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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the fiscal year ended: December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from to
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Commission file number: 0-8115
PH GROUP INC.
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(Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>
<S> <C>
OHIO 31-0737351
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
2365 Scioto Harper Drive, Columbus, Ohio 43204
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(Address of Principal Executive Offices) (Zip Code)
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(614) 279-8877
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Issuer's Telephone Number, Including Area Code:
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Shares, without par value
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(Title of Class)
Check whether the issuer (1) 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. [X]
The issuer's revenues for its most recent fiscal year were $13,752,009.
The aggregate market value of Common Shares held by non-affiliates of
the Registrant on March 6, 1998 was $3,578,768.
The number of Common Shares outstanding on March 6, 1998 was 1,588,731.
The following document has been incorporated by reference into this
Form 10-KSB:
Document Part of Form 10-KSB
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Registrant's Proxy Statement for its Part III
1998 Annual Meeting of Shareholders to
be held on April 30, 1998
Transitional Small Business Disclosure Format (check one)
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
a. Business Development.
PH Group Inc. is an Ohio corporation (the "Company" or the "Registrant") that
resulted from the merger of a number of small companies over the past 20 years,
the oldest of which was incorporated as the Millersport Bank Company in 1906.
The Company sold its banking operations in 1981.
The PH Hydraulics division of the Company arose out of an acquisition in 1987 by
PH Hydraulics & Automation, Inc., a former subsidiary of the Company, of the
right to manufacture and market a line of industrial hydraulic presses which the
Company markets under the PH Hydraulics(TM) label.
The Trueblood division of the Company arose out of an acquisition in 1990 of the
right to manufacture and market a line of plastic injection molding machines
which the Company markets under the Trueblood(TM) label. The Trueblood
operations were conducted by subsidiaries of PH Hydraulics & Automation, Inc.
As of October 31, 1996, PH Hydraulics & Automation, Inc., the sole subsidiary of
the Company, was merged into the Company.
On April 30, 1997, the Company purchased the operating assets of St. Lawrence
Press, a division of St. Lawrence, Inc., for a price of approximately $1.3
million. The purchase agreement contains a contingent earnout component where
the purchase price is subject to future increases based on 5% of gross sales in
excess of an annual specified level ($2.5 million in the first two years and $3
million in the last two years) for eligible products in each of the four years
following the purchase date. The maximum earn out for any one year is $200,000
and the minimum is $50,000. A $170,275 liability has been included on the
financial statements (see Note 3) for the present value of the minimum annual
contingent earnout payments with a corresponding increase in the cost of the
purchase price.
The acquisition was funded with cash, the assumption of liabilities, notes
payable, and restricted common stock which is subject to a repurchase agreement.
St. Lawrence presses are generally larger hydraulic presses that range up to
5,000 tons.
b. Business of Issuer
Business and Principal Products
Based upon its market research, it is management's belief that the acquisition
of the St. Lawrence hydraulic press line gives the Company the widest range of
standard and special design hydraulic presses manufactured in the United States.
Hydraulic presses are used in a number of metalforming applications, primarily
in the automotive, aircraft, appliance, and prototype industries. Typical
metalforming applications are assembly, forming, trimming, embossing, and
compression molding. The Company estimates that the market for hydraulic presses
is in excess of $150 million per year. The Company's hydraulic presses range
from 1 to 5,000 tons and are marketed under the names of PH Hydraulics and
St. Lawrence Press. The Company's injection molding product line is used by the
automotive, electrical, medical, and consumer products industries. The process
involves inserting a non-plastic part in a mold and injecting plastic around the
part. The Company estimates that the market for its injection molding machines
is in excess of $200 million. The injection molding machines have a tonnage
range from 30 to 450 tons and are marketed under the Trueblood label.
The Company sells its products primarily through independent sales
representatives. Each product line has a National Sales Manager who administers
the Company sales and marketing activities.
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The following table shows the Company's sales by class of products within the
machine tool industry for the years 1997, 1996, and 1995.
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<CAPTION>
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1997 1996 1995
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Dollars Percent Dollars Percent Dollars Percent
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<S> <C> <C> <C> <C> <C> <C>
Presses 6,896,463 50.1 5,007,010 55 6,373,834 75
- -------------------------- -------------- -------------- -------------- --------------- -------------- --------------
Machines 6,596,793 48.0 3,875,888 42 1,727,463 20
- -------------------------- -------------- -------------- -------------- --------------- -------------- --------------
Repair Parts 214,992 1.8 153,605 1 248,876 3
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Repair Service 43,757 0.3 33,047 1 60,260 1
- -------------------------- -------------- -------------- -------------- --------------- -------------- --------------
Molded Products 0 0 32,300 1 56,978 1
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Total 13,752,005 100 9,101,850 100 8,467,411 100
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</TABLE>
Sources and Availability of Raw Materials
As a matter of policy, the Company uses standard industrial components in the
manufacture of its products. This policy is perceived as a strong marketing
advantage. Since steel is the largest material component of the Company's
product, its availability impacts the Company's ability to meet promised
delivery dates. The Company does not, however, depend heavily on certified or
specialty steels. Hydraulic cylinders and manifolds are key purchase components
which vary in availability and lead times. All of the components used by the
Company in the manufacture of its products are available domestically from a
wide range of suppliers. The Company has experienced no difficulty in obtaining
components from suppliers and anticipates no future difficulty.
Backlog
Backlog at December 31, 1997 was approximately $6,505,150, all of which is
expected to be completed in 1998. Backlog at December 31, 1996 was approximately
$2,887,000 and all 1996 backlog was shipped in 1997.
Competition
The Company's two hydraulic press lines face different competition based on the
size of the press. The Company believes that, because of its wide product range
and customer base, it is in a unique position to gain market share for both
product lines. The Company's smaller hydraulic presses, sold under the PH
Hydraulics name, ranging from 1 to 300 tons, have competition from four to six
small companies. These presses, especially less than 50 tons, are sold on the
basis of price and delivery time. The larger presses, sold under the St.
Lawrence Press name have competition from significantly larger companies. The
competitive factors for sales of the larger hydraulic presses are technical and
engineering design and delivery. Price is seldom the deciding factor. Management
believes that, because of the unique combination of two well-regarded product
lines, it will gain market share. Both product lines have excellent reputations
for performance, quality and engineering design.
Effect of Environmental Regulation
Compliance with federal, state and local provisions regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, has not had a material effect upon the capital expenditures,
earnings or competitive position of the Company. The Company believes that the
nature of its operations has little, if any, environmental impact. The Company,
therefore, anticipates no material capital expenditures for environmental
control facilities for its current fiscal year or for the foreseeable future.
Forward Looking Statements
Certain statements contained in this Annual Report on Form 10-KSB which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). In
addition, certain statements in future filings by the Company with the
Securities and Exchange Commission, in press releases, and in oral and written
statements made by or with the approval of the Company
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which are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking statements
include, but are not limited to (a) projections of revenues, income or loss,
earnings or loss per share, the payment or non-payment of dividends, capital
structure and other financial items; (b) statements of plans and objectives of
the Company or its management or Board of Directors, including those relating to
products or services; (c) statements of future economic performance; and (d)
statements of assumption underlying such statements. Words such as "believes",
"anticipates", "expects", "targeted", and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of
identifying such statements.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Factors that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to (a) the strength of the U.S. economy
in general; (b) the ability to improve processes and business practices to keep
pace with economic, competitive and technological environments, including
successfully addressing Year 2000 issues; (c) the ability to increase market
share and control expenses; (d) acquisitions and the ability to successfully
integrate their operations; (e) the ability to raise additional capital through
stock issuances and (f) the success of the Company at managing the risks
involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
Employees
As of December 31, 1997, the Company had 85 employees, all of whom were full
time.
Significant Customers
In 1997, one of the Company's customers accounted for 29% of sales and 33% of
the accounts receivable balance. No other customer accounted for more than 10%
of sales. In 1996, one of the Company's customers accounted for 14% of sales and
4% of the accounts receivable balance.
Research and Development
Research and development costs of $16,492 were expensed during 1996. There were
no research and development costs in 1997.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases a manufacturing and office facility at 2365 Scioto Harper
Drive, Columbus, Ohio, containing approximately 22,000 square feet. The lease
term is April 1, 1989 through August 31, 1999. The rent payments escalate from
an annual amount of $54,750 to $88,080 at the end of the eighth year.
The Company owns land in Franklin County, Ohio recorded on the Company's books
at $20,570 and approximately 470 acres of undeveloped land in Perry County, Ohio
recorded on the Company's books at $149,600. The Perry County land is subject to
a contract of sale with the U. S. Department of Agriculture dated January 9,
1998 for a consideration of $480 per acre.
The Company leases manufacturing and office space at 12500 South Wayne Road,
Romulus, Michigan, containing approximately 20,000 square feet. The lease term
is May 1, 1997 through April 30, 2002 at a monthly rental of $14,850. A portion
of the space is subleased for $2,400 per month. The Company has the right to
cancel its lease in April 1999.
The Company believes that all of the buildings owned or leased by it are well
maintained, in good operating condition, and are suitable for their present
uses.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
a. Market Information
The Company's Common Shares are traded over the counter. The price of the
Company's Common Shares is found on the Electronic Bulletin Board. The range of
high and low bids for the Registrant's Common Shares for each quarter during its
past two fiscal years is as follows:
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<CAPTION>
Year Quarter High(a) Low(a)
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<S> <C> <C> <C>
1997 4th $4.00 $2.50
3rd 3.20 1.60
2nd 3.00 1.20
1st 2.88 1.20
1996 4th 1.69 .95
3rd 2.20 1.20
2nd (b) (b)
1st (b) (b)
</TABLE>
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(a) Adjusted for a 5-for-4 stock split distributed on January 2, 1998.
(b) Prices were not available.
The above quotations reflect inter-dealer prices, without retail mark up, mark
down or commission and may not represent actual transactions.
b. Holders
As of December 31, 1997, there were approximately 843 record holders of the
Company's Common Shares.
c. Dividends
The Company did not pay cash dividends in 1997 or 1996. Bank lending agreements
contain restrictions against cash dividend payments unless certain financial
covenants are met. The Company's Common Shares were split 5-for-4 on January 2,
1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company, for the third year in a row, increased revenues and profits.
Revenues increased to $13.7 million, an increase of 51.5 percent over 1996's
$9.1 million. The major reason for the Company's growth was sales of its
Trueblood machines which increased to $6.7 million or a 72 percent increase
over 1996's $3.9 million. One of the significant reasons for the Trueblood
increase was a large $3.0 million order, most of which was shipped during the
year. St. Lawrence, acquired in April, 1997, had $1.9 million of 1997's
shipments. Revenue for the Company's other product line, PH Hydraulics,
remained basically even with 1996's at $5.1 million.
