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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
Annual Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year Commission File No. 0-7099
ended December 31, 1998
CECO ENVIRONMENTAL CORP.
(Name of Small Business Issuer in Its Charter)
New York 13-2566064
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
505 University Avenue, Suite 1400
Toronto, Ontario CANADA M5G 1X3
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (416) 593-6543
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value per share
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No__.
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
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State issuer's revenues for its most recent fiscal year: $26,381,622
Aggregate market value of voting stock held by non-affiliates of
registrant (based on the last sale price on March 15, 1999): $16,071,279
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: 8,388,816 shares of common
stock, par value $0.01 per share, as of March 15, 1999.
Transitional Small Business Disclosure Format: Yes__ No _X_
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PART I
Item 1. Business
CECO Environmental Corp. ("CEC" or the "Company") was incorporated in
New York State in 1966. The Company owns 6,373,192 shares of common stock CECO
Filters, Inc. ("CECO"), representing 92.8% of CECO's outstanding common stock.
The Company has no significant operations nor does it hold any significant
assets other than CECO stock. CECO was incorporated July 25, 1985, and commenced
operations in August 1985.
For a description of CECO's business and other information regarding
CECO, see "CECO Filters, Inc." below.
Recent Developments
In 1998 management at CECO continued to concentrate on targeting
industrial markets in addition to specialty markets by focusing on adding
service components to products offered. In addition, CECO continued to focus on
offering a facilities management service, which focus began in 1997. The
facilities management service combines products and management services using
industry leading computer technology. Such service is also known as Computer
Aided Facilities Management ("CAMF").
On September 25, 1997, pursuant to an Asset Purchase Agreement, New
Busch Co., Inc., a Delaware corporation ("Busch") which is a wholly-owned
subsidiary of CECO, acquired certain assets, and all rights and interests of,
Busch Co., a Pennsylvania corporation (the "Seller") for a purchase price of
$2,100,000 plus acquisition costs. The Seller was engaged in the business of
marketing, selling, designing and assembling ventilation, environmental and
process-related products, and also provided manufacturer's representative
services to certain companies or manufacturers in support of related businesses.
Busch has continued this business, focusing on providing custom engineered, high
quality, precision-manufactured products to steel aluminum, chemical, paper,
glass and other related industries, and also in providing a wide range of
special services, including conceptual studies, application engineering and
system start-up.
In connection with such acquisition, Busch entered into an Employment,
Non-Compete and Confidentiality Agreement with Andrew M. Halapin, the majority
stockholder and President of the Seller, pursuant to which Mr. Halapin agreed to
be Busch's President and Chief Operating Officer for approximately three years.
Included as compensation for Mr. Halapin's services was a $500,000 signing
bonus. For a description of Busch's business and other information regarding
Busch see "New Busch Co., Inc." below.
On March 16, 1998, pursuant to an Asset Purchase Agreement, U.S.
Facilities Management Company, Inc. ("USFM"), a wholly owned subsidiary of CECO,
acquired certain assets, and all rights and interests of, Integrated Facilities
Management, Inc. an Arizona corporation ("IFM") for a purchase price of
$150,000. IFM was engaged in the business of
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providing a full range of services for inter-facility general repair,
preventative maintenance and inter-facility construction needs for owners and
users of industrial commercial, educational, healthcare and manufacturing
facilities (the "IFM Business"). The closing was deemed effective as of January
1, 1998. The funds used for the acquisition were from the working capital of the
Company. The IFM Business in 1998 was responsible for approximately $4,500,000
of the Company's gross revenues. CECO invested an additional approximately
$840,000 in such division. However, because of the high overhead associated with
the IFM Business, the IFM Business generated an operating loss in 1998 and CECO
is, therefore, curtailing the IFM Business in 1999.
CECO, as of March 16, 1999 refinanced its various credit facilities
that were formerly with Core States Bank with PNC Bank, National Association
("PNC"). PNC has provided a $5,000,000 line of credit, a $625,000 term loan, a
$787,155 first mortgage loan and a $2,000,000 senior committed acquisition line
of credit to CECO and its wholly-owned subsidiaries, Air Purator Corporation,
New Busch Co., Inc and U.S. Facilities Management Company, Inc. (collectively,
the "Borrowers"). The proceeds from the line of credit, term loan and the
mortgage loan were used to pay in full the Company's then existing obligations
to Core States Bank. The line of credit and term loan are secured with the
assets of the Borrowers. The mortgage loan is secured with the plant facility
owned by the Company in Conshohocken, Pennsylvania. The Company has guaranteed
the payment of all of such obligations.
The new financing should enable the Company to continue and to expand
its acquisition strategy, which forms a significant part of the Company's growth
plans.
Growth and Acquisition Strategy
The Company expects its growth to continue as a result of its
acquisition strategy and internal development. A significant part of the
Company's growth has and is expected to continue to result from acquisitions of
other entities in its industry. Management has and continues to evaluate
potential acquisition opportunities for the Company. The Company has received a
committed $2,000,000 acquisition line of credit as part of its financing from
PNC. In addition, PNC has discussed with the Company an additional line of
credit for acquisitions in the amount of $9,000,000, which, if made, would be
made in the sole discretion of PNC based upon the details of the acquisition
transaction proposed by the Company. Internal growth has and is anticipated to
continue to come from the Company's research and development and growth within
the Company's industry.
CECO Filters, Inc.
CECO Filters, Inc. ("CECO"), a Delaware corporation, is located in
Conshohocken, Pennsylvania. CECO manufactures and sells industrial air filters
known as fiber bed mist eliminators. The filters are used to trap, collect and
remove solid soluble and liquid particulate matter suspended in an air or other
gas stream whether generated in a point source emission or otherwise. The
principal functions which can be performed by use of the filters are (a) the
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removal of damaging mists and particles (for example, in process operations that
could cause downstream corrosion and damage to equipment), (b) the removal of
pollutants and (c) the recovery of valuable materials for reuse. The filters are
also used to collect fine insoluble particulates. CECO's filters are used by,
among others, the chemical and electronics industries; manufacturers of various
acids, vegetable and animal based cooking oils, textile products, alkalies,
chlorine, paper, computers, automobiles, asphalt, pharmaceutical products and
chromic acid; electric generating facilities including cogeneration facilities;
and end users of pollution control products such as incinerators.
CECO holds a US Patent for a device with the trade names of the
N-SERT(R) and X- SERT(R) prefilter. This device is used to protect the filter's
surface from becoming coated with insoluble solids. Field performance has
demonstrated the effectiveness of this device. CECO also holds a patent for its
N-ESTED(R) multiple-bed fiberbed TWIN-PAK(R) filter, which permits an increase
in filter surface area of 60% or more, thus decreasing energy consumption and
improving collection efficiency. The device also permits the user to increase
the capacity of the emission generating source without an energy or major
modification penalty.
CECO's filters range in size from 2 to 20 feet in height and are
typically either 16 or 24 inches in diameter. The cages used in CECO's filter
assemblies may be stainless steel, carbon steel, titanium or fiberglass mesh.
The filter material used in approximately 75% of CECO's filters is fiberglass,
which may be purchased in various grades of fiber diameter and chemical
resistance depending on the specific requirements of the customer. Filter
material may also be made of polyester, polypropelene or ceramic materials.
CECO's filters are manufactured with different levels of efficiency in the
collectibility of particulates, depending on the requirements of the customer.
Eventually, the filter material contained in CECO's filters will become
saturated with insoluble solids or corroded and require replacement. The life of
the filter material will be primarily dependent on the nature of the particles
collected and the filtration atmosphere. Filter life generally ranges from 3
months to 15 years. The filters can be returned to CECO for replacement of the
filter material, or can be replaced on-site by the customer. CECO sells
replacement filter material segments with the trade name of SITE-PAK(R) for
on-site installation by the customer and compressor kits to be used in
connection with on-site replacement.
CECO has exclusive rights to engineer, market and sell the patented
Catenary Grid Scrubber(R). This device is designed for use with heat and mass
transfer operations and particulate control. CECO designs complete systems
centered around these devices.
A significant portion of CECO's business consists of the sale of
replacement filter material segments for its filters and for filters made by
other manufacturers. The replacement process for filters made by other
manufacturers involves modification of the cages to permit the insertion of
replacement segments. Once modification of the cage and replacement of filter
material has been completed by CECO, subsequent replacement of the filter
material can be made on-site by the customer.
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During 1998, CECO continued to implement the results of its new design
strategies by utilizing standard components customized for specific customer
needs. These unique designs are characterized by ease of use, flexibility in
application and the ability to achieve complete product recycle when the
customer's use is satisfied. This breakthrough enables CECO to offer the same
units or applications in widely disparate industries with the possibility to
reuse the units once the original use is satisfied. It also allows CECO the
flexibility to sell or rent the systems. The rental approach allows CECO to
reuse the units after cleaning and repacking, resulting in a high return on
capital employed.
Andrew Halapin, president of New Busch Co., became the sales manager of
CECO in 1998 to assist in the sale of CECO's products.
Air Purator Corporation
Air Purator Corporation ("APC"), a wholly owned subsidiary of CECO, is
engaged in the manufacture of specialty needled fiberglass fabrics. Some of the
fabrics are coated to permit their use in certain highly corrosive applications.
The fabrics are mainly used in a particulate collection device known as a pulse
jet baghouse which is fabricated by a number of companies. Before APC's fabric
is placed into the baghouse, the fabric will generally be sewn into a shape
resembling a tube closed at one end, called a bag. The bag is then placed in an
enclosed cylindrical apparatus known as a bag holder. APC mainly sells its
fabrics to the bag fabricator. Other applications include the recovery of
valuable materials such as carbon black. There are many domestic and foreign
fabricators with which APC deals. APC's flagship product line is known in the
field under the Huyglas(R) trade name. Other products include Dynaglas(R) and
GNT products.
A felted fiberglass fabric developed by APC and targeted to compete
with other fabrics sold for dust collection in industrial applications is now
being marketed. This product may allow CECO to compete for a larger share of the
global market for filter fabric media and may add to CECO's established position
with the Huyglas(R) trade name. APC recently developed two new products that are
capable of higher temperature exposure and less costly final fabrication. These
products, once commercialized, could improve the operating results of the
company.
APC is presently engaged in the development of additional products
based on its proprietary technology. One of its sales personnel is designated as
a "Product Champion" and is vigorously pursuing various applications outside of
uses traditionally associated with such fabrics. Several new products are
currently being tested, but APC is unable to predict whether these efforts will
result in the successful development of marketable products.
Compliance Systems International
In October 1997, the assets of Compliance Systems International, a
Delaware corporation ("CSI"), a wholly-owned subsidiary of CECO, were moved to
CECO. CSI was originally formed by CECO to pursue domestic and foreign
environmental service markets and the sale of
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certain specialty equipment. CECO maintained use of the name CSI in its
operations for a brief time following the moving of the assets, however, CECO
has entirely ceased using such name.
New Busch Co., Inc.
CECO purchased the business of Busch Co. in September of 1997, which
purchase was deemed effective as of July 1, 1997. Busch Co. had been in business
since August of 1947. In 1998, Busch generated approximately 50% of the
Company's consolidated net sales.
Busch is engaged in the business of marketing, selling, designing and
assembling ventilation, environmental and process-related products, and
providing manufacturer's representative services to certain companies or
manufacturers. Busch consists of two divisions: Busch INTERNATIONAL and Busch
MARTEC. A third division, Busch RIG (resource implementation group) was phased
out in 1998. Busch RIG designed and manufactured custom electrical and control
systems and also acted as a manufacturers' representative of certain products,
such as heat transfer devices and related support products. Its operations have
been integrated into the Busch INTERNATIONAL and Busch MARTEC divisions.
Busch INTERNATIONAL, the larger division of Busch, designs and supplies
custom air systems to steel, aluminum, chemical, paper, glass, cement, power
generation, and related industries on an international level. As part of its
system designs, it supplies custom engineered precision-manufactured products
specializing in air related applications. In addition, Busch INTERNATIONAL
provides a wide range of special services, including conceptual studies,
application engineering, and system start-up. Busch employs an engineering staff
experienced in aerodynamic, mechanical, civil, and electrical disciplines. These
personnel are utilized entirely to support Busch's air systems work. Areas of
expertise include turbine inlet filtration, evaporative cooling, gas absorption,
scrubbers, acoustics, and corrosion control.
Busch INTERNATIONAL is noted as the premier supplier of custom
engineered solutions for the control of fume and oil mist emissions from steel
and aluminum rolling mills. Busch's Fume-Shield Systems are designed and
supplied by Busch and are devised to contain, capture, convey, and clean
contaminated air. Busch International fume exhaust systems and air-curtain hoods
are designed to provide high efficiency control of oil mist and fumes.
Busch INTERNATIONAL also designs, manufactures and supplies ventilation
and other air handling equipment for industrial use. It also provides systems
for corrosion protection, fugitive emissions control, evaporative cooling, oil
mist collection, mill building ventilation, crane cab ventilation and other air
handling applications. Some of these air handling units are the MRV-80, MRV-81,
N-DUR-AIR, RE-TREAT,(R) and PCR.
Busch INTERNATIONAL'S patented Jet*Star heat and transfer device is an
excellent strip cooler, strip dryer, coil cooler, and strip blow-off system and
is gaining significant market penetration for its ability to rapidly cool or
heat metal or other materials. The rapid cooling
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permits higher throughput than competitive processes. Busch is presently
involved in supplying Jet*Start for new and upgrade mill construction work.
Busch MARTEC acts as a manufacturers' representative with manufacturers
relating to air and fluids products. Busch MARTEC does business almost
exclusively in the Pittsburgh and tri-state area. Busch MARTEC also supplies
certain products to the other Busch divisions.
U.S. Facilities Management Company
During the fourth quarter of 1996 CECO formed USFM. USFM provides
facilities management and emission control systems, software and outsource
monitoring and/or maintenance service to help customers achieve air quality and
operational goals. In 1997, CECO funded USFM with $400,000 to test CAMF service
in Phoenix, Arizona. This is a component in CECO's new strategy to focus on
adding additional service elements to its products.
Customers
During 1998, one customer comprised approximately 11% of CECO's
consolidated net sales for 1998. During 1997, there were no customers which
comprised more than 10% of CECO's consolidated net sales. During 1996, two
customers comprised more than 10% of CECO's consolidated net sales in each year.
Because the demand for CECO's filters, replacement segments, fabric material,
scrubbers and consulting services is not constant but can fluctuate due to
economic conditions, filter life and other factors beyond CECO's control, CECO
is unable to predict the level of purchases by its largest customers, or any
other customer, in the future.
While CECO is exploring targeting larger industrial markets, CECO is
also continuing to service specialty market areas, where it believes it has a
competitive advantage over its larger competitors who generally have much
greater resources than CECO. In the year ended December 31, 1998, CECO and its
subsidiaries continued to develop additional market areas, including storage
facility vent emission control and its related odor control, new dry particulate
emission control and combination scrubber-fiber bed filter systems, while also
implementing changes to reach larger industrial markets, such as machining,
automotive and asphalt markets. In recent years CECO added capabilities to
penetrate the semiconductor and printed circuit board markets through its filter
technology and its patented scrubbers.
Government Regulations
CECO has not been materially impacted by existing government
regulation, nor is CECO aware of any probable government regulation that would
materially affect its operations. CECO's costs in complying with environmental
laws has been negligible. During 1998 and 1997, CECO estimates that $97,090 and
$91,803 respectively, has been expended on research
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and development programs. Such costs are generally included as factors in
determining CECO's pricing procedures.
Suppliers
CECO purchases all of its chemical grade fiberglass as needed from
Manville Corporation, which CECO believes is the only domestic supplier of such
fiberglass. However, there are foreign suppliers of chemical grade fiberglass,
and, based on current conditions, CECO believes that it could obtain such
material from foreign suppliers on acceptable terms. CECO believes that there is
sufficient supply of raw materials for the other components of its filters and
does not anticipate any shortages in the near future.
APC purchases its raw material from a variety of sources and does not
anticipate any shortages in the near future. While CECO depends upon two
suppliers for certain specialty items, including glass and chemicals, CECO
believes it has a good relationship with such suppliers and does not anticipate
any difficulty in continuing to receive such items on terms acceptable to CECO.
Busch purchases a majority of its fans from New York Blower and a
majority of its louvers from American Warming. Busch purchases additional
materials from a variety of sources and does not anticipate any shortages in the
near future. Busch believes it has a good relationship with such suppliers and
does not anticipate any difficulty in continuing to receive such items on terms
acceptable to Busch.
Backlog
As of December 31, 1998, CECO's backlog of orders was approximately
$10,795,753 as compared to approximately $10,213,816 as of December 31, 1997.
Competition and Marketing
Monsanto Corporation is dominant in the fiber bed mist eliminator
industry. Monsanto's financial resources are far greater than CECO's, and
Monsanto can undertake much more extensive marketing and advertising programs
than CECO. Monsanto is also a competitor of Busch. Certain other competitors
also have greater financial resources than CECO.
CECO competes by stressing its exclusive products, including
SITE-PAK(R) segments that permit on-site filter media replacement capability and
prefilters, its patented product that protects the surface of a fiber bed filter
from becoming plugged with solids, and its patented multiple-bed fiberbed
filters that dramatically increase the surface area of a filter. Also, CECO
believes that it is the only U.S. manufacturer of fiber bed mist eliminators
whose filter material can be replaced on-site by a customer. CECO believes it is
price competitive within the market for filters with similar efficiency.
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Manufacturers of electrostatic precipitators and wet scrubbers may also
be deemed to be in competition with CECO, because those devices are also
effective in removing particulates from an air or another gas stream. While such
devices may have higher operating costs than fiber bed mist eliminators,
replacement of the component parts of such devices is rare as compared to fiber
bed mist eliminators.
CECO's subsidiaries each face substantial competition. Kirk & Blum is
dominant in the air systems design industry and competes with Busch
International, a division of Busch. Kirk & Blum's financial resources are far
greater than CECO's. APC and CECO each face competition from other forms of
environmental control and material recovery devices including scrubbers and
electrostatic precipitators and from other filter fabric media that can also be
fabricated into bags for baghouses. These fabrics and fibers include, Teflon(R),
Goretex(R), woven fiberglass (both treated and non-treated), polyester,
Ryton(R), Nomex(R) and several other fabrics.
CECO's marketing efforts have consisted of telemarketing and direct
solicitation of orders from existing customers. CECO is also utilizing direct
mail solicitation and selected advertising in trade journals and product guides
and trade shows. CECO also utilizes sales representatives located in the United
States, Canada and overseas and Special Sales Directors, each focused on
specific industries. Busch, in addition to using direct solicitation and some
sales representatives, also participates in industrial shows.
Employees
As of March 15, 1999, the Company did not have any full-time employees.
CECO and its subsidiaries had 88 full-time employees and 5 part-time employees
as of December 31, 1998. None of CECO's employees is currently unionized and
CECO considers its relationship with its employees to be satisfactory.
Key Employee
CECO's operations to date have been largely dependent on the efforts of
its President, Dr. Steven I. Taub. The loss to CECO of Dr. Taub would have a
material adverse effect upon the operations of CECO. CECO has obtained key man
life insurance in face amount of $5 million on the life of Dr. Taub in an effort
to reduce, to the extent possible, the immediate adverse economic impact to its
business that would occur if it were to lose the services of Dr.
Taub.
Product Liability Insurance
As of October, 1989 CECO obtained product liability insurance covering
its products. The policy excludes environmental liability.
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Patents
CECO currently holds one US patent for its N-SERT(R) and X-SERT(R)
prefilters. CECO also holds a patent on its Twin Pak(R) multiple bed fiberbed
filter and an exclusive world-wide license to the patent on the Catenary Grid
Scrubber, Ultra-violet Enhanced Cantenary Grid Scrubber, and the Narrow Gap
Venturi Scrubber, along with fluoropolymer media for difuusion filtration. APC
holds two patents on the Huyglas material. All of the prefilters, the multiple
bed units and the Huyglas material have contributed to CECO's performance during
1998. Busch holds an exclusive license to the patent on the JET*STAR strip
cooler, strip dryer, coil cooler, and strip blow-off systems. Busch also holds
an exclusive license on the patent on the flexible nozzle material used in
connection with the JET*STAR systems and the process of using water in addition
to air used in the JET*STAR systems. There is no assurance that measurable
revenues will accrue to CECO or its subsidiaries as a result of their patents or
licenses.
Acquisition of Shares of CECO by the Company
On February 18, 1998, the Company exchanged 281,768 shares of the
Company for 281,768 shares of CECO with a single off-shore investor. The Company
also made open market purchases of 110,500 shares of the Company in 1998. As of
December 31, 1998, the Company owned 6,373,192 shares of CECO's common stock,
representing 92.8% of CECO's outstanding common stock.
The Company intends to purchase additional shares of CECO common stock
if such additional shares become available at a price which the Company
considers reasonable. Such purchases, if made, would be made through private
transactions, including exchanges of the Company's common stock for CECO common
stock, or open market stock purchases of CECO common stock.
Investment by CECO in the Company
On May 26, 1993, CECO purchased 100,000 shares of newly issued Common
Stock of the Company for $2.80 per share or $280,000 in the aggregate. The
market price for the Company's Common Stock closed at $4.00 per share at that
date. The purchase price was paid for with $160,000 in cash, with the balance
due on demand, without interest. The balance was paid in full during the first
quarter of 1994. On the date of purchase the Company owned 52.1% of CECO's
common stock. As of December 31, 1996, CECO distributed 17,800 shares of such
Common Stock of the Company to certain of CECO's key employees in lieu of cash
bonuses. No additional shares have been distributed.
Consulting Agreement
On November 1, 1998, the Company entered into a Consulting Agreement
with IRG Investor Relations Group Ltd. ("IRG") by which IRG agrees to perform
certain corporate and investor relations services. As part of IRG's
compensation, the Company issued 250,000 warrants for the common stock of the
Company, with an exercise price of $2.00 per share and 250,000 warrants for the
common stock of the Company, with an exercise price of $3.00 per
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share. In addition, the Company issued to a third party as compensation for
introducing the Company and IRG, 700,000 warrants for the common stock of the
Company, 450,000 of which are exercisable at $2.00 per share and 250,000 of
which are exercisable at $3.00 per share.
Readiness for Year 2000
The Company has conducted an analysis and assessment of its Year 2000
risk. Based on such analysis, the Company believes that its information systems
and systems and equipment containing embedded chips are essentially Year 2000
ready, and those components that are not Year 2000 ready will not have a
material impact on the ability of the Company to conduct business. The Company
has been advised by most of its key supply-chain partners that they are or
expect to be Year 2000 ready prior to December 31, 1999. Some of the Company's
suppliers have not definitely committed that they are or will be Year 2000
ready, however, the Company does not expect any of its suppliers' Year 2000
compliance problems to have a material impact on the Company's business.
Item 2. Properties
The Company maintains its executive offices in Toronto, Ontario.
CECO owns a plant facility in Conshohocken, Pennsylvania. On March 16,
1999 CECO refinanced the property with a seven year commercial mortgage from PNC
Bank, National Association at 7.75%.
CECO, for APC's operations, leases 11,500 square feet of space from BTR
North America, Inc. for the premises in Taunton, Massachusetts for annual rental
of $54,625. This lease expires on February 28 of each year and is renewable
yearly upon mutual consent and APC continues to lease the premises as a
tenant-at-will.
Busch maintains its offices in Pittsburgh, Pennsylvania. The lease that
Busch was assigned in connection with the acquisition of the Busch assets, is
dated January 10, 1980 and extends through July 31, 2002. The lease is for
approximately 12,000 square feet at an annual rental of $133,308. The rental
amount will be adjusted commencing August 1, 1999. Andrew M. Halapin, the former
principal owner of Busch, is the beneficial owner of the property in which
Busch's offices are located. Busch also leases 1,000 square feet of space in
Etna, Pennsylvania for $315 per month. Such lease will expire on March 31, 1999.
The Company plans on renewing said lease on approximately the same terms.
USFM leases property in Mesa, Arizona. The lease is for approximately
625 square feet of office space and a 2500 square foot warehouse for $1,750 per
month.
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Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or to which any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Annual Report on Form 10-KSB.
PART II
Item 5. Market of the Registrant's Common Stock and Related Stockholder
Matters.
(a) The Company's common stock is traded in the over-the-counter market
and is quoted in the NASDAQ automated quotation system under the symbol CECE.
The following table sets forth the range of bid prices for the common stock of
the Company as reported in the NASDAQ system during the periods indicated, and
represents prices between broker-dealers, which do not include retail mark-ups
and mark-downs, or any commissions to the broker-dealers.
The bid prices do not reflect prices in actual transactions.
CEC Common Stock - Bids CEC Common Stock - Bids
----------------------- -----------------------
1997 High Low 1998 High Low
- ---- ---- --- ---- ---- ---
1st Quarter $3.125 $1.9375 1st Quarter $4.00 $2.625
2nd Quarter $3.8125 $1.875 2nd Quarter $4.00 $2.375
3rd Quarter $4.875 $3.0625 3rd Quarter $3.00 $1.531
4th Quarter $5.00 $3.0625 4th Quarter $3.25 $1.406
1999
- ----
1st Quarter $3.8125 $2.25
(through March 24, 1999)
(b) The approximate number of beneficial holders of common stock of the
Company as of March 15, 1999 was 1550.
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(c) The Company has paid no dividends during the fiscal year ended
December 31, 1997 or the fiscal year ended December 31, 1998. The Company does
not expect to pay dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview
The Company is comprised of CECO Filter, Inc. and its subsidiaries, Air
Purator Corporation, U.S. facilities Management Company, Inc. and New Busch Co.,
Inc. (collectively referred to as "the CECO Group"), which provide innovative
solutions to air quality problems through particle and chemical control
technologies and management services.
CECO manufactures and markets filters known as fiber bed mist
eliminators, designed to trap, collect and remove solid soluble and liquid
particulate matter suspended in an air or other gas stream whether generated
from a point source emission or otherwise. CECO offers innovative patented
technologies, Catenary Grid(R) and Narrow Gap Venturi(TM), designed for use with
heat and mass transfer operations and particulate control. APC designs and
manufactures high performance filter media and bags for use in high temperature
pulse-jet baghouses, the most effective type of baghouse for capturing submicron
particulate from gas streams. Busch is engaged in designing, manufacturing and
supplying equipment used to control the environment in and around industrial
plants with a variety of proprietary and patented technologies. USFM provides
facilities management and software, and outsourced plant-wide maintenance
management to assist customers achieve their performance goals.
Results of Operations - The Company
The Company's consolidated statement of operations for the years ended
December 31, 1998 and 1997 reflect the operations of the Company consolidated
with the operations of CECO and CECO's subsidiaries. As of December 31, 1998,
the Company owned approximately 93% of the outstanding Common Stock of CECO.
Minority interest on the consolidated statement of operations has been presented
as a reduction in the income for the year.
The following table sets forth income line items shown on the condensed
consolidated statement of operations, as a percentage of net sales, for the
periods indicated. This table should be read in conjunction with the condensed
consolidated financial statements and notes thereto.
14
<PAGE>
Year Ended
December 31,
-------------------------------
1998 1997
------ ------
Revenues:
Net sales- products 45.3% 75.0%
Contract revenues 54.7 25.0
----- -----
Total revenues 100.0 100.0
----- -----
Costs and expenses:
Cost of revenues - products 26.5 39.5
Cost of revenues - contracts 41.5 16.3
Selling and administrative 25.2 41.8
Depreciation and amortization 2.4 2.7
----- -----
95.6 100.2
----- -----
Income (loss) from operations 4.3 (.2)
Investment income .3 .6
Interest expense (1.0) (.9)
----- -----
Income (loss) before income taxes
and minority interest 3.6 (.5)
Income taxes 1.4 -
----- -----
Income (loss) before minority interest 2.2 (.5)
Minority interest in net (income) loss of
consolidated subsidiary (.1) .2
----- -----
Net income (loss) 2.0% (.3)%
----- -----
The Company's consolidated net sales, comprised entirely of CECO's
consolidated net sales, increased 81.6% over the prior year, to $26,381,622 for
the year ended December 31, 1998
15
<PAGE>
from $14,530,974 for the years ended December 31, 1997. This increase was due
primarily to an increase in sales from its recently acquired subsidiaries,
specifically Busch that was acquired in mid-year 1997 and IFM that was acquired
in 1998. During the fiscal year ended December 31, 1997, the results of
operations for Busch were only consolidated with the results of operations of
the Company for a six-month period.
During 1998, the Company's earned $315,000 from consulting fees from
CECO and $67,815 as investment income from marketable securities. During 1997
the Company received consulting fees of $240,000 from CECO and investment income
from marketable securities of $84, 326. The Company's selling and administrative
expenses decreased slightly to $203,759 for the year ended December 31, 1998
from $204,104 for the year ended December 31, 1997, excluding those expenses
incurred by CECO that are reflected on the Company's consolidated statement of
operations. These expenses consisted primarily of fees related to acquisition
consulting and shareholder relations, and legal and accounting fees.
Except as set forth above, the Company has no other income (loss),
revenues or expenses, other than as a result of its investment in CECO. The
Company does not engage in operations other the through its operating
subsidiaries, CECO and CECO's subsidiaries.
See discussion of CECO below.
Results of Operations - CECO
Revenues
Revenues for the year ended December 31, 1998 increased by $11,850,648
or 82% to $26,381,622 from $14,530,974 for the year ended December 31, 1997. The
increase was due primarily to an increase in sales from its recently acquired
subsidiaries, specifically Busch that was acquired in mid-year 1997 and IFM that
was acquired in 1998. During the fiscal year ended December 31, 1997, the
results of operations for Busch were only consolidated with the results of
operations of the Company for a six-month period.
Costs and Gross Margin
CECO's overall cost of sales increased as a percentage of revenues to
68% for the year ended December 31, 1998 compared to 56% for the year ended
December 31, 1997. This increase is attributable to (i) the consolidation of the
revenues of Busch for the entire year ended December 31, 1998 of $13,000,000 as
compared to revenues for the last six months of the year ended December 31, 1997
of $4,400,000, for which the cost of sales as a percentage of revenues equaled
approximately 71.0% and 67%, respectively, for the year ended December 31, 1998
and the six months ended December 31, 1997 and (ii) the sales of USFM, which
equaled $4,500,000 for the year ended December 31, 1998. At USFM, the cost of
sales as a percentage of revenues equaled 95.0%. The sales of Busch and USFM
accounted for an aggregate of 66%, of CECO's total sales for the year ended
December 31, 1998 and with respect to Busch, 30% for the year ended December 31,
1997. The cost of sales as a percentage of revenues for the balance of CECO's
business was approximately 49% for the year ended December 31, 1998 and 51% for
16
<PAGE>
the year ended December 31, 1997. Such sales accounted for 34% of CECO's total
sales for the year ended December 31, 1998 and 70% of CECO's total sales for the
year ended December 31, 1997. This small decrease is attributable to reduced
material costs and lower costs incurred to service CECO's products. CECO
attempts to use the latest technology available in an effort to reduce both the
costs of sales, including maintaining optimal levels of inventory and operating
expenses, and to increase the Company's net income.
Expenses
CECO's selling and administrative expenses were $6,470,980 for the year
ended December 31, 1998 compared to $5,850,452 for the year ended December 31,
1997, representing an increase of $620,528 or 11%. A substantial portion of the
increase is attributable to selling and administrative expenses of Busch's
operations for the first full year from the date of acquisition, and selling and
administrative expenses associated with USFM since the effective date of the IFM
acquisition. Although a significant portion of CECO's selling and administrative
expenses are fixed in nature.
CECO's depreciation and amortization expense increased to $502,990 in
1998 from $289,544, or $213,446, which is an increase of 74%. A significant
portion of this increase was attributable to the reclassification of an asset as
a patent that previously was classified as goodwill. Goodwill is amortized over
a forty-year period and patents are amortized over a seventeen-year period.
Interest
CECO's interest expense increased $179,866 or 138% during the year
ended December 31, 1998 to $310,567 from $130,701 for the year ended December
31, 1997. The increase was principally the result of increased borrowing by CECO
from its line of credit.
Net Income (Loss)
CECO generated pre-tax income of $829,973 for the year ended December
31, 1998 compared to a pre-tax loss of $95,744 for the year ended December 31,
1997. The increase in income is attributable to a significant increase in
revenues and lower expenses associated with the operations of CECO and APC, and
the non-recurrence of the expenses associated with the Busch acquisition in
1997.
Net income per share for 1998 and 1997 were as follows:
1998 1997
---- ----
$0.06 ($0.01)
As described above, CECO and the Company are parties to a management
and consulting agreement pursuant to which CECO paid consulting fees to the
Company of $315,000 for the year ended December 31, 1998 and $240,000 for the
year ended December 31, 1997. Such
17
<PAGE>
amounts are eliminated in the consolidation of the financial statement of CECO
and the Company.
Financial Condition, Liquidity and Capital Resources
The Company's consolidated cash position was $364,648 at December 31,
1998; a decrease from the Company's consolidated cash position of $847,827 on
December 31, 1997. The net decrease is attributable to an increase in cash
outflows in connection with the operations of the Company, primarily due to a
decrease in cash received from progress billings related to engineering
contracts negotiated by Busch, and its subsidiaries and the Company's investment
in USFM (acquired on March 16, 1998).
At December 31, 1998, the Company's consolidated working capital was
$371,948 compared to $591,921 at December 31, 1997. The primary reason from the
reduction in working capital is the reduction in cash received from the progress
billings described above.
The Company's investments in marketable securities, which earned
interest income of $67,815 in 1998, consist principally of high yield bonds of
major U.S. corporations and had a market value of $695,944 on December 31, 1998.
CECO's capital expenditures were $334,368 and $341,905 for the years
ended December 31, 1998 and 1997, respectively. The expenditures were primarily
for computer hardware and software upgrades, engineering and manufacturing
equipment upgrades and office renovations. Neither the Company nor CECO has
material firm commitments for capital expenditures. Capital expenditures are
expected to continue to increase as a result of CECO's anticipated growth.
Until March 16, 1999, CECO maintained a $2,000,000 line of credit with
a commercial bank (the "Original Lender"), which was used primarily to finance
the operations of the Company and its subsidiaries. At December 31, 1998,
$1,200,000 was outstanding on the line of credit. In 1997, CECO obtained a
four-year term loan in the principal amount of $1,000,000 from the Original
Lender, the proceeds of which were used to finance the acquisition of Busch. At
December 31, 1998, the outstanding principal balance of this loan was $687,500.
CECO also had a mortgage note payable to the Original Lender the outstanding
balance of which was $802,151 on December 31, 1998. The line of credit, term
loan and mortgage note were paid in full on March 16, 199 in connection with the
refinancing of the Company's credit facility. A term loan payable to First Union
National Bank, the outstanding balance of which was $218,500 at December 31,
1998 was also paid in full at such time.
Effective March 16, 1999, the Company, CECO and their subsidiaries
acquired financing from PNC as follows: a $5,000,000 line of credit, a $625,000
term loan, a $787,155 first mortgage loan and a $2,000,000 senior committed
acquisition line of credit. Proceeds of this credits facility were used to repay
the line of credit, term loan and mortgage from the Original Lender. This new
credit facility represents a substantial increase in the financing available to
the Company, CECO and their subsidiaries, which the Company expects to use in
connection with the its growth and acquisition strategies.
18
<PAGE>
The Company also has a second mortgage note payable to Pennsylvania
Industrial Development Authority, the outstanding balance of which was $245,636
at December 31, 1998.
Since January 1, 1994, the Company and CECO have been parties to a
management and consulting agreement pursuant to which the Company has provided
management and financial consulting services to CECO for a monthly fee of
$20,000 through July 1998 and $35,000 per month thereafter. This agreement was
originally due to expire in December 31, 1998, but was extended by the parties
and will automatically renew for one-year terms unless cancelled by the Company.
The Company believes that its management and consulting agreement with
CECO and interest income from its investment in marketable securities should
provide sufficient revenue to meet its general and administrative obligations.
Management believes that CECO's anticipated cash flow from operations together
with its available credit line will be adequate to meet CECO's expected cash
needs for working capital, sales growth, debt service payments and capital
investment goals for at least the next twelve months.
Results of Operations - CECO
1998 as Compared to 1997
Revenues for the year ended December 31, 1998 increased by $11,850,648
or 81.6% from $14,530,974 in 1997 compared to $26,381,622 in 1998. This increase
was due primarily to the Busch acquisition completed in 1997 & the IFM
acquisition in 1998.
CECO's overall cost of sales increased as a percentage of sales for the
year ended December 31, 1998 (68.0 %) compared to the year ended December 31,
1997 (55.8%). This increase is attributed to the impact of Busch where costs as
a percentage of revenues amounted to 71.0%, and IFM, now called USFM(Az), where
costs as a percentage of revenues amounted to 95.0% both from January 1, 1998
through December 31, 1998. Without the impact of Busch and IFM, the costs as a
percentage of revenues would have been 49.9%. The decrease compared to the prior
year excluding figures from the operations of Busch and IFM, is attributed to
lower material costs, as well as lower costs incurred to service CECO's
products. CECO continues to use the latest technology available in an effort to
reduce both cost of sales, including maintaining optimal levels of inventory and
operating expenses, and ultimately increase overall company profits.
CECO's selling and administrative expenses amounted to $6,470,980 for
the year ended December 31, 1998 compared to $5,850,452 for the year ended
December 31, 1997, representing an increase of $620,528 or 10.6%. A significant
amount of this increase is attributable to selling and administrative expenses
of Busch's operations for the first full year from date of acquisition, and
selling and administrative expenses associated with IFM (now called USFM) since
the effective date of IFM acquisition, A substantial portion of CECO's selling
and administrative expenses are fixed in nature.
19
<PAGE>
CECO entered into a management and consulting agreement with the
Company in 1994, in which terms of the agreement require payment of monthly fees
of $20,000 through July, 1998 and $35,000 through December 1998, in exchange for
management and financial consulting services involving corporate policies;
marketing; strategic and financial planning; and mergers, acquisitions and
related matters. CECO paid management fees to the Company of $315,000 during the
year ended December 31, 1998.
CECO's depreciation and amortization expense increased from $289,544 in
1997 to $502,990 in 1998, primarily due to additional amortization expense
related to Jet*star that was reclassified as a patent effective 07/01/97.
CECO's interest expense increased $179,866 or 137.6% during the year
ended December 31, 1998 compared to the same period in 1997, principally due to
increased borrowing from CECO's line of credit in 1998.
CECO generated pre-tax income of $829,973 for the year ended December
31, 1998 compared to a pre-tax loss of $95,744 for the year ended December 31,
1997. The significant change is attributed to the increase in revenues for the
year ended December 31, 1998 over the comparable period in 1997 and the absence
of the Busch acquisition related expenses.
