, upon the request of the Holder thereof, acknowledge in writing its
continuing obligation to afford to that Holder any rights (including without
limitation any right to registration of the Warrant Shares issued upon such
exercise) to which the Holder shall continue to be entitled after such exercise
in accordance with the provisions of this Agreement; provided, however, that if
the Holder of a Warrant shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford those rights to
the Holder.
(c) Net Exercise of Warrants. Notwithstanding anything
to the contrary contained in this Section 4, any Holder may elect to exercise
any Warrant in whole or in part by receiving shares of Common Stock equal to
the value (determined below) of the Warrant (or any part hereof), upon
surrender of the Warrant (or any part thereof) at the office or agency
described in Section 4(a) above, together with notice of such election,
specifying the part of the Warrant so surrendered, in which event the Company
shall issue and deliver to the Holder a number of shares of Common Stock
determined using the following formula:
(Y) (A-B)
X = ---------
A
where
X = the number of shares of Common Stock to be
issued to the Holder;
Y = the number of shares of Common Stock
purchasable under the Warrant, or portion of
the Warrant, surrendered;
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<PAGE> 16
A = the Current Market Price per share of the
Common Stock, determined pursuant to Section
6(d) of this Agreement; and
B = the then current Exercise Price per share of
Common Stock.
5. Delivery of Stock Certificates, etc., on Exercise: No
Fractional Shares.
(a) Stock Certificates, Etc. As soon as practicable
after the exercise of any Warrants and in any event within five business days
thereafter, the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of and delivered
to the purchasing Holder a certificate or certificates for the number of fully
paid and nonassessable Warrant Shares to which such Holder shall be entitled
upon such exercise, together with any Other Securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 6 of this Agreement or otherwise.
(b) No Fractional Shares. The Company will not issue a
fractional share of Common Stock upon exercise of a Warrant. Rather, if a
fractional share would otherwise be issued, the Company will instead issue a
number of whole shares equal to the next lowest number of whole shares and
shall pay to the exercising Holder an amount in cash equal to amount obtained
by multiplying (x) the fractional shares not issued by (y) the Current Market
Price (as defined in Section 6(d)) per share of the Common Stock on the last
trading day prior to the exercise date.
.
6. Anti-dilution Provisions. The Warrants are subject to the
following additional terms and conditions:
(a) Adjustment for Change in Capital Stock. If, after
the date of this Agreement, the Company:
(1) pays a dividend or makes a distribution on
its Common Stock in shares of its capital
stock (including Common Stock);
(2) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(3) combines its outstanding shares of Common
Stock into a smaller number of shares; or
(4) issues by reclassification of its Common Stock
any shares of its capital stock or Other
Securities (including without limitation any
such reclassification in connection with a
consolidation or merger in which the Company
is the continuing entity);
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<PAGE> 17
then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted or
readjusted, the Exercise Price shall remain in effect until a further
adjustment or readjustment is required by this Section 6(b).
Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to this Section 6(a), the Warrant Shares shall simultaneously
be adjusted by multiplying the number of Warrant Shares issuable upon exercise
of each Warrant immediately prior to such event by the Exercise Price in effect
on the date thereof and dividing the product so obtained by the Exercise Price
as adjusted.
These adjustments referred to in the preceding paragraph shall become
effective on (x) in the case of a dividend or distribution, the earlier of the
record date thereof or the distribution date thereof and (y) in the case of a
subdivision, combination or reclassification, the earlier of the record date
thereof or the effective date thereof.
(b) Adjustments For Other Distributions. If, after the
date of this Agreement, the holders of Common Stock generally shall have
received or, on or after the record date fixed for the determination of
eligible stockholders, shall have become entitled to receive (i) securities
other than capital stock, (ii) evidences of its indebtedness, (iii) assets
(other than cash dividends or distributions), or (iv) rights, options, warrants
or convertible or exchangeable securities (other than Convertible Securities or
Options) containing the right to subscribe for or purchase securities of the
Company, then and in each such case the Holder of each Warrant, upon the
exercise thereof as provided in Section 4 above, shall be entitled to receive,
in addition to the Warrant Shares otherwise receivable on such exercise, the
amount of securities, indebtedness, assets (other than cash in the case
referred to in subdivision (iii) of this Section 6(b)) and such rights,
options, warrants or convertible or exchangeable securities which such Holder
would hold on the date of such exercise if on the date of this Agreement such
Holder had been the holder of record of the number of shares of Common Stock
called for by the Warrants held by such Holder and had thereafter, during the
period from the date of this Agreement to and including the date of such
exercise, retained such shares, giving effect to all adjustments called for
during such period by this Section 6.
(c) Adjustments For Sale or Other Issuance of Common
Stock.
(i) If at any time prior to the exercise of the
Warrants in full, the Company shall issue or sell any Common Stock without
consideration or for consideration per share less than the Current Market Price
per share (as defined in Section 6(d)) on the date of such issuance or sale
(which shall be deemed for all purposes of this Section 6(c), in the case of
Common Stock issued as all or part of the consideration for an acquisition, to
be the same as the date the definitive agreement for such acquisition is
entered into), the Exercise Price shall be
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<PAGE> 18
adjusted so that the Exercise Price shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of such
sale or issuance (which date in the event of distribution to shareholders shall
be deemed to be the record date set by the Company to determine shareholders
entitled to participate in such distribution) by a fraction, the numerator of
which shall be (i) the number of shares of Common Stock outstanding on the date
of such sale or issuance, plus (ii) the number of additional shares of Common
Stock which the aggregate consideration received by the Company upon such
issuance or sale would purchase at such Current Market Price per share of the
Common Stock and the denominator of which shall be (i) the number of shares of
Common Stock outstanding on the date of such issuance or sale, plus (ii) the
number of additional shares of Common Stock offered for purchase. Any
adjustments required by this Section 6(c) shall be made immediately after such
issuance or sale or record date, as the case may be. Such adjustments shall be
made successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in
the Exercise Price, or number of shares of Common Stock purchasable upon
exercise of the Warrants, as provided above and in Section 6(c)(vii) below, the
consideration received by the Company for any issue or sale of securities
shall:
(A) To the extent it consists of cash,
be computed as the gross amount of cash received by the Company before
deduction of any underwriting or similar commissions, compensation, discounts
or concessions paid or allowed by the Company in connection with such issue or
sale and before deduction of any other expenses payable in connection
therewith.
(B) In case of the issuance (otherwise
than upon conversion or exchange of Convertible Securities) or sale of
additional Common Stock, Options or Convertible Securities for a consideration
other than cash or a consideration a part of which is other than cash, then for
purposes of this Section 6(c) the fair value of such consideration as
determined by the Board of Directors of the Company in the good faith exercise
of its business judgment, regardless of the accounting treatment thereof, shall
be deemed to be the value of the consideration other than cash received by the
Company for such securities.
(iii) Options and Convertible Securities. If the
Company in any manner issues or grants any Options or any Convertible
Securities -- but only to the extent (i) such Options are exercisable at less
than the Current Market Price at the date of issue of such Options or (ii) the
amount paid for such Convertible Securities per share plus any additional
amount payable per share upon conversion thereof is less than the Current
Market Price per share at the date of issue of the Convertible Securities --
the total maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon conversion or exchange of the total maximum amount of
such Convertible Securities at the time such Convertible Securities first
become convertible or exchangeable shall (as of the date of issue or grant of
such Options or, in the case of the issue or sale of Convertible Securities
other than where the same are issuable upon the exercise of Options, as of the
date of such issue or sale) be deemed to be issued and to be outstanding for
the purpose of this Section 6(c) and to have been issued for the sum of the
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<PAGE> 19
amount (if any) paid for such Options or Convertible Securities and the amount
(if any) payable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities at the time such Convertible Securities
first become convertible or exchangeable; provided that, subject to the other
provisions of this Section 6(c), no further adjustment of the Exercise Price
shall be made upon the actual issuance of any such Common Stock or Convertible
Securities or upon the conversion or exchange of any such Convertible
Securities.
(iv) Change in Option Price or Conversion Rate.
If the purchase price provided for in any option referred to in Section
6(c)(iii), or the rate or price at which any Convertible Securities referred to
in Section 6(c)(iii) are convertible into or exchangeable for shares of Common
Stock, shall change at any time (other than under or by reason of conventional
provisions designed to protect against dilution), the Exercise Price in effect
at the time of such event shall forthwith be readjusted --but only to the
extent such change does not result in either the per share Option exercise
price or the amount per share payable for such Convertible Securities plus the
amount payable per share on the conversion of such Convertible Securities to be
greater than the lesser of the Current Market Price per share at the time such
Options or Convertible Securities were issued, as referred to in Section
6(c)(iii), or the Current Market Price at the effective date of such change --
to the Exercise Price that would have been in effect at such time had such
Options or Convertible Securities then still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the purchase
price provided for in any such Option, or the additional consideration (if any)
payable upon the conversion or exchange of any such Convertible Securities, or
the rate or price at which any such Convertible Securities are convertible into
or exchangeable for shares of Common Stock shall be changed at any time under
or by reason of conventional provisions designed to protect against dilution,
then in case of, but only to the extent of, the delivery of shares of Common
Stock upon the exercise of any such Option or upon conversion or exchange of
any such Convertible Security, the Exercise Price then in effect hereunder
shall, upon issuance of such shares of Common Stock, be adjusted --but only to
the extent such change does not result in either the per share Option exercise
price or the amount per share payable for such Convertible Securities plus the
amount payable per share on the conversion of such Convertible Securities to be
greater than the Current Market Price per share at the time such Options or
Convertible Securities were issued, as referred to in Section 6(c)(iii) -- to
such amount as would have obtained had such Option or Convertible Security
never been issued and had adjustments been made based only upon the issuance of
the shares of Common Stock for the consideration actually received for such
Option or Convertible Security and such Common Stock.
(v) Expiration of Option or Conversion Rights.
In the event of the termination or expiration of any right to purchase Common
Stock under any Option or of any right to convert or exchange Convertible
Securities, the Exercise Price shall, upon such termination, be changed to the
Exercise Price that would have been in effect at the time of such expiration
had such Option or Convertible Security, to the extent outstanding immediately
prior to such expiration, never been issued. As used in this Section 6(c)(v),
the word "expiration" includes a termination, without payment of consideration
by the Company, of a right to purchase, convert or exchange.
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<PAGE> 20
(vi) Excluded Events. Notwithstanding anything in
this Section 6 to the contrary, the Exercise Price shall not be adjusted by
virtue of (i) the Warrants or the existence or exercise of any Options of the
Company outstanding on the date hereof and disclosed in the Prospectus or (ii)
the issuance or sale of, or the grant of Options to purchase, Common Stock to
employees, directors, or officers of the Company or its subsidiaries, or to
other persons who do not beneficially own more than one percent of the Common
Stock (assuming for this purpose that all Options then held by the person,
including new options then being granted, but no other Option or Convertible
Securities, have then been exercised in full) and are not the children of such
a one percent or greater shareholder or the spouses of such children, pursuant
to stock option plans currently existing or hereafter approved by the Board of
Directors of the Company, provided that the exercise price is no less than the
lower of fair market value at the time of grant (as determined in accordance
with the applicable stock option plan) or the Current Market Price at the time
of grant (all as determined in accordance with this Section 6(c)).
(vii) Adjustment in Number of Warrant Shares.
Whenever the Exercise Price payable upon exercise of a Warrant is adjusted
pursuant to this Section 6(c), the Warrant Shares issuable on exercise of the
Warrant shall simultaneously be adjusted by multiplying the number of the
Warrant Shares issuable upon exercise of the Warrant immediately prior to such
event by the Exercise Price in effect on the date thereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(d) Current Market Price. For the purpose of any
computation under Section 6, the "Current Market Price" per share of Common
Stock at any date shall be the average of the daily closing prices for the 15
consecutive trading days commencing 20 trading days before such date. The
closing price for each day shall be the last reported sale price, regular way
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices, regular way, for such day, in either case on the
principal national securities exchange on which the shares are listed or
admitted to trading, or if they are not listed or admitted to trading on any
national securities exchange, but are traded in the Nasdaq National Market
("NNM"), or if the shares are otherwise securities for which transaction
reports are required to be made on a real-time basis pursuant to an effective
transaction reporting plan under Rule 11a3-1 of the Rules of the Commission
under the Exchange Act, the last reported sales price or, if they are not
listed or admitted to trade, and if last sale data is not then available from
NNM, but are traded in the over-the-counter market, the average of the
representative closing bid and asked quotations for the Common Stock on NNM or
any comparable system, or if the Common Stock is not listed on NNM or a
comparable system, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers, Inc. selected
from time to time by the independent members of the Board of Directors of the
Company for that purpose.
(e) Minimum Adjustment. No adjustment in the number of
Warrant Shares purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent in the number of
Warrant Shares purchasable upon the exercise of each Warrant. No adjustment in
the Exercise Price payable hereunder shall be required unless
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<PAGE> 21
such adjustment would require an increase or decrease in the Exercise Price of
at least $.01 per share. Any adjustments that by reason of this Section 6(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment and, notwithstanding the foregoing, all adjustments
so carried forward shall be made at the time of, and in connection with, each
exercise of any of the Warrants. All calculations shall be made to the nearest
one-thousandth of a share, or cent, as the case may be.
(f) Other Securities. If at any time, as a result of an
adjustment made pursuant to this Section 6, the Holders shall become entitled
to purchase any shares of capital stock or Other Securities of the Company
other than shares of Common Stock, thereafter the number of such Other
Securities so purchasable upon exercise of each Warrant and the Exercise Price
for such securities shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this Section 6; and the provisions
of Sections 3, 4, 5 and 7, inclusive, with respect to the Warrant Shares, shall
apply on like terms to any such Other Securities.
(g) Consolidations, Mergers and Other Transactions. In
case of any consolidation of the Company with or merger of the Company into
another corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The Company shall not
complete any such consolidation, merger, sale or conveyance unless the
agreement referred to in the foregoing sentence is executed and delivered, is
binding and the mailing thereof provided for in the next sentence is done at
the time of such completion. The Company shall mail by first class mail,
postage prepaid, to each Holder, notice of the execution of and a copy of such
agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6 and for other protections and rights (including without limitation
registration rights) for the Holders as are as nearly equivalent as may be
practical to those they have under this Warrant Agreement. The provisions of
this Section 6 shall similarly apply to successive consolidations, mergers,
sales or conveyances. Each Holder of Warrants shall be under no duty or
responsibility to determine the correctness of any provisions contained in any
such agreement relating either to the kind or amount of shares of stock or
Other Securities or property receivable upon exercise of Warrants or with
respect to the method employed and provided therein for any adjustments.
(h) Notice of Adjustments. Whenever the Exercise Price
or the kind or amount of securities purchasable under the Warrants shall be
adjusted pursuant to any of the provisions of this Warrant Agreement, the
Company shall forthwith thereafter cause to be sent to VKCO and all other
Holders a certificate setting forth the adjustments in the Exercise Price and
the number of shares and, in addition, setting forth in detail the facts
requiring such adjustments.
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<PAGE> 22
In addition, the Company at its expense shall within 90 days following the end
of each of its fiscal years during the term of this Agreement and promptly upon
the reasonable request of the Holders of at least ten percent of the Warrants
in connection with the exercise from time to time of all or any portion of any
Warrants, cause independent public accountants of nationally recognized
standing selected by the Company to compute any such adjustment in accordance
with the terms of the Warrants and prepare and deliver to the Holders a
certificate setting forth such adjustment and showing in detail the facts upon
which the adjustment is based.
(i) Notice of Certain Events. In the event of (i) any
taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any Other Securities or
property, or to receive any other right or (ii) any capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all of the assets of the
Company to, or consolidation or merger of the Company with or into, any other
corporation or other entity or (iii) any voluntary or involuntary dissolution
or liquidation of the Company, then and in each such event the Company will
mail or cause to be mailed to each Holder and, in addition, on the same date as
the earliest such mailing, telecopied and mailed to VKCO, a notice specifying
the date upon which any such record date is to be taken for the purpose of such
dividend, distribution or right, stating the amount and character of such
dividend, distribution or right and the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place and the time, if any,
as of which the holders of record of Common Stock (or Other Securities) shall
be entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
15 business days prior to the proposed record date therefor.
(j) Other Events Altering Exercise Price. Upon the
occurrence of any event not specifically denominated in this Section 6 as
altering the Exercise Price and the amount of Common Stock purchasable upon the
exercise of the Warrants, if the reasonable exercise of the business judgment
of the independent members of the Board of Directors of the Company (or, if
none, the Board of Directors or the Company) requires, on equitable principles,
the alteration of the Exercise Price favorable to Holders and/or corresponding
adjustment favorable to Holders to the number of shares for which the Warrants
are exercisable, the Exercise Price and such number of shares shall be
equitably altered.
7. Further Covenants of the Company. The Company hereby agrees
as follows:
(a) Reservation of Stock. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon the exercise
of the Warrants, all Warrant Shares from time to time issuable upon the
exercise of the Warrants.
(b) Title to Stock. All of the Warrant Shares delivered
upon the exercise of the Warrants and payment of the Exercise Price (including
for the purpose by a net exercise of
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<PAGE> 23
Warrants as permitted by Section 4(c)) shall be validly issued, fully paid and
nonassessable; each Holder of a Warrant shall receive good and marketable title
to the Warrant Shares, free and clear of all voting and other trust
arrangements, liens, encumbrances, equities, preemptive rights and, without
limitation, claims of any type whatsoever; and the Company shall have paid all
taxes, if any, in respect of the issuance thereof.
(c) Exchange of Warrants. Subject to Section 3(a)
hereof, upon surrender for exchange of any Warrant to the Company, the Company
at its expense will promptly issue and deliver to the Holder thereof a new
Warrant or Warrants of like tenor, in the name of such Holder, calling in the
aggregate for the number of Warrant Shares called by the Warrants so
surrendered.
(d) Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of Warrants and, in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement by the Warrant Holder reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, upon surrender by the Holder and cancellation of such Warrants, the
Company at its expense will execute and deliver, in lieu thereof, new Warrants
of like tenor.
(e) Reporting by the Company. The Company agrees that,
during the term of the Warrants, it will use its best efforts to keep current
in the filing of all forms and other materials which it may be required to file
with the appropriate regulatory authority pursuant to the Exchange Act and all
other forms and reports required to be filed with any regulatory authority
having jurisdiction over the Company. The Company will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell Warrant Shares without registration
under the Act within the limitation of the exemptions provided by (a) Rule 144
under the Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission.
8. Other Holders. The Warrants are issued upon the following
terms, to all of which each Holder or owner thereof by the taking thereof
consents and agrees: (a) any person who shall become a transferee, within the
limitations on transfer imposed by Section 3(a) hereof, of a Warrant properly
endorsed, shall take such Warrant subject to the provisions of Sections 3(a)
and 3(b) hereof and thereupon shall be authorized to represent that such
transferee is the absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted bona fide purchaser
for value; and (b) each prior taker or owner waives and renounces all equities
or rights in such Warrant in favor of each such permitted bona fide purchaser,
and each such permitted bona fide purchaser shall acquire absolute title
thereto and to all rights presented thereby; and (c) until such time as the
respective Warrant is transferred on the books of the Company, the Company may
treat the registered Holder thereof as the absolute owner thereof for all
purposes, notwithstanding any notice to the contrary.
9. General Provisions. All notices, certificates and other
communications from or at the request of the Company to the Holder of any
Warrant or Warrant Share as such shall be
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<PAGE> 24
mailed by first class, registered or certified mail, postage prepaid to the
Holder, with a copy to each of Van Kasper & Company, 600 California Street,
Suite 1700, San Francisco, CA 94108, Attn.: President, or to such other address
for itself as VKCO shall have furnished to the Company in writing. This
Warrant Agreement and any of the terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. In addition and notwithstanding the foregoing, the provisions of
Section 3(c) and (d) and Section 6 hereof cannot be changed, waived, discharged
or terminated in a manner adverse to the Holders without the written consent of
one or more Holder or Holders who collectively own, of record, that number of
Warrants and/or Warrant Shares which in the aggregate shall constitute
two-thirds of all Warrant Shares issued or issuable under this Agreement
(excluding Warrant Shares which have been previously sold, transferred or
otherwise disposed of in a registered public offering, pursuant to Rule 144
under the Act, as such Rule may be amended from time to time, or pursuant to
Regulation S, as such regulation may be amended from time to time). The
headings in this Warrant Agreement are for purposes of reference only and shall
not limit or otherwise affect any of the terms hereof. This Warrant Agreement,
together with the forms of instruments annexed hereto, supersedes all prior
negotiations and all prior written and prior and contemporaneous oral
agreements, representations, warranties and inducements and constitutes the
full and complete agreement of the parties hereto with respect to the subject
matter hereof.
10. GOVERNING LAW. THIS WARRANT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS, AND NOT THE LAW PERTAINING
TO CHOICE OR CONFLICT OF LAWS, OF THE STATE OF CALIFORNIA.
FLOUR CITY INTERNATIONAL, INC.
By ___________________________________
Michael J. Russo
President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the
date first above written.
VAN KASPER & COMPANY
By ___________________________________
David H. Horwich
Senior Vice President
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<PAGE> 25
Exhibit A
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
CONDITIONS SPECIFIED IN A WARRANT AGREEMENT, DATED MAY ___, 1998, BETWEEN THE
COMPANY AND VAN KASPER & COMPANY EXCEPT TO THE EXTENT PERMITTED BY THE WARRANT
AGREEMENT, NO TRANSFER, SALE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER
DISPOSITION OF THESE WARRANTS OR THE SHARES OF COMMON STOCK OF THE COMPANY
ACQUIRED ON EXERCISE OF THESE WARRANTS SHALL BE VALID OR EFFECTIVE UNTIL
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (OR, IF APPLICABLE, A
SUCCESSOR LAW THERETO) OR THE COMPANY HAS BEEN PRESENTED WITH SATISFACTORY
EVIDENCE THAT THESE WARRANTS OR SUCH SHARES OF COMMON STOCK WILL BE TRANSFERRED
IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION AND UNTIL ANY APPLICABLE
CONDITIONS CONTAINED IN THE WARRANT AGREEMENT HAVE BEEN FULFILLED. A COPY OF
THE WARRANT AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE
PROVISIONS OF THE WARRANT AGREEMENT.
No. V-1
Warrant to Purchase up to _____ Shares of Common Stock
EXERCISABLE COMMENCING 9:00 A.M., SAN FRANCISCO TIME,
ON MAY ___, 1999 AND ENDING 5:00 P.M., SAN FRANCISCO TIME,
ON MAY___, 2003
FLOUR CITY INTERNATIONAL, INC.
COMMON STOCK PURCHASE WARRANT
This certifies that Van Kasper & Company, or registered assigns, is
the holder (the "Holder") of this Warrant to purchase, subject to adjustment,
the number of fully paid and nonassessable shares set forth above (the "Warrant
Shares") of Common Stock, par value $0.0001 per share (the "Common Stock"), of
Flour City International, Inc., a Nevada corporation (the "Company"), at the
per share exercise price, subject to adjustment (the "Exercise Price"), set
forth in the Warrant Agreement, dated May___, 1998 (the "Warrant Agreement"),
between the Company and Van Kasper & Company, at any time prior to the
Expiration Date (defined below), by surrendering this Warrant, with the form of
subscription set forth hereon duly executed, to the Company at the Company's
offices at 915 Riverview Drive, Suite One, Johnson City, Tennessee 37601, or at
such other office or agency as the Company may designate and by paying in full,
in the manner provided in Section 4 of the Warrant Agreement, the Exercise
Price for the Warrant Shares then purchased. Payment of the Exercise Price may
be made in cash or by cashier's check
A-1
<PAGE> 26
payable to the order of the Company, or by surrender of a portion of this
Warrant as provided in Section 4(c) of the Warrant Agreement.
This Warrant may be exercised at any time and from time to time, in
whole or in part, at the option of the Holder, commencing 9:00 a.m., San
Francisco time, on May ___, 1999 until 5:00 p.m., San Francisco time, May ___,
2003 (the "Expiration Date"). Upon the purchase of fewer than all of the
Warrant Shares, there shall be issued to the Holder a new Warrant exercisable
for the number of Warrant Shares for which this Warrant has not been exercised
or surrendered as payment. Prior to the Expiration Date, the Holder shall be
entitled to exchange this Warrant, without charge, for another Warrant or
Warrants exercisable for the same aggregate number of Warrant Shares.
Prior to the Expiration Date, subject to any applicable laws
restricting transferability and to any restriction on transferability that may
appear on this Warrant or in the Warrant Agreement, the Holder shall be
entitled to transfer this Warrant upon delivery thereof, duly endorsed by the
Holder or by his, her or its duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer, with the form of assignment set forth hereon duly executed. Upon any
such transfer, a new Warrant or Warrants exercisable for the same aggregate
number of Warrant Shares will be issued by the Company, without charge, in
accordance with instructions in the form of assignment.
This Warrant is issued under and in accordance with the Warrant
Agreement and, except as otherwise provided in this Warrant, is subject to the
terms and provisions contained therein. Upon certain events provided for in
the Warrant Agreement, the Exercise Price and the number of shares of Common
Stock issuable upon the exercise of this Warrant are subject to adjustment. No
fractional shares will be issued upon the exercise of a Warrant. Instead, the
Company shall pay the value of such fractional share to the Holder in cash, as
provided in the Warrant Agreement.
THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS AND NOT THE LAW PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF
THE STATE OF CALIFORNIA.
In witness whereof, the Company has caused this Warrant to be duly
executed.
FLOUR CITY INTERNATIONAL, INC.
By ____________________________________
Michael J. Russo
President and Chief Executive Officer
Attest:
_______________________________________
Name
Title
A-2
<PAGE> 27
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant to
purchase _______ shares of Common Stock, acknowledges that it will not dispose
of such shares except in compliance with Section 3(b) of the Warrant Agreement
and the Securities Act of 1933, as amended, and requests that Certificates for
such shares be issued and delivered as follows:
Issue to: _______________________________________________________________
(Name)
_______________________________________________________________
(Address, including Zip Code)
_______________________________________________________________
(Social Security or Tax Identification Number)
Deliver to: _______________________________________________________________
(Name)
_______________________________________________________________
(Address, including Zip Code)
In full payment of the aggregate purchase price with respect to the
number of shares being purchased upon exercise of this Warrant, the
undersigned hereby (check applicable payment method): (i) [ ] tenders
payment of $________ by cashier's check payable to the order of Flour
City International, Inc. or (ii) [ ] hereby surrenders to the Company,
Warrants to purchase ________ shares of Common Stock. If the Warrant
is exercised hereby (and, if applicable, surrendered to purchase
shares of Common Stock) so as to purchase fewer than all the shares of
Common Stock that may be purchased pursuant to this Warrant, the
undersigned requests that a new Warrant representing the number of
full shares for which the Warrant has not been exercised or
surrendered be issued and delivered as set forth below.
Name of Warrant holder or Assignee:
__________________________________________
(Please Print)
Address:
__________________________________________
__________________________________________
Signature Dated:
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
A-3
<PAGE> 28
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant, with respect to the number of shares of
Common Stock set forth below:
Name Number of Shares Taxpayer
of Assignee Address of Common Stock Identification Number
----------- ------- --------------- ---------------------
and does hereby irrevocably authorize the Company to make such transfer on the
Warrant Register maintained at the principal office of the Company and, if
applicable, to issue to the undersigned a Warrant for the portion of such
Warrant not so sold, assigned or transferred.
Dated: __________________ ___________________________________
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant).
A-4
<PAGE> 1
EXHIBIT 4.2
AGREEMENT
This Agreement is made as of the date set forth below by the
undersigned directors, officers and certain significant holders of the Common
Stock, par value $0.0001 per share (the "Common Stock"), of Flour City
International, Inc., a Nevada corporation (the "Company"), with the
Underwriters (as defined below) in connection with the proposed public offering
(the "Offering") of the Common Stock. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Underwriting
Agreement (the "Underwriting Agreement") by and among the Company and the
Underwriters set forth therein (the "Underwriters") for whom Van Kasper &
Company ("Van Kasper") is acting as representative.
WHEREAS, the undersigned wish to provide for an orderly trading market
for the Common Stock during the period following the commencement of the
Offering and to induce the Underwriters to participate in the Offering.
NOW THEREFORE, as contemplated by Section 1(s) of the Underwriting
Agreement and in consideration of the foregoing recital and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as set forth below.
Each of the parties hereto severally, and not jointly, agrees that
such party will not, without the prior written consent of Van Kasper, for a
period of 180 days from the date of the Underwriting Agreement (the "Effective
Date"), directly or indirectly, offer, sell, grant any option to purchase,
contract to sell or otherwise sell or dispose of any shares of Common Stock,
any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock owned by
the undersigned or with respect to which the undersigned has the power of
disposition, or announce any offer to do so. Each of the parties hereto
severally, and not jointly, also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the transfer of
shares of Common Stock held by such person except in compliance with the
foregoing restriction. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the Effective Date.
________________________________
Print Name:
Accepted and agreed to as of the Effective Date:
VAN KASPER & COMPANY
as Representative of the Underwriters
By:_____________________________
<PAGE> 1
EXHIBIT 5.1
MANNING, MARDER & WOLFE
707 WILSHIRE BOULEVARD, 45TH FLOOR
LOS ANGELES, CALIFORNIA 90017
April 3, 1997
Flour City International, Inc.
915 Riverview Drive
Johnson City, Tennessee 37601
Ladies and Gentlemen:
We have acted as counsel to Flour City International, Inc., a Nevada
corporation (the "Company"), in connection with the proceedings (the "Company
Proceedings") taken and to be taken by the Company as contemplated in the
Registration Statement on Form S-1 (the "Registration Statement") filed by the
Company under the Securities Act of 1933, as amended, with the Securities and
Exchange Commission (the "Commission"), relating to the sale of up to 2,300,000
shares (the "Shares") of the Company's Common Stock, par value $.0001 per share.
We have examined the Registration Statement. In addition, we have reviewed such
other documents and have made such further investigations as we have deemed
necessary to enable us to express the opinion hereinafter set forth. In
rendering this opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of photostatic copies.
We are members of the Bar of the State of California only and we
express no opinion as to the law of any jurisdiction other than the General
Corporation Law of the State of Nevada as specifically referenced in this
opinion.
Based upon and subject to the foregoing, we hereby advise you that in
our opinion the Shares have been duly authorized by the Company and, upon
completion of the Company Proceedings and payment and delivery in accordance
with the Underwriting Agreement, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the caption
"Legal Matters" in the Registration Statement.