St. Lawrence Press, a name well known in the large press industry, acquired in
April, 1997, was funded with cash, the assumption of liabilities, notes payable
and restricted common stock which is subject to a repurchase agreement. The
addition of the St. Lawrence product line, specializing in presses up to 5,000
tons used in embossing, hydro-forming and die spotting, secures PH Group as the
only press manufacturer in the country manufacturing presses from 1 ton to
5,000 tons. The Company's revenue increase was aided in 1997 by St. Lawrence
sales.
New order bookings for the year were $17.3 million. Normally, new orders booked
after October are not shipped until the following year. New order bookings
increased by 86 percent over 1996 new orders of $9.3 million. St. Lawrence
booked $3.6 million for the eight months it was owned by PH Group. Trueblood
had new order bookings for the year of $7.1 million and PH Hydraulics had new
orders of $6.4 million. Based on the Company's $6.5 million backlog of orders
at the start of the new year, 1998 should be the fourth consecutive year of
increased sales and revenue. Parts orders comprised the remaining bookings.
Accompanying the record sales was also record net income. Net income increased
by 64.4 percent. Net income for 1997 was $605 thousand as opposed to $368
thousand in 1996. Net income as a percent of sales increased to 4.4 percent
from 4.0 percent in 1996.
The St. Lawrence acquisition impacted the traditional financial analysis of the
Company due to increased engineering content and longer period of time from
order to delivery. St. Lawrence presses are large, complex, highly engineered
presses. The average St. Lawrence press sells for approximately $300 thousand
as opposed to $34 thousand for an average PH Hydraulic press. St. Lawrence
presses have greater engineering complexity than either the PH Hydraulic
presses or the Trueblood machines. In addition to the increased engineering
costs, St. Lawrence presses create financial pressures due to the amount of
time between receipt of the purchase order and shipment. A St. Lawrence press
can easily take over 26 weeks between receipt of order and shipment. As a
result of the long cycle time between order and shipment, the Company expects
interest costs to increase as bank borrowings may be necessary to fund
inventory and labor for longer periods than the Company's other two product
lines.
Cost of goods sold in 1997 was 72 percent of sales which compares favorably to
76 percent in 1996. The major reason for the drop in cost of goods sold was a
reduction of material costs for the year, improved factory floor efficiencies
and continued investment in computer hardware and software. Material costs as a
percent of sales was reduced to 47.8 percent of sales in 1997 as opposed to
49.1 percent in 1996. The reduction in material costs for the year was a result
of three factors. The first factor was that the Company received a large order
of $3.0 million for duplicate Trueblood machines. The large order allowed the
Company to receive greater than normal discounts for material. The second
factor is that the Company continues to reap benefits from its MRP plan that it
initiated in late 1995. MRP is designed to speed delivery of our products by
refining production processes. The third reason for the drop in material costs
is that a large percent of St. Lawrence shipments were rebuilt presses. A
rebuilt press has significantly less material costs as a percent of sales than
a new press. Material costs as a percent of sales has decreased for three
consecutive years.
Labor, as a percent of sales, increased to 10.2 percent from 9.8 percent.
Direct labor and burden costs are 28 percent higher at the Company's St.
Lawrence plant in Romulus, Michigan. Consequently, the $1.9 million in
shipments for 1997 for St. Lawrence averaged $46 per labor hour as opposed to
$36 per labor hour at its Columbus, Ohio facility. The large difference in
labor rates has led the Company to initiate the close of its St. Lawrence
facility by 1999 and move operations to Central Ohio.
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The Company, to accommodate its projected growth plus the consolidation of St.
Lawrence to Central Ohio, is planning on moving to a new facility. The new
facility will be 45,000 - 60,000 square feet and be equipped with crane
capacity to improve both production capacity and gross profit margins.
Management believes that a new facility plus consolidation of operations will
substantially improve profitability.
Selling, general and administrative (SG&A) costs rose substantially in 1997.
SG&A costs were $2.8 million or 20.4 percent of sales for 1997 as opposed to
$1.7 million or 18.7 percent of sales in 1996. The majority of the increases
were related to the St. Lawrence acquisition. Salaries, taxes and benefits
increased by 48.3 percent for the year with the St. Lawrence staff comprising
slightly less than 50 percent of the increases. During the year the Company
added significantly to the quality of its engineering department by recruiting
higher quality engineers. The increase in the engineering staff plus increased
salary costs with the St. Lawrence acquisition increased the salary, taxes and
benefits to 11.7 percent of sales in 1997. Company projection for 1998 calls
for salaries, taxes and benefits to be 10.2 percent of sales for the year. The
reduction is due to elimination of certain positions at St. Lawrence with the
consolidation of functions to Columbus plus increased operational efficiencies
with the Company's integrated business system.
The Company financed part of its St. Lawrence acquisition by $600,000 in bank
financing. The St. Lawrence acquisition plus increased business borrowings
increased interest expense. The Company aggressively solicits customer deposits
to provide working capital rather than the use of its line of credit. The
Company finished the year with $1.7 million in customer deposits.
The St. Lawrence acquisition contributed to the significant increase in
professional expense costs for the year. Professional expenses, which included
legal, accounting and SEC reporting requirements, increased 44 percent in 1996
to $248 thousand. In 1997 the Company expensed $280 thousand in advertising and
promotion expenses, a 168 percent increase over 1996. The Company's 1998 budget
calls for an increase in advertising and promotion expenses to $330 thousand.
The Company believes that it is necessary to spend 2 percent of projected sales
in business promotion costs.
Liquidity and Capital Resource
The financial position of the Company continues to improve as a result of the
third consecutive year of revenue and profit growth.
Net worth increased in the period by $658 thousand to $1,784,000. This is an
increase of 54.5 percent compared to 1996. Working capital decreased by $167
thousand compared to 1996. A large portion of this is due to financing of the
St. Lawrence acquisition using $600,000 of short term debt which increases
current liabilities. For the year inventories rose from a December 31, 1996
level of $765 thousand to the 1997 year end level of $2,829,000. This sharp
rise is the result of a record backlog at the end of 1997 with orders scheduled
to ship in the first quarter of 1998 of approximately $4.0 million.
Consequently, comparative accounts payable for the two years show the 1997
ending balance of $1,951,000 versus $736,000 for 1996. Long term debt also
continues to improve as it was reduced from $433 thousand in 1996 to $390
thousand in 1997. The Company was able to fund all increased business
opportunities with existing lines of credit and customer deposits.
The Company has issued shares of common stock subject to a repurchase option
related to the acquisition of St. Lawrence. At year end the Company share price
exceeded the 1998 repurchase option price of $1.60 per share. Management
anticipates the Company will not have to use cash to fund its redemption
obligation for the 1998 installment since the Company believes the share price
will continue to exceed the fixed option share price.
At the end of 1997 the Company's backlog was in excess of $6.5 million. To
assist in the cost of production and design the Company many times receives
deposits from the time the press or injection molding machine is accepted which
minimizes the Company cash requirement.
The Company has a $600 thousand short term loan which was used to acquire St.
Lawrence. The note is due April 30, 1998, however the Company intends to
refinance this for a one year period. Ultimately, the Company intends to repay
the loan by installment payments, sale of assets or proceeds of an equity
offering. The Company believes the note will be retired during the third
quarter of 1998.
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The Company's profitability is demonstrated by net income of $605 thousand in
addition to non-cash expenses of $340 thousand, thus, generating $945 thousand
in net income plus depreciation. Property, plant, and equipment for the year
increased to $995 thousand (net of depreciation). The majority of this increase
is the result of acquiring the property and equipment of St. Lawrence Press
along with investment in computer hardware and software aimed at improved
efficiencies.
The Company currently has available to it $2.5 million in a bank line of
credit. The credit line is backed by the receivables and inventory of the
Company. The Company also has a term loan balance of $298 thousand which is
secured by Company fixed assets. The unused and available funds on the credit
line at December 31, 1997 were in excess of $1.9 million.
The Company, to meet its long range goals of growth and acquisitions, has
recognized that it needs additional capitalization. To meet the additional
capital needs the Company has signed a letter of intent with an investment
banker firm to raise $3.0 million, subject to shareholder approval of the
authorization of preferred stock. The Company will issue preferred stock with
terms yet to be negotiated to raise the capital. The Company and its investment
banker anticipate that the capital will be successfully raised by the end of the
third quarter.
At this time the Company is not aware of any environmental issues that will
have a material or adverse impact on its future capital requirements or results
of operations.
Market Price and Dividends
The Company's common stock is traded over the counter on the electronic bulletin
board (NASDAQ) under the symbol PHHH. The Company's stock is thinly traded,
however, to stimulate trading volume and liquidity the Company split the stock
25 percent effective January 2, 1998. The Company goal is to have the Company's
stock listed on the NASDAQ small cap market by the year end. The stock split
and the conversion of 31,250 shares of common stock subject to the repurchase
option of those shares to permanent equity will meet the NASDAQ requirement for
one million shares of common stock in the non-control group shareholders. The
Company anticipates meeting the NASDAQ criteria for $4.0 million of tangible
net worth with this year projected earnings and the proceeds of the equity
raise.
Year 2000
The Company has begun to review its computer programs and information systems
to ensure the Company will be Year 2000 compliant. This may include upgrading
or replacing existing software depending upon the outcome of the ongoing
review. The Company believes, at this time, this review and any consequent
corrective measures will eliminate concerns as to the potential effect the Year
2000 could have on the Company.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company, and the related notes, together with
the report of Greene & Wallace, Inc. dated February 6, 1998, are set forth at
pages F-1 through F-23 attached hereto.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Information regarding the Registrant's directors and executive officers is set
forth at "ELECTION OF DIRECTORS" in the Registrant's definitive Proxy Statement
for its 1998 Annual Meeting of Shareholders to be held on April 30, 1998, filed
with the Securities and Exchange Commission (the "1998 Proxy Statement"), which
information is incorporated herein by reference.
No disclosure is required under Item 405 of Regulation S-B.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this item is set forth at "COMPENSATION OF
MANAGEMENT" in the 1998 Proxy Statement, which information is incorporated
herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth at "SECURITY OWNERSHIP OF
PRINCIPAL SHAREHOLDERS, DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS" in the 1998
Proxy Statement, which information is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth at "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" in the 1998 Proxy Statement, which information is
incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS.
2. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
2.1. Asset Purchase Agreement, dated as of April 30, 1997, between PH
Group Inc. and St. Lawrence Press Company, Inc. (incorporated by reference to
Exhibit 2 of the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended March 31, 1997; Commission File No. 0-8115).