1997 as Compared to 1996
Revenues for the year ended December 31, 1997 were $14,530,974, an
increase of $4,683,277 or 47.6% from $9,847,697 for the year ended December 31,
1996. This increase was due primarily to the Busch acquisition completed in
1997.
CECO's overall cost of sales increased as a percentage of sales for the
year ended December 31, 1997 (55.8%) compared to the year ended December 31,
1996 (52.7%). This increase is attributed to the impact of the Busch
acquisition; Busch's costs as a percentage of sales amounted to 66.9% from July
1, 1997 through December 31, 1997. Without the acquisition of Busch, CECO's cost
of sales as a percentage of sales would have been 51.0%. The decrease compared
to the prior year excluding figures from the operations of Busch, is attributed
to lower material costs, as well as lower costs incurred to service CECO's
products. CECO continues to use the latest technology available in an effort to
reduce both cost of sales, including maintaining optimal levels of inventory and
operating expenses, and ultimately increase overall company profits.
CECO's selling and administrative expenses amounted to $5,850,452 for
the year ended December 31, 1997 compared to $3,316,716 for the year ended
December 31, 1996, representing an increase of $2,533,736, or 76.4%. A
significant amount of this increase is attributable to (I) selling and
administrative expenses of Busch's operations since the effective date of the
Busch acquisition, and (ii) selling and administrative expenses associated with
USFM which only recently commenced its operations. The selling and
administrative expenses of Busch include a non-recurring $500,000 charge for a
sign-on bonus (the "Sign On Bonus") paid to a former officer of the old Busch
Co. in connection with a three-year employment agreement. A substantial portion
of CECO's selling and administrative expenses are fixed in nature.
20
<PAGE>
CECO entered into a management and consulting agreement with the
Company in 1994, in which terms of the agreement require payment of monthly fees
of $20,000 through December 1998 in exchange for management and financial
consulting services involving corporate policies; marketing; strategic and
financial planning; and mergers, acquisitions and related matters. CECO paid
management fees to the Company of $240,000 during each of the years ended
December 31, 1997 and 1996.
CECO's depreciation and amortization expense decreased from $341,599 in
1996 to $289,544 in 1997, primarily because equipment and intangible assets
acquired over five years became fully amortized or depreciated during 1997.
CECO's interest expense decreased by $24,136 or 15.6% during the year
ended December 31, 1997 compared to the same period in 1996, principally due to
decreased borrowing from CECO's line of credit in 1997.
CECO incurred a pretax loss of $95,744 for the year ended December 31,
1997 compared to pretax income of $606,813 for the year ended December 31, 1996.
Pretax income for the year ended December 31, 1997, before deducting the charge
for the Sign On Bonus ("non-recurring charge") was $404,256. The decrease from
the prior year is attributed principally to the increase in selling and
administrative expenses in relation to the Busch acquisition, expenses connected
with the start-up of USFM and expenses in relation to international sales
development.
Net income (loss) per share for 1997 and 1996 before and after
non-recurring charges were as follows:
1997 1996
---- ----
Before non-recurring charges $ .06 $ .06
After non-recurring charges (.01) .06
21
<PAGE>
Item 7. Financial Statements
The Company's Consolidated Financial Statements of CECO Environmental
Corp. and Subsidiaries for Years Ended December 31, 1998 and 1997 and other data
are presented on the following pages:
Cover Page 23
Independent Auditor's Report 24
(Margolis & Company P.C.)
Consolidated Balance Sheet 25
Consolidated Statement of Operations 26
Consolidated Statement of Shareholders' 27
Equity
Consolidated Statement of Cash Flows 28
Supplemental Disclosures of Cash 29
Flow Information
Supplemental Disclosures of Non-Cash 29
Investing and Financing Activities
Notes to Consolidated Financial Statements 30
for the Years Ended December 31, 1998,
and 1997
22
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997
23
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
CECO Environmental Corp.
Toronto, Ontario Canada
We have audited the accompanying consolidated balance sheet of CECO
Environmental Corp. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company'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, the financial statements referred to above present fairly, in
all material respects, the financial position of CECO Environmental Corp. and
Subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Certified Public Accountants
Bala Cynwyd, PA
January 22, 1999
24
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31,
1998 1997
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 364,648 $ 847,827
Marketable securities - trading 695,944 634,150
Accounts receivable 4,068,640 2,979,414
Inventories 541,315 771,068
Costs and estimated earnings in excess of
billings on uncompleted contracts 226,504 235,454
Due from former owners of Busch 147,939 -
Investment in sales - type lease 95,400 -
Prepaid expenses and other current assets 344,961 230,458
Prepaid income taxes - 150,200
Deferred income taxes 84,500 33,477
----------- -----------
Total current assets 6,569,851 5,882,048
Property and equipment, net 2,062,452 1,947,482
Goodwill, net 5,169,353 4,843,888
Other intangible assets, at cost, net 1,270,780 1,320,501
Investment in sales-type lease 333,900 -
Deferred income taxes 68,500 23,896
----------- -----------
$15,474,836 $14,017,815
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations $ 1,200,000 $ -
Current portion of long-term debt 385,149 333,871
Current portion of capital lease obligation 3,223 5,554
Accounts payable and accrued expenses 3,104,004 1,873,965
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,174,427 2,517,310
Unearned income 78,000 -
Due to former owners of Busch - 559,427
Income taxes payable 253,100 -
----------- -----------
Total current liabilities 6,197,903 5,290,127
Long-term debt, less current portion 1,569,713 1,732,993
Capital lease obligation, less current portion - 3,821
----------- -----------
Total liabilities 7,767,616 7,026,941
----------- ----------
Minority interest 149,941 248,289
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued - -
Common stock, $.01 par value; 100,000,000
shares authorized, 8,388,816 and 8,107,048
shares issued in 1998 and 1997, respectively 83,888 81,070
Capital in excess of par value 10,139,013 9,860,063
Accumulated deficit (2,316,953) (2,849,879)
----------- -----------
7,905,948 7,091,254
Less treasury stock, at cost (348,669) (348,669)
----------- -----------
Net shareholders' equity 7,557,279 6,742,585
----------- -----------
$15,474,836 $14,017,815
=========== ===========
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
25
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Net sales - products $11,961,116 $10,901,728
Contract revenues 14,420,506 3,629,246
----------- -----------
Total revenues 26,381,622 14,530,974
---------- -----------
Costs and expenses:
Cost of revenues - products 6,993,386 5,746,125
Cost of revenues - contracts 10,958,726 2,369,886
Selling and administrative 6,674,739 6,054,556
Depreciation and amortization 617,964 384,661
----------- -----------
25,244,815 14,555,228
----------- -----------
Income (loss) from operations 1,136,807 (24,254)
Investment income 67,815 84,326
Interest expense 260,567 130,701
----------- -----------
Income (loss) before income taxes
and minority interest 944,055 (70,629)
Income taxes 373,322 7,200
----------- -----------
Income (loss) before minority interest 570,733 (77,829)
Minority interest in net (income) loss of
consolidated subsidiary (37,807) 24,055
----------- -----------
Net income (loss) $ 532,926 ($ 53,774)
=========== ===========
Net income (loss) per share, basic and diluted $ .06 ($ .01)
=========== ===========
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
26
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CAPITAL IN
COMMON EXCESS OF ACCUMULATED TREASURY
STOCK PAR VALUE DEFICIT STOCK
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $73,385 $ 8,178,998 ($2,796,105) ($348,669)
Net (loss) for year ended
December 31, 1997 (53,774)
Acquisition of 19.5% of CECO Filters, Inc.
common stock through issuance of
768,500 shares of common stock 7,685 1,681,065
------- ---------- ----------- ---------
Balance, December 31, 1997 81,070 9,860,063 (2,849,879) (348,669)
Net income for year ended
December 31, 1998 532,926
Acquisition of 4.1% of CECO Filters, Inc.
common stock through issuance of
281,768 shares of common stock 2,818 278,950
------- ---------- ----------- ---------
Balance, December 31, 1998 $83,888 $10,139,013 ($2,316,953) ($348,669)
======= =========== =========== ========
</TABLE>
The notes to consolidated financial statements are an integral part of the above
statement.
27
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income (loss) $ 532,926 ($ 53,774)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 617,964 384,661
Deferred income taxes (95,627) 1,362
Unearned revenue 78,000 -
Minority interest 37,807 (24,055)
Gain on sale of marketable securities, trading (1,253) -
(Increase) decrease in operating assets:
Accounts receivable (519,519) (902,369)
Inventories 229,753 (60,318)
Costs and estimated earnings in excess of
billings on uncompleted contracts 32,836 (235,454)
Due from former owners of Busch (147,939) -
Minimum lease payments receivable (429,300) -
Prepaid expenses and other current assets (96,762) (174,460)
Prepaid income taxes 150,200 (150,200)
Purchase of marketable securities (2,134,312) (1,191,998)
Proceeds from sale of marketable securities 2,073,771 1,573,369
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 733,422 653,370
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,514,707) 2,517,310
Due to former owners of Busch (559,427) 502,592
Income taxes payable 253,100 (276,976)
----------- -----------
Net cash provided by (used in) operating activities (759,067) 2,563,060
----------- -----------
Cash flows from investing activities:
Acquisition of IFM, net of cash acquired,
comprised of the following:
Excess of current liabilities over
current assets, net of cash acquired 169,756 -
Equipment (93,372) -
Goodwill (171,235) -
Acquisition of Busch, comprised of the following:
Goodwill (16,614) (796,910)
Inventory - (145,379)
Equipment - (131,818)
Patents - (1,129,754)
Prepaid expenses - (13,059)
Acquisitions of property and equipment (240,996) (210,087)
Acquisitions of intangible assets (340,848) (168,845)
Sale of CECO Filter's common stock - 24,100
----------- -----------
Net cash (used in) investing activities ($ 693,309) ($ 2,571,752)
----------- -----------
</TABLE>
CONTINUED ON NEXT PAGE
The notes to consolidated financial statements are an integral part of the above
statement.
28
<PAGE>
CECO ENVIRONMENTAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Net borrowings (repayments), short-term obligations $ 1,200,000 ($ 400,000)
Proceeds from issuance of long-term debt 230,000 1,000,000
Repayments of long-term debt and
capital lease obligation (460,803) (155,655)
----------- -----------
Net cash provided by financing activities 969,197 444,345
----------- -----------
Net increase (decrease) in cash (483,179) 435,653
Cash at beginning of year 847,827 412,174
----------- -----------
Cash at end of year $ 364,648 $ 847,827
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 260,567 $ 130,701
----------- -----------
Income taxes $ 118,000 $ 433,014
----------- -----------
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company exchanged 281,768 and 186,000 shares of its common stock for 281,768
and 186,000 shares of CECO Filters, Inc. ("CFI") common stock with unrelated
third parties in 1998 and 1997, respectively. On August 13, 1997, the Company
exchanged 582,500 shares of its common stock for 1,165,000 shares of CFI's
common stock with an officer of CFI.
The notes to consolidated financial statements are an integral part of the above
statement.
29
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business - The principal business of the Company's subsidiary
is to provide standard and engineered systems for air quality
improvement and to offer complete operation and maintenance services to
industrial and commercial customers, primarily in the United States.
Principles of consolidation - The consolidated financial statements
include the accounts of CECO Environmental Corp. (the "Company"), and
CECO Filters, Inc. ("CFI"), a 93% (as of December 31, 1998) owned
subsidiary. The Company acquired its majority ownership in CFI in April,
1993 (see Note 2). All intercompany balances and transactions have been
eliminated.
Use of estimates - The presentation 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.
Investments in marketable securities - The Company's investments in
marketable securities comprise corporate debt securities, all classified
as trading securities, which are carried at their fair value based on
the quoted market prices. Accordingly, net realized and unrealized gains
and losses on trading securities are included in net income. Investment
income consists principally of interest income.
Accounts receivable - The Company considers accounts receivable to be
fully collectible; accordingly, no allowance for doubtful accounts is
required.
Inventories - Inventories are valued at the lower of cost, using the
first-in, first-out (FIFO) method, or market.
Property and equipment - Property and equipment are recorded at cost.
Expenditures for repairs and maintenance are charged to income as
incurred. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets.
Intangible assets - Goodwill is being amortized on a straight-line basis
over 40 years. The Company's policy is to continually monitor the
recoverability of goodwill using a fair value approach. Other intangible
assets are being amortized on a straight-line basis over their estimated
useful lives, which range from 5 to 17 years.
Revenue recognition - Revenue from manufactured products and products
purchased for resale is recognized upon shipment to customers.
Revenue from contracts for the design and manufacture of air handling
units and inter-facility construction are recognized on the percentage
of completion method, measured by the percentage of contract costs
incurred to date to estimated total contract costs for each contract.
This method is used because management considers contract costs to be
the best available measure of progress on these contracts.
30
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. Nature of Business and Summary of Significant Accounting Policies -
Continued
Contracts - continued
Contract costs include direct material, labor cost and those indirect
costs related to contract performance, such as indirect labor, supplies,
tools and repairs. Selling and administrative costs are charged to
expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Changes in job performance, job conditions and estimated profitability
may result in revisions to contract revenue and costs and are recognized
in the period in which the revisions are made.
The asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of
amounts billed. The liability, "billings in excess of costs and
estimated earnings on uncompleted contracts," represents billings in
excess of revenues recognized.
Income taxes - The Company follows the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using tax rates in effect for the year in which the
differences are expected to reverse.
Advertising costs - Advertising costs are charged to operations in the
year incurred and totaled $158,029 in 1998 and $117,481 in 1997.
Research and development - Research and development costs are charged to
expense as incurred. The amounts charged were $97,090 in 1998 and
$91,803 in 1997.
Per share data - The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share," which establishes standards for
computing basic and diluted earnings per share. Per share data is
computed using the weighted average number of common shares outstanding.
The Company considers outstanding options and warrants in computing
diluted net income (loss) per share only when they are dilutive. The
weighted average number of common shares was 8,250,896 in 1998 and
7,551,836 in 1997 for basic and 8,845,626 in 1998 and 7,953,212 in 1997
for diluted net income (loss) per share.
Reclassifications - Certain reclassifications have been made to the 1997
financial statements to conform with the 1998 presentation.
Stock-based compensation - In October, 1996, the Financial Accounting
Standards Board adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS 123
permits companies to choose between a "fair value based method of
accounting" for employee stock options or to continue to measure
compensation cost for employee stock compensation plans using the
intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Company has chosen to continue to use the APB
25 method. Under such method, compensation is measured by
31
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. Nature of Business and Summary of Significant Accounting Policies -
Continued
Stock-based compensation - continued
the quoted market price of the stock at the measurement date less the
amount, if any, that the employee is required to pay. The measurement
date is the first date on which the number of shares that an individual
employee is entitled to receive and the option or purchase price, if
any, are known. The Company did not incur any compensation expense in
either year.
Entities electing to remain with this method must make pro forma
disclosures of net income (loss) and earnings (loss) per share as if the
fair value based method of accounting defined in SFAS 123 had been
applied to all awards granted in fiscal years beginning after December
15, 1994. The Company has not presented the proforma disclosures
required by SFAS 123 since the impact on the Company's income (loss)
from operations for the periods presented was de minimis.
Recent accounting pronouncements - In June, 1997 and February, 1998,
respectively, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," both of which are effective for fiscal
years beginning after December 15, 1997. In June, 1998, the FASB also
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after December 15,
1998. The adoption of these pronouncements will have no impact on the
Company's consolidated results of operations, financial position, or
cash flows.
2. Investment in CFI
Pursuant to a Stock Exchange Agreement dated May 30, 1992, between the
Company and IntroTech Investments, Inc. ("IntroTech"), a privately-held
Ontario corporation, the Company exchanged 1,666,666 newly issued shares
of its common stock for 1,666,666 shares of CFI common stock owned by
IntroTech. CFI is a Delaware corporation. The 1,666,666 shares of CFI
common stock acquired by the Company are restricted. Those shares
represented 24.51% of the outstanding shares of common stock of CFI.
During 1993 through 1996, the Company exchanged 2,953,964 additional
shares of its common stock for 2,953,964 shares of CFI's common stock
with unrelated third parties. On August 13, 1997, the Company exchanged
582,500 shares of its common stock for 1,165,000 shares of CFI's common
stock with an officer of CFI. During 1997 and 1998, the Company
exchanged 186,000 and 281,768, respectively, additional shares of its
common stock for 186,000 and 281,768 shares of CFI's common stock with
unrelated third parties. As of December 31, 1998, the Company owned
92.8% of CFI's common stock. The excess of the aggregate purchase over
the fair market value of the net assets acquired was allocated to
goodwill which is being amortized on the straight-line method over 40
years.
32
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
3. Acquisition of Businesses
During March, 1998, pursuant to an Asset Purchase Agreement, the Company
acquired substantially all of the assets, and the business, of
Integrated Facilities Management, Inc. ("IFM") for $150,000 in cash.
IFM, located in Mesa, Arizona, provides a full range of services for
inter-facility general repair, preventive maintenance and inter-facility
construction needs exclusively for owners and users of industrial
commercial, educational, healthcare and manufacturing facilities. The
acquisition was accounted for as a purchase. The excess of the aggregate
purchase price over the fair market value of the net assets acquired was
allocated to goodwill which is being amortized on the straight-line
method over 40 years. The Asset Purchase Agreement provides that,
notwithstanding the actual closing date, the closing was deemed to be
effective as of January 1, 1998 and the consolidated statement of
operations, therefore, includes the operations of IFM since January 1,
1998.
On September 25, 1997, pursuant to an Asset Purchase Agreement, New
Busch Co., Inc., a wholly-owned subsidiary of CECO Filters, Inc.,
acquired substantially all of the assets, and the business, of Busch Co.
("Busch") for $2,100,000 in cash, plus acquisition costs. During the
next three years, the Company has a contingent obligation to pay to the
former owner of Busch an earnout based on certain targeted EBITDA as
defined in the agreement. The Company did not incur a liability under
the earnout arrangement for the year ended December 31, 1998. Any
amounts paid under this arrangement will be recorded as compensation.
Busch, located in Pittsburgh, Pennsylvania, was engaged in the business
of marketing, selling, designing and assembling ventilation,
environmental and process-related products, and also provided
manufacturer's representative services to certain companies or
manufacturers in support of related businesses. The acquisition was
accounted for as a purchase. The excess of the aggregate purchase price
over the fair market value of the net assets acquired of approximately
$1,900,000 was allocated to goodwill based upon preliminary estimates of
fair value. Additional costs associated with the acquisition of
approximately $16,000 were paid during 1998 and has been recorded as
goodwill. During April, 1998, the Company completed a valuation of
certain patents acquired as part of this acquisition, utilizing the
services of an independent consultant. The valuation resulted in the
reclassification of approximately $1,047,000 from goodwill to patents.
Goodwill is being amortized on the straight-line method over 40 years.
The 1997 amounts have been adjusted to reflect this reclassification.
The Asset Purchase Agreement provides that, notwithstanding the actual
September 25, 1997 closing date, the closing was deemed to be effective
as of July 1, 1997. The 1997 statement of operations, therefore,
includes the operations of New Busch Co. since July 1, 1997.
On a pro forma basis, unaudited results of operations for the years
ended December 31, 1998 and 1997 would have been as follows, if the
Busch and the IFM acquisitions had been made as of January 1, 1997:
DECEMBER 31,
1998 1997
----------- -----------
Total revenues $26,381,622 $25,693,370
Income before taxes on income 944,056 804,022
Net income 532,926 479,984
Net income per share $.06 $.07
33
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
4. Financial Instruments
Fair value of financial instruments:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash $ 364,648 $ 364,648 $ 847,827 $ 847,827
Marketable securities695,944 695,944 634,150 634,150
Due from former owners
of Busch 147,939 - - -
Financial liabilities:
Short-term obligations1,200,000 1,200,000 - -
Long-term debt 1,954,862 1,846,759 2,066,864 1,963,547
Due to former owners
of Busch - - 559,427 -
</TABLE>
The fair values of cash, short-term obligations and due to/from former
owners of Busch are assumed to be equal to their reported carrying
amounts based on their close proximity to maturity and due to interest
rates which fluctuate with the market.
Valuations for marketable securities are determined based on quoted
market prices and valuations for long-term debt are determined based on
future payments discounted at current interest rates for similar
obligations.
Management of the Company does not expect any losses to result from its
standby letter of credit described in Note 11 and, therefore, is of the
opinion that the fair value of this off-balance sheet financial
instrument is zero.
The Company does not hold any financial instruments for trading
purposes.
Concentrations of credit risk:
Financial instruments that potentially subject the Company to credit
risk consist principally of cash and accounts receivable. The Company
performs periodic evaluations of the financial institutions in which its
cash is invested. The Company performs ongoing credit evaluations of its
customers' financial condition, and generally requires no collateral
from its customers.
5. Accounts Receivable
1998 1997
---------- ----------
Trade receivables $1,402,085 $1,321,760
Contract receivables:
Billed on completed contracts 233,315 3,817
Billed on contracts in progress 2,433,240 1,653,837
---------- ----------
$4,068,640 $2,979,414
========== ==========
34
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
6. Inventories
Inventories consisted of the following at
December 31:
1998 1997
---------- ----------
Raw material $ 380,477 $ 409,639
Finished goods 46,742 157,911
Parts for resale 114,096 203,518
---------- -----------
$ 541,315 $ 771,068
========== ==========
7. Costs and Estimated Earnings on Uncompleted
Contracts
1998 1997
-----------------------
Costs incurred on uncompleted contracts $9,140,606 $2,217,978
Estimated earnings 3,308,598 1,205,994
---------- ----------
12,449,204 3,423,972
Less billings to date 13,397,127 5,705,828
---------- ----------
($ 947,923) ($2,281,856)
========== ==========
Included in the accompanying balance sheet
under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 226,504 $ 235,454
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,174,427) (2,517,310)
---------- ----------
($ 947,923) ($2,281,856)
========== ==========
8. Property and Equipment
Property and equipment consisted of the
following at December 31:
1998 1997
-----------------------
Land $ 137,342 $ 137,342
Building 1,770,246 1,679,659
Machinery and equipment 2,128,353 1,884,572
---------- ----------
4,035,941 3,701,573
Less accumulated depreciation 1,973,489 1,754,091
---------- ----------
$2,062,452 $1,947,482
========== ==========
Depreciation expense was $219,398 and $200,550 for 1998 and 1997,
respectively.
Machinery and equipment at December 31, 1998 and 1997 included equipment
acquired under a capital lease with a cost of $19,793 and accumulated
depreciation of $18,738 and $15,097, respectively.
35
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
9. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following at
December 31:
1998 1997
---------- -----------
Goodwill $5,666,958 $5,212,340
Less accumulated amortization 497,605 368,452
---------- -----------
$5,169,353 $4,843,888
========== ==========
Non-compete agreements $ 300,000 $ 100,000
Patents 1,318,806 1,299,114
--------- -----------
1,618,806 1,399,114
Less accumulated amortization 348,026 78,613
---------- -----------
$1,270,780 $1,320,501
========= ===========
Amortization expense was $398,566 and $184,111 for 1998 and 1997,
respectively.
10. Investment in Lease Sales-Type
The Company entered into a sales-type lease. The unearned finance income
of $87,000 is being realized over the five-year lease term.
Future minimum lease payments receivable under the sales-type capital
lease as of December 31, 1998 are as follows:
YEAR ENDING DECEMBER 31,
1999 $ 95,400
2000 95,400
2001 95,400
2002 95,400
2003 47,700
--------
429,300
Less unearned income 78,000
--------
Net investment in sales-type lease $351,300
========
11. Debt
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Short-term obligations
Note payable, bank, under line of credit. The Company has a line of
credit with a bank permitting borrowings of up to $1,500,000 with
interest at the prime rate plus 1/2% (effective rate of 8.25% and 9%
at December 31, 1998 and 1997, respectively). Borrowings are limited
to 80% of eligible accounts receivable plus a permitted out-of-formula
advance which at December 31, 1998 was $500,000. There was also a
$150,000 standby letter of credit to the Pennsylvania Industrial
Development Authority which was outstanding at both dates. $1,200,000 $ -
========== =========
</TABLE>
The Company is required to maintain compensating cash balances of 5% of
the total line of credit offered, or is subject to additional fees.
36
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
11. Debt - Continued
<TABLE>
<CAPTION>
Long-term debt
1998 1997
------------------------
<S> <C> <C>
Term loan, bank, monthly payments of $20,833, plus interest at 1/2% over
the prime rate (effective rate of 8.25%) through September, 2001 $ 687,500 $ 937,500
Mortgage note payable, bank, monthly installments of $10,149, including
interest at 7.75% per annum, through March 1, 2003, at which time the
interest rate will be adjusted to prime plus 1/2%. Remaining principal
will be repaid in 60 equal monthly installments plus
interest beginning April 1, 2003. 802,151 857,956
Pennsylvania Industrial Development Authority, payable in equal monthly
installments of $2,797 including interest at 3% per annum, through
May, 2007, collateralized by a second mortgage on land and building 245,636 271,408
Term loan, bank, monthly payments of $3,833, plus interest at 8.3%
through September, 2003 218,500 -
Other 1,075 -
---------- ----------
1,954,862 2,066,864
Less current portion 385,149 333,871
------- ----------
$1,569,713 $1,732,993
========== ==========
</TABLE>
Maturities of all long-term debt over the next five years and thereafter
are estimated as follows:
1999 $ 385,149
2000 389,442
2001 333,288
2002 152,401
2003 148,003
Thereafter 546,579
-----------
$1,954,862
===========
CFI's property and equipment, accounts receivable, and inventory serve
as collateral for its bank debt. The bank debt is also subject to
certain financial covenants.
37
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
12. Capital Lease Obligation
The Company acquired equipment under the provisions of a long-term
lease.
Future minimum lease payments under the capital lease are as follows:
1999 $3,280
Less amount representing interest 57
------
Present value of net minimum
capital lease payments, current portion $3,223
======
13. Shareholders' Equity
Stock Option Plan
CFI maintained a stock option plan for its employees through 1997.
During 1997, all participants in the CFI plan were given the
opportunity to exchange their unexercised options for the same number
of options in a new plan established by CECO Environmental Corp. Under
the former plan, options to purchase 500,000 shares of CFI's common
stock were available to be granted at not less than 100% of the market
price of the shares on the date of grant. Options were generally
exercisable one year from the date of grant and expired between five
and ten years of the date of grant. At December 31, 1997, there were no
outstanding options with respect to the CFI plan. The grant date for
all of the exchanged options is December 15, 1997 and 20% of the
options become exercisable each year over the following five years.
There are 1,500,000 shares of CECO Environmental Corp.'s common stock
that have been reserved for issuance under this plan.
The status of the CECO Environmental Corp. stock option plan is as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------- ----------- --------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 312,320 $4.46 0
Granted 312,320 $4.46
Forfeited 0
---------- ---------
Outstanding at end of year 312,320 4.46 312,320 4.46
========== =========
Options exercisable at year end 0 0
========== =========
Available for grant at end of year 1,187,680 1,187,680
========== =========
</TABLE>
38
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
13. Shareholders' Equity - Continued
Employee Stock Purchase Plan
Effective October 1, 1998, the Company established an Employee Stock
Purchase Plan for all employees meeting certain eligibility criteria.
Under the Plan, eligible employees may purchase through the initial
twelve month offering and through a series of semiannual offerings, each
October and April, commencing October 1, 1999, shares of the Company's
common stock, subject to certain limitations. The purchase price of each
share is 85% of the lessor of its fair market value on the grant date or
on the exercise date. The aggregate number of whole shares of common
stock purchasable under the option shall not exceed 10% of the
employee's base compensation. At December 31, 1998, 250,000 shares were
available for purchase under the plan. At December 31, 1998, there have
been no shares issued under this plan.
Warrants to Purchase Common Stock
In January, 1998, warrants were issued to the Chief Executive Officer to
purchase 250,000 shares of the Company's common stock at an exercise
price of $2.75 per share. These warrants expire ten years from date of
issuance. In September, 1998, warrants were issued to the Chief
Executive Officer to purchase 250,000 shares of the Company's common
stock. These warrants have an exercise price of $1.625 per share. The
aforementioned warrants expire 10 years from date of issuance. In
November, 1998, warrants were issued to two unrelated third parties to
purchase 500,000 and 700,000 shares of the Company's common stock at an
exercise price of $2 per warrant for the first 250,000 and 450,000
shares, respectively, and $3 per warrant for the remaining 250,000
shares. These warrants expire two years from issuance.
Stock Options
In June, 1998, the Company granted options to a member of the board of
directors to purchase 10,000 shares of the Company's common stock at
$2.75 per share. The options become exercisable on February 1, 1999
through June 30, 2008. The value of the stock options are deemed de
minimis.
14. Sales to Major Customers
CFI had one customer in 1998 representing 11% of consolidated net
revenues. There were no customers in 1997 where revenues exceeded 10% of
consolidated net revenues.
15. Employee Benefit Plans
CFI has a 401(k) Savings and Retirement Plan which covers substantially
all employees. Under the terms of the Plan, employees can contribute
between 1% and 22% of their annual compensation to the Plan. CFI matches
50% of the first 6%. Plan expense for the years ended December 31, 1998
and 1997 was $119,423 and $57,678, respectively.
CFI also has a profit-sharing plan which covers substantially all
employees. There were no contributions to the Plan for 1998 or 1997.
39
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
16. Commitments
Rent
CFI leases certain facilities on a year-to-year basis. CFI also has
future annual minimum rental commitments under noncancelable operating
leases as follows:
1999 $297,481
2000 195,585
2001 172,466
2002 102,465
2003 4,560
The Company leases a facility from the President and Chief Operating
Officer of New Busch Co., Inc. who is the beneficial owner of the
property with an annual rental of approximately $133,000 expiring July,
2002.
Total rent expense under all operating leases for 1998 and 1997 was
$341,549 and $206,927, respectively.
Non-Compete Agreement
In connection with the acquisition of Busch described in Note 3, the
Company entered into a non-compete agreement with a former shareholder
of Busch. In addition to the $100,000 paid at the closing date, the
agreement requires annual payments of $200,000 on each of the next four
anniversary dates of the closing.
The related cost is being amortized ratably over the four-year period.
17. Income Taxes
Income taxes (benefit) consisted of the following at December 31:
1998 1997
--------------------------
Current:
Federal $286,200 ($64,085)
State 182,747 69,923
-------- -------
468,947 5,838
-------- -------
Deferred:
Federal (29,625) 1,362
State (66,000) -
-------- -------
(95,625) 1,362
-------- -------
$373,322 $ 7,200
======== =======
40
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
17. Income Taxes - Continued
The provision for income taxes differs from the statutory rate due to
the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Tax (benefit) at statutory rate $320,979 ($24,014)
Increase (decrease) in tax resulting from:
Net operating loss deduction (77,879) (40,875)
State income tax, net of federal benefit 77,054 46,149
Change in tax versus book basis of assets (8,883) 1,362
Permanent differences, principally goodwill 54,307 44,249
Under (over) accrual of prior years' taxes 7,947 (16,852)
Other (203) (2,819)
-------- -------
$373,322 $ 7,200
======== =======
</TABLE>
Deferred income taxes reflect the future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The net deferred tax liability consisted of the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax asset:
Inventory capitalization $ 18,500 $13,477
Depreciation 20,900 20,600
Non-compete agreement 73,400 18,666
Employee bonuses - restricted stock in lieu of cash - 20,000
State loss carryforwards 120,000 74,000
Federal net operating loss carryforwards 36,000 114,000
Less valuation allowance (90,000) (188,000)
-------- -------
178,800 72,743
------- -------
Deferred tax liability:
Goodwill (24,600) (15,370)
Patents (1,200) -
-------- -------
(25,800) (15,370)
-------- -------
Net deferred tax liability $153,000 $57,373
======= =======
</TABLE>
The Company has federal net operating loss carryforwards of
approximately $107,000 and $336,000 at December 31, 1998 and 1997,
respectively, which begin to expire in 2008. The loss carryforward of
$107,000 has separate return loss year limitations from losses incurred
prior to the acquisition of CFI. Additionally, the Company has state net
operating loss carryforwards of approximately $1,333,000 and $826,000 at
December 31, 1998 and 1997, respectively, which begin to expire in 2001.
Due to the uncertainty of the realization of certain tax carryforwards,
the Company has established a valuation allowance against these
carryforward benefits in the amount of $90,000 at December 31, 1998.
CECO Environmental Corp. and CFI file a consolidated federal income tax
return.
41
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
18. Related Party Transactions
Effective January 1, 1995, the Company entered into a consulting
agreement with CFI. The terms of the agreement require monthly fees by
CFI of $20,000 through July, 1998 and $35,000 through December, 1998 in
exchange for management and financial consulting services involving
corporate policies; marketing; strategic and financial planning; and
mergers, acquisitions and related matters. CFI paid the Company $315,000
and $240,000 during each of the years ended December 31, 1998 and 1997.
These fees have been eliminated in consolidation.
19. Consulting Agreement
The Company entered into a one year consulting agreement with an option
to renew for an additional year with an unrelated third party, effective
November 1, 1998, to provide investor relations services to the Company.
As compensation, the consultant received warrants to purchase 500,000
shares of the Company's common stock at $2 per warrant for the first
250,000 shares and $3 per warrant for the remaining 250,000 shares, with
warrants expiring November, 2000. In connection with this transaction,
warrants were issued to an unrelated third party to purchase 700,000
shares of the Company's common stock at $2 per warrant for the first
450,000 shares and $3 per warrant for the remaining 250,000 shares, with
warrants expiring November, 2000. The value of the warrants is
considered de minimis.
In addition, the Company advanced $150,000 at November 1, 1998 and is
obligated to advance an additional $150,000 on January 1, 1999 as
advances towards expenses incurred for the public relations program. Any
unused advances are fully refundable. The initial $150,000 advance has
been recorded as a prepaid asset and amortized proratably over the
twelve-month period.
20. Backlog of Uncompleted Contracts
<TABLE>
<CAPTION>
1998
-----------
<S> <C> <C>
Contracts in progress, January 1, 1998, including contracts
acquired in connection with acquisition of IFM $8,750,121
New contracts, 1998 11,260,548
Contract adjustments 360,343
----------
20,371,012
Less contract revenues recognized for 1998 (14,420,506)
----------
Balance, December 31, 1998 $5,950,506
==========
1997
-----------
Contracts in progress acquired on July 1, 1997
in connection with acquisition of Busch Co. $8,557,030
New contracts, July 1 through December 31, 1997 2,804,467
Contract adjustments 291,501
----------
11,652,998
Less contract revenues recognized, July 1, 1997
through December 31, 1997 (3,629,246)
----------
Balance, December 31, 1997 $8,023,752
==========
</TABLE>
42
<PAGE>
CECO ENVIRONMENTAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
21. Segment and Related Information
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998.
The Company has three reportable segments: Air Quality Improvement,
Ventilation and Environmental Products and Interfacility Maintenance.
The Company provides standard and engineered systems and filter media
for air quality improvement through its Air Quality Improvement segment.
The Ventilation and Environmental Products segment assembles and
manufactures ventilation, environmental and process-related products.
Interfacility repair, preventative maintenance and inter-facility
construction are provided by the Interfacility Maintenance segment.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on operating earnings of the respective business
segments.
<TABLE>
<CAPTION>
VENTILATION ELIMINATION
AIR AND OF INTER-
QUALITY ENVIRONMENTAL INTERFACILITY SEGMENT TOTAL
IMPROVEMENT PRODUCTS MAINTENANCE OTHER ACTIVITY CONSOLIDATED
--------------------------------------------------------------------------------------------
1998
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 8,405,289 $13,033,784 $5,083,370 ($ 140,821) $26,381,622
Depreciation and amortization 183,394 282,548 37,048 $ 114,974 617,964
Operating income (loss) 1,077,074 753,717 (690,251) (3,733) 1,136,807
Other significant noncash items:
Cost and estimated earnings
in excess of billings on
uncompleted contracts 193,116 33,388 226,504
Total assets, net of
inter-segment receivables 10,342,894 4,967,269 1,758,360 4,778,671 (6,372,358) 15,474,836
Capital expenditures 55,540 47,374 138,032 240,996
1997
--------------------------------------------------------------------------------------------
Net sales $ 9,698,208 $ 4,421,862 $ 452,847 ($ 41,943) $14,530,974
Depreciation and amortization 200,538 85,931 3,085 $ 95,107 384,661
Operating income (loss) 785,882 (302,167) (448,758) (59,211) (24,254)
Other significant noncash items:
Cost and estimated earnings
in excess of billings on
uncompleted contracts 235,454 235,454
Total assets, net of
inter-segment receivables 7,207,414 4,875,364 152,990 4,507,276 ( 2,725,229) 14,017,815
Capital expenditures 191,584 10,450 8,053 210,087
</TABLE>
43
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company has had no changes in or disagreements with its
independent accountants during the Company's two most recent fiscal years.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following are the directors and executive officers of the Company.
The terms of all directors expire at the next annual meeting of shareholders and
upon election of their successors. The terms of all officers expire at the next
annual meeting of the board of directors and upon the election of the successors
of such officers.
Name Age Position
- ---- --- --------
Phillip DeZwirek 61 Chairman of the Board of Directors; Chief
Executive Officer and Chief Financial
Officer
Jason Louis DeZwirek 28 Director, Secretary
Josephine Grivas 59 Director
Donald Wright 61 Director
The business backgrounds during the past five years of the Company's
directors and officers are as follows:
Phillip DeZwirek became a director, the Chairman of the Board and the
Chief Executive Officer of the Company in August 1979. Mr. DeZwirek's principal
occupations during the past five years have been as Chairman of the Board of
Digital Fusion Multimedia Corp. of Toronto Canada; Chairman of the Board and
Vice President of CECO Filters, Inc., a Delaware corporation (since 1985); and
President of Can-Med (since 1990). Mr. DeZwirek has also been involved in
private investment activities for the past five years. Digital Fusion's common
stock is traded over-the-counter on the NASDAQ Bulletin Board. CECO is discussed
elsewhere in this document. See Item 1 - Business.
Jason Louis DeZwirek, the son of Phillip DeZwirek, became a director
of the Company in February, 1994. He became Secretary of the Company on February
20, 1998, following the resignation of Josephine Grivas as Secretary. Mr.
DeZwirek from October 1, 1997, has also
44
<PAGE>
been a member of the Committee that was established to administer the Company's
stock option plan. Mr. DeZwirek's principal occupation since 1993 has been as
the President of Digital Fusion, a company that adapts books and movies to the
CD Rom medium. From 1992 until 1993, Mr. DeZwirek was the Chief Financial
Officer of Missing Treasurers Productions, a television production company.