Very truly yours,
/s/ Manning, Marder & Wolfe
----------------------------
MANNING, MARDER & WOLFE
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
BY AND BETWEEN
FLOUR CITY ARCHITECTURAL METALS, INC.
AND
ROGER ULBRICHT
<PAGE> 2
EMPLOYMENT AGREEMENT
I N D E X
<TABLE>
<CAPTION>
<S> <C>
1. EMPLOYMENT................................................................1
2. TITLES AND DUTIES.........................................................1
2.1 Initial Appointments................................................1
3. COMPENSATION..............................................................2
3.1 Base Salary.........................................................2
3.2 Benefits............................................................2
4. STOCK PURCHASE RIGHTS.....................................................3
4.1 Stock Purchase Rights...............................................3
4.2 Disposition of Shares...............................................4
4.3 Transfer Restrictions...............................................6
4.4 Company's Repurchase Right..........................................6
4.5 Fractional Shares...................................................8
4.6 Additional Shares or Substituted Securities.........................8
4.7 Special Termination of Repurchase Right.............................9
4.8 Cancellation of Shares..............................................9
4.9 Additional Rights .................................................10
5. DISABILITY OR DEATH......................................................10
6. TERMINATION..............................................................11
6.1 Termination by Employer............................................11
6.2 Termination by Executive...........................................12
7. ARBITRATION..............................................................12
8. PLACE OF PERFORMANCE.....................................................13
9. NON-DISCLOSURE...........................................................13
10. NON-COMPETITION AND NON-SOLICITATION.....................................14
11. ASSIGNMENT OF WORK PRODUCT...............................................15
12. GENERAL PROVISIONS.......................................................15
</TABLE>
i
<PAGE> 3
12.1 Governing Law and Jurisdiction....................................15
12.2 Notices...........................................................15
12.3 Attorneys' Fees...................................................15
12.4 Complete Agreement................................................16
12.5 Binding...........................................................16
12.6 Authority.........................................................16
12.7 Number and Gender.................................................17
12.8 Failure to Object Not a Waiver....................................17
12.9 Unenforceable Terms...............................................17
12.10 Execution in Counterparts.........................................17
12.11 Further Assurance.................................................17
12.12 Cross References..................................................18
12.13 Miscellaneous Provisions..........................................18
ii
<PAGE> 4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered on the 16th
day of January, 1997 (the "Execution Date"), by and between Flour City
International, Inc., a Nevada corporation ("Company"); Flour City Architectural
Metals, Inc., a Delaware corporation ("Employer"); and Roger Ulbricht
("Executive"), (Employer and Executive are sometimes hereinafter referred to
collectively as the "Parties" and individually as a "Party").
RECITALS
A. Employer is a company engaged in the business of engineering,
management and construction of custom curtain wall projects; and
B. Executive has particular and peculiar knowledge and background in
performing executive level management services and related activities for a
business of this nature; and
C. The parties hereto desire to enter into an Agreement whereby the
Executive's services will be made available to Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT.
Employer shall employ Executive as its Vice President of Business
Development and Technical Services for a term of five (5) consecutive years (the
"Term"), commencing on January 1, 1997 (the "Effective Date"). The employment
relationship created by this Agreement may only be terminated prior to the
expiration of the Term in accordance with the provisions of Sections 5 and 6
hereof and in accordance with the terms and conditions contained therein.
2. TITLES AND DUTIES.
2.1 INITIAL APPOINTMENTS.
Subject at all times to the supervision and direction of Employer's
Board of Directors, Executive shall be employed as the Vice President of
Business Development and Technical Services of Employer to perform such
executive and other duties relating to the business and operations of
<PAGE> 5
the Company and any present or future subsidiaries or affiliates thereof as are
delegated or assigned to the Executive from time to time by such Board of
Directors and are consistent with the position of Vice President of Business
Development and Technical Services. Executive shall faithfully and diligently
perform all duties and will promote and advance the business and affairs of
Employer.
3. COMPENSATION.
3.1 BASE SALARY.
3.1.1 Executive will be paid an annual base salary of $105,000
("Base Salary") commencing as of the Effective Date. The Base Salary shall be
payable in equal bi-weekly installments.
3.1.2 Executive's Base Salary shall be evaluated on an annual
basis by the Board of Directors. Executive's Base Salary may be increased in the
sole discretion of the Board of Directors, but never decreased during the Term,
without the consent of Executive.
3.2 BENEFITS.
In addition to the Base Salary, Executive shall receive the following
benefits:
3.2.1 During the period for which Executive is employed by
Employer, Employer shall purchase medical health insurance for Executive (which
health insurance shall also cover Executive's spouse and certain children) of
the type and in such amounts as is available from time to time to all other
executives of Employer;
3.2.2 During the period for which Executive is employed by
Employer, Executive shall be entitled to (a) a vacation period each year of
fifteen (15) business days and (b) additional holidays customarily observed by
Employer, and during such time, Executive's compensation shall be paid in full;
provided, however, that if Executive does not take all or a portion of the
vacation time to which Executive is entitled hereunder, Employer shall
compensate Executive therefor on such terms as Employer and Executive may
mutually agree;
2
<PAGE> 6
3.2.3 During the period for which Executive is employed by
Employer, and within five (5) business days of the submission of the appropriate
documentation by Executive, Executive shall be reimbursed by Employer for all
ordinary and necessary business expenses reasonably incurred by Executive in the
performance of Executive's duties, provided that:
3.2.3.1 Each such expenditure is of a nature
qualifying it as a proper business expense of Employer; and
3.2.3.2 Executive furnishes to Employer adequate
records and other documentation as may be reasonably required by Employer for
the substantiation of such expenditures as a business expense of Employer.
4. STOCK PURCHASE RIGHTS.
4.1 STOCK PURCHASE RIGHTS.
4.1.1 Subject to and upon the terms and conditions set forth
in this Section 4, Executive is hereby granted the exclusive right to purchase a
total of 100,000 shares of Company's Common Stock (the "Shares"), representing
one percent (1%) of the total issued and outstanding shares of Company as of the
Effective Date, at the price of $.0001 per Share (the "Purchase Price").
4.1.2 By executing this Agreement, Executive hereby warrants
and represents that Executive will acquire the Shares for Executive's own
account and not with a view to their resale or distribution and that Executive
is prepared to hold the Shares for an indefinite period and has no present
intention to sell, distribute or grant any participating interests in the
Shares. Executive hereby acknowledges the fact that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
that Company is issuing the Shares to Executive in reliance on the
representations made by Executive herein.
4.1.3 Executive hereby confirms that Executive has been
informed that the Shares may not be resold or transferred unless the Shares are
first registered under Federal and applicable state securities laws or an
exemption therefrom is available. Accordingly, Executive hereby
3
<PAGE> 7
acknowledges that Executive is prepared to hold the Shares for an indefinite
period and that Executive is aware that Rule 144 of the Securities and Exchange
Commission issued under the 1933 Act is not presently available to exempt the
sale of the Shares from the registration requirements of the 1933 Act. Should
Rule 144 subsequently become available, Executive is aware that any sale of the
Shares effected pursuant to Rule 144 may, depending upon the status of Executive
as an "affiliate" or "non-affiliate" under the Rule, be made only in limited
amounts in accordance with the provisions of the Rule, and that in no event may
any Shares be sold pursuant to the Rule until Executive has held the Shares for
the requisite holding period following payment in full for the Shares.
4.1.4 Executive represents and warrants that Executive has a
preexisting business or personal relationship with the officers and directors of
Company, that Executive is aware of the business affairs and financial condition
of Company and that Executive has such knowledge and experience in business and
financial matters with respect to companies in business similar to Company's
which enables Executive to evaluate the risks of the prospective investment and
to make an informed investment decision with respect thereto. Executive further
represents and warrants that Company has made available to Executive the
opportunity to ask questions and receive answers from Company concerning the
terms and conditions of the issuance of the Shares and that Executive could be
reasonably assumed to have the capacity to protect Executive's own interests in
connection with such investment.
4.2 DISPOSITION OF SHARES.
4.2.1 Executive hereby agrees that Executive shall make no
disposition of the Shares (other than a permitted transfer under paragraph
4.3.1) unless and until:
(a) Executive shall have notified Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
4
<PAGE> 8
(b) Executive shall have complied with all requirements of
this Agreement applicable to the disposition of the Shares; and
(c) Executive shall have provided Company with written
assurances, in form and substance satisfactory to Company that (i) the proposed
disposition does not require registration of the Shares under the 1933 Act or
(ii) all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration available under
the 1933 Act has been taken.
Company shall not be required (i) to transfer on its books any
Shares which have been sold or transferred in violation of the provisions of
this Section 4 or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of this Agreement.
4.2.2 In order to reflect the restrictions on disposition of
the Shares, the stock certificates for the Shares will be endorsed with
restrictive legends, including the legends substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT,
(B) A "NO ACTION" LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH SALE OR OFFER, OR SATISFACTORY ASSURANCES TO THE
CORPORATION THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH
RESPECT TO SUCH SALE OR OFFER.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT
IN CONFORMITY WITH THE TERMS OF A WRITTEN AGREEMENT, DATED JANUARY 16,
1997 BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES
(OR ITS ASSIGNEES) WHICH CONTAINS CERTAIN RIGHTS OF REPURCHASE UPON THE
SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES OR UPON TERMINATION
5
<PAGE> 9
OF SERVICE WITH THE CORPORATION. THE CORPORATION WILL, UPON
WRITTEN REQUEST, FURNISH A COPY OF SUCH AGREEMENT TO THE
HOLDER HEREOF WITHOUT CHARGE.
4.2.3 Until such time as Company actually exercises its
repurchase rights under this Agreement, Executive (or any successor in interest)
shall have all the rights of a stockholder (including voting and dividend
rights) with respect to the Shares, subject, however, to the transfer
restrictions of this Section 4.
4.3 TRANSFER RESTRICTIONS.
4.3.1 Executive shall not transfer, assign, encumber or
otherwise dispose of any of the Shares which are subject to Company's repurchase
rights under this Section 4. Such restrictions on transfer, however, shall not
be applicable to (i) a gratuitous transfer of the Shares made to the Executive's
spouse or issue, including adopted children, or to a corporation, trust or
partnership for the exclusive benefit of the Executive or the Executive's spouse
or issue, or (ii) a transfer of title to the Shares effected pursuant to the
Executive's will or the laws of intestate succession.
4.3.2 Each person (other than Company) to whom the Shares are
transferred by means of one of the permitted transfers specified in paragraph
4.3.1 must, as a condition precedent to the validity of such transfer,
acknowledge in writing, the Company's repurchase rights granted hereunder, to
the same extent such shares would be so subject if retained by the Executive.
4.4 COMPANY'S REPURCHASE RIGHT.
4.4.1 The Company may repurchase all or any portion of the
Shares purchased by Executive hereunder, at the Purchase Price (the "Repurchase
Right") in which the Executive has not acquired a vested interest in accordance
with the vesting provisions of paragraph 4.4.3 (such shares to be hereinafter
called the "Unvested Shares"), solely in the event that Executive's employment
with the Company is terminated for any reason. Company's Repurchase Rights with
respect to the Unvested Shares shall be exercisable at any time for a period of
ninety (90) days following the effective date of Executive's termination of
employment with the Company.
6
<PAGE> 10
4.4.2 The Repurchase Right shall be exercisable by written
notice delivered to the Executive prior to the expiration of Company's
Repurchase Right. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. Executive shall,
prior to the close of business on the date specified for the repurchase, deliver
to the Secretary of the Company the certificates representing the Unvested
Shares to be repurchased, each certificate to be properly endorsed for transfer.
Company shall, concurrently with the receipt of such stock certificates, pay to
Executive in cash or cash equivalents (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price for the
Unvested Shares which are to be repurchased.
4.4.3 The Repurchase Right shall terminate with respect to any
Unvested Shares for which it is not timely exercised under paragraph 4.4.2. In
addition, the Repurchase Right shall terminate, and cease to be exercisable,
with respect to any and all Shares in which the Executive vests in accordance
with the following schedule. Executive shall acquire a vested interest in, and
the Repurchase Right shall lapse with respect to, the Shares in accordance with
the following provisions:
(i) Twenty percent (20%) of the Shares purchased by
Executive shall vest one (1) year from the Effective Date; provided, that,
Company has "earnings before income taxes" ("EBIT") for the Company's 1997
fiscal year ending during this period in excess of $2,000,000;
(ii) Twenty percent (20%) of the Shares purchased by
Executive shall vest two (2) years from the Effective Date; provided, that,
Company has EBIT for the Company's 1998 fiscal year ending during this period in
excess of $3,000,000; or "cumulative EBIT" ("CEBIT") in excess of $6,000,000;
for purposes of this Section 4, CEBIT means the cumulative annual fiscal EBIT
during the term of this Agreement through the date of calculation;
7
<PAGE> 11
(iii) Twenty percent (20%) of the Shares purchased by
Executive shall vest three (3) years from the Effective Date; provided, that,
Company has EBIT for Company's 1999 fiscal year ending during this period in
excess of $4,000,000; or CEBIT in excess of $10,800,000;
(iv) Twenty percent (20%) of the Shares purchased by
Executive shall vest four (4) years from the Effective Date; provided, that,
Company has EBIT for Company's 2000 fiscal year ending during this period in
excess of $5,000,000; or CEBIT in excess of $16,800,000; and
(v) Twenty percent (20%) of the Shares purchased by
Executive shall vest five (5) years from the Effective Date; provided, that,
Company has EBIT for Company's 2001 fiscal year ending during this period in
excess of $6,000,000; or CEBIT in excess of $24,000,000.
In the event Company does not have the requisite EBIT or CEBIT for its
fiscal year ending during any of the foregoing annual periods in which a
determination is made as to whether that portion of Company's Shares vest, then
all such Shares attributable to that annual period shall be treated and shall
remain Unvested Shares until December 31, 2001 at which time all previously
Unvested Shares shall automatically vest and the Company's Repurchase Right
shall terminate.
4.5 FRACTIONAL SHARES.
No fractional shares shall be repurchased by Company. Accordingly,
should the Repurchase Right extend to a fractional share, then such fractional
share shall be added to any fractional share in which the Executive is at such
time vested in order to make one whole vested share no longer subject to the
Repurchase Right.
4.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES.
In the event of any stock dividend, stock split, recapitalization or
other transaction affecting the Employer's outstanding Common Stock as a class
without receipt of consideration, then any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which is by reason of any such transaction distributed with respect to
the Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Shares are at the time
8
<PAGE> 12
covered by such right. Appropriate adjustments to reflect the distribution of
such securities or property shall be made to the number of Shares for all
purposes relating to the Repurchase Right. Appropriate adjustments shall also be
made to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Employer's
capital structure; provided, however, that the aggregate purchase price shall
remain the same.
4.7 SPECIAL TERMINATION OF REPURCHASE RIGHT.
In the event of any of the following transactions (a "Corporate
Transaction"), other than a Corporate Transaction that occurs during the initial
12 months following the Effective Date:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any other corporate reorganization or business
combination in which fifty percent (50%) or more of the outstanding voting stock
of the Company is transferred, or exchanged through merger, to different holders
in a single transaction of the Company or a series of related transactions, then
the Company shall terminate the Repurchase Right in whole as of the effective
date of the Corporate Transaction.
4.8 CANCELLATION OF SHARES.
If the Company (or its assignees) shall make available, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Shares to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the person from whom such shares are
to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement), and such shares shall be deemed purchased in accordance
with the applicable provisions hereof and
9
<PAGE> 13
the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered to the
Company pursuant to this Agreement.
4.9 ADDITIONAL RIGHTS.
The shares of Company's common stock issued to Executive hereunder,
shall be in addition to any additional stock or stock options which may be
granted to Executive by Company from time to time hereafter. In the event
Executive is granted stock options during Executive's association with Company,
the number of shares of common stock subject to the option and the price per
share thereof shall be proportionately adjusted for any increase or decrease in
the number of issued and outstanding shares of Company's common stock resulting
from any subdivision or consolidation of shares of Company's common stock or the
payment of a stock dividend (but only on common stock) or any other increases or
decrease in the number of such shares affected without the receipt of
consideration by Company. The issuance of shares of common stock upon the
conversion of convertible securities shall be treated as an issuance for which
Company received consideration for this purpose.
5. DISABILITY OR DEATH.
Employer shall have the right to terminate this Agreement in the event
of Executive's death or if Executive becomes permanently disabled. In the event
of Executive's permanent disability, Employer shall continue to pay the Base
Salary that would have otherwise been earned by Executive for a period of six
(6) months from the date of certification by an attending physician; provided,
however, that Employer's obligation hereunder shall be reduced to the extent of
any disability insurance payments received by Executive. In the event of the
death of Executive, Executive's estate will receive the Base Salary that would
have otherwise been earned by Executive for a period of twelve (12) months. For
purposes of this Agreement, the phrase "permanently disabled" shall mean
10
<PAGE> 14
the inability of Executive to perform Executive's duties hereunder for a
continuous period of more than three (3) consecutive months during any twelve
(12) month period. Such permanent disability shall be determined by Executive's
attending physician.
6. TERMINATION.
6.1 TERMINATION BY EMPLOYER.
6.1.1 Except as expressly provided in Section 5 hereof
Employer may terminate Executive's employment hereunder for "cause" only in
accordance with the provisions of this Section 6.1.1, or "without cause" only in
accordance with the provisions of Section 6.1.2 hereinbelow. For purposes of
this Agreement, the term "cause" shall mean a material breach of this Agreement
by Executive or the willful and continued failure by Executive to substantially
perform Executive's duties hereunder. In the event termination is for cause,
Employer is not required to give advance notice to Executive. Employer will
continue the payment of Base Salary and all benefits provided for herein for a
ten (10) day period following notice of termination
6.1.2 Employer may terminate Executive's employment without
cause only in the event that Employer incurs a "net loss" for two (2)
consecutive quarters in excess of $250,000 per quarter; or absent such losses,
only upon the approval of a majority of Employer's Board of Directors, and if
employed by Employer at such time, the consent of either Michael Russo or Roger
Ulbricht. In the event Executive's employment is terminated without cause
Executive shall receive not less than sixty (60) days prior written notice of
such action. Except as provided in Section 5 hereof, in the event of termination
without cause, Employer shall continue the payment of Executive's Base Salary
and all benefits provided for herein for a period of six (6) months following
date of termination.
6.2 TERMINATION BY EXECUTIVE.
6.2.1 Executive may terminate Executive's employment hereunder
for "cause" only in accordance with the provisions of this Section 6.2.1, or
"without cause" only in accordance with
11
<PAGE> 15
the provisions of Section 6.2.2 hereinbelow. For purposes of this Agreement, the
term "cause" shall mean a material breach of this Agreement by Employer which
breach has not been cured within thirty (30) days after a written demand for
such performance is delivered to Employer by Executive that specifically
identifies the manner in which Executive believes that Employer has breached
this Agreement. In the event of such termination, Employer will continue the
payment of the Base Salary and all benefits provided for in Section 3 hereof
until the expiration of one (1) year from the date of termination.
6.2.2 Executive may terminate Executive's employment hereunder
without cause at any time following the expiration of eighteen (18) months from
the Effective Date and only upon giving not less than three (3) months prior
written notice to Employer. In the event of such termination, Employer will
continue the payment of the Executive's Base Salary and all benefits provided
for in Section 3 hereof through the date of termination.
7. ARBITRATION.
In the event of any disagreement or controversy between Executive and
Employer arises out of or in connection with this Agreement, including without
limitation, the performance of the Parties hereunder, the same shall be
submitted to arbitration in accordance with the rules of the American
Arbitration Association and the Parties hereto agree that a decision of the
arbitrator shall be binding on the Parties hereto and each Party hereto agrees
to comply with any such decision; provided, that, Employer shall be entitled to
seek injunctive or equitable relief in any court of competent jurisdiction for a
breach or alleged breach by Executive of any provision contained in Sections 9
or 10 of this Agreement.
8. PLACE OF PERFORMANCE.
It is contemplated that Executive will perform a majority of
Executive's principal duties at Employer's principal place of business located
at 915 Riverview Drive, Johnson City, Tennessee 37601 or at such other location
as Employer may decide.
12
<PAGE> 16
9. NON-DISCLOSURE.
Executive understands that certain information regarding Employer's
business may be disclosed to Executive during the course of Executive's
association with Employer. Such information may include, but is not limited to
client and potential client names, addresses, telephone numbers and project
information; mailing labels; project report forms; actual or potential bidding
data for current or potential projects; information regarding pending projects
or proposals; methods of quotation, production or engineering, including quality
control and project management; business plans and projections; new product,
facility and expansion plans; pricing information, including price lists,
quotation guides, previous or outstanding quotations, equipment prices and
billing information; estimating programs and methodology; techniques used in,
approaches or results of any market research; advertising sources; employee
salaries, contract, project and wage information; financial information
regarding Employer and its business; customer information reports; and marketing
plans and programs; whether written, verbal or contained on computer hardware or
software, diskette, tape microfiche or other media ("Information"). This
Information is of substantial value and highly confidential, is not known to the
general public, is the subject of reasonable efforts to maintain its secrecy,
constitutes the professional and trade secrets of Employer and is being provided
and disclosed to Executive solely for use in connection with Executives
employment with Employer.
In consideration of such employment and receipt of Information,
Executive agrees that Executive: (i) will regard and preserve the Information as
highly confidential and as the trade secrets of Employer; (ii) will not
disclose, nor permit to be disclosed, any of the Information to any person or
entity, absent consent and approval from Employer; (iii) will not make any use
of the Information for Executive's own benefit or for the benefit of any person
or entity other than Employer; (iv) will return all of the Information,
including but not limited to formulations, customer lists, books maintained by
Employee, source lists, to Employer within twenty-four (24) hours after request
for
13
<PAGE> 17
same; and (v) will comply with all of the provisions contained in this Section 9
during the Term of this Agreement and at all times following the termination of
this Agreement.
10. NON-COMPETITION AND NON-SOLICITATION.
Executive agrees and represents to Employer that for so long as
Executive is an employee or director of Employer and for a period of one (1)
year thereafter, Executive will not, as principal, employer, stockholder,
co-partner, employee or in any other individual or representative capacity
whatsoever, enter into or engage, directly or indirectly, anywhere within the
World, in any business which is in any way directly competitive with the
business of Employer, and Executive will not acquire or own or become a partner,
employer, stockholder, officer or director of any company engaged in the
business of engineering, management or construction of curtain wall projects;
provided, however, that the preceding provision shall not be construed to
prevent Executive from owning less than five percent (5%) of the equity of any
public entity engaged in the curtain wall industry, whether or not such entity
is engaged in a business in competition with the business conducted by Employer.
Executive further agrees that during Executive's association with
Employer and for a period of one (1) year thereafter, Executive will not
directly or indirectly, solicit, communicate with or otherwise contact any of
Employer's customers or potential customers for the purpose of conducting any
engineering, management or construction of curtain wall business which business
is not the Employer's business. Executive agrees that Executive will not
directly or indirectly, employ, solicit for employment or advise or recommend to
any other person that they employ or solicit for employment, any person employed
by Employer during the Term of this Agreement or at any time following the
termination of this Agreement.
11. ASSIGNMENT OF WORK PRODUCT.
Executive agrees that the fruits of Executive's labor and efforts as an
employee of Employer shall belong solely to Employer and Executive shall have no
proprietary or other rights relating to
14
<PAGE> 18
such work product.
12. GENERAL PROVISIONS.
12.1 GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Tennessee.
12.2 NOTICES.
All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, first class mail, telex or telecopier,
addressed as follows:
<TABLE>
<CAPTION>
PARTY ADDRESS
----- -------
<S> <C>
Employer: Flour City Architectural Metals, Inc.
915 Riverview Drive
Johnson City, TN 37601
Executive: Roger Ulbricht
----------------------------------
----------------------------------
</TABLE>
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five (5) business days
after deposit in any United States Post Office in the Continental United States,
postage prepaid if mailed or if sent via professional carrier service provided
all fees are prepaid; when answered back, if telexed; and when receipt is
acknowledged or confirmed, if telecopied.
12.3 ATTORNEYS' FEES.
In the event a dispute arises with respect to this Agreement, the
party prevailing in such dispute shall be entitled to recover all expenses,
including, without limitation, reasonable attorneys' fees and expenses incurred
in ascertaining such party's rights and in preparing to enforce or in enforcing
such party's rights under this Agreement.
15
<PAGE> 19
12.4 COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either oral or
in writing, between the Parties with respect to the subject matter hereof and
contains all of the covenants and agreements between the Parties with respect to
such subject matter in any manner whatsoever. Each Party to this Agreement
acknowledges that no representations, inducements, promises or agreements, oral
or otherwise, have been made by any Party, or anyone herein, and that no other
agreement, statement or promise not contained in this Agreement shall be valid
or binding. This Agreement may be changed or amended only by an amendment in
writing signed by all of the Parties or their respective successors-in-interest.
12.5 BINDING.
The Agreement shall be binding upon and inure to the benefit of the
successors-in-interest, assigns and personal representatives of the respective
Parties. If Executive should die while any amount would still be payable to
Executive hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee.
12.6 AUTHORITY.
Each of the Parties hereby represents and warrants to the other that:
(a) he/she/it has the power and authority to enter into this Agreement, and (b)
the execution, delivery and performance of this Agreement do not and will not
violate the terms of any agreement or other instrument to which he/she/it is a
party or by which he/she/it is bound. Employer further represents and warrants
to Executive that this Agreement has been duly authorized by all necessary
corporate action and has been duly and validly executed and delivered by
Employer and constitutes the valid and binding obligation of Employer,
enforceable against Employer in accordance with its terms.
16
<PAGE> 20
12.7 NUMBER AND GENDER.
Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural, and the masculine
gender shall include the feminine and neuter genders and the word "person" shall
include corporation, firm, partnership or other form of association.
12.8 FAILURE TO OBJECT NOT A WAIVER.
The failure of either Party to this Agreement to object to or to take
affirmative action with respect to any conduct of the other which is in
violation of the terms of this Agreement, shall not be construed as a waiver or
continuing waiver of the violation or breach or of any future violation, breach
or wrongful conduct.
12.9 UNENFORCEABLE TERMS.
Any provision hereof prohibited by law or unenforceable under the law
of any jurisdiction in which such provision is applicable shall as to such
jurisdiction only be ineffective without affecting any other provision of this
Agreement. To the full extent, however, that such applicable law may be waived
to the end that this Agreement be deemed to be a valid and binding agreement
enforceable in accordance with its terms, the Parties hereto hereby waive such
applicable law knowingly and understanding the effect of such waiver.
12.10 EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts and when so
executed shall constitute one agreement binding on all the Parties,
notwithstanding that all the Parties are not signatory to the original and same
counterpart.
12.11 FURTHER ASSURANCE.
From time to time each Party will execute and deliver such further
instruments and will take such other action as any other Party may reasonably
request in order to discharge and perform their obligations and agreements
hereunder and to give effect to the intentions expressed in this Agreement.
17
<PAGE> 21
12.12 CROSS-REFERENCES.
All cross-references in this Agreement, unless specifically directed to
another agreement or document, refer to provisions in this Agreement, and shall
not be deemed to be referenced to the overall transaction or to any other
agreements or documents.
12.13 MISCELLANEOUS PROVISIONS.
The various headings and numbers herein and the grouping of provisions
of this Agreement into separate Sections and paragraphs are for the purpose of
convenience only and shall not be considered a part hereof. The language in all
parts of this Agreement shall in all cases be construed in accordance with its
fair meaning as if prepared by all Parties to the Agreement and not strictly for
or against any of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
"Employer"
Flour City Architectural Metals, Inc.,
a Delaware corporation
By: _______________________
Name: _______________________
Title: _______________________
"Company"
Flour City International, Inc.,
a Nevada corporation
By: _______________________
Name: _______________________
Title: _______________________
"Executive"
--------------------------------------------
Roger Ulbricht
18
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
BY AND BETWEEN
FLOUR CITY ARCHITECTURAL METALS, INC.
AND
BRYAN R. WILLIS
<PAGE> 2
EMPLOYMENT AGREEMENT
I N D E X
<TABLE>
<CAPTION>
<S> <C>
1. EMPLOYMENT................................................................1
2. TITLES AND DUTIES.........................................................1
2.1 Initial Appointments................................................1
3. COMPENSATION..............................................................2
3.1 Base Salary.........................................................2
3.2 Benefits............................................................2
4. STOCK PURCHASE RIGHTS.....................................................3
4.1 Stock Purchase Rights...............................................3
4.2 Disposition of Shares...............................................4
4.3 Transfer Restrictions...............................................6
4.4 Company's Repurchase Right..........................................6
4.5 Fractional Shares...................................................8
4.6 Additional Shares or Substituted Securities.........................8
4.7 Special Termination of Repurchase Right.............................9
4.8 Cancellation of Shares..............................................9
4.9 Additional Rights .................................................10
5. DISABILITY OR DEATH......................................................10
6. TERMINATION..............................................................11
6.1 Termination by Employer............................................11
6.2 Termination by Executive...........................................11
7. ARBITRATION..............................................................12
8. PLACE OF PERFORMANCE.....................................................12
9. NON-DISCLOSURE...........................................................13
10. NON-COMPETITION AND NON-SOLICITATION.....................................14
11. ASSIGNMENT OF WORK PRODUCT...............................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
12. GENERAL PROVISIONS......................................................15
12.1 Governing Law and Jurisdiction....................................15
12.2 Notices...........................................................15
12.3 Attorneys' Fees...................................................15
12.4 Complete Agreement................................................15
12.5 Binding...........................................................16
12.6 Authority.........................................................16
12.7 Number and Gender.................................................16
12.8 Failure to Object Not a Waiver....................................17
12.9 Unenforceable Terms...............................................17
12.10 Execution in Counterparts.........................................17
12.11 Further Assurance.................................................17
12.12 Cross References..................................................17
12.13 Miscellaneous Provisions..........................................18
</TABLE>
ii
<PAGE> 4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered on the 16th
day of January, 1997 (the "Execution Date"), by and between Flour City
International, Inc., a Nevada corporation ("Company"); Flour City Architectural
Metals, Inc., a Delaware corporation ("Employer"); and Bryan R. Willis
("Executive"), (Employer and Executive are sometimes hereinafter referred to
collectively as the "Parties" and individually as a "Party").