3. ARTICLES OF INCORPORATION AND BYLAWS.
3.1. Amended and Restated Articles of Incorporation of the Company
(reflecting the Amended Articles of Incorporation and all amendments thereto)
(incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on
Form 10-QSB for the quarterly period ended March 31, 1997; Commission File No.
0-8115) (the "1st Quarter 10-QSB").
3.2. Amended and Restated Code of Regulations of the Company
(reflecting the Code of Regulations and all amendments thereto) (incorporated by
reference to Exhibit 3.2 to the 1st Quarter 10-QSB).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
4.1. See Articles III, IV, V and VI of the Amended and Restated
Articles of Incorporation of the Company (reflecting the Amended Articles of
Incorporation and all amendments thereto) (incorporated by reference to Exhibit
3.1 to the 1st Quarter 10-QSB).
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4.2. See Article I, Section 1(F), 2, and 3 of Article II, Article IV
and Sections 1 and 3 of Article V of the Amended and Restated Code of
Regulations of the Company (reflecting the Code of Regulations and all
amendments thereto) (incorporated by reference to Exhibit 3.2 to the 1st Quarter
10-QSB).
10. MATERIAL CONTRACTS (*indicates management contract or compensatory
plan or arrangement).
10.1. Bank Lending Agreement (incorporated by reference to Exhibit 10
to the Company's Annual Report on Form 10-KSB for the year ended December 31,
1995; Commission File No. 0-8115).
10.2. Option Agreement between the Company and Charles T. Sherman dated
January 23, 1997.*
10.3. Employment Agreement between the Company and Charles T. Sherman
dated January 23, 1997.*
10.4. Split Dollar Agreement between the Company and Charles T. Sherman
dated September 11, 1997.*
10.5. PH Group Inc. 1997 Stock Incentive Plan.*
10.6. PH Group Inc. Employee Stock Purchase Plan.
23. CONSENT OF EXPERTS.
23.1. Consent of Greene & Wallace, Inc.
24. POWERS OF ATTORNEY.
24.1. Powers of Attorney.
24.2. Certified resolution of the Registrant's Board of Directors
authorizing officers and directors signing on behalf of the Company to sign
pursuant to a power of attorney.
27. FINANCIAL DATA SCHEDULE
27. Financial Data Schedule (submitted electronically for SEC
information only).
(b) REPORTS ON FORM 8-K.
There were no Forms 8-K filed by the Company during the fourth quarter
of fiscal year 1997.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: March 30, 1998
PH GROUP INC.
(the "Registrant")
By: /s/ CHARLES T. SHERMAN
------------------------------
Charles T. Sherman, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the 30th day of March, 1998.
SIGNATURE TITLE
/s/ CHARLES T. SHERMAN Director, President,
- ------------------------------------- Chief Executive Officer
Charles T. Sherman (principal executive officer)
KENNETH P. FURLONG* Treasurer (principal accounting
- ------------------------------------- officer
Kenneth P. Furlong
MICHAEL W. GARDNER* Director, Vice President of
- ------------------------------------- Operations
Michael W. Gardner
BOB BINSKY* Director
- -------------------------------------
Bob Binsky
ALIDA BREEN* Director
- -------------------------------------
Alida Breen
DAVID H. MONTGOMERY* Director
- -------------------------------------
David H. Montgomery
TERRY L. SANBORN* Director
- -------------------------------------
Terry L. Sanborn
* Charles T. Sherman, by signing his name hereto, does sign this document on
behalf of the person indicated above pursuant to a Power of Attorney duly
executed by such person.
*By: /s/ CHARLES T. SHERMAN
-------------------------------------------
Charles T. Sherman, Attorney-in-fact
-10-
<PAGE> 11
PH GROUP, INC.
Audited Financial Statements
For the Years Ended December 31, 1997 and 1996
<PAGE> 12
GREENE & WALLACE, INC.
Certified Public Accountants 1241 Dublin Road
& Consultants Columbus, Ohio 43215
(614) 488-3126
FAX(614) 488-0095
INDEPENDENT AUDITORS' REPORT
To the Shareholders
PH Group, Inc.
We have audited the accompanying balance sheets of PH Group, Inc. as of December
31, 1997 and 1996 and the related 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 PH Group, Inc. as of December
31, 1997 and 1996, and the results of its operations and cash flows for the
years then ended in conformity with generally accepted accounting principles.
Columbus, Ohio
February 6, 1998 Greene & Wallace, Inc.
F-1
<PAGE> 13
PH GROUP, INC.
Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
Assets
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash $ 7,789 116,449
Accounts receivable (Notes 3 and 9) 2,834,678 2,135,276
Inventories, less estimated long-term
portion (Note 3) 2,790,172 764,989
Deferred income taxes (Note 4) 150,500 50,200
Other current assets (Note 8) 193,798 88,885
---------- ---------
Total current assets 5,976,937 3,155,799
---------- ---------
Property and equipment, at cost (Notes 3 and 5):
Office equipment 621,933 407,656
Manufacturing equipment 1,053,198 956,140
Leasehold improvements 265,564 255,518
Vehicles 166,180 132,934
---------- ---------
Total property and equipment 2,106,875 1,752,248
Less accumulated depreciation
and amortization 1,112,086 927,879
---------- ---------
Property and equipment, net 994,789 824,369
---------- ---------
Other noncurrent assets:
Inventory, estimated long-term portion
(Note 3) 39,000 39,000
Land held for investment (Note 3) 169,720 169,720
Goodwill, net 785,899 83,178
Deferred income taxes (Note 4) 50,100 --
Other noncurrent assets (Note 8) 278,132 106,280
---------- ---------
Total other noncurrent
assets 1,322,851 398,178
---------- ---------
Total assets $8,294,577 4,378,346
========== =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-2
<PAGE> 14
PH GROUP, INC.
Balance Sheets
(contd)
December 31, 1997 and 1996
Liabilities and Shareholders' Equity
------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $1,950,925 735,530
Bank line of credit (Note 3) 457,049 1,157,849
Current portion of long-term debt
(Note 3) 750,658 141,877
Current portion of capital lease
obligations (Note 5) 19,175 16,854
Income taxes payable 422,626 23,500
Accrued expenses and taxes 485,635 494,823
Customer deposits 1,722,235 249,049
---------- ---------
Total current liabilities 5,808,303 2,819,482
---------- ---------
Noncurrent liabilities, less any current portions:
Long-term debt (Note 3) 353,070 373,681
Capital lease obligations (Note 5) 23,765 42,940
Deferred compensation (Note 10) 12,916 6,366
Deferred income taxes (Note 4) -- 10,200
---------- ---------
Total noncurrent liabilities 389,751 433,187
---------- ---------
Total liabilities 6,198,054 3,252,669
---------- ---------
Common stock subject to repurchase,
125,000 shares issued and
outstanding, at redemption
value (see Note 13) 312,500 --
---------- ---------
Shareholders' equity: (Notes 7 and 14)
Common stock, with no par value,
authorized 10,000,000 shares;
issued and outstanding 1,418,731
in 1997 and 1,359,731 in 1996
at stated value 11,350 10,878
Additional paid-in capital 1,292,051 1,239,023
Retained earnings (deficit) 480,622 (124,224)
---------- ---------
Total shareholders' equity 1,784,023 1,125,677
---------- ---------
Total liabilities and
shareholders' equity $8,294,577 4,378,346
========== =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-3
<PAGE> 15
PH GROUP, INC.
Statements of Operations
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $13,752,009 9,101,850
Cost of sales 9,844,240 6,901,102
----------- ---------
Gross margin 3,907,769 2,200,748
Selling, general and administrative
expenses 2,842,905 1,680,616
----------- ---------
Income from operations 1,064,864 520,132
----------- ---------
Other income (expenses):
Oil and gas royalty, net (1,872) 7,595
Interest income 11,213 1,755
Interest expense (189,570) (154,079)
Other, net 51,511 35,509
----------- ---------
Total other income
(expenses), net (128,718) (109,220)
----------- ---------
Income before income taxes 936,146 410,912
Provision for income taxes (Note 4) (331,300) (43,200)
----------- ---------
Net income $ 604,846 367,712
=========== =========
Per share data:
Basic earnings per share $ .43 .27
=========== =========
Diluted earnings per share $ .37 .26
=========== =========
Weighted average common shares
outstanding (1) 1,397,343 1,357,303
=========== =========
</TABLE>
(1) Adjusted for stock split January 2, 1998 - see Note 14.
The accompanying notes are an integral part
of these financial statements.
F-4
<PAGE> 16
PH GROUP, INC.
Statements of Shareholders' Equity
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Retained
Outstanding Additional Earnings Total
Common Stock Paid-in (Accumulated Subscription Shareholders'
Shares Amount Capital Deficit) Receivable Equity
------ ------ ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 1,357,231 $10,858 1,236,543 (491,936) (10,000) 745,465
Collection of subscription
receivable -- -- -- -- 10,000 10,000
Issuance of common stock (Note 7) 2,500 20 2,480 -- -- 2,500
Net income -- -- -- 367,712 -- 367,712
--------- ------- --------- -------- ------- ---------
Balance, December 31, 1996 1,359,731 10,878 1,239,023 (124,224) -- 1,125,677
Issuance of common stock 59,000 472 53,028 -- -- 53,500
Net income -- -- -- 604,846 -- 604,846
--------- ------- --------- -------- ------- ---------
Balance, December 31, 1997 1,418,731 $11,350 1,292,051 480,622 -- 1,784,023
========= ======= ========= ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 17
PH GROUP, INC.
Statements of Cash Flows
For the years ended December 31, 1997 and 1996
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 604,846 367,712
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 339,985 215,282
Gain on sale of property and
equipment (7,875) (16,562)
Changes in assets and liabilities
affecting cash flows from
operating activities:
Accounts receivable (699,402) (857,861)
Inventories (1,924,683) 117,033
Other current assets 3,136 (25,289)
Other noncurrent assets (46,040) (16,748)
Accounts payable 963,160 (57,164)
Accrued income taxes payable 399,126 18,500
Accrued expenses and taxes (9,188) 80,500
Customer deposits 1,029,237 19,969
Deferred income taxes (160,600) (41,000)
Deferred compensation 6,550 6,366
----------- --------
Net cash provided by (used in)
operating activities 498,252 (189,262)
----------- --------
Cash flows from investing activities:
Proceeds from sale of equipment 145,079 14,400
Acquisition costs (211,143) --
Capital expenditures for
property and equipment (319,090) (227,651)
Note receivable, net (9,000) (45,000)
----------- --------
Net cash used in investing
activities (394,154) (258,251)
----------- --------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-6
<PAGE> 18
PH GROUP, INC.