Josephine Grivas has been a director of the Company since February,
1991. She was its Secretary from October, 1992 until she resigned as of February
2, 1998. Ms. Grivas has since October 1, 1997, also been a member of the
Committee that was established to administer the Company's stock option plan.
Since February 20, 1998, Ms. Grivas has been a member of the Audit Committee,
which was created to evaluate transactions where the potential for a conflict of
interest exists and such other matters that are properly referred to the Audit
Committee by the Board of Directors. Ms. Grivas had been an administrative
assistant for Phillip DeZwirek, Icarus Investment Corp. and other entities he
controls since 1975. She retired from those positions in February 1998. Ms.
Grivas also is the Secretary and Treasurer and a director of Can-Med.
Donald A. Wright became a director of the Company on February 20,
1998. Mr. Wright has also been a member of the Audit Committee since February
20, 1998. Mr. Wright has been a principal of and real estate broker with The
Phillips Group in San Diego, California, a company which is a real estate
developer and apartment building syndicator, since 1992. Since November 1996,
Mr. Wright has also been a real estate broker with Prudential Dunn Realtors in
Pacific Beach, California. From August 1995 until October 1996 he was the
principal of and real estate broker with Barbour Real Estate Sales and Leasing
in La Costa, California.
During the fiscal year ended December 31, 1998, the Board held no
meetings. During and since the end of such period, action has been taken by
unanimous written consent of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance. Donald
Wright, a director of the Company, failed to timely file (i) a Form 3 upon the
acquisition of shares of stock of the Company and (ii) a Form 4 to report
addition acquisitions of the Company's shares of stock. Mr. Wright acquired an
aggregate of 11,000 shares of stock in a series of 11 transactions that should
have been reported in a Form 3 and Form 4. Such transactions were reported in a
Form 5. Except for Mr. Wright, the Company is not aware of any persons who
beneficially own or owned more than 10 percent of the outstanding common stock
of the Company or any officer, director or other person subject to the
requirements of Section 16 of the Securities Exchange Act of 1934 who, during
the period covered by this Annual Report on Form 10-KSB, failed to file, or
failed to file on a timely basis, any reports or forms required to be filed
under said Section 16 or the rules and regulations promulgated thereunder.
45
<PAGE>
Item 10. Executive Compensation
Except for the compensation described below, neither the Company nor
any of its subsidiaries paid, set aside or accrued any salary or other
remuneration or bonus, or any amount pursuant to a profit-sharing, pension,
retirement, deferred compensation or other similar plan, during its last fiscal
year, to or for any of the Company's executive officers or directors.
Except for the options described below issued to Donald Wright, the
directors of the Company received no consideration for serving in their capacity
as directors of the Company during its last fiscal year. The Company has no
annuity, pension or retirement plans.
Warrants
In consideration for Philip DeZwirek's valuable service to the Company
as an employee, officer and director, the Company granted Mr. DeZwirek (i)
warrants on January 14, 1998 to purchase up to 250,000 shares of the Company's
common stock, which are exercisable at any time between June 14, 1998 and
January 14, 2008 inclusive at a price of $2.75, the closing price of the
Company's common stock on January 14, 1998, (ii) warrants on September 14, 1998
to purchase up to 250,000 shares of the Company's common stock, which are
exercisable at any time between March 14, 1999 and September 14, 2008 inclusive
at a price of $1.625, the closing price of the Company's common stock on
September 14, 1998, and (iii) warrants on January 22, 1999 to purchase up to
500,000 shares of the Company's common stock, which are exercisable at any time
between July 22, 1999 and January 22, 2009 inclusive at a price of $3.00, the
closing price of the Company's common stock on January 22, 1999 (each such grant
of warrants a "Warrant Grant"). All of such warrants are transferable and grant
the holders thereof "piggyback registration rights", i.e. the right to
participate in any registration of securities by the Company other than a
registration statement in connection with a merger or pursuant to registration
statements on Forms S-4 or S-8. Additionally, the holders of a majority of the
shares underlying the warrants and the warrants for each Warrant Grant have the
right on two occasions to have the Company prepare and file with the Securities
and Exchange Commission a registration statement and such other documents as may
be necessary for such holders to effect a public offering of the shares
underlying the warrants previously issued or to be issued upon the effectiveness
of such registration statement. The Company is however required to pay the
expenses of only one of such registrations for each Warrant Grant. With respect
to each Warrant Grant, the right to demand such registrations expires 10 years
from the date of the Warrant Grant, or upon the happening of certain other
conditions.
Options
In consideration for Donald Wright's valuable services as a director,
the Company granted Mr. Wright options (the "Options") to purchase up to 10,000
shares of the Company's common stock on June 30, 1998. The Options are
exercisable at any time between February 1, 1999 and June 30, 2008 inclusive at
a price of $2.75. The Options are transferable, subject to federal and state
securities laws.
46
<PAGE>
Compensation
On October 1, 1997, the Board of Directors of the Company adopted the
CECO Environmental Corp. 1997 Stock Option Plan (the "Plan"). The Plan was
approved by the shareholders on September 10, 1998. The stock options are
intended to qualify as incentive stock options and may be issued to officers and
employees of the Company and its subsidiaries. The Plan must be administered by
a committee of at least two non-employee directors; the committee currently
consists of Jason DeZwirek and Josephine Grivas. One Million, Five Hundred
Thousand shares of the Company's stock has been reserved for issuance pursuant
to the Plan. Options to purchase stock may be granted at not less than 100% of
the market price of the shares on the date of the grant, except that if the
grantee of the options owns more than 10% of the voting power of stock of the
Company or any of its subsidiaries, the option price per share may not be less
than 110% of the market price on the date of the grant. As of March 18, 1999,
312,320 options under the Plan have been issued, none of which were issued to an
officer or director of the Company.
On September 1, 1998, the Board of Directors of the Company adopted
the CECO Environmental Corp. 1998 Employee Stock Purchase Plan (the "Stock
Plan"). Employees, other than certain part-time employees, are eligible to
participate in the Stock Plan, which provides employees the opportunity to
purchase stock of the Company at a discounted price. The maximum number of
shares of common stock of the Company that will be offered under the Stock Plan
is 250,000. Such shares will be offered in nine separate consecutive offerings
commencing October 1, 1998, with the final offering terminating on September 30,
2003. The purchase price per share will be the lesser of 85% of the market price
of the stock on the last business day of the offering or 85% of the market price
of the stock on the offering date. Payment of the stock under the Stock Plan is
paid through employee payroll deductions. The Stock Plan is administered by the
Company's board of directors, however, the board of directors may delegate its
authority to a committee of the board or an officer of the Company. Adoption of
the Stock Plan is subject to the approval of the shareholders of the Company by
August 31, 1999. Any grants of stock and rights to purchase stock of the Company
will be void and all amount contributed by employees will be refunded in the
event shareholder approval is not obtained by August 31, 1999. No grants of
stock have been issued as of March 15, 1999 under the Stock Plan.
The following table summarizes the total compensation of Phillip
DeZwirek, the Chief Executive Officer of the Company, for 1998 and the two
previous years. There were no other executive officers of the Company who
received compensation in excess of $100,000 in 1998.
47
<PAGE>
SUMMARY COMPENSATION TABLE FOR THE COMPANY:
Name/ Annual Compensation Long Term Compensation
Principal Position Year Salary Options (#)
- ------------------ ---- ------ -----------------------
Phillip DeZwirek 1998 $80,000 500,000(1)
President and 1997 $50,000 -
Chief Executive Officer 1996 $42,500 750,000(2)
The following tables set forth information with respect to Mr.
DeZwirek concerning exercise of options on stock of the Company during the last
fiscal year and unexercised options on stock of the Company held as of the end
of the fiscal year.
OPTION/SAR GRANTS BY THE COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1998:
- -------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options Employees in or Base Expiration
Name Granted (#) Fiscal Year ($/SH) Date
- ---- ----------- ----------- ------ --------------
Phillip DeZwirek 250,000 50% $2.75 Jan. 14, 2008
250,000 50% $1.625 Sept. 14, 2008
AGGREGATED OPTION/SAR ON THE COMPANY
EXERCISES FOR THE YEAR ENDED DECEMBER 31, 1998
AND OPTION/SAR VALUES ON THE COMPANY AS OF DECEMBER 31, 1998:
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options/SARs Options/SARs
Exercise Realized at 12/31/98 at 12/31/98
Name (#) ($) Exercisable Unexerciseable Exercisable Unexerciseable
- ---- -------- -------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Phillip DeZwirek 0 0 1,000,000 250,000 $1,000,000 $343,750
</TABLE>
- -----------------
(1) Represents 250,000 Warrants issued on January 14, 1998 and 250,000
Warrants issued on September 14, 1998.
(2) Represents the Warrants issued to Phillip DeZwirek on November 7,
1996.
48
<PAGE>
The following table summarizes the total compensation of the Chief
Executive Officer of CECO Filters, Inc. for 1998 and the two previous years (the
"Named Executive Officer"). There were no other executive officers of CECO
Filters, Inc. who received compensation in excess of $100,000 for 1998.
SUMMARY COMPENSATION TABLE FOR CECO FILTERS, INC.:
- --------------------------------------------------
<TABLE>
<CAPTION>
Name/ Annual Compensation Long Term Compensation All Other
Principal Position Year Salary Options (#) Compensation(1)
- ------------------ ------------------- --------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Steven I. Taub, Ph.D./ 1998 $240,7402 - $4,750.20
President and 1997 $226,300 210,5203 $4,750.20
Chief Executive Officer 1996 $228,800 30,000 $4,750.20
</TABLE>
AGGREGATED OPTION/SAR ON THE COMPANY
EXERCISES FOR THE YEAR ENDED DECEMBER 31, 1998
AND OPTION/SAR VALUES ON THE COMPANY AS OF DECEMBER 31, 1998:
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options/SARs Options/SARs
Exercise Realized at 12/31/98 at 12/31/98
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven I. Taub, Ph.D. 0 0 42,104 168,416 $0 $0
</TABLE>
Dr. Taub entered into an Employment Agreement dated September 30, 1997
with CECO. The Employment Agreement was effective September 30, 1997 and has a
term through June 30, 2002. Either party may terminate the Employment Agreement
for cause. Dr. Taub's base salary is set at $225,000 per year, but may be
modified by the mutual agreement of CECO and Dr. Taub. In addition to his base
salary, Dr. Taub is entitled to (i) a $2,000 IRA contribution by CECO, (ii) a
car for business use, or in the alternative, an expense reimbursement for his
personal car up to $600 per month, (iii) life, medical, dental and disability
insurance, and (iv) up to 25 days of paid vacation annually. In addition, Dr.
Taub will receive fees for service as a director of CECO equal to the highest
fee paid to any other director of CECO or its affiliates.
- --------------------
(1) Includes matching contributions by the Company to the Company's
401(k) Plan on behalf of Dr. Taub.
(2) $225,000 is allocated to base salary, $2,000 to IRA contribution,
$7,200 to automobile allowance and $6,540 to insurance premiums, all of which
items Dr. Taub pays for directly.
(3) All options granted are for shares of stock of the Company
pursuant to the Company's Stock Option Plan and were granted in exchange for the
cancellation of all options held by Dr. Taub for the purchase of 325,000 shares
of CECO.
49
<PAGE>
Under the terms of the Employment Agreement, upon Dr. Taub's death,
the Company must redeem, at the request of Dr. Taub's estate, all of the stock
owned by Dr. Taub. The price of such redeemed stock will be the lesser of
$2,000,000 or its market value. Either CECO or the Company must maintain at
least $2,000,000 of life insurance on the life of Dr. Taub to pay for such
redemption.
Dr. Taub has agreed not to engage in any business competitive with
CECO for a term of two years after termination of his employment.
The following table summarizes the total compensation of Andrew M.
Halapin, President and Chief Operating Officer of Busch, for 1998. There were no
other executive officers of Busch who received compensation in excess of
$100,000 for 1998. Mr. Halapin did not receive any options or SAR grants from
the Company or Busch in 1998.
SUMMARY COMPENSATION TABLE FOR NEW BUSCH CO., INC.:
<TABLE>
<CAPTION>
Name/ Annual Compensation All Other
Principal Position Year Salary Bonus Compensation(2)
- ------------------ ------------------- ------ ----- ---------------
<S> <C> <C> <C> <C>
Andrew M. Halapin 1998 $200,000 - $200,000
President and 1997 $100,000 $500,000(1) $100,000
Chief Operating Officer
</TABLE>
Busch entered into an Employment, Non-Compete and Confidentiality
Agreement dated September 25, 1997 with Andrew M. Halapin, pursuant to which Mr.
Halapin agreed to be Busch's President and chief operating officer until June
30, 2000. Mr. Halapin receives a $200,000 annual salary. Mr. Halapin is also
entitled to a bonus depending upon whether Busch meets or exceeds certain target
earnings. Mr. Halapin agrees to not compete with Busch and its affiliates
(including CECO) for two years from the date of the Employment Agreement or one
year from the date of termination of the Employment Agreement, whichever is
later. As compensation for Mr. Halapin's agreement not to compete, he received
$100,000 upon execution of the Employment Agreement and is entitled to
additional $200,000 annual payments for four years, for a total payment of
$900,000 for Mr. Halapin's agreement not to compete with Busch and its
affiliates. Upon termination of the Employment Agreement, Busch is required to
pay Mr. Halapin $450,000 before January 31, 2002 in consideration of Mr.
Halapin's providing certain consulting services to CECO.
- --------------------
(1) Represents a $500,000 signing bonus.
(2) Represents a $100,000 payment in 1997 and a $200,000 payment in
1998 for consideration of a non-compete agreement contained in Mr. Halapin's
Employment Agreement.
50
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth the name and address of each beneficial
owner of more than five percent (5%) of the Company's common stock known to the
Company, the number of shares of common stock of the Company beneficially owned
as of March 15, 1999, and the percent of the class so owned by each such person.
51
<PAGE>
No. of Shares % of Total CEC
Name and Address of of Common Stock Common Shares
Beneficial Owner Beneficially Owned Outstanding(1)
- --------------------------------------------------------------------------------
Icarus Investment Corp.(2)
505 University Avenue, Suite 1400
Toronto, Ontario M5G 1X3 1,334,360 15.9%
Phillip DeZwirek(2,3,4)
505 University Avenue, Suite 1400
Toronto, Ontario M5G 1P7 2,589,857 26.9%
IntroTech Investments, Inc.(5)
195 Hillsdale Avenue East
Toronto, Ontario M5S 1T4 1,598,666 19.0%
- ----------------------
(1) Based upon 8,388,816 shares of common stock of the Company outstanding as of
March 15, 1999.
(2) Icarus Investment Corp. ("Icarus") is owned 50% by Phillip DeZwirek and 50%
by Jason Louis DeZwirek. Ownership of the shares of common stock of CEC owned by
Icarus Investment Corp. also are attributed to both Messrs. Phillip DeZwirek and
Jason Louis DeZwirek. With respect to the shares owned by Icarus, Icarus has
sole dispositive and voting power and Phillip DeZwirek and Jason Louis DeZwirek
are deemed to have shared voting and shared dispositive power.
(3) Phillip DeZwirek is the Chief Executive Officer, Chief Financial Officer and
Chairman of the Board of Directors of CEC.
(4) Includes (i) 750,000 shares of the Company's common stock that Phillip
DeZwirek can purchase on or prior to November 7, 2006 from the Company at a
price of $1.75 per share pursuant to Warrants granted to Mr. DeZwirek by the
Company on November 7, 1996; (ii) 250,000 shares that may be purchased pursuant
to Warrants granted January 14, 1998 at a price of $2.75 per share prior to
January 14, 2008 and (iii) 250,000 shares of the Company's common stock that may
be purchased pursuant to Warrants granted September 14, 1998 at a price of
$1.625 per share prior to September 14, 2008. Excludes 500,000 shares that may
be purchased pursuant to Warrants granted to Mr. DeZwirek by the Company January
22, 1999, which are not exercisable until July 22, 1999.
(5) Introtech Investments, Inc. ("IntroTech") is owned 100% by Jason Louis
DeZwirek. Ownership of the shares of common stock of the Company owned by
IntroTech also are attributed to Jason Louis DeZwirek. IntroTech and Jason Louis
DeZwirek are each deemed to have sole dispositive and sole voting power with
respect to such shares.
52
<PAGE>
Jason Louis DeZwirek(2,5)
195 Hillsdale Avenue East
Toronto, Ontario M5S 1T4 2,933,026 35.0%
Steven Taub(6) 645,656 7.6%
CECO Filters, Inc.
1027-29 Conshohocken road
Conshohocken, PA 19428
Brinker Pioneer, L.P.
259 Radnor-Chester Road
Radnor, PA 19087 580,266 6.9%
Richard Paul Genovese(7) 700,000 7.7%
IRG Investor(8) 500,000 5.6%
Relations Group, Ltd.
1286 Homer Street, 4th fl.
Vancouver, B.C. V6B 2Y5
- --------
(6) Includes 63,156 shares of the Company's common stock that Dr. Taub may
purchase by the exercise of options.
(7) Represents 700,000 shares of the Company's common stock that Mr. Genovese
may purchase by the exercise of warrants.
(8) Represents 500,000 shares of the Company's common stock that IRG Investor
Relations Group Ltd. may purchase by the exercise of warrants.
53
<PAGE>
(b) Security Ownership of Management
As of March 15, 1999, the present directors and executive officers of
the Company are the beneficial owners of the numbers of shares of common stock
of the Company set forth below:
Name of Number of
Beneficial Shares of % of Total CEC
Owner and Common Stock Common Shares
Position Held Beneficially Owned Outstanding(1)
- ------------- ------------------ --------------
Phillip DeZwirek
Chief Financial
Officer, Chief
Executive Officer,
Chairman of the
Board of Directors 2,589,85(2) 26.9%
Jason Louis DeZwirek
Director, Secretary 2,933,026(3) 35.0%
Josephine Grivas
Director -- --
Donald Wright 21,000(4) .25%
Director
Steven Taub 645,656(5) 7.6%
President of CECO
Officers and
Directors as a
group (5 persons) 4,855,179 50%
- -------------------
(1) See Note 1 to the foregoing table.
(2) See Notes 2, 3, and 4, to the foregoing table.
(3) See Notes 2 and 5 to the foregoing table.
(4) Includes 10,000 shares of the Company's common stock that may be
purchased pursuant to Options granted June 30, 1998 at a price of $2.75 per
share prior to June 30, 2008.
(5) See Note 6 to the foregoing table.
54
<PAGE>
(c) Changes in Control
The Company is not aware of any current arrangement(s) that may result
in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions
Since January 1, 1997, the following transactions have occurred in
which persons who, at the time of such transactions, were directors, officers or
owners of more than 5% of the Company's common stock, had a direct or indirect
material interest.
The Company and CECO have entered into a written management and
consulting agreement pursuant to which the Company provides management and
financial consulting services to CECO. The agreement has been effective since
July 1, 1994. The Company advises CECO on corporate policies, strategic and
financial planning, mergers and acquisitions, financing, long-term financial
goals and growth plans and related matters. Pursuant to this agreement CECO paid
the Company management and financial consulting fees of $20,000 per month
($240,000 total) for the 1997 fiscal year, and paid $20,000 per month through
July 1998 and $35,000 per month through December 1998 ($315,000 total) for the
1998 fiscal year. The contract is now automatically renewable on an annual basis
on each January 1, unless terminated by the Company. The contract requires
$35,000 consulting fees per month, which are adjustable each January 1. The
consulting agreement may also be terminated upon the sale of substantially all
of the assets of CECO or the merger of CECO into another company, in which event
the Company is entitled to receive a severance fee of $420,000.
On September 25, 1997, CECO borrowed $500,000 from the Company to help
fund the purchase of the assets for Busch. The loan is a subordinated, unsecured
loan. No principal may be repaid until the entire balance of a $1,000,000 loan
from CoreStates Bank, N.A. is repaid in full. The Company, however, receives
payments of interest. Interest accrues on the unpaid principal at the rate of
10% per annum.
Andrew Halapin, President of Busch, is the beneficial owner of the
building in which Busch leases its principal office. The lease is a triple net
lease, with annual rent in the amount of $133,308, which may be increased on
August 1, 1999.
Item 13. Exhibits, Lists and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization dated August 13, 1997 between
CECO, the Company and Steven I. Taub. (Incorporated by reference
from Form 10-KSB dated December 31, 1997 of the Company)
55
<PAGE>
3(i) Articles of Incorporation (Incorporated by reference from Form
10-KSB dated December 31, 1993 of the Company)
3(ii) Bylaws (Incorporated by reference from Form 10-KSB dated
December 31, 1993 of the Company) and Amendment to Bylaws.
4.1 CECO Filters, Inc. Savings and Retirement Plan. (Incorporated by
reference from CECO's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990)
4.2 CECO Environmental Corp. 1997 Stock Option Plan. (Incorporated
by reference from Form 10-KSB, exhibit 4.4, dated December 31,
1997 of the Company)
4.3 CECO Environmental Corp. 1998 Employee Stock Purchase Plan
(Incorporated by reference from Form S-8, exhibit 4, dated
September 17, 1998 of the Company).
10.1 Mortgage dated October 28, 1991 by CECO and the Montgomery
County Industrial Development Corporation ("MCIDC")
(Incorporated by reference from CECO's Annual Report on Form
10-K for the fiscal year ended December 31, 1991)
10.2 Installment Sale Agreement dated October 28, 1991 between CECO
and MCIDC (Incorporated by reference from CECO's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991)
10.6 Lease dated as of March 10, 1992 between CECO and BTR North
America, Inc. (Incorporated by reference from CECO's Annual
Report on Form 10-K for the fiscal year ended December 31, 1991)
10.7 Commercial Promissory Note dated February 25, 1993 between CECO
and Corestates Bank, N.A. (Incorporated by reference from CECO's
Annual Report on Form 10-KSB for the fiscal year ended December
31, 1993)
10.8 Commercial-Industrial Mortgage dated February 25, 1993 between
CECO and Corestates Bank, N.A. (Incorporated by reference from
CECO's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1993)
10.9 Consulting Agreement dated as of January 1, 1994 and effective
as of July 1, 1994 between the Company and CECO (Incorporated by
reference to Form 10-QSB dated September 30, 1994 of the
Company)
56
<PAGE>
10.10 Warrant Agreement dated as of November 7, 1996 between the
Company and Phillip DeZwirek. (Incorporated by reference from
the Company's Form 10-KSB dated December 31, 1996)
10.11 Warrant Agreement dated as of January 14, 1998 between the
Company and Phillip DeZwirek. (Incorporated by reference from
the Company's Form 10-KSB dated December 31, 1998)
10.12 Asset Purchase Agreement among New Busch Co., Inc., Busch Co.
and Andrew Halapin dated September 9, 1997. (Incorporated by
reference from the Form 8-K filed by CECO on October 9, 1997
with respect to event of September 25, 1997)
10.13 Employment, Non-Compete and Confidentiality Agreement between
New Busch Co., Inc. and Andrew M. Halapin dated September 25,
1997. (Incorporated by reference from the Form 8-K filed by CECO
on October 9, 1997 with respect to event of September 25, 1997)
10.14 Employment Agreement and Addendum to Employment Agreement
between CECO and Steven I. Taub dated September 30, 1997.
(Incorporated by reference from the Company's Quarterly Report
on Form 10-QSB for quarter ended September 30, 1997)
10.15 $1,000,000 Note of CECO payable to Corestates Bank, N.A. dated
September 25, 1997. (Incorporated by reference from the
Company's Form 10-KSB dated December 31, 1997)
10.16 $1,500,000 Demand Note of CECO payable to Corestates Bank, N.A.
dated September 25, 1997. (Incorporated by reference from the
Company's Form 10-KSB dated December 31, 1997)
10.17 Loan Agreement between CECO and Corestates Bank, N.A. dated
September 24, 1997. (Incorporated by reference from the
Company's Form 10-KSB dated December 31, 1997)
10.18 Lease between Busch Co. and Richard Roos dated January 10, 1980,
Amendment to Lease dated August 1, 1988 between Busch Co. and
Richard Roos, Amendment to Lease dated May 21, 1991 between
Richard A. Roos and Busch Co. and Amendment to Lease dated June
1, 1991 between JDA, Inc. and Busch Co. (Incorporated by
reference from the Company's Form 10-KSB dated December 31,
1997)
57
<PAGE>
10.19 Assignment of Lease dated September 25, 1997 among Richard A.
Roos, JDA, Inc., Busch Co. and New Busch Co., Inc.
10.20 Lease between Joseph V. Salvucci and Busch Co. dated October 17,
1994. (Incorporated by reference from the Company's Form 10-KSB
dated December 31, 1997)
10.21 Warrant Agreement dated as of September 14, 1998 between the
Company and Phillip DeZwirek.
10.22 Warrant Agreement dated as of January 22, 1999 between the
Company and Phillip DeZwirek.
10.23 Warrant Agreement between the Company and IRG Investor Relations
Group Ltd. and Warrant Certificates (Incorporated by reference
from the Company's Form S-8 dated December 8, 1998)
10.24 Consulting Agreement between the Company and IRG Investor
Relations Group Ltd. dated November 1, 1998 (Incorporated by
reference from the Company's Form S-8 dated December 8, 1998)
10.25 Warrant Agreement between the Company and Richard Genovese dated
November 2, 1998 and Warrant Certificates.
10.26 Option for the Purchase of Shares of Common Stock for Donald
Wright dated June 30, 1998.
10.27 $5,000,000 Line of Credit Note of the Company, CECO, APC, Busch
and USFM (the "Borrowers") dated March 16, 1999 payable to PNC
Bank, National Association ("PNC").
10.28 $787,155.41 Mortgage Note of the Borrowers dated March 16, 1999
payable to PNC.
10.29 $625,000.06 Term Loan Note of the Borrowers dated March 16, 1999
payable to PNC.
10.30 Letter Agreement dated March 16, 1999 among PNC and the
Borrowers.
10.31 Open-End Mortgage and Security Agreement dated March 16, 1999 by
CECO in favor of PNC, with the joinder of MCIDC.
10.32 Guaranty of Suretyship Agreement of the Company dated March 16,
1999 for the benefit of PNC.
21 Subsidiaries of the Company.
58
<PAGE>
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the fiscal
quarter ended December 31, 1998.
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CECO ENVIRONMENTAL CORP.
By: /s/ Phillip DeZwirek
--------------------------
Phillip DeZwirek,
Chief Executive Officer
Chief Financial Officer
Dated: March 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Principal Executive, Financial
and Accounting Officer
/s/ Phillip DeZwirek March 26, 1999
- ---------------------------------------
Phillip DeZwirek, Chairman of the
Board and Director,
Principal Executive, Financial
and Accounting Officer
/s/ Jason Louis DeZwirek March 26, 1999
- ---------------------------------------
Jason Louis DeZwirek, Director
/s/ Josephine Grivas March 26, 1999
- ---------------------------------------
Josephine Grivas, Director
/s/ Donald Wright March 26, 1999
- ---------------------------------------
Donald Wright, Director
60
<PAGE>
Exhibit 3(ii)
ACTION BY UNANIMOUS WRITTEN CONSENT
OF THE DIRECTORS OF
CECO ENVIRONMENTAL CORP.
The undersigned, being all of the Directors of CECO ENVIRONMENTAL
CORP., a New York corporation (the "Corporation"), pursuant to the provisions of
Section 708 of the Business Corporation Law of the State of New York, do hereby
consent, in lieu of meeting, to the adoption of the following resolutions:
RESOLVED, that effective February 22, 1998, the second
sentence of Article II, Section 4, of the Bylaws of the Corporation be,
and hereby is, amended in accordance with the amendment to the New York
Business Corporation Law to read as follows:
"Such date shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days
prior to any other action."
FURTHER RESOLVED, that effective February 22, 1998, the
seventh sentence of the fourth paragraph of Article II, Section 5,
entitled "Notice or Actual or Constructive Waiver of Notice," of the
Bylaws of the Corporation be, and hereby is, amended in accordance with
the amendment to the New York Business Corporation Law to read as
follows:
"A copy of the notice of any meeting shall be given,
personally or by first class mail, not less than ten days nor
more than sixty days before the date of the meeting, unless
the lapse of the prescribed period of time shall have been
waived, to each shareholder at his record address or at such
other address which he may have furnished by notice in writing
to the Secretary of the corporation."
FURTHER RESOLVED, that the appropriate officers of the
Corporation be, and hereby are, authorized and directed to execute any
and all documents and to take any other actions which they deem
necessary to effectuate the foregoing resolutions.
Dated: February 18, 1998
/s/Phillip DeZwirek /Jason DeZwirek
- --------------------------- ---------------------------------
Phillip DeZwirek Jason DeZwirek
/Josephine Grivas/
- ---------------------------
Josephine Grivas
BEING ALL OF THE DIRECTORS OF CECO ENVIRONMENTAL CORP.
<PAGE>
EXHIBIT 10.19
ASSIGNMENT OF LEASE
ASSIGNMENT made this 25th day of Septmeber, 1997 by and among RICHARD
A. ROOS and JDA, INC., a Pennsylvania corporation (collectively "Landlord"),
BUSCH CO., a Pennsylvania corporation ("Tenant") and NEW BUSCH CO., INC., a
Delaware corporation ("New Busch").
BACKGROUND
Landlord and Tenant are parties to a lease dated January 10, 1980 as
amended by Amendments to Lease dated August 1, 1988, May 21, 1991 and extended
through July 31, 1999 by Addendum to Lease dated June 1, 1991 (the "Lease")
covering the demised premises located in Sheller Township, Allegheny County,
Pennsylvania as defined in the Lease (the "Premises"). Pursuant to the sale of
certain of its assets to New Busch, Tenant desires to assign all of its rights
and obligations under the Lease: to New Busch and New Busch desires to accept
such assignment and Landlord has consented to such assignment.
NOW THEREFORE in consideration of the foregoing premises and intending
to be legally bound hereby, Landlord, Tenant and New Busch hereby represent and
agree as follows:
1. Representations of Landlord and Tenant. Landlord and Tenant hereby
represent, with the intent that New Busch should rely on this representation in
connection with this Assignment, the following:
(a) The Lease is in full force and effect and has not been
amended or supplemented. The Lease represents the entire agreement between
Landlord and Tenant with respect to the Premises.
(b) No "default" or "event of default" under the Iease has
occurred or is continuing and no event which with notice or lapse of time or
both would be a "default" or "event of default" under the Lease has occurred.
(c) All rent and additional rent under the Lease has been paid
through September 30, 1997.
(d) The interest in and to the leasehold estate retained by
Richard A. Roughs expires on July 31, 1999.
Landlord and Tenant agree that they shall be estopped from any
future assertion of facts contrary to the foregoing representations.
<PAGE>
2. Assignment.
(a) Tenant hereby assigns to New Busch all of the right, title
and interest of Tenant in and to the Lease as of the Effective Date (as
hereinafter defined).
(b) New Busch hereby assumes and agrees, as of the Effective
Date, to make all payments and to keep all covenants and agreements of Tenant
under the Lease with the same force and effect as if New Busch had executed the
Lease originally as tenant therein.
(c) Landlord hereby consents to the assignment of the Lease
contained herein. Furthermore, pursuant to Article 18 of the Lease, Tenant shall
remain liable to Landlord under all terms and conditions of the Lease.
(d) Tenant hereby agrees to indemnify and hold New Busch harmless
from and against any and all losses or damages (including without limitation,
the cost of defending the same) relating to a default under the Lease or
otherwise with respect to the Lease accruing prior to the Effective Date of this
Assignment.
(e) New Busch hereby agrees to indemnify and hold Tenant harmless
from and against any and all losses or damages (including without limitation,
the cost of defending the same) relating to a default under the Lease or
otherwise with respect to the Lease accruing from and after the Effective Date
of this Assignment.
3. Amendments to Lease. Landlord and New Busch hereby agree
that on the Effective Date, the Lease shall be amended and supplemented as
follows (capitalized terms used in the following subparagraphs (a) through (d)
but not defined herein, shall have the meanings given to them in the Lease):
(a) The term of the Lease shall be extended to July 31, 2002.
The period from August 1, 1999 through July 31, 2002 is hereinafter referred to
as the "Extension Tenn."
(b) Prior to August 1, 1999, Annual Net Basic Rental of $103,200
and additional rent in the amount of $2,509.00 per month shall be paid by Tenant
as provided in the Lease. During the Extension Term, in lieu of the foregoing
payments, Tenant shall pay Annual Net Basic Rental as set forth in subsection
(c) below:
(c) Annual Net Basic Rental during the first year of the
Extension Term (commencing August 1, 1999) shall be equal to the lesser of (a)
$133,308, increased by the percentage increase in the CPI (as hereinafter
defined) from June 1998 to June 1999 or (b) the Fair Market Rental Value of the
Premises (as hereinafter defined). The Annual Net Basic Rental during the second
and third years of the Extension Term shall be the Annual Net Basic Rental for
the prior year increased by the percentage increase in the CPI. Notwithstanding
the foregoing, the percentage increase in any given year shall not exceed four
(4%) percent. Such Annual Net Basic
<PAGE>
Rental shall be payable in monthly installments, each of which installment shall
be an amount equal to one-twelfth (1/12th) of the applicable Annual Net Basic
Rental, and shall be paid in advance on or before the tenth business day of each
month during the Extension Term, without demand, to the Lessor at JDA, Inc., 940
Mt. Royal Boulevard, Pittsburgh, Pennsylvania 15223 or such other place as the
Landlord may designate in writing from time to time.
(d) For the purpose of the foregoing:
(i) "Fair Market Rental Value of the Premises" shall be
the annual rent agreed to by Landlord and Tenant or, if they do not reach
agreement, the annual rent equal to the fair market rental value of the
Premises, taking into consideration all of the other terms and conditions of the
Lease, as determined by an MAI appraiser selected by Landlord and Tenant. In the
event Landlord and Tenant cannot agree on an MAI appraiser, each shall select
one MAI appraiser and that appraiser shall appoint a third MAI appraiser whose
determination of Fair Market Rental Value shall control. The cost of any
appraisal shall be divided equally between Landlord and Tenant. Landlord and
Tenant shall negotiate in good faith, beginning no later than April 1, 1999 in
order to determine annual rental value of the Premises. If they have not reached
agreement on annual rent prior to May 1, 1999, they shall attempt to agree on an
MAI appraiser by May 15, 1999. If they have not agreed on such appraiser by May
15, 1999, they shall each appoint one MAI appraiser by May 30, 1999. Such
appraiser shall select the third MAI appraiser by June 15, 1999. The single MAI
appraisers appointed by the MAI appraisers appointed by the MAI appraisers
appointed by each of the parties shall have thirty (30) days to determine Fair
Market Rental Value of the Premises.
(ii) "CPI" shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers in the Pittsburgh area published by the
Bureau of Labor Statistics of the U.S. Department of Labor (1982-84 equals 100)
(All Items). In the event that the CP1 ceases to use 1982-84 average of 100 as
the basis of calculation, or if a substantial change is made in the terms or
number of items contained in the CP1, then the CPL shall be adjusted to the
figure that would have been arrived at had the change in the a manner of
computing the CPI in effect on the date of this amendment to lease not been
altered. In the event such CPI (or a successor or, substitute index) is not
available, a reliable governmental or non-partisan publication evaluating the
information thereto fore used in determining the CPI shall be used. In the event
no CPI shall be published for the month in question, the CPI published on the
date nearest thereto shall be used.
(iii) "Percentage Increase" shall be calculated as
follows: first calculate the sum which is the difference between the CPI for
June of the then current year and June of the immediately preceding year.
Second, divide that difference by the CPI for June of the immediately preceding
year. Third, multiply the quotient just derived by 100 to obtain the "percentage
increase." (For an example of the calculation see Exhibit A") on such appraiser
by May 15, 1999, they shall each appoint one MAI appraiser by May 30, 1999. Such
appraiser shall select the third MAI appraiser by June 15, 1999. The single MAI
appraiser appointed by the
<PAGE>
parties or the single MAI appraiser appointed by the MAI appraisers appointed by
each of the parties shall have thirty (30) days to determine Fair Market Rental
Value of the Premises.
(ii) "CPI" shall mean the Consumer Price Index for Urban
Wage Earners and Clerical Workers in the Pittsburgh area published by the Bureau
of Labor Statistics of the U.S. Department of Labor (1982-84 equals 100) (All
Items). In the event that the CP1 ceases to use 1982-84 average of 100 as the
basis of calculation, or if a substantial change is made in the terms or number
of items contained in the CPI, then the CPI shall be adjusted to the figure that
would have been arrived at had the change in the a manner of computing the CPI
in effect on the date of this amendment to lease not been altered. In the event
such CPI (or a successor or, substitute index) is not available, a reliable
governmental or non-partisan publication evaluating the information thereto fore
used in determining the CPI shall be used. In the event no CPI shall be
published for the month in question, the CPI published on the date nearest
thereto shall be used.
(iii) "Percentage Increase" shall be calculated as
follows: first calculate the sum which is the difference between the CPI for
June of the then current year and June of the immediately preceding year.
Second, divide that difference by the CPI for June of the immediately preceding
year. Third, multiply the quotient just derived by 100 to obtain the "percentage
increase." (For an example of the calculation see Exhibit "A").
4. Additional Covenants.
(a) Landlord agrees to execute such waiver of liens as may be
requested from time to time by Tenant's bank or other financial institution.
(b) Landlord, Tenant and New Busch hereby represent and warrant
to each other, that they have dealt with no broker in connection with this
Assignment and there are no brokerage commissions or finder's fees payable in
connection therewith. Each party hereby agrees to hold the other party harmless
from and against any and all damage (including without limitation, the cost of
defending the same) arising from any claim by a broker claiming to have dealt
with such party in connection with this Assignment.
(c) This Assignment shall be binding and inure to the benefit of
the parties hereto and their respective successors and assigns.
(d) This Assignment shall be effective beginning July 1, 1997
(the "Effective Date").
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
as of the day and year first above written.
<PAGE>
/Richard A. Roughs/
-----------------------------------
Richard A. Roughs
JDA, INC.
By: /Andrew M. Halapin/
--------------------------------
Andrew M. Halapin
President
BUSCH CO.
By: /AndrewM.Halapin/
--------------------------------
Andrew M. Halapin
President
NEW BUSCH CO., INC.
By: /Steven I. Taub
--------------------------------
Steven I. Taub
Chairman
<PAGE>
EXHIBIT 10.21
____________________________________
CECO ENVIRONMENTAL CORP.