RECITALS
A. Employer is a company engaged in the business of engineering,
management and construction of custom curtain wall projects; and
B. Executive has particular and peculiar knowledge and background in
performing executive level management services and related activities for a
business of this nature; and
C. The parties hereto desire to enter into an Agreement whereby the
Executive's services will be made available to Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT
Employer shall employ Executive as its Chief Financial Officer for a
term of five (5) consecutive years (the "Term"), commencing on January 1, 1997
(the "Effective Date"). The employment relationship created by this Agreement
may only be terminated prior to the expiration of the Term in accordance with
the provisions of Sections 5 and 6 hereof and in accordance with the terms and
conditions contained therein.
2. TITLES AND DUTIES.
2.1 INITIAL APPOINTMENTS.
Subject at all times to the supervision and direction of Employer's
Board of Directors, Executive shall be employed as the Chief Financial Officer
of Employer to perform such executive and other duties relating to the business
and operations of the Company and any present or future
<PAGE> 5
subsidiaries or affiliates thereof as are delegated or assigned to the Executive
from time to time by such Board of Directors and are consistent with the
position of Chief Financial Officer. Executive shall faithfully and diligently
perform all duties and will promote and advance the business and affairs of
Employer.
3. COMPENSATION.
3.1 BASE SALARY.
3.1.1 Executive will be paid an annual base salary of $100,000
("Base Salary") commencing as of the Effective Date. The Base Salary shall be
payable in equal bi-weekly installments.
3.1.2 Executive's Base Salary shall be evaluated on an annual
basis by the Board of Directors. Executive's Base Salary may be increased in the
sole discretion of the Board of Directors, but never decreased during the Term,
without the consent of Executive.
3.2 BENEFITS.
In addition to the Base Salary, Executive shall receive the following
benefits:
3.2.1 During the period for which Executive is employed by
Employer, Employer shall purchase medical health insurance for Executive (which
health insurance shall also cover Executive's spouse and certain children) of
the type and in such amounts as is available from time to time to all other
executives of Employer;
3.2.2 During the period for which Executive is employed by
Employer, Executive shall be entitled to (a) a vacation period each year of
fifteen (15) business days and (b) additional holidays customarily observed by
Employer, and during such time, Executive's compensation shall be paid in full;
provided, however, that if Executive does not take all or a portion of the
vacation time to which Executive is entitled hereunder, Employer shall
compensate Executive therefor on such terms as Employer and Executive may
mutually agree;
2
<PAGE> 6
3.2.3 During the period for which Executive is employed by
Employer, and within five (5) business days of the submission of the appropriate
documentation by Executive, Executive shall be reimbursed by Employer for all
ordinary and necessary business expenses reasonably incurred by Executive in the
performance of Executive's duties, provided that:
3.2.3.1 Each such expenditure is of a nature
qualifying it as a proper business expense of Employer; and
3.2.3.2 Executive furnishes to Employer adequate
records and other documentation as may be reasonably required by Employer for
the substantiation of such expenditures as a business expense of Employer.
4. STOCK PURCHASE RIGHTS.
4.1 STOCK PURCHASE RIGHTS
4.1.1 Subject to and upon the terms and conditions set forth
in this Section 4, Executive is hereby granted the exclusive right to purchase a
total of 400,000 shares of Company's Common Stock (the "Shares"), representing
four percent (4%) of the total issued and outstanding shares of Company as of
the Effective Date, at the price of $.0001 per Share (the "Purchase Price").
4.1.2 By executing this Agreement, Executive hereby warrants
and represents that Executive will acquire the Shares for Executive's own
account and not with a view to their resale or distribution and that Executive
is prepared to hold the Shares for an indefinite period and has no present
intention to sell, distribute or grant any participating interests in the
Shares. Executive hereby acknowledges the fact that the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
that Company is issuing the Shares to Executive in reliance on the
representations made by Executive herein.
4.1.3 Executive hereby confirms that Executive has been
informed that the Shares may not be resold or transferred unless the Shares are
first registered under Federal and applicable state securities laws or an
exemption therefrom is available. Accordingly, Executive hereby
3
<PAGE> 7
acknowledges that Executive is prepared to hold the Shares for an indefinite
period and that Executive is aware that Rule 144 of the Securities and Exchange
Commission issued under the 1933 Act is not presently available to exempt the
sale of the Shares from the registration requirements of the 1933 Act. Should
Rule 144 subsequently become available, Executive is aware that any sale of the
Shares effected pursuant to Rule 144 may, depending upon the status of Executive
as an "affiliate" or "non-affiliate" under the Rule, be made only in limited
amounts in accordance with the provisions of the Rule, and that in no event may
any Shares be sold pursuant to the Rule until Executive has held the Shares for
the requisite holding period following payment in full for the Shares.
4.1.4 Executive represents and warrants that Executive has a
preexisting business or personal relationship with the officers and directors of
Company, that Executive is aware of the business affairs and financial condition
of Company and that Executive has such knowledge and experience in business and
financial matters with respect to companies in business similar to Company's
which enables Executive to evaluate the risks of the prospective investment and
to make an informed investment decision with respect thereto. Executive further
represents and warrants that Company has made available to Executive the
opportunity to ask questions and receive answers from Company concerning the
terms and conditions of the issuance of the Shares and that Executive could be
reasonably assumed to have the capacity to protect Executive's own interests in
connection with such investment.
4.2 DISPOSITION OF SHARES.
4.2.1 Executive hereby agrees that Executive shall make no
disposition of the Shares (other than a permitted transfer under paragraph
4.3.1) unless and until:
(a) Executive shall have notified Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
4
<PAGE> 8
(b) Executive shall have complied with all requirements of
this Agreement applicable to the disposition of the Shares; and
(c) Executive shall have provided Company with written
assurances, in form and substance satisfactory to Company that (i) the proposed
disposition does not require registration of the Shares under the 1933 Act or
(ii) all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration available under
the 1933 Act has been taken.
Company shall not be required (i) to transfer on its books any
Shares which have been sold or transferred in violation of the provisions of
this Section 4 or (ii) to treat as the owner of the Shares, or otherwise to
accord voting or dividend rights to, any transferee to whom the Shares have been
transferred in contravention of this Agreement.
4.2.2 In order to reflect the restrictions on disposition of
the Shares, the stock certificates for the Shares will be endorsed with
restrictive legends, including the legends substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER SUCH ACT,
(B) A "NO ACTION" LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH SALE OR OFFER, OR SATISFACTORY ASSURANCES TO THE
CORPORATION THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH
RESPECT TO SUCH SALE OR OFFER.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT
IN CONFORMITY WITH THE TERMS OF A WRITTEN AGREEMENT, DATED JANUARY 16,
1997 BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES
(OR ITS ASSIGNEES) WHICH CONTAINS CERTAIN RIGHTS OF REPURCHASE UPON THE
SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES OR UPON TERMINATION
5
<PAGE> 9
OF SERVICE WITH THE CORPORATION. THE CORPORATION WILL, UPON
WRITTEN REQUEST, FURNISH A COPY OF SUCH AGREEMENT TO THE
HOLDER HEREOF WITHOUT CHARGE.
4.2.3 Until such time as Company actually exercises its
repurchase rights under this Agreement, Executive (or any successor in interest)
shall have all the rights of a stockholder (including voting and dividend
rights) with respect to the Shares, subject, however, to the transfer
restrictions of this Section 4.
4.3 TRANSFER RESTRICTIONS.
4.3.1 Executive shall not transfer, assign, encumber or
otherwise dispose of any of the Shares which are subject to Company's repurchase
rights under this Section 4. Such restrictions on transfer, however, shall not
be applicable to (i) a gratuitous transfer of the Shares made to the Executive's
spouse or issue, including adopted children, or to a corporation, trust or
partnership for the exclusive benefit of the Executive or the Executive's spouse
or issue, or (ii) a transfer of title to the Shares effected pursuant to the
Executive's will or the laws of intestate succession.
4.3.2 Each person (other than Company) to whom the Shares are
transferred by means of one of the permitted transfers specified in paragraph
4.3.1 must, as a condition precedent to the validity of such transfer,
acknowledge in writing, the Company's repurchase rights granted hereunder, to
the same extent such shares would be so subject if retained by the Executive.
4.4 COMPANY'S REPURCHASE RIGHT.
4.4.1 The Company may repurchase all or any portion of the
Shares purchased by Executive hereunder, at the Purchase Price (the "Repurchase
Right") in which the Executive has not acquired a vested interest in accordance
with the vesting provisions of paragraph 4.4.3 (such shares to be hereinafter
called the "Unvested Shares"), solely in the event that Executive's employment
with the Company is terminated for any reason. Company's Repurchase Rights with
respect to the Unvested Shares shall be exercisable at any time for a period of
ninety (90) days following the effective date of Executive's termination of
employment with the Company.
6
<PAGE> 10
4.4.2 The Repurchase Right shall be exercisable by written
notice delivered to the Executive prior to the expiration of Company's
Repurchase Right. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. Executive shall,
prior to the close of business on the date specified for the repurchase, deliver
to the Secretary of the Company the certificates representing the Unvested
Shares to be repurchased, each certificate to be properly endorsed for transfer.
Company shall, concurrently with the receipt of such stock certificates, pay to
Executive in cash or cash equivalents (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price for the
Unvested Shares which are to be repurchased.
4.4.3 The Repurchase Right shall terminate with respect to any
Unvested Shares for which it is not timely exercised under paragraph 4.4.2. In
addition, the Repurchase Right shall terminate, and cease to be exercisable,
with respect to any and all Shares in which the Executive vests in accordance
with the following schedule. Executive shall acquire a vested interest in, and
the Repurchase Right shall lapse with respect to, the Shares in accordance with
the following provisions:
(i) Twenty percent (20%) of the Shares purchased by
Executive shall vest one (1) year from the Effective Date; provided, that,
Company has "earnings before income taxes" ("EBIT") for the Company's 1997
fiscal year ending during this period in excess of $2,000,000;
(ii) Twenty percent (20%) of the Shares purchased by
Executive shall vest two (2) years from the Effective Date; provided, that,
Company has EBIT for the Company's 1998 fiscal year ending during this period in
excess of $3,000,000; or "cumulative EBIT" ("CEBIT") in excess of $6,000,000;
for purposes of this Section 4, CEBIT means the cumulative annual fiscal EBIT
during the term of this Agreement through the date of calculation;
7
<PAGE> 11
(iii) Twenty percent (20%) of the Shares purchased by
Executive shall vest three (3) years from the Effective Date; provided, that,
Company has EBIT for Company's 1999 fiscal year ending during this period in
excess of $4,000,000; or CEBIT in excess of $10,800,000;
(iv) Twenty percent (20%) of the Shares purchased by
Executive shall vest four (4) years from the Effective Date; provided, that,
Company has EBIT for Company's 2000 fiscal year ending during this period in
excess of $5,000,000; or CEBIT in excess of $16,800,000; and
(v) Twenty percent (20%) of the Shares purchased by
Executive shall vest five (5) years from the Effective Date; provided, that,
Company has EBIT for Company's 2001 fiscal year ending during this period in
excess of $6,000,000; or CEBIT in excess of $24,000,000.
In the event Company does not have the requisite EBIT or CEBIT for its
fiscal year ending during any of the foregoing annual periods in which a
determination is made as to whether that portion of Shares vest, then all such
Shares attributable to that annual period shall be treated and shall remain
Unvested Shares until December 31, 2001 at which time all previously Unvested
Shares shall automatically vest and the Company's Repurchase Right shall
terminate.
4.5 FRACTIONAL SHARES.
No fractional shares shall be repurchased by Company. Accordingly,
should the Repurchase Right extend to a fractional share, then such fractional
share shall be added to any fractional share in which the Executive is at such
time vested in order to make one whole vested share no longer subject to the
Repurchase Right.
4.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES.
In the event of any stock dividend, stock split, recapitalization or
other transaction affecting the Employer's outstanding Common Stock as a class
without receipt of consideration, then any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which is by reason of any such transaction distributed with respect to
the Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Shares are at the time
8
<PAGE> 12
covered by such right. Appropriate adjustments to reflect the distribution of
such securities or property shall be made to the number of Shares for all
purposes relating to the Repurchase Right. Appropriate adjustments shall also be
made to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Employer's
capital structure; provided, however, that the aggregate purchase price shall
remain the same.
4.7 SPECIAL TERMINATION OF REPURCHASE RIGHT.
In the event of any of the following transactions (a "Corporate
Transaction"), other than a Corporate Transaction that occurs during the initial
12 months following the Effective Date:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any other corporate reorganization or business
combination in which fifty percent (50%) or more of the outstanding voting stock
of the Company is transferred, or exchanged through merger, to different holders
in a single transaction of the Company or a series of related transactions, then
the Company shall terminate the Repurchase Right in whole as of the effective
date of the Corporate Transaction.
4.8 CANCELLATION OF SHARES.
If the Company (or its assignees) shall make available, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Shares to be repurchased in accordance with the provisions of this
Agreement, then from and after such time, the person from whom such shares are
to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement),
9
<PAGE> 13
and such shares shall be deemed purchased in accordance with the applicable
provisions hereof and the Company (or its assignees) shall be deemed the owner
and holder of such shares, whether or not the certificates therefor have been
delivered to the Company pursuant to this Agreement.
4.9 ADDITIONAL RIGHTS.
The shares of Company's common stock issued to Executive hereunder,
shall be in addition to any additional stock or stock options which may be
granted to Executive by Company from time to time hereafter. In the event
Executive is granted stock options during Executive's association with Company,
the number of shares of common stock subject to the option and the price per
share thereof shall be proportionately adjusted for any increase or decrease in
the number of issued and outstanding shares of Company's common stock resulting
from any subdivision or consolidation of shares of Company's common stock or the
payment of a stock dividend (but only on common stock) or any other increases or
decrease in the number of such shares affected without the receipt of
consideration by Company. The issuance of shares of common stock upon the
conversion of convertible securities shall be treated as an issuance for which
Company received consideration for this purpose.
5. DISABILITY OR DEATH.
Employer shall have the right to terminate this Agreement in the event
of Executive's death or if Executive becomes permanently disabled. In the event
of Executive's permanent disability, Employer shall continue to pay the Base
Salary that would have otherwise been earned by Executive for a period of six
(6) months from the date of certification by an attending physician; provided,
however, that Employer's obligation hereunder shall be reduced to the extent of
any disability insurance payments received by Executive. In the event of the
death of Executive, Executive's estate will receive the Base Salary that would
have otherwise been earned by Executive for a period of twelve (12) months. For
purposes of this Agreement, the phrase "permanently disabled" shall mean the
inability of Executive to perform Executive's duties hereunder for a continuous
period of more
10
<PAGE> 14
than three (3) consecutive months during any twelve (12) month period. Such
permanent disability shall be determined by Executive's attending physician.
6. TERMINATION.
6.1 TERMINATION BY EMPLOYER.
6.1.1 Except as expressly provided in Section 5 hereof
Employer may terminate Executive's employment hereunder for "cause" only in
accordance with the provisions of this Section 6.1.1, or "without cause" only in
accordance with the provisions of Section 6.1.2 hereinbelow. For purposes of
this Agreement, the term "cause" shall mean a material breach of this Agreement
by Executive or the willful and continued failure by Executive to substantially
perform Executive's duties hereunder. In the event termination is for cause,
Employer is not required to give advance notice to Executive. Employer will
continue the payment of Base Salary and all benefits provided for herein for a
ten (10) day period following notice of termination
6.1.2 Employer may terminate Executive's employment without
cause only in the event that Employer incurs a "net loss" for two (2)
consecutive quarters in excess of $250,000 per quarter; or absent such losses,
only upon the approval of a majority of Employer's Board of Directors, and if
employed by Employer at such time, the consent of either Michael Russo or Roger
Ulbricht. In the event Executive's employment is terminated without cause
Executive shall receive not less than sixty (60) days prior written notice of
such action. Except as provided in Section 5 hereof, in the event of termination
without cause, Employer shall continue the payment of Executive's Base Salary
and all benefits provided for herein for a period of six (6) months following
date of termination.
6.2 TERMINATION BY EXECUTIVE.
6.2.1 Executive may terminate Executive's employment hereunder
for "cause" only in accordance with the provisions of this Section 6.2.1, or
"without cause" only in accordance with the provisions of Section 6.2.2
hereinbelow. For purposes of this Agreement, the term "cause" shall
11
<PAGE> 15
mean a material breach of this Agreement by Employer which breach has not been
cured within thirty (30) days after a written demand for such performance is
delivered to Employer by Executive that specifically identifies the manner in
which Executive believes that Employer has breached this Agreement. In the event
of such termination, Employer will continue the payment of the Base Salary and
all benefits provided for in Section 3 hereof until the expiration of one (1)
year from the date of termination.
6.2.2 Executive may terminate Executive's employment hereunder
without cause at any time following the expiration of eighteen (18) months from
the Effective Date and only upon giving not less than three (3) months prior
written notice to Employer. In the event of such termination, Employer will
continue the payment of the Executive's Base Salary and all benefits provided
for in Section 3 hereof through the date of termination.
7. ARBITRATION.
In the event of any disagreement or controversy between Executive and
Employer arises out of or in connection with this Agreement, including without
limitation, the performance of the Parties hereunder, the same shall be
submitted to arbitration in accordance with the rules of the American
Arbitration Association and the Parties hereto agree that a decision of the
arbitrator shall be binding on the Parties hereto and each Party hereto agrees
to comply with any such decision; provided, that, Employer shall be entitled to
seek injunctive or equitable relief in any court of competent jurisdiction for a
breach or alleged breach by Executive of any provision contained in Sections 9
or 10 of this Agreement.
8. PLACE OF PERFORMANCE.
It is contemplated that Executive will perform a majority of
Executive's principal duties at Employer's principal place of business located
at 915 Riverview Drive, Johnson City, Tennessee 37601 or at such other location
as Employer may decide.
12
<PAGE> 16
9. NON-DISCLOSURE
Executive understands that certain information regarding Employer's
business may be disclosed to Executive during the course of Executive's
association with Employer. Such information may include, but is not limited to
client and potential client names, addresses, telephone numbers and project
information; mailing labels; project report forms; actual or potential bidding
data for current or potential projects; information regarding pending projects
or proposals; methods of quotation, production or engineering, including quality
control and project management; business plans and projections; new product,
facility and expansion plans; pricing information, including price lists,
quotation guides, previous or outstanding quotations, equipment prices and
billing information; estimating programs and methodology; techniques used in,
approaches or results of any market research; advertising sources; employee
salaries, contract, project and wage information; financial information
regarding Employer and its business; customer information reports; and marketing
plans and programs; whether written, verbal or contained on computer hardware or
software, diskette, tape microfiche or other media ("Information"). This
Information is of substantial value and highly confidential, is not known to the
general public, is the subject of reasonable efforts to maintain its secrecy,
constitutes the professional and trade secrets of Employer and is being provided
and disclosed to Executive solely for use in connection with Executives
employment with Employer.
In consideration of such employment and receipt of Information,
Executive agrees that Executive: (i) will regard and preserve the Information as
highly confidential and as the trade secrets of Employer; (ii) will not
disclose, nor permit to be disclosed, any of the Information to any person or
entity, absent consent and approval from Employer; (iii) will not make any use
of the Information for Executive's own benefit or for the benefit of any person
or entity other than Employer; (iv) will return all of the Information,
including but not limited to formulations, customer lists, books maintained by
Employee, source lists, to Employer within twenty-four (24) hours after request
for
13
<PAGE> 17
same; and (v) will comply with all of the provisions contained in this Section 9
during the Term of this Agreement and at all times following the termination of
this Agreement.
10. NON-COMPETITION AND NON-SOLICITATION
Executive agrees and represents to Employer that for so long as
Executive is an employee or director of Employer and for a period of one (1)
year thereafter, Executive will not, as principal, employer, stockholder,
co-partner, employee or in any other individual or representative capacity
whatsoever, enter into or engage, directly or indirectly, anywhere within the
World, in any business which is in any way directly competitive with the
business of Employer, and Executive will not acquire or own or become a partner,
employer, stockholder, officer or director of any company engaged in the
business of engineering, management or construction of curtain wall projects;
provided, however, that the preceding provision shall not be construed to
prevent Executive from owning less than five percent (5%) of the equity of any
public entity engaged in the curtain wall industry, whether or not such entity
is engaged in a business in competition with the business conducted by Employer.
Executive further agrees that during Executive's association with
Employer and for a period of one (1) year thereafter, Executive will not
directly or indirectly, solicit, communicate with or otherwise contact any of
Employer's customers or potential customers for the purpose of conducting any
engineering, management or construction of curtain wall business which business
is not the Employer's business. Executive agrees that Executive will not
directly or indirectly, employ, solicit for employment or advise or recommend to
any other person that they employ or solicit for employment, any person employed
by Employer during the Term of this Agreement or at any time following the
termination of this Agreement.
11. ASSIGNMENT OF WORK PRODUCT
Executive agrees that the fruits of Executive's labor and efforts as an
employee of Employer shall belong solely to Employer and Executive shall have no
proprietary or other rights relating to
14
<PAGE> 18
such work product.
12. GENERAL PROVISIONS.
12.1 GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Tennessee.
12.2 NOTICES.
All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, first class mail, telex or telecopier,
addressed as follows:
<TABLE>
<CAPTION>
PARTY ADDRESS
----- -------
<S> <C>
Employer: Flour City Architectural Metals, Inc.
915 Riverview Drive
Johnson City, TN 37601
Executive: Bryan Willis
4114 Glaze Road
Johnson City, TN 37601
</TABLE>
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five (5) business days
after deposit in any United States Post Office in the Continental United States,
postage prepaid if mailed or if sent via professional carrier service provided
all fees are prepaid; when answered back, if telexed; and when receipt is
acknowledged or confirmed, if telecopied.
12.3 ATTORNEYS' FEES.
In the event a dispute arises with respect to this Agreement, the
party prevailing in such dispute shall be entitled to recover all expenses,
including, without limitation, reasonable attorneys' fees and expenses incurred
in ascertaining such party's rights and in preparing to enforce or in enforcing
such party's rights under this Agreement.
15
<PAGE> 19
12.4 COMPLETE AGREEMENT.
This Agreement supersedes any and all other agreements, either oral or
in writing, between the Parties with respect to the subject matter hereof and
contains all of the covenants and agreements between the Parties with respect to
such subject matter in any manner whatsoever. Each Party to this Agreement
acknowledges that no representations, inducements, promises or agreements, oral
or otherwise, have been made by any Party, or anyone herein, and that no other
agreement, statement or promise not contained in this Agreement shall be valid
or binding. This Agreement may be changed or amended only by an amendment in
writing signed by all of the Parties or their respective successors-in-interest.
12.5 BINDING.
The Agreement shall be binding upon and inure to the benefit of the
successors-in-interest, assigns and personal representatives of the respective
Parties. If Executive should die while any amount would still be payable to
Executive hereunder if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee.
12.6 AUTHORITY.
Each of the Parties hereby represents and warrants to the other that:
(a) he/she/it has the power and authority to enter into this Agreement, and (b)
the execution, delivery and performance of this Agreement do not and will not
violate the terms of any agreement or other instrument to which he/she/it is a
party or by which he/she/it is bound. Employer further represents and warrants
to Executive that this Agreement has been duly authorized by all necessary
corporate action and has been duly and validly executed and delivered by
Employer and constitutes the valid and binding obligation of Employer,
enforceable against Employer in accordance with its terms.
16
<PAGE> 20
12.7 NUMBER AND GENDER
Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural, and the masculine
gender shall include the feminine and neuter genders and the word "person" shall
include corporation, firm, partnership or other form of association.
12.8 FAILURE TO OBJECT NOT A WAIVER.
The failure of either Party to this Agreement to object to or to take
affirmative action with respect to any conduct of the other which is in
violation of the terms of this Agreement, shall not be construed as a waiver or
continuing waiver of the violation or breach or of any future violation, breach
or wrongful conduct.
12.9 UNENFORCEABLE TERMS.
Any provision hereof prohibited by law or unenforceable under the law
of any jurisdiction in which such provision is applicable shall as to such
jurisdiction only be ineffective without affecting any other provision of this
Agreement. To the full extent, however, that such applicable law may be waived
to the end that this Agreement be deemed to be a valid and binding agreement
enforceable in accordance with its terms, the Parties hereto hereby waive such
applicable law knowingly and understanding the effect of such waiver.
12.10 EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts and when so
executed shall constitute one agreement binding on all the Parties,
notwithstanding that all the Parties are not signatory to the original and same
counterpart.
12.11 FURTHER ASSURANCE.
From time to time each Party will execute and deliver such further
instruments and will take such other action as any other Party may reasonably
request in order to discharge and perform their
17
<PAGE> 21
obligations and agreements hereunder and to give effect to the intentions
expressed in this Agreement.
12.12 CROSS-REFERENCES.
All cross-references in this Agreement, unless specifically directed to
another agreement or document, refer to provisions in this Agreement, and shall
not be deemed to be referenced to the overall transaction or to any other
agreements or documents.
12.13 MISCELLANEOUS PROVISIONS.
The various headings and numbers herein and the grouping of provisions
of this Agreement into separate Sections and paragraphs are for the purpose of
convenience only and shall not be considered a part hereof. The language in all
parts of this Agreement shall in all cases be construed in accordance with its
fair meaning as if prepared by all Parties to the Agreement and not strictly for
or against any of the Parties.
(SIGNATURES ON FOLLOWING PAGE)
18
<PAGE> 22
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
"Employer"
Flour City Architectural Metals, Inc.,
a Delaware corporation
By: _______________________
Name: _______________________
Title: _______________________
"Company"
Flour City International, Inc.,
a Nevada corporation
By: _______________________
Name: _______________________
Title: _______________________
"Executive"
-------------------------------------
Bryan R. Willis
19
<PAGE> 1
EXHIBIT 10.17
[HONGKONGBANK LOGO]
Kasion Contracting Co Ltd
Suite 1301 Hollywood Plaza
610 Nathan Road
Mongkok
Kowloon
Attn: Mrs Rowena Tang
24 July 1997
Dear Madam
BANKING FACILITIES
A/C NO. 580-097988-001
With reference to our recent discussions, we are pleased to advise that we have
reviewed your banking facilities and offer a renewal within the following
limits. These facilities are subject to review at any time and, in any event by
30 April 1998, and also subject to our overriding right of withdrawal and
repayment on demand, including the right to call for cash cover on demand for
prospective and contingent liabilities.
Overdraft HKD6,000,000*+
- ---------
Interest will continue to be charged on daily
balances at 1-3/4% over our best lending rate
(currently 8-3/4% per annum, but subject to
fluctuation at our discretion) and payable
monthly in arrears to the debit of your current
account.
A commitment fee of 1/4% per annum will
continue to be charged daily on the undrawn
balance of your overdraft facility and will be
payable monthly in arrears to the debit of your
current account.
* Overdraft can be fully switchable to
Import/TR Line.
+ Within which HKD4,000,000 temporary until
31 July 1997 when limit will revert to
HKD2,000,000.
/...2
<PAGE> 2
Import Line HKD8,000,000*#o
- -----------
Documentary credits to your suppliers and Import Loan
Facilities in either HK Dollar or foreign currency as
following usance days less any usance/credit periods
granted by your suppliers:
- -- up to 120 usance days for Aluminum material.
- -- up to 90 usance days for Glass materials/others/
offshore shipment.
Within which HKD4,000,000*#o
- ------
Goods under your control and/or Trust Receipts.
Interest on the HK Dollar Import Loan facilities will
continue to be charged on a daily basis at 1-1/2% over our
best lending rate (currently 8-3/4% per annum, but subject
to fluctuation at our discretion) and payable monthly in
arrears to the debit of your current account.
Interest on the Foreign Currency Import Loan facilities will
be charged at the Board Rate published by the Bank which
varies from time to time.
# Of which HKD4,000,000 can be earmarked for issuance
of Performance Bond and Standby DC when required.
o A sublimit Import/TR Line of HKD4,000,000 available
for Kasion F.C. Ltd. (A/C No. 580-238376)
Commission Structure
- --------------------
Our Opening Commission on Documentary Credits and Commission in Lieu of
Exchange will continue to be charged as follows:
Opening Commission Commission in
on Documentary Credits Lieu of Exchange
---------------------- ----------------
For the first USD50,000 1/4% 1/4%
or its equivalent
Balance in excess of 1/8% 1/8%
USD50,000 or its
equivalent
<PAGE> 3
Corporate Card Facility HK150,000
- -----------------------
To issue credit cards to your executives
applied to you.
Security
- --------
As security for the foregoing facilities, we continue to hold:
1) A Hold Cover Indemnity from HongKongBank Finance & Secs (Thailand) Ltd for
THB20,000,000 expiring on 4 May 1998.
2) A Joint and Several Guarantee for HKD15,000,000 from Mr. John Tang Wing
Yan and Rowena Ng Ching Ching.
3) An Equitable Mortgage over the property at Unit 2C, 21 Grampian Road,
Kowloon in the name of Ng Ching Ching Rowena together with a 'Three party
Memorandum of Deposit of Title Deeds & Undertaking' Form dated 18 June 97
to secure the temporary Overdraft facility of HKD4,000,000 until 31 July
1997.
4) Your Counter-Indemnities in respect of Standby Documentary Credits issued
by us on your behalf.
5) A charge over your deposit for HKD1,089,447.74 (A/C No. 461-103855) with
future accrued interest held under lien to us.
Apart from the above mentioned security, we require an additional deposit of
HKD1,000,000 in the name of your company with future accrued interest to be
held under lien to us.
We would be grateful if you would provide us with a certified copy of board
resolution from Kasion F.C. Ltd. resolving on the acceptance of making
utilizations under the facilities granted to your company and the agreement to
the terms and conditions as stipulated in this facility letter.
We have debited your current account with HKD5,000.__ being our review fee.
The above commitment will remain open for acceptance until the close of
business on 14 August 1997 and if not accepted by that date, will be deemed to
have lapsed.
Please arrange for the authorised signatories of Kasion F.C. Ltd and your
company, in accordance with the terms of the mandate given to the Bank, to sign
and return to us the duplicate copy for this letter to signify your
confirmation as to the correctness of the security held, your understanding and
acceptance of the terms and conditions under which these facilities are granted.
We are pleased to be of continued assistance.