Statements of Cash Flows
(contd)
For the years ended December 31, 1997 and 1996
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Principal payments on
debt obligations $(136,604) (136,106)
Proceeds from debt obligations 600,000 42,136
Line of credit, net (700,800) 625,000
Principal payments on notes
payable to directors -- (87,500)
Payment of capital lease obligations (16,854) (14,814)
Proceeds from issuance of common stock 41,500 12,500
--------- --------
Net cash (used in) provided by
financing activities (212,758) 441,216
--------- --------
Net decrease in cash (108,660) (6,297)
Cash, beginning of year 116,449 122,746
--------- --------
Cash, end of year $ 7,789 116,449
========= ========
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 92,774 64,159
========= =======
Cash paid for interest expense $ 189,570 154,079
========= =======
</TABLE>
See Note 12 for information related to significant non cash investing and
financing transactions during 1997.
The accompanying notes are an integral
part of these financial statements.
F-7
<PAGE> 19
PH GROUP, INC.
Notes to Financial Statements
Note 1 - Business Description:
PH Group, Inc. (previously known as Resource General Corporation), an
Ohio corporation, is the product of the merger of several companies,
the oldest of which was incorporated in 1906. The primary operations of
the Company are the manufacture and marketing of a line of hydraulic
presses and injection molding equipment under the names PH Hydraulics,
St. Lawrence Press and Trueblood. The principal market area of these
product lines is North America. The Company also owns several real
estate parcels held for investment in Ohio, and royalty interests in a
number of oil and gas wells in southeastern Ohio.
Note 2 - Summary of Significant Accounting Policies:
The following is a summary of certain significant accounting policies
followed in the preparation of the financial statements.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market. Inventories at December 31, 1997 and 1996 consisted
of the following:
1997 1996
---- ----
Raw materials $ 425,377 346,365
Work-in-process 2,403,795 457,624
---------- -------
$2,829,172 803,989
========== =======
The Company has in stock certain items which are held as replacement
parts for previously built machines. Inventory of $39,000 in both 1997
and 1996 is shown on the balance sheet as a long-term asset which
represents an estimate of this portion of total materials inventory at
each year end which is not expected to be utilized or sold currently.
F-8
<PAGE> 20
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 2 - Summary of Significant Accounting Policies: (contd)
Property and equipment
Property and equipment are stated at cost. Upon sale or retirement, the
cost and related accumulated depreciation are eliminated from the
respective accounts and the resulting gain or loss is included in
income. Depreciation and amortization are computed using the
straight-line method for financial reporting purposes and accelerated
methods for income tax purposes over the estimated useful lives of the
related assets.
Depreciation expense was $248,674 and $178,556 in 1997 and 1996,
respectively.
Oil and gas royalty interests
Oil and gas royalty interests were valued at $180,000 when originally
acquired, and subsequently written down to $113,345 in 1986 due to a
decline in oil and gas prices. Oil and gas royalty interests are
amortized based on actual oil and gas production compared to reserves
estimated by a geological study. The annual amortization was $4,004 in
1997 and $9,000 in 1996.
The accumulated amortization at December 31, 1997 and 1996 was $113,345
and $109,341, respectively.
Land held for investment
Land held for investment is valued at the lower of cost or market.
Expenditures that add to the recoverable value of the property are
capitalized as land development costs.
Goodwill
Goodwill is being amortized using the straight-line method over periods
ranging from six to fifteen years for financial statement purposes. The
amortization expense for 1997 and 1996 was $61,142 and $27,726,
respectively. Goodwill on the financial statements is shown net of
accumulated amortization at December 31, 1997 and 1996 of $136,026 and
$74,884, respectively.
F-9
<PAGE> 21
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 2 - Summary of Significant Accounting Policies: (contd)
Non competition and consulting agreement
Non competition and consulting agreements are being amortized using the
straight-line method over the lives of the agreements which range from
32 to 116 months. The amortization expense for 1997 was $24,839.
Amounts are presented in other non current assets net of accumulated
amortization of $24,839 at December 31, 1997.
Research and development costs
Research and development costs are expensed as incurred. Research and
development costs of $16,492 were expensed during 1996. There were no
research and development costs in 1997.
Revenue recognition
Revenue from equipment sales and the related costs of sales are
generally recognized when products are completed, and accepted for
shipment by the customer, and all costs are incurred or subject to
reasonable estimate. Advance payments from customers prior to
completion are reported as customer deposits.
Product warranty
The Company generally provides a warranty against defects in its
products for periods ranging from one to two years. A liability for
estimated warranty costs is recognized on current sales. The Company
has determined the estimate based on the historical relationship of
actual warranty costs to sales revenue.
Earnings per share
Basic earnings per share amounts (EPS) are computed based on the
weighted average number of common shares actually outstanding. Diluted
EPS includes the effect on EPS of dilutive stock options and restricted
stock subject to put options. Computation of the dilutive effect of
stock option conversion is computed using the treasury stock method.
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share", became effective with the Company's year ended December 31,
1997. EP information for 1996 has been restated as required by the new
standard. All EPS information for 1996 and 1997 reflects the
retroactive impact of a five for four stock split which occurred
January 2, 1998.
F-10
<PAGE> 22
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 2 - Summary of Significant Accounting Policies: (contd)
Earnings per share (contd)
A reconciliation of basic EPS to diluted EPS is as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------- ----------------------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available
to common
stockholders $604,846 1,397,343 $.43 $367,712 1,357,303 $.27
==== ====
Effect of Dilutive
Securities
Restricted stock
issued in
conjunction
with "St. Lawrence"
acquisition subject
to put option -- 83,904 -- --
Outstanding stock
options -- 140,840 -- 56,090
------- --------- ------ --------
Diluted EPS
Income available to
common stockholders
and assumed
conversions $604,846 1,622,087 $.37 $367,712 1,413,393 $.26
======== ========= ==== ======== ========= ====
</TABLE>
Use of estimates in financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-11
<PAGE> 23
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 3 - Bank Debt and Other Installment Obligations:
Bank line of credit
The Company has a line of credit agreement with a bank to borrow up to
$2,500,000, subject to certain borrowing base restrictions. The line is
secured as noted below. Interest is payable monthly at bank prime plus
1%. The agreement expires on April 1, 1998. Outstanding balances due
were $457,049 and $1,157,849 at December 31, 1997 and 1996.
Term debt
Term debt consists of the following at December 31:
1997 1996
---- ----
Promissory note payable to bank at
an interest rate of prime plus 1%,
secured, due April 1, 1998. Personally
guaranteed by the Company president
and by an entity owned by certain
shareholders. $600,000 --
Term loan payable to a bank at an
interest rate of prime plus 1%, secured,
requires monthly principal payments of
$8,333 through November 2000. 291,667 383,333
Minimum contingent earnout liability on
St. Lawrence Press asset acquisition.
Requires minimum annual payments of $50,000
including principal and interest through
May 2001. An imputed interest rate of 9%
has been applied to this obligation. The
liability is subject to increase based on
sales activity levels, (see Note 12). 124,774 --
F-12
<PAGE> 24
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 3 - Bank Debt and Other Installment Obligations:
Term debt (contd)
1997 1996
---- ----
Other installment notes at interest rates
ranging from 5% to 10.25%, secured by
certain vehicles and manufacturing
equipment, requiring monthly principal and
interest payments with various maturities
through August 2000. 87,287 132,225
---------- -------
Total 1,103,728 515,558
Less current portion 750,658 141,877
---------- -------
Long-term portion $ 353,070 373,681
========== =======
Maturities of long-term debt obligations for each year through
expiration at December 31, 1997 are as follows:
1998 $750,658
1999 174,550
2000 132,648
2001 45,872
The bank financing agreements, line of credit, promissory note, and
term debt are secured by all property and equipment, accounts
receivable, inventory and the assignment of the proceeds of a $500,000
life insurance policy. These agreements also contain several
restrictive covenants regarding the following; tangible net worth, debt
to tangible net worth ratio, defined cash flow coverage ratio, current
ratio, payment of dividends, and repurchase of common stock.
F-13
<PAGE> 25
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 4 - Income Taxes:
The provision for income taxes on income before income taxes is
comprised of the following for the years ended December 31:
1997 1996
---- ----
Currently payable:
Federal $(419,800) (68,500)
State and local (72,100) (15,700)
--------- -------
Total current (491,900) (84,200)
Deferred tax benefit:
Federal 160,600 41,000
--------- ------
Provision for income taxes $ 331,300 43,200
========= ======
The following is a reconciliation between the amount of reported income
tax provision and the amount computed by multiplying income before
income taxes by the applicable statutory federal income tax rate:
1997 1996
---- ----
Expected Federal income
tax expense at statutory
rate of 34% $(318,300) (139,700)
(Increases) decreases:
State and local taxes (72,100) (15,700)
Effect of graduated rates -- 6,800
Change in valuation
allowances on deferred
tax assets 39,800 96,900
Other items, net 19,300 8,500
--------- --------
Provision for income taxes $(331,300) (43,200)
========= ========
F-14
<PAGE> 26
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 4 - Income Taxes: (contd)
Deferred taxes are recorded based upon temporary differences between
the financial statement and tax basis of assets and liabilities and
available tax credit carryforwards. Temporary differences and
carryforwards which give rise to a significant portion of deferred tax
assets and liabilities at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Deferred tax assets:
Inventory $104,900 42,700
Oil and gas mineral rights 28,700 26,300
Deferred landfill development
costs 47,600 45,500
Accrued expenses 79,400 33,800
Alternative minimum tax credit -- 31,900
Goodwill 29,000 15,700
Other items, net 4,600 2,100
Investment tax credits -- 5,600
-------- -------
294,200 203,600
Less: Valuation allowance (54,000) (93,800)
-------- -------
Gross deferred tax asset 240,200 109,800
-------- -------
Deferred tax liabilities:
Depreciation 39,600 69,800
-------- -------
Gross deferred tax liability 39,600 69,800
-------- -------
Net deferred tax asset $200,600 40,000
======== =======
</TABLE>
Note 5 - Leases:
Capital lease agreement
The Company is the lessee of computer hardware and software equipment
under a capital lease agreement which expires in the year 2000. The
lease contains a bargain purchase option at its conclusion. The Company
records assets and liabilities under capital lease agreements at the
lower of the present value of the minimum lease payments or the fair
value of the asset. The assets are depreciated over the lower of their
related lease term or their estimated productive lives.