AND
PHILLIP DeZWIREK
WARRANT AGREEMENT
Dated as of September 14, 1998
____________________________________
<PAGE>
WARRANT AGREEMENT (the "Agreement") dated as of September 14, 1998
between CECO Environmental Corp., a New York corporation (the "Company"), and
Phillip DeZwirek (hereinafter referred to as a "Holder" or "DeZwirek").
W I T N E S S E T H :
WHEREAS, DeZwirek is an employee, officer and director of the Company;
and
WHEREAS, DeZwirek has, and continues to provide valuable services
to the Company; and
WHEREAS, the Company desires to grant to DeZwirek, and DeZwirek desires
to accept from the Company, warrant certificates giving DeZwirek the right to
purchase shares of the Company's Common Stock.
NOW, THEREFORE, in consideration of the premises, the payment by
DeZwirek to the Company of an aggregate of ten dollars ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. DeZwirek is granted the right to purchase, from the Company,
at any time from March 15, 1999, until 5:30 p.m., New York time, on September
14, 2008 (the "Expiration Date"), at which time the Warrants expire, up to an
aggregate of 250,000 shares (subject to adjustment as provided in Section 8
hereof) of common stock, par value $.01 per share, of the Company ("Common
Stock") at an initial exercise price (subject to adjustment as provided in
Section 11 hereof) of $1.625 per share (the "Exercise Price").
<PAGE>
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Registration of Warrant. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
4. Exercise of Warrant.
4.1 Method of Exercise. The Warrants initially are exercisable
at the product of (i) the Exercise Price multiplied by (ii) the number of shares
of Common Stock purchased (subject to adjustment as provided in Section 11
hereof), as set forth in Section 8 hereof payable by certified or official bank
check in United States dollars. The product of the number of Warrants exercised
at any one time multiplied by the Exercise Price shall be referred to as the
"Purchase Price." Upon surrender of a Warrant Certificate with the annexed Form
of Election to Purchase duly executed, together with payment of the Purchase
Price for the shares of Common Stock purchased at the Company's principal
offices located at 505 University Avenue, Suite 1400, Toronto, Ontario, Canada,
the registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock). In the case of the purchase of less
than all the shares of Common Stock purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and
<PAGE>
deliver a new Warrant Certificate of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
5. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock shall be made forthwith (and
in any event within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 7 and 9 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock, or other securities, property or rights issued upon exercise of
the Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the then present President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or any Assistant Secretary
of the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
<PAGE>
6. Transfer of Warrant. The Warrants shall be transferable only on the
books of the Company maintained at its principal office, where its principal
office may then be located, upon delivery thereof duly endorsed by the Holder or
by its duly authorized attorney or representative accompanied by proper evidence
of succession, assignment or authority to transfer. Upon any registration
transfer, the Company shall execute and deliver new Warrants to the person
entitled thereto.
7. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
8. Exercise Price and Number of Securities. Except as otherwise
provided in Section 10 hereof, each of the Warrants are exercisable to purchase
one share of Common Stock at an initial exercise price equal to the Exercise
Price. The Exercise Price and the number of shares of Common Stock for which the
Warrant may be exercised shall be the price and the number of shares of Common
Stock which shall result from time to time from any and all adjustments in
accordance with the provisions of Section 11 hereof.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each Warrant
Certificate and each certificate representing the shares of Common Stock, and
any of the other securities issuable upon exercise of the Warrants and the
securities underlying the securities issuable upon exercise of the Warrants
(collectively, the "Warrant Shares") shall bear the following legend, unless (i)
such
<PAGE>
Warrants or Warrant Shares are distributed to the public or sold for
distribution to the public pursuant to this Section 9 or otherwise pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), (ii) such Warrants or Warrant Shares are subject to a currently
effective registration statement under the Act; or (iii) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory to
counsel for the Company, that such legend is unnecessary for any such
certificate:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
9.2 Piggyback Registration. If, at any time commencing September 1,
1999, and expiring on the Expiration Date, the Company proposes to register any
of its securities, not registered on the date hereof, under the Act (other than
in connection with a merger or pursuant to Form S-4 or Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the filing
of each such registration statement, to the Holders of the Warrants and/or the
Warrant Shares of its intention to do so. If any of the Holders of the Warrants
and/or Warrant Shares notify
<PAGE>
the Company within twenty (20) days after mailing of any such notice of its or
their desire to include any such securities in such proposed registration
statement, the Company shall afford such Holders of the Warrants and/or Warrant
Shares the opportunity to have any such Warrant Shares registered under such
registration statement. In the event that the managing underwriter for said
offering advises the Company in writing that in the underwriter's opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without causing a diminution in the
offering price or otherwise adversely affecting the offering, the Company will
include in such registration (a) first, the securities the Company proposes to
sell, (b) second, the securities held by the entities that made the demand for
registration, (c) third, the Warrants and/or Warrant Shares requested to be
included in such registration which in the opinion of such underwriter can be
sold, pro rata among the Holders of Warrants and/or Warrant Shares on the basis
of the number of Warrants and/or Warrant Shares requested to be registered by
such Holders, and (d) fourth, other securities requested to be included in such
registration.
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 Demand Registration.
(a) At any time commencing September 1, 1999 and expiring on the
Expiration Date, the Holders of the Warrants and/or Warrant Shares representing
a "Majority" (as
<PAGE>
hereinafter defined) of the Warrants and/or Warrant Shares shall have the right
on one occasion (which right is in addition to the registration rights under
Section 9.2 hereof), exercisable by written notice to the Company, to have the
Company prepare and file with the Securities and Exchange Commission (the
"Commission"), a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale by such Holders and any other Holders
of the Warrants and/or Warrant Shares who notify the Company within fifteen (15)
days after the Company mails notice of such request pursuant to Section 9.3(b)
hereof (collectively, the "Requesting Holders") of their respective Warrant
Shares so as to allow the unrestricted sale of the Warrant Shares to the public
from time to time until the earlier of the following: (i) the Expiration Date,
or (ii) the date on which all of the Warrant Shares requested to be registered
by the Requesting Holders have been sold (the "Registration Period").
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Warrants and/or Warrant Shares to all other
registered Holders of the Warrants and the Warrant Shares within ten (10) days
from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 9.2
and subsection (a) of this Section 9.3, at any time commencing September 1, 1999
and expiring on the Expiration Date, the Holders of Warrants and/or Warrant
Shares shall have the right on one occasion, exercisable by written request to
the Company, to have the Company prepare and file with the Commission a
registration statement so as to permit a public offering and sale by such
Holders of
<PAGE>
their respective Warrant Shares from time to time until the first to occur of
the following: (i) the expiration of this Agreement, or (ii) all of the Warrant
Shares requested to be registered by such Holders have been sold; provided,
however, that the provisions of Section 9.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested. The Company
shall also file such applications and other documents as may be necessary to
permit the sale of the Warrant Shares to the public during the Registration
Period in those states to which the Company and the holders of the Warrants
and/or Warrant Shares shall mutually agree.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with the
registration statement filed pursuant to Section 9.3(c).
<PAGE>
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holder(s) within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any Holder of the Warrant Shares or
controlling person thereof makes a claim for indemnification but it 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 of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9.4(d) hereof
provide for indemnification in such case or (ii) contribution under the Act may
be required on the part of any Holder of the Warrant Shares, or controlling
person thereof, then the Company, any such Holder of the Warrant Shares, or
<PAGE>
controlling person thereof shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The 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 the Company on the one hand or a Holder of
Warrant Shares, or controlling person thereof on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and such Holders of such
securities and such controlling persons agree that it would not be just and
equitable if contribution pursuant to this Section 9.4(e) were determined by pro
rata allocation or by any other method which does not take account of the
equitable considerations referred to in this Section 9.4(e). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
9.4(e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
<PAGE>
(f) The Holder(s) of the Warrant Shares to be sold pursuant to
a registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished in writing, by or on behalf of such Holders, or their successors or
assigns, for specific inclusion in such registration statement.
(g) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(h) The Company shall not permit the inclusion of any securities
other than the Warrant Shares to be included in any registration statement filed
pursuant to Section 9.3 hereof, or permit any other registration statement
(other than a registration statement on Form S-4 or S-8) to be or remain
effective during a one hundred and eighty (180) day period following the
effective date of a registration statement filed pursuant to Section 9.3 hereof,
without the prior written consent of the Holder(s) of the Warrants and Warrant
Shares representing a Majority of such securities or as otherwise required by
the terms of any existing registration rights granted prior to the date of this
Agreement by the Company to the holders of any of the Company's securities.
(i) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i)
<PAGE>
an opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, a "cold comfort" letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(j) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(k) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting.
Such agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are
<PAGE>
customarily contained in agreements of that type used by the managing
underwriter. The Holder(s) shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Shares and may, at their
option, require that any or all of the representations, warranties and covenants
of the Company to or for the benefit of such underwriters shall also be made to
and for the benefit of such Holder(s). Such Holder(s) shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holder(s) and their intended
methods of distribution.
(l) For purposes of this Agreement, the term "Majority" in
reference to the Warrants or Warrant Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Shares that (i) are
not held by the Company, or (ii) have not been resold to the public pursuant to
a registration statement filed with the Commission under the Act or Rule 144
promulgated under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating
to the
<PAGE>
Warrant Shares covered by a registration statement is required to be delivered
under the Act, of the happening of any event with respect to such selling Holder
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
11. Adjustments to Exercise Price and Number of Securities. The
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrants or the securities underlying the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
11.1 Dividend, Subdivision and Combination. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
11.2 Adjustment in Number of Securities. Upon each adjustment of
the Exercise
<PAGE>
Price pursuant to the provisions of this Section 11, the number of Warrant
Shares issuable upon the exercise at the adjusted Exercise Price of each Warrant
shall be adjusted to the nearest number of whole shares of Common Stock
determined by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of the applicable Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
11.3 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as of the date hereof, or
(ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to each Holder a supplemental warrant
agreement providing that the Holder of each Warrant then outstanding shall have
the right thereafter (until the Expiration Date) to receive, upon exercise of
such Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger to which the Holder would
have been entitled if the Holder had exercised such Warrant immediately prior to
such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in this
<PAGE>
Section 11. The above provision of this subsection shall similarly apply to
successive consolidations or mergers.
11.5 No Adjustment of the Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant
Shares;
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof or issued pursuant to any stock purchase plan in existence as of the
date of this Agreement, pursuant to the terms thereof; or
(c) If the amount of said adjustment shall be less than ten
cents ($.10) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least ten
cents ($.10) per share.
12. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable, without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company for a new
Warrant Certificate of like tenor and date representing in
<PAGE>
the aggregate the Holder's right to purchase the same number of Warrant Shares
in such denominations as shall be designated in such Warrant Certificate at the
time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or other securities upon the exercise of the Warrants, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof or the exercise or conversion of any
other exercisable or convertible securities underlying the Warrants. Every
transfer agent and warrant agent (collectively "Transfer Agent") for the Common
Stock and other securities of the
<PAGE>
Company issuable upon the exercise of the Warrants will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Common Stock and other securities as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with every Transfer Agent for
the Common Stock and other securities of the Company issuable upon the exercise
of the Warrants. The Company will supply every such Transfer Agent with duly
executed stock and other certificates, as appropriate, for such purpose. The
Company covenants and agrees that, upon each exercise of the Warrants and
payment of the Purchase Price, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock and other securities issuable upon
the exercise of the Warrants and the securities underlying the securities
issuable upon exercise of the Warrants to be listed (subject to official notice
of issuance) on all securities exchanges or securities associations on which the
Common Stock issued to the public in connection herewith may then be listed
and/or quoted.
15. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holder(s) of the Warrants the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares
of
<PAGE>
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then in any one or more of said events, the Company shall give written
notice to the registered holders of the Warrants of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
16. Notices. All notices, requests, consents and other communications
hereunder shall
<PAGE>
be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) if to the registered Holder of the Warrants, to the address
of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4
hereof or to such other address as the Company may designate by notice to the
Holders.
17. Supplements; Amendments; Entire Agreement. This Agreement contains
the entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is
sought. The Company and DeZwirek may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates (other
than DeZwirek) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and DeZwirek may deem necessary or
desirable and which the Company and DeZwirek deem shall not adversely affect the
interests of the Holders of Warrant Certificates.
18. Successors. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder(s) and
their respective successors and assigns hereunder.
<PAGE>
19. Survival of Representations and Warranties. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
20. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
21. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
<PAGE>
22. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
DeZwirek and any other registered Holder(s) of the Warrant Certificates or
Warrant Shares any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and DeZwirek and any other Holder(s) of the Warrant Certificates or
Warrant Shares.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CECO ENVIRONMENTAL CORP.
By:_______________________________
Name:______________________
Title:_____________________
/Phillip DeZwirek/
-------------------------------
Phillip DeZwirek
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 14, 2008
Warrant No.__
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from March 15, 1999 until 5:30 p.m., New York time, on September 14, 2008
("Expiration Date"), up to __________ shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $1.625 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue
<PAGE>
a new Warrant Certificate evidencing the adjustment in the Exercise Price and
the number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _________, 199__.
ATTEST: CECO ENVIRONMENTAL CORP.
_____________________ By: [SEAL]
Secretary --------------------------------
Name:_______________________
Title:______________________
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT]
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. ___, to purchase ______ shares of Common
Stock (as defined in the Warrant Agreement described below) and herewith tenders
in payment for such securities a certified or official bank check payable in
United States dollars to the order of CECO Environmental Corp., a New York
corporation (the "Company") in the amount of $____________, all in accordance
with the terms of Section 4.1 of the Warrant Agreement dated as of September 14,
1998 between the Company and Phillip DeZwirek. The undersigned requests that a
certificate for such securities be registered in the name of ________, whose
address is ____________________ and that such certificate be delivered to
________, whose address is _______________________, and if said number of shares
of Common Stock shall not be all the shares of Common Stock purchasable
hereunder, that a new Warrant Certificate for the balance of the shares of
Common Stock purchasable under the within Warrant Certificate be registered in
the name of the undersigned warrantholder or his assignee as below indicated and
delivered to the address stated below.
Dated:_________________
Signature:_______________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:__________________________________________
__________________________________________
__________________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
[NAME OF TRANSFEREE] Warrant Certificate No.___ , together with all right, title
and interest therein, and does hereby irrevocably constitute and
appoint__________________ Attorney, to transfer the within Warrant Certificate
on the books of the within-named Company, with full power of substitution.
Dated:______________
Signature:________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the
Warrant Certificate.)
Address:__________________________________________
__________________________________________
__________________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, SEPTEMBER 14, 2008
Warrant No. 3
WARRANT CERTIFICATE
This Warrant Certificate certifies that Phillip DeZwirek, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from March 15, 1999, until 5:30 p.m., New York time, on September 14, 2008
("Expiration Date"), up to 250,000 shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $1.625 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to
<PAGE>
certain conditions, be adjusted. In such event, the Company will, at the request
of the holder, issue a new Warrant Certificate evidencing the adjustment in the
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of September 14, 1998.
CECO ENVIRONMENTAL CORP.
By: /Jason DeZwirek/ [SEAL]
----------------------------- ------
Name: /Jason DeZwirek/
-------------------
Title: /Secretary/
------------------
<PAGE>
EXHIBIT 10.22
---------------------------------
CECO ENVIRONMENTAL CORP.
AND
PHILLIP DeZWIREK
WARRANT AGREEMENT
Dated as of January 22, 1999
---------------------------------
<PAGE>
WARRANT AGREEMENT (the "Agreement") dated as of January 22, 1999
between CECO Environmental Corp., a New York corporation (the "Company"), and
Phillip DeZwirek (hereinafter referred to as a "Holder" or "DeZwirek").
W I T N E S S E T H :
WHEREAS, DeZwirek is an employee, officer and director of the Company;
and
WHEREAS, DeZwirek has, and continues to provide valuable services to
the Company; and
WHEREAS, the Company desires to grant to DeZwirek, and DeZwirek desires
to accept from the Company, warrant certificates giving DeZwirek the right to
purchase shares of the Company's Common Stock.
NOW, THEREFORE, in consideration of the premises, the payment by
DeZwirek to the Company of an aggregate of ten dollars ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. DeZwirek is granted the right to purchase, from the Company,
at any time from July 22, 1999, until 5:30 p.m., New York time, on January 22,
2009 (the "Expiration Date"), at which time the Warrants expire, up to an
aggregate of 500,000 shares (subject to adjustment as provided in Section 8
hereof) of common stock, par value $.01 per share, of the Company ("Common
Stock") at an initial exercise price (subject to adjustment as provided in
Section 11 hereof) of $3.00 per share (the "Exercise Price").
<PAGE>
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Registration of Warrant. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
4. Exercise of Warrant.
4.1 Method of Exercise. The Warrants initially are exercisable at
the product of (i) the Exercise Price multiplied by (ii) the number of shares of
Common Stock purchased (subject to adjustment as provided in Section 11 hereof),
as set forth in Section 8 hereof payable by certified or official bank check in
United States dollars. The product of the number of Warrants exercised at any
one time multiplied by the Exercise Price shall be referred to as the "Purchase
Price." Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase Price
for the shares of Common Stock purchased at the Company's principal offices
located at 505 University Avenue, Suite 1400, Toronto, Ontario, Canada, the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock). In the case of the purchase of less
than all the shares of Common Stock purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock purchasable thereunder.
<PAGE>
5. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock shall be made forthwith (and
in any event within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 7 and 9 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock, or other securities, property or rights issued upon exercise of
the Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the then present President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or any Assistant Secretary
of the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
<PAGE>
6. Transfer of Warrant. The Warrants shall be transferable only on the
books of the Company maintained at its principal office, where its principal
office may then be located, upon delivery thereof duly endorsed by the Holder or
by its duly authorized attorney or representative accompanied by proper evidence
of succession, assignment or authority to transfer. Upon any registration
transfer, the Company shall execute and deliver new Warrants to the person
entitled thereto.
7. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
8. Exercise Price and Number of Securities. Except as otherwise
provided in Section 10 hereof, each of the Warrants are exercisable to purchase
one share of Common Stock at an initial exercise price equal to the Exercise
Price. The Exercise Price and the number of shares of Common Stock for which the
Warrant may be exercised shall be the price and the number of shares of Common
Stock which shall result from time to time from any and all adjustments in
accordance with the provisions of Section 11 hereof.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each Warrant
Certificate and each certificate representing the shares of Common Stock, and
any of the other securities issuable upon exercise of the Warrants and the
securities underlying the securities issuable upon exercise of the Warrants
(collectively, the "Warrant Shares") shall bear the following legend, unless (i)
such Warrants or Warrant Shares are distributed to the public or sold for
distribution to the public pursuant to this Section 9 or otherwise pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), (ii) such Warrants or Warrant Shares are subject to a currently
effective registration statement under the Act; or (iii) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory to
counsel for the Company, that such legend is unnecessary for any such
certificate:
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
9.2 Piggyback Registration. If, at any time commencing September 1,
1999, and expiring on the Expiration Date, the Company proposes to register any
of its securities, not registered on the date hereof, under the Act (other than
in connection with a merger or pursuant to Form S-4 or Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the filing
of each such registration statement, to the Holders of the Warrants and/or the
Warrant Shares of its intention to do so. If any of the Holders of the Warrants
and/or Warrant Shares notify the Company within twenty (20) days after mailing
of any such notice of its or their desire to include any such securities in such
proposed registration statement, the Company shall afford such
<PAGE>
Holders of the Warrants and/or Warrant Shares the opportunity to have any such
Warrant Shares registered under such registration statement. In the event that
the managing underwriter for said offering advises the Company in writing that
in the underwriter's opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without causing a diminution in the offering price or otherwise adversely
affecting the offering, the Company will include in such registration (a) first,
the securities the Company proposes to sell, (b) second, the securities held by
the entities that made the demand for registration, (c) third, the Warrants
and/or Warrant Shares requested to be included in such registration which in the
opinion of such underwriter can be sold, pro rata among the Holders of Warrants
and/or Warrant Shares on the basis of the number of Warrants and/or Warrant
Shares requested to be registered by such Holders, and (d) fourth, other
securities requested to be included in such registration.
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 Demand Registration.
(a) At any time commencing January 22, 1999 and expiring on
the Expiration Date, the Holders of the Warrants and/or Warrant Shares
representing a "Majority" (as hereinafter defined) of the Warrants and/or
Warrant Shares shall have the right on one occasion (which right is in addition
to the registration rights under Section 9.2 hereof), exercisable by written
notice to the Company, to have the Company prepare and file with the Securities
and Exchange
<PAGE>
Commission (the "Commission"), a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale by such
Holders and any other Holders of the Warrants and/or Warrant Shares who notify
the Company within fifteen (15) days after the Company mails notice of such
request pursuant to Section 9.3(b) hereof (collectively, the "Requesting
Holders") of their respective Warrant Shares so as to allow the unrestricted
sale of the Warrant Shares to the public from time to time until the earlier of
the following: (i) the Expiration Date, or (ii) the date on which all of the
Warrant Shares requested to be registered by the Requesting Holders have been
sold (the "Registration Period").
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Warrants and/or Warrant Shares to all other
registered Holders of the Warrants and the Warrant Shares within ten (10) days
from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 9.2
and subsection (a) of this Section 9.3, at any time commencing January 22, 1999
and expiring on the Expiration Date, the Holders of Warrants and/or Warrant
Shares shall have the right on one occasion, exercisable by written request to
the Company, to have the Company prepare and file with the Commission a
registration statement so as to permit a public offering and sale by such
Holders of their respective Warrant Shares from time to time until the first to
occur of the following: (i) the expiration of this Agreement, or (ii) all of the
Warrant Shares requested to be registered by such Holders have been sold;
provided, however, that the provisions of Section 9.4(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request.
<PAGE>
9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested. The Company
shall also file such applications and other documents as may be necessary to
permit the sale of the Warrant Shares to the public during the Registration
Period in those states to which the Company and the holders of the Warrants
and/or Warrant Shares shall mutually agree.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed pursuant
to Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with the
registration statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
<PAGE>
(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holder(s) within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any Holder of the Warrant Shares or
controlling person thereof makes a claim for indemnification but it 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 of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9.4(d) hereof
provide for indemnification in such case or (ii) contribution under the Act may
be required on the part of any Holder of the Warrant Shares, or controlling
person thereof, then the Company, any such Holder of the Warrant Shares, or
controlling person thereof shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether
<PAGE>
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 the
Company on the one hand or a Holder of Warrant Shares, or controlling person
thereof on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and such Holders of such securities and such controlling persons
agree that it would not be just and equitable if contribution pursuant to this
Section 9.4(e) were determined by pro rata allocation or by any other method
which does not take account of the equitable considerations referred to in this
Section 9.4(e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 9.4(e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) The Holder(s) of the Warrant Shares to be sold pursuant to
a registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished in writing, by or on behalf of such Holders, or their successors or
assigns, for specific inclusion in such registration statement.
<PAGE>
(g) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(h) The Company shall not permit the inclusion of any
securities other than the Warrant Shares to be included in any registration
statement filed pursuant to Section 9.3 hereof, or permit any other registration
statement (other than a registration statement on Form S-4 or S-8) to be or
remain effective during a one hundred and eighty (180) day period following the
effective date of a registration statement filed pursuant to Section 9.3 hereof,
without the prior written consent of the Holder(s) of the Warrants and Warrant
Shares representing a Majority of such securities or as otherwise required by
the terms of any existing registration rights granted prior to the date of this
Agreement by the Company to the holders of any of the Company's securities.
(i) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a "cold comfort" letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
<PAGE>
(j) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(k) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holders holding
a Majority of the Warrant Shares requested to be included in such underwriting.
Such agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holder(s) shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Shares and may, at their option, require that
any or all of the representations, warranties and covenants of the Company to or
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder(s). Such Holder(s) shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holder(s) and their intended
methods of distribution.
<PAGE>
(l) For purposes of this Agreement, the term "Majority" in
reference to the Warrants or Warrant Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Shares that (i) are
not held by the Company, or (ii) have not been resold to the public pursuant to
a registration statement filed with the Commission under the Act or Rule 144
promulgated under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating
to the Warrant Shares covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
11. Adjustments to Exercise Price and Number of Securities. The
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrants or the securities underlying the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
<PAGE>
11.1 Dividend, Subdivision and Combination. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
11.2 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 11, the number of
Warrant Shares issuable upon the exercise at the adjusted Exercise Price of each
Warrant shall be adjusted to the nearest number of whole shares of Common Stock
determined by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of the applicable Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
11.3 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as of the date hereof, or
(ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
<PAGE>
11.4 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to each Holder a supplemental warrant
agreement providing that the Holder of each Warrant then outstanding shall have
the right thereafter (until the Expiration Date) to receive, upon exercise of
such Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger to which the Holder would
have been entitled if the Holder had exercised such Warrant immediately prior to
such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in this Section 11. The above provision of this subsection
shall similarly apply to successive consolidations or mergers.
11.5 No Adjustment of the Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant
Shares;
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof or issued pursuant to any stock purchase plan in existence as of the
date of this Agreement, pursuant to the terms thereof; or
<PAGE>
(c) If the amount of said adjustment shall be less than ten
cents ($.10) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least ten
cents ($.10) per share.
12. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable, without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company for a new
Warrant Certificate of like tenor and date representing in the aggregate the
Holder's right to purchase the same number of Warrant Shares in such
denominations as shall be designated in such Warrant Certificate at the time of
such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or other securities upon the exercise of the Warrants, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
<PAGE>
14. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof or the exercise or conversion of any
other exercisable or convertible securities underlying the Warrants. Every
transfer agent and warrant agent (collectively "Transfer Agent") for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares of Common Stock and other securities as shall
be requisite for such purpose. The Company will keep a copy of this Agreement on
file with every Transfer Agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Warrants. The Company will supply
every such Transfer Agent with duly executed stock and other certificates, as
appropriate, for such purpose. The Company covenants and agrees that, upon each
exercise of the Warrants and payment of the Purchase Price, all shares of Common
Stock and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any stockholder. As long as the Warrants shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock and other securities
issuable upon the exercise of the Warrants and the securities underlying the
securities issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges or securities
associations on which the Common Stock issued to the public in connection
herewith may then be listed and/or quoted.
<PAGE>
15. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holder(s) of the Warrants the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then in any one or more of said events, the Company shall give written
notice to the registered holders of the Warrants of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
<PAGE>
16. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4
hereof or to such other address as the Company may designate by notice to the
Holders.
17. Supplements; Amendments; Entire Agreement. This Agreement contains
the entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is
sought. The Company and DeZwirek may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates (other
than DeZwirek) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and DeZwirek may deem necessary or
desirable and which the Company and DeZwirek deem shall not adversely affect the
interests of the Holders of Warrant Certificates.
<PAGE>
18. Successors. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder(s) and
their respective successors and assigns hereunder.
19. Survival of Representations and Warranties. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
20. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
21. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
22. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
<PAGE>
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
DeZwirek and any other registered Holder(s) of the Warrant Certificates or
Warrant Shares any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and DeZwirek and any other Holder(s) of the Warrant Certificates or
Warrant Shares.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CECO ENVIRONMENTAL CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
-------------------------------------
Phillip DeZwirek
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, JANUARY 22, 2009
Warrant No._____
WARRANT CERTIFICATE
This Warrant Certificate certifies that ____________, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from July 22, 1999 until 5:30 p.m., New York time, on January 22, 2009
("Expiration Date"), up to_________ shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $3.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
<PAGE>
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ______________, 199__.
ATTEST: CECO ENVIRONMENTAL CORP.
By:____________________________ [SEAL]
___________________________________
Secretary Name:_________________________________
Title:________________________________
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT]
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No.___, to purchase ______________ shares of
Common Stock (as defined in the Warrant Agreement described below) and herewith
tenders in payment for such securities a certified or official bank check
payable in United States dollars to the order of CECO Environmental Corp., a New
York corporation (the "Company") in the amount of $____________, all in
accordance with the terms of Section 4.1 of the Warrant Agreement dated as of
January 22, 1999 between the Company and Phillip DeZwirek. The undersigned
requests that a certificate for such securities be registered in the name of
_____________ , whose address is ________________ , and that such certificate be
delivered to ____________ , whose address is __________________ , and if said
number of shares of Common Stock shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant Certificate for the balance of the
shares of Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned warrantholder or his assignee as below
indicated and delivered to the address stated below.
Dated:
Signature:__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address: _______________________________________________
_______________________________________________
_________________________________________________________
(Insert Social Security or Other Identifying Number of
Holder)
Signature Guaranteed:_________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
<PAGE>
FOR VALUE RECEIVED ________________ hereby sells, assigns and transfers unto
[NAME OF TRANSFEREE] Warrant Certificate No._______ , together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
________________ Attorney, to transfer the within Warrant Certificate on the
books of the within-named Company, with full power of substitution.
Dated:___________________________________
Signature:__________________________________________________
(Signature must conform in all respects to name of holder
as specified on the face of the Warrant Certificate.)
Address: ___________________________________________________
___________________________________________________
_____________________________________________________________
(Insert Social Security or Other Identifying Number of Holder)
Signature Guaranteed:_________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, JANUARY 22, 2009
Warrant No. 4
WARRANT CERTIFICATE
This Warrant Certificate certifies that Phillip DeZwirek, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from July 22, 1999 until 5:30 p.m., New York time, on January 22, 2009
("Expiration Date"), up to 500,000 shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $3.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
<PAGE>
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of January 22, 1999.
CECO ENVIRONMENTAL CORP.
By:_____________________________________ [SEAL]
Name:___________________________________
Title:__________________________________
<PAGE>
EXHIBIT 10.25
______________________________
CECO ENVIRONMENTAL CORP.
AND
RICHARD PAUL GENOVESE
WARRANT AGREEMENT
Dated as of November 2, 1998
______________________________
<PAGE>
WARRANT AGREEMENT (the "Agreement") dated as of November 2, 1998
between CECO Environmental Corp., a New York corporation (the "Company"), and
RICHARD PAUL GENOVESE (hereinafter referred to as a "Holder" or "Genovese").
W I T N E S S E T H :
WHEREAS, Genovese introduced the Company to IRG Investor Relations
Group Ltd. ("IRG");
WHEREAS, IRG provides public relations services to public companies;
and
WHEREAS, Genovese facilitated an agreement pursuant to which IRG will
provide public relations services to the Company and the Company will engage IRG
to provide such services;
WHEREAS, the Company desires to grant to Genovese, and Genovese desires
to accept from the Company, warrant certificates giving Genovese the right to
purchase shares of the Company's Common Stock.
NOW, THEREFORE, in consideration of the premises contained herein, the
payment by IRG to the Company of an aggregate of ten dollars ($10.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. Genovese is granted the right to purchase, from the Company,
at any time from November 2, 1998, until 5:30 p.m., New York time, on November
2, 2000 (the "Expiration Date"), at which time the Warrants expire, up to an
aggregate of 450,000 shares (subject to adjustment as provided in Section 11
hereof) of common stock, par value $.01 per share, of the
<PAGE>
Company ("Common Stock") at an initial exercise price (subject to adjustment as
provided in Section 11 hereof) of $2.00 per share and up to an aggregate of
250,000 shares (subject to adjustment as provided in Section 11 hereof) of
common stock, par value $.01 per share, of the Company ("Common Stock") at an
initial exercise price (subject to adjustment as provided in Section 11 hereof)
of $3.00 per share (both the $2.00 per share exercise price and the $3.00 per
share exercise price shall be referred to herein as the "Exercise Price").
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibits A, attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions, and other variations
as required or permitted by this Agreement.
3. Registration of Warrant. The Warrants shall be numbered and shall be
registered on the books of the Company when issued.
4. Exercise of Warrant.
4.1 Method of Exercise. The Warrants initially are exercisable
at the product of (i) the Exercise Price multiplied by (ii) the number of shares
of Common Stock purchased (subject to adjustment as provided in Section 11
hereof), as set forth in Section 8 hereof payable by certified or official bank
check in United States dollars. The product of the number of Warrants exercised
at any one time multiplied by the Exercise Price shall be referred to as the
"Purchase Price." Upon surrender of a Warrant Certificate with the annexed Form
of Election to Purchase duly executed, together with payment of the Purchase
Price for the shares of Common Stock purchased at the
<PAGE>
Company's principal offices located at 505 University Avenue, Suite 1400,
Toronto, Ontario, Canada, the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock). In the case of the purchase of less than all the shares of Common
Stock purchasable under any Warrant Certificate, the Company shall cancel said
Warrant Certificate upon the surrender thereof and shall execute and deliver a
new Warrant Certificate of like tenor for the balance of the shares of Common
Stock purchasable thereunder.
5. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock shall be made forthwith (and
in any event within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 7 and 9 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
<PAGE>
The Warrant Certificates and the certificates representing the shares
of Common Stock, or other securities, property or rights issued upon exercise of
the Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the then present President or any Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or any Assistant Secretary
of the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
6. Transfer of Warrant. The Warrants shall be transferable only on the
books of the Company maintained at its principal office, where its principal
office may then be located, upon delivery thereof duly endorsed by the Holder or
by its duly authorized attorney or representative accompanied by proper evidence
of succession, assignment or authority to transfer. Upon any registration
transfer, the Company shall execute and deliver new Warrants to the person
entitled thereto.
7. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
8. Exercise Price and Number of Securities. Except as otherwise
provided in Section 10 hereof, each of the Warrants are exercisable to purchase
one share of Common Stock at an initial exercise price equal to the Exercise
Price. The Exercise Price and the number of shares of Common Stock for which the
Warrant may be exercised shall be the price and the number of shares
<PAGE>
of Common Stock which shall result from time to time from any and all
adjustments in accordance with the provisions of Section 11 hereof.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each Warrant
Certificate and each certificate representing the shares of Common Stock, and
any of the other securities issuable upon exercise of the Warrants and the
securities underlying the securities issuable upon exercise of the Warrants
(collectively, the "Warrant Shares") shall bear the following legend, unless (i)
such Warrants or Warrant Shares are distributed to the public or sold for
distribution to the public pursuant to this Section 9 or otherwise pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), (ii) such Warrants or Warrant Shares are subject to a currently
effective registration statement under the Act; or (iii) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory to
counsel for the Company, that such legend is unnecessary for any such
certificate:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER
SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
<PAGE>
9.2 Piggyback Registration. If, at any time commencing November 2,
1998, and expiring on the Expiration Date, the Company proposes to register any
of its securities, not registered on the date hereof, under the Act (other than
in connection with a merger or pursuant to Form S-4 or Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the filing
of each such registration statement, to the Holders of the Warrants and/or the
Warrant Shares of its intention to do so. If any of the Holders of the Warrants
and/or Warrant Shares notify the Company within twenty (20) days after mailing
of any such notice of its or their desire to include any such securities in such
proposed registration statement, the Company shall afford such Holders of the
Warrants and/or Warrant Shares the opportunity to have any such Warrant Shares
registered under such registration statement. In the event that the managing
underwriter, if any, for said offering advises the Company in writing that in
the underwriter's opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
causing a diminution in the offering price or otherwise adversely affecting the
offering, the Company will include in such registration (a) first, the
securities the Company proposes to sell, (b) second, the securities held by the
entities that made the demand for registration, (c) third, the Warrants and/or
Warrant Shares requested to be included in such registration which in the
opinion of such underwriter can be sold, pro rata among the Holders of Warrants
and/or Warrant Shares on the basis of the number of Warrants and/or Warrant
Shares requested to be registered by such Holders, and (d) fourth, other
securities requested to be included in such registration.
<PAGE>
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 Demand Registration.
(a) At any time commencing November 2, 1998 and expiring on the
Expiration Date, the Holders of the Warrants and/or Warrant Shares representing
a "Majority" (as hereinafter defined) of the Warrants and/or Warrant Shares
shall have the right on four occasions (which right is in addition to the
registration rights under Section 9.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Holders, in order to comply with the
provisions of the Act, so as to permit the public sale by such Holders and any
other Holders of the Warrants and/or Warrant Shares who notify the Company
within fifteen (15) days after the Company mails notice of such request pursuant
to Section 9.3(b) hereof (collectively, the "Requesting Holders") of their
respective Warrant Shares so as to allow the unrestricted sale of the Warrant
Shares to the public from time to time until the earlier of the following: (i)
the Expiration Date, (ii) the date on which all of the Warrant Shares requested
to be registered by the Requesting Holders have been sold (the "Registration
Period") or (iii) the date on which such Warrant Shares can be sold without
registration pursuant to Rule 144 under the Act or an equivalent exemption.
<PAGE>
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Warrants and/or Warrant Shares to all other
registered Holders of the Warrants and the Warrant Shares within ten (10) days
from the date of the receipt of any such registration request.
9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested. The Company
shall also file such applications and other documents as may be necessary to
permit the sale of the Warrant Shares to the public during the Registration
Period in those states to which the Company and the holders of the Warrants
and/or Warrant Shares shall mutually agree.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with the
registration statement filed pursuant to Section 9.3(c).
<PAGE>
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holder(s) within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any Holder of the Warrant Shares or
controlling person thereof makes a claim for indemnification but it 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 of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9.4(d) hereof
provide for indemnification in such case or (ii)
<PAGE>
contribution under the Act may be required on the part of any Holder of the
Warrant Shares, or controlling person thereof, then the Company, any such Holder
of the Warrant Shares, or controlling person thereof shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The 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 the Company on the one hand
or a Holder of Warrant Shares, or controlling person thereof on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and such Holders
of such securities and such controlling persons agree that it would not be just
and equitable if contribution pursuant to this Section 9.4(e) were determined by
pro rata allocation or by any other method which does not take account of the
equitable considerations referred to in this Section 9.4(e). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
9.4(e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration
<PAGE>
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished in writing, by or on behalf of such Holders, or their successors or
assigns, for specific inclusion in such registration statement.
(g) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a "cold comfort" letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are
<PAGE>
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting.
Such agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holder(s) shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Shares and may, at their option, require that
any or all of the representations, warranties and covenants of the Company to or
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder(s). Such Holder(s) shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holder(s) and their intended
methods of distribution.
<PAGE>
(k) For purposes of this Agreement, the term "Majority" in
reference to the Warrants or Warrant Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Shares that (i) are
not held by the Company, or (ii) have not been resold to the public pursuant to
a registration statement filed with the Commission under the Act or Rule 144
promulgated under the Act, or similar exemption.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating
to the Warrant Shares covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
11. Adjustments to Exercise Price and Number of Securities. The
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the
<PAGE>
Warrants or the securities underlying the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
11.1 Dividend, Subdivision and Combination. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
11.2 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 11, the number of
Warrant Shares issuable upon the exercise at the adjusted Exercise Price of each
Warrant shall be adjusted to the nearest number of whole shares of Common Stock
determined by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of the applicable Warrant
Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
<PAGE>
11.3 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as of the date hereof, or
(ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to each Holder a supplemental warrant
agreement providing that the Holder of each Warrant then outstanding shall have
the right thereafter (until the Expiration Date) to receive, upon exercise of
such Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger to which the Holder would
have been entitled if the Holder had exercised such Warrant immediately prior to
such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in this Section 11. The above provision of this subsection
shall similarly apply to successive consolidations or mergers.