Yours faithfully
For and on behalf of
KASION CONTRACTING COMPANY LIMITED
For and on behalf of
KASION F.C. LTD
/s/ ROGER LIM [sig illegible]
- -------------------------------- -----------------------------------
Roger Lim [Illigible]
Corporate Relationship Manager Authorised Signatures
<PAGE> 1
EXHIBIT 10.18
EMPIRE TOWERS PROJECT
BANGKOK, THAILAND
CURTAIN WALL CONTRACT
22352-CWL
[LOGO]
EMPIRE
TOWERS
BETWEEN
THK REAL ESTATE LIMITED
AND
KASION F.C. LTD.
<PAGE> 2
EXHIBIT "A"
GENERAL CONDITIONS
________________________________________________________________________________
EMPIRE TOWERS PROJECT
<PAGE> 3
[LOGO]
THK REAL ESTATE LIMITED
FURNISH AND INSTALL CURTAIN WALL
22352-CWL
[LOGO]
EMPIRE
TOWERS
BETWEEN
THK REAL ESTATE LIMITED
AND
KASION F.C. LTD.
[LOGO]
<PAGE> 4
EMPIRE TOWERS PROJECT
THK REAL ESTATE LIMITED
Contractor: KASION F.C. LTD. CONTRACT AGREEMENT FORM
c/o Kasion Contracting Co., Ltd. CURTAIN WALL CONTRACT
Address: Suite 1301, Hollywood Plaza
610 Nathan Road Contract No.: 22352-CWL
Mongkok, Kowloon, Hong Kong
Contact: MR. JOHN W. TANG Work Location: Bangkok, Thailand
Telephone: (852) 2-783-8732 Issuing Office: THK-BINT, Bangkok
Facsimile: (852) 2-384-5778
This contract is effective as of the 15th day of June, 1995, between THK REAL
ESTATE LIMITED (OWNER), and the above named CONTRACTOR who hereby agree that
all Work specified below shall be performed by CONTRACTOR in accordance with
all the provisions of the contract, consisting of the following Contract
Documents:
CONTRACT AGREEMENT
Exhibit "A" General Conditions, dated: 12 September 1994
Exhibit "B" Special Conditions, dated: 12 September 1994
Exhibit "C" Quantities, Prices and Data, dated: 18 November 1994
Exhibit "D" Scope of Work and Technical Specifications,
dated: 12 September 1994
Exhibit "E" Drawings, dated: 12 September 1994
1. WORK TO BE PERFORMED: Except as may be specified elsewhere in the
contract, CONTRACTOR shall furnish all plant; labor; materials; tools;
supplies; equipment; transportation; supervision; technical,
professional and other services; and shall perform all operations
necessary and required to satisfactorily design, fabricate, furnish and
install the curtain wall systems for the Empire Towers office buildings
and all appurtenant structures, facilities and works.
2. COMPENSATION: As full consideration for the satisfactory performance by
CONTRACTOR of this contract, OWNER shall pay to CONTRACTOR compensation
in accordance with the Total Lump Sum Price set forth in Exhibit "C"
and with the payment provisions of this contract.
3. SCHEDULE: CONTRACTOR shall commence WORK in accordance with the
instructions provided in the Notice to Proceed to be issued by BECHTEL
subsequent to the date of this Contract and shall complete all WORK as
set forth in the Schedule provisions in Exhibit "B".
OWNER: THK REAL ESTATE LIMITED CONTRACTOR: KASION F.C. LTD.
Authorized Authorized
Signature: /s/ Signature: /s/
----------------------- ---------------------------
Print Name: Print Name: John W. Tang
----------------------- ---------------------------
Print Title: Print Title: Director
----------------------- ---------------------------
<PAGE> 5
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "A"
GENERAL CONDITIONS
TABLE OF CONTENTS
GC TITLE PAGE
- -- --------------------------------------------- ----
1 ENTIRE AGREEMENT 1
2 WORDS AND PHRASES 1
3 INDEPENDENT CONTRACTOR 1
4 AUTHORIZED REPRESENTATIVES 2
5 NOTICES 2
6 CONTRACT INTERPRETATION 2
7 ORDER OF PRECEDENCE 2
8 STANDARDS AND CODES 3
9 LAWS AND REGULATIONS 3
10 PERMITS 3
11 TAXES 4
12 LABOR, PERSONNEL AND WORK RULES 4
13 COMMERCIAL ACTIVITIES 4
14 PUBLICITY AND ADVERTISING 4
15 SAFETY AND HEALTH 4
16 FIRE PREVENTION 5
17 SITE CONDITIONS AND NATURAL RESOURCES 5
18 DIFFERING SITE CONDITONS 6
19 TITLE TO MATERIALS FOUND 6
20 SURVEY CONTROL POINTS AND LAYOUTS 6
21 CONTRACTOR'S WORK AREA 7
22 CLEANING UP 7
23 COOPERATION WITH OTHERS 7
24 ENVIRONMENTAL CONDITIONS 7
25 RESPONSIBILITY FOR WORK, SECURITY AND PROPERTY 8
26 CONTRACTOR'S PLANT, EQUIPMENT AND FACILITIES 9
27 ILLUMINATION 9
28 USE OF OWNER'S CONSTRUCTION EQUIPMENT OR FACILITIES 10
29 FIRST AID FACILITIES 10
30 INSPECTION, QUALITY SURVEILLANCE, REJECTION
OF MATERIALS AND WORKMANSHIP 11
31 TESTING 11
32 EXPEDITING 11
33 PROGRESS 11
34 DELAYS AND EXTENSION OF TIME 12
35 CHANGES 12
36 USE OF COMPLETED PORTIONS OF WORK 13
37 EXAMINATION OF CONTRACTOR'S RECORDS AND ACCOUNTS 14
38 WARRANTY 14
39 BACKCHARGES 14
40 INDEMNITY 15
41 PATENT AND COPYRIGHT INDEMNITY 16
42 ASSIGNMENTS AND SUBCONTRACTS 16
43 SUSPENSION 16
44 TERMINATION FOR DEFAULT 17
45 OPTIONAL TERMINATION 19
46 FINAL INSPECTION AND ACCEPTANCE 20
47 NON-WAIVER 20
48 SURVIVAL 20
<PAGE> 6
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "A"
GENERAL CONDITIONS
GC-1 ENTIRE AGREEMENT
This CONTRACT embodies the entire agreement between the OWNER and CONTRACTOR
and supersedes all other writings. The parties shall not be bound by, or be
liable for any statement, representation, promise, inducement or understanding
not set forth herein.
GC-2 WORDS AND PHRASES
Where the words "as shown", "as detailed", "as indicated", or words of like
import are used in this CONTRACT, reference is to the drawings listed in this
CONTRACT unless the context clearly indicates a different meaning.
Where the words "required", "approved", "satisfactory", "determined",
"acceptable" or words of like import are used in this CONTRACT, action by
BECHTEL, the ARCHITECT or the STRUCTURAL ENGINEER is indicated unless the
context clearly indicates otherwise, and all the WORK shall be in accordance
therewith.
A requirement that a CONTRACTOR-furnished document is to be submitted for or
subject to "Authorization to Proceed", "Approval", "Acceptance", "Review",
"Comment", or any combinations of such words or words of like import shall
mean unless the context clearly indicates otherwise, that CONTRACTOR shall,
before implementing the information in the document, submit the document,
obtain resolution of any comments and authorization to proceed. Such review
shall not mean that a complete check will be performed. Authorization to
proceed shall not constitute acceptance or approval of design details,
calculations, analyses, tests, construction methods or materials developed or
selected by CONTRACTOR and shall not relieve CONTRACTOR from full compliance
with requirements of the CONTRACT.
Such action, or failure to act, shall not relieve CONTRACTOR of its contractual
responsibilities for performance of this CONTRACT. Wherever in this CONTRACT it
is provided that CONTRACTOR shall perform certain work "at its expense" or
"without charge" or that certain work "will not be paid for separately", such
quoted words mean that CONTRACTOR shall not be entitled to any additional
compensation from OWNER for such work, and the cost thereof shall, unless
otherwise specified, be considered as included in the payment for other items of
the work.
GC-3 INDEPENDENT CONTRACTOR
CONTRACTOR represents that it is fully experienced, properly qualified,
registered, licensed, equipped, organized, and financed to perform the WORK
under this CONTRACT. CONTRACTOR shall act as an independent contractor and not
as the agent of BECHTEL or OWNER in performing this CONTRACT, maintaining
complete control over is employees and all of its lower-tier suppliers and
subcontractors. Nothing contained in this CONTRACT or any lower-tier purchase
order or subcontract awarded by CONTRACTOR shall create any contractual
relationship between any lower-tier supplier or subcontractor and either BECHTEL
or OWNER. CONTRACTOR shall perform the WORK hereunder in accordance with its
own methods subject to compliance with the CONTRACT.
Contract 22352-CWL
Exhibit "A"
Page Number 1
12 September 1994
<PAGE> 7
GC-4 AUTHORIZED REPRESENTATIVES
Before starting WORK, CONTRACTOR shall designate in writing an authorized
representative acceptable to BECHTEL to represent and act for CONTRACTOR and
shall specify any and all limitations of such representative's authority. Such
representative shall be present or be represented at the JOBSITE at all times
when WORK is in progress, and shall be empowered to receive communications in
accordance with this CONTRACT on behalf of CONTRACTOR. During periods when the
WORK is suspended, arrangements shall be made for an authorized representative
acceptable to BECHTEL for any emergency WORK that may be required. All
communications given to the authorized representative of BECHTEL in accordance
with this CONTRACT shall be binding upon CONTRACTOR. BECHTEL shall designate in
writing one or more representatives to represent and act for BECHTEL and to
receive communications from CONTRACTOR. Notification of changes of authorized
representatives for either BECHTEL or CONTRACTOR shall be provided in advance,
in writing, to the other party.
GC-5 NOTICES
Any notices provided for hereunder shall be in writing and may be served
either personally on the authorized representative of the receiving party at
the JOBSITE or by registered mail to the address of that party as shown on the
face of the Contract Agreement Form, hereof or as such address may have been
changed by written notice.
GC-6 CONTRACT INTERPRETATION
All questions concerning interpretation or clarification of this CONTRACT,
including the discovery of conflicts, errors or omissions, or the acceptable
performance thereof by CONTRACTOR, shall be immediately submitted in writing to
BECHTEL for resolution. All determinations, instructions, and clarifications of
BECHTEL shall be final and conclusive unless determined by a court of
competent jurisdiction to have been fraudulent or capricious, or arbitrary, or
so grossly erroneous as necessarily to imply bad faith, or not supported by
substantial evidence. At all times CONTRACTOR shall proceed with the WORK in
accordance with the determinations, instructions, and clarifications of
BECHTEL. CONTRACTOR shall be solely responsible for requesting instructions or
interpretations and shall be solely liable for any costs and expenses arising
from its failure to do so.
GC-7 ORDER OF PRECEDENCE
The Contract Agreement Form, all documents listed therein, and subsequently
issued Change Notices and amendments are essential parts of this CONTRACT and a
requirement occurring in one is binding as though occurring in all, and are
intended to include all items required for the proper execution and completion
of the WORK. In resolving conflicts, discrepancies, errors or omissions
pursuant to the General Condition titled "CONTRACT INTERPRETATION" the
following order of precedence shall be used:
1. Contract Change Notices and Amendments, if any
2. Contract Agreement Form
3. Exhibit "C" - Quantities, Prices and Data
4. Exhibit "B" - Special Conditions
5. Exhibit "A" - General Conditions
6. Exhibit "D" - Scope of Work
7. Exhibit "D" - Technical Specifications
8. Exhibit "E" - Drawings
Contract 22352-CWL
Exhibit "A"
Page Number 2
12 September 1994
<PAGE> 8
GC-8 STANDARDS AND CODES
Wherever references are made in this CONTRACT to standards or codes in
accordance with which the WORK under this CONTRACT is to be performed, the
edition or revision of the standards or codes current on the effective date of
this CONTRACT shall apply unless otherwise expressly stated. In case of
conflict between any referenced standards and codes and the CONTRACT, the
latter shall govern.
GC-9 LAWS AND REGULATIONS
All applicable laws, ordinances, statutes, rules, regulations, orders or
decrees in effect at the time the WORK under this CONTRACT is performed, shall
apply to CONTRACTOR and its employees and representatives. These shall include
the orders of governmental authorities (including without limitation all laws
of the Kingdom of Thailand relating to registration to do business, to the
formation of business entities under the Kingdom of Thailand law, to the
payment of taxes and to the payment of penalties, assessments, levies or other
punitive charges caused by CONTRACTOR'S negligence, delinquency, or violation
of the Kingdom of Thailand law, and to the obtaining of permits and licenses);
giving due regard to all business practices and local customs prevailing in the
Kingdom of Thailand generally and at the JOBSITE.
If during the term of this CONTRACT there are changed or new laws, ordinances,
statutes, rules, regulations, orders or decrees not known or foreseeable at the
time of signing this CONTRACT which become effective and which affect the cost
or time of performance of this CONTRACT, CONTRACTOR shall immediately notify
BECHTEL in writing and submit detailed documentation of such effect in terms of
both time and cost of performing the CONTRACT. If the WORK is affected by such
changed or new laws, ordinances, etc., and BECHTEL concurs with the effect of
such changes, an equitable adjustment in compensation and time of performance
will be made.
If CONTRACTOR discovers any discrepancy or inconsistency between this CONTRACT
and any law, ordinance, statute, rule, regulation, order or decree, CONTRACTOR
shall report the same immediately, in writing, to BECHTEL who will issue such
further instructions as may be necessary.
GC-10 PERMITS
Except as otherwise specified, CONTRACTOR shall procure and pay for all permits
and inspections, other than inspections performed by OWNER'S Technical
Representatives; furnish any bonds, security or deposits required to permit
performance of the WORK hereunder; and provide BECHTEL with CONTRACTOR'S
assistance as necessary in obtaining all authorizations and permits necessary
for the performance of CONTRACTOR'S services which are required to be taken in
OWNER'S name.
GC-11 TAXES
CONTRACTOR shall pay all taxes, levies, duties and assessments of every nature
due in connection with the WORK under this CONTRACT and shall make any and all
payroll deductions required by law, and hereby indemnifies and holds harmless
BECHTEL, OWNER and its Technical Representatives from any liability on account
of any and all such taxes, levies, duties, assessments and deductions.
Contract 22352-CWL
Exhibit "A"
Page Number 3
12 September 1994
<PAGE> 9
GC-12 LABOR, PERSONNEL AND WORK RULES
CONTRACTOR shall employ only competent and skilled personnel to perform the
WORK and shall remove from the JOBSITE any CONTRACTOR personnel determined to be
unfit or acting in violation of any provision of this CONTRACT. CONTRACTOR is
responsible for maintaining labor relations in such manner that there is
harmony among workers and shall comply with and enforce JOBSITE procedures,
regulations and work rules established or approved by BECHTEL.
GC-13 COMMERCIAL ACTIVITIES
Neither CONTRACTOR nor its employees shall establish any commercial activity
or issue concessions or permits of any kind to third parties for establishing
commercial activities on the JOBSITE or any other lands owned or controlled
by BECHTEL or OWNER.
GC-14 PUBLICITY AND ADVERTISING
CONTRACTOR shall not make any announcement, take any photographs (excepting
those specified in Special Condition titled "Progress Photos, Time-Lapse Movies
and Video Records") or release any information concerning this CONTRACT, or the
PROJECT, or any part thereof to any member of the public, press, business
entity, or any official body unless prior written consent is obtained from OWNER
through BECHTEL.
GC-15 SAFETY AND HEALTH
CONTRACTOR shall be fully and solely responsible for conducting all operations
under this CONTRACT at all times in such a manner as to avoid the risk of
bodily harm to persons and damage to property. CONTRACTOR shall continually and
diligently inspect all WORK, materials and equipment to discover any conditions
which might involve such risks and shall be solely responsible for discovery
and correction of any such conditions.
CONTRACTOR shall submit prior to its mobilization to the JOBSITE, its Project
Safety and Health Plan for approval by BECHTEL. CONTRACTORS shall have sole
responsibility for implementing its safety program. All of CONTRACTOR'S
obligations under the General Condition titled "INDEMNITY" apply to any
liability arising in connection with or incidental to CONTRACTOR'S performance
or failure to perform as provided in this General Condition titled "SAFETY AND
HEALTH."
Neither BECHTEL nor OWNER shall be responsible for supervising the
implementation of CONTRACTOR'S safety program, and neither BECHTEL nor OWNER
shall have responsibility for the safety of CONTRACTOR'S or its lower-tier
suppliers' or subcontractors' employees.
CONTRACTOR'S failure to correct an unsafe condition or unsafe act by its
personnel after notice thereof shall be grounds for:
(a) An order to suspend the affected operations until the unsafe
condition and,
(b) Withhold any part of or all of any payments otherwise due or
payable to CONTRACTOR and,
(c) If the violation continues, default termination of this
CONTRACT for such failure.
CONTRACTOR shall appoint one or more (as appropriate) safety representative(s)
acceptable to BECHTEL who shall be resident at the JOBSITE, have responsibility
to correct unsafe conditions or
Contract 22352-CWL
Exhibit "A"
Page Number 4
12 September 1984
<PAGE> 10
unsafe acts, act on behalf of CONTRACTOR on health and safety matters, and
participate in periodic safety meetings with BECHTEL. CONTRACTOR shall
instruct its personnel on the requirements of the approved Project Safety and
Health Plan and shall coordinate with other contractors on safety matters.
CONTRACTOR shall furnish safety equipment and enforce the use of such equipment
by its employees.
CONTRACTOR shall maintain accident, injury and any other records required by
applicable laws and regulations or by BECHTEL and shall furnish BECHTEL a
monthly summary of injuries and labor hours lost due to injuries.
GC-16 FIRE PREVENTION
Within thirty (30) calendar days after CONTRACT award and in any event prior to
commencing WORK at the JOBSITE, CONTRACTOR shall submit its plan for fire
prevention and protection to BECHTEL for acceptance in accordance with the
Special Condition titled "Safety, Health and Security Programs."
GC-17 SITE CONDITIONS AND NATURAL RESOURCES
CONTRACTOR shall have the sole responsibility for satisfying itself concerning
the nature and location of the WORK and the general and local conditions,
including but not limited to the following:
(a) Transportation, access, disposal, handling and storage of materials,
(b) Availability and quality of labor, water, electric power and road
conditions,
(c) Climatic conditions, tides, and seasons,
(d) River hydrology and river stages,
(e) Physical conditions at the JOBSITE and the project area as a whole,
(f) Topography and ground surface conditions, and
(g) Equipment and facilities needed preliminary to and during the
performance of the WORK.
The failure of CONTRACTOR to acquaint itself with any applicable conditions
will not relieve CONTRACTOR of the responsibility for properly estimating
either the difficulties or the cost of successfully performing CONTRACTOR'S
obligations under this CONTRACT.
Where OWNER has made investigations of subsurface conditions in areas where
WORK is to be performed under this CONTRACT, such investigations are made by
OWNER for the purpose of study and design. If the records of such investigation
are included in the CONTRACT, the interpretation of such records shall be the
sole responsibility of CONTRACTOR.
Neither BECHTEL nor OWNER assumes any responsibility whatsoever in respect to
the sufficiency or accuracy of such investigations, the records thereof, or of
the interpretations set forth and there is
Contract 22352-CWL
Exhibit "A"
Page Number 5
12 September 1994
<PAGE> 11
GC-17 SITE CONDITIONS AND NATURAL RESOURCES (Continued)
no warranty or guarantee, either express or implied, that the conditions
indicated by such investigations or records thereof are representative of those
existing throughout such areas, or any part thereof, or tfhat unforeseen
developments may not occur, or that materials other than or in proportions
different from those indicated may not be encountered.
GC-18 DIFFERING SITE CONDITIONS
CONTRACTOR shall promptly notify BECHTEL in writing before proceeding with any
WORK which CONTRACTOR believes constitutes a differing site condition with
respect to:
(a) Subsurface or latent physical conditions at the JOBSITE differing
materially from those indicated in this CONTRACT, or
(b) Previously unknown physical conditions at the JOBSITE, of an
unusual nature, differing materially from those ordinarily
encountered and generally recognized as inherent in WORK of the
character provided for in this CONTRACT.
BECHTEL will, as promptly as practical, cause an investigation of such
conditions and inform CONTRACTOR of the determination. If BECHTEL determines
that such conditions do materially so differ and cause an increase or decrease
in CONTRACTOR'S cost of or the time required for performance of the WORK under
the CONTRACT, an adjustment will be made and the CONTRACT modified in writing
accordingly. No claim of CONTRACTOR under this clause will be allowed unless
CONTRACTOR has given the required notice.
GC-19 TITLE TO MATERIALS FOUND
The title to water, soil, rock, gravel, sand, minerals, timber, and any other
materials developed or obtained in the excavation or other operations of
CONTRACTOR or any of its lower-tier subcontractors and the right to use said
materials or dispose of same is hereby expressly reserved by OWNER. Neither
CONTRACTOR, its lower-tier subcontractors, nor any of their representatives or
employees shall have any right, title, or interest in said materials nor shall
they assert or make any claim thereto. CONTRACTOR may, at the sole discretion
of OWNER, be permitted, without charge, to use in the WORK any such materials
which meet the requirements of this CONTRACT.
GC-20 SURVEY CONTROL POINTS AND LAYOUTS
Survey control points are shown on the As-Built drawings included in Exhibit
"E".
CONTRACTOR shall complete the layout, including locations, lines, and grades,
of all WORK and shall be responsible for all requirements necessary for WORK
execution in accordance with the survey control points specified or shown on
the drawings, subject to such modifications as BECHTEL may require as WORK
progresses.
If CONTRACTOR or any of its lower-tier subcontractors or any of their
representatives or employees move or destroy or render inaccurate any survey
control point, such control point shall be replaced at CONTRACTOR'S expense. No
separate payment will be made for survey work performed by CONTRACTOR.
Contract 22352-CWL
Exhibit "A"
Page Number 6
12 September 1994
<PAGE> 12
GC-21 CONTRACTOR'S WORK AREA
All CONTRACTOR work areas on the JOBSITE will be assigned by BECHTEL.
CONTRACTOR shall confine its operations to the areas so assigned. Should
CONTRACTOR find it necessary or advantageous to use any additional off-site
area for any purpose whatsoever, CONTRACTOR shall, at its expense, provide and
make its own arrangements for the use of such additional off-site areas.
GC-22 CLEANING UP
CONTRACTOR shall, at all times, keep its work areas in a neat, clean and safe
condition.
Upon completion of any portion of the WORK, CONTRACTOR shall promptly remove
from the work area all its equipment, construction plant, temporary structures
and surplus materials not to be used at or near the same location during later
stages of the WORK.
Upon completion of the WORK and prior to final payment, CONTRACTOR shall at its
expense satisfactorily dispose of all rubbish, remove all plant, buildings,
equipment and materials belonging to CONTRACTOR and return to OWNER'S warehouse
or JOBSITE storage areas all salvageable OWNER supplied materials. CONTRACTOR
shall leave the premises in a neat, clean and safe condition.
In event of CONTRACTOR'S failure to comply with the foregoing, BECHTEL will
accomplish same at CONTRACTOR'S expense.
GC-23 COOPERATION WITH OTHERS
BECHTEL, OWNER, other contractors and other subcontractors may be working at
the JOBSITE during the performance of this CONTRACT and CONTRACTOR'S WORK or
use of certain facilities may be interfered with as a result of such concurrent
activities. BECHTEL reserves the right to require CONTRACTOR to schedule the
order of performance of the WORK in such a manner as will minimize interference
with work of any of the parties involved.
GC-24 ENVIRONMENTAL CONDITIONS
Throughout performance of the WORK, CONTRACTOR shall conduct all operations
in such a way as to minimize impact upon the natural environment and comply
with all laws, regulations and rules applicable to the JOBSITE. CONTRACTOR
shall provide:
(a) Dust control of all excavations, material sites, roads and disposal
areas within its assigned work areas of responsibility,
(b) Suitable equipment, facilities and precautions to prevent the
discharge of waster or contaminants which may pollute the
atmosphere, any body of water, or land areas, or which may harm fish
or other wildlife.
In the event CONTRACTOR encounters on the JOBSITE material reasonably believed
to be a toxic or hazardous material, or a toxic or hazardous waste, CONTRACTOR
shall immediately stop WORK in the affected area and notify BECHTEL of the
condition. Pending receipt of written instructions from BECHTEL, CONTRACTOR
shall not resume WORK in the affected area.
GC-25 RESPONSIBILITY FOR WORK, SECURITY AND PROPERTY
A. Work in Progress, Materials and Equipment. CONTRACTOR shall be responsible
for and bear any and all risk of loss of or damage to WORK in progress, all
materials delivered
Contract 22352-CWL
Exhibit "A"
Page Number 7
12 September 1994
<PAGE> 13
GC-25 RESPONSIBILITY FOR WORK, SECURITY AND PROPERTY (Continued)
to the JOBSITE and all materials and equipment until completion and final
acceptance of the WORK under this CONTRACT.
B. Delivery, Unloading and Storage. CONTRACTOR'S responsibility for
materials and plant equipment required for the performance of this
CONTRACT shall include:
(a) Receiving and unloading.
(b) Storing in a secure place and subject to review by OWNER'S
Technical Representatives. Outside storage of materials and
equipment subject to degradation by the elements shall be in weather
tight enclosures provided by CONTRACTOR.
(c) Delivering from storage to the JOBSITE all materials and plant
equipment as required, and
(d) Maintaining complete and accurate records for OWNER'S Technical
Representatives' inspection of all materials and plant equipment
received, stored and issued for use in the performance of the
CONTRACT.
C. Security. CONTRACTOR shall at all times conduct all operations under
this CONTRACT in a manner to avoid the risk of loss, theft, or damage by
vandalism, sabotage or any other means to any WORK, materials, equipment
or other property at the JOBSITE. CONTRACTOR shall continuously inspect
all WORK, materials and equipment to discover and determine any conditions
which might involve such risks and shall be solely responsible for
discovery, determination and correction of any such conditions.
CONTRACTOR shall comply with BECHTEL'S and OWNER'S security requirements
for the JOBSITE. CONTRACTOR shall cooperate with BECHTEL on all security
matters and shall promptly comply with any project security arrangements
established by BECHTEL or OWNER. Such compliance with these security
requirements shall not relieve CONTRACTOR of its responsibility for
maintaining proper security for the above noted items, nor shall it be
construed as limiting in any manner CONTRACTOR'S obligation with respect
to all applicable laws and regulations and to undertake reasonable action
to establish and maintain secure conditions at the JOBSITE.
D. Property. CONTRACTOR shall plan and conduct operations so as not to:
(a) Enter upon lands in their natural state unless authorized by
BECHTEL,
(b) Damage, close or obstruct any utility installation, highway, road
or other property until permits therefor have been obtained,
(c) Disrupt or otherwise interfere with the operation of any pipeline,
telephone, electric transmission line, ditch or structure unless
otherwise specifically authorized by this CONTRACT, or
(d) Damage or destroy cultivated and planted areas, and vegetation such
as trees, plants, shrubs, and grass on or adjacent to the premises
which, do not interfere with the performance of this CONTRACT. This
includes damage arising from performance of WORK through operation
of equipment or stockpiling of materials.
CONTRACTOR shall not be entitled to any extension of time or compensation on
account of CONTRACTOR'S failure to protect all materials, equipment and
environment as described herein. All costs in connection with any repairs or
restoration necessary or required by reason of unauthorized obstruction, damage
or use shall be borne by CONTRACTOR.
Contract 22352-CWL
Exhibit "A"
Page Number 8
12 September 1994
<PAGE> 14
GC-26 CONTRACTOR'S PLANT, EQUIPMENT AND FACILITIES
CONTRACTOR shall provide and use for the WORK hereunder only such construction
plant and equipment as are capable of producing the quality and quantity of
WORK and materials required by this CONTRACT and within the time or times
specified in the CONTRACT SCHEDULE.
Before proceeding with the WORK hereunder, CONTRACTOR shall furnish BECHTEL with
information and drawings relative to such equipment, plant and facilities as
BECHTEL may request. Upon written order of BECHTEL, CONTRACTOR shall
discontinue operation of unsatisfactory plant, equipment or facilities and
shall either modify the unsatisfactory items or remove such items from
the JOBSITE.
CONTRACTOR shall, at the time any equipment is moved onto the JOBSITE, present
to BECHTEL an itemized list of all equipment and tools, including but not
limited to power tools, welding machines, pumps and compressors. Said list must
include description and quantity, and serial number where applicable. It is
recommended that CONTRACTOR identify its equipment by color, decal and etching.
Prior to removal of any or all equipment, CONTRACTOR shall clear such removal
through BECHTEL. CONTRACTOR shall not remove construction plant, equipment or
tools from the JOBSITE before the WORK is finally accepted, without BECHTEL'S
written approval.
GC-27 ILLUMINATION
When any work is performed at night or where daylight is obscured, CONTRACTOR
shall, at its expense, provide artificial light sufficient to permit WORK to
be carried on efficiently, satisfactorily and safely, and to permit thorough
inspection. During such time periods the access to the place of WORK shall also
be clearly illuminated. All wiring for electric light and power shall be
installed and maintained in a safe manner and meet all applicable codes and
standards.
GC-28 USE OF OWNER'S CONSTRUCTION EQUIPMENT OR FACILITIES
Where CONTRACTOR requests BECHTEL and BECHTEL agrees to make available to
CONTRACTOR certain equipment or facilities belong to OWNER for the performance
of CONTRACTOR WORK under the CONTRACT, the following shall apply:
(a) Equipment or facilities will be charged to CONTRACTOR at agreed
rental rates,
(b) BECHTEL will furnish a copy of the equipment maintenance and
inspection record, and these records shall be maintained by
CONTRACTOR during the rental period,
(c) CONTRACTOR shall assure itself of the condition of such
equipment and assume all risks and responsibilities during its
use. CONTRACTOR shall release, defend, indemnify and hold
BECHTEL and OWNER harmless against any damages or claims that
may arise from use of the equipment,
(d) BECHTEL and CONTRACTOR shall jointly inspect such equipment
before its use and upon its return. The cost of all necessary
repairs or replacement for damage other than normal wear shall
be at CONTRACTOR'S expense, and
(e) If such equipment is furnished with an operator, the services of
such operator will be performed under the complete direction and
control of CONTRACTOR and such operator shall be considered
CONTRACTOR'S employee for all purposes other than the payment of
wages, Workers' Compensation, Insurance or other benefits
whether paid directly or indirectly by BECHTEL or OWNER.