F-15
<PAGE> 27
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 5 - Leases:
Capital lease agreement (contd)
Minimum future lease payments under the capital lease agreement as of
December 31, 1997 for each year through expiration and in the aggregate
are as follows:
Year ending December 31:
1998 $23,633
1999 23,633
2000 1,968
-------
Total minimum lease payments $49,234
Less amount representing
interest (6,294)
-------
Present value of minimum lease
payments 42,940
Long-term portion 23,765
-------
Current portion $19,175
=======
Following is a summary of property held under capital lease agreement:
1997 1996
---- ----
Office Equipment $101,307 92,607
Less: Accumulated
depreciation 57,304 37,043
-------- ------
$ 44,003 55,564
======== ======
The interest rate on the capital lease agreement is 13%. The Company
imputes interest based on the lower of the Company's incremental
borrowing rate at the inception of the lease or the lessor's implicit
rate of return.
Depreciation on assets held under capital leases for 1997 and 1996 was
$20,261 and $18,522, respectively.
F-16
<PAGE> 28
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 5 - Leases: (contd)
Operating lease agreements
During 1989, the Company entered into an agreement to lease office and
manufacturing space in Columbus, Ohio. The lease period is 125 months
with renewal options for an additional three years and an option to buy
the facility at the conclusion of the lease for its fair market value.
The lease was structured with a rent abatement for the first five
months of the lease and monthly payments starting thereafter at $4,548,
escalating to $7,340. In accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases", the Company has
recorded the lease expense on a straight-line basis.
During May 1997, the Company entered into an agreement to lease office
and manufacturing space in Romulus, Michigan. The lease requires
monthly payments of $14,850, plus a proportionate share of the
operating expenses. The agreement expires in April 2002, with an option
for early termination in April 1999. A portion of this space is
subleased for $2,400 per month, plus a proportionate share of the
operating expenses, under a month to month operating lease agreement.
Minimum future rental payments for the above noncancelable operating
leases having remaining terms in excess of one year as of December 31,
1997, for each year through expiration/cancellation are as follows:
1998 $266,280
1999 118,120
--------
Total minimum future
rental payments $384,400
========
Rental expense under all operating leases was approximately $182,000 in
1997 and $73,000 in 1996.
F-17
<PAGE> 29
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 6 - Fair Value of Financial Instruments:
Estimated fair values of the Company's significant financial
instruments, all of which are held for non- trading purposes
approximate their carrying amounts at December 31, 1997 and 1996. The
fair values of bank line of credit and long-term debt including current
portions, are based on current rates at which the Company could borrow
funds with similar remaining maturities.
Note 7 - Stock Options:
The Company has a fixed director's stock option plan. Under this plan
the Company can grant up to 6,250 options per newly elected director
after May 1996. The maximum term of the options is ten years and they
become fully vested at the end of two years. Directors who held their
position before May 1996 could receive up to 25,000 options which were
fully vested upon receipt, and expire in the year 2005. The exercise
price of each option is equal to the market price of the Company's
stock on the date of the grant. All stock option information in these
financial statements has been adjusted to reflect the impact of a five
for four stock split in January of 1998 (see Note 14).
The Company applies APB Opinion No. 25 in accounting for its stock
options plan, accordingly, no compensation cost has been recognized in
1997 and 1996. Had compensation cost been determined on the basis of
fair value pursuant to FASB Statement No. 123, net income and earnings
per share would have been reduced as follows:
1997 1996
---- ----
Net income
As reported $604,846 367,712
Pro forma 545,276 354,712
Earnings per share
As reported - basic .43 .27
Pro forma - basic .39 .26
As reported - diluted .37 .26
Pro forma - diluted .34 .25
F-18
<PAGE> 30
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 7 - Stock Options: (contd)
The fair value of each option granted is estimated on the grant date
using the Black-Scholes Formula. The following weighted average
assumptions were made in estimating the fair value for options granted
in 1997 and 1996, respectively: risk-free interest rates of 6.25% and
6.84%; and volatility factors of 1.84, and .001. The expected life of
the options was assumed at 4 years and the expected dividend yields
were assumed to be 0% for both 1997 and 1996.
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
1997 1996
------------------------ --------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 252,500 $0.86 217,500 $0.80
Granted 32,500 1.68 62,500 1.04
Exercised (52,250) 0.81 (2,500) 1.00
Forfeited or
expired -- -- (25,000) 0.80
------- -------
Outstanding at
end of year 233,750 $1.02 252,500 $0.86
======= ===== ======= =====
Exercisable at end
of year 179,750 $1.01 194,000 $0.84
======= ===== ======= =====
Weighted average fair
value of options
granted during the
year $2.29 $0.30
===== =====
</TABLE>
Exercise prices range from $.80 to $2.60 per share for options
outstanding at December 31, 1997.
F-19
<PAGE> 31
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 7 - Stock Options: (contd)
The Company adopted the 1997 Stock Incentive Plan at its annual meeting
of shareholders in April 1997. This plan allows the Board of Directors
to grant stock options for up to 187,500 shares of the Company's stock
to employees, directors and consultants. Options to acquire Company
stock for employees and consultants shall not be granted with exercise
prices less than the fair market value of a share on the date of the
grant. The number of shares granted to employees and consultants is at
the discretion of the board. Shares to be granted to non-employee
directors shall be up to 3,750 shares per director per year depending
on the relative increase in income before taxes over the prior calendar
year. Options granted to non-employee directors are to be made at
exercise prices equal to the fair value of the stock at the date of the
annual meeting occurring in the performance year. No options had been
granted under this plan as of December 31, 1997. However, income level
for 1997 will require that options to purchase 18,750 shares, in the
aggregate, at $2.60 per share be granted to non-employee directors on
the date of the Company's 1998 annual meeting of shareholders.
On January 21, 1998 options for 55,700 shares were granted to employees
and executives of the Company. Exercise price for these options is
$3.06 per share.
Note 8 - Transactions with Related Parties:
In 1996 fees of $19,600 were paid to a director for services provided
to the Company.
In 1997 fees of $85,000 were incurred to an entity owned by certain
shareholders in regards to activities involving the St. Lawrence Press
asset acquisition, (see Note 12). At December 31, 1997 a liability of
$32,000 is due to this entity and presented in accounts payable.
The Company's president and an entity owned by certain shareholders
have guaranteed a note payable for $600,000, see Note 3.
F-20
<PAGE> 32
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 8 - Transactions with Related Parties: (contd)
In December 1996 the Company agreed to lend $59,000 to an entity owned
by certain shareholders. At December 31, 1997 the outstanding balance
was $53,100, with $5,900 in other current assets and $47,200 in other
non-current assets. At December 31, 1996 the outstanding balance was
$45,000 with $5,900 in other current assets and $39,100 in other
non-current assets. Interest is computed on the outstanding principal
amount at a rate of bank prime plus 1.25%. Principal repayment is
$5,900 per year for 1998 and 1999. The remaining balance is due in
2000.
Note 9 - Significant Customers and Industry Concentration:
A significant portion of the Company's business activity is with
customers directly or indirectly related to the automotive industry.
One of the Company's customers accounted for approximately 29% of the
sales in 1997 and 33% of the accounts receivable balance at December
31, 1997. One of the Company's customers accounted for 14% of sales in
1996 and 4% of the accounts receivable balance at December 31, 1996.
Generally, the Company performs ongoing credit evaluation of its
customers' financial condition.
Note 10 -Deferred Compensation Plans:
The Company has entered into individual deferred compensation contracts
with several key employees. The Company has invested in corporate-owned
variable annuity investments to fund these agreements. The deferred
compensation benefits do not vest until the employee has completed nine
to ten years of service from the contract date. The deferred
compensation expense recognized during 1997 and 1996 was $6,551 and
$6,366, respectively.
Note 11 -Profit-Sharing Plan:
The Company sponsors a profit-sharing plan covering employees
completing at least six months of service, working at least 1,000
annual hours, and having attained the age of 21. Contributions to the
plan are made at the discretion of the Board of Directors. Employees
have an option to make voluntary contributions to the Plan under the
provisions of Internal Revenue Code Section 401(k). Profit-sharing
expense was approximately $51,900 in 1997, and $44,500 in 1996.
F-21
<PAGE> 33
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 12 -Business Combination:
On April 30, 1997, the Company acquired certain net assets of the St.
Lawrence Press Company in a business combination accounted for as a
purchase. The acquired business is engaged in the production,
development and sales of various multi-ton hydraulic presses. The
results of operations of the acquired business are included in the
financial statements from the date of acquisition. The $1,257,430
purchase price, including acquisition costs, exceeded the value of the
net tangible assets acquired by $910,418. The excess amount was
allocated as follows: Goodwill $763,863; Consulting Agreements
$109,915; and Noncompetition Agreements $36,640. These intangible
assets are being amortized over fifteen years for the Goodwill and the
specific lives of the Noncompetition and Consulting Agreements which
range from 32 to 116 months.
The purchase agreement contains a contingent earnout component where
the purchase price is subject to future increases. The increases are
based on 5% of gross sales in excess of an annual specified level ($2.5
million in the first two years and $3 million in the last two years)
for eligible products in each of the four years following the purchase
date. The maximum earn out for any one year is $200,000 and the minimum
is $50,000. A $170,275 liability has been included on the financial
statements (see Note 3) for the present value of the minimum annual
contingent earnout payments with a corresponding increase in the cost
of the purchase price.
The acquisition was funded with cash, the assumption of liabilities,
notes payable, and restricted common stock which is subject to a
repurchase agreement, (see Note 13).
F-22
<PAGE> 34
PH GROUP, INC.
Notes to Financial Statements
(contd)
Note 13 - Common Shares Subject to Repurchase:
In conjunction with the St. Lawrence Press asset acquisition discussed
in Note 12, the Company has issued 125,000 shares of common stock
which are subject to a repurchase agreement. The issued shares are
subject to restrictions on their transfer and voting rights. The
Company has guaranteed the value of these shares by providing the
holders four separate put rights which can require the Company to
redeem these shares as follows: 31,250 shares on April 30, 1998 at
$1.60 per share; 31,250 shares on April 30, 1999 at $2.40 per share;
31,250 shares on April 30, 2000 at $2.80 per share; and, 31,250 shares
on April 30, 2001 at $3.20 per share. Each separate put option is not
exercisable until the dates shown above and expires one year from this
vesting date. The holders are required to attempt to sell the shares
in the market at a price equal to or greater than the minimum share
price for 90 days prior to requiring the Company to redeem them.
On the date issued, there was no significant difference between the
estimated fair value of the common shares subject to repurchase and
the future mandatory redemption amounts.