11.5 No Adjustment of the Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the Warrant
Shares;
<PAGE>
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof or issued pursuant to any stock purchase plan in existence as of the
date of this Agreement, pursuant to the terms thereof; or
(c) If the amount of said adjustment shall be less than ten
cents ($.10) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least ten
cents ($.10) per share.
12. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable, without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company for a new
Warrant Certificate of like tenor and date representing in the aggregate the
Holder's right to purchase the same number of Warrant Shares in such
denominations as shall be designated in such Warrant Certificate at the time of
such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
<PAGE>
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or other securities upon the exercise of the Warrants, nor shall it be required
to issue scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof or the exercise or conversion of any
other exercisable or convertible securities underlying the Warrants. Every
transfer agent and warrant agent (collectively "Transfer Agent") for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares of Common Stock and other securities as shall
be requisite for such purpose. The Company will keep a copy of this Agreement on
file with every Transfer Agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Warrants. The Company will supply
every such Transfer Agent with duly executed stock and other certificates, as
appropriate, for such purpose. The Company covenants and agrees that, upon each
exercise of the Warrants and payment of the Purchase Price, all shares of Common
<PAGE>
Stock and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any stockholder. As long as the Warrants shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock and other securities
issuable upon the exercise of the Warrants and the securities underlying the
securities issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges or securities
associations on which the Common Stock issued to the public in connection
herewith may then be listed and/or quoted.
15. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holder(s) of the Warrants the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for
<PAGE>
shares of capital stock of the Company, or any option, right or warrant to
subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; then in any one or more of said events, the Company shall give written
notice to the registered holders of the Warrants of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
16. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4 hereof
or to such other address as the Company may designate by notice to the Holders.
<PAGE>
17. Supplements; Amendments; Entire Agreement. This Agreement contains
the entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is
sought. The Company and Genovese may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates (other
than Genovese) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and Genovese may deem necessary or
desirable and which the Company and Genovese deem shall not adversely affect the
interests of the Holders of Warrant Certificates.
18. Successors. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder(s) and
their respective successors and assigns hereunder.
19. Survival of Representations and Warranties. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
<PAGE>
20. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
21. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
22. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
Genovese and any other registered Holder(s) of the Warrant Certificates or
Warrant Shares any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and Genovese and any other Holder(s) of the Warrant Certificates or
Warrant Shares.
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CECO ENVIRONMENTAL CORP.
By: /Phillip DeZwirek/
-------------------------------------
Name: Phillip DeZwirek
--------------------------
Title: President
-------------------------
/Richard Paul Genovese/
----------------------------------------
Richard Paul Genovese
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, NOVEMBER 2, 2000
Warrant No.__
WARRANT CERTIFICATE
<PAGE>
This Warrant Certificate certifies that _______ , or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from November 2, 1998 until 5:30 p.m., New York time, on November 2, 2000
("Expiration Date"), up to _______ shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $2.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
<PAGE>
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ____________, 199__.
ATTEST: CECO ENVIRONMENTAL CORP.
________________________ By: [SEAL]
Secretary ----------------------------------
Name:_______________________
Title:______________________
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT]
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. _______, to purchase _______ shares of
Common Stock (as defined in the Warrant Agreement described below) and herewith
tenders in payment for such securities a certified or official bank check
payable in United States dollars to the order of CECO Environmental Corp., a New
York corporation (the "Company") in the amount of $____________, all in
accordance with the terms of Section 4.1 of the Warrant Agreement dated as of
November 2, 1998 between the Company and Richard Paul Genovese. The undersigned
requests that a certificate for such securities be registered in the name of
___________, whose address is _____________________ and that such certificate be
delivered to__________ , whose address is__________________ , and if said number
of shares of Common Stock shall not be all the shares of Common Stock
purchasable hereunder, that a new Warrant Certificate for the balance of the
shares of Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned warrantholder or his assignee as below
indicated and delivered to the address stated below.
Dated:___________
Signature:_____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:___________________________________________
___________________________________________
___________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
[NAME OF TRANSFEREE] Warrant Certificate No. ___, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_______________ Attorney, to transfer the within Warrant Certificate on the
books of the within-named Company, with full power of substitution.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXHIBIT B
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
<PAGE>
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, NOVEMBER 2, 2000
Warrant No.
WARRANT CERTIFICATE
This Warrant Certificate certifies that ___________, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from November 2, 1998 until 5:30 p.m., New York time, on November 2, 2000
("Expiration Date"), up to ____________ shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $3.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
<PAGE>
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ____________, 199__.
ATTEST: CECO ENVIRONMENTAL CORP.
________________________ By: [SEAL]
Secretary ----------------------------------
Name:_______________________
Title:______________________
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT]
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. _________, to purchase ___________ shares
of Common Stock (as defined in the Warrant Agreement described below) and
herewith tenders in payment for such securities a certified or official bank
check payable in United States dollars to the order of CECO Environmental Corp.,
a New York corporation (the "Company") in the amount of $____________, all in
accordance with the terms of Section 4.1 of the Warrant Agreement dated as of
November 2, 1998 between the Company and Richard Paul Genovese. The undersigned
requests that a certificate for such securities be registered in the name
of__________________ , whose address is ___________________ and that such
certificate be delivered to __________, whose address is ___________, and if
said number of shares of Common Stock shall not be all the shares of Common
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the shares of Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned warrantholder or his assignee as below
indicated and delivered to the address stated below.
Dated:___________
Signature:_____________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:___________________________________________
___________________________________________
___________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
<PAGE>
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers unto [NAME
OF TRANSFEREE] Warrant Certificate No. __, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
______________ Attorney, to transfer the within Warrant Certificate on the books
of the within-named Company, with full power of substitution.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, NOVEMBER 2, 2000
Warrant No. RPG - 1
WARRANT CERTIFICATE
This Warrant Certificate certifies that Richard Genovese, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from November 2, 1998, until 5:30 p.m., New York time, on November 2, 2000
("Expiration Date"), up to 450,000 shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $2.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or
<PAGE>
type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of November 2, 1998.
CECO ENVIRONMENTAL CORP.
By: /Phillip DeZwirek/ [SEAL]
-------------------------------------
Name: /Phillip DeZwirek/
--------------------------
Title: /President/
-------------------------
<PAGE>
ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. ________, to purchase _________ shares of
Common Stock (as defined in the Warrant Agreement described below) and herewith
tenders in payment for such securities a certified or official bank check
payable in United States dollars to the order of CECO Environmental Corp., a New
York corporation (the "Company") in the amount of $____________, all in
accordance with the terms of Section 4.1 of the Warrant Agreement dated as of
November 2, 1998 between the Company and Richard Paul Genovese. The undersigned
requests that a certificate for such securities be registered in the name
of_________________, whose address is ____________________ and that such
certificate be delivered to _____________, whose address is
____________________, and if said number of shares of Common Stock shall not be
all the shares of Common Stock purchasable hereunder, that a new Warrant
Certificate for the balance of the shares of Common Stock purchasable under the
within Warrant Certificate be registered in the name of the undersigned
warrantholder or his assignee as below indicated and delivered to the address
stated below.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
Dated:
<PAGE>
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ___________ hereby sells, assigns and transfers unto
_________ ________________________________ Warrant Certificate No. ________,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ________________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, NOVEMBER 2, 2000
Warrant No. RPG - 2
WARRANT CERTIFICATE
This Warrant Certificate certifies that Richard Genovese, or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from November 2, 1998, until 5:30 p.m., New York time, on November 2, 2000
("Expiration Date"), up to 250,000 shares, of fully-paid and non-assessable
common stock, $.01 par value ("Common Stock") of CECO Environmental Corp., a New
York corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $3.00 per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at the principal executive office
of the Company, but subject to the conditions set forth herein. Payment of the
Exercise Price shall be made by certified or official bank check in United
States dollars payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter expire and shall be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or
<PAGE>
type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal executive office of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrant holder to any of
the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of November 2, 1998.
CECO ENVIRONMENTAL CORP.
By: /Phillip DeZwirek/ [SEAL]
-------------------------------------
Name: /Phillip DeZwirek/
--------------------------
Title: /President/
-------------------------
<PAGE>
ELECTION TO PURCHASE PURSUANT TO SECTION 4.1 OF THE
WARRANT AGREEMENT
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. ____________, to purchase _________
shares of Common Stock (as defined in the Warrant Agreement described below) and
herewith tenders in payment for such securities a certified or official bank
check payable in United States dollars to the order of CECO Environmental Corp.,
a New York corporation (the "Company") in the amount of $____________, all in
accordance with the terms of Section 4.1 of the Warrant Agreement dated as of
November 2, 1998 between the Company and Richard Paul Genovese. The undersigned
requests that a certificate for such securities be registered in the name of
_______________, whose address is ____________________ and that such certificate
be delivered to _________________, whose address is _____________________, and
if said number of shares of Common Stock shall not be all the shares of Common
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the shares of Common Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned warrantholder or his assignee as below
indicated and delivered to the address stated below.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________ hereby sells, assigns and transfers unto _______
________________________________ Warrant Certificate No. ___________, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ______________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:_____________
Signature:___________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
Address:_____________________________________________
_____________________________________________
_____________________________________________________
(Insert Social Security or Other Identifying Number
of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank, savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
<PAGE>
Exhibit 10.26
Option for the Purchase of Shares of Common Stock
10,000 Shares
FOR VALUE RECEIVED, CECO Environmental Corp. (the "Company"), hereby certifies
that Donald Wright, or a permitted assign thereof, is entitled to purchase from
the Company, at any time or from time to time commencing February 1, 1999, and
prior to 5:00 P.M., P.S.T., on June 30, 2008, Ten Thousand (10,000) fully paid
and nonassessable shares of the common stock, of the Company for a purchase
price of $2.75 per share. (Hereinafter, (i) said common stock, together with any
other equity securities which may be issued by the Company with respect thereto
or in substitution therefor, is referred to as the "Common Stock," (ii) the
shares of the Common Stock purchasable hereunder or under any other Option or
(as hereinafter defined) are referred to as the "Option Shares," (iii) the price
payable hereunder for each of the Option Shares is referred to as the "Option
Exercise Price," (iv) this Option, and all options hereafter issued in exchange
or substitution for this Option or such other options are referred to as the
"Options" and (v) the holder of this Option is referred to as the "Holder" and
the holder of this Option and all other Options are referred to as the
"Holders"). The Option Exercise Price is subject to adjustment as hereinafter
provided:
1. Exercise of Option.
a) Exercise for Cash
This Option may be exercised, in whole at any time or in part from time
to time, commencing February 1, 1999, and prior to 5:00 P.M., P.S.T.,
on June 30, 2008, by the Holder by the surrender of this Option (with
the subscription form at the end hereof duly executed) at the address
set forth in Subsection 8(a) hereof, together with proper payment of
the Per Share Option Price times the number of shares of Common Stock
to be received. Payment for Option Shares shall be made by certified or
official bank check payable to the order of the Company or if
applicable, without cash pursuant to a cashless net exercise. If this
Option is exercised in part, this Option must be exercised for a number
of whole shares of the Common Stock, and the Holder is entitled to
receive a new Option Covering the Option Shares which have not been
exercised. Upon such surrender of this Option the Company will (a)
issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder
shall be entitled and, if this Option is exercised in whole, in lieu of
any fractional share of the Common Stock to which the Holder shall be
entitled, pay to the Holder cash in an amount equal to the fair value
of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (b) deliver the
other securities and properties receivable upon the exercise of this
Option, or the proportionate part thereof if this Option is exercised
in part, pursuant to the provisions of this Option.
<PAGE>
b) Cashless Exercise
In lieu of exercising this Option in the manner set forth in paragraph
l(a) above, this Option may be exercised, in whole or in part, by
surrender of the Option without payment of any other consideration,
commission or remuneration, by execution of the cashless exercise
subscription form (at the end hereof, duly executed). The number of
shares to be issued in exchange for the Option will be computed by
subtracting the Option Exercise Price from either (i) the closing bid
price of the Common Stock on the date of receipt of the cashless
exercise subscription form, or (ii) the most recent negotiated value
used in connection with any sale of the Company's securities or in
connection with any business combination involving the Company, and
multiplying that amount by the number of shares represented by the
Option, and dividing by the closing bid price as of the same date.
2. Reservation of Option Shares, Listing.
The Company agrees that, prior to the expiration of this Option, the
Company will at all times have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this
Option, the shares of the Common Stock and other securities and
properties as from time to time shall be receivable upon the exercise
of this Option, free and clear of all restrictions on sale or transfer
(except for applicable state or federal securities law restrictions)
and free and clear of all pre-emptive rights.
3. Protection Against Dilution.
a) If, at any time or from time to time after the date of this Option,
the Company shall issue or distribute (for no consideration) to the
holders of shares of Common Stock evidences of its indebtedness, any
other securities of the Company or any cash, property or other
assets (excluding a subdivision, combination or reclassification, or
dividend or distribution payable in shares of Common Stock, referred
to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if
the full amount thereof, together with the value of other dividends
and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to
not more than 5% of the Company's net worth) (any such nonexcluded
event being herein called a "Special Dividend"), the Option Exercise
Price shall be adjusted by multiplying the Option Exercise Price
then in effect by a fraction, the numerator of which shall be the
then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior
to the record date of the daily closing price of the Common Stock as
reported by the principal exchange or market on which the Common
Stock is listed) less the fair market value (as determined by the
Company's Board of Directors) of the evidences of indebtedness,
securities or property, or other assets issued or distributed in
such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per
share of Common Stock. An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the record
date of any such Special Dividend.
<PAGE>
b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by
reclassification of its Common Stock any shares of capital stock of
the Company, the Option Exercise Price shall be adjusted so that the
Holder of any Option upon the exercise hereof shall be entitled to
receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately prior thereto.
An adjustment made pursuant to this Subsection 3(b) shall become
effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made pursuant
to this Subsection 3(b), the Holder of any Option thereafter
surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a
written notice to the Holder of any Option promptly after such
adjustment) shall reasonably determine the allocation of the
adjusted Option Exercise Price between or among shares of such
classes or capital stock or shares of Common Stock and other capital
stock.
c) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities
with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company),
the Holder of this Option shall have the right thereafter to convert
such Option into the kind and amount of securities, cash or other
property which he would have owned or have been entitled to receive
immediately after such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance had
this Option been converted immediately prior to the effective date
of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application
of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Option to the
end that the provisions set forth in this Section 3 shall thereafter
correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or be, in
relation to any shares of stock or other securities or property
thereafter deliverable on the conversion of this Option. The above
provisions of this Subsection 3(c) shall similarly apply to
successive reorganizations, reclassifications, consolidations,
mergers, statutory exchanges, sales or conveyances. The issuer of
any shares of stock or other securities or property thereafter
deliverable on the conversion of this Option shall be responsible
for all of the agreements and obligations of the Company hereunder.
Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of
the Options not less than 10 days prior to such event. A sale of all
or substantially all of the assets of the Company for a
consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.
<PAGE>
d) No adjustment in the Option Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
$0.05 per share of Common Stock; provided, however, that any
adjustments which by reason of this Subsection 3(d) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment; provided further, however, that adjustments
shall be required and made in accordance with the provisions of this
Section 3 (other than this Subsection 3(d)) not later than such time
as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Option or Common Stock issuable
upon exercise hereof. All calculations under this Section 3 shall be
made to the nearest cent. Anything in this Section 3 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Option Exercise Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible
or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
e) Whenever the Option Exercise Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of
Options in accordance with this Section 3, the Company shall
promptly obtain, at its expense, a certificate of a firm of
independent public accountants of recognized standing selected by
the Board of Directors (who may be the regular auditors of the
Company) setting forth the Option Exercise Price and the number of
Option Shares after such adjustment or the effect of such
modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and
cause copies of such certificate to be mailed to the Holders of the
Options.
f) If the Board of Directors of the Company shall declare any dividend
or other distribution with respect to the Common Stock, other than a
cash distribution out of earned surplus, the Company shall mail
notice thereof to the Holders of the Options not less than 10 days
prior to the record date fixed for determining shareholders entitled
to participate in such dividend or other distribution.
<PAGE>
4. Fully Paid Stock, Taxes.
The Company agrees that the shares of the Common Stock represented by
each and every certificate for Option Shares delivered on the exercise
of this Option shall, at the time of such delivery, be validly issued
and outstanding, fully paid and nonassessable, and not subject to
pre-emptive rights, and the Company will take all such actions as may
be necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the
then Option Exercise Price. The Company further covenants and agrees
that it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in respect
of the issue of any Option Share or certificate therefor.
5. Transferability.
Subject to compliance with federal and applicable state securities laws
and the provisions of Section 13, the Holder of any Option may, prior
to exercise or expiration thereof, surrender such Option at the
principal office of the Company for transfer or exchange. Within a
reasonable time after notice to the Company from a registered Holder of
its intention to make such exchange and without expense (other than
transfer taxes, if any) to such registered Holder, the Company shall
issue in exchange therefor another Option or Options, in such
denominations as requested by the registered Holder, for the same
aggregate number of Option Shares so surrendered and containing the
same provisions and subject to the same terms and conditions as the
Option(s) so surrendered. The Company may treat the registered Holder
of this Option as he or it appears on the Company's books at any time
as the Holder for all purposes. The Company shall permit any Holder of
a Option or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Options. All options issued
upon the transfer or assignment of this Option will be dated the same
date as this Option, and all rights of the Holder thereof shall be
identical to those of the Holder.
6. Loss, etc., of Option.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Option, and of indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Option, if mutilated, the
Company shall execute and deliver to the Holder a new Option of like
date, tenor and denomination.
7. Option Holder Not Shareholders.
Except as otherwise provided herein, this Option does not confer upon
the Holder any right to vote or to consent to or receive notice as a
shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
<PAGE>
8. Communication.
No notice or other communication under this Option shall be effective
unless, but any notice or other communication shall be effective and
shall be deemed to have been given if, the same is in writing and (i)
is personally delivered, (ii) five days after such written material is
mailed by first-class mail, postage prepaid, or (iii) one day after
such written material is sent by a nationally recognized overnight
courier, addressed to:
a) the Company at 505 University Avenue, Suite 1400, Toronto, Ontario
M5G 1X3, Canada, Attn: Phillip DeZwirek or such other address as the
Company has designated in writing to the Holder; or
b) the Holder at 4538 Cass Street, San Diego, CA 92109 or such other
address as the Holder has designated in writing to the Company.
9. Headings.
The headings of this Option have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. Withholding.
The Holder acknowledges that, upon any exercise of this Option, the
Company shall have the right to require the Holder to pay to the
Company an amount equal to the amount the Company is required to
withhold as a result of such exercise for federal and state income tax
purposes.
11. Applicable Law.
This Option shall be governed by and construed in accordance with the
law of the State of Illinois without giving effect to the principles of
conflicts of law thereof.
<PAGE>
12. Securities Law Compliance.
The exercise of all or any parts of this Option shall only be effective
at such time as counsel to the Company shall have determined that the
issuance and delivery of Common Stock pursuant to such exercise will
not violate any state or federal securities or other laws. Holder may
be required by the Company, as a condition of the effectiveness of any
exercise of this Option, to agree in writing that all Common Stock to
be acquired pursuant to such exercise shall be held, until such time
that such Common Stock is registered or exempt from registration and
freely tradable under applicable state and federal securities laws, for
Holder's own account without a view to any further distribution
thereof, that the certificates for such shares shall bear an
appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state
and federal securities laws.
13. Nontransferability.
Except as otherwise agreed to by the Company, during the lifetime of
Holder, this Option shall be exercisable only by Holder or by the
Holder's guardian or other legal representative, and shall not be
assignable or transferable by Holder, in whole or in part, other than
by will or by the laws of descent and distribution.
14. Scope of Agreement.
This Agreement shall bind and inure to the benefit of the Company and
its successors and assigns and Holder and any successor or successors
of Holder permitted by Section 13 above.
IN WITNESS WHEREOF, CECO Environmental Corp. has caused this Option to be signed
by its Chairman, as of this 30th day of June, 1998.
CECO ENVIRONMENTAL CORP.
By: Phillip DeZwirek
-----------------------
Name: Phillip DeZwirek
Title: Chairman
<PAGE>
SUBSCRIPTION
The undersigned, _____________________, pursuant to the provisions of the
foregoing Option, hereby agrees to subscribe for and purchase shares of the
Common Stock of CECO Environmental Corp. covered by said Option, and makes
payment therefor in a manner specified in the Option in full at the price per
share provided by said Option.
Dated: Signature:
Address:
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED___________________ hereby sells, assigns and transfers unto
____________ the foregoing Option and all rights evidenced thereby, and does
irrevocably constitute and appoint _______________________, attorney, to
transfer said Option on the books of _____________________.
Dated: Signature:
Address:
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ____________________hereby assigns and transfers unto
___________________ the right to purchase ______________ shares of the Common
Stock of CECO Environmental Corp. by the foregoing Option, and a proportionate
part of said Option and the rights evidenced hereby, and does irrevocably
constitute and appoint attorney, to transfer that part of said Option on the
books of ---------------------.
Dated: Signature:
Address:
CASHLESS EXERCISE SUBSCRIPTION
The undersigned _______________________ pursuant to the provisions of the
foregoing Option, hereby agrees to subscribe to that number of shares of Common
Stock of CECO Environmental Corp. as are issuable in accordance with the formula
set forth in paragraph l(b) of the Option, and makes payment therefore in full
by surrender and delivery of this Option.
Dated: Signature:
Address:
<PAGE>
EXHIBIT 10.27
LINE OF CREDIT NOTE
$5,000,000 March 16, 1999
FOR VALUE RECEIVED, CECO FILTERS, INC., AIR PURATOR CORPORATION, NEW BUSCH CO.,
INC. and U.S. FACILITIES MANAGEMENT COMPANY, INC., (collectively, the
"Borrowers"), with an address at c/o CECO FILTERS, INC.,1029 Conshohocken Road,
Conshohocken, PA 19428, jointly and severally, promise to pay to the order of
PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the United
States of America in immediately available funds at its offices located at 1600
Market Street, Philadelphia, Pennsylvania 19103, or at such other location as
the Bank may designate from time to time, the principal sum of FIVE MILLION
DOLLARS ($5,000,000) (the "Facility") or such lesser amount as may be advanced
to or for the benefit of the Borrowers hereunder prior to the Expiration Date
(as hereinafter defined), together with interest accruing on the outstanding
principal balance from the date hereof, as provided below:
1. Advance Procedures. The Borrowers may borrow, repay and reborrow hereunder
until the Expiration Date (as such term is defined in the Letter Agreement
hereinafter referred to), subject to the terms and conditions of this Note and
the Loan Documents (as defined herein). In no event shall the aggregate unpaid
principal amount of advances under this Note exceed the face amount of this
Note. A request for advance made by telephone must be promptly confirmed in
writing by such method as the Bank may reasonably require. The Borrowers
authorize the Bank to accept telephonic requests for advances, and the Bank
shall be entitled to rely upon the authority of any person providing such
instructions. The Borrowers hereby indemnify and hold the Bank harmless from and
against any and all damages, losses, liabilities, costs and expenses (including
reasonable attorneys' fees and expenses) which may arise or be created by the
acceptance of such telephone requests or making such advances, provided,
however, that the foregoing indemnity agreement shall not apply to damages,
losses, liabilities, costs and expenses solely attributable to the Bank's gross
negligence or willful misconduct. The Bank will enter on its books and records,
which entry when made will be presumed correct absent manifest error, the date
and amount of each advance, as well as the date and amount of each payment made
by the Borrowers.
2. Rate of Interest. Each advance outstanding under this Note will bear interest
at a rate per annum selected by the Borrowers from the interest rate options set
forth below (each, an "Option"), it being understood that the Borrowers may
select different Options to apply simultaneously to different advances and may
select up to four (4) different interest periods to apply simultaneously to
different advances bearing interest under the Euro-Rate Option as set forth
below. There are no required interest periods for advances bearing interest
under the Prime Rate Option.
<PAGE>
(a) Prime Rate Option. A rate of interest per annum (computed on the
basis of a year of 360 days and the actual number of days elapsed) (i) at all
times prior to the USFM Date (as defined below) equal to the rate of interest
publicly announced by the Bank as its prime rate (the "Prime Rate") and (ii) at
all times from and after the USFM Date through the Expiration Date, the Prime
Rate minus one quarter of one percent (1/4 %). If and when the Prime Rate
changes, the rate of interest on advances bearing interest under the Prime Rate
Option will change automatically without notice to the Borrowers, effective on
the date of any such change. For purposes of this Note, the USFM Date is the
last day of the second of two consecutive fiscal quarters of U.S. Facilities
Management Company, Inc. ("USFM") during both of which USFM has had net income
determined in accordance with generally accepted accounting principles equal to
or greater than zero (0).
(b) Euro-Rate Option. A rate of interest per annum (computed on the
basis of a year of 360 days and the actual number of days elapsed) equal to the
sum of the Euro-Rate plus (i) at all times prior to the USFM Date two hundred
fifty (250) basis points (2.5%) and (ii) at all times from and after the USFM
Date through the Expiration Date two hundred twenty five (225) basis points
(2.25%), for the Euro-Rate Interest Period selected by the Borrowers. For the
purpose hereof, the following terms shall have the following meanings:
"Business Day" shall mean any day other than a
Saturday or Sunday or a legal holiday on which commercial
banks are authorized or required to be closed for business in
Philadelphia, Pennsylvania.
"Euro-Rate" shall mean, with respect to any advance
to which the Euro-Rate Option applies for any Euro-Rate
Interest Period, the interest rate per annum determined by the
Bank by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the
rate of interest determined by the Bank in accordance with its
usual procedures (which determination shall be conclusive
absent manifest error) to be the average of the London
interbank offered rates of interest per annum for dollars set
forth on Telerate display page 3750 or such other display page
on the Telerate System as may replace such page to evidence
the average of rates quoted by banks designated by the British
Bankers' Association (or appropriate successor or, if the
British Bankers' Association or its successor ceases to
provide such quotes, a comparable replacement determined by
the Bank), two (2) Business Days prior to the first day of
such Euro-Rate Interest Period for an amount comparable to
such advance and having a borrowing date and a maturity
comparable to such Euro-Rate Interest Period by (ii) a number
equal to 1.00 minus the Euro-Rate Reserve Percentage. The
Euro-Rate may also be expressed by the following formula:
Telerate page 3750 as quoted by British Bankers'
Euro-Rate = Association or appropriate successor
------------------------------------
1.00 - Euro-Rate Reserve Percentage
"Euro-Rate Interest Period" shall mean the period of
one, two or three months selected by the Borrowers commencing
on the date of disbursement of an advance and each successive
period selected by the Borrowers thereafter; provided, that if
a Euro-Rate Interest Period would end on a day which is not a
Business Day, it shall end on the next succeeding Business
Day, unless such day falls in the succeeding calendar month in
which case the Euro-Rate Interest Period shall end on the next
preceding Business Day. In no event shall any Euro-Rate
Interest Period end on a day after the Expiration Date.
<PAGE>
"Euro-Rate Reserve Percentage" shall mean the maximum
effective percentage in effect on such day as prescribed by
the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements
(including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency liabilities").
The Euro-Rate shall be adjusted with respect to any advance to which the
Euro-Rate Option applies that is outstanding on the effective date of any change
in the Euro-Rate Reserve Percentage as of such effective date. The Bank shall
give prompt notice to the Borrowers of the Euro-Rate as determined or adjusted
in accordance herewith, which determination shall be conclusive absent manifest
error. If the Bank determines (which determination shall be final and
conclusive) that, by reason of circumstances affecting the interbank eurodollar
market generally, deposits in dollars (in the applicable amounts) are not being
offered to banks in the interbank eurodollar market for the selected term, or
adequate means do not exist for ascertaining the Euro-Rate, then the Bank shall
give notice thereof to the Borrowers. Thereafter, until the Bank notifies the
Borrowers that the circumstances giving rise to such suspension no longer exist,
(a) the availability of the Euro-Rate Option shall be suspended, and (b) the
interest rate for all advances then bearing interest under the Euro-Rate Option
shall be converted at the expiration of the then current Euro-Rate Interest
Period(s) to the Prime Rate Option.
In addition, if, after the date of this Note, the Bank shall determine (which
determination shall be final and conclusive) that any enactment, promulgation or
adoption of or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline, request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for the
Bank to make or maintain or fund loans under the Euro-Rate Option, the Bank
shall notify the Borrowers. Upon receipt of such notice, until the Bank notifies
the Borrowers that the circumstances giving rise to such determination no longer
apply, (a) the availability of the Euro-Rate Option shall be suspended, and (b)
the interest rate on all advances then bearing interest under the Euro-Rate
Option shall be converted to the Prime Rate Option either (i) on the last day of
the then current Euro-Rate Interest Period(s) if the Bank may lawfully continue
to maintain advances under the Euro-Rate Option to such day, or (ii) immediately
if the Bank may not lawfully continue to maintain advances under the Euro-Rate
Option.
3. Payment Terms. (a) Interest on the Line of Credit Loans shall be due and
payable in the case of a Line of Credit Loan bearing interest under the Prime
Rate Option, monthly commencing on April 1, 1999 and continuing on the first day
of each month thereafter, and in the case of a Line of Credit Loan bearing
interest under the Euro-Rate Option, on the last day of the applicable Euro-Rate
Interest Period.
<PAGE>
(b) On the Expiration Date, all outstanding principal and accrued but
unpaid interest shall be due and payable in full.
(c) If any payment under this Note shall become due on a Saturday,
Sunday or public holiday under the laws of the State where the Bank's office
indicated above is located, such payment shall be made on the next succeeding
business day and such extension of time shall be included in computing interest
in connection with such payment. The Borrowers hereby authorize the Bank to
charge Ceco Filters, Inc.'s deposit account at the Bank for any payment when due
hereunder. Payments received will be applied to charges, fees and expenses
(including attorneys' fees), accrued interest and principal in any order the
Bank may choose, in its sole discretion.
4. Late Payments; Default Rate. If the Borrowers fail to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within five calendar days of the date due and payable, the Borrowers
also shall pay to the Bank a late charge equal to three percent (3%) of the
amount of such payment. Such five day period shall not be construed in any way
to extend the due date of any such payment. The late charge is imposed for the
purpose of defraying the Bank's expenses incident to the handling of delinquent
payments and is in addition to, and not in lieu of, the exercise by the Bank of
any rights and remedies hereunder, under the other Loan Documents or under
applicable laws, and any fees and expenses of any agents or attorneys which the
Bank may employ. Upon maturity, whether by acceleration, demand or otherwise,
and at the option of the Bank upon the occurrence of any Event of Default (as
hereinafter defined) and during the continuance thereof, this Note shall bear
interest at a rate per annum (based on a year of 360 days and actual days
elapsed) which shall be two percentage points (2%) in excess of the interest
rate in effect from time to time under this Note but not more than the maximum
rate allowed by law (the "Default Rate"). The Default Rate shall continue to
apply whether or not judgment shall be entered on this Note.
5. Prepayment. The indebtedness evidenced by this Note may be prepaid in whole
or in part at any time without penalty. Notwithstanding anything contained
herein to the contrary, upon any prepayment (other than a prepayment which is
the result of the expiration of the Refinancing Extension) by or on behalf of
the Borrowers (whether voluntary, on default or otherwise) of indebtedness
hereunder which bears interest under the Euro-Rate Option, the Bank may require,
if it so elects, the Borrowers to pay the Bank as compensation for the cost of
being prepared to advance fixed rate funds hereunder an amount equal to the Cost
of Prepayment. "Cost of Prepayment" means an amount equal to the present value,
if positive, of the product of (a) the difference between (i) the yield, on the
beginning date of the applicable interest period, of a U.S. Treasury obligation
with a maturity similar to the applicable interest period minus (ii) the yield
on the prepayment date, of a U.S. Treasury obligation with a maturity similar to
the remaining maturity of the applicable interest period, and (b) the principal
amount to be prepaid, and (c) the number of years, including fractional years,
from the prepayment date to the end of the applicable interest period. The yield
on any U.S. Treasury obligation shall be determined by reference to Federal
Reserve Statistical Release H.15(519) "Selected Interest Rates". For purposes of
making present value calculations, the yield to maturity of a similar maturity
U.S. Treasury obligation on the prepayment date shall be deemed the discount
rate.
<PAGE>
6. Additional Costs. In the event that any change in law, regulation, treaty or
directive or in the interpretation or application thereof or compliance by the
Bank with any request or directive made subsequent to the date hereof (whether
or not having the force of law) from any central bank or other governmental
authority, agency or instrumentality:
(a) shall subject the Bank to any tax of any kind whatsoever with
respect to this Note, or any advances made by the Bank hereunder, or change the
basis of taxation of payments to the Bank or principal interest or any other
amount payable hereunder (except for any taxes imposed on or measured by the
overall income of the Bank);
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan, FDIC insurance or similar requirement against assets
held by, or deposits or other liabilities in or for the account of, advances by,
or other credit extended by, or any other acquisition of funds by, any office of
the Bank which are not otherwise included in the determination of the interest
rate hereunder;
(c) affects the amount of capital required or expected to be maintained
by the Bank or any corporation controlling the Bank and the Bank determines the
amount of capital required is increased by or based upon the existence of the
credit facility evidenced by this Note or any advance hereunder, as determined
by the Bank in its reasonable discretion; or
(d) shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining any advance hereunder or to reduce any amount
receivable hereunder then, in any such case, the Borrowers shall promptly pay
the Bank, within five (5) days of its demand, any additional amounts necessary
to compensate the Bank for such additional costs or reduced amount receivable as
determined by the Bank. If the Bank becomes entitled to claim any additional
amounts pursuant hereto, it shall promptly notify the Borrowers of the event by
reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by the Bank to the
Borrowers shall be conclusive in the absence of manifest error.
7. Other Loan Documents. This Note is issued in connection with a certain letter
agreement dated March 16, 1999 (the "Letter Agreement") and the other documents
referred to therein, the terms of which are incorporated herein by reference
(collectively, the "Loan Documents"), and is secured by the property described
in the Loan Documents (if any) and by such other collateral as previously may
have been or may in the future be granted to the Bank to secure this Note.
<PAGE>
8. Events of Default. The occurrence of any of the following events will be
deemed to be an "Event of Default" under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note when due; (ii) the
occurrence of any event of default or default and the lapse of any notice or
cure period under any Loan Document or any other debt, liability or obligation
to the Bank of any Obligor; (iii) the filing by or against any Obligor of any
proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation,
conservatorship or similar proceeding (and, in the case of any such proceeding
instituted against any Obligor, such proceeding is not dismissed or stayed
within sixty (60) days of the commencement thereof, provided that the Bank shall
not be obligated to advance additional funds during such period); (iv) any
assignment by any Obligor for the benefit of creditors, or any levy,
garnishment, attachment or similar proceeding is instituted against any property
of any Obligor held by or deposited with the Bank and such proceeding is not
dismissed within thirty (30) days of the commencement thereof, provided that the
Bank shall not be obligated to advance additional funds during such period; (v)
a default with respect to any other indebtedness of any Obligor for borrowed
money, if the effect of such default is to cause the acceleration of such debt;
(vi) the commencement of any foreclosure or forfeiture proceeding, execution or
attachment against any collateral securing the obligations of any Obligor to the
Bank and such proceeding is not dismissed within thirty (30) days of the
commencement thereof, provided that the Bank shall not be obligated to advance
additional funds during such period; (vii) the entry of a final judgment in
excess of $25,000 against any Obligor for the payment of money and the failure
of such Obligor to discharge the judgment within thirty (30) days of the entry
thereof, unless the same has been appealed and a stay of the enforcement thereof
has been obtained; (viii) any material adverse change in the business, assets,
operations, financial condition or results of operations of any Obligor of which
the Bank has given the Borrowers' Representative one hundred twenty (120) days
notice; (ix) the Borrowers cease doing business as a going concern; (x) the
revocation or attempted revocation, in whole or in part, of any guarantee by any
Guarantor; (xi) the death or legal incompetency of any individual Obligor or, if
any Obligor is a partnership, the death or legal incompetency of any individual
general partner; (xii) any representation or warranty made by any Obligor to the
Bank in any Loan Document, or any other documents now or in the future securing
the obligations of any Obligor to the Bank, proves to have been false, erroneous
or misleading in any material respect when made; (xiii) the failure of any
Obligor to observe or perform any covenant or other agreement with the Bank
contained in any Loan Document or any other documents now or in the future
securing the obligations of any Obligor to the Bank and the lapse of any
applicable notice and cure period in connection therewith; or (xiv) any change
of control of any Obligor shall occur (as used herein, the term "change of
control" means either any change in ownership of any class of stock or capital
stock generally of any Obligor which would result in a change or transfer of
power to control the election of a majority of the board of directors or in
other indicia of majority voting control to persons or entities other than the
Obligors). As used herein, the term "Obligor" means any Borrowers and any
Guarantor, and the term "Guarantor" means any guarantor of the obligations of
the Borrowers to the Bank existing on the date of this Note or arising in the
future.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the option of the Bank and without demand or
notice of any kind, may be accelerated and become immediately due and payable;
(d) at the option of the Bank, this Note will bear interest at the Default Rate
from the date of the occurrence of the Event of Default; and (e) the Bank may
exercise from time to time any of the rights and remedies available to the Bank
under the Loan Documents or under applicable law.
<PAGE>
9. Power to Confess Judgment. The Borrowers hereby empower any attorney of any
court of record, after the occurrence of any Event of Default hereunder, to
appear for the Borrowers and, with or without complaint filed, confess judgment,
or a series of judgments, against the Borrowers in favor of the Bank or any
holder hereof for the entire principal balance of this Note, all accrued
interest and all other amounts due hereunder, together with costs of suit and an
attorney's commission of the greater of three percent (3%) of such principal and
interest or $5,000 added as a reasonable attorney's fee, and for doing so, this
Note or a copy verified by affidavit shall be a sufficient warrant. The
Borrowers hereby forever waive and release all procedural errors in said
proceedings and all rights of appeal and all relief from any and all
appraisement, stay or exemption laws of any state now in force or hereafter
enacted. Interest on any such judgment shall accrue at the Default Rate.