Contract 22352-CWL
Exhibit "A"
Page Number 9
12 September 1984
<PAGE> 15
GC-29 FIRST AID FACILITIES (SEE SPECIAL CONDITION SC-11)
Where BECHTEL, OWNER or others have first-aid facilities at the JOBSITE they
may, at their option, make available their first-aid facilities for the
treatment of employees of CONTRACTOR who may be injured or become ill while
engaged in the performance of the WORK under this CONTRACT.
If first-aid facilities and/or services are made available to CONTRACTOR'S
employees then, in consideration for the use of such facilities and the receipt
of such services, CONTRACTOR hereby agrees:
(a) To release, defend, indemnify and hold harmless BECHTEL, OWNER,
and their authorized representatives, successors or assigns,
and all of their officers and employees from and against any
and all claims, demands, liabilities, including attorney's
fees, arising from the receipt of such services or the use of
such facilities by CONTRACTOR'S employees, except for claims
and demands arising out of the sole active negligence of
BECHTEL, OWNER or any of their representatives.
(b) Upon receipt of any notice from BECHTEL or OWNER of any such
claim, demand or liability being pursued against BECHTEL or
OWNER, to not only undertake the defense of such claim, demand
or liability, but also upon entry of judgment, to make any and
all payments necessary thereunder, and
(c) That in the event any of CONTRACTOR's employees require
off-site medical services, including transportation thereto,
CONTRACTOR shall promptly pay for such services directly to the
providers thereof.
GC-30 INSPECTION, QUALITY SURVEILLANCE, REJECTION OF MATERIALS AND WORKMANSHIP
All materials and equipment furnished and WORK performed shall be properly
inspected by CONTRACTOR at its expense, and shall at all times be subject to
quality surveillance and quality audit by OWNER'S Technical Representatives,
who shall be afforded full and free access to the shops, factories or other
places of business of CONTRACTOR and its lower-tier suppliers and
subcontractors for such quality surveillance or audit. CONTRACTOR shall provide
safe and adequate facilities, drawings, documents and samples as requested, and
shall provide assistance and cooperation including stoppage of WORK to perform
such examination as may be necessary to determine compliance with the
requirements of this CONTRACT. Any WORK covered prior to any quality
surveillance or test by OWNER'S Technical Representatives, shall be uncovered
and replaced at the expense of CONTRACTOR. Failure of OWNER'S Technical
Representatives to make such quality surveillance or to discover defective
design, materials or workmanship shall not relieve CONTRACTOR of its
obligations under this CONTRACT nor prejudice the rights of BECHTEL or OWNER
thereafter to reject or require the correction of defective work in accordance
with the provisions of this CONTRACT.
If any WORK is determined by OWNER'S Technical Representatives to be defective
or not in conformance with this CONTRACT, CONTRACTOR will be notified in
writing and shall, at CONTRACTOR'S expense, immediately remove and replace or
correct such defective work.
GC-31 TESTING
Unless otherwise provided in the CONTRACT, testing of materials or WORK shall
be performed by an independent testing organization, approved by OWNER'S
Technical Representative, at CONTRACTOR'S expense and in accordance with
CONTRACT requirements. In the event such
Contract 22352-CWL
Exhibit "A"
Page Number 10
12 September 1994
<PAGE> 16
GC-31 TESTING (Continued)
testing of materials or work results in the failure of that material or work,
CONTRACTOR shall, upon replacement or repair of such failed material or work,
reperform the test until such time that the material or work passes the
test(s). All re-work, replacement and testing shall be at CONTRACTOR'S expense.
Should tests in addition to those required by this CONTRACT be desired by
BECHTEL or OWNER, CONTRACTOR will be advised in ample time to permit such
testing. Such additional tests will be at OWNER'S expense.
CONTRACTOR shall furnish samples as requested and shall provide reasonable
assistance and cooperation necessary to permit tests to be performed on
materials or work in place including reasonable stoppage of WORK during testing.
GC-32 EXPEDITING
The material and equipment furnished and WORK performed under this CONTRACT may
be subject to expediting by BECHTEL and/or OWNER or their representatives who
shall be allowed full and free access to the shops, factories and other places
of business of CONTRACTOR and its lower-tier suppliers and subcontractors for
expediting purposes. As required by BECHTEL, CONTRACTOR shall provide detailed
schedules and progress reports for use in expediting and shall cooperate with
BECHTEL and OWNER in expediting activities.
GC-33 PROGRESS
CONTRACTOR shall give BECHTEL full information in advance as to its plans for
performing each part of the WORK. If at any time, CONTRACTOR'S actual progress
is inadequate to meet the requirements of this CONTRACT, BECHTEL may so notify
CONTRACTOR who shall thereupon take such steps as may be necessary to improve
its progress. If within a reasonable period as determined by BECHTEL,
CONTRACTOR does not improve performance to meet the currently approved CONTRACT
SCHEDULE, BECHTEL may require an increase in CONTRACTOR'S labor force, the
number of shifts, overtime operations, additional days of WORK per week and an
increase in the amount of construction plant, all without additional cost to
OWNER. Neither such notice nor BECHTEL'S failure to issue such notice shall
relieve CONTRACTOR of its obligation to achieve the quality of WORK and
rate of progress required by this CONTRACT.
Failure of CONTRACTOR to comply with BECHTEL'S instructions may be grounds for
determination by BECHTEL that CONTRACTOR is not prosecuting the WORK with
such diligence as will assure completion within the times specified. Upon such
determination, OWNER may terminate, in accordance with the applicable
provisions of this CONTRACT, CONTRACTOR'S right to proceed with the performance
of the CONTRACT.
GC-34 DELAYS AND EXTENSION OF TIME
If CONTRACTOR'S performance of this CONTRACT is prevented or delayed by any
unforeseeable cause, existing or future, which is beyond the reasonable control
and without the fault or negligence of CONTRACTOR, CONTRACTOR shall, within
twenty-four hours of the commencement of any such delay, give to BECHTEL
written notice thereof and within seven (7) calendar days of commencement of
the delay the anticipated impact of the delay on performance of the WORK.
Within seven (7) calendar days after the termination of any such delay,
CONTRACTOR shall file a written notice with BECHTEL specifying the actual
duration of the delay. Failure to give any of the above notices shall be
sufficient ground for denial of an extension of time. If BECHTEL determines
that the delay was unforeseeable, beyond the control and without the fault or
negligence of CONTRACTOR, BECHTEL will determine the duration of the delay and
will extend the time of performance of this CONTRACT accordingly. Such extension
shall be the sole remedy for the delay.
Contract 22352-CWL
Exhibit "A"
Page Number 11
12 September 1994
<PAGE> 17
GC-35 CHANGES
BECHTEL may, at any time, without notice to the sureties, if any, by written
Change Notice, make any change in the WORK within the general scope of this
CONTRACT, including but not limited to changes:
(a) In the drawings, designs or specifications,
(b) In the quantity, method or manner of CONTRACTOR'S WORK,
(c) In OWNER-furnished facilities, equipment, materials, services or
JOBSITE, and
(d) Directing acceleration or deceleration in the performance of
the WORK.
If at any time CONTRACTOR believes that other acts or omissions of BECHTEL or
OWNER constitute a change to the WORK not covered by a Change Notice,
CONTRACTOR must within ten (10) calendar days submit in writing a Change
Notice request explaining in detail the basis for the request. BECHTEL will
either issue a Change Notice or deny the request in writing.
If CONTRACTOR believes that an equitable adjustment is due under this clause,
it must, within ten (10) calendar days after receipt of written Change Notice,
submit to BECHTEL a written statement (proposal) setting for the nature,
schedule and monetary impact of such change in sufficient detail to permit
thorough analysis and negotiation. The proposal shall state the basis for
compensation in conformance with the provisions of the Special Condition titled
"Pricing of Adjustments".
If any change under this clause causes an increase or decrease in CONTRACTOR'S
cost of, or the time required for, the performance of any part of the WORK
under this CONTRACT whether or not changed by any order, as may be agreed to by
BECHTEL, an equitable adjustment shall be made and the CONTRACT modified by
written Contract Amendment signed by both parties. CONTRACTOR shall not be
entitled to and neither BECHTEL nor OWNER shall be liable to CONTRACTOR or its
lower-tier suppliers or subcontractors in tort (including negligence), or in
contract except as specifically provided herein, for increased costs in
connection with any changes or delays in the WORK.
No request by CONTRACTOR for an equitable adjustment hereunder shall be
approved unless the required notice has been given within ten (10) calendar
days as specified.
In no case shall any claim by CONTRACTOR be considered if asserted after Final
Payment under this CONTRACT. Nothing in this clause shall excuse CONTRACTOR
from proceeding with the CONTRACT as changed, whether or not an equitable
adjustment has been made.
All modifications to this CONTRACT shall only be made by written Contract
Amendment signed by both parties.
GC-36 USE OF COMPLETED PORTIONS OF WORK
Whenever, as determined by BECHTEL, any portion of the WORK performed by
CONTRACTOR is suitable for use, BECHTEL or OWNER may occupy and use such
portion. Use shall not constitute acceptance, relieve CONTRACTOR of its
responsibilities, or act as a waiver by BECHTEL or OWNER of any of the terms of
the CONTRACT.
Contract 22352-CWL
Exhibit "A"
Page Number 12
12 September 1994
<PAGE> 18
GC-36 USE OF COMPLETED PORTIONS OF WORK (Continued)
CONTRACTOR shall not be liable for normal wear and tear or for repair of damage
caused by any misuse during such occupancy or use by BECHTEL or OWNER. If such
use increases the cost or time of performance of remaining portions of the WORK,
CONTRACTOR shall be entitled to an equitable adjustment in its compensation or
schedule under this CONTRACT.
If, as a result of CONTRACTOR'S failure to comply with the provisions of this
CONTRACT, such use proves to be unsatisfactory to BECHTEL or OWNER, BECHTEL or
OWNER shall have the right to continue such use until such portion of the WORK
can, without injury to BECHTEL or OWNER, be taken out of service for correction
of defects, errors, omissions or replacement of unsatisfactory materials or
equipment as necessary for such portion of the WORK to comply with the CONTRACT;
provided that the period of such operation or use pending completion of
appropriate remedial action shall not exceed twelve (12) months unless otherwise
mutually agreed in writing between the parties.
CONTRACTOR shall not use any permanently installed equipment unless such use is
approved in writing by BECHTEL. When such use is approved, CONTRACTOR shall at
CONTRACTOR'S expense properly use and maintain and, upon completion of such use,
recondition such equipment as required to meet specifications.
If BECHTEL or OWNER furnishes an operator for such equipment, all services
performed shall be under the complete direction and control of CONTRACTOR, and
such operator shall be considered CONTRACTOR's employee for all purposes other
than payment of such operator's wages. Worker's Compensation insurance or other
benefits paid directly or indirectly by BECHTEL or OWNER.
GC-37 EXAMINATION OF CONTRACTOR'S RECORDS AND ACCOUNTS
CONTRACTOR shall maintain records and accounts in connection with the
performance of this CONTRACT which will accurately document incurred costs of
whatever nature. BECHTEL, OWNER, or their representatives shall have the right
to examine at all reasonable times, with advance notification, such records and
accounts for the limited purpose of verifying requests for payment when costs
are the basis of such payment and for evaluating the reasonableness of proposed
CONTRACT price adjustments and claims.
If BECHTEL or OWNER establish uniform codes of accounts for the Project,
CONTRACTOR shall use such codes in identifying its records and accounts.
GC-38 WARRANTY
All materials and equipment incorporated into the WORK under this CONTRACT shall
be new and of the most suitable grade of their respective kinds for their
intended uses unless otherwise specified. All workmanship shall be in accordance
with sound construction practices acceptable to the OWNER'S Technical
Representatives. CONTRACTOR warrants all materials, equipment and labor it
furnishes or performs under this CONTRACT against defects in design, materials,
and workmanship for a period of Twelve (12) months after acceptance of the
Project as a whole by OWNER, unless a longer period is specified elsewhere in
this CONTRACT.
If at any time prior to the expiration of the warranty period, CONTRACTOR,
BECHTEL or OWNER discovers any defect in such design, materials, equipment or
workmanship, CONTRACTOR shall, upon written notice from BECHTEL or OWNER given
within a reasonable time after discovery, correct such defects to the
satisfaction of BECHTEL or OWNER by redesigning, repairing or replacing the
defective work at a time acceptable to BECHTEL or OWNER. All costs incidental to
Contract 22352-CWL
Exhibit "A"
Page Number 13
12 September 1994
<PAGE> 19
GC-38 WARRANTY (Continued)
such corrective action including access, removal, disassembly, reinstallation,
reconstruction, retesting and reinspection as may be necessary to correct the
defect or demonstrate that the previously defective WORK conforms to the
requirements of this CONTRACT shall be borne by CONTRACTOR.
CONTRACTOR further warrants any and all corrective action against defects in
design, materials, and workmanship for a period of twelve (12) months, or longer
period as specified, following acceptance by BECHTEL or OWNER of the corrected
work.
GC-39 BACKCHARGES
If, under the provisions of this CONTRACT, CONTRACTOR is notified by BECHTEL to
correct defective or nonconforming work, and CONTRACTOR states or by its actions
indicates that it is unable or unwilling to proceed with corrective action in a
reasonable time, BECHTEL or OWNER may, upon written notice, proceed with or
cause to accomplish the redesign, repair, rework or replacement of nonconforming
work by the most expeditious means available and backcharge CONTRACTOR for the
costs incurred. Furthermore, if BECHTEL or OWNER agrees to or is required to
perform WORK or cause the WORK to be performed for CONTRACTOR, such as cleanup,
off-loading or completion of incomplete WORK, BECHTEL or OWNER may, upon written
notice, perform such WORK by the most expeditious means available and backcharge
CONTRACTOR for the costs incurred.
The cost of backcharge WORK shall include:
(a) Incurred labor costs including all payroll additives,
(b) Incurred net delivered material costs,
(c) Incurred lower-tier supplier and subcontractor costs (including the
cost of BECHTEL and OWNER'S Technical Representatives) directly
related to performing the corrective action,
(d) Equipment and tool rentals at prevailing rates in the JOBSITE area,
and
(e) A factor of sixty percent (60%) applied to the total of items (a)
through (d) for OWNER'S overhead, supervision and administrative
costs.
The backcharge notice will request CONTRACTOR'S approval for BECHTEL or OWNER to
proceed with the required WORK. However, failure of CONTRACTOR to grant such
approval shall not impair BECHTEL'S or OWNER'S right to proceed with WORK or to
cause the WORK to be performed under this or any other provision of this
CONTRACT.
OWNER shall separately invoice or deduct from payments otherwise due to
CONTRACTOR the costs as provided herein. OWNER'S right to back charge is in
addition to any and all other rights and remedies provided in this CONTRACT or
by law. The performance of backcharge WORK by BECHTEL or OWNER shall not relieve
CONTRACTOR of any of its responsibilities under this CONTRACT including but not
limited to express or implied warranties, specified standards for quality,
contractual liabilities and indemnifications, and the CONTRACT SCHEDULE.
GC-40 INDEMNITY
CONTRACTOR hereby releases and shall indemnify, defend and hold harmless
BECHTEL, OWNER, the ARCHITECT and the STRUCTURAL ENGINEER, and their
subsidiaries and affiliates and the officers, agents, employees, successors and
assigns and authorized representative of all
Contract 22352-CWL
Exhibit "A"
Page Number 14
12 September 1994
<PAGE> 20
GC-40 INDEMNITY (Continued)
the foregoing from and against any and all suits, actions, legal or
administrative proceedings, claims, demands, damages, liabilities, interest,
attorney's fees, costs and expenses of whatsoever kind or nature, including
those arising out of injury to or death of CONTRACTOR'S employees, whether
arising before or after completion of the WORK hereunder and in any manner
directly or indirectly caused, occasioned, or contributed to in whole or in
part, or claimed to be caused, occasioned or contributed to in whole or in part,
by reason of any act, omission, fault or negligence whether active or passive of
CONTRACTOR, its lower-tier suppliers, subcontractors or of anyone acting under
its direction or control or on its behalf in connection with or incidental to
the performance of this CONTRACT. CONTRACTOR'S aforesaid release, indemnity and
hold harmless obligations, or portions or applications thereof, shall apply even
in the event of the fault or negligence, whether active or passive, or strict
liability of the parties released, indemnified or held harmless to the fullest
extent permitted by law, but in no event shall they apply to liability caused by
the willful misconduct or gross negligence of the party released, indemnified
or held harmless.
GC-41 PATENT AND COPYRIGHT INDEMNITY
CONTRACTOR hereby indemnifies and shall defend and hold harmless BECHTEL, OWNER,
the ARCHITECT and the STRUCTURAL ENGINEER, and their representatives from and
against any and all claims, actions, losses, damages, and expenses, including
attorney's fees, arising from any claim, whether rightful or otherwise, that any
concept, product, equipment, material, process, copyrighted material or
confidential information, or any part thereof, furnished by CONTRACTOR under
this CONTRACT constitutes and infringement of any patent or copyrighted material
or a theft of trade secrets. If use of any part of such concept, product,
equipment, material, process, copyrighted material or confidential information
is limited or prohibited, CONTRACTOR shall, at its sole expense procure the
necessary licenses to use the infringing or a modified but non-infringing
concept, product, equipment, material, process, copyrighted material or
confidential information or, with BECHTEL'S or OWNER'S prior written approval,
replace it with substantially equal but non-infringing concepts, products,
equipment, materials, processes, copyrighted material or confidential
information; provided, however,
(a) That any such substituted or modified concepts, products,
equipment, material, processes, copyrighted material or
confidential information shall meet all the requirements and be
subject to all the provisions of this CONTRACT, and
(b) That such replacement or modification shall not modify or relieve
CONTRACTOR of its obligations under this CONTRACT.
The foregoing obligation shall not apply to any concept, product, equipment,
material, process, copyrighted material or confidential information the detailed
design of which (excluding rating and/or performance specifications) has been
furnished in writing by BECHTEL or OWNER to CONTRACTOR.
GC-42 ASSIGNMENTS AND SUBCONTRACTS
Any assignment of this CONTRACT or rights hereunder, in whole or part, without
the prior written consent of OWNER shall be void, except that upon ten (10)
calendar days written notice to BECHTEL, CONTRACTOR may assign monies due or to
become due under this CONTRACT, provided that any assignment of monies shall be
subject to proper set-offs in favor of OWNER and any deductions provided for in
this CONTRACT.
Contract 22352-CWL
Exhibit "A"
Page Number 15
12 September 1994
<PAGE> 21
GC-42 ASSIGNMENTS AND SUBCONTRACTS (Continued)
CONTRACTOR shall not subcontract with any third party for the performance of
all or any portion of the WORK without the advance written approval of BECHTEL.
Lower-tier subcontracts and purchase orders must include provisions to secure
all rights and remedies of BECHTEL, OWNER, the ARCHITECT and the STRUCTURAL
ENGINEER, provided under this CONTRACT, and must impose upon the lower-tier
supplier and subcontractor all of the general duties and obligations required
to fulfill this CONTRACT.
Copies of all purchase and subcontract agreements are to be provided to BECHTEL
upon request. Pricing may be deleted unless the compensation to be paid
thereunder is reimbursable under this CONTRACT.
No assignment or subcontract will be approved which would relieve CONTRACTOR or
its sureties, if any, of their responsibilities under this CONTRACT.
GC-43 SUSPENSION
BECHTEL may by written notice to CONTRACTOR, suspend at any time the
performance of all or any portion of the WORK to be performed under the
CONTRACT. Upon receipt of such notice, CONTRACTOR shall, unless the notice
requires otherwise:
(a) Immediately discontinue WORK on the date and to the extent
specified in the notice,
(b) Place no further orders or subcontracts for material, services,
or facilities with respect to suspended WORK other than to the
extent required in the notice,
(c) Promptly make every reasonable effort to obtain suspension upon
terms satisfactory to BECHTEL of all orders, subcontracts and
rental agreements to the extent they relate to performance of
suspended WORK.
(d) Continue to protect and maintain the WORK including those
portions on which WORK has been suspended, and
(e) Take any other reasonable steps to minimize costs associated
with such suspension.
As full compensation for such suspension, CONTRACTOR will be reimbursed for the
following costs, reasonably incurred, without duplication of any item, to the
extent that such costs directly result from such WORK suspension:
(f) A standby charge to be paid to CONTRACTOR during the period of
WORK suspension, which standby charge shall be sufficient to
compensate CONTRACTOR for keeping, to the extent required in the
suspension notice, its organization and equipment committed to
the WORK on an standby basis,
(g) All reasonable costs associated with mobilization and
demobilization of CONTRACTOR'S plant, forces and equipment, and
(h) An equitable amount to reimburse CONTRACTOR for the cost of
maintaining and protecting that portion of the WORK upon which
performance has been suspended.
Upon receipt of notice to resume suspended WORK, CONTRACTOR shall immediately
resume performance under this CONTRACT to the extent required in the notice.
If the CONTRACTOR intends to assert a claim for equitable adjustment under this
clause, it must, within ten (10) calendar days after receipt of notice to
resume WORK, submit to BECHTEL a written statement setting forth the schedule
impact and monetary extent of such claim in sufficient detail to permit
thorough analysis. No adjustment shall be made for any suspension to the extent
that performance would have been suspended, delayed, or interrupted by any
CONTRACTOR non-compliance with the requirements of this CONTRACT.
Contract 22352-CWL
Exhibit "A"
Page Number 16
12 September 1994
<PAGE> 22
GC-44 TERMINATION FOR DEFAULT (Continued)
Notwithstanding any other provisions of this CONTRACT, CONTRACTOR shall be
considered in default of its contractual obligations under this CONTRACT if it:
(a) Performs WORK which fails to conform to the requirements of this
CONTRACT,
(b) Fails to meet the CONTRACT SCHEDULE or fails to make progress so
as to endanger performance of this CONTRACT,
(c) Abandons or refuses to proceed with any of the WORK, including
modifications directed pursuant to the General Condition titled
"CHANGES,"
(d) Fails to fulfill any of the terms of this CONTRACT, or
(e) Fails to provide adequate assurance of CONTRACTOR'S future
performance in accordance with the terms and conditions of the
CONTRACT, within the time specified in the following paragraph, in
response to demand by BECHTEL in the event that an order for relief
in bankruptcy is entered with respect to CONTRACTOR or CONTRACTOR
becomes insolvent or makes a general assignment for the benefit of
creditors. BECHTEL shall be the sole judge of the adequacy of said
assurance.
Upon the occurrence of any of the foregoing, BECHTEL shall notify CONTRACTOR in
writing of the nature of the failure and of OWNER'S intention to terminate the
CONTRACT for default. If CONTRACTOR does not cure such failure within three
(3) calendar days from receipt of notification, or sooner if safety to persons
is involved, or if CONTRACTOR fails to provide satisfactory evidence that such
default will be corrected, OWNER may, by written notice to CONTRACTOR and
without notice to CONTRACTOR'S sureties, if any, terminate in whole or in part
CONTRACTOR'S right to proceed with the WORK and OWNER may prosecute the WORK to
completion by CONTRACT or by any other method deemed expedient. OWNER may take
possession of and utilize any materials, plant, tools, equipment, and property
of any kind furnished by CONTRACTOR and necessary to complete the WORK.
CONTRACTOR and its sureties, if any, shall be liable for all costs in excess of
the Total Lump Sum Price for such terminated WORK reasonably and necessarily
incurred in the completion of the WORK as scheduled, including cost of
administration of any CONTRACT awarded to others for completion.
Upon completion for default, CONTRACTOR shall:
(f) Immediately discontinue WORK on the date and to the extent
specified in the notice and place no further purchase orders or
subcontracts to the extent that they relate to the performance of
the terminated WORK,
(g) Inventory, maintain and turn over to OWNER all materials, plant,
tools, equipment, and property furnished by CONTRACTOR or provided
by OWNER for performance of the terminated WORK,
(h) Promptly obtain cancellation upon terms satisfactory to OWNER of
all purchase orders, lower-tier subcontracts, rentals, or any
other agreements existing for performance of the terminated WORK or
assign those agreements as directed by OWNER,
(i) Cooperate with BECHTEL and OWNER in the transfer of information
and disposition of WORK in progress so as to mitigate damages,
(j) Comply with other reasonable requests from BECHTEL or OWNER
regarding the terminated WORK, and
(k) Continue to perform in accordance with all of the terms and
conditions of this CONTRACT such portion of the WORK that is not
terminated.
Contract 22352-CWL
Exhibit "A"
Page Number 17
12 September 1994
<PAGE> 23
GC-44 TERMINATION FOR DEFAULT (Continued)
If, after termination pursuant to this clause, it is determined for any reason
that CONTRACTOR was not in default, the rights and obligations of the parties
shall be the same as if the notice of termination had been issued pursuant to
the General Condition titled "Optional Termination."
GS-45 OPTIONAL TERMINATION
OWNER may, at its option, terminate for convenience any of the WORK under this
CONTRACT in whole or, from time to time, in part, at any time by written
notice through BECHTEL to CONTRACTOR. Such notice shall specify the extent to
which the performance of the WORK is terminated and the effective date of such
termination. Upon receipt of such notice CONTRACTOR shall:
(a) Immediately discontinue the WORK on the date and to the extent
specified in the notice and place no further orders or lower-tier
subcontracts for materials, services, or facilities, other than as
may be required for completion of such portion of the WORK that is
not terminated,
(b) Promptly obtain cancellation upon terms satisfactory to OWNER of
all purchase orders, lower-tier subcontracts, rentals, or any
other agreements existing for the performance of the terminated
WORK or assign those agreements as directed by OWNER,
(c) Assist BECHTEL or OWNER in the maintenance, protection, and
disposition of work in progress, plant, tools, equipment, property
and materials acquired by CONTRACTOR or furnished by OWNER under
this CONTRACT, and
(d) Complete performance of such portion of the WORK which is not
terminated.
Upon any such termination, CONTRACTOR shall waive any claims for damages
including loss of anticipated profits, on account thereof, but as the sole
right and remedy of CONTRACTOR, OWNER shall pay in accordance with the
following:
(e) All amounts due and not previously paid to CONTRACTOR for WORK
completed in accordance with this CONTRACT prior to such notice of
termination, and for WORK thereafter completed as specified in such
notice,
(f) Reasonable administrative costs of settling and paying claims
arising out of termination of WORK under lower-tier subcontracts or
purchase orders,
(g) Reasonable costs incurred in demobilization and the disposition of
residual material, plant and equipment, and
(h) A reasonable profit on items (f) and (g) of this paragraph.
CONTRACTOR shall submit within thirty (30) calendar days after receipt of
notice of termination, a proposal for an adjustment to the Total Lump Sum Price
including all incurred costs described herein. BECHTEL shall review, analyze,
and verify such proposal, and negotiate an equitable adjustment, and, upon
agreement, the CONTRACT shall be amended in writing accordingly.
Contract 22352-CWL
Exhibit "A"
Page Number 18
12 September 1994
<PAGE> 24
GC-46 FINAL INSPECTION AND ACCEPTANCE
When CONTRACTOR considers the WORK, or any independently identifiable portion
of the WORK under this CONTRACT to be complete and ready for acceptance,
CONTRACTOR shall notify BECHTEL in writing. BECHTEL, the ARCHITECT or the
STRUCTURAL ENGINEER with CONTRACTOR'S cooperation, will conduct such reviews,
inspections and tests as may be reasonably required to satisfy BECHTEL and
OWNER that the WORK, or identified portion of the WORK, conforms to all
requirements of the CONTRACT. If all or any part of the WORK covered by
CONTRACTOR'S notice does not conform to CONTRACT requirements, BECHTEL shall
notify CONTRACTOR of such nonconformance and CONTRACTOR shall take corrective
action in accordance with the General Condition titled "Inspection, Quality
Surveillance, Rejection of Materials and Workmanship" and have the
nonconforming WORK reinspected until accepted. BECHTEL'S written acceptance
("Certificate of Final Acceptance") shall be final and conclusive except with
regard to latent defects, fraud or such gross mistakes as amount to fraud, or
with regard to OWNER'S rights under the General Condition titled "Warranty".
GC-47 NON-WAIVER
Failure by BECHTEL or OWNER to insist upon strict performance of any terms or
conditions of this CONTRACT, or failure or delay to exercise any rights or
remedies provided herein or by law, or failure to properly notify CONTRACTOR in
the event of breach, or the acceptance of or payment for any goods or services
hereunder, or the review or failure to review designs shall not release
CONTRACTOR from any of the warranties or obligations of this CONTRACT and shall
not be deemed a waiver of any right of BECHTEL or OWNER to insist upon strict
performance hereof or any of its rights or remedies as to any prior or
subsequent default hereunder nor shall any termination of WORK under this
CONTRACT by OWNER operate as a waiver of any of the terms hereof.
GC-48 SURVIVAL
The obligations imposed on CONTRACTOR which by their nature survive termination
or completion of the CONTRACT, including but not limited to those General
Conditions entitled "Laws and Regulations", "Taxes", "indemnity", "Patent and
Copyright Indemnity", Liabilities", "Optional Termination", "Termination for
Default", "Warranty", "Examination of Contractor's Records and
Accounts" and "Insurance" shall remain in full force and effect.
GC-49 TERMINATION BY CONTRACTOR
CONTRACTOR shall be entitled by a fourteen (14) calendar day prior written
notice of termination given to BECHTEL and OWNER to terminate the CONTRACT on
any of the following grounds:
(a) If the whole or essential part of WORK is suspended on the
written instruction of BECHTEL and permission to resume WORK is
not given by BECHTEL within a period of 90 days from the date of
suspension, or
(b) if the carrying out of whole or essential part of WORK is
suspended for a continuous period of 90 days or more by reason
of one or more act(s) of Force Majuere or unforeseen reason, or
(c) if OWNER fails to pay to CONTRACTOR the amount due under any
Certificate of Payment within two months after the expiration of
the due date, or
(d) if OWNER improperly or fraudulently interferes with or
influences or obstructs the issue of a payment Certificate, or
Contract 22352-CWL
Exhibit "A"
Page Number 19
12 September 1994
<PAGE> 25
[illegible] economic dislocation, it is impossible for him to continue to meet
his contractual obligations, or
(f) if OWNER becomes bankrupt or, being a company, going into
liquidation, other than for the purpose of a scheme of reconstruction or
amalgamation, or
Upon expiration of the notice referred to above, CONTRACTOR shall:
(g) immediately discontinue the WORK on the date specified in the
notice and place no further orders or lower-tier subcontracts for materials,
services, or facilities,
(h) promptly obtain cancellation of all purchase orders, lower-tier
subcontracts, rentals or any other agreement existing for the performance of
terminated WORK or assign those agreements, if possible, to OWNER,
(i) assist BECHTEL or OWNER in maintenance, protection and disposition
of WORK in progress, plant, tools, equipment, property and materials acquired
by CONTRACTOR or furnished by OWNER under this contract, and
upon any such termination, OWNER shall pay in accordance with the following:
(j) all amounts due and not previously paid to CONTRACTOR for WORK
completed in accordance with this CONTRACT prior to such notice of termination,
and for WORK thereafter completed which has been specifically approved by
BECHTEL,
(k) reasonable administrative costs of settling and paying claims
arising out of the termination of WORK under lower-tier subcontracts or
purchase orders
(l) reasonable costs incurred in mobilization and demobilization and
the disposition of residual material, plant and equipment, and
(m) a reasonable profit on items (k) and (l) of this paragraph.