Note 14 - Subsequent Event-Stock Split:
On January 2, 1998 the Board of Directors declared a five for four
split of the Company's common stock, payable to shareholders of record
on December 15, 1997. All common stock, stock option, and earnings per
share information has been restated to give retroactive effect for the
split in the 1997 and 1996 financial statements.
F-23
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page in
Sequentially
Numbered
Exhibit No. Description Copy
- ----------- ----------- ----
<S> <C> <C>
2.1. Asset Purchase Agreement, dated as of April 30, 1997,
between PH Group Inc. and St. Lawrence Press Company, Inc.
(incorporated by reference to Exhibit 2 of the Company's
Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 1997; Commission File No. 0-8115). *
3.1. Amended and Restated Articles of Incorporation of the Company
(reflecting the Amended Articles of Incorporation and all
amendments thereto) (incorporated by reference to Exhibit 3.1
of the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended March 31, 1997; Commission File
No. 0-8115) (the "1st Quarter 10-QSB"). *
3.2. Amended and Restated Code of Regulations of the Company
(reflecting the Amended Code of Regulations and all amendments
thereto) (incorporated by reference to Exhibit 3.2 to the 1st
Quarter 10-QSB). *
4.1. See Articles III, IV, V and VI of the Amended and Restated
Articles of Incorporation of the Company (reflecting the
Amended Articles of Incorporation and all amendments thereto)
(incorporated by reference to Exhibit 3.1 to the 1st Quarter
10-QSB).
4.2. See Article I, Section 1(F), 2, and 3 of Article II, Article
IV and Sections 1 and 3 of Article V of the Amended and
Restated Code of Regulations of the Company (reflecting the
Code of Regulations and all amendments thereto) (incorporated
by reference to Exhibit 3.2 to the 1st Quarter 10-QSB).
10.1. Bank Lending Agreement (incorporated by reference to Exhibit 10
to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995; Commission File No. 0-8115) *
10.2. Option Agreement between the Company and Charles T. Sherman
dated January 23, 1997. 37
10.3. Employment Agreement between the Company and Charles T. Sherman
dated January 23, 1997. 40
10.4. Split Dollar Agreement between the Company and Charles T. Sherman
dated September 11, 1997 47
10.5. PH Group Inc. 1997 Stock Incentive Plan. 52
10.6. PH Group Inc. Employee Stock Purchase Plan. 65
23.1 Consent of Greene & Wallace, Inc. 75
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C>
24.1. Powers of Attorney. 76
24.2. Certified resolution of the Registrant's Board of Directors
authorizing officers and directors signing on behalf of the Company
to sign pursuant to a power of attorney. 83
27. Financial Data Schedule (submitted electronically for SEC information only).
</TABLE>
- ---
*Incorporated by reference
<PAGE> 1
Exhibit 10.2
PH GROUP, INC.
2365 SCIOTO HARPER DRIVE
COLUMBUS, OHIO 43204
January 23, 1997
Charles T. Sherman
PH Group, Inc.
2365 Scioto Harper Drive
Columbus, Ohio 43204
Congratulations. You have been granted a Stock Option under the Company's
Stock Incentive Plan (the "Plan") on the following terms:
1. NUMBER OF SHARES. The number of Shares of Common Stock of the Company
that you may purchase under this Option is: 10,000
2. EXERCISE PRICE. The exercise price to purchase Shares under this Option
is: $1.69 per Share.
3. VESTING. 25% of the Shares originally subject to this Option will vest
and become exercisable on the first four anniversaries of the date of this
Agreement if you have been an Employee of the Company continuously from
the date of this Agreement through the date when such portion of the
Option vests. Notwithstanding any other provision hereof, this Option, to
the extent that it has not previously been exercised or lapsed, shall vest
fully and become exercisable upon the occurrence of any Change in Control
if you are an Employee at that time.
4. LAPSE. This Option will lapse and cease to be exercisable upon the
earliest of:
(i) the expiration of 10 years from the date of this Agreement,
(ii) nine months after you cease to be an Employee because of your
death or disability,
(iii) three months after a termination without cause of your
employment with any Employer, or
(iv) immediately upon termination of your employment with all
Employers by such Employers for cause or by your resignation.
5. TAXATION. This Option is a Nonqualified Option. You will have taxable
income upon the exercise of this Option. At that time, you must pay to the
Company an amount equal to the required federal, state, and local tax
withholding less any withholding otherwise made from your salary or bonus.
You must satisfy any relevant withholding requirements before the Company
issues Shares to you.
6. EXERCISE. This Option may be exercised by the delivery of this
Agreement, with the notice of exercise attached hereto properly completed
and signed by you, to the Treasurer of the Company, together with the
aggregate Exercise Price for the number of Shares as to which the Option
is being exercised, after the Option has become exercisable and before it
has ceased to be exercisable. The Exercise Price must be paid in cash by
(a) delivery of a certified or cashier's check payable to the order of the
Company in such amount, (b) wire transfer of immediately available funds
to a bank account designated by the Company, or (c) reduction of a debt of
the Company to you. This Option may be exercised as to less than all of
the Shares purchasable hereunder, but not for a fractional share, nor may
it be exercised as to less than 100 Shares unless it is exercised as to
all of the Shares then available hereunder.
7. NO TRANSFER. This Option may not be sold, pledged nor otherwise
transferred other than by will or the laws of descent and distribution;
and it may be exercised during your lifetime only by you. This Agreement
is neither a negotiable instrument nor a security (as such term is defined
in Article 8 of the Uniform Commercial Code).
<PAGE> 2
8. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not an employment
agreement and nothing contained herein gives you any right to continue to
be employed by or provide services to the Company or affects the right of
the Company to terminate your employment or other relationship with you.
9. PLAN CONTROLS. This Agreement is an Option Agreement (as such term is
defined in the Plan) under Article 5 of the Plan. The terms of this
Agreement are subject to, and controlled by, the terms of the Plan, as it
is now in effect or may be amended from time to time hereafter, which are
incorporated herein as if they were set forth in full. Any words or
phrases defined in the Plan have the same meanings in this Agreement. The
Company will provide you with a copy of the Plan promptly upon your
written or oral request made to its Treasurer.
10. MISCELLANEOUS. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof and it supersedes and
discharges all prior agreements (written or oral) and negotiations and all
contemporaneous oral agreements concerning such subject matter. This
Agreement may not be amended or terminated except by a writing signed by
the party against whom any such amendment or termination is sought. If any
one or more provisions of this Agreement shall be found to be illegal or
unenforceable in any respect, the validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby. This Agreement shall be governed by the laws of the State of
Ohio.
Please acknowledge your acceptance of this Agreement by signing the
enclosed copy in the space provided below and returning it promptly to the
Company.
PH GROUP, INC.
By: /s/ MICHAEL GARDNER
--------------------------
Name: Michael Gardner
------------------------
Its: Vice President
-------------------------
Accepted and Agreed to as of
the date first set forth above:
/s/ CHARLES T. SHERMAN
- --------------------------
Charles T. Sherman
<PAGE> 3
OPTION EXERCISE FORM
The undersigned hereby exercises the right to purchase ____________ shares
of Common Stock of the Company pursuant to the Option Agreement dated January
23, 1997 under the Company's Stock Incentive Plan. The undersigned hereby
represents and warrants to the Company that he or she is not exercising such
rights or planning to transfer such shares while in the possession of material
inside information relating to the Company.
Date:
--------------------------
--------------------------
Charles T. Sherman
Sign and complete this Option Exercise Form and deliver it to:
PH Group, Inc.
Attn.: Treasurer
2365 Scioto Harper Drive
Columbus, Ohio 43204
together with the option price in cash by (a) delivery of a certified or
cashier's check payable to the order of the Company in such amount, (b) wire
transfer of immediately available funds to a bank account designated by the
Company, or (c) reduction of a debt of the Company to you.
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of January 23, 1997 ("Effective Date"), by and between RESOURCE
GENERAL CORPORATION, an Ohio corporation with a place of business at 2365 Scioto
Harper Drive, Columbus, Ohio 43204 (the "Company"), and CHARLES T. SHERMAN of
Powell, Ohio (the "Executive").
WHEREAS, the Executive has significant experience in the management of
capital equipment manufacturing, sales and marketing operations; and
WHEREAS, the Company and the Executive desire that the Executive be
employed by the Company on the terms and conditions herein contained;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto, intending to be legally bound, agree as follows:
Section 1. DUTIES. From and after the Effective Date, and based upon
the terms and conditions set forth herein, the Company agrees to employ the
Executive and the Executive agrees to be employed by the Company, as President
and Chief Executive Officer of the Company and in such equivalent, additional or
higher executive level position or positions as shall be assigned to him by the
Board of Directors of the Company (the "Board of Directors"). While serving in
such executive level position or positions, the Executive shall report to, be
responsible to, and shall take direction from the Board of Directors. During the
Term of this Agreement, the Executive agrees to devote substantially all of his
working time to the position he holds with the Company and to faithfully,
industriously, and to the best of his ability, experience and talent, perform
the duties which are assigned to him. The Executive shall observe and abide by
the reasonable corporate policies and decisions of the Company in all business
matters.
Section 2. TERM. Subject to Sections 4 and 5 hereof, the term of this
Agreement shall be for a period commencing January 23, 1997, and terminating on
December 31, 2001 and shall continue thereafter on a year-to-year basis unless
either party hereto gives written notice to the other at least six months prior
to December 31 of the year in which such party intends to have this Agreement
terminate that such party does not intend to renew this Agreement (the "Term").
Section 3. COMPENSATION. During the Term, the Company shall pay, and
the Executive agrees to accept as full consideration for the services to be
rendered by the Executive hereunder, compensation consisting of the following:
3.1. SALARY. Beginning on the first day of the Term and
continuing throughout the Term, the Company shall pay the Executive a salary of
$150,000/year, payable in accordance with the customary pay practices of the
Company. Such salary may be increased or decreased by the Board of Directors
(but not below $150,000 per year).
<PAGE> 2
3.2. BONUS. The Board of Directors will, on an annual basis,
review the performance of the Company and of the Executive and will pay such
bonus as they deem appropriate, in their discretion, to the Executive based upon
such review.
3.3. BENEFITS. During the Term, the Executive will receive
such employee benefits as are generally available to all executives of the
Company. The Executive shall be entitled to reimbursement for all business
expenses he incurs in the performance of his duties against presentation of
appropriate documentation thereof.