No single exercise of the foregoing power to confess judgment, or a series of
judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Bank shall elect until such time as the Bank shall have received
payment in full of the debt, interest and costs.
10. Right of Setoff. In addition to all liens upon and rights of setoff against
the money, securities or other property of the Borrowers given to the Bank by
law, the Bank shall have, with respect to the Borrowers' obligations to the Bank
under this Note and to the extent permitted by law, a contractual possessory
security interest in and a contractual right of setoff against, and the
Borrowers hereby assign, convey, deliver, pledge and transfer to the Bank all of
the Borrowers' right, title and interest in and to, all deposits, moneys,
securities and other property of the Borrowers now or hereafter in the
possession of or on deposit with, or in transit to, the Bank whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon or notice to the Borrowers. Every such right of
setoff shall be deemed to have been exercised immediately upon the occurrence of
an Event of Default hereunder without any action of the Bank, although the Bank
may enter such setoff on its books and records at a later time.
11. Miscellaneous. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power, nor shall the Bank's action or inaction
impair any such right or power. The Borrowers agree to pay on demand, to the
extent permitted by law, all costs and expenses incurred by the Bank in the
enforcement of its rights in this Note and in any security therefor, including
without limitation reasonable fees and expenses of the Bank's counsel. If any
provision of this Note is found to be invalid by a court, all the other
provisions of this Note will remain in full force and effect. The Borrowers and
all other makers and indorsers of this Note hereby forever waive presentment,
protest, notice of dishonor and notice of non-payment. The Borrowers also waive
all defenses based on suretyship or impairment of collateral. If this Note is
executed by more than one Borrowers, the obligations of such persons or entities
hereunder will be joint and several. This Note shall bind the Borrowers and
their successors and assigns, and the benefits hereof shall inure to the benefit
of the Bank and its successors and assigns.
<PAGE>
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWERS DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The
Borrowers hereby irrevocably consent to the exclusive jurisdiction of any state
or federal court for the county or judicial district where the Bank's office
indicated above is located, and consent that all service of process be sent by
nationally recognized overnight courier service directed to the Borrowers at the
Borrowers' address set forth herein and service so made will be deemed to be
completed on the business day after deposit with such courier; provided that
nothing contained in this Note will prevent the Bank from bringing any action,
enforcing any award or judgment or exercising any rights against the Borrowers
individually, against any security or against any property of the Borrowers
within any other county, state or other foreign or domestic jurisdiction. The
Borrowers acknowledge and agree that the venue provided above is the most
convenient forum for both the Bank and the Borrowers. The Borrowers waive any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
12. WAIVER OF JURY TRIAL. THE BORROWERS IRREVOCABLY WAIVE ANY ALL RIGHTS THE
BORROWERS MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE BORROWERS
ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrowers acknowledge that they have read and understood all the provisions
of this Note, including the confession of judgment and waiver of jury trial, and
have been advised by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
CECO FILTERS, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
<PAGE>
AIR PURATOR CORPORATION
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
NEW BUSCH CO., INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
U.S. FACILITIES MANAGEMENT
COMPANY, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
<PAGE>
EXHIBIT 10.28
MORTGAGE NOTE
$787,155.41 March 16, 1999
FOR VALUE RECEIVED, CECO FILTERS, INC. AIR PURATOR CORPORATION, NEW BUSCH CO.,
INC. and U.S. FACILITIES MANAGEMENT COMPANY, INC. (collectively, the
"Borrowers"), with an address at c/o CECO Filters, Inc., 1029 Conshohocken Road,
Conshohocken, PA 19428, jointly and severally, promise to pay to the order of
PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the United
States of America in immediately available funds at its offices located at 1600
Market Street, Philadelphia, PA 19103, or at such other location as the Bank may
designate from time to time, the principal sum of Seven Hundred Eighty-Seven
Thousand One Hundred Fifty-Five and 41/100 Dollars ($787,155.41) (the "Mortgage
Loan"), together with interest accruing on the outstanding principal balance
from the date hereof, as provided below:
1. Rate of Interest. Amounts outstanding under this Note will bear interest
as follows:
(a) A rate per annum (the "Floating Rate") which is equal to the Prime Rate plus
(i) at all times prior to the USFM Date (as defined below), one quarter of one
percent (1/4%) and (ii) at all times from and after the USFM Date to March 1,
2006, zero (0); provided that the Borrowers shall have the one time option to
convert from the Floating Rate and fix the interest at a rate (the "Fixed Rate")
offered by the Bank as its cost of funds rate for the then remaining term of the
Facility plus (i) at all times prior to the USFM Date, two and one-half percent
(2 1/2%) and (ii) at all times from and after the USFM Date to March 1, 2006,
two and one-quarter percent (2 1/4%).
(b) Interest will be calculated on the basis of a year of 360 days and the
actual number of days elapsed. As used herein, "Prime Rate" shall mean the rate
publicly announced by the Bank from time to time as its prime rate. The Prime
Rate is determined from time to time by the Bank as a means of pricing some
loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.
If and when the Prime Rate changes, the rate of interest under this Note will
change automatically without notice to the Borrowers, effective on the date of
any such change. For purposes of this Note, the "USFM Date" is the last day of
the second of two consecutive fiscal quarters of U.S. Facilities Management
Company, Inc. ("USFM") during both of which USFM has had net income determined
in accordance with generally accepted accounting principles equal to or greater
than zero (0).
2. Payment Terms.
(a) Interest. Interest on the Mortgage Loan shall be due and payable monthly
commencing on April 1, 1999 and continuing on the first day of each month
thereafter until March 1, 2006.
<PAGE>
(b) Principal. Principal shall be payable in consecutive equal monthly
installments in the amount of $8,032.20 each, which shall be due and payable on
the first day of each month commencing April 1, 1999. The outstanding balance of
principal and accrued interest shall be due and payable on March 1, 2006,
subject to the provisions of Section 11 of the Letter Agreement.
(c) General Provisions. If any payment under this Note shall become due on a
Saturday, Sunday or public holiday under the laws of the State where the Bank's
office indicated above is located, such payment shall be made on the next
succeeding business day and such extension of time shall be included in
computing interest in connection with such payment. The Borrowers hereby
authorize the Bank to charge CECO Filters, Inc.'s deposit account at the Bank
for any payment when due hereunder. Payments received will be applied to
charges, fees and expenses (including attorneys' fees), accrued interest and
principal in any order the Bank may choose, in its sole discretion.
3. Late Payments; Default Rate. If the Borrowers fail to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within five business days of the date due and payable, the Borrowers
also shall pay to the Bank a late charge equal to three percent (3%) of the
amount of such payment. Such five day period shall not be construed in any way
to extend the due date of any such payment. The late charge is imposed for the
purpose of defraying the Bank's expenses incident to the handling of delinquent
payments and is in addition to, and not in lieu of, the exercise by the Bank of
any rights and remedies hereunder, under the other Loan Documents or under
applicable laws, and any fees and expenses of any agents or attorneys which the
Bank may employ. Upon maturity, whether by acceleration, demand or otherwise,
and at the option of the Bank upon the occurrence of any Event of Default (as
hereinafter defined) and during the continuance thereof, this Note shall bear
interest at a rate per annum (based on a year of 360 days and actual days
elapsed) which shall be two percent (2%) in excess of the interest rate in
effect from time to time under this Note but not more than the maximum rate
allowed by law (the "Default Rate"). The Default Rate shall continue to apply
whether or not judgment shall be entered on this Note.
4. Prepayment. If this Note bears interest at the Floating Rate, the
indebtedness may be prepaid in whole or in part at any time without penalty. If
this Note bears interest at a Fixed Rate, the indebtedness may be prepaid in
whole or in part at any time, however, notwithstanding anything contained herein
to the contrary, upon such prepayment (other than a prepayment which is the
result of the Refinancing Extension) by or on behalf of the Borrowers (whether
voluntary, on default or otherwise) of indebtedness hereunder which bears
interest at a fixed rate, the Bank may require, if it so elects, the Borrowers
to pay the Bank as compensation for the cost of being prepared to advance fixed
rate funds hereunder an amount equal to the Cost of Prepayment. "Cost of
Prepayment" means an amount equal to the present value, if positive, of the
product of (a) the difference between (i) the yield, on the beginning date of
the applicable interest period, of a U.S. Treasury obligation with a maturity
similar to the applicable interest period minus (ii) the yield on the prepayment
date, of a U.S. Treasury obligation with a maturity similar to the remaining
maturity of the applicable interest period, and (b) the principal amount to be
prepaid, and (c) the number of years, including fractional years, from the
prepayment date to the end of the applicable interest period. The yield on any
U.S. Treasury obligation shall be determined by reference to Federal Reserve
Statistical Release H.15(519) "Selected Interest Rates". For purposes of making
present value calculations, the yield to maturity of a similar maturity U.S.
Treasury obligation on the prepayment date shall be deemed the discount rate and
the term "applicable interest period" shall mean the number of months or a
fraction thereof remaining in the term of the loan through the maturity date of
this Note. The Cost of Prepayment shall also apply to any payments made after
acceleration of the maturity of this Note.
<PAGE>
5. Other Loan Documents. This Note is issued in connection with a certain
letter agreement dated March 16, 1999 (the "Letter Agreement") and the other
documents referred to therein, the terms of which are incorporated herein by
reference (collectively, the "Loan Documents"), and is secured by the property
described in the Loan Documents (if any) and by such other collateral as
previously may have been or may in the future be granted to the Bank to secure
this Note.
6. Events of Default. The occurrence of any of the following events will be
deemed to be an "Event of Default" under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note when due; (ii) the
occurrence of any event of default or default and the lapse of any notice or
cure period under any Loan Document or any other debt, liability or obligation
to the Bank of any Obligor; (iii) the filing by or against any Obligor of any
proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation,
conservatorship or similar proceeding (and, in the case of any such proceeding
instituted against any Obligor, such proceeding is not dismissed or stayed
within sixty (60) days of the commencement thereof, provided that the Bank shall
not be obligated to advance additional funds during such period); (iv) any
assignment by any Obligor for the benefit of creditors, or any levy,
garnishment, attachment or similar proceeding is instituted against any property
of any Obligor held by or deposited with the Bank and such proceeding is not
dismissed within thirty (30) days of the commencement thereof; (v) a default
with respect to any other indebtedness of any Obligor for borrowed money, if the
effect of such default is to cause the acceleration of such debt; (vi) the
commencement of any foreclosure or forfeiture proceeding, execution or
attachment against any collateral securing the obligations of any Obligor to the
Bank and such proceeding is not dismissed or stayed within thirty (30) days of
the commencement thereof; (vii) the entry of a final judgment in excess of
$25,000 against any Obligor and the failure of such Obligor to discharge the
judgment within thirty (30) days of the entry thereof, unless the same has been
appealed and a stay of the enforcement thereof has been obtained; (viii) any
material adverse change in the business, assets, operations, financial condition
or results of operations of any Obligor of which the Bank has given the
Borrowers' Representative one hundred twenty (120) days notice; (ix) the
Borrowers cease doing business as a going concern; (x) any representation or
warranty made by any Obligor to the Bank in any Loan Document, or any other
documents now or in the future securing the obligations of any Obligor to the
Bank, proves to be false, erroneous or misleading in any material respect when
made; (xi) the failure of any Obligor to observe or perform any covenant or
other agreement with the Bank contained in any Loan Document or any other
documents now or in the future securing the obligations of any Obligor to the
Bank and the lapse of any applicable notice and cure period in connection
therewith; or (xii) any change of control of any Obligor shall occur (as used
herein, the term "change of control" means either any change in ownership of any
class of stock or capital stock generally of any Obligor which would result in a
change or transfer of power to control the election of a majority of the board
of directors or in other indicia of majority voting control to persons or
entities other than the Obligors). As used herein, the term "Obligor" means any
Borrower and any Guarantor, and the term "Guarantor" means any guarantor of the
obligations of the Borrowers to the Bank existing on the date of this Note or
arising in the future.
<PAGE>
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the option of the Bank and without demand, may be
accelerated and become immediately due and payable; (d) at the option of the
Bank, this Note will bear interest at the Default Rate from the date of the
occurrence of the Event of Default; and (e) the Bank may exercise from time to
time any of the rights and remedies available to the Bank under the Loan
Documents or under applicable law.
7. Power to Confess Judgment. The Borrowers hereby empower any attorney of any
court of record, after the occurrence of any Event of Default hereunder, to
appear for the Borrowers and, with or without complaint filed, confess judgment,
or a series of judgments, against the Borrowers in favor of the Bank or any
holder hereof for the entire principal balance of this Note, all accrued
interest and all other amounts due hereunder, together with costs of suit and an
attorney's commission of the greater of 3% of such principal and interest or
$5,000 added as a reasonable attorney's fee, and for doing so, this Note or a
copy verified by affidavit shall be a sufficient warrant. The Borrowers hereby
forever waive and release all procedural errors in said proceedings and all
rights of appeal and all relief from any and all appraisement, stay or exemption
laws of any state now in force or hereafter enacted. Interest on any such
judgment shall accrue at the Default Rate.
No single exercise of the foregoing power to confess judgment, or a series of
judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Bank shall elect until such time as the Bank shall have received
payment in full of the debt, interest and costs.
8. Right of Setoff. In addition to all liens upon and rights of setoff against
the money, securities or other property of each Borrower given to the Bank by
law, the Bank shall have, with respect to such Borrower's obligations to the
Bank under this Note and to the extent permitted by law, a contractual
possessory security interest in and a contractual right of setoff against, and
each Borrower hereby assigns, conveys, delivers, pledges and transfers to the
Bank all of such Borrower's right, title and interest in and to, all deposits,
moneys, securities and other property of such Borrower now or hereafter in the
possession of or on deposit with, or in transit to, the Bank whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon any Borrower. Every such right of setoff shall
be deemed to have been exercised immediately upon the occurrence of an Event of
Default hereunder without any action of the Bank, although the Bank may enter
such setoff on its books and records at a later time.
<PAGE>
9. Miscellaneous. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power, nor shall the Bank's action or inaction
impair any such right or power. Each Borrower agrees to pay on demand, to the
extent permitted by law, all costs and expenses incurred by the Bank in the
enforcement of its rights in this Note and in any security therefor, including
without limitation reasonable fees and expenses of the Bank's counsel. If any
provision of this Note is found to be invalid by a court, all the other
provisions of this Note will remain in full force and effect. Each Borrower and
all other makers and indorsers of this Note hereby forever waive presentment,
protest, notice of dishonor and notice of non-payment. Each Borrower also waives
all defenses based on suretyship or impairment of collateral. If this Note is
executed by more than one Borrower, the obligations of such persons or entities
hereunder will be joint and several. This Note shall bind each Borrower and its
successors and assigns, and the benefits hereof shall inure to the benefit of
the Bank and its successors and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. Each
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court for the county or judicial district where the Bank's office
indicated above is located, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrowers at the
address set forth herein and service so made will be deemed to be completed on
the business day after deposit with such courier; provided that nothing
contained in this Note will prevent the Bank from bringing any action, enforcing
any award or judgment or exercising any rights against each Borrower
individually, against any security or against any property of such Borrower
within any other county, state or other foreign or domestic jurisdiction. Each
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and such Borrower. The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
10. WAIVER OF JURY TRIAL. EACH BORROWER IRREVOCABLY WAIVES ANY ALL RIGHTS SUCH
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. EACH BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
Each Borrower acknowledges that it has read and understood all the
provisions of this Note, including the waiver of jury trial, and has been
advised by counsel as necessary or appropriate.
<PAGE>
WITNESS the due execution hereof as a document under seal, as of the
date first written above, with the intent to be legally bound hereby.
CECO FILTERS, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
AIR PURATOR CORPORATION
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
NEW BUSCH CO., INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
U.S. FACILITIES MANAGEMENT COMPANY, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
<PAGE>
EXHIBIT 10.29
TERM LOAN NOTE
$625,000.06 March 16, 1999
FOR VALUE RECEIVED, CECO FILTERS, INC. AIR PURATOR CORPORATION, NEW BUSCH CO.,
INC. and U.S. FACILITIES MANAGEMENT COMPANY, INC. (collectively, the
"Borrowers"), with an address at c/o CECO Filters, Inc., 1029 Conshohocken Road,
Conshohocken, PA 19428, jointly and severally, promise to pay to the order of
PNC BANK, NATIONAL ASSOCIATION (the "Bank"), in lawful money of the United
States of America in immediately available funds at its offices located at 1600
Market Street, Philadelphia, PA 19103, or at such other location as the Bank may
designate from time to time, the principal sum of SIX HUNDRED TWENTY FIVE
THOUSAND AND 06/100 DOLLARS ($625,000.06) (the "Term Loan"), together with
interest accruing on the outstanding principal balance from the date hereof, as
provided below:
1. Rate of Interest. Amounts outstanding under this Note will bear interest as
follows:
(a) A rate per annum (the "Floating Rate") which is equal to the Prime Rate plus
(i) at all times prior to the USFM Date (as defined below), one half of one
percent (1/2%) and (ii) at all times from and after the USFM Date to September
1, 2001, one quarter of one percent (1/4%); provided that the Borrowers shall
have the one time option to convert from the Floating Rate and fix the interest
at a rate (the "Fixed Rate") offered by the Bank as its cost of funds rate for
the then remaining term of the Facility plus (i) at all times prior to the USFM
Date, two and three quarters percent (2 3/4%) and (ii) at all times from and
after the USFM Date to September 1, 2001, two and one-half percent (2 1/2%).
(b) Interest will be calculated on the basis of a year of 360 days and the
actual number of days elapsed. As used herein, "Prime Rate" shall mean the rate
publicly announced by the Bank from time to time as its prime rate. The Prime
Rate is determined from time to time by the Bank as a means of pricing some
loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.
If and when the Prime Rate changes, the rate of interest under this Note will
change automatically without notice to the Borrowers, effective on the date of
any such change. For purposes of this Note, the "USFM Date" is the last day of
the second of two consecutive fiscal quarters of U.S. Facilities Management
Company, Inc. ("USFM") during both of which USFM has had net income determined
in accordance with generally accepted accounting principles equal to or greater
than zero (0).
<PAGE>
2. Payment Terms.
(a) Interest. Interest on the Term Loan shall be due and payable monthly
commencing on April 1, 1999 and continuing on the first day of each month
thereafter until September 1, 2001.
(b) Principal. Principal shall be payable in consecutive equal monthly
installments each in the amount of $20,833 which shall be due and payable on the
first day of each month commencing April 1, 1999. The outstanding balance of
principal and accrued interest shall be due and payable on September 1, 2001,
subject to the provisions of Section 11 of the Letter Agreement.
(c) General Provisions. If any payment under this Note shall become due on a
Saturday, Sunday or public holiday under the laws of the State where the Bank's
office indicated above is located, such payment shall be made on the next
succeeding business day and such extension of time shall be included in
computing interest in connection with such payment. The Borrowers hereby
authorize the Bank to charge CECO Filters, Inc.'s deposit account at the Bank
for any payment when due hereunder. Payments received will be applied to
charges, fees and expenses (including attorneys' fees), accrued interest and
principal in any order the Bank may choose, in its sole discretion.
3. Late Payments; Default Rate. If the Borrowers fail to make any payment of
principal, interest or other amount coming due pursuant to the provisions of
this Note within five business days of the date due and payable, the Borrowers
also shall pay to the Bank a late charge equal to three percent (3%) of the
amount of such payment. Such five day period shall not be construed in any way
to extend the due date of any such payment. The late charge is imposed for the
purpose of defraying the Bank's expenses incident to the handling of delinquent
payments and is in addition to, and not in lieu of, the exercise by the Bank of
any rights and remedies hereunder, under the other Loan Documents or under
applicable laws, and any fees and expenses of any agents or attorneys which the
Bank may employ. Upon maturity, whether by acceleration, demand or otherwise,
and at the option of the Bank upon the occurrence of any Event of Default (as
hereinafter defined) and during the continuance thereof, this Note shall bear
interest at a rate per annum (based on a year of 360 days and actual days
elapsed) which shall be two percent (2%) in excess of the interest rate in
effect from time to time under this Note but not more than the maximum rate
allowed by law (the "Default Rate"). The Default Rate shall continue to apply
whether or not judgment shall be entered on this Note.
<PAGE>
4. Prepayment. If this Note bears interest at the Floating Rate, the
indebtedness may be prepaid in whole or in part at any time without penalty. If
this Note bears interest at a Fixed Rate, the indebtedness may be prepaid in
whole or in part at any time provided however, notwithstanding anything
contained herein to the contrary, upon such prepayment (other than a prepayment
which is the result of the expiration of the Refinancing Extension) by or on
behalf of the Borrowers (whether voluntary, on default or otherwise) of
indebtedness hereunder which bears interest at a fixed rate, the Bank may
require, if it so elects, the Borrowers to pay the Bank as compensation for the
cost of being prepared to advance fixed rate funds hereunder an amount equal to
the Cost of Prepayment. "Cost of Prepayment" means an amount equal to the
present value, if positive, of the product of (a) the difference between (i) the
yield, on the beginning date of the applicable interest period, of a U.S.
Treasury obligation with a maturity similar to the applicable interest period
minus (ii) the yield on the prepayment date, of a U.S. Treasury obligation with
a maturity similar to the remaining maturity of the applicable interest period,
and (b) the principal amount to be prepaid, and (c) the number of years,
including fractional years, from the prepayment date to the end of the
applicable interest period. The yield on any U.S. Treasury obligation shall be
determined by reference to Federal Reserve Statistical Release H.15(519)
"Selected Interest Rates". For purposes of making present value calculations,
the yield to maturity of a similar maturity U.S. Treasury obligation on the
prepayment date shall be deemed the discount rate and the term "applicable
interest period" shall mean the number of months or a fraction thereof remaining
in the term of the loan through the maturity date of this Note. The Cost of
Prepayment shall also apply to any payments made after acceleration of the
maturity of this Note.
5. Other Loan Documents. This Note is issued in connection with a certain letter
agreement dated March 16, 1999 (the "Letter Agreement") and the other documents
referred to therein, the terms of which are incorporated herein by reference
(collectively, the "Loan Documents"), and is secured by the property described
in the Loan Documents (if any) and by such other collateral as previously may
have been or may in the future be granted to the Bank to secure this Note.
6. Events of Default. The occurrence of any of the following events will be
deemed to be an "Event of Default" under this Note: (i) the nonpayment of any
principal, interest or other indebtedness under this Note when due; (ii) the
occurrence of any event of default or default and the lapse of any notice or
cure period under any Loan Document or any other debt, liability or obligation
to the Bank of any Obligor; (iii) the filing by or against any Obligor of any
proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation,
conservatorship or similar proceeding (and, in the case of any such proceeding
instituted against any Obligor, such proceeding is not dismissed or stayed
within sixty (60) days of the commencement thereof, provided that the Bank shall
not be obligated to advance additional funds during such period); (iv) any
assignment by any Obligor for the benefit of creditors, or any levy,
garnishment, attachment or similar proceeding is instituted against any property
of any Obligor held by or deposited with the Bank and such proceeding is not
dismissed within thirty (30) days of the commencement thereof; (v) a default
with respect to any other indebtedness of any Obligor for borrowed money, if the
effect of such default is to cause the acceleration of such debt; (vi) the
commencement of any foreclosure or forfeiture proceeding, execution or
attachment against any collateral securing the obligations of any Obligor to the
Bank and such proceeding is not dismissed or stayed within thirty (30) days of
the commencement thereof; (vii) the entry of a final judgment in excess of
$25,000 against any Obligor and the failure of such Obligor to discharge
<PAGE>
the judgment within thirty (30) days of the entry thereof, unless the same has
been appealed and a stay of the enforcement thereof has been obtained; (viii)
any material adverse change in the business, assets, operations, financial
condition or results of operations of any Obligor of which the Bank has given
the Borrowers' Representative one hundred twenty (120) days notice; (ix) the
Borrowers cease doing business as a going concern; (x) any representation or
warranty made by any Obligor to the Bank in any Loan Document, or any other
documents now or in the future securing the obligations of any Obligor to the
Bank, proves to be false, erroneous or misleading in any material respect when
made; (xi) the failure of any Obligor to observe or perform any covenant or
other agreement with the Bank contained in any Loan Document or any other
documents now or in the future securing the obligations of any Obligor to the
Bank and the lapse of any applicable notice and cure period in connection
therewith; or (xii) any change of control of any Obligor shall occur (as used
herein, the term "change of control" means either any change in ownership of any
class of stock or capital stock generally of any Obligor which would result in a
change or transfer of power to control the election of a majority of the board
of directors or in other indicia of majority voting control to persons or
entities other than the Obligors). As used herein, the term "Obligor" means any
Borrower and any Guarantor, and the term "Guarantor" means any guarantor of the
obligations of the Borrowers to the Bank existing on the date of this Note or
arising in the future.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) or (iv) above shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder shall be immediately due and payable without demand or notice
of any kind; (c) if any other Event of Default shall occur, the outstanding
principal balance and accrued interest hereunder together with any additional
amounts payable hereunder, at the option of the Bank and without demand, may be
accelerated and become immediately due and payable; (d) at the option of the
Bank, this Note will bear interest at the Default Rate from the date of the
occurrence of the Event of Default; and (e) the Bank may exercise from time to
time any of the rights and remedies available to the Bank under the Loan
Documents or under applicable law.
7. Power to Confess Judgment. The Borrowers hereby empower any attorney of any
court of record, after the occurrence of any Event of Default hereunder, to
appear for the Borrowers and, with or without complaint filed, confess judgment,
or a series of judgments, against the Borrowers in favor of the Bank or any
holder hereof for the entire principal balance of this Note, all accrued
interest and all other amounts due hereunder, together with costs of suit and an
attorney's commission of the greater of 3% of such principal and interest or
$5,000 added as a reasonable attorney's fee, and for doing so, this Note or a
copy verified by affidavit shall be a sufficient warrant. The Borrowers hereby
forever waive and release all procedural errors in said proceedings and all
rights of appeal and all relief from any and all appraisement, stay or exemption
laws of any state now in force or hereafter enacted. Interest on any such
judgment shall accrue at the Default Rate.
No single exercise of the foregoing power to confess judgment, or a series of
judgments, shall be deemed to exhaust the power, whether or not any such
exercise shall be held by any court to be invalid, voidable, or void, but the
power shall continue undiminished and it may be exercised from time to time as
often as the Bank shall elect until such time as the Bank shall have received
payment in full of the debt, interest and costs.
<PAGE>
8. Right of Setoff. In addition to all liens upon and rights of setoff against
the money, securities or other property of each Borrower given to the Bank by
law, the Bank shall have, with respect to such Borrower's obligations to the
Bank under this Note and to the extent permitted by law, a contractual
possessory security interest in and a contractual right of setoff against, and
each Borrower hereby assigns, conveys, delivers, pledges and transfers to the
Bank all of such Borrower's right, title and interest in and to, all deposits,
moneys, securities and other property of such Borrower now or hereafter in the
possession of or on deposit with, or in transit to, the Bank whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon any Borrower. Every such right of setoff shall
be deemed to have been exercised immediately upon the occurrence of an Event of
Default hereunder without any action of the Bank, although the Bank may enter
such setoff on its books and records at a later time.
9. Miscellaneous. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power, nor shall the Bank's action or inaction
impair any such right or power. Each Borrower agrees to pay on demand, to the
extent permitted by law, all costs and expenses incurred by the Bank in the
enforcement of its rights in this Note and in any security therefor, including
without limitation reasonable fees and expenses of the Bank's counsel. If any
provision of this Note is found to be invalid by a court, all the other
provisions of this Note will remain in full force and effect. Each Borrower and
all other makers and indorsers of this Note hereby forever waive presentment,
protest, notice of dishonor and notice of non-payment. Each Borrower also waives
all defenses based on suretyship or impairment of collateral. If this Note is
executed by more than one Borrower, the obligations of such persons or entities
hereunder will be joint and several. This Note shall bind each Borrower and its
successors and assigns, and the benefits hereof shall inure to the benefit of
the Bank and its successors and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK AND THE
BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S
OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. Each
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court for the county or judicial district where the Bank's office
indicated above is located, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrowers at the
address set forth herein and service so made will be deemed to be completed on
the business day after deposit with such courier; provided that nothing
contained in this Note will prevent the Bank from bringing any action, enforcing
any award or judgment or exercising any rights against each Borrower
individually, against any security or against any property of such Borrower
within any other county, state or other foreign or domestic jurisdiction. Each
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and such Borrower. The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
<PAGE>
10. WAIVER OF JURY TRIAL. EACH BORROWER IRREVOCABLY WAIVES ANY ALL RIGHTS SUCH
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. EACH BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
Each Borrower acknowledges that it has read and understood all the provisions of
this Note, including the waiver of jury trial, and has been advised by counsel
as necessary or appropriate.
<PAGE>
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
CECO FILTERS, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
AIR PURATOR CORPORATION
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
NEW BUSCH CO., INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
U.S. FACILITIES MANAGEMENT COMPANY, INC.
By: /Steven Taub/
--------------------------
Print Name: /Steven Taub/
Title: /President/
<PAGE>
EXHIBIT 10.30
March 16, 1999
CECO Filters, Inc.
Air Purator Corporation
New Busch Co., Inc.
U.S. Facilities Management Company, Inc.
1029 Conshohocken Road
Conshohocken, PA 19428
Attention: Mr. Steven Taub
Re: $5,000,000 Secured Committed Line of Credit
$625,000.06 Secured Term Loan
$787,155.41 First Mortgage Loan
$2,000,000 Senior Committed Acquisition Line of Credit
Dear Mr. Taub:
We are pleased to inform you that PNC Bank, National Association (the "Bank")
has approved your requests for a secured committed line of credit, a term loan,
a first mortgage loan and a senior committed acquisition line of credit to CECO
Filters, Inc. ("CECO Filters"), Air Purator Corporation, New Busch Co., Inc. and
U.S. Facilities Management Company, Inc. (collectively, the "Borrowers"). We
look forward to this opportunity to help you meet the financing needs of your
business. As your primary bank, we want to supply all your banking needs.
All the details regarding your loans are outlined in the following sections of
this letter. If these terms are satisfactory, please follow the instructions for
proceeding with your loans provided at the end of this letter.
1. Secured Committed Line of Credit and Use of Proceeds. The first credit
facility covered by this letter is a secured committed line of credit under
which the Borrowers' Representative (as hereinafter defined) may request and the
Bank, subject to the terms and conditions of this letter, will make advances to
the Borrowers from time to time until the Expiration Date, in an amount in the
aggregate at any time outstanding not to exceed $5,000,000 (the "Line of
Credit"). The "Expiration Date" shall mean March 16, 2000, or such other later
date as may be designated by the Bank by written notice to the Borrowers'
Representative (including, if applicable, the Refinancing Extension (as
hereafter defined)). If on or prior to the then current Expiration Date, and in
the absence of an Event of Default under the Line of Credit Note (as hereinafter
defined), the Bank has determined that it will not renew the Line of Credit and
extend such Expiration Date or if the Bank proposes changes to the material
terms and conditions of the Line of Credit as a condition to such renewal and
extension and the Borrowers do not agree to such changes, the Bank will
nonetheless extend the Expiration Date for the lesser of (i) the period of time
necessary for the Borrowers to consummate replacement financing for the Loans
and (ii) one hundred twenty (120) days from such Expiration Date (such
additional period being referred to as the "Refinancing Extension")
<PAGE>
Advances under the Line of Credit will be used to refinance the existing
$2,000,000 CoreStates Bank Demand Line of Credit and for general corporate and
working capital purposes of the Borrowers.
a. Advance Procedures. In order to request an advance under the Line of
Credit, the Borrowers' Representative shall hand deliver or telecopy (or notify
by telephone and promptly confirm by hand delivery or telecopy) to the Bank the
information requested by the form of Borrowing Request attached as Exhibit A
hereto (i) not later than 2:00 p.m., Philadelphia time, on the day of the
proposed borrowing, in the case of Line of Credit Loans bearing interest under
the Prime Rate Option and (ii) not later than 11:00 a.m. three business days
before a proposed borrowing in the case of Line of Credit Loans bearing interest
under the Euro-Rate Option. Such notice shall be irrevocable and shall specify
(a) the principal amount of the borrowing being requested (minimum borrowing
increments of $50,000; (b) whether the borrowing then being requested is to bear
interest under the Euro-Rate Option or the Prime Rate Option; (c) the date of
such borrowing (which shall be a business day); and (d) if such borrowing is to
bear interest under the Euro-Rate Option, the interest period with respect
thereto, which shall be one, two or three months. If no election as to the type
of borrowing is specified in any such notice, then the requested borrowing shall
bear interest under the Prime Rate Option. If no interest period with respect to
any borrowing bearing interest under the Euro-Rate Option is specified in any
such notice, then the Borrowers shall be deemed to have selected an interest
period of one month's duration.
b. Interest Rate. Each Line of Credit Loan shall bear interest as set
forth in the Line of Credit Note (as defined below), the terms of which are
incorporated into this letter by reference.
c. Repayment. Subject to the terms and conditions of this letter, and
provided there is no Event of Default (as defined in the Line of Credit Note),
the Borrowers may borrow, repay and reborrow under the Line of Credit amounts
not to exceed $5,000,000 until the Expiration Date, on which date the
outstanding principal balance and any accrued but unpaid interest shall be due
and payable. Interest will be due and payable as set forth in the Line of Credit
Note.
d. Line of Credit Note. The obligation of the Borrowers to repay loans
under the Line of Credit shall be evidenced by a Line of Credit Note (the "Line
of Credit Note") in form and content satisfactory to the Bank.
2. Term Loan and Use of Proceeds. The second credit facility covered by this
letter is a term loan in the amount of $625,000.06 (the "Term Loan"). The
proceeds of the Term Loan will be advanced at the time of closing and shall be
used to refinance CECO Filters' existing term loan from CoreStates Bank.
a. Interest Rate. Amounts outstanding under the Term Loan will bear
interest at one of the rate alternatives provided in the Term Note (as defined
below), the terms of which are incorporated into this letter by reference.
<PAGE>
b. Repayment. The principal amount of the Term Loan shall be paid in
consecutive monthly installments of $20,833 commencing on April 1, 1999 with a
final payment of all outstanding principal and accrued interest on September 1,
2001. Interest shall be paid in arrears at the same time as the principal
installments.
c. Term Note. The obligation of the Borrowers to repay the Term Loan
shall be evidenced by a Term Note (the "Term Note") in form and content
satisfactory to the Bank.
3. Mortgage Loan and Use of Proceeds. The third credit facility covered by this
letter is a mortgage loan in the amount of $787,155.41 (the "Mortgage Loan").
The proceeds of the Mortgage Loan will be advanced at the time of closing and
shall be used to refinance CECO Filters' existing mortgage loan from CoreStates
Bank.
a. Interest Rate. Amounts outstanding under the Mortgage Loan will bear
interest at one of the rate alternatives provided in the Mortgage Note (as
defined below), the terms of which are incorporated into this letter by
reference.
b. Repayment. The principal amount of the Mortgage Loan shall be paid
in eighty-three consecutive monthly installments in the amount of $8,032.20
each, commencing on April 1, 1999 and continuing on the first day of each month
thereafter and a balloon payment of all outstanding principal and interest on
March 1, 2006. Interest shall be paid in arrears at the same time as the
principal installments.
c. Mortgage Note. The obligation of the Borrowers to repay the Mortgage
Loan shall be evidenced by a Mortgage Note (the "Mortgage Note") in form and
content satisfactory to the Bank.
4. Acquisition Line of Credit and Use of Proceeds. The fourth credit facility
covered by this letter is an acquisition line of credit in the amount of
$2,000,000 (the "Acquisition Line of Credit"). The Borrowers shall have the
option to finance the cost of certain acquisitions by separate term loans (each,
an "Acquisition Loan"), subject to the terms and conditions hereof. Acquisition
Loans shall be made at such times on or before March 16, 2000 (the "Acquisition
Line Expiration Date") and in such amounts as the Borrowers' Representative may
request in writing from time to time, provided, the aggregate initial principal
amount of all Acquisition Loans shall not exceed $2,000,000. The Acquisition
Loans, together with the loans under the Line of Credit, the Term Loan, and the
Mortgage Loan are hereafter called the "Loans").
a. Interest Rate. (i) Each Acquisition Loan shall bear interest at a
rate per annum (the "Floating Rate") which is equal to the Prime Rate plus (x)
at all times prior to the USFM Date (as defined below), one-half of one percent
(1/2%) and (y) at all times from and after the USFM Date through the maturity
date of such Acquisition Loan, one quarter of one percent (1/4%); provided that
the Borrowers shall have the one time option to convert from the Floating Rate
and fix the interest at a rate (the "Fixed Rate") offered by the Bank as its
cost of funds rate for the then remaining term of the Acquisition Loan plus (i)
at all times prior to the USFM Date, two and three quarters percent (2 3/4%),
(ii) at all times from and after the USFM Date through the
<PAGE>
maturity date of such Acquisition Loan, two and one-half percent (2 1/2%), and
(iii) interest will be calculated on the basis of a year of 360 days and the
actual number of days elapsed. As used herein, "Prime Rate" shall mean the rate
publicly announced by the Bank from time to time as its prime rate. The Prime
Rate is determined from time to time by the Bank as a means of pricing some
loans to its borrowers. The Prime Rate is not tied to any external rate of
interest or index, and does not necessarily reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.
If and when the Prime Rate changes, the rate of interest under each Acquisition
Note will change automatically without notice to the Borrowers' Representative,
effective on the date of any such change. For purposes of each Acquisition Note,
the "USFM Date" is the last day of the second of two consecutive fiscal quarters
of U.S. Facilities Management Company, Inc. ("USFM") during both of which USFM
has had net income determined in accordance with generally accepted accounting
principles equal to or greater than zero (0).
b. Repayment. The principal amount of each Acquisition Loan shall be
payable in equal consecutive quarterly installments during the term thereof and
the principal of and accrued interest on each Acquisition Loan shall be due and
payable three (3) years from the date when such Acquisition Loan was made.