CONTRACTOR shall submit within sixty (60) calendar days after issue of notice
of termination, a proposal for an adjustment to the Total Lump Sum Price
including all incurred costs described herein. BECHTEL shall review, analyze
and verify such proposal, and negotiate an equitable adjustment, and, upon
agreement, BECHTEL shall duly notify the result to both OWNER and CONTRACTOR
and Certify the amount due to CONTRACTOR. The OWNER shall pay the amount so
certified by BECHTEL within 30 days from the date of such notification by
BECHTEL.
- - - - - - END OF EXHIBIT - - - - - -
Contract 22352-CWL
Exhibit "A"
Page Number 20
12 September 1994
<PAGE> 26
EXHIBIT "B"
SPECIAL CONDITIONS
________________________________________________________________________________
EMPIRE TOWERS PROJECT
<PAGE> 27
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "B"
SPECIAL CONDITIONS
TABLE OF CONTENTS
SC Title Page
- -- ----- ----
1 DEFINITIONS 1
2 INSURANCE 3
3 BECHTEL FURNISHED DRAWINGS AND SPECIFICATIONS 5
4 OWNER FURNISHED UTILITIES AND FACILITIES 5
5 OWNER FURNISHED MATERIALS AND EQUIPMENT 6
6 OWNER FURNISHED PERMITS 6
7 CONTRACTOR FURNISHED DRAWINGS, DATA AND SAMPLES 7
8 COMMENCEMENT, PROSECUTION AND COMPLETION OF THE WORK 11
9 CONTRACT SCHEDULE 11
10 TEMPORARY ACCESS AND HAUL ROADS 13
11 NOT USED 13
12 SAFETY, HEALTH AND SECURITY PROGRAMS 13
13 EXPLOSIVES 15
14 ADVANCE PAYMENT AND PERFORMANCE SECURITIES 15
15 CERTIFICATES OF PAYMENT AND PAYMENTS 16
16 MEASUREMENT FOR PAYMENT AND PAYMENT FOR WORK (NOT INCLUDED IN THE
LUMP SUM PRICE BREAKDOWN AND PAY ITEMS. (SC-15) 21
17 PRICING OF ADJUSTMENTS 21
18 QUALITY ASSURANCE PROGRAM 23
19 APPLICABLE LAW 23
20 CONTRACT LANGUAGE 23
21 NOT USED 23
22 ASSIGNMENT OF SUBCONTRACT TO CONTRACTOR 23
23 NONDISCLOSURE 23
24 MEASUREMENT SYSTEM 24
25 ARBITRATION 24
26 LIQUIDATED DAMAGES AND BONUS FOR EARLY COMPLETION 24
27 KEY PERSONNEL 25
28 NOT USED 26
29 OPERATING AND MAINTENANCE INSTRUCTIONS 26
30 NOT USED 26
31 CONTRACTOR'S ARCHITECT AND ENGINEER 26
32 EXTRA WORK HOURS - OWNER, BECHTEL AND TECHNICAL REPRESENTATIVES 26
<PAGE> 28
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "B"
SPECIAL CONDITIONS
SC-1 DEFINITIONS
OWNER MEANS THK REAL ESTATE LTD.
--------------------
BECHTEL means BECHTEL INTERNATIONAL, INC. and all of its authorized
---------------------------
representatives acting in their professional capacities as project manager on
behalf of OWNER or other project manager appointed by OWNER.
CONTRACTOR means KASION F.C. LTD., its authorized representatives, successors,
----------------
and permitted assigns.
ARCHITECT means ACT Consultants Co., Ltd., as a Technical Representative of
-------------------------
OWNER has technical responsibility for all aspects of the EMPIRE TOWERS PROJECT
except for those held by STRUCTURAL ENGINEER.
STRUCTURAL ENGINEER means Wong Hobach Lau Consulting Engineers, as a Technical
------------------------------------
Representative of OWNER has technical responsibility for the structure of the
High-Rise portion of the EMPIRE TOWERS PROJECT.
PROJECT means the EMPIRE TOWERS PROJECT FOR OWNER, located in Bangkok,
Thailand, for which the WORK under this CONTRACT is being performed.
Work means all activities required by the CONTRACT to be performed by
CONTRACTOR.
JOBSITE means the site located at the southwest corner of the intersection of
Klong Chaongnaoncee and Sathom Road, Bangkok, Thailand, at which location
construction activity shall be performed under this CONTRACT and any other
lands and places provided by OWNER for work space or any other purpose as may
be specifically designated in the CONTRACT as forming part of the JOBSITE.
JOBSITE shall also include CONTRACTOR'S offsite work and Storage areas used
only for this PROJECT.
CONTRACT means the Contract Agreement Form and all documents listed therein at
any tier.
CONTRACT SCHEDULE means the time period set forth for performance of the WORK
under this CONTRACT.
RELATIONSHIP OF THE PARTIES
A. BECHTEL is OWNER'S representative authorized to review, direct and
coordinate the performance of the WORK and the obligations of the CONTRACTOR,
STRUCTURAL ENGINEER and ARCHITECT, and any third party in connection with the
execution of the PROJECT and it may delegate its employees to review the WORK
in progress. BECHTEL is
Contract 22352-CWL
Exhibit "B"
Page Number 1
12 September 1994
<PAGE> 29
SC-1 DEFINITIONS (Continued)
the administrator of the application of the CONTRACT with respect to all
matters except for the technical interpretation of the technical portion of the
CONTRACT. BECHTEL has the authority to act on behalf of OWNER to the extent
expressly provided in the CONTRACT or otherwise in writing.
BECHTEL'S duties and responsibilities with respect to CONTRACTOR'S work under
the CONTRACT are, without limitation, as follows:
(1) On-site administration on construction activities and advising OWNER as
to the progress of the WORK; monthly measurement and evaluation of work
completed for the purpose of interim payments to CONTRACTOR and issuing
the Certificate of Payment to OWNER; determination of deviations
between contractual and actual CONTRACTOR performance or quality of
materials and assessment of CONTRACTOR'S program status. BECHTEL shall
be entitled to give to CONTRACTOR written instructions and CONTRACTOR
shall comply with such instructions. The giving of such instructions
and compliance therewith by CONTRACTOR shall not relieve CONTRACTOR of
any of its obligations hereunder.
(2) Preparation of estimates of costs of all modification of design
throughout the term of the CONTRACT, and negotiation with CONTRACTOR of
any legitimate financial variation from CONTRACT Prices.
(3) Negotiation with CONTRACTOR of any financial variations claimed as a
result of disruptions of CONTRACTOR'S program due to any influences
specifically excluded by the CONTRACT from the CONTRACTOR'S
responsibility.
(4) BECHTEL shall be responsible for monitoring the proper performance of
CONTRACTOR'S means, methods, techniques, sequences and procedures
according to the approved schedule and programs and will recommend to
OWNER preventative and corrective measures to be taken and at the same
time, notify CONTRACTOR and any third party as it deems appropriate.
B. The ARCHITECT/STRUCTURAL ENGINEER shall be OWNER'S Technical
Representatives during the construction period and shall observe the WORK in
progress on behalf of OWNER. Their obligations, with respect to their assigned
areas of responsibility, are;
(1) Review and approval of shop drawings and material samples for
conformance with the CONTRACT.
(2) Consultation with BECHTEL for the purpose of clarification and
interpretation of the technical portions of the CONTRACT.
(3) Full time inspection and coordination of the WORK at the JOBSITE by
CONTRACTOR to determine if the construction is in conformance with the
CONTRACT
(4) Perform technical interpretation of the CONTRACT and judge all
technical aspects of performance thereunder. To the extent provided in
the CONTRACT, enforce performance thereof by CONTRACTOR.
Contract 22352-CWL
Exhibit "B"
Page Number 2
12 September 1994
<PAGE> 30
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
SC-1 DEFINITIONS (Continued)
(5) Make decisions on all technical differences between it and CONTRACTOR
and on all other matters relating to the technical aspects of the WORK.
It shall be entitled to give to CONTRACTOR through BECHTEL, written
instructions within the Scope of its functions, and CONTRACTOR shall
comply with such instructions. The giving of such instructions and
compliance therewith by CONTRACTOR shall not relieve CONTRACTOR of any
of its obligations hereunder.
C. OWNER may, from time to time, have its employees or consultants on the
JOBSITE during construction to observe the WORK in progress and the fulfillment
of all parties' obligations. Such employees or consultants shall have no
obligation or authority to direct the WORK.
SC-2 INSURANCE
A. CONTRACTOR shall, at its sole expense, maintain in effect at all times
during the performance of the WORK insurance coverage with limits not less than
those set forth below with insurers and under forms of policies satisfactory to
BECHTEL and OWNER. CONTRACTOR shall deliver to BECHTEL no later than ten (10)
calendar days after award of this CONTRACT but in any event prior to commencing
WORK at the JOBSITE evidence that policies providing such coverage and limits
of insurance are in full force and effect. Certificates shall provide that not
less than thirty (30) calendar days advance notice will be given in writing
to BECHTEL prior to cancellation, termination or material alteration of said
policies of insurance. Certificates shall identify on their face the Project
Name and the applicable Contract Number.
Coverage:
- --------
(1) Workers' Compensation Insurance as required by any applicable law
or regulation.
(2) Employer's Liability Insurance including a "principals" clause of
not less than:
Baht ** each accident.
(3) Automobile Bodily Injury and Property Damage Liability Insurance
covering automobiles owned or hired by CONTRACTOR, with minimum
limits as follows:
a. Bodily Injury Baht ** each occurrence
b. Property Damage Baht ** each occurrence
(4) Aircraft and Watercraft Liability Insurance covering aircraft and
watercraft owned or hired by CONTRACTOR with a minimum limit of
Baht ** each occurrence and including OWNER and BECHTEL as
additional insureds thereunder, if applicable.
(5) "All Risk" Equipment Insurance covering physical damage to all
engineering office and automotive equipment owned or hired for use
by CONTRACTOR in the performance of WORK, containing a waiver of
right of subrogation against OWNER and BECHTEL.
Contract 22352-CWL
Exhibit "B"
Page Number 3
12 September 1994
<PAGE> 31
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
SC-2 INSURANCE (Continued)
B. Prior to the commencement of WORK at the JOBSITE, and without in any
way limiting CONTRACTOR'S liability under this CONTRACT, OWNER shall take out,
carry and maintain, or cause to be taken out, carried and maintained, during
the performance of the WORK and for such additional period as hereinafter
specified, the following PROJECT Insurance:
1. Third Party Losses and Damages
Comprehensive Personal Injury and Property Damage Liability
Insurance, excluding coverage for automobiles owned or hired by
CONTRACTOR. The policy limit will be a combined single limit
for personal injury and property damage of Baht ** each
occurrence, with a sublimit of Baht ** for liability for
collapse of any building or structure (conditionally, for any
collapse resulting from vibration, removal and weakening of
support caused by CONTRACT WORK), subject to a deductible of
** of the amount of the claim or Baht ** whichever is
greater, insuring OWNER, BECHTEL and CONTRACTOR each as named
insureds, including their officers, directors, employees and
related entities, with a cross-liability or severability of
interest clause, and covering against liabilities arising out of
or in any way connected with the PROJECT, excluding personal
injury claims against any insured by employees of any other
insured. This insurance shall be maintained in force until
twelve (12) months after Final Acceptance of Termination of
WORK. This insurance shall not apply to loss of or damage to
existing underground cable or other underground lines unless
the insured requests the location of such cables or lines from
the appropriate Public Authorities. Such coverage as does apply
to underground cables or lines shall cover only physical damage
and not consequential damage.
2. Builder's Risk or Course of Construction Insurance. Builder's
Risk or Course of Construction Insurance, insuring on an "All
Risk" basis with a limit of not less than the full insurable
replacement cost of the PROJECT subject to deductible amounts
as selected by OWNER, and covering the PROJECT and all
materials and equipment to be incorporated therein, including
property in transit or elsewhere (other than property insured
under Paragraph B(3) below) and insuring the interests of
OWNER, BECHTEL and its related entities, CONTRACTOR, and
Subcontractors on all tiers. Such insurance shall, subject to
the policy terms and conditions, include coverage for physical
damage resulting from the WORK and shall include an insurer's
waiver of subrogation or right of recourse in favor of each
party insured thereunder. Furthermore, such insurance shall
remain in effect until the entire PROJECT is completed and
accepted by OWNER and including the Warranty period following
Final Acceptance or Termination of the WORK.
3. Ocean Marine Cargo Insurance. Ocean Marine Cargo Insurance
covering property comprising the PROJECT subject to ocean or
air strikes, covering on a warehouse to warehouse basis with a
limit equal to the maximum amount subject to any one conveyance
at any time, whether under or on deck. This insurance shall
insure the interests of OWNER, BECHTEL and its related
entities. CONTRACTOR, and its Subcontractor at all tiers, and
such other parties as may be designated by OWNER and shall
include an insurer's waiver of subrogation.
Contract 22352-CWL
Exhibit "B"
Page Number 4
12 September 1994
<PAGE> 32
SC-2 INSURANCE (Continued)
C. The requirements contained herein as to types and limits, as well as
BECHTEL'S approval of insurance coverage to be maintained by CONTRACTOR, are
not intended to and shall not in any manner limit or qualify the liabilities
and obligations assumed by CONTRACTOR under this CONTRACT.
D. The Certificates of Insurance provided by CONTRACTOR must provide clear
evidence that CONTRACTOR'S Insurance Policies contain the minimum limits of
coverage and special provisions prescribed in this Special Condition titled
"INSURANCE."
E. CONTRACTOR shall deliver the original and two (2) copies of the initial
Certificate(s) of Insurance and notices of cancellation, termination and
alteration of such policies to:
Mr. Thor E. Christiansen
Project Manager
Bechtel International, Inc.
Contract No. 22352-CWL
SC-3 BECHTEL-FURNISHED DRAWINGS AND SPECIFICATIONS
OWNER, through BECHTEL will furnish specifications and prints of engineering
design drawings for each part of the WORK under this CONTRACT. Such drawings
will give information required for the preparation of shop detail drawings by
CONTRACTOR.
CONTRACTOR shall, immediately upon receipt thereof, check all specifications
and drawings furnished and shall promptly notify BECHTEL of any omissions or
discrepancies in such specifications or drawings.
One (1) copy of such specifications and one (1) full size reproducible copy of
such drawings will be furnished to CONTRACTOR without charge. Any additional
copies of such specifications and drawings will, upon CONTRACTOR'S request, be
furnished to CONTRACTOR at actual cost.
All drawings listed in Exhibit "E". Drawings are a part of this CONTRACT;
however, CONTRACTOR shall perform WORK only in accordance with drawings marked
"Issued for Construction" (IFC). Such IFC drawings will become a part of the
CONTRACT, superseding or supplementing the original "Issue for Bid" drawings.
All specifications included in Exhibit "D" - SCOPE OF WORK AND SPECIFICATIONS,
and issued with the CONTRACT will be considered as being in the IFC status.
SC-4 OWNER-FURNISHED UTILITIES AND FACILITIES
A. Utilities. No utilities will be furnished by OWNER to CONTRACTOR.
However, the below listed utilities are available at outlets existing on the
JOBSITE and CONTRACTOR shall, at its expense, arrange for the delivery by and
payment to the appropriate Municipal Agency and shall extend such utilities
from said outlets to points of use and at completion of all the WORK remove
all materials and equipment used for such temporary extensions.
1. Water for construction
2. M.E.A. Electric power
Contract 22352-CWL
Exhibit "B"
Page Number 5
12 September 1994
<PAGE> 33
SC-4 OWNER-FURNISHED UTILITIES AND FACILITIES (Continued)
B. Facilities. The facilities listed below will be furnished by OWNER. Such
facilities may be used by CONTRACTOR without charge therefore, provided that
any such use will be subject to written approval of BECHTEL.
NONE
SC-5 OWNER-FURNISHED MATERIALS AND EQUIPMENT
OWNER will furnish to CONTRACTOR, at OWNER'S warehouse or storage area, the
items listed below to be incorporated into or used in performance of the WORK
under this CONTRACT. Such items will be furnished, without cost to CONTRACTOR,
provided that CONTRACTOR shall, at its expense, accept delivery thereof at the
warehouse or storage area, load, unload, transport to points of use and care
for such items until final disposition thereof. At time of acceptance of any
such item from OWNER, CONTRACTOR shall sign a receipt therefor. Signing of such
receipt without reservation therein shall preclude any subsequent claim by
CONTRACTOR that any such items were received from OWNER in a damaged condition
and with shortages. If at any time after acceptance of any such item from OWNER
any such item is damaged, lost, stolen or destroyed, such item shall be
repaired or replaced at the expense of CONTRACTOR. Items required to be
replaced may, at its option, be furnished by OWNER. Upon completion of all the
WORK under this CONTRACT, CONTRACTOR shall, at its expense, return all surplus
and unused items to OWNER'S warehouse or JOBSITE storage area.
OWNER will exert every reasonable effort to make delivery of such materials and
equipment so as to avoid delay in the progress of the WORK. However, should
OWNER, for any reason, fail to make delivery of any such item and a delay shall
result, CONTRACTOR shall be entitled to no additional compensation or damages
on account of such delay. The only adjustment that will be made will be the
granting of an appropriate extension of time. Materials to be furnished by
OWNER are as follows:
NONE
SC-6 OWNER-FURNISHED PERMITS
The General Condition titled "PERMITS" notwithstanding, OWNER will without cost
to CONTRACTOR, furnish the permits listed below. CONTRACTOR shall, in
accordance with said General Condition titled "PERMITS", provide all other
permits. All such OWNER-furnished permits are available for examination at the
project office of OWNER during regular business hours.
Permits to be furnished by OWNER:
1. Building Permit for the Service Block
Permit No. sor.tor.133/34
Expire: 19 December 2535 (Year corresponding to 1992)
Extended: 07 December 2537 (Year corresponding to 1994)
Extended: 29 July 2538 (Year corresponding to 1995)
2. Building Permit for the Main Building
Permit No. 1257/2535
Expire: 29 October 2537 (Year corresponding to 1994)
Extended: 29 October 2538 (Year corresponding to 1995)
Contract 22352-CWL
Exhibit "B"
Page Number 6
12 September 1994
Revised 15 May 1996
<PAGE> 34
SC-7 CONTRACTOR FURNISHED SHOP DRAWINGS AND SAMPLES
Review and permission to proceed by ARCHITECT or STRUCTURAL ENGINEER as stated
in this Special Condition does not constitute acceptance or approval of design
details, calculations, analyses, test methods, certificates or materials
developed or selected by CONTRACTOR and does not relieve CONTRACTOR from full
compliance with Contractual obligations.
A. The term "shop drawings" as used herein includes fabrication, erection,
layout and setting drawings, manufacturer's standard drawings, schedules,
descriptive literature, catalogs and brochures; performance and test data
wiring and control diagrams; and all other drawings and descriptive data
pertaining to materials, equipment, piping, duct and conduit systems, and
methods of constructions as may be required to show that the materials,
equipment or systems and the position thereof conforms to the CONTRACT
requirements. As used herein, the term "manufactured" applies to standard units
usually mass produced, and "fabricated" means items specifically assembled or
made out of selected materials to meet individual design requirements. Shop
drawings shall establish the actual detail or all manufactured or fabricated
items, indicate proper relation to adjoining work, amplify design details of
mechanical and electrical equipment in proper relation to physical spaces in
the structure and incorporate minor changes it design or construction to suit
actual conditions.
B. The term "samples" as used herein includes: natural materials fabricated
items; equipment, devices and appliances and, or parts thereof as called for in
the specifications, and any other samples as may be required by the
ARCHITECT/STRUCTURAL ENGINEER to determine whether the kind, quality,
construction, workmanship, finish, color and other characteristics of the
materials, etc., proposed by CONTRACTOR conform to the requirements of the
CONTRACT. Samples shall establish the kind, quality and other required
characteristics of the various parts of the work, and all WORK shall be in
accordance with the accepted samples.
C. Within sixty (60) calendar days after execution of the CONTRACT, CONTRACTOR
shall be required to submit to BECHTEL, ARCHITECT/STRUCTURAL ENGINEER, for
their review and approval, a schedule for the submittal of Shop Drawings and
Samples ("Shop Drawings and Samples Submittal Schedule"). The schedule shall
indicate the date on which CONTRACTOR shall submit shop drawings and samples
for each of the various items of WORK to the ARCHITECT/STRUCTURAL ENGINEER
for review.
The schedule shall be directly related to the CONTRACT SCHEDULE prepared by
CONTRACTOR and shall be based on the requirement that all shop drawings and
samples are to be submitted to the ARCHITECT/STRUCTURAL ENGINEER within nine
(9) months after the commencement of the shop drawing review period. The
schedule shall allow approximately twenty (20) days for the
ARCHITECT/STRUCTURAL ENGINEER's review and additional time for resubmission of
shop drawings and samples which may be unacceptable. However, CONTRACTOR shall
recognize that the time required for the ARCHITECT/STRUCTURAL ENGINEER's review
may vary depending upon the quantity of material submitted at any one time and
the complexity of the shop drawing(s). At the time that the submittal schedule
is presented, CONTRACTOR shall also submit for review its proposed format for
the transmittal of shop drawings and samples and an explanation of his system
for identifying shop drawings and samples.
D. CONTRACTOR shall submit all required shop drawings and samples in
accordance with the approved "Shop Drawings and Samples Submittal Schedule" and
with such promptness as to cause no delay in its own WORK or in that of any
other Contractor or subcontractor. No
Contract 22352-CWL
Exhibit "B"
Page Number 7
12 September 1994
<PAGE> 35
SC-7 CONTRACTOR FURNISHED SHOP DRAWINGS AND SAMPLES (Continued)
extensions of time will be granted to CONTRACTOR because of failure to have shop
drawings and samples submitted in ample time to allow for review. Each
subcontractor shall submit all shop drawings, samples and manufacturers'
descriptive data through CONTRACTOR. All such submissions shall be thoroughly
checked by CONTRACTOR for completeness and for compliance with the CONTRACT
before submittal. All shop drawings and samples shall be submitted to the
ARCHITECT/STRUCTURAL ENGINEER unless otherwise directed by BECHTEL. All samples
shall bear CONTRACTOR's stamp certifying that they have been checked. In
checking shop drawings CONTRACTOR shall verify all dimensions and field
conditions and shall check and coordinate each shop drawing with the shop
drawings for the requirements of all other sections or trades whose work is
related thereto and as required for proper and complete installation of the
WORK. Any items submitted without CONTRACTOR's stamp, and any submission which,
in the ARCHITECT/STRUCTURAL ENGINEER's opinion is incomplete, contains numerous
errors or has not been checked or only checked superficially shall be returned
to CONTRACTOR unchecked for resubmission.
E. The ARCHITECT/STRUCTURAL ENGINEER's review of shop drawings and samples
is for the convenience of OWNER in following the WORK and it shall be recognized
by the CONTRACTOR that every submittal returned to CONTRACTOR, regardless of how
marked, may not actually have been reviewed in every detail and that in no event
shall CONTRACTOR assume that the review is complete in every aspect. Such
reviews shall not relieve CONTRACTOR, subcontractor, manufacturer, fabricator or
supplier from responsibility for any deficiency that may exist or for any
departures or deviations from the requirements of the CONTRACT nor shall it
relieve it from responsibility for errors of any sort in shop drawings or
schedules, or from the necessity of furnishing any WORK required by the CONTRACT
which may have been omitted on the shop drawings. Any submission by CONTRACTOR,
regardless of how stamped by CONTRACTOR and any independent investigation or
review by OWNER or ARCHITECT/STRUCTURAL ENGINEER, shall not be considered a
warranty by OWNER and ARCHITECT/STRUCTURAL ENGINEER that the submission and the
WORK depicted are in full compliance with the requirements of the CONTRACT.
F. All shop drawings must be properly identified with the name of the
project and dated, and each lot submitted must be accompanied by a letter of
transmittal referring to the name of the project and to the specification
section number for identification of each item. Shop drawings for each section
of the WORK shall be numbered consecutively and the numbering system shall be
retained throughout all revisions. Each drawing shall have a clear space for the
stamps of CONTRACTOR and the ARCHITECT/STRUCTURAL ENGINEER. CONTRACTOR shall
submit one (1) reproducible transparency and two (2) prints of each drawing,
including fabrication, erection, layout and setting drawings, and such other
drawings as required under the various sections of the specifications until
final acceptance is obtained. CONTRACTOR shall also submit six (6) copies of
manufacturer's descriptive data for materials, equipment and fixtures, including
catalog sheets showing dimensions, performance characteristics and capacities,
wiring diagrams and controls schedules and other pertinent information as
required.
G. In cases where a considerable range of color, graining, texture or other
characteristics may be anticipated in finished products, a sufficient number of
samples of the specified materials shall be furnished to the ARCHITECT/
STRUCTURAL ENGINEER to indicate the full range of such characteristics
which will be present in the finished products any such products delivered or
erected without submittal and acceptance of full range samples shall be subject
to rejection.
Contract 22352-CWL
Exhibit "B"
Page Number 8
12 September 1994
<PAGE> 36
SC-7 CONTRACTOR FURNISHED SHOP DRAWINGS AND SAMPLES (Continued)
Except for range samples, and unless otherwise called for in the various
sections of the specifications or specifically requested by the ARCHITECT/
STRUCTURAL ENGINEER before submittal, samples shall be submitted in triplicate.
All samples shall be marked tagged, or otherwise properly identified with the
name of CONTRACTOR, the name of the project, the purpose for which the samples
are submitted and the date and shall be accompanied by a letter of transmittal
containing similar information, together with the specification section number
for identification of each item. Each tag or sticker shall have clear space for
the stamps of CONTRACTOR and the ARCHITECT/STRUCTURAL ENGINEER. Samples of
materials which are generally furnished in containers bearing the
manufacturers' descriptive labels and printed application instructions shall,
if not submitted in the standard containers, they must be supplied with such
labels and application instructions.
H. Each submittal will be returned to CONTRACTOR stamped or marked by the
ARCHITECT/STRUCTURAL ENGINEER as follows:
CODE ACTIVITY
---- --------
1 Approved - Work may proceed.
2 Approved as noted - Work may proceed as noted. Resubmittal is not
required.
3 Revise and Resubmit.
4 Reviewed Only.
I. Notice to proceed with or without notations shall not be construed by
CONTRACTOR as any indication that the submittal is correct or suitable or that
the WORK represented by the submittal is in accordance with the CONTRACT.
J. The ARCHITECT/STRUCTURAL ENGINEER will return the shop drawing
transparencies stamped with "CODE 1" or "CODE 2" to CONTRACTOR who shall be
responsible for obtaining prints thereof and distributing them to the
manufacturers, suppliers, subcontractors and to his supervisory staff.
K. In the case of shop drawings in the form of manufacturer's descriptive
literature, catalog cuts and brochures stamped "CODE 1" or "CODE 2", the
ARCHITECT/STRUCTURAL ENGINEER will return four (4) stamped copies to the
CONTRACTOR who shall be responsible for distributing them to the manufacturers,
suppliers, subcontractors and to his supervisory staff. If the manufacturer's
descriptive literature is stamped "CODE 3" the ARCHITECT/STRUCTURAL ENGINEER
will return four (4) copies to the CONTRACTOR who shall submit six (6) new
copies of the required shop drawings to the ARCHITECT/STRUCTURAL ENGINEER.
L. In the case of samples stamped "CODE 1" or "CODE 2", the ARCHITECT/
STRUCTURAL ENGINEER will return one of the three (3) samples to the
CONTRACTOR. If stamped "CODE 3", the ARCHITECT/STRUCTURAL ENGINEER will return
two of the submitted samples and the CONTRACTOR shall resubmit three (3) new
samples to the ARCHITECT/STRUCTURAL ENGINEER.
Contract 22352-CWL
Exhibit "B"
Page Number 9
12 September 1994
<PAGE> 37
SC-7 CONTRACTOR FURNISHED SHOP DRAWINGS AND SAMPLES (Continued)
M. As-Built Drawings and Specifications
(a) Drawings:
(1) Progress As-Builts. During construction, CONTRACTOR shall
keep a marked-up-to-date set of as-built blueline drawings on
the JOBSITE as an accurate record of all deviations between WORK
as shown and WORK as installed. These drawings shall be
available to BECHTEL and OWNER'S Technical Representatives for
inspection at any time during regular business hours.
(2) Final As-Builts. CONTRACTOR shall at its expense and not
later than thirty (30) calendar days from and after issuance of
the "Certificate of Final Acceptance" and before Final Payment
furnish to BECHTEL a complete set of marked-up as-built
reproducible drawings with "AS-BUILT" clearly printed on each
sheet. BECHTEL, without charge, will furnish CONTRACTOR with
reproducible copies for mark-up by CONTRACTOR. CONTRACTOR shall
accurately and neatly transfer all deviations from progress
as-builts to final as-builts. As-built drawings shall be
provided where specified and as required to reflect as-built
conditions.
(b) Specifications:
(1) Progress As-Builts. During construction, CONTRACTOR shall
keep a marked-up-to-date set of as-built specifications on the
JOBSITE annotated to clearly indicate all substitutions that are
incorporated into the WORK. Where selection of more than one
product is specified, annotation shall show which product was
installed. These specifications shall be available to BECHTEL
and OWNER'S Technical Representatives for inspection at any time
during regular business hours.
(2) Final As-Builts. CONTRACTOR shall at its expense and not
later than thirty (30) calendar days from and after the issuance
of the "Certificated of Final Acceptance" and before Final
Payment furnish to BECHTEL a complete set of marked-up as-built
specifications with AS-BUILT clearly printed on the cover.