3.4. CONTINUATION. The salary and benefits shall cease if the
Executive is terminated "for cause" (as defined in Section 4.1) or if the
Executive resigns (see Sections 4 and 5). The salary shall continue to be paid
in monthly installments under the following rules:
3.4.1. SALARY. If the employment of the Executive is
terminated for any reason other than "cause" or the voluntary resignation by the
Executive, the Executive shall continue to receive in monthly installments his
base salary in effect at the time of such termination until the first of the
following occurs: (a) the start of the Executive's employment with another
employer, or (b) 12 months from the date of such termination; provided, however,
that if the Executive's new employment pays the Executive an annual base salary
which is less than the annual base salary the Executive received at the time of
termination of his employment with the Company, the monthly difference (net of
applicable taxes, if any) shall be paid by the Company to the Executive for any
month that the Executive was so employed during the period of 12 months from the
date of termination of Executive's employment with the Company.
3.4.2. STOCK OPTION. The Company shall cause to be
prepared and adopted by the Company a stock option plan pursuant to which the
Executive shall be granted a Nonqualified stock option to purchase 10,000 Common
shares of the Company at the average of the closing bid and asked prices of a
share of the Company's stock on the Effective Date (such stock option being
referred to hereinafter as the "Option"; a "Nonqualified stock option" means a
stock option other than an "Incentive Stock Option", as the same is described in
Section 422 of the Internal Revenue Code of 1986).
Section 4. TERMINATION. The Company may terminate the employment of the
Executive prior to the end of the Term of this Agreement "for cause", with such
termination "for cause" being based upon the following terms and conditions:
4.1. TERMINATION FOR CAUSE. Termination "for cause" shall be
defined as a termination by the Company of the employment of the Executive
occasioned by (a) a willful and continuous breach of this Agreement or a
material duty by the Executive in the course of his employment or willful and
continued neglect of his duty as an employee hereunder, after written notice
thereof has been given to the Executive and such activities have not been cured
within a reasonable time thereafter; (b) the conviction of the Executive by a
court of competent jurisdiction of a felony; (c) Executive engaging in any act
involving the misuse or misappropriation of money or other property of the
Company, defrauding the Company, any affiliate of the Company or any customer of
the Company; or (d) the current abuse by the Executive of illegal drugs or other
controlled substances.
-2-
<PAGE> 3
4.2. CESSATION OF PAYMENTS. In the event of termination by the
Company "for cause", all salary, benefits and other payments shall cease at the
time of termination, and the Company shall have no further obligations to the
Executive under this Agreement. In the event that a benefit plan or stock plan
which covers the Executive has specific provisions concerning termination of
employment, then such benefit plan or stock plan shall control the disposition
of the benefits or stock options.
4.3. RENEGOTIATION. The parties agree that the employment
relationship described herein shall end if either party gives written notice to
the other of its intention to terminate this Agreement, as set forth in Section
2. Nevertheless, if the Executive continues to render services in the Company's
employ after the termination of this Agreement in the absence of any written
extension, it is understood that such continued employment will be "at will,"
terminable at any time by either party.
4.4. DISABILITY. The Company may terminate the employment of
the Executive prior to the end of the Term if the Executive has been unable to
perform his duties hereunder for a continuous period of six months due to a
physical or mental condition that, in the opinion of a licensed physician, will
be of indefinite duration or is without a reasonable probability of recovery.
The Executive agrees to submit to an examination by a licensed physician of the
Company's choice in order to obtain such opinion at the request of the Company,
made after the Executive has been absent from his place of employment for at
least six months. Such examination shall be paid for by the Company. However,
this provision does not abrogate either the Company's or the Executive's rights
and obligations pursuant to the Family and Medical Leave Act of 1993, and a
termination of employment under this Section 4.4 shall not be deemed to be a
termination "for cause."
Section 5. RESIGNATION, DEATH OR DISABILITY.
5.1. RESIGNATION. If, during the Term, the Executive resigns
for any reason, all salary, benefits and other payments (except those that must
continue by statute) shall cease at the time such resignation becomes effective.
In the event that a benefit plan or stock plan which covers the Executive has
specific provisions relative to resignation by an employee, then such benefit
plan or stock plan shall control the disposition of the benefits or stock
options.
5.2. DEATH OR DISABILITY. If, during the Term, the Executive
dies or his employment is terminated because of his disability (see Section 4.4
above), all salary, benefits and other payments (except those that must continue
by statute) shall cease at the time of death or disability, provided, however,
that the Company shall provide such health, dental and similar insurance or
benefits as were provided to Executive immediately before his termination by
reason of death or disability, to Executive or his family for 12 months after
such termination on the same terms and conditions (including cost) as were
applicable before such termination. In the event that such a benefit plan or a
stock plan which covers the Executive has specific provisions concerning the
death or disability of an employee (e.g., life insurance or disability
insurance), then such benefit plan or stock plan shall control the disposition
of such benefits or stock options.
-3-
<PAGE> 4
5.3. NONEXCLUSIVE REMEDY. The language set forth in Section 5
shall not limit the Company's right to seek other remedies for damages incurred
in the event Executive fails to comply with the terms of this Agreement.
5.4. TERMINATION OTHER THAN FOR CAUSE. If the Executive's
employment with the Company is terminated by the Company other than "for cause",
the benefits and other payments provided for hereunder shall continue during the
period during which base salary payments are made.
Section 6. PROPRIETARY INFORMATION. The Executive agrees that he will
not, during the Term and for a period of five years thereafter, use directly or
indirectly, for his own account or for the account of any other person, firm or
corporation, or disclose to any other person, firm or corporation, confidential
information of the Company, including, but not limited to, supplier or customer
lists, pricing or cost information, purchasing and marketing know-how, methods
and techniques, in any form whatsoever; provided, however, that confidential
information shall not include information that shall become generally known to
the public or the trade without violation of this Agreement. Notwithstanding
anything to the contrary contained in this Section 6, in the event Executive is
required to disclose any confidential information by court order or decree or in
compliance with the rules and regulations of a governmental agency or in
compliance with law, the Executive will provide the Company with prompt notice
of such required disclosure so that the Company may seek an appropriate
protective order and/or waive compliance with the provisions of this Section 6.
If in the absence of a protective order or the receipt of a waiver hereunder,
the Executive is advised by counsel that such disclosure is necessary to comply
with such court order, decree, rule, regulation or law, the Executive may
disclose such information in accordance with such court order or decree or in
compliance with such rule, regulation or law without liability hereunder.
Section 7. NON-COMPETITION.
7.1. PROSCRIBED ACTIVITIES. Executive agrees that during the
Term and for three years thereafter, the Executive will not
7.1.1. enter into the employ of or render any
services to any person, firm, or corporation, which has a material amount of its
assets employed in a Competitive Business (as defined in Section 7.2 below);
7.1.2. engage in any Competitive Business for his own
account;
7.1.3. become associated with or interested in
through retention or by employment any Competitive Business as an individual,
partner, shareholder, creditor, director, officer, principal, agent, employee,
trustee, consultant, advisor, or in any other relationship or capacity;
7.1.4. solicit, interfere with, or endeavor to entice
away from the Company, any of its employees, customers, strategic partners, or
sources of supply;
7.1.5. discourage or otherwise attempt to prevent any
person from doing business with the Company; or
-4-
<PAGE> 5
7.1.6. disparage, by any means and to any person, the
Company or its business or any person employed by or on the Board of Directors
of the Company.
7.2. PERMITTED ACTIVITIES. Nothing in this Agreement shall
preclude the Executive from investing his personal assets in the securities of
any Competitive Business if such securities are traded on a national stock
exchange or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than one percent (1%) of
the publicly-traded equity securities of such Competitive Business. "Competitive
Business" for purposes of this Agreement shall mean any business or enterprise
which is engaged in the development and/or commercialization of products or
services:
7.2.1. related to the manufacture and sale of
industrial machine presses or injection molding presses or related automation,
or
7.2.2. reasonably understood to be competitive in the
relevant market with products and/or systems described in Section 7.2.1 above.
Section 8. INJUNCTIVE RELIEF. The Executive specifically acknowledges
and agrees that (a) the restrictions contained in Sections 6 and 7 are
reasonable in view of the nature of the business in which the Company is
engaged, (b) the Executive's obligations under this Agreement are of a special
and unique character which gives them a peculiar value, and (c) the Company
cannot be reasonably or adequately compensated in damages in an action at law in
the event the Executive breaches any of his obligations under Sections 6 or 7.
The Executive therefore expressly agrees that, in addition to any other rights
or remedies which the Company may possess, the Company shall be entitled to
injunctive and other equitable relief to prevent a breach of any of the
provisions of Section 6 or Section 7, including, without limitation, a temporary
restraining order or temporary injunction from any court of competent
jurisdiction restraining any threatened or actual violation, and the Executive
hereby consents to the entry of such an order and injunctive relief and waives
the making of a bond as a condition for obtaining such relief. Such rights shall
be cumulative and in addition to any other legal or equitable rights and
remedies the Company may have. It is expressly agreed by the parties hereto that
all of the provisions of this Section 8 shall survive the termination of this
Agreement.
Section 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
Section 10. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of the Agreement, which shall remain in
full force and effect.
Section 11. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and preliminary agreements.
This Agreement may not be amended except in writing executed by the parties
hereto.
-5-
<PAGE> 6
Section 12. EFFECT ON SUCCESSORS OF INTEREST. This Agreement shall
inure to the benefit of and be binding upon heirs, administrators, executors,
successors and assigns of each of the parties hereto. Notwithstanding the above,
the Executive recognizes and agrees that his obligation under this Agreement may
not be assigned without the consent of the Company.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
RESOURCE GENERAL CORPORATION EXECUTIVE
By: /s/ MICHAEL GARDNER /s/ CHARLES T. SHERMAN
------------------------------- ----------------------------
Michael Gardner, Vice President Charles T. Sherman
-6-
<PAGE> 1
SPLIT DOLLAR AGREEMENT
- ------------------------------------------------------------------------
This agreement made and entered into at Columbus, Ohio, this eleventh
day of September 1997, by and between PH Group Inc., a for-profit corporation,
having its principal office at 2365 Scioto Harper Drive, Columbus, Ohio 43204
(hereinafter called "Corporation") and an employee of said corporation, residing
at 354 Whitaker Avenue, Powell, Ohio 43065 (hereinafter called "Insured").
WHEREAS, Charles T. Sherman has been employed by the Corporation and
renders valuable and vital services to and for the benefit of the Corporation:
and
WHEREAS, the Corporation desires to maintain and continue harmonious
relations with said Employee in order to retain the services of said Employee:
and
WHEREAS, the Corporation is willing to pay a portion of the premiums
for the mutual benefit of the parties hereto, for investments in life insurance
on the life of said Employee so as to provide life insurance protection.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. This agreement shall be funded by a Flexible Premium Variable
Life Insurance policy. When issued, such policy shall be
identified and be made part of this agreement by inserting in
Schedule A, attached hereto, the policy number and specified
amount. Additional life coverage on the Insured may be made
subject to the terms of this agreement by an inc- rease in the
coverage (as permitted by the terms) of the life policy and by
including any such increase in coverage in Schedule A. Other
insurance policies on the life of said Insured may be made
subject to the terms of this agreement by including them on
Schedule A.