Interest shall be due and payable monthly as set forth in the corresponding
Acquisition Note.
c. Acquisition Note. The obligation of the Borrowers to repay each
Acquisition Loan shall be evidenced by a separate promissory note (the
"Acquisition Note" and, together with the Line of Credit Note, the Term Note,
the Mortgage Note, the "Notes") in form and content satisfactory to the Bank.
d. Additional Conditions Precedent to the Bank's Obligation to Advance
Under the Acquisition Line of Credit. The Bank's obligation to make any advance
under the Acquisition Line of Credit is subject to the further condition that as
of the date of each Acquisition Loan, the Bank shall have received the
following:
(i) a Compliance Certificate showing that, after giving effect
to such Acquisition Loan and the acquisition to be financed from the proceeds
thereof, the Borrowers are in compliance with the covenants set forth herein;
(ii) a certificate of an officer of the Borrowers stating that
(a) the target company of such acquisition is a company domiciled in the United
States and its business is complimentary to that of the Borrowers and (b) such
acquisition is not the result of a contested or "hostile" takeover;
(iii) a fully executed Amendment to the Security Agreement (as
defined below) or any additional security document(s) necessary in the Bank's
sole discretion to give the Bank a first priority security interest in all of
the assets or stock of the target company of such acquisition;
<PAGE>
(iv) copies of any and all additional debt (subordinated,
seller, lease, pari-passu debt) instruments to be executed or assumed in
connection with such acquisition, the amount and terms of which shall be
acceptable to the Bank;
(v) copies of any and all documents to be executed or assumed
in connection with the acquisition which reflect any contingent or potential
liabilities, the terms of which shall be acceptable to the Bank; and
(vi) evidence that at the time of making the Acquisition Loan
there remains at least $500,000 available under the Acquisition Line of Credit.
5. Security. The Borrowers must cause the following to be executed and delivered
to the Bank in form and content satisfactory to the Bank as security for the
Line of Credit, the Term Loan, the Mortgage Loan and the Acquisition Loans:
a. a guaranty and suretyship agreement, under which CECO Environmental,
Inc., a New York corporation (the "Guarantor") will unconditionally guarantee
the due and punctual payment of all indebtedness owed to the Bank by the
Borrowers;
b. a security agreement (the "Security Agreement") granting the Bank a
first priority perfected lien on the Borrowers' existing and future accounts,
inventory, equipment, general intangibles, chattel paper, documents and
instruments and other personal property;
c. a mortgage granting the Bank a first priority perfected lien on real
property located at 1029 Conshohocken Road, Conshohocken, PA (the "Premises") up
to the principal amount of $787,155.41, subject to the existing second mortgage
securing financing from the Pennsylvania Industrial Development Authority (the
"PIDA Mortgage");
d. a mortgage granting the Bank a third lien on the Premises securing
the remaining amount of the Loans;
e. insurance on all of the real and personal property of the Borrowers,
in such amounts and with such coverages as are reasonably acceptable to the
Bank, containing standard mortgagee and/or lender loss payable endorsements in
favor of the Bank; and
f. an assignment to the Bank of a life insurance policy in the initial
face amount of $5,000,000 insuring the life of Steven Taub, subject to the terms
and conditions set forth in that certain side letter between the Bank and CECO
Filters dated the date hereof.
6. Covenants. Unless compliance is waived in writing by the Bank or until
termination of the Line of Credit, Term Loan, Mortgage Loan and the Acquisition
Line of Credit and payment in full of the Loans:
a. The Borrowers will promptly submit to the Bank such information
relating to the Borrowers' affairs as the Bank may reasonably request.
<PAGE>
b. The Borrowers will not make or permit any material change in the
nature of its business as carried on as of the date of this letter or in its
senior management or decrease the equity ownership by Guarantor.
c. The Borrowers will comply with the financial and other covenants
included in Exhibit B hereto.
7. Representations and Warranties. To induce the Bank to extend the Line of
Credit, the Term Loan, the Mortgage Loan, and the Acquisition Line of Credit or
the making of any advance to the Borrowers under the Line of Credit or the
Acquisition Line of Credit, the Borrowers represent and warrant as follows:
a. The Borrowers' latest financial statements provided to the Bank are
true, complete and accurate in all material respects and fairly present the
financial condition, assets and liabilities, whether accrued, absolute,
contingent or otherwise and the results of the Borrowers' operations for the
period specified therein. The Borrowers' financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
from period to period subject in the case of interim statements to normal
year-end adjustments. Since the date of the latest financial statements provided
to the Bank, the Borrowers have not suffered any damage, destruction or loss
which has materially adversely affected their business, assets, operations,
financial condition or results of operations.
b. There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrowers, threatened against
the Borrowers which could result in a material adverse change in their business,
assets, operations, financial condition or results of operations and there is no
basis known to the Borrowers or their officers, directors or shareholders for
any such action, suit, proceedings or investigation.
c. The Borrowers have filed all returns and reports that are required
to be filed by them in connection with any federal, state or local tax, duty or
charge levied, assessed or imposed upon the Borrowers or their property,
including unemployment, social security and similar taxes and all of such taxes
have been either paid or adequate reserve or other provision has been made
therefor.
d. Each of the Borrowers is duly organized, validly existing and in
good standing under the laws of the state of its incorporation or organization
and has the power and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly qualified, licensed
and in good standing to do business in all jurisdictions where its ownership of
property or the nature of its business requires such qualification or licensing.
e. The Borrowers have full power and authority to enter into the
transactions provided for in this letter and has been duly authorized to do so
by all necessary and appropriate action and when executed and delivered by the
Borrowers, this letter and the other loan documents executed and delivered
pursuant hereto will constitute the legal, valid and binding obligations of the
Borrowers, enforceable in accordance with their terms.
<PAGE>
f. There does not exist any default or violation by any of the
Borrowers of or under any of the terms, conditions or obligations of: (i) its
organizational documents; (ii) any material indenture, mortgage, deed of trust,
franchise, permit, contract, agreement, or other instrument to which it is a
party or by which it is bound; or (iii) any law, regulation, ruling, order,
injunction, decree, condition or other requirement applicable to or imposed upon
such Borrower by any law or by any governmental authority, court or agency.
8. Costs. The Borrowers shall reimburse the Bank for the Bank's expenses
(including the reasonable fees and expenses of the Bank's outside and in-house
counsel) in documenting and closing this transaction and the related
transactions executed concurrently herewith and in connection with any
amendments, modifications, renewals or enforcement actions relating to the
Loans.
9. Fees.
a. Line of Credit Fee. Beginning on April 1, 1999 and on each July 1,
October 1, January 1 and April 1 thereafter and on the Expiration Date, the
Borrowers shall pay a commitment fee to the Bank, in arrears, at the rate of one
quarter of one percent (.25%) per annum on the average daily balance of the Line
of Credit which is undisbursed during the preceding quarter or portion thereof.
The commitment fee shall be computed on the basis of a year of 360 days and paid
on the actual number of days elapsed.
b. Acquisition Line of Credit Fee. Beginning on April 1, 1999 and on
each July 1, October 1, January 1 and April 1 thereafter and on the Acquisition
Line Expiration Date, the Borrowers shall pay a commitment fee to the Bank, in
arrears, at the rate of one quarter of one percent (.25%) per annum on the
average daily balance of the Acquisition Line of Credit which is undisbursed
during the preceding quarter or portion thereof. The commitment fee shall be
computed on the basis of a year of 360 days and paid on the actual number of
days elapsed.
c. Acquisition Loan Fee. On the date of the making of each Acquisition
Loan, the Borrowers will pay to the Bank a fee equal to one percent (1%) of the
amount of such Acquisition Loan.
10. Depository. The Borrowers will establish and maintain at the Bank the
Borrowers' primary depository accounts.
11. Acceleration of Term Loan and Mortgage Loan. Notwithstanding any other
provision hereof or in the Notes, in the event the Line of Credit is terminated
by the Borrower, the Term Loan and the Mortgage Loan and the Acquisition Loans
shall, at Bank's discretion, also become due and payable at the time of such
termination. If on or prior to the current Expiration Date, and in the absence
of an Event of Default under any of the Notes, the Bank has determined that it
will not renew the Line of Credit and extend such Expiration Date or if Bank
proposes changes to the material terms and conditions of the Line of Credit as a
condition to such renewal and extension and the Borrowers do not agree to such
changes, the Term Loan, the Mortgage Loan and the Acquisition Loans shall all
become due and payable at the expiration of the Refinancing Extension.
<PAGE>
12. Borrowers' Representative. Each of the Borrowers hereby appoints CECO
Filters as its non-exclusive representative for providing notices and reports to
and otherwise communicating with the Bank under this Agreement or the other loan
documents, including without limitation making requests for Loans hereunder, and
providing information on behalf of any one or more of the Borrowers and for
receiving communications and notices from the Bank. (In such capacity, CECO
Filters is herein referred to as the "Borrowers' Representative"). The Bank
shall be entitled to rely exclusively on the Borrowers' Representative's
authority so to act in each instance without inquiry or investigation, and each
of the Borrowers hereby agrees to indemnify and hold harmless the Bank for any
losses, costs, delays, errors, claims, penalties or charges arising from or out
of the Borrowers' Representative's actions pursuant to this Section 12 and the
Bank's reliance thereon and hereon, provided, however, that the foregoing
indemnity agreement shall not apply to losses, costs, delays, errors, claims,
penalties or charges solely attributable to the Bank's gross negligence or
willful misconduct. Notice from the Borrowers' Representative shall be deemed to
be notice from all Borrowers and notice to the Borrowers' Representative shall
be deemed to be notice to all Borrowers.
13. Additional Provisions. Before the first advance under the Line of Credit,
the Term Loan, the Mortgage Loan or the Acquisition Line of Credit, the
Borrowers agree to sign and deliver to the Bank the Notes, audited financial
statements of the Borrowers for the fiscal year ended December 31, 1998, which
are satisfactory to the Bank and contain no material changes from the draft
financial statements for such fiscal year previously provided to the Bank by the
Borrowers, a Subordination Agreement dated the date hereof between CECO Filters,
Inc. and CECO Environmental, Inc. and other required documents and such other
instruments and documents as the Bank may reasonably request, such as certified
resolutions, incumbency certificates or other evidence of authority. The Bank
will not be obligated to make any advance under the Line of Credit or the
Acquisition Line of Credit if any Event of Default (as defined in the Notes) or
event which with the passage of time, provision of notice or both would
constitute an Event of Default under the Notes shall have occurred and be
continuing.
Each of the Borrowers hereby irrevocably and unconditionally: A. submits for
itself and its property in any legal action or proceeding relating to this
letter or the Notes, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of the
Commonwealth of Pennsylvania, the courts of the United States of America for the
Eastern District of Pennsylvania, and appellate courts from any thereof; B.
consents that any such action or proceeding may be brought in such courts and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same; C.
agrees that service of process in any such action or proceeding may be effected
by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such Borrower at its address set
forth on the first page hereof or at such other address of which the Bank shall
have been notified in writing by the Borrowers' Representative; and D. agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction.
<PAGE>
This letter is governed by the laws of the Commonwealth of Pennsylvania. No
modification or waiver of any of the terms of this letter will be valid and
binding unless agreed to in writing by the Bank. When accepted, this letter and
the other documents described herein will constitute the entire agreement
between the Bank and the Borrowers concerning the Line of Credit, the Term Loan,
the Mortgage Loan and the Acquisition Line of Credit, and shall replace all
prior understandings, statements, negotiations and written materials relating to
the Line of Credit, the Term Loan, the Mortgage Loan and the Acquisition Line of
Credit. Please acknowledge acceptance of these terms by signing in the space
indicated below.
Thank you for giving PNC Bank this opportunity to work with your business. We
look forward to other ways in which we may be of service to your business or to
you personally.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:__________________________________
Name:
Title:
<PAGE>
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted this 16th day of March, 1999.
Borrowers:
CECO Filters, Inc.
By: /Steven Taub/
- ------------------------------
Title: /President
- ------------------------------
Air Purator Corporation
By: /Steven Taub/
- ------------------------------
Title: /President
- ------------------------------
New Busch Co., Inc.
By: /Steven Taub/
- ------------------------------
Title: /President
- ------------------------------
U.S. Facilities Management Company, Inc.
By: /Steven Taub/
- ------------------------------
Title: /President
- ------------------------------
<PAGE>
EXHIBIT A
FORM OF BORROWING REQUEST
[Date]
PNC Bank, National Association
1600 Market Street
Philadelphia, PA 19103
Attention: John G. Siegist
Ladies and Gentlemen:
The undersigned, CECO Filters, Inc., Air Purator Corporation, New Busch
Co., Inc. and U.S. Facilities Management Company, Inc. (collectively, the
"Borrowers"), refer to the Letter Agreement dated March 16, 1999 (as heretofore
amended, supplemented or otherwise modified, the "Letter Agreement"), between
the Borrowers and PNC Bank, National Association. Capitalized terms used herein
and not otherwise defined herein shall have the meanings assigned to such terms
in the Letter Agreement. The Borrowers hereby give you notice pursuant to the
Letter Agreement that they request an advance under the Letter Agreement, and in
that connection set forth below the terms on which such advance is requested to
be made:
(A) Principal amount of advance $___________________
(B) Interest Rate Option(1) $___________________
(C) Date of borrowing (which is a business day) ____________________
(D) If the advance is to bear interest under the
Euro-Rate Option, Euro-Rate Interest Period(2) ____________________
__________________________
(1) Euro-Rate Option or Prime Rate Option.
(2) Which shall be subject to the definition of "Euro-Rate Interest Period" in
the Line of Credit Note and end not later than the Expiration Date.
1
<PAGE>
Upon acceptance of the advance made by the Bank in response to this
request, the Borrowers shall be deemed to have represented and warranted that
the conditions to lending specified in the Letter Agreement have been satisfied.
Very truly yours,
CECO FILTERS, INC.
By:_____________________________________
Name:
Title:
2
<PAGE>
EXHIBIT B
FINANCIAL REPORTING COVENANTS:
1. The Borrowers' Representative will deliver to the Bank:
(A) Financial Statements for each fiscal year, within 90 days after the
end of each fiscal year, audited and certified by a certified
public accountant acceptable to the Bank.
(B) Financial Statements for each fiscal quarter except the fourth
quarter, within 45 days after the end of each quarter
(C) With each delivery of Financial Statements, the chief executive
officer or chief financial officer of the Borrowers' Representative
shall also deliver a certificate, substantially in the form of
Exhibit C (a "Compliance Certificate"), on behalf of the Borrowers
as to the Borrowers' compliance with the financial covenants for
the period then ended and whether any Event of Default (as defined
in the Notes) exists, and, if so, the nature thereof and the
corrective measures the Borrowers propose to take.
(D) Availability Compliance Certificate, substantially in the form of
Exhibit D (an "Availability Compliance Certificate") within 15 days
after the end of each month.
(E) Accounts receivable and accounts payable aging reports within 15
days after the end of each month.
2. The Guarantor will deliver to the Bank:
a. Financial Statements for its fiscal year, within 90 days after
the end of each fiscal year, audited and certified by a
certified public accountant acceptable to the Bank.
b. Financial Statements for each fiscal quarter except the fourth
quarter, within 45 days after the end of each quarter.
"Financial Statements" means the consolidated and consolidating balance
sheet and statements of income and cash flows prepared in accordance
with generally accepted accounting principles in effect from time to
time ("GAAP") applied on a consistent basis (subject in the case of
interim statements to normal year-end adjustments).
FINANCIAL COVENANTS:
a. Fixed Charge Coverage Ratio. The Borrowers shall maintain a
ratio of (i) EBITDA minus Capital Expenditures to (ii) the sum
of income taxes, interest expense, dividends and scheduled
principal payments, all determined in accordance with GAAP as
of the last day of any fiscal quarter for the period of twelve
consecutive months then ending greater than 1.00 to 1.00.
<PAGE>
For purposes of this subparagraph and subparagraph (c) below,
"EBITDA" shall mean net income, excluding any extraordinary
gains and extraordinary non-cash losses plus interest expense,
income taxes, depreciation expense and amortization expense,
to the extent that each of the same has been deducted in
calculating net income.
For purposes of this subparagraph and subparagraph (d) below,
"Capital Expenditure" shall mean an expenditure for any fixed
asset or any improvements or additions thereto, including
direct or indirect acquisition of such asset and capitalized
leases, but excluding assets acquired pursuant to an
acquisition permitted under this Agreement, which expenditure
is capitalized in accordance with GAAP.
b. Interest Coverage Ratio. The Borrowers maintain a ratio of (i)
EBIT to (ii) interest expense, all determined in accordance
with GAAP as of the last day of any fiscal quarter for the
period of twelve consecutive months then ending greater than
2.0 to 1.0
For purposes of this subparagraph, "EBIT"shall mean EBITDA
minus depreciation expense and amortization expense.
c. Leverage Ratio. The Borrowers shall not permit the ratio of
(i) funded indebtedness of the Borrowers (including
subordinated debt and capitalized leases) to (ii) EBITDA, all
determined in accordance with GAAP as of the end of any fiscal
quarter for the period of twelve consecutive months then
ending, to exceed 3.00 to 1.00.
d. Capital Expenditures. The Borrowers will not permit Capital
Expenditures of the Borrowers incurred during any fiscal year
to be greater than $350,000.
e. Availability. The Borrowers shall not permit the aggregate
principal amount of indebtedness outstanding at any one time
under the Line of Credit to exceed the sum of (i) the
difference between (A) 80% of the sum of Borrowers accounts
receivable at such time plus costs and estimated earnings in
excess of billings on uncompleted contracts minus (B) 100% of
billings in excess of costs and estimated earnings at such
time on uncompleted contracts and (ii) 50% of Borrowers
inventory at such time.
<PAGE>
AFFIRMATIVE COVENANTS:
The Borrowers shall:
a. Books and Records. Maintain books and records in accordance
with GAAP and give representatives of the Bank access thereto
at all reasonable times during normal business hours and
following reasonable notice, including permission to examine,
copy and make abstracts from any of such books and records and
such other information as the Bank may from time to time
reasonably request, and the Borrowers will make available to
the Bank for examination copies of any reports, statements or
returns which the Borrowers may make to or file with any
governmental department, bureau or agency, federal or state.
b. Payment of Taxes and Other Charges. Pay and discharge when due
all indebtedness and all taxes, assessments, charges, levies
and other liabilities imposed upon the Borrowers, their
income, profits, property or business, except those which
currently are being contested in good faith by appropriate
proceedings and for which the Borrowers shall have set aside
adequate reserves or made other adequate provisions with
respect thereto acceptable to the Bank in its sole discretion.
c. Maintenance of Existence, Operation and Assets. Do all things
necessary to maintain, renew and keep in full force and effect
their organizational existence and all rights, permits and
franchises necessary to enable them to continue their
business; continue in operation in substantially the same
manner as at present; keep their properties in good operating
condition and repair; and make all necessary and proper
repairs, renewals, replacements, additions and improvements
thereto.
d. Insurance. Maintain with financially sound and reputable
insurers, insurance with respect to their property and
business against such casualties and contingencies, of such
types and in such amounts as is customary for established
companies engaged in the same or similar business and
similarly situated.
e. Compliance with Laws. Comply with all laws applicable to the
Borrowers and to the operation of their business (including
any statute, rule or regulation relating to employment
practices and pension benefits or to environmental,
occupational and health standards and controls).
f. Additional Reports. Provide prompt written notice to the Bank
of the occurrence of any of the following (together with a
description of the action which the Borrowers propose to take
with respect thereto): (i) any Event of Default or potential
Event of Default, (ii) any litigation in excess of $50,000 and
not covered by insurance filed by or against the Borrowers,
(iii) any Reportable Event or Prohibited Transaction with
respect to any Employee Benefit Plan(s) (as such terms are
defined in ERISA) or (iv) any event which might result in a
material
<PAGE>
adverse change in the business, assets, operations,
financial condition or results of operation of the Borrowers.
NEGATIVE COVENANTS:
a. The Borrowers will not create, assume, incur or suffer to
exist any mortgage, pledge, encumbrance, security interest or
lien of any kind upon any of its property, now owned or
hereafter acquired, or acquire or agree to acquire any kind of
property under conditional sales or other title retention
agreements, except liens disclosed on the Borrowers's latest
Financial Statements provided to the Bank prior to the date of
this letter (including the PIDA Mortgage); provided, however,
that the foregoing restrictions shall not prevent the
Borrowers from:
(i) incurring liens for taxes, assessments or governmental
charges or levies which shall not at the time be due and
payable or can thereafter be paid without penalty or are being
contested in good faith by appropriate proceedings diligently
conducted and with respect to which it has created adequate
reserves;
(ii) making pledges or deposits to secure obligations under
workers' compensation laws or similar legislation;
(iii) granting liens or security interests in favor of the
Bank; or
(iv) granting liens to secure additional indebtedness
permitted in (b)(iv) and (b)(v) below.
b. The Borrowers will not create, incur, guarantee, endorse
(except endorsements in the course of collection), assume or
suffer to exist any indebtedness, except (i) indebtedness to
the Bank, (ii) open account trade debt incurred in the
ordinary course of business and not past due, (iii)
intercompany loans among Borrowers, (iv) purchase money
indebtedness, (v) capitalized leases, (v) other indebtedness
disclosed on the Borrowers' latest Financial Statements
(including the PIDA Mortgage) which have been provided to the
Bank prior to the date of this letter.
c. The Borrowers will not liquidate, merge or consolidate (other
than among the Borrowers and as long as CECO Filters is either
the survivor or remains the parent of the Borrowers which
merge or consolidate after such merger or consolidation) with
any person, firm, corporation or other entity without the
Bank's prior approval, or sell, lease, transfer or otherwise
dispose of all or any substantial part of its property or
assets, whether now owned or hereafter acquired, except in the
ordinary course of business.
d. The Borrowers will not directly or indirectly make
acquisitions of all or substantially all of the property or
assets of any person, firm, corporation or other entity,
without the Bank's prior approval.
<PAGE>
e. The Borrowers will not declare or pay any dividends on or make
any distribution with respect to any class of its equity or
purchase, redeem, retire or otherwise acquire any of its
equity.
f. The Borrowers will not make or have outstanding any loans or
advances to or otherwise extend credit to any person, firm or
corporation, except in the ordinary course of business.
g. The Borrowers will not engage in any business either directly
or indirectly except for businesses in which the Borrowers are
engaged on the date of this letter agreement and any business
activities directly related, similar or incidental or
ancillary to such existing business.
<PAGE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
This Certificate is executed and delivered in connection with
the Letter Agreement dated March 16, 1999 (together with all exhibits,
schedules, extensions, renewals, amendments, substitutions and replacements
thereof and thereto, the "Letter Agreement") between CECO Filters, Inc., Air
Purator Corporation, New Busch Co., Inc. and U.S. Facilities Management Company,
Inc. (collectively, the "Borrowers") and PNC Bank, National Association (the
"Bank"). Capitalized terms appearing herein but not defined herein shall have
the meanings assigned to them in the Letter Agreement.
The undersigned, [insert name], [insert title] of CECO
Filters, Inc., hereby certifies on behalf of the Borrowers to the Bank, with
respect to the fiscal [quarter] [year] ended ____________, ____ (the "Fiscal
Period"), as follows:
1. The Fixed Charged Coverage Ratio as of the end of the Fiscal
Period is _____ as detailed below:
EBITDA ________________
minus capital expenditures ________________
Total (A)_______________
Income taxes ________________
plus interest expense ________________
plus dividends ________________
plus scheduled principal payments ________________
Total (B)_______________
The ratio of (A) to (B) is _________________
2. The Interest Coverage Ratio as of the end of the Fiscal Period is
____________ as detailed below:
EBIT (A) ______________
Interest expense (B) ______________
The ratio of (A) to (B) is ______________
3. The Leverage Ratio as of the end of the Fiscal Period is
________________ as detailed below:
Total Indebtedness (A) _____________
EBITDA (B) _____________
The ratio of (A) to (B) is _____________
IN WITNESS WHEREOF, I have signed this Certificate as of the
____ day of __________, ____.
CECO FILTERS, INC.
By____________________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF AVAILABILITY COMPLIANCE CERTIFICATE
This Certificate is executed and delivered in connection with
the Letter Agreement dated March 16, 1999 (together with all exhibits,
schedules, extensions, renewals, amendments, substitutions and replacements
thereof and thereto, the "Letter Agreement") between CECO Filters, Inc., Air
Purator Corporation, New Busch Co., Inc. and U.S. Facilities Management Company,
Inc. (collectively, the "Borrowers") and PNC Bank, National Association (the
"Bank"). Capitalized terms appearing herein but not defined herein shall have
the meanings assigned to them in the Letter Agreement.
The undersigned, [insert name], [insert title] of CECO
Filters, Inc. hereby certifies on behalf of the Borrowers to the Bank, with
respect to and as of the month ended __________, _____ as follows:
plus Accounts Receivables $ __________________
costs and estimated
earnings in excess of
billings on uncompleted
contracts $ __________________
x .80
_______________(A)
minus billings in excess of costs
and estimated earnings on
uncompleted contracts $ _______________(B)
(A) - (B) $ _______________(C)
Inventory $ _______________
x .50
$________________(D)
(C) + (D) $________________
IN WITNESS WHEREOF, I have signed this Certificate as of the
____ day of __________, ____.
CECO FILTERS, INC.
By____________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.31
OPEN-END MORTGAGE AND SECURITY AGREEMENT
(This Mortgage Secures Future Advances)
THIS OPEN-END MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made
as of March 16, 1999 by CECO FILTERS, INC. a Delaware corporation (the
"Mortgagor"), with an address at 1029 Conshohocken Road, Conshohocken,
Pennsylvania 19428 in favor of PNC BANK, NATIONAL ASSOCIATION (the "Mortgagee"),
with an address at 1600 Market Street, Philadelphia, PA 19103, with the joinder
of Montgomery County Industrial Development Corporation (the "Fee Owner").
WHEREAS, the Mortgagor is the equitable owner of a certain tract or
parcel of land described in Exhibit A attached hereto and made a part hereof,
together with the improvements now or hereafter erected thereon; and
WHEREAS, Mortgagor, Air Purator Corporation, New Busch Co., Inc. and U.
S. Facilities Management Company, Inc. (collectively, the "Borrowers") borrowed
or obtained extensions of credit from the Mortgagee in an amount not to exceed
Eight Million Four Hundred Twelve Thousand One Hundred Fifty-Five and 40/100
Dollars ($8,412,155.40) (collectively, the "Loans"), which Loans are evidenced
by certain promissory notes or other instruments in favor of the Mortgagee
(collectively as the same may hereafter be modified, restated or substantially,
the "Notes") and the Mortgagor is executing and delivering this Mortgage as
collateral security for these Loans up to the principal amount of $787,155.41;
WHEREAS, the Pennsylvania Industrial Development Authority ("PIDA") has
lent $405,000 to the Fee Owner for the benefit of the Mortgagor, such loan
secured by a second mortgage on the Property dated October 28, 1991 in the
maximum amount of $405,000 in favor of PIDA of which $239,070.98 is currently
outstanding;
WHEREAS, PIDA has agreed to permit the grant to the Bank of an
additional third mortgage on the Property securing the remaining amount of the
Loans;
NOW, THEREFORE, for the purpose of securing the payment and performance
of the following obligations (collectively called the "Obligations"):
(A) the Loans, the Notes and all other loans, advances, debts,
liabilities, obligations, covenants and duties owing by the Borrowers or any of
them to the Mortgagee of any kind or nature, present or future (including,
without limitation, any interest accruing thereon after maturity, or after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to the Borrowers or any of them,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether or not evidenced by any Notes, guaranty or other
instrument, whether arising under any agreement, instrument or document, whether
or not for the payment of money, whether arising by reason of
<PAGE>
an extension of credit, opening of a letter of credit, Loans, equipment lease,
or guarantee, under any interest or currency swap, future, option or other
similar agreement, or in any other manner, whether arising out of overdrafts on
deposit or other accounts or electronic funds transfers (whether through
automatic clearing houses or otherwise) or out of the Mortgagee's non-receipt of
or inability to collect funds or otherwise not being made whole in connection
with depository transfer check or other similar arrangements, whether direct or
indirect (including those acquired by assignment or participation), absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising, and any amendments, extensions, renewals or increases and all costs and
expenses of the Mortgagee incurred in the documentation, negotiation,
modification, enforcement, collection or otherwise in connection with any of the
foregoing, including reasonable attorneys' fees and expenses.
(B) Any sums advanced by the Mortgagee or which may otherwise become
due pursuant to the provisions of the Notes or this Mortgage or pursuant to any
other document or instrument at any time delivered to the Mortgagee to evidence
or secure any of the Obligations or which otherwise relate to any of the
Obligations (as the same may be amended, supplemented or replaced from time to
time, the "Loans Documents").
The Mortgagor, for good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound hereby, does hereby give, grant,
bargain, sell, convey, assign, transfer, mortgage, hypothecate, pledge, set over
and confirm unto the Mortgagee and does agree that the Mortgagee shall have a
security interest in the following described property, all accessions and
additions thereto, all substitutions therefor and replacements and proceeds
thereof, and all reversions and remainders of such property now owned or held or
hereafter acquired (the "Property"), to wit:
(a) All of the Mortgagor's estate in the premises described in
Exhibit A, together with all of the easements, rights of way, privileges,
liberties, hereditaments, gores, streets, alleys, passages, ways, waters,
watercourses, rights and appurtenances thereunto belonging or appertaining, and
all of the Mortgagor's estate, right, title, interest, claim and demand
whatsoever therein and in the public streets and ways adjacent thereto, either
in law or in equity (the "Land");
(b) All the buildings, structures and improvements of every kind
and description now or hereafter erected or placed on the Land, and all
facilities, fixtures, machinery, apparatus, appliances, installations, machinery
and equipment, including all building materials to be incorporated into such
buildings, all electrical equipment necessary for the operation of such
buildings and heating, air conditioning and plumbing equipment now or hereafter
attached to, located in or used in connection with those buildings, structures
or other improvements (the "Improvements");
(c) All of Mortgagor's rights under that certain Installment Sale
Agreement dated October 28, 1991 between Fee Owner, as owner, and Mortgagor, as
purchaser, (the "Installment Sale Agreement") and all rents, issues and profits
arising or issuing from the Land and the Improvements (the "Rents") including
the Rents arising or issuing from all leases and subleases now or hereafter
entered into covering all or any part of the Land and Improvements
<PAGE>
(the "Leases"), all of which Leases and Rents are hereby assigned to the
Mortgagee by the Mortgagor. The foregoing assignment shall include all fees,
charges, accounts or other payments for the use or occupancy of rooms and other
public facilities in hotels, motels, or other lodging properties, and all cash
or securities deposited under Leases to secure performance of lessees of their
obligations thereunder, whether such cash or securities are to be held until the
expiration of the terms of such leases or applied to one or more installments of
rent coming due prior to the expiration of such terms. The foregoing assignment
extends to Rents arising both before and after the commencement by or against
the Mortgagor of any case or proceeding under any Federal or State bankruptcy,
insolvency or similar law, and is intended as an absolute assignment and not
merely the granting of a security interest. The Mortgagor, however, shall have a
license to collect retain and use the Rents so long as no Event of Default shall
have occurred and be continuing or shall exist. The Mortgagor will execute and
deliver to the Mortgagee, on demand, such additional assignments and instruments
as the Mortgagee may require to implement, confirm, maintain and continue the
assignment of Rents hereunder;
(d) All proceeds of the conversion, voluntary or involuntary, of
any of the foregoing into cash or liquidated claims;
(e) And without limiting any of the other provisions of this
Mortgage, the Mortgagor, as debtor, expressly grants unto the Mortgagee, as
secured party, a security interest in all those portions of the Property which
may be subject to the Uniform Commercial Code provisions applicable to secured
transactions under the laws of any state, and the Mortgagor will execute and
deliver to the Mortgagee on demand such financing statements and other
instruments as the Mortgagee may require in order to perfect and maintain such
security interest under the UCC on the aforesaid collateral.
To have and to hold the same unto the Mortgagee, its successors and
assigns, forever.
Provided, however, that if the Mortgagor shall pay to the Mortgagee the
Obligations, and if the Mortgagor shall keep and perform each of its other
covenants, conditions and agreements set forth herein and in the other Loans
Documents, then, upon the termination of all obligations, duties and commitments
of the Mortgagor under the Obligations and this Mortgage, and subject to the
provisions of Section 23, the estate hereby granted and conveyed shall become
null and void.
This Mortgage is an "Open-End Mortgage" as set forth in 42 Pa. C.S.A.
ss. 8143 and secures obligations up to a maximum principal amount of
indebtedness outstanding at any time of $787,155.41, plus accrued and unpaid
interest, including advances for the payment of taxes and municipal assessments,
maintenance charges, insurance premiums, costs incurred for the protection of
the Property or the lien of this Mortgage, expenses incurred by the Mortgagee by
reason of default by the Mortgagor under this Mortgage and advances for
construction, alteration or renovation on the Property or for any other purpose,
together with all other sums due hereunder or secured hereby. All notices to be
given to the Mortgagee pursuant to 42 Pa. C.S.A. ss. 8143 shall be given as set
forth in Section 18.
<PAGE>
1. Representations and Warranties. The Mortgagor represents and
warrants to the Mortgagee that the (i) Fee Owner possesses good and
marketable unencumbered fee simple title in the Land and Improvements and
Mortgagor and Fee Owner possess good and marketable unencumbered title to
the remainder of the Property now owned by Mortgagor and Fee Owner,
except for those title exceptions listed on the mortgagee title insurance
policy approved by and issued to Mortgagee, insuring the priority of the
lien of this Mortgage, (ii) Mortgagor is the equitable owner of the Land
pursuant to the Installment Sale Agreement, and (iii) this Mortgage is a
valid and enforceable first lien on the Property, subject only to the
aforesaid exceptions. The Mortgagor shall perform all of its duties and
obligations under the Installment Sale Agreement and preserve such title
as it warrants herein and the validity and priority of the lien hereof
and shall forever warrant and defend the same to the Mortgagee against
the claims of all persons.
2. Affirmative Covenants. Until all of the Obligations shall have been
fully paid, satisfied and discharged the Mortgagor shall:
(a) Payment and Performance of Obligations. Pay or cause to be paid
and perform all Obligations when due as provided in the Loans Documents.
(b) Legal Requirements. Promptly comply with and conform to all present and
future laws, statutes, codes, ordinances, orders and regulations and all
covenants, restrictions and conditions which may be applicable to the Mortgagor
or to any of the Property (the "Legal Requirements").
(c) Impositions. Before interest or penalties are due thereon and otherwise
when due, the Mortgagor shall pay all taxes of every kind and nature, all
charges for any easement or agreement maintained for the benefit of any of the
Property, all general and special assessments (including any condominium or
planned unit development assessments, if any), levies, permits, inspection and
license fees, all water and sewer rents and charges, and all other charges and
liens, whether of a like or different nature, imposed upon or assessed against
the Mortgagor or any of the Property except those which are currently being
contested in good faith by appropriate proceedings and for which the Mortgagor
shall have set aside adequate reserves or made other adequate provisions with
respect thereto acceptable to Mortgagee in its sole discretion (the
"Impositions"). Within thirty (30) days after the payment of any Imposition, the
Mortgagor shall deliver to the Mortgagee evidence acceptable to the Mortgagee of
such payment. The Mortgagor's obligations to pay the Impositions shall survive
the Mortgagee's taking title to the Property through foreclosure, deed-in-lieu
or otherwise.
(d) Maintenance of Security. Use, and permit others to use, the Property only
for its present use or such other uses as permitted by applicable Legal
Requirements and approved in writing by the Mortgagee. The Mortgagor shall keep
the Property in good condition and order, ordinary wear and tear excepted, and
in a rentable and tenantable state of repair and will make or
<PAGE>
cause to be made, as and when necessary, all repairs, renewals, and
replacements, structural and nonstructural, exterior and interior, foreseen and
unforeseen, ordinary and extraordinary, provided, however, that no structural
repairs, renewals or replacements which in the aggregate exceed $50,000 shall be
made without the Mortgagee's prior written consent. The Mortgagor shall not
remove, demolish or alter the Property nor commit or suffer waste with respect
thereto, nor permit the Property to become deserted or abandoned. The Mortgagor
covenants and agrees not to take or permit any action with respect to the
Property which will in any manner impair the security of this Mortgage.
3. Leases. The Mortgagor shall not (a) execute an assignment or pledge of the
Rents or the Leases other than in favor of the Mortgagee; (b) accept any
prepayment of an installment of any Rents prior to the due date of such
installment; or (c) enter into or amend any of the terms of any of the Leases
without the Mortgagee's prior written consent. Any or all leases or subleases of
all or any part of the Property shall be subject in all respects to the
Mortgagee's prior written consent, shall be subordinated to this Mortgage and to
the Mortgagee's rights and, together with any and all rents, issues or profits
relating thereto, shall be assigned at the time of execution to the Mortgagee as
additional collateral security for the Obligations, all in such form, substance
and detail as is satisfactory to the Mortgagee in its sole discretion.
4. Due on Sale Clause. The Mortgagor shall not sell, convey or otherwise
transfer any interest in the Property (whether voluntarily or by operation of
law), or agree to do so, without the Mortgagee's prior written consent,
including (a) any sale, conveyance, assignment, or other transfer of (including
installment land sale contracts), or the grant of a security interest in, all or
any part of the legal or equitable title to the Property; (b) any lease of all
or any portion of the Property; or (c) any sale, conveyance, assignment, or
other transfer of, or the grant of a security interest in, any share of stock of
the Mortgagor, except in favor of the Mortgagee. The transfer of legal title
from the Fee Owner to the Mortgagor shall not be a violation of this Section.
Any default under this Section shall cause an immediate acceleration of the
Obligations without any demand by the Mortgagee.
5. Insurance. The Mortgagor shall keep the Property continuously insured, in an
amount not less than the cost to replace the Property or an amount not less than
eighty percent (80%) of the full insurable value of the Property, whichever is
greater, against loss or damage by fire, with extended coverage and against
other hazards as the Mortgagee may from time to time require. With respect to
any property under construction or reconstruction, the Mortgagor shall maintain
builder's risk insurance. The Mortgagor shall also maintain comprehensive
general public liability insurance, in an amount of not less than One Million
Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) general
aggregate per location, which includes contractual liability insurance for the
Mortgagor's obligations under the Leases, and worker's compensation insurance.
All property and builder's risk insurance shall include protection for
continuation of income for a period of twelve (12) months, in the event of any
damage caused by the perils referred to above. All policies, including policies
for any amounts carried in excess of the required minimum and policies not
specifically required by the Mortgagee, shall be with an insurance company or
companies satisfactory to the Mortgagee, shall be in form satisfactory to
<PAGE>
the Mortgagee, shall meet all coinsurance requirements of the Mortgagee, shall
be maintained in full force and effect, shall be assigned to the Mortgagee, with
premiums prepaid, as collateral security for payment of the Obligations, shall
be endorsed with a standard mortgagee clause in favor of the Mortgagee and shall
provide for at least thirty (30) days notice of cancellation to the Mortgagee.