BECHTEL, without charge, will furnish CONTRACTOR a set of
specifications for mark-up by CONTRACTOR. CONTRACTOR shall
accurately and neatly transfer all annotations from progress
as-builts to final as-builts.
(c) Endorsement:
CONTRACTOR shall sign each final as-built drawing and the cover
of the as-built specifications and shall note thereon that
deviations and annotations are complete and accurate.
Contract 22352-CWL
Exhibit "B"
Page Number 10
12 September 1994
<PAGE> 38
SC-8 COMMENCEMENT, PROSECUTION AND COMPLETION OF THE WORK
CONTRACTOR shall complete the WORK under the CONTRACT to meet the following
Milestone Dates:
<TABLE>
<CAPTION>
Days after receipt of
No. Activity Notice to Proceed
- --- -------- ---------------------
<S> <C> <C>
1. Complete Curtain Wall Installation 837
</TABLE>
CONTRACTOR shall furnish sufficient forces, construction plant and equipment,
and shall work such hours, including extra shifts and overtime operations and
shall furnish such other necessities to assure the prosecution of the WORK in
accordance with the CONTRACT SCHEDULE as set forth in the Special Condition
below titled "CONTRACT SCHEDULE."
SC-9 CONTRACT SCHEDULE
CONTRACTOR shall, within thirty (30) calendar days of CONTRACT award and
before the first progress payment is made, submit to CONTRACTOR for approval
the CONTRACT SCHEDULE consisting of a detailed fabrication and construction
schedule meeting the dates established in the Special Condition titled
"COMMENCEMENT, PROSECUTION AND COMPLETION OF THE WORK." The CONTRACT SCHEDULE
shall be based on an analysis of construction activities and sequence of
operations needed for the orderly performance and completion of any separable
parts of and all the WORK in accordance with this CONTRACT. The CONTRACT
SCHEDULE shall be Critical Path Method (CPM) network utilizing commercially
available computerized software which provides an arrow diagram and activity
listing. The network diagram shall show in detail and in sequence all
activities, their descriptions, durations and dependencies, necessary and
required to complete the WORK and any separable parts thereof. The activity
listing shall show the following information for each activity on the network
diagram:
Identification by node numbers and description
Duration
Earliest start and finish dates
Latest start and finish dates
Total float time
The CONTRACT SCHEDULE shall be complete in all respects, covering in addition
to activities at the JOBSITE, off-site activities such as design,
fabrication, procurement and jobsite delivery of CONTRACTOR-furnished equipment
and the scheduled JOBSITE delivery dates of equipment to be furnished by OWNER,
if any; the schedule shall be in sufficient detail to clearly delineate
submission and review of shop drawings and samples; fabrication and delivery of
materials; the installation and testing of major items; contiguous or related
WORK under other contracts; and, other items critical to the WORK. The
ARCHITECT/STRUCTURAL ENGINEER review activity shall be included in the CONTRACT
SCHEDULE. Schedule activity durations shall generally range in duration from
three (3) to fifteen (15) working days, or as deemed reasonable by BECHTEL
based on complexity, and criticality of the tasks involved. An exception will
be made for procurement items which shall have a duration starting with the
issuance of the purchase agreement and shall include the approval of shop
drawings and ending with delivery of the items to the JOBSITE. The schedule
will identify work days per week and shifts per day that the CONTRACTOR intends
to perform WORK. The critical path and required milestones shall be clearly
identified on the CONTRACT SCHEDULE. In addition, CONTRACTOR shall submit a
detailed narrative description of its plan of performing the WORK to meet the
CONTRACT SCHEDULE.
Contract 22352-CWL
Exhibit "B"
Page Number 11
12 September 1994
<PAGE> 39
SC-9 CONTRACT SCHEDULE (Continued)
CONTRACTOR shall promptly inform BECHTEL of any proposed change in the CONTRACT
SCHEDULE and narrative and shall furnish BECHTEL with a revised schedule and
narrative within ten (10) calendar days after approval by BECHTEL of such
change. The schedule and narrative shall be kept up to date, taking into account
the actual WORK progress and shall be revised, every thirty (30) calendar days
or at any other time as BECHTEL may deem required. The revised schedule and
narrative shall, as determined by BECHTEL, be sufficient to meet the
requirements for the completion of the separable parts of any and all of the
WORK as set forth in this CONTRACT. When approved by BECHTEL, the CONTRACT
SCHEDULE will supersede all previous schedules and progress charts.
If requested by BECHTEL, CONTRACTOR shall prepare at its own cost, sub-networks
to further analyze and clarify aspects of the CONTRACT SCHEDULE.
The updating of the detailed CONTRACT SCHEDULE shall include:
- Actual dates for activities started
- Actual dates for activities completed
- Physical % complete for activities in progress
- Remaining durations for activities in progress
If CONTRACTOR submits a CONTRACT SCHEDULE showing any critical path activity
more than one (1) week late, CONTRACTOR must submit a recovery plan within five
(5) working days for approval.
PERFORMANCE REPORTS
CONTRACTOR shall be required to submit the following Performance Reports:
(a) CONTRACTOR DAILY REPORT: listing all non-manual and manual personnel by
craft as well as all construction equipment and facilities utilized in
the WORK. (DAILY)
(b) THREE (3) WEEK CONSTRUCTION: schedule showing those activities being
worked during a three (3) week period and will be reviewed at weekly
schedule meetings with BECHTEL. (WEEKLY)
(c) CONTRACT PHYSICAL PROGRESS REPORT: showing quantities installed as
required by BECHTEL. (MONTHLY)
(d) CONTRACT SCHEDULE MONTHLY UPDATE: an update of the Current CONTRACT
SCHEDULE. (MONTHLY)
(e) CONTRACT PROGRESS CHART: an "S" curve and (for activities as required by
BECHTEL) updated to show actual progress. (MONTHLY)
(f) MONTHLY STATUS REPORT: (Within ten (10) calendar days after the end of
the month). (MONTHLY)
The Monthly Status Report shall include, but not be limited to the
following:
Contract 22352-CWL
Exhibit "B"
Page Number 12
12 September 1994
<PAGE> 40
SC-9 CONTRACT SCHEDULE (Continued)
(1) Description of Contractors Activities during the previous
period
(2) Schedule(s)
(3) Cost & Commitment Report
(4) Cash Flow
(5) Monthly Force Report
(6) Update Progress Chart
If CONTRACTOR fails to submit the Performance Reports and the CONTRACT
SCHEDULE as stated above, BECHTEL reserves the right to withhold Progress
Payments until such time as CONTRACTOR meets such requirements.
PROJECT MEETINGS
A. Pre-Construction Conference: Prior to commencing any WORK, a
pre-construction conference will be requested by BECHTEL. In attendance will be
CONTRACTOR, BECHTEL, OWNER'S Technical Representatives and others deemed by
BECHTEL to be advisable. The purpose of the conference will be to determine
procedures and priorities related to smooth performance of the WORK and to
review items requiring clarification. Procedures for processing and
distribution of documents and correspondence related to the CONTRACT will be
discussed.
B. Progress Meetings: BECHTEL, CONTRACTOR, and its subcontractors, suppliers
and vendors whose attendance is necessary or requested shall attend weekly
progress meetings for the purpose of discussing execution of the WORK.
Proceedings of the meetings will be recorded by CONTRACTOR, and after review by
BECHTEL, distributed.
SC-10 TEMPORARY ACCESS AND HAUL ROADS
A. Throughout the term of this CONTRACT the main roads, highways, and
motorways within the Kingdom of Thailand may be subject to heavy congestion,
major construction or repair or restrictions as to use by local authorities.
Notwithstanding this, CONTRACTOR shall be responsible for planning and
obtaining access to its assigned work areas without impacting the CONTRACT
SCHEDULE.
B. CONTRACTOR shall, at its expense, construct and maintain temporary access
and haul roads as may be necessary for the proper performance of this
CONTRACT. CONTRACTOR shall submit a layout of all proposed roads prior to road
construction. The layout shall show widths of roads, direction of traffic,
cures, surfaces, grades and related information in sufficient detail for review
by BECHTEL. Roads constructed on OWNER'S land or rights-of-way shall be
subject to OWNER'S approval and shall be removed, at OWNER'S discretion, at the
completion of the PROJECT.
SC-11 NOT USED
SC-12 SAFETY, HEALTH AND SECURITY PROGRAMS
In performance of the WORK under this CONTRACT, CONTRACTOR, shall establish and
maintain the following programs:
A. A Safety and Health Program shall be submitted in writing to BECHTHEL for
review and coordination with other JOBSITE activities within thirty (30)
calendar days after execution of the CONTRACT and in any event prior to
commencing WORK at the
Contract 22352-CWL
Exhibit "B"
Page Number 13
12 September 1994
<PAGE> 41
SC-12 SAFETY, HEALTH AND SECURITY PROGRAMS (Continued)
JOBSITE. Such program shall be commensurate with the WORK and shall provide:
1. Designation of one or more qualified individuals as safety
representative(s).
2. Specific review and approval of all work plans and methods by the
safety representative(s).
3. Periodic inspection by the safety representative(s) of CONTRACTOR'S
work and storage areas to assure safe conditions and practices.
4. Immediate reporting of any and all deaths, injuries and damage to
property to BECHTEL.
5. Full cooperation in the conduct of inspections by BECHTEL, OWNER,
governmental agencies and other agencies of competent jurisdiction. Copies of
citation notices by such agencies shall be submitted to BECHTEL immediately upon
receipt.
6. Compliance with all applicable safety and health related laws and
regulations and directives of governmental and other agencies of competent
jurisdiction.
7. Immediate correction by CONTRACTOR of any unsafe conditions or
unsafe acts by its employees.
B. A Fire Prevention Program shall be submitted in writing to BECHTEL for
review and coordination with other JOBSITE activities within thirty (30)
calendar days of CONTRACT aware and in any event prior to commencement of WORK
at the JOBSITE. Such program shall include:
1. Restriction of burning to designated areas. No unauthorized fires
shall be permitted on the JOBSITE.
2. Assignment of fire watches, trained and equipped to prevent or
control fires, for all welding and burning operations.
3. Proper identification, storing, handling and use of inflammable
material to prevent accidental ignition.
4. Adequate fire extinguishing equipment appropriate for the
operations being performed shall be provided by the CONTRACTOR and CONTRACTOR'S
personnel shall be trained in the maintenance and use of such equipment.
5. Evacuation procedures and fire drills as required by BECHTEL.
C. A Security Program shall be submitted by CONTRACTOR in writing to BECHTEL
for approval and coordination with other JOBSITE activities within thirty (30)
days of execution of the CONTRACT and in any event,prior to commencing WORK at
the JOBSITE. Such program shall include:
1. Controlled access to office, warehouse, material and equipment
sites.
Contract 22352-CWL
Exhibit "B"
Page Number 14
12 September 1994
<PAGE> 42
SC-12 SAFETY, HEALTH AND SECURITY PROGRAMS (Continued)
2. Accountability procedures for the requisition and issue of
materials.
3. Periodic security checks of all work areas assigned to CONTRACTOR.
4. Coordination and compliance with PROJECT security programs.
5. Prompt reporting of incidents of loss, theft or vandalism to
BECHTEL subsequently detailed in writing.
Notwithstanding any review or approval of the CONTRACTOR'S programs by BECHTEL
or OWNER as required herein, CONTRACTOR is responsible for maintaining proper
and effective safety, fire prevention, and security conditions at all times at
the JOBSITE.
SC-13 EXPLOSIVES
Explosives shall be transported to the JOBSITE only when required to perform the
WORK under this CONTRACT. CONTRACTOR shall be responsible for properly
purchasing, transporting, storing, safeguarding, handling and using explosives
required to perform the WORK under this CONTRACT. CONTRACTOR shall employ
competent and qualified personnel for the use of explosives and shall assume
full responsibilities for the cost of any incidental or consequential damages
caused by the improper use of explosives. Residual surplus explosives shall be
promptly removed from the JOBSITE and properly disposed of by CONTRACTOR.
SC-14 ADVANCE PAYMENT AND PERFORMANCE SECURITIES
A. CONTRACTOR shall, upon execution of this CONTRACT and receipt of the
Advance Payment, furnish to OWNER through BECHTEL the following security:
For Advance Payment, CONTRACTOR shall provide an unconditional and
irrevocable Bank Guarantee in an amount equal to 100% of the advance payment
amount which will be valid until full liquidation of the advance payment in
accordance with the terms of this CONTRACT.
B. CONTRACTOR shall, within ten (10) calendar days after execution of this
CONTRACT, furnish to OWNER through BECHTEL the following security:
For Performance in accordance with the terms of this CONTRACT, CONTRACTOR
shall provide an unconditional and irrevocable Bank Guarantee for
performance of the WORK under this CONTRACT. Such security shall be in an
amount equal to 10% of the Total Lump Sum Price and shall be valid through
the Warranty period as defined in the General Condition titled "WARRANTY".
CONTRACTOR shall vary the value of this security as necessary and called for
by the issuing bank to equal all CONTRACT changes made pursuant to the
General Condition titled "CHANGES". Upon Issuance of the "Certificate of
Final Acceptance" for the PROJECT, BECHTEL may approve the reduction of the
value of the Performance Security for the period of Warranty.
Such securities shall be issued in a form and by a bank acceptable to OWNER.
Contract 22352-CWL
Exhibit "B"
Page Number 15
12 September 1994
<PAGE> 43
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS
A. ADVANCE PAYMENT - An advance payment of five percent (5%) of the Total Lump
Sum Price shall be paid to the CONTRACTOR upon the effective date of the
CONTRACT. Such sum shall be paid against an unconditional and irrevocable Bank
Guarantee submitted to OWNER in Thai Baht issued by a Bank approved by OWNER in
a form and substance acceptable to OWNER and valid for the duration of the
period for which the advance payment is outstanding. The reimbursement of the
Advance Payment to OWNER shall be made on a prorata basis, starting with the
first monthly Progress Payment and ending upon the issuance of the Certificate
of Final Acceptance. The value of the Letter of Credit shall be reduced in
accordance with the amounts recovered by OWNER as and when effected.
B. PROGRESS PAYMENTS - PERMANENT WORK - Exhibit "C", Appendix A-1, "Lump Sum
Price Breakdown and Pay Items" shall be used as the basis for the CONTRACTOR's
Monthly Payment Requisitions which shall be prepared in accordance with he
format outlined under Paragraph E. herein.
CONTRACTOR shall make all surveys necessary for determining the value of the
Monthly Payment Requisitions in accordance with Exhibit "C", Appendix A-1,
"Lump Sum Price Breakdown and Pay Items". Copies of field notes, computations
and other records made by CONTRACTOR for the purpose of determining quantities
shall be furnished to BECHTEL upon request. CONTRACTOR shall notify BECHTEL
prior to the time such surveys are made. BECHTEL, at its discretion, may
arrange to have its representative witness and verify all surveys made by
CONTRACTOR for determining quantities of WORK to be paid for as Progress
Payments.
At the end of each month the CONTRACTOR shall submit to BECHTEL a detailed
statement, based upon the above described survey, in an approved form, showing
the estimated value (quantity of units x unit rate = total) of the Permanent
Work executed up to the end of the month. If, in the opinion of BECHTEL, such
value is justified, BECHTEL will issue a Certificate of Payment to OWNER.
CONTRACTOR will be paid monthly, on the Certificate of Payment, the amount due
for the above described method of determining the value of the Permanent Work
executed up to the end of the previous month together with any agreed upon of
estimated values of unused materials for Permanent Work (at the invoiced price
or at an agreed upon amount) delivered and stored in an approved manner by
CONTRACTOR to the JOBSITE.
C. PROGRESS PAYMENTS - PRELIMINARIES - The amount of the Preliminaries
(General Conditions) requested by CONTRACTOR shall, as mutually agreed upon
between CONTRACTOR and BECHTEL and approved by OWNER, be paid on equal monthly
installments starting from the first month of the mobilization period and will
be adjusted according to the forecasted final CONTRACT completion date.
D. RETENTION - All payments to CONTRACTOR are subject to a retention of ** of
the said amount(s), until the total amount of retained money shall reach the
equivalent of ** of the Total Lump Sum Price which then shall be considered
the "Limit of Retention Money". Thereafter, and in lieu of retentions on
subsequent payments CONTRACTOR shall provide OWNER with an irrevocable,
unconditional Bank Guarantee issued by a Bank approved by OWNER and in a form
and substance acceptable to OWNER, equal to ** of each monthly
Contract 22352-CWL
Exhibit "B"
Page Number 16
12 September 1994
<PAGE> 44
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS (Continued)
payment totaling in the aggregate at completion an additional ** of the Total
Lump Sum Price. Upon receipt of BECHTEL's "Certificate of Final Acceptance" in
accordance with the General Condition titled "Final Inspection and Acceptance",
OWNER shall remit to CONTRACTOR the retention amounts corresponding to each
component for which a Certificate of Final Acceptance has been issued and shall
also reduce the aforesaid bank guarantee by the corresponding portion provided
that CONTRACTOR shall submit to OWNER a replacement irrevocable unconditional
Bank Guarantee in the same form and source as the original, in the amount of **
of the total value of the relevant Component. Said Bank Guarantee(s) shall
remain in force until expiration of the full 12 month Period of Warranty as
defined under the General Condition titled "Warranty", herein. Provided further
that in the event of different Warranty periods having become applicable to
different Components of the WORK pursuant to the General condition titled
"Warranty", the expression "expiration of the full 12 month Warranty Period"
shall for the purpose of this Clause be deemed to mean the expiration of each
corresponding period. Provided always that if at such time there shall remain
to be executed by the CONTRACTOR any WORK ordered during such period(s). OWNER
shall be entitled to retain an amount of the "Retention Money" or bond
corresponding, in the opinion of BECHTEL, to the value of the remaining WORK to
be executed until such WORK has been completed to the satisfaction of BECHTEL.
E. PAYMENT -- The Amount Due the CONTRACTOR as aforesaid shall be the
summation of the following:
1. The value of the Permanent Work executed at the JOBSITE and forming
part of the WORK, and
2. Monthly installments for Preliminaries, and
3. The value of the materials and goods delivered upon the JOBSITE for
use in the Permanent Works, provided that they are reasonably and
properly stored and/or protected against weather or other
casualties, and
4. The value of imported materials in shipment against signed Shipping
Documents in the name of OWNER and any other reasonable safeguards
and insured to OWNER's name in amounts imposed by OWNER, (payments
will be made by OWNER on imported material shipments against
shipping documents provided that the goods are insured
warehouse-to-warehouse), and
5. The addition or reduction for any other amounts payable to or
allowed by the CONTRACTOR under the terms of the Contract Documents,
and
6. The deduction of repayment of advance payment in accordance with
Paragraph A. hereof, and
7. The deduction of retentions in accordance with Paragraph D, hereof,
and
8. The deduction of any Backcharges against the CONTRACTOR as
determined by BECHTEL.
9. The deduction of the amount of all previous payment certified under
the CONTRACT.
Contract 22352-CWL
Exhibit "B"
Page Number 17
12 September 1994
<PAGE> 45
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS (Continued)
Payment shall be made by OWNER within thirty (30) calendar days after BECHTEL'S
Certificate of Payment has been delivered to OWNER, but not later than forty
five (45) calendar days after CONTRACTOR has delivered to BECHTEL his formal
request for payment.
CONTRACTOR shall submit monthly and the final invoices in original and two (2)
copies to:
Thor E. Christiansen
Project Manager
Bechtel International, Inc.
Contract No. 22352-CWL
BECHTEL may, by any Certificate of Payment, make any correction or
modification in any previous certificate which it has issued, and shall have
power to withhold any certificate if the WORK, or any part thereof, are not
being carried out to BECHTEL'S satisfaction.
The payment of all monies due to the CONTRACTOR under the provision of this
Clause shall be in Thai Baht as prescribed in the CONTRACT.
If the CONTRACTOR is not paid the amount due within 30 days after certification
for payment by BECHTEL but not later than 45 days after the delivery of the
formal request for payment to BECHTEL by CONTRACTOR, interest on the certified
amount due shall become due and payable by OWNER to CONTRACTOR at a rate of the
Minimum Lending Rate (MLR) of Bangkok Bank Co., Ltd. plus two percent (+2%) on
a daily basis upon all certified amount unpaid, from the date by which the same
should have been paid.
Without prejudice to the CONTRACTOR'S entitlement to the payment of interest,
as set out above, or to terminate the CONTRACT, as set out below, if OWNER
fails to pay CONTRACTOR the amount due under any certificate of payment
CONTRACTOR may, after 7 days from the date of such failure to pay, give OWNER
and BECHTEL, 7 days notice of CONTRACTORS intention to suspend or reduce the
rate of WORK. If OWNER has still failed to pay within such 14 day period and
CONTRACTOR has given notice, CONTRACTOR may forthwith suspend or reduce the
rate of WORK. CONTRACTOR shall agree with BECHTEL the "measures necessary to
make and maintain WORK in a safe and secure manner, and the costs of all such
actions, as well as such other costs may be incurred by CONTRACTOR due to such
suspension or reduction in the rate of WORK, shall be agreed by BECHTEL for
payment. BECHTEL shall also grant an extension of time to cover any delays
resulting from such suspension or reduction in the rate of the WORK. Should
OWNER make payment of all monies due to CONTRACTOR, CONTRACTOR shall forthwith
resume the work.
If any payment is delayed by more than two months, CONTRACTOR may at any time,
without prejudice to any other rights or remedies, and after giving BECHTEL and
OWNER 14 days written notice, terminates the CONTRACT.
If the CONTRACT is terminated as aforesaid. CONTRACTOR shall be paid by OWNER
for all work executed prior to the date of termination in accordance with the
CONTRACT and BECHTEL shall determine the amount of additional payment due to
CONTRACTOR as a result of all and any costs caused to CONTRACTOR by such
termination of the CONTRACT, in accordance with the principles set out in
Clause GC-49 TERMINATION BY CONTRACTOR.
Contract 22352-CWL
Exhibit "B"
Page Number 18
12 September 1994
<PAGE> 46
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS (Continued)
F. COMPLETION OF WARRANTY CERTIFICATE - The WORK shall not be considered as
completed until a Completion of Warranty Certificate(s) covering each material,
equipment or system for which CONTRACTOR is required by the CONTRACT to provide
a "Period of Warranty" shall have been signed by BECHTEL stating that WORK has
been completed and maintained to its satisfaction. The Completion of Warranty
Certificate(s) shall be given by BECHTEL thirty (30) days after the expiration
of the Period of Warranty (or if different Periods of Warranty shall become
applicable to each Component of the WORK the expiration of each corresponding
period), or as soon thereafter as any WORK ordered during such period pursuant
to General Conditions titled "Warranty" and "Final Inspection and Acceptance"
hereof shall have been completed to the satisfaction of BECHTEL and full effect
shall be given to this Clause notwithstanding any previous entry on WORK or the
taking possession, working, or using thereof, or any part thereof by Owner.
Provided always that the issuance of Completion of Warranty Certificate(s) by
BECHTEL shall not be a condition to allow the cancellation of CONTRACTOR's Bank
Guarantee(s) or any portion thereof. Such Bank Guarantees or portions thereof
may only be canceled after CONTRACTOR has received written approval from OWNER
to do so, and such approval shall not be unreasonably withheld by OWNER, and is
to be released within fourteen (14) days from OWNER having received BECHTEL's
"Completion of Warranty Certificate(s)."
No certificate other than the "Completion of Warranty Certificates" shall be
deemed to constitute approval of any WORK or other matter in respect of which
it is issued, or shall be taken as an admission of the due performance of the
CONTRACT, or any part thereof, or of the accuracy of any claim or demand made
by CONTRACTOR, or of additional or varied WORK having been ordered by BECHTEL,
nor shall any other certificate conclude or prejudice any of the powers of
BECHTEL or OWNER.
G. RELEASES - Where required by BECHTEL and as a condition to the making of
any progress payment to CONTRACTOR, CONTRACTOR shall submit satisfactory
evidence demonstrating that CONTRACTOR has made payments to suppliers,
subcontractors, or other persons, firms or corporations in respect of whose
supplies or work is related to the performance of WORK for which previous
progress payments have been requested.
Any amounts otherwise payable under this CONTRACT may be withheld with
reasonable prior notice by BECHTEL, in whole or in part, if:
1. A substantiated claim by a supplier, subcontractor, or other persons,
firms or corporations, in respect of whose supplies or work is related
to the performance of WORK for which previous progress payments have
been made to CONTRACTOR, but where CONTRACTOR has, for no good
reason, not made due and appropriate payment to such supplier,
subcontractor, or other persons, firms or corporations.
2. CONTRACTOR is in default of any CONTRACT condition as determined by
BECHTEL, including without limitation, the CONTRACT SCHEDULE, quality
or safety requirements, of which CONTRACTOR has been notified to
remedy and for which CONTRACTOR has not furnished satisfactory
evidence that such default has been remedied.
3. CONTRACTOR has failed to deliver any item which is required to be
delivered by CONTRACTOR under this CONTRACT.
Contract 22352-CWL
Exhibit "B"
Page Number 19
12 September 1994
<PAGE> 47
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS (Continued)
OWNER will pay such withheld payments within 30 days after CONTRACTOR furnishes
satisfactory evidence that it has paid, satisfied or discharged any claim of
BECHTEL, OWNER, or third parties against CONTRACTOR arising out of or in any way
connected with this CONTRACT, or after CONTRACTOR cures all defaults, as
verified by BECHTEL, in the performance of this CONTRACT.
If claims filed against CONTRACTOR connected with performance under this
CONTRACT are not promptly removed by CONTRACTOR after receipt of written notice
from BECHTEL to do so, BECHTEL may remove such claims and deduct all costs in
connection with such removal from any or all Certificates of Payments which may
become due. If the amount of such withheld payment or other monies due
CONTRACTOR under this CONTRACT is insufficient to meet such costs, or if any
claim against CONTRACTOR is discharged by BECHTEL or OWNER after final payment
is made, CONTRACTOR and its surety or sureties, if any, shall promptly pay OWNER
all costs incurred thereby regardless of when such claim arose or whether such
claim imposed a lien upon the PROJECT or the real property upon which the
PROJECT is situated.
In the event a lien is filed, CONTRACTOR shall remove the lien, or see that it
is removed or shall furnish a bond for the full amount thereof within fourteen
(14) calendar days of notice by BECHTEL. CONTRACTOR shall obtain for itself
legally effective waivers of lien and furnish same to BECHTEL with each
application for payment. Failure to comply with the foregoing requirements
shall constitute grounds for termination of this CONTRACT in accordance with the
General Condition titled "TERMINATION FOR DEFAULT."
Upon receipt by CONTRACTOR of BECHTEL's written "Certificate of Final
Acceptance" under this CONTRACT, CONTRACTOR shall prepare in writing for
BECHTEL's approval of the amount and value of all WORK satisfactorily completed
under this CONTRACT. Upon BECHTEL's approval CONTRACTOR shall prepare and submit
its final invoice. Unless otherwise specified by applicable law, OWNER shall,
within sixty (60) calendar days following the "Certificate of Final Acceptance"
and after submittal of such invoice, pay to CONTRACTOR the amount then remaining
due, less any amount as deemed appropriate by BECHTEL to provide for any
Warranty item which may arise before the completion of the Warranty period,
provided that, CONTRACTOR shall have furnished BECHTEL and OWNER for itself, its
subcontractors, immediate and remote, and all material suppliers, vendors,
laborers and other parties acting through or under it, waivers and releases of
all claims against BECHTEL or OWNER arising under or by virtue of this CONTRACT,
except such claims, if any, as may with the consent of BECHTEL and OWNER be
specifically excepted by CONTRACTOR from the operation of the release in stated
amounts to be set forth therein.
No payments of invoices or portions thereof shall at any time constitute
approval or acceptance of WORK under this CONTRACT, nor be considered to be a
waiver by BECHTEL or OWNER of any of the terms of this CONTRACT. In addition,
title to all material and equipment for which payment has been made, whether or
not the same has been incorporated in the WORK, and title to all completed WORK
whether paid for or not, shall vest in OWNER, and in any case shall not be part
of CONTRACTOR's property or estate in the event CONTRACTOR is adjudged bankrupt
or makes a general assignment for the benefit of creditors, or if a receiver is
appointed on account of CONTRACTOR's insolvency.
Contract 22352-CWL
Exhibit "B"
Page Number 20
12 September 1994
<PAGE> 48
SC-15 CERTIFICATES OF PAYMENT AND PAYMENTS (Continued)
Notwithstanding any other provision of this CONTRACT, if CONTRACTOR indents to
claim any additional payment pursuant to any provision of this CONTRACT or
otherwise, CONTRACTOR shall give notice of his intention to BECHTEL immediately
and in any event within ten (10) calendar days after the event giving rise to
the claim becomes known to CONTRACTOR, failing which CONTRACTOR shall not be
entitled to make such claim.
SC-16 MEASURE FOR PAYMENT AND PAYMENT FOR WORK (NOT INCLUDED IN THE
LUMP SUM PRICE BREAKDOWN AND PAY ITEMS. (SC-15))
In the event that any part or parts of the WORK are not covered in the "Lump
Sum Price Breakdown and Pay Items" as defined in SC-15 and need to be measured
for monthly Progress Payments or Changes, BECHTEL will give notice to
CONTRACTOR or its representative who shall attend or send a qualified
representative to assist in making such measurements and shall furnish all the
particulars required by either of them. Should CONTRACTOR not attend, or
neglect, or omit to send such representative then the measurement made by or on
behalf of BECHTEL or approved by BECHTEL, shall be taken to be the correct
measurement of the WORK.
For purpose of measuring such Permanent Work as is to be measured by records
and drawings, BECHTEL shall prepare records and drawings month by month of such
WORK and CONTRACTOR, as and when called upon to do so, shall within five (5)
Calendar days attend to examine and agree such records and drawings with
BECHTEL and shall sign the same when so agreed and if CONTRACTOR does not so
attend to examine and agree with any such records and drawings, they shall be
taken to be correct. If after examination of such records and drawings
CONTRACTOR does not agree with the same or does not sign the same as agreed,
they shall nevertheless be taken to be correct unless CONTRACTOR shall within
five (5) Calendar days of such examination lodge with BECHTEL for decision by
BECHTEL a notice in writing of the respects in which such records and drawings
are claimed by it to be incorrect. The decision of BECHTEL shall be final.
For the preparing of interim Certificates of Payment and Changes only, the WORK
may be measured net, notwithstanding any general or local custom, except where
otherwise specifically described or prescribed in the CONTRACT.
SC-17 PRICING OF ADJUSTMENTS
A. BECHTEL shall determine the amount (if any), which in its opinion should
be added to or deducted from the Total Lump Sum Price named in this CONTRACT in
respect of any extra or additional WORK done or WORK omitted by a Change Notice
issued pursuant to General Condition titled "Changes".
B. The value of any additional WORK or WORK omitted shall be determined by
applying unit prices included in Exhibit "C", Appendix A-2, "Prices for Changes
and Contractor's Detailed Bill of Quantities".
C. If the unit prices defined in Paragraph B. above are not applicable, the
value will be determined in one of the following ways:
1. By estimate and acceptance in a lump sum based on quantity breakdown
hereinafter described.
2. By actual cost incurred and percentage, or by actual cost incurred and
a fixed fee.
Contract 22352-CWL
Exhibit "B"
Page Number 21
12 September 1994
<PAGE> 49
SC-17 PRICING OF ADJUSTMENTS (Continued)
Regarding Items 1. and 2. above, in the case of a disagreement of the value of
the additional WORK or WORK omitted, CONTRACTOR shall notify BECHTEL in writing
of its reasons for the disagreement. If, after examination by BECHTEL, the
value of such work is still in dispute, CONTRACTOR shall proceed with the WORK
but shall have the right to refer the matter to arbitration.
D. Itemized proposals for Changes in the WORK according to C1. and C2. herein
shall be accompanied by a breakdown showing CONTRACTOR'S estimated labor and
materials (itemized as to type, size, quantity and unit of measurement) in
their actual amounts before computation of overhead and profit.
E. In a Change involving both deductions and addition, including relocation
of WORK or substitution of one material for another, such deductions and
additions shall be balanced before computation of overhead and profit.
F. BECHTEL, may, if in its opinion it is necessary or desirable, order in
writing that additional or substituted WORK shall be executed on a "Time and
Material" basis, CONTRACTOR shall then be paid for that WORK scheduled and
agreed upon between BECHTEL and CONTRACTOR.
CONTRACTOR shall submit to BECHTEL such payroll records, receipts or other
vouchers as may be necessary to prove the amounts to be paid, and before
ordering materials shall submit to BECHTEL quotations for the same for approval.
In respect of all WORK executed on a Time and Material basis, CONTRACTOR shall
during the continuance of such WORK, deliver each day to BECHTEL an exact list,
in duplicate, of the names, occupation and time of all workmen employed on such
WORK and a statement, also in duplicate, showing the description and quantity
of all materials and plant used thereon, or therefor, (other than plant which
is included in the percentage addition). One copy of each list and statement
will, when agreed, be signed by BECHTEL and returned to CONTRACTOR.
At the end of each month CONTRACTOR shall deliver to BECHTEL a priced statement
of the labor, material, and plant, (except as aforesaid), used, and CONTRACTOR
shall not be entitled to any payment unless such list and statements have been
fully and punctually rendered.
G. CONTRACTOR shall send to BECHTEL once each month an account giving
particulars (as full and detailed as possible), of all claims for additional
expense to which CONTRACTOR may consider itself entitled, and of all extra or
additional WORK ordered by OWNER or BECHTEL which it has executed during the
preceding month. No claim for payment for any such WORK will be considered
which is not submitted with full justification and support. CONTRACTOR is not
entitled to any extra cost due to extension of time for Changes not exceeding
twenty percent (20%) of the quantities included in the items listed in the
summary of the Bill of Quantities. OWNER is not obligated to meet any claim for
extra payment for which prior notification was not provided to BECHTEL in
writing by CONTRACTOR within one month of the occurrence of the event giving
rise to such claim, or within one month of the date on which CONTRACTOR should
first have become aware of such occurrence, (if later).
Contract 22352-CWL
Exhibit "B"
Page Number 22
12 September 1994
<PAGE> 50
SC-18 QUALITY ASSURANCE PROGRAM
Within thirty (30) calendar days of CONTRACT award and in any event prior
to commencing WORK at the JOBSITE, CONTRACTOR shall submit a Quality Assurance
Program for approval consisting of the following documents:
(a) Quality Assurance Manual
(b) Project Quality Assurance Plan.
This plan shall cover the flow and distribution of correspondence, requests for
information, procedural direction, specific technical instructions, controls
instituted to assure the quality of the WORK and the documenting of any other
significant quality activities.
The quality assurance plan shall reflect the interfaces between BECHTEL, OWNER,
CONTRACTOR and other relevant organizational entities. It shall contain all
appropriate interface control instructions. The plan shall be updated as
necessary during the CONTRACT to reflect any changes in plan.
The quality assurance plan shall provide for the issuance of a "stop work"
order by the CONTRACTOR, BECHTEL or OWNER at any time during the WORK when
significant adverse quality trends and/or deviations from the approved Quality
Assurance Program are found.
SC-19 APPLICABLE LAW
This CONTRACT shall be interpreted under and governed by the laws of the
Kingdom of Thailand.
SC-20 CONTRACT LANGUAGE
All written correspondence in any way related to this CONTRACT shall be in the
English language. CONTRACTOR shall ensure that each manager, superintendent,
or supervisor is either fluent in both written and spoken English and that, at
a minimum, one English speaking superintendent is at the WORK Site whenever
work is being performed.
SC-21 NOT USED
SC-22 ASSIGNMENT OF SUBCONTRACT TO CONTRACTOR
OWNER and BECHTEL may elect to assign this CONTRACT to others. In this event,
and as deemed appropriate by OWNER and BECHTEL, CONTRACTOR will be directed to
execute an appropriate Subcontract and to perform this WORK under the direction
of the General Construction Contractor.
SC-23 NONDISCLOSURE
CONTRACTOR agrees not to divugle to third parties, without the written consent
of BECHTEL or OWNER, any information obtained from or through BECHTEL or OWNER
in connection with the performance of this CONTRACT unless:
(a) The information is known to CONTRACTOR prior to obtaining the
same from BECHTEL or OWNER;
(b) The information is, at the time of disclosure by CONTRACTOR,
then in the public domain; or
Contract 22352-CWL
Exhibit "B"
Page Number 23
12 September 1994
<PAGE> 51
SC-23 NONDISCLOSURE (Continued)
(c) The information obtained by CONTRACTOR from a third party who
did not receive same, directly or indirectly from BECHTEL or OWNER and
who has no obligation of secrecy with respect thereto.
CONTRACTOR further agrees that it will not, without the prior written consent
of BECHTEL or OWNER, disclose to any third party any information developed or
obtained by CONTRACTOR in the performance of this CONTRACT except to the extent
that such information falls within one of the categories described in (a), (b)
or (c) above.
If so requested by BECHTEL or OWNER, CONTRACTOR further agrees to require its
employees to execute a nondisclosure agreement prior to performing any WORK
under this CONTRACT.
SC-24 MEASUREMENT SYSTEM
CONTRACTOR shall use the Metric (SI) system of measurement for all designs,
specifications, drawings, plans and WORK except as otherwise directed in
writing by BECHTEL.
SC-25 ARBITRATION
Any controversy or claim arising out of or relating to this CONTRACT or the
breach thereof shall, at the written request of a party delivered to the other
party not less than thirty days in advance of the date of such submittal, be
submitted to arbitration in accordance with the Rules, then obtaining, of the
International Chamber of Commerce. The award rendered by the arbitrator(s) shall
be binding upon the parties without appeal. The site of such arbitration shall
be Bangkok, Thailand. Arbitration shall be conducted in the English language.
Judgment upon such award may be entered in any court having jurisdiction
thereof or application may be made to such court for a judicial acceptance of
the award and an order of enforcement, as the party seeking to enforce such
award may elect. Each party shall bear its own expenses of arbitration and any
costs paid to the International Chamber of Commerce shall be shared equally by
the parties.
SC-26 LIQUIDATED DAMAGES AND BONUS FOR EARLY COMPLETION
The parties hereby agree that the damages which OWNER will sustain as a result
of CONTRACTOR'S failure to complete the PROJECT or any of its components as
prescribed in this CONTRACT are difficult or impossible to determine with
certainty and, therefore, have in good faith estimated as fair compensation
(and not as a penalty) the liquidated damages as set forth below. If CONTRACTOR
fails to complete the WORK by the time specified in Special Condition entitled
"Commencement, Prosecution and Completion of the Work" for the milestones
titled "Final testing and Commissioning (High Block)" and "Final testing and
Commissioning (Low Block)" considering any extensions evidenced by a duly
executed Contract Amendment, CONTRACTOR shall pay to OWNER liquidated damages
for such default:
For each calendar week or part of a week of delay which shall elapse
between the prescribed completion date and the actual date of
completion an amount of 0.4% (four per one thousand) of value of the
entire component of the PROJECT or a portion thereof which OWNER deems
unsuitable for its intended use even if caused by an uncompleted or
unacceptable part that is less than the value of the affected component
or portion, and this amount plus reimbursement to OWNER for its,
BECHTEL's or OWNER's Technical Representatives additional staff
salaries, overtime and doubleshift costs and any additional costs,
including but not limited to cost of suppliers and other contractors
related thereto, shall be deducted from any monies due or to become due
CONTRACTOR.
Contract 22352-CWL
Exhibit "B"
Page Number 24
12 September 1994
<PAGE> 52
SC-26 LIQUIDATED DAMAGES AND BONUS FOR EARLY COMPLETION (Continued)
The amount of the liquidated damages and other reimbursements related thereto
as provided for in this Clause shall not exceed twelve percent (12%) of the
value of the uncompleted or the unacceptable portion of the WORK.
If, before the completion of the whole of the WORK, any of the components of
the WORK has been certified by BECHTEL as completed, pursuant to General
Condition titled "Final Inspection and Acceptance", or occupied or used by
OWNER, the liquidated damages for delay shall, for any period of delay after
such certification, be reduced in the proportion which the value of the
component so certified bears to the value of the whole of the WORK.
OWNER may without prejudice to any other method of recovery and without the
need for judicial proceedings deduct the amount of Liquidated Damages from any
monies in its possession due or which may become due to CONTRACTOR under this
CONTRACT, or any other CONTRACT between OWNER and CONTRACTOR. No prior notice
shall be required for the application of Liquidated Damages and they shall
become due and payable by the mere event of delay. The payment or deduction of
such damages shall not relieve CONTRACTOR from its obligation to complete the
WORK or from any other of its obligations and liabilities. Nothing in this
Clause shall operate to restrict any other rights and remedies available to
OWNER at law or under the CONTRACT.
If CONTRACTOR shall complete the WORK in advance of the time(s) prescribed by
CONTRACT, or approved time extensions thereto, OWNER shall pay CONTRACTOR as
follows:
For each calendar week of early completion, an amount equal to 0.1%
(one per one thousand) of the value of the WORK completed and suitable
for acceptance by OWNER. The bonus for early completion shall not
exceed two point five percent (2.5%) of the value of that part of
the WORK which is completed early.
Such bonus for Early Completion of the WORK shall only apply to the completion
of entire components of the PROJECT specified in this CONTRACT and OWNER'S use
of components of the PROJECT as defined in the General Condition titled "Use of
Completed Portions of Work", shall not constitute Early Completion under the
meaning of this Clause.
SC-27 KEY PERSONNEL
CONTRACTOR shall not reassign or remove the key personnel listed below without
the prior written authorization of BECHTEL.
Name Title/Position
---- --------------
Joanne L. Bottger Project Manager
Alford Siu Keung, Lam Construction Manager
Walter J. Murphy General Field Superintendent
Robert L. Shilts Project Superintendent
SC-28 NOT USED
Contract 22352-CWL
Exhibit "B"
Page Number 25
12 September 1994
<PAGE> 53
SC-29 OPERATING AND MAINTENANCE INSTRUCTIONS
A. Prior to the issuance of the Certificate of Final Acceptance by BECHTEL,
and as a condition of the acceptance of the work by BECHTEL, CONTRACTOR shall
submit to BECHTEL five (5) copies of operating and maintenance instructions,
spare parts lists, additional copies of equipment or systems shop drawings,
wiring and control diagrams and other similar information as necessary to
clearly describe the operations and maintenance of each item of operating
equipment and apparatus furnished under the CONTRACT. Such data shall be
assembled in heavy duty hard cover loose leaf binders, indexed by division of
work and type and location of equipment within the building. Manuals shall be
delivered to BECHTEL in suitable transfer cases labeled to indicate each
division of work contained therein.
B. CONTRACTOR shall allow for and pay all costs in connection with the
training of OWNER'S employees in connection with the operation and maintenance
of certain parts of the Works as set out below, provided always that OWNER
shall be responsible for the safety of his employees.
1. All operating mechanical and electrical equipment and systems.
2. Other items called for in the technical specifications.
SC-30 NOT USED
SC-31 CONTRACTOR'S ARCHITECT AND ENGINEER
Prior to commencement of work, CONTRACTOR shall employ one qualified engineer
and one qualified architect who have Thai engineering/architectural
professional licenses. They shall assume professional responsibility for the
construction work of the PROJECT done by CONTRACTOR to ensure that all
activities at the JOBSITE are in full compliance with all local regulations
and restrictions. CONTRACTOR shall register its engineer and architect's names
at Bangkok Metropolitan Administration (BMA) Office for the whole duration of
WORK under this CONTRACT.
SC-32 EXTRA WORK HOURS - OWNER, BECHTEL AND TECHNICDAL REPRESENTATIVES
CONTRACTOR shall schedule all WORK to be performed during normal daytime
working hours and during the normal work week. None of the WORK shall be
performed on Sundays, legal Holidays or during the night without the prior
written permission of BECHTEL, except when the WORK is absolutely necessary or
the saving of life or property or for the Safety of the WORK in the latter
event, CONTRACTOR shall immediately notify BECHTEL and the ARCHITECT/STRUCTURAL
ENGINEER.
Permission by BECHTEL to allow CONTRACTOR to perform WORK on Sundays, legal
Holidays or during the night shall be contingent upon CONTRACTOR agreeing to
reimburse OWNER, BECHTEL and the ARCHITECT/STRUCTURAL ENGINEER for their
overtime or doubleshift staff costs and any other additional costs related
thereto all of which shall be deducted by BECHTEL from any monies due
CONTRACTOR.
Contract 22352-CWL
Exhibit "B"
Page Number 26
12 September 1994
<PAGE> 54
EXHIBIT "C"
QUANTITIES, PRICING AND DATA
________________________________________________________________________________
EMPIRE TOWERS PROJECT
<PAGE> 55
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "C"
QUANTITIES, PRICES AND PAYMENT
1. WORK TO BE PERFORMED
CONTRACTOR shall furnish all plant; labor; materials; tools; supplies;
equipment; transportation; supervision; technical, professional and
other services; and shall perform all operations necessary and required
to satisfactorily furnish and install the curtain wall system for the
Empire Towers office buildings and all appurtenant structures,
facilities and works strictly in accordance with all requirements of
this CONTRACT.
2. TOTAL LUMP SUM PRICE
The Total Lump Sum Price (exclusive of Thai Value Added Taxes - VAT) for
performing all work is Baht ** . The breakdown of this Lump Sum Price
against pay items is detailed in Appendix A-1, entitled "Total Lump Sum
Price Breakdown and Pay Items", which is by this reference incorporated
into this CONTRACT.
All prices are fixed for the duration of the CONTRACT and are not
subject to escalation for any cause. Payment of the Total Lump Sum
Price shall constitute full payment for performance of the WORK and
covers all costs of whatever nature incurred by CONTRACTOR in
accomplishing the WORK in accordance with the provisions of the
CONTRACT.
3. PRICES FOR CHANGE
CONTRACTOR will submit its detailed Bill of Quantities, Appendix A-2,
"Prices for Changes and Contractors Detailed BOQ", within sixty (60)
days of Contract Award, which will be, upon approval by BECHTEL and by
this reference, incorporated into this CONTRACT.
Prices for changes and CONTRACTORS Detailed Bill of Quantities (BOQ),
represent a basis for determining the full and complete compensation
due for additional work or credit due for deleted work. Prices are
inclusive of all costs including but not limited to labor, material,
services, overhead, all other costs whether direct or indirect and
profit. The CONTRACTOR'S Bill of Quantities (BOQ) shall be the basis
for pricing changes in accordance with the General Conditions entitled
"Changes" and the Special Condition entitled "Pricing of Adjustment".
4. PAYMENT
Payment in accordance with Appendix A-1, "Total Lump Sum Price
Breakdown and Pay Items", and the Special Conditions titled "ADVANCE
PAYMENT, PERFORMANCE AND PAYMENT SECURITIES", "MEASUREMENT FOR PAYMENT
AND PAYMENT FOR WORK", "CERTIFICATES OF PAYMENT AND PAYMENTS" and
"PRICING OF ADJUSTMENTS" shall be full compensation for all WORK
completed in accordance with the CONTRACT.
5. APPENDICES
Attachment A-1 Lump Sum Price Breakdown and Payments
Attachment A-2 Prices for Changes and Contractors Detailed Bill of
Quantities
Contract 22352-CWL
Exhibit "C"
Page Number 1
18 November 1994
Revised 17 May 1995
<PAGE> 56
ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH
HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY AMERICAN RICE, INC. AS PART OF A REQUEST FOR CONFIDENTIAL
TREATMENT.
EMPIRE TOWERS PROJECT
Kasion F.C. Ltd.
EXHIBIT "C"
APPENDIX A-1
"TOTAL LUMP SUM PRICE BREAKDOWN AND PAY ITEMS"
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM CODE DESCRIPTION OF WORK % Qty. Unit TH Baht Th Baht
- ---- ---- ------------------- -- ------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 14000.1 Task 1 - Design and Shop Drawings ** 1 LS ** **
2 14000.2 Task 2 - Mock up Tests ** 1 LS ** **
3 14000.3 Task 3 - Fabricate, Deliver & Install Inserts ** 1 LS ** **
4 14000.4 Task 4 - Fabricate and Deliver Aluminum ** 70,222 M2 ** **
5 14000.5 Task 5 - Fabricate and Deliver Glass ** 41,520 M2 ** **
6 14000.6 Task 6 - Install Curtain Wall, Metal Clad & Doors ** 99,525 LS ** **
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal Curtain Wall **
===========
</TABLE>
(APPENDIX A-1, ITEM 58, CODE 14000.0)
Contract 22352-CWL
Exhibit "C", Appendix A-1
Page 1 of 1
18 November 1994
Revised 17 May 1995
<PAGE> 57
EMPIRE TOWERS PROJECT
Kasion F.C. Ltd.
EXHIBIT "C"
APPENDIX A-2
"PRICES FOR CHANGES AND CONTRACTORS DETAILED BILL OF QUANTITIES (BOQ)"
<TABLE>
<CAPTION>
UNIT RATE
----------------- Amount Amount
ITEM CODE DESCRIPTION OF WORK QTY UNIT TH Baht US Dollar TH Baht US Dollar
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contractor will be furnished an itemized Bill of Quantities List which
shall be completed by Contractor within sixty (60) days of contract execution.
------------------
TOTAL
==================
</TABLE>
Contract 22352-CWL
Exhibit "B", Appendix A-2
Page 1 OF 1
18 November 1994
<PAGE> 58
EXHIBIT "D"
SCOPE OF WORK AND SPECIFICATIONS
________________________________________________________________________________
EMPIRE TOWERS PROJECT
<PAGE> 59
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "D"
SCOPE OF WORK AND TECHNICAL SPECIFICATIONS
1. SCOPE OF WORK - CONTRACTOR shall perform as detailed in this Exhibit "D"
and its Specifications and all Drawings included in Exhibit "E", and shall
furnish all plant; labor; materials; tools; supplies; equipment;
transportation; supervision; technical, professional and other services;
and shall perform all operations necessary and required to satisfactorily
furnish and install the curtain wall system for the Empire Towers office
buildings.
2. WORK INCLUDED - CONTRACTORS work includes but is not limited to,
coordinating his work with other contractors, supply and install all
temporary materials and equipment, designing and engineering of curtain
wall components, supplying and installing curtain wall anchor inserts,
supplying all material and equipment associated with the curtain wall
systems for the high rise tower and low rise building, supplying all
materials for the interior and exterior round and rectangular aluminum
column covers at the 1st basement, ground and mezzanine floors, the
aluminum entrance canopies, the aluminum Architectural feature at the base
of the high rise tower and the low rise building, the exterior glass walls
and doors at the ground floor, the exterior and interior glass walls and
doors at the mezzanine floor and providing all labor necessary to assemble
and install all work shown or specified in this contract.
3. COORDINATED USE OF TOWER CRANE - CONTRACTOR shall have use of the site
Tower Cranes which will be provided by the General Construction (GC)
Contractor (Contract No. 22352-GCC) on a fully operated and maintained
basis (FOME) to the end the crane's tackle. The CG Contractor may restrict
times and duration of CONTRACTOR's use and it is CONTRACTOR's
responsibility to thoroughly coordinate all aspects of its vertical
transportation requirements, well in advance of its needs, with the CG
Contractor.
4. WORK EXCLUDED - Work not included in this CONTRACT is as follows:
a. Cleaning of installed materials (CONTRACTOR shall remove all
caulking material and labels).
b. Protection of installed materials.
c. Replacement of glass broken by others.
d. Rubbish removal from the Site. (CONTRACTOR shall place all rubbish
and debris at designated, central location on each floor.)
e. Designation of perimeter offset lines, perimeter 1.5 meter column
benchmarks and center line of bay marks.
f. Patching of fireproofing.
g. Disposal of safety cables along the perimeter of building during
installation of CW materials.
i. Providing, maintaining and removal of safety nets/overhead
protection when required.
j. Bracing of beams and/or reinforcing of structure where required to
receive CW anchor bolts.
5. TECHNICAL SPECIFICATIONS
The following technical specification for Design, Supply and Installation
of the Curtain Wall System forms a part of the CONTRACT:
"CURTAIN WALL SPECIFICATIONS, VOLUME II, DATED MAY 22, 1994"
Contract 22352-CWL
Exhibit "D"
Page Number 1
12 September 1994
<PAGE> 60
EXHIBIT "E"
LIST OF DRAWINGS
________________________________________________________________________________
EMPIRE TOWERS PROJECT
<PAGE> 61
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "E"
DRAWINGS
The drawings listed in Attachment E-1 hereto, consisting of two pages,
form a part of this Contract.
Contract 22382-CWL
Exhibit "E"
Page Number 1
12 September 1994
<PAGE> 62
THK REAL ESTATE LIMITED
EMPIRE TOWERS PROJECT
EXHIBIT "E"
ATTACHMENT "E-1"
LIST OF DRAWINGS
<TABLE>
<CAPTION>
DW NO. DESCRIPTION REV DATE
- -- -- ----------- --- ----
<S> <C> <C> <C> <C>
VOLUME I: CURTAIN WALL
CURTAIN WALL DRAWINGS
CW - 1 INDEX OF DRAWINGS, LEGENDS AND SYMBOLS, GENERAL NOTES 0 20-May-94
CW - 2 KEY PLAN 0 20-May-94
CW - 3 HIGH BLOCK GROUND FLOOR PLAN 0 20-May-94
CW - 4 LOW BLOCK AND TRANSITION BLOCK GROUND FLOOR 0 20-May-94
CW - 5 HIGH BLOCK MEZZANINE FLOOR PLAN 0 20-May-94
CW - 6 LOW BLOCK AND TRANSITION BLOCK 2nd FLOOR PLAN 0 20-May-94
CW - 6A DETAIL PLAN 0 20-May-94
CW - 6B DETAIL PLAN 0 20-May-94
CW - 6C DETAIL PLAN 0 20-May-94
CW - 6D DETAIL PLAN 0 20-May-94
CW - 6E DETAIL PLAN 0 20-May-94
CW - 6F DETAIL PLAN 0 20-May-94
CW - 6G DETAIL PLAN 0 20-May-94
CW - 7 HIGH BLOCK 2nd FLOOR PLAN 0 20-May-94
CW - 8 HIGH BLOCK 2nd FLOOR REFLECTED CEILING PLAN 0 20-May-94
CW - 9 LOW BLOCK 3rd FLOOR PLAN 0 20-May-94
CW - 10 HIGH BLOCK 3rd THRU 9th FLOOR PLAN 0 20-May-94
CW - 11 LOW BLOCK 4th FLOOR PLAN AND LOW BLOCK 5th THRU 9th 0 20-May-94
FLOOR PLAN
CW - 12 HIGH BLOCK 10TH FLOOR PLAN 0 20-May-94
CW - 13 LOW BLOCK 10th FLOOR PLAN & LOW BLOCK UPPER PART 0 20-May-94
OF 10th FLOOR PLAN
CW - 14 LOW BLOCK ROOF PLAN 0 20-May-94
CW - 15 1ST REFUGE FLOOR PLAN 0 20-May-94
CW - 16 11th FLOOR PLAN 0 20-May-94
CW - 17 12th THRU 28th FLOOR PLAN 0 20-May-94
CW - 18 2ND REFUGE FLOOR PLAN 0 20-May-94
CW - 19 29th THRU 44th FLOOR PLAN 0 20-May-94
CW - 20 3rd REFUGE FLOOR PLAN 0 20-May-94
CW - 21 45th THRU 48th FLOOR PLAN 0 20-May-94
CW - 22 49th FLOOR PLAN* 0 20-May-94
CW - 23 50th FLOOR PLAN 0 20-May-94
CW - 24 51st FLOOR PLAN 0 20-May-94
CW - 25 52nd FLOOR PLAN 0 20-May-94
CW - 26 53rd FLOOR PLAN 0 20-May-94
CW - 27 54th FLOOR PLAN 0 20-May-94
CW - 28 55th FLOOR PLAN 0 20-May-94
CW - 29 56th FLOOR PLAN 0 20-May-94
CW - 30 57th & 58th FLOOR PLAN 0 20-May-94
CW - 31 MACHINE ROOM LEVEL PLAN 0 20-May-94
CW - 32 ROOF PLAN 0 20-May-94
CW - 33 EAST ELEVATION 0 20-May-94
</TABLE>
Contract 22352-CWL
Attachment"e-1"
Page Number 1
12 September 1994
<PAGE> 63
DW. NO. DESCRIPTION REV. DATE
- ------- ----------- ---- ----
CW- 34 WEST ELEVATION 0 20-May-94
CW- 35 SOUTH ELEVATION 0 20-May-94
CW- 36 NORTH ELEVATION 0 20-May-94
CW- 37 SECTION - A 0 20-May-94
CW- 38 SECTION - B 0 20-May-94
CW- 39 SECTION - C 0 20-May-94
CW- 40 SECTION - D,E 0 20-May-94
CW- 41 SECTION - F 0 20-May-94
CW- 42 CURTAIN WALL SECTIONS 0 20-May-94
CW- 43 CURTAIN WALL SECTIONS 0 20-May-94
CW- 44 CURTAIN WALL SECTIONS 0 20-May-94
CW- 45 CURTAIN WALL SECTIONS 0 20-May-94
CW- 46 CURTAIN WALL SECTIONS 0 20-May-94
CW- 47 CURTAIN WALL SECTIONS 0 20-May-94
CW- 48 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 49 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 50 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 51 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 52 SECTIONS AND DETAILS 0 20-May-94
CW- 53 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 54 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 55 ENTRANCE ELEVATIONS 0 20-May-94
CW- 56 CURTAIN WALL SECTIONS AND DETAILS 0 20-May-94
CW- 57 SECTIONS AND DETAILS 0 20-May-94
CW- 58 SECTIONS AND DETAILS 0 20-May-94
CW- 59 SECTIONS AND DETAILS 0 20-May-94
CW- 60 TYPICAL COLUMN CLADDING DETAILS 0 20-May-94
Contract 22352-CWL
Attachment "E-1"
Page Number 2
12 September 1994
<PAGE> 1
EXHIBIT 11.1
FLOUR CITY INTERNATIONAL, INC.
EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (000)........... $ 938 $ 1,411 $ 5,273 $ 351 $ 809
============ ============ ============ ============ ============
Average shares outstanding
Basic:
Historical FCAM
Pacific............... 100 100 100 100 100
Effect of FCI merger..... 8,999,900 8,999,900 8,999,900 8,999,900 8,999,900
International Forest
Share Exchange........ 16,182,000 16,182,000 16,182,000 16,182,000 16,182,000
Effect of shares issued
to International
Forest shareholders
(Public Merger)....... 2,536,000 2,536,000 2,536,000 2,536,000 2,536,000
Repurchase of shares..... -- -- -- -- (625,000)
------------ ------------ ------------ ------------ ------------
27,718,000 27,718,000 27,718,000 27,718,000 27,093,000
Reverse stock split of 1
for 7.................... (23,758,286) (23,758,286) (23,758,286) (23,758,286) (23,222,571)
------------ ------------ ------------ ------------ ------------
Basic shares outstanding... 3,959,714 3,959,714 3,959,714 3,959,714 3,870,429
------------ ------------ ------------ ------------ ------------
Employee stock grants...... 142,857 142,857 142,857 142,857 142,857
Effect of International
Forest share exchange on
employee stock grants.... 256,857 256,857 256,857 256,857 256,857
------------ ------------ ------------ ------------ ------------
Diluted shares
outstanding.............. 4,359,428 4,359,428 4,359,428 4,359,428 4,270,143
============ ============ ============ ============ ============
Earnings per
share -- basic........... $ 0.24 $ 0.36 $ 1.33 $ 0.09 $ 0.21
============ ============ ============ ============ ============
Earnings per
share -- diluted......... $ 0.22 $ 0.32 $ 1.21 $ 0.08 $ 0.19
============ ============ ============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-43793 of Flour City International, Inc. on Form S-1 of our reports dated
December 5, 1997 (April 2, 1998 with respect to Notes 2 and 15) on the financial
statements of Flour City International, Inc. and June 4, 1997 on the financial
statements of Flour City Architectural Metals, Inc. appearing in the Prospectus,
which is part of such Registration Statement and of our Report dated December 5,
1997 relating to the Financial Statement Schedule appearing elsewhere in such
Registration Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Nashville, Tennessee
April 2, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-43793 of Flour City International, Inc. of our report dated June 26, 1997
(April 2, 1998 with respect to Note 2) on the financial statements of Flour City
Architectural Metals (Pacific) Ltd. appearing in the Prospectus, which is part
of such Registration Statement and of our Report dated June 26, 1997 relating to
the Financial Statement Schedule appearing elsewhere in such Registration
Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte Touche Tohmatsu
DELOITTE TOUCHE TOHMATSU
Hong Kong
April 2, 1998