Such insurance shall also name the Mortgagee as an additional insured under the
comprehensive general public liability policy and the Mortgagor shall also
deliver to the Mortgagee a copy of the replacement cost coverage endorsement. If
the Property is located in an area which has been identified by any governmental
agency, authority or body as a flood hazard area or the like, then the Mortgagor
shall maintain a flood insurance policy covering the Property in an amount not
less than the original principal amount of the Loans or the maximum limit of
coverage available under the federal program, whichever amount is less.
6. Rights of Mortgagee to Insurance Proceeds.
In the event of loss under $100,000, the Mortgagor shall have
the exclusive right to adjust, collect and compromise all insurance claims. In
the event of loss in excess of $100,000, the Mortgagee shall have the exclusive
right to adjust, collect and compromise all insurance claims, and the Mortgagor
shall not adjust, collect or compromise any claims under said policies without
the Mortgagee's prior written consent (which consent shall not be unreasonably
withheld.) Each insurer is hereby authorized and directed to make such payment
in excess of $100,000 under said policies, including return of unearned
premiums, directly to the Mortgagee instead of to the Mortgagor and the
Mortgagee jointly, and the Mortgagor appoints the Mortgagee as the Mortgagor's
attorney-in-fact to endorse any draft therefor; provided, however, if there has
not been an Event of Default, all insurance proceeds shall be made available to
Mortgagor and shall be applied to the repair and restoration of any of the
Property in Mortgagor's reasonable discretion. Following an Event of Default,
all insurance proceeds shall be directed to the Mortgagee and may, at the
Mortgagee's sole option, after consultation with the Mortgagor, be applied to
all or any part of the Obligations and in any order (notwithstanding that such
Obligations may not then otherwise be due and payable) or to the repair and
restoration of any of the Property under such terms and conditions as the
Mortgagee may reasonably impose.
7. Installments for Insurance, Taxes and Other Charges. After an Event of
Default, the Mortgagor shall, if requested by the Mortgagee, pay to the
Mortgagee monthly, an amount equal to one-twelfth (1/12) of the annual premiums
for the insurance policies referred to hereinabove and the annual Impositions
and any other item which at any time may be or become a lien upon the Property
(the "Escrow Charges"). The amounts so paid shall be used in payment of the
Escrow Charges so long as no Event of Default shall have occurred. No amount so
paid to the Mortgagee shall be deemed to be trust funds, nor shall any sums paid
bear interest. The Mortgagee shall have no obligation to pay any insurance
premium or Imposition if at any time the funds being held by the Mortgagee for
such premium or Imposition are insufficient to make such payments. Upon the
occurrence of an Event of Default, the Mortgagee shall have the right, at its
election, to apply any amount so held against the Obligations due and payable in
such order as the Mortgagee may deem fit, and the Mortgagor hereby grants to the
Mortgagee a lien upon and security interest in such amounts for such purpose.
<PAGE>
8. Condemnation. The Mortgagor, immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation or taking by eminent domain
of any of the Property, shall notify the Mortgagee of the pendency of such
proceedings. The Mortgagee may participate in any such proceedings and the
Mortgagor shall deliver to the Mortgagee all instruments requested by it to
permit such participation. Any award or compensation for property taken or for
damage to property not taken, whether as a result of such proceedings or in lieu
thereof, is hereby assigned to and shall be received and collected directly by
the Mortgagee, and any award or compensation shall following an occurrence of an
Event of Default be applied, at the Mortgagee's option, to any part of the
Obligations and in any order (notwithstanding that any of such Obligations may
not then be due and payable) or to the repair and restoration of any of the
Property under such terms and conditions as the Mortgagee may impose. If no
Event of Default has occurred, Mortgagor shall be entitled to receive such
proceeds and shall apply such award or compensation to the repair and
restoration of any of the Property in Mortgagor's reasonable discretion.
9. Environmental Matters.
(a) For purposes of this Section 9, the term "Environmental Laws" shall
mean all federal, state and local laws, regulations and orders, whether now or
in the future enacted or issued, pertaining to the protection of land, water,
air, health, safety or the environment. The term "Regulated Substances" shall
mean all substances regulated by Environmental Laws, or which are known or
considered to be harmful to the health or safety of persons, or the presence of
which may require investigation, notification or remediation under the
Environmental Laws. The term "Contamination" shall mean the discharge, release,
emission, disposal or escape of any Regulated Substances into the environment
which may require notification, treatment, response or removal action or
remediation under any Environmental Laws.
(b) Except as set forth in the Phase I and Phase II environmental reports
prepared by Keating Environmental Management, Inc., dated as of August 2, 1991
and September 20, 1991, respectively, the Mortgagor represents and warrants (i)
that no Contamination is present at, on or under the Property and that no
Contamination is being or has been emitted onto any surrounding property; (ii)
all operations and activities on the Property have been and are being conducted
in accordance with all Environmental Laws, and the Mortgagor has all permits and
licenses required under the Environmental Laws; (iii) no underground or
aboveground storage tanks are or have been located on or under the Property; and
(iv) no legal or administrative proceeding is pending or threatened relating to
any environmental condition, operation or activity on the Property, or any
violation or alleged violation of Environmental Laws. These representations and
warranties shall be true as of the date hereof, and shall be deemed to be
continuing representations and warranties which must remain true, correct and
accurate during the entire duration of the term of this Mortgage.
<PAGE>
(c) The Mortgagor shall ensure, at its sole cost and expense, that the
Property and the conduct of all operations and activities thereon comply and
continue to comply with all Environmental Laws. The Mortgagor shall notify the
Mortgagee promptly and in reasonable detail in the event that the Mortgagor
becomes aware of any violation of any Environmental Laws, the presence or
release of any Contamination with respect to the Property, or any governmental
or third party claims relating to the environmental condition of the Property or
the conduct of operations or activities thereon. The Mortgagor also agrees not
to permit or allow the presence of Regulated Substances on any part of the
Property, except for those Regulated Substances (i) which are used in the
ordinary course of the Mortgagor's business, but only to the extent they are in
all cases used in a manner which complies with all Environmental Laws; and (ii)
those Regulated Substances which are naturally occurring on the Property. The
Mortgagor agrees not to cause, allow or permit the presence of any Contamination
on the Property, except in accordance with and to the extent permitted by
applicable law or regulation.
(d) The Mortgagee shall not be liable for, and the Mortgagor shall
indemnify, defend and hold the Mortgagee and all of its officers, directors,
employees and agents, and all of their respective successors and assigns
harmless from and against all losses, costs, liabilities, damages, fines,
claims, penalties and expenses (including reasonable attorneys', consultants'
and contractors' fees, costs incurred in the investigation, defense and
settlement of claims, as well as costs incurred in connection with the
investigation, remediation or monitoring of any Regulated Substances or
Contamination) that the Mortgagee may suffer or incur (including as holder of
the Mortgage, as mortgagee in possession or as successor in interest to the
Mortgagor as owner of the Property by virtue of a foreclosure or acceptance of a
deed in lieu of foreclosure, except for Contamination caused or permitted by
Mortgagee while in its possession or under its ownership) as a result of or in
connection with (i) any Environmental Laws (including the assertion that any
lien existing or arising pursuant to any Environmental Laws takes priority over
the lien of the Mortgage); (ii) the breach of any representation, warranty,
covenant or undertaking by the Mortgagor in this Section 9; (iii) the presence
on or the migration of any Contamination or Regulated Substances on, under or
through the Property; or (iv) any litigation or claim by the government or by
any third party in connection with the environmental condition of the Property
or the presence or migration of any Regulated Substances or Contamination on,
under, to or from the Property; provided, however, that the foregoing indemnity
agreement shall not apply to losses, costs, liabilities, damages, fines, claims,
penalties and expenses solely attributable to Mortgagee's gross negligence or
willful misconduct. Upon payment in full of the Obligations, and so long as
Mortgagee has not participated in the operation of Mortgagor's business (as such
terms are defined in the Environmental Laws), the indemnity agreement contained
in this Section shall terminate. In the event that Mortgagee has participated in
the operation of Mortgagor's business, the indemnity agreement contained in this
Section shall survive until Mortgagor delivers to Mortgagee an environmental
report which indicates to Mortgagee, in its sole discretion, that there has been
no Contamination of the Property.
(e) Upon the Mortgagee's request, the Mortgagor shall execute and deliver
an Environmental Indemnity Agreement satisfactory in form and substance to the
Mortgagee, to more fully reflect the Mortgagor's representations, warranties,
covenants and indemnities with respect to the Environmental Laws.
<PAGE>
10. Inspection of Property. The Mortgagee shall have the right to enter
upon the Property at any reasonable hour during normal business hours and
following reasonable notice for the purpose of inspecting the order, condition
and repair of the buildings and improvements erected thereon, as well as the
conduct of operations and activities on the Property. The Mortgagee may enter
the Property (and cause the Mortgagee's employees, agents and consultants to
enter the Property), upon prior written notice to the Mortgagor, to conduct any
and all environmental testing deemed appropriate by the Mortgagee in its sole
discretion. The environmental testing shall be accomplished by whatever means
the Mortgagee may deem appropriate, including the taking of soil samples and the
installation of ground water monitoring wells or other intrusive environmental
tests. In the Event of a Default, the cost of such environmental testing shall
be borne by Mortgagor. The Mortgagor shall provide the Mortgagee (and the
Mortgagee's employees, agents and consultants) reasonable rights of access to
the Property as well as such information about the Property and the past or
present conduct of operations and activities thereon as the Mortgagee shall
reasonably request.
11. Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder: (a) any Event of
Default (as defined in any of the Obligations); (b) any default under any of the
Obligations that does not have a defined set of "Events of Default" and the
lapse of any notice or cure period provided in such Obligations with respect to
such default; (c) demand by the Mortgagee under any of the Obligations that have
a demand feature; (d) the failure by the Mortgagor to perform any of its
obligations under this Mortgage or under any Environmental Indemnity Agreement
executed and delivered pursuant to Section 9(e) and the lapse of applicable
notice and cure periods; (e) falsity, inaccuracy or material breach by the
Mortgagor of any written warranty, representation or statement made or furnished
to the Mortgagee by the Mortgagor; (f) an uninsured material loss, theft,
damage, or destruction to any of the Property, or the entry of any judgment in
excess of $25,000 against the Mortgagor for the payment of money and the failure
of the Mortgagor to discharge the judgment within thirty (30) days of the entry
thereof, unless the same has been appealed and a stay of the enforcement thereof
has been obtained or any lien against or the making of any levy, seizure or
attachment of or on the Property and such proceeding is not dismissed within
thirty (30) days of the commencement thereof; (g) the failure of the Mortgagee
to have a mortgage lien on the Property with the priority required under Section
1; (h) any indication or evidence received by the Mortgagee that the Mortgagor
may have directly or indirectly been engaged in any type of activity which, in
the Mortgagee's discretion, might result in the forfeiture of any property of
the Mortgagor to any governmental entity, federal, state or local; (i)
foreclosure proceedings are instituted against the Property upon any other lien
or claim, whether alleged to be superior or junior to the lien of this Mortgage
and such proceeding is not dismissed or stayed within thirty (30) days of the
commencement thereof; (j) the failure by the Mortgagor to pay any Impositions as
required under Section 2(c), or to maintain in full force and effect any
insurance required under Section 5; or (k) the Mortgagor or any other obligor or
guarantor of any of the Obligations, shall at any time deliver or cause to be
delivered to the Mortgagee a notice pursuant to 42 Pa. C.S.A. ss. 8143 electing
to limit the indebtedness secured by this Mortgage.
<PAGE>
12. Rights and Remedies of Mortgagee. If an Event of Default occurs, the
Mortgagee may, at its option and without demand, notice or delay, do one or more
of the following:
(a) The Mortgagee may declare the entire unpaid principal balance
of the Obligations, together with all interest thereon, to be due and payable
immediately.
(b) The Mortgagee may (i) institute and maintain an action of
mortgage foreclosure against the Property and the interests of the Mortgagor
therein, (ii) institute and maintain an action on any instruments evidencing the
Obligations or any portion thereof, and (iii) take such other action at law or
in equity for the enforcement of any of the Loans Documents as the law may
allow, and in each such action the Mortgagee shall be entitled to all costs of
suit and attorneys fees.
(c) The Mortgagee may, in its sole and absolute discretion:
(i) collect any or all of the Rents, including any Rents past due and unpaid,
(ii) perform any obligation or exercise any right or remedy of the Mortgagor
under any Lease, or (iii) enforce any obligation of any tenant of any of the
Property. The Mortgagee may exercise any right under this subsection (c),
whether or not the Mortgagee shall have entered into possession of any of the
Property, and nothing herein contained shall be construed as constituting the
Mortgagee a "mortgagee in possession", unless the Mortgagee shall have entered
into and shall continue to be in actual possession of the Property. The
Mortgagor hereby authorizes and directs each and every present and future tenant
of any of the Property to pay all Rents directly to the Mortgagee and to perform
all other obligations of that tenant for the direct benefit of the Mortgagee, as
if the Mortgagee were the landlord under the Lease with that tenant, immediately
upon receipt of a demand by the Mortgagee to make such payment or perform such
obligations. The Mortgagor hereby waives any right, claim or demand it may now
or hereafter have against any such tenant by reason of such payment of Rents or
performance of obligations to the Mortgagee, and any such payment or performance
to the Mortgagee shall discharge the obligations of the tenant to make such
payment or performance to the Mortgagor.
(d) The Mortgagee shall have the right, in connection with the
exercise of its remedies hereunder, to the appointment of a receiver to take
possession and control of the Property or to collect the Rents, without notice
and without regard to the adequacy of the Property to secure the Obligations. A
receiver while in possession of the Property shall have the right to make
repairs and to make improvements necessary or advisable in its or his opinion to
preserve the Property, or to make and keep them rentable to the best advantage,
and the Mortgagee may advance moneys to a receiver for such purposes. Any moneys
so expended or advanced by the Mortgagee or by a receiver shall be added to and
become a part of the Obligations secured by this Mortgage.
13. Application of Proceeds. The Mortgagee shall apply the proceeds of any
foreclosure sale of, or other disposition or realization upon, or Rents or
profits from, the Property to satisfy the Obligations in such order of
application as the Mortgagee shall determine in its exclusive discretion.
<PAGE>
14. Confession of Judgment in Ejectment. At any time after the occurrence
of an Event of Default, without further notice, regardless of whether the
Mortgagee has asserted any other right or exercised any other remedy under this
Mortgage or any of the other Loans Documents, it shall be lawful for any
attorney of any court of record as attorney for the Mortgagor to confess
judgment in ejectment against the Mortgagor and all persons claiming under the
Mortgagor for the recovery by the Mortgagee of possession of all or any part of
the Property, for which this Mortgage shall be sufficient warrant. If for any
reason after such action shall have commenced the same shall be discontinued and
the possession of the Property shall remain in or be restored to the Mortgagor,
the Mortgagee shall have the right upon any subsequent default or defaults to
bring one or more amicable action or actions as hereinbefore set forth to
recover possession of all or any part of the Property.
15. Mortgagee's Right to Protect Security. The Mortgagee is hereby
authorized to do any one or more of the following, irrespective of whether an
Event of Default has occurred: (a) appear in and defend any action or proceeding
purporting to affect the security hereof or the Mortgagee's rights or powers
hereunder; (b) purchase such insurance policies covering the Property as it may
elect if the Mortgagor fails to maintain the insurance coverage required
hereunder; and (c) take such action as the Mortgagee may determine to pay,
perform or comply with any Impositions or Legal Requirements upon Mortgagor's
failure to do so when required, to cure any Events of Default and to protect its
security in the Property.
16. Appointment of Mortgagee as Attorney-in-Fact. The Mortgagee, or any of
its officers, is hereby irrevocably appointed attorney-in-fact for the Mortgagor
(without requiring any of them to act as such), such appointment being coupled
with an interest, to do any or all of the following: (a) collect the Rents after
the occurrence of an Event of Default; (b) settle for, collect and receive any
awards payable under Section 8 from the authorities making the same; and (c)
execute, deliver and file such financing statements and other instruments as the
Mortgagee may require in order to perfect and maintain its security interest
under the Uniform Commercial Code on any portion of the Property.
17. Certain Waivers. The Mortgagor hereby waives and releases all benefit
that might accrue to the Mortgagor by virtue of any present or future law
exempting the Property, or any part of the proceeds arising from any sale
thereof, from attachment, levy or sale on execution, or providing for any stay
of execution, exemption from civil process or extension of time for payment,
and, unless specifically required herein, all notices of the Mortgagor's default
or of the Mortgagee's election to exercise, or the Mortgagee's actual exercise
of any option under this Mortgage or any other Loans Document.
18. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally to the Mortgagor or the
Mortgagee, or if sent by facsimile transmission with confirmation of delivery,
or by nationally recognized overnight courier service, to the address set forth
above or to such other address as the Mortgagor or the Mortgagee may give to the
other in writing for such purpose.
<PAGE>
19. Preservation of Rights. No delay or omission on the Mortgagee's part
to exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the
Mortgagee's action or inaction impair any such right or power. The Mortgagee's
rights and remedies hereunder are cumulative and not exclusive of any other
rights or remedies which the Mortgagee may have under other agreements, at law
or in equity. The Mortgagee may exercise any one or more of its rights and
remedies without regard to the adequacy of its security.
20. Illegality. In case any one or more of the provisions contained in
this Mortgage should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
21. Changes in Writing. No modification, amendment or waiver of any
provision of this Mortgage nor consent to any departure by the Mortgagor
therefrom will be effective unless made in a writing signed by the Mortgagee,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand on the Mortgagor in
any case will entitle the Mortgagor to any other or further notice or demand in
the same, similar or other circumstance.
22. Entire Agreement. This Mortgage (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Mortgagor and the Mortgagee with respect to the subject matter hereof.
23. Survival; Successors and Assigns. This Mortgage will be binding upon
and inure to the benefit of the Mortgagor and the Mortgagee and their respective
successors and assigns; provided, however, that the Mortgagor may not assign
this Mortgage in whole or in part without the Mortgagee's prior written consent
and the Mortgagee at any time may assign this Mortgage in whole or in part; and
provided, further, that the rights and benefits under Sections 9, 10 and 25
shall also inure to the benefit of any persons or entities who acquire title or
ownership of the Property from or through the Mortgagee or through action of the
Mortgagee (including a foreclosure, sheriff's or judicial sale). The provisions
of Sections 9, 10 and 25 shall survive the termination, satisfaction or release
of this Mortgage, the foreclosure of this Mortgage or the delivery of a deed in
lieu of foreclosure.
24. Interpretation. In this Mortgage, the singular includes the plural and
the plural the singular; references to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute
referred to; the word "or" shall be deemed to include "and/or", the words
"including", "includes" and "include" shall be deemed to be followed by the
words "without limitation" and references to sections or exhibits are to those
of this Mortgage unless otherwise indicated. Section headings in this Mortgage
are included for convenience of reference only and shall not constitute a part
of this Mortgage for any other
<PAGE>
purpose. If this Mortgage is executed by more than one party as Mortgagor, the
obligations of such persons or entities will be joint and several.
25. Indemnity. The Mortgagor agrees to indemnify each of the Mortgagee,
its directors, officers and employees and each legal entity, if any, who
controls the Mortgagee (the "Indemnified Parties") and to hold each Indemnified
Party harmless from and against any and all claims, damages, losses, liabilities
and expenses (including all fees of counsel with whom any Indemnified Party may
consult and all expenses of litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with or arising out of the matters referred to in this
Mortgage or in the other Loans Documents by any person, entity or governmental
authority (including any person or entity claiming derivatively on behalf of the
Mortgagor), whether (a) arising from or incurred in connection with any breach
of a representation, warranty or covenant by the Mortgagor, or (b) arising out
of or resulting from any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, or tort, or contract or otherwise, before any court or governmental
authority, which arises out of or relates to this Mortgage, any other Loans
Document, or the use of the proceeds of the Loans; provided, however, that the
foregoing indemnity agreement shall not apply to claims, damages, losses,
liabilities and expenses to the extent attributable to an Indemnified Party's
gross negligence or willful misconduct. The indemnity agreement contained in
this Section shall survive the termination of this Mortgage, payment of any
Loans and assignment of any rights hereunder. The Mortgagor may participate at
its expense in the defense of any such action or claim.
26. Governing Law and Jurisdiction. This Mortgage has been delivered to
and accepted by the Mortgagee and will be deemed to be made in the State where
the Mortgagee's office indicated above is located. THIS MORTGAGE WILL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE MORTGAGOR AND THE MORTGAGEE
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE MORTGAGEE'S OFFICE
INDICATED ABOVE IS LOCATED, EXCEPT THAT THE LAWS OF THE STATE WHERE THE PROPERTY
IS LOCATED (IF DIFFERENT FROM THE STATE WHERE SUCH OFFICE OF THE MORTGAGEE IS
LOCATED) SHALL GOVERN THE CREATION, PERFECTION AND FORECLOSURE OF THE LIENS
CREATED HEREUNDER ON THE PROPERTY OR ANY INTEREST THEREIN. The Mortgagor hereby
irrevocably consents to the exclusive jurisdiction of any state or federal court
for the county or judicial district where the Mortgagee's office indicated above
is located, and consents that all service of process be sent by nationally
recognized overnight courier service directed to the Mortgagor at the
Mortgagor's address set forth herein and service so made will be deemed to be
completed on the business day after deposit with such courier; provided that
nothing contained in this Mortgage will prevent the Mortgagee from bringing any
action, enforcing any award or judgment or exercising any rights against the
Mortgagor individually, against any security or against any property of the
Mortgagor within any other county, state or other foreign or domestic
jurisdiction. The Mortgagor acknowledges and agrees that the venue provided
above is the most convenient forum for both the Mortgagee and the Mortgagor. The
Mortgagor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Mortgage.
<PAGE>
27. WAIVER OF JURY TRIAL. THE MORTGAGOR IRREVOCABLY WAIVES ANY AND ALL
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS MORTGAGE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
MORTGAGE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE MORTGAGOR
ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Mortgagor acknowledges that it has read and understood all the provisions of
this Mortgage, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the
date first written above.
ATTEST CECO FILTERS, INC..
By: By: /Steven Taub/
----------------------- ---------------------------------
Name: Print Name: /Steven Taub/
Title: Title: /President/
(SEAL)
<PAGE>
CERTIFICATE OF RESIDENCE
The undersigned certifies that the residence of the Mortgagee is 1600
Market Street, Philadelphia, PA 19103.
-------------------------------
On behalf of the Mortgagee
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF PHILADELPHIA )
On this, the /16th / day of March, 1999, before me, a Notary Public,
the undersigned officer, personally appeared /Steven Taub/, who acknowledged
himself to be the /President/ of CECO Filters, Inc., a Delaware corporation and
that he, in such capacity, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing on behalf of CECO
Filters, Inc.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBITS
A. Legal Description
<PAGE>
CONSENT AND JOINDER TO
OPEN-END MORTGAGE AND SECURITY AGREEMENT
Intending to be legally bound hereby, the undersigned, MONTGOMERY
COUNTY INDUSTRIAL DEVELOPMENT CORPORATION ("Montgomery IDC"), fee owner of the
Property described in the foregoing Mortgage (the "Mortgage"), joins in the
Mortgage for the purpose of: (i) consenting to the creation hereof; (ii)
submitting and subordinating its fee interest in the Property to the lien of the
Mortgage with the same effect as if the foregoing Mortgage were executed and
delivered by Montgomery IDC to Mortgagee alone; and (iii) evidencing its
agreement that a foreclosure under the Mortgage shall divest Montgomery IDC of
all of its right, title and interest in and to the Property.
The foregoing provisions of this Consent and Joinder to Open-End
Mortgage and Security Agreement to the contrary notwithstanding, Montgomery
IDC's liability under the Mortgage and/or this Consent and Joinder shall be
limited to Montgomery IDC's interest in the Property and the rents, issues and
profits therefrom, and the lien of any judgment shall be restricted thereto.
MONTGOMERY COUNTY
INDUSTRIAL DEVELOPMENT
CORPORATION
Attest:__________________________ By:________________________________
Name: __________________________ Name:______________________________
Title: __________________________ Title:_____________________________
<PAGE>
EXHIBIT 10.32
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT (this "Guaranty") is made and
entered into as of March 16, 1999 by CECO ENVIRONMENTAL, INC., a New York
corporation (the "Guarantor"), with an address at 505 University Avenue, Suite
1400, Toronto, Ontario, Canada M56 1X3, in consideration of the extension of
credit by PNC BANK, NATIONAL ASSOCIATION (the "Bank"), with an address at 1600
Market Street, Philadelphia, PA 19103 to CECO FILTERS, INC., AIR PURATOR
CORPORATION, NEW BUSCH CO., INC and U.S. FACILITIES MANAGEMENT COMPANY, INC.
(collectively, the "Borrowers"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
1. Guaranty of Obligations. The Guarantor hereby guarantees, and
becomes surety for, the prompt payment and -----------------------
performance of all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrowers to the
Bank of any kind or nature, present or future (including, without
limitation, any interest accruing thereon after maturity, or after
the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding relating to the
Borrowers, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under
any agreement, instrument or document, whether or not for the
payment of money, whether arising by reason of an extension of
credit, opening of a letter of credit, loan, equipment lease, or
guarantee, under any interest or currency swap, future, option or
other similar agreement, or in any other manner, whether arising
out of overdrafts on deposit or other accounts or electronic funds
transfers (whether through automatic clearing houses or otherwise)
or out of the Bank's non-receipt of or inability to collect funds
or otherwise not being made whole in connection with depository
transfer check or other similar arrangements, whether direct or
indirect (including those acquired by assignment or
participation), absolute or contingent, joint or several, due or
to become due, now existing or hereafter arising, and any
amendments, extensions, renewals or increases and all costs and
expenses of the Bank incurred in the documentation, negotiation,
modification, enforcement, collection or otherwise in connection
with any of the foregoing, including reasonable attorneys' fees
and expenses (collectively, the "Obligations"). If any of the
Borrowers defaults under any such Obligations, the Guarantor will
pay the amount due to the Bank.
2. Nature of Guaranty; Waivers. This is a guaranty of payment and not of
collection and the Bank shall not be required, as a condition of the Guarantor's
liability, to make any demand upon
<PAGE>
or to pursue any of its rights against the Borrowers, or to pursue any rights
which may be available to it with respect to any other person who may be liable
for the payment of the Obligations.
This is an absolute, unconditional, irrevocable and continuing guaranty
and will remain in full force and effect until all of the Obligations have been
indefeasibly paid in full, and the Bank has terminated this Guaranty. This
Guaranty will not be affected by any surrender, exchange, acceptance, compromise
or release by the Bank of any other party, or any other guaranty or any security
held by it for any of the Obligations, by any failure of the Bank to take any
steps to perfect or maintain its lien or security interest in or to preserve its
rights to any security or other collateral for any of the Obligations or any
guaranty, or by any irregularity, unenforceability or invalidity of any of the
Obligations or any part thereof or any security or other guaranty thereof. The
Guarantor's obligations hereunder shall not be affected, modified or impaired by
any counterclaim, set-off, deduction or defense based upon any claim the
Guarantor may have against the Borrowers or the Bank, except payment or
performance of the Obligations.
Notice of acceptance of this Guaranty, notice of extensions of credit
to the Borrowers from time to time, notice of default, diligence, presentment,
notice of dishonor, protest, demand for payment, and any defense based upon the
Bank's failure to comply with the notice requirements of the applicable version
of Uniform Commercial Code ss. 9-504 are hereby waived to the extent permitted
by law.
The Bank at any time and from time to time, without notice to or the
consent of the Guarantor, and without impairing or releasing, discharging or
modifying the Guarantor's liabilities hereunder, may (a) change the manner,
place, time or terms of payment or performance of or interest rates on, or other
terms relating to, any of the Obligations; (b) renew, substitute, modify, amend
or alter, or grant consents or waivers relating to any of the Obligations, any
other guaranties, or any security for any Obligations or guaranties; (c) apply
any and all payments by whomever paid or however realized including any proceeds
of any collateral, to any Obligations of the Borrowers in such order, manner and
amount as the Bank may determine in its sole discretion; (d) deal with any other
person with respect to any Obligations in such manner as the Bank deems
appropriate in its sole discretion; (e) substitute, exchange or release any
security or guaranty; or (f) take such actions and exercise such remedies
hereunder as provided herein.
3. Repayments or Recovery from the Bank. If any demand is made at any time
upon the Bank for the repayment or recovery of any amount received by it in
payment or on account of any of the Obligations and if the Bank repays all or
any part of such amount by reason of any judgment, decree or order of any court
or administrative body or by reason of any settlement or compromise of any such
demand, the Guarantor will be and remain liable hereunder for the amount so
repaid or recovered to the same extent as if such amount had never been received
originally by the Bank. The provisions of this section will be and remain
effective notwithstanding any contrary action which may have been taken by the
Guarantor in reliance upon such payment, and any such contrary action so taken
will be without prejudice to the Bank's rights hereunder and will be deemed to
have been conditioned upon such payment having become final and irrevocable.
<PAGE>
4. Enforceability of Obligations. No modification, limitation or discharge
of the Obligations arising out of or by virtue of any bankruptcy, reorganization
or similar proceeding for relief of debtors under federal or state law will
affect, modify, limit or discharge the Guarantor's liability in any manner
whatsoever and this Guaranty will remain and continue in full force and effect
and will be enforceable against the Guarantor to the same extent and with the
same force and effect as if any such proceeding had not been instituted. The
Guarantor waives all rights and benefits which might accrue to it by reason of
any such proceeding and will be liable to the full extent hereunder,
irrespective of any modification, limitation or discharge of the liability of
the Borrowers that may result from any such proceeding.
5. Events of Default. If any of the following occur (each an "Event of
Default"): (i) any Event of Default (as defined in any of the Obligations); (ii)
any default under any of the Obligations that does not have a defined set of
"Events of Default" and the lapse of any notice or cure period provided in such
Obligations with respect to such default; (iii) demand by the Bank under any of
the Obligations that have a demand feature; (iv) the failure by the Guarantor to
perform any of its obligations hereunder and the lapse of any applicable notice
and cure period; (v) the falsity, inaccuracy or material breach by the Guarantor
of any written warranty, representation or statement made or furnished to the
Bank by the Guarantor; or (vi) the termination or attempted termination of this
Guaranty, then the Guarantor will, on the demand of the Bank, immediately
deposit with the Bank in U.S. dollars all amounts due or to become due under the
Obligations and the Bank will use such funds to repay the Obligations. Upon the
occurrence of any Event of Default, the Bank in its discretion may exercise with
respect to any collateral any one or more of the rights and remedies provided a
secured party under the applicable version of the Uniform Commercial Code.
6. Right of Setoff. In addition to all liens upon and rights of setoff
against the money, securities or other property of the Guarantor given to the
Bank by law, the Bank shall have, with respect to the Guarantor's obligations to
the Bank under this Guaranty and to the extent permitted by law, a contractual
possessory security interest in and a contractual right of setoff against, and
the Guarantor hereby assigns, conveys, delivers, pledges and transfers to the
Bank all of the Guarantor's right, title and interest in and to, all deposits,
moneys, securities and other property of the Guarantor now or hereafter in the
possession of or on deposit with, or in transit to, the Bank whether held in a
general or special account or deposit, whether held jointly with someone else,
or whether held for safekeeping or otherwise, excluding, however, all IRA,
Keogh, and trust accounts. Every such security interest and right of setoff may
be exercised without demand upon the Guarantor. Every such right of setoff shall
be deemed to have occurred immediately upon the occurrence of an Event of
Default hereunder without any action of the Bank although the Bank may enter
such setoff on its books and records at a later time.
7. Costs. To the extent that the Bank incurs any costs or expenses in
protecting or enforcing its rights under the Obligations or this Guaranty,
including reasonable attorneys' fees and the costs and expenses of litigation,
such costs and expenses will be due on demand, will be included in the
Obligations and will bear interest from the incurring or payment thereof at the
Default Rate (as defined in any of the Obligations).
<PAGE>
8. Postponement of Subrogation. Until the Obligations are indefeasibly
paid in full, the Guarantor postpones and subordinates in favor of the Bank any
and all rights which the Guarantor may have to (a) assert any claim against the
Borrowers based on subrogation rights with respect to payments made hereunder,
and (b) any realization on any property of the Borrowers, including
participation in any marshalling of the Borrowers' assets.
9. Power to Confess Judgment. The Guarantor hereby empowers any attorney
of any court of record, after the occurrence of any Event of Default hereunder,
to appear for the Guarantor and, with or without complaint filed, confess
judgment, or a series of judgments, against the Guarantor in favor of the Bank
for the amount of the Obligations and an attorney's commission of the greater of
three percent (3%) of such principal and interest or $5,000 added as a
reasonable attorney's fee and for doing so this Guaranty or a copy verified by
affidavit shall be a sufficient warrant. The Guarantor hereby forever waives and
releases all procedural errors in said proceedings and all rights of appeal and
all relief from any and all appraisement, stay or exemption laws of any state
now in force or hereafter enacted with respect to such judgment or judgments.
No single exercise of the foregoing power to confess judgment, or a
series of judgments, shall be deemed to exhaust the power, whether or not any
such exercise shall be held by any court to be invalid, voidable, or void, but
the power shall continue undiminished and it may be exercised from time to time
as often as the Bank shall elect until such time as the Bank shall have received
payment in full of the Obligations and costs.
10. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally, or if sent by facsimile
transmission with confirmation of delivery, or by nationally recognized
overnight courier service, to the addresses for the Bank and the Guarantor set
forth above or to such other address as one may give to the other in writing for
such purpose.
11. Preservation of Rights. No delay or omission on the Bank's part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the Bank's
action or inaction impair any such right or power. The Bank's rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity.
The Bank may proceed in any order against the Borrowers, the Guarantor or any
other obligor of, or collateral securing, the Obligations.
12. Illegality. In case any one or more of the provisions contained in this
Guaranty should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
13. Changes in Writing. No modification, amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom will be effective unless made in a writing signed by the Bank, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on the Guarantor
<PAGE>
in any case will entitle the Guarantor to any other or further notice or demand
in the same, similar or other circumstance.
14. Entire Agreement. This Guaranty (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Guarantor and the Bank with respect to the subject matter hereof.
15. Successors and Assigns. This Guaranty will be binding upon and inure to
the benefit of the Guarantor and the Bank and their respective successors and
assigns; provided, however, that the Guarantor may not assign this Guaranty in
whole or in part without the Bank's prior written consent and the Bank at any
time may assign this Guaranty in whole or in part.
16. Interpretation. In this Guaranty, unless the Bank and the Guarantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to; the
word "or" shall be deemed to include "and/or", the words "including", "includes"
and "include" shall be deemed to be followed by the words "without limitation";
and references to sections or exhibits are to those of this Guaranty unless
otherwise indicated. Section headings in this Guaranty are included for
convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose. If this Guaranty is executed by more than one party as
Guarantor, the obligations of such persons or entities will be joint and
several.
17. Indemnity. The Guarantor agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, who controls
the Bank (the "Indemnified Parties") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including all reasonable fees of counsel with whom any Indemnified Party may
consult and all expenses of litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party as a result of the execution of or performance under this Guaranty;
provided, however, that the foregoing indemnity agreement shall not apply to
claims, damages, losses, liabilities and expenses solely attributable to an
Indemnified Party's gross negligence or willful misconduct. The indemnity
agreement contained in this Section shall survive the termination of this
Guaranty. The Guarantor may participate at its expense in the defense of any
such claim.
18. Governing Law and Jurisdiction. This Guaranty has been delivered to and
accepted by the Bank and will be deemed to be made in the State where the Bank's
office indicated above is located. THIS GUARANTY WILL BE INTERPRETED AND THE
RIGHTS AND LIABILITIES OF THE BANK AND THE GUARANTOR DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE WHERE THE BANK'S OFFICE INDICATED ABOVE IS LOCATED,
EXCLUDING ITS CONFLICT OF LAWS RULES. The Guarantor hereby irrevocably consents
to the exclusive jurisdiction of any state or federal court for the county or
judicial district where the Bank's office indicated above is located, and
consents that all service of process be sent by nationally recognized overnight
courier service directed to the Guarantor at the Guarantor's address set forth
herein and service so made will be deemed to be completed on the business day
after deposit with such courier; provided that nothing contained in this
Guaranty will prevent the Bank from bringing any action, enforcing any award
<PAGE>
or judgment or exercising any rights against the Guarantor individually, against
any security or against any property of the Guarantor within any other county,
state or other foreign or domestic jurisdiction. The Guarantor acknowledges and
agrees that the venue provided above is the most convenient forum for both the
Bank and the Guarantor. The Guarantor waives any objection to venue and any
objection based on a more convenient forum in any action instituted under this
Guaranty.
19. Equal Credit Opportunity Act. If the Guarantor is not an "applicant for
credit" under Section 202.2 (e) of the Equal Credit Opportunity Act of 1974
("ECOA"), the Guarantor acknowledges that (i) this Guaranty has been executed to
provide credit support for the Obligations, and (ii) the Guarantor was not
required to execute this Guaranty in violation of Section 202.7(d) of the ECOA.
20. WAIVER OF JURY TRIAL. THE GUARANTOR IRREVOCABLY WAIVES ANY AND ALL
RIGHT THE GUARANTOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS GUARANTY, ANY DOCUMENTS EXECUTED IN
CONNECTION WITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. THE GUARANTOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
The Guarantor acknowledges that it has read and understood all the
provisions of this Guaranty, including the confession of judgment and waiver of
jury trial, and has been advised by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the
date first written above, with the intent to be legally bound hereby.
CECO ENVIRONMENTAL, INC.
By:_________________________________
Name:
Title:
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES
CECO Filters, Inc.
Air Purator Corporation (subsidiary of CECO Filters, Inc.)
U.S. Facilities Management Company, Inc. (subsidiary of CECOFilters, Inc.)
New Busch Co., Inc. (subsidiary of CECO Filters, Inc.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES AS OF AND FOR
THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 364,648
<SECURITIES> 695,944
<RECEIVABLES> 4,068,640
<ALLOWANCES> 0
<INVENTORY> 541,315
<CURRENT-ASSETS> 6,569,851
<PP&E> 4,035,941
<DEPRECIATION> 1,973,489
<TOTAL-ASSETS> 15,474,836
<CURRENT-LIABILITIES> 6,197,903
<BONDS> 3,154,862
0
0
<COMMON> 83,888
<OTHER-SE> 7,473,391
<TOTAL-LIABILITY-AND-EQUITY> 15,474,836
<SALES> 11,961,116
<TOTAL-REVENUES> 26,381,622
<CGS> 6,993,386
<TOTAL-COSTS> 25,244,815
<OTHER-EXPENSES> 260,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,567
<INCOME-PRETAX> 944,055
<INCOME-TAX> 373,322
<INCOME-CONTINUING> 570,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532,926
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