2. Said Owner shall be designated Owner of the policy and may
exercise ownership rights permitted to such Owner by the terms
of such policy, except that said policy shall be collaterally
assigned to the Corporation. The policy shall be subject to
said collateral assignment.
3. Said Employee shall have all powers or rights in and/or
affecting the aforesaid life insurance policy subject to the
aforesaid collateral assignment provided the collateral
assignment has not been released by the Corporation.
4. Payment of Premiums. The following provisions shall govern the
<PAGE> 2
payment of premiums with respect to the policy:
a) Corporate Payment of Premiums. On or before
the due date of each policy premium, or
within any grace period, corporate shall (i)
pay the full amount of the premium to the
insurer AND (ii) promptly furnish evidence
to the Employee of its timely payment of
such premium.
(b) Employee Reimbursement of Computed Economic
Benefit. Employee shall reimburse the
Corporation for a portion of each premium
paid by the corporation. The amount of such
reimbursement shall equal the economic
benefit attributed to the life insurance
protection, on the Employee's life, that is
provided under this Agreement. The value of
such economic benefit shall be calculated
using the lesser of (i) the rates known as
"P.S. 58" rates or (ii) the insurer's
published premium rates for an individual
one-year term life insurance policy
available to all standard risks-in either
case, based in the Employee's age at the due
date of the premium payment.
5. In the event that the policy shall mature as a death
claim while this agreement remains in force, the
Corporation shall be entitled to claim from the
proceeds payable hereunder the sum total of all of
its contributions towards the premium payments then
outstanding. Said payment shall be considered a
return of capital to the Corporation and a
termination of this agreement. The balance of such
proceeds shall be paid to the beneficiary or
beneficiaries designated by the Employee in the
manner and in the amount provided under the terms of
said policy and any subsequent beneficiary
designation. "Premium Payment Then Outstanding," as
used in the agreement, means the aggregate amount of
payments advanced by employer in payment of premiums
as provided above, less any amounts received by
employer under the policy or from insured in
reimbursement of such payments.
6. This agreement shall be terminated upon the happening
of any of the following events:
(a) By mutual consent of the parties hereto.
(b) By termination, other than retirement, of
the Insured's employment with the said
Corporation.
(c) In the event this agreement is terminated
under this Paragraph 6, the Corporation
shall be entitled to a sum equal to the
total sum of the Corporation's contributions
<PAGE> 3
toward premium payments then outstanding in
said policy. Upon such payment, the
corporation shall deliver to the Owner the
assignment pertinent to each policy. The
terms of said payments are as follows:
i) A lump sum payment by said Owner of
the entire sum within thirty (30)
days after the termination of this
agreement. If said payment is to be
made by either a loan or withdrawal
of existing policy cash values, the
30-day payment period applies only
if the insurance company is solvent
and not in any form of
rehabilitation. Should the
availability of cash value from the
policy be unavailable, for any
reason, the Owner's payment period
to said corporation will be extended
until such time as the insurance
company can and will release the
existing policy cash values, or
ii) Installment payment of the premium
payments then outstanding plus
interest of the rate of 8% per
annum. Said payments shall be paid
in equal monthly installments within
two (2) years after the termination
date of this agreement. Said
payments shall be evidenced by a
series of promissory notes in like
amounts.
iii) Said owner shall have five (5) days
after the termination of this
agreement to elect the method of
payment and shall notify the
corporation thereof. If no election
is made by said Owner, the full
purchase price shall become due and
payable at the option of said
Corporation within thirty(30) days
after notice is given to said Owner
by the Corporation in accordance
with the notice requirements set
forth at Paragraph 10 of this
agreement. In the event the amount
due the Corporation is not paid, the
Corporation as assignee, shall be
entitled to exercise and all rights
given to it by the assignment.
7. The parties hereto agree that any insurance company
funding this agreement shall be fully discharged as
to any policy issued by it by the payment of the
death benefit thereunder to the beneficiaries named
in the insurance policy, subject to the terms and
condition of such policy. In no event shall any such
insurance company be considered a party to this
agreement nor to any modifications or amendments
thereof or any agreement
<PAGE> 4
supplementary thereto. Nothing in this agreement nor
in any modifications, amendments or supplements
hereto shall in any way affect the obligations of
said insurance company as expressly provided by the
policy (or policies) of insurance issued by it or the
collateral assignment pertaining to each policy. It
is further agreed that the insurance company, acting
in good faith, may rely on the statement of the
Corporation of any amount due the Corporation under
the collateral assignment and this agreement.
8. This agreement may not be amended or modified except
by a written instrument signed by the parties or
their successors in interest hereto.
9. This agreement shall be binding upon the parties
hereto and their successors, assigns executor or
administrators and beneficiaries.
10. All notices required by this agreement are to be in
writing and sent be certified or registered mail to
the addresses above stated.
11. This agreement shall be subject to and interpreted
according to the laws of the state of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement the day and year first above written.
ATTEST:
------------------- -----------------------
Secretary Chairman
WITNESS:
------------------- ------------------------
Employee
<PAGE> 5
SCHEDULE A
INSURANCE POLICIES
- --------------------------------------------------------------------------------
INSURANCE CARRIER POLICY NUMBER FACE AMOUNT TYPE OF POLICY
Pacific Mutual VP6051182-0 $425,000 Flexible Premium
Variable Life
<PAGE> 1
Exhibit 10.5
PH GROUP INC.
1997 STOCK INCENTIVE PLAN
--------------------
JANUARY 28, 1997
--------------------
PREAMBLE:
1. PH Group Inc., an Ohio corporation (the "Company"), by means of this
Stock Incentive Plan (the "Plan"), desires to attract and retain capable
employees, officers, directors and consultants and to provide them with long
term incentives to continue their services to the Company, to maximize the value
of the Company to its shareholders and to acquire a continuing ownership
interest in the Company.
2. The Company has determined that the foregoing objectives will be
promoted by granting Awards (as hereinafter defined) under this Plan to certain
employees, officers, directors and consultants of the Company and of its Parent
and Subsidiaries, if any, pursuant to this Plan.
TERMS:
ARTICLE 1. DEFINITIONS.
Section 1.1. General. Certain words and phrases used in this Plan shall
have the meanings given to them below in this section:
"Award" means a grant of Options under the Plan.
"Board of Directors" means the board of directors of the Company.
"Change in Control" means (a) the acquisition by any person (defined for
the purposes of this definition to mean any person within the meaning of Section
13(d) of the Exchange Act), other than the Company or an employee benefit plan
created by the Board of Directors for the benefit of its Employees, either
directly or indirectly, of the beneficial ownership (determined under Rule 13d-3
of the Regulations promulgated by the SEC under Section 13(d) of the Exchange
Act) of securities issued by the Company having 20% or more of the voting power
of all the voting securities issued by the Company in the election of Directors
at the next meeting of the holders of voting securities to be held for such
purpose; (b) the election of a majority of the Directors elected at any meeting
of the holders of voting securities of the Company who are persons who were not
nominated for such election by the Board of Directors or a duly constituted
committee of the Board of Directors having authority in such matters; (c) the
approval by the shareholders of the Company of a merger or consolidation with
another person, other than a merger or consolidation in which the holders of the
Company's voting securities issued and outstanding immediately before such
merger or consolidation continue to hold voting securities in the surviving or
resulting corporation (in the same relative proportions to each other as existed
before such event) comprising 80% or more of the voting power for all purposes
of the surviving or resulting corporation; or (d) the approval by the
shareholders of the Company of a transfer of substantially all of the assets of
the Company to another person other than a transfer to a transferee, 80% or more
of the voting power of which is owned or controlled by the Company or by the
holders of the Company's voting securities issued and outstanding immediately
before such transfer in the same relative proportions to each other as existed
before such event.
"Code" means the Internal Revenue Code of 1986 and the regulations
thereunder, as now in effect or hereafter amended.
<PAGE> 2
"Committee" means the Committee of the Board of Directors that administers
the Plan under Section 2.1 below.
"Common Stock" means the common stock, without par value, of the Company.
"Consultant" means any person who provides services to any Employer (other
than in connection with the offer or sale of securities of the Employer in a
capital raising transaction), who is neither an Employee nor a Director and who
is a consultant or an adviser to the Employer within the meaning of General
Instruction A.1. to Form S-8 promulgated by the SEC under the Securities Act of
1933.
"Date of Grant" means the date an Award is first granted.
"Director" means a member of the Board of Directors.
"Effective Date" means the date this Plan is first adopted by the Board of
Directors.
"Employee" means any common law employee of an Employer.
"Employer" means the Company or any Parent or Subsidiary of the Company
which employs a given Employee or has engaged a given Consultant.
"Exchange Act" means the Securities Exchange Act of 1934 and the
regulations thereunder, as now in effect or hereafter amended.
"Exercise Price" means, with respect to an Option, the amount of
consideration that must be delivered to the Company in order to purchase a
single Share thereunder.
"Fair Market Value of a Share" means the amount determined to be the fair
market value of a single Share by the Committee based upon the trading price of
the Shares, their offering price in public and private offerings by the Company
and such other factors as it deems relevant. In the absence of such a
determination, the Fair Market Value of a Share shall be deemed to be (a) if the
Shares are listed or admitted to trading on a national securities exchange or
the NASDAQ - National Market System, the per Share closing price regular way on
the principal national securities exchange or the NASDAQ - National Market
System on which the Shares are listed or admitted to trading on the day prior to
the date of determination or, if no closing price can be determined for the date
of determination, the most recent date for which such price can reasonably be
ascertained, or (b) if the Shares are not listed or admitted to trading on a
national securities exchange or the NASDAQ - National Market System, the mean
between the representative bid and asked per Share prices in the
over-the-counter market at the closing of the day prior to the date of
determination or the most recent such bid and asked prices then available, as
reported by NASDAQ or if the Shares are not then quoted by NASDAQ as furnished
by any market maker selected from time to time by the Company for that purpose.
"Grantee" means any Participant to whom an Award has been granted.
"Holder" means any Grantee who holds a valid Award and any heir or legal
representative to whom such Grantee's Award has been transferred by will or the
laws of descent and distribution.
"Incentive Stock Option" or "ISO" means a Stock Option intended to comply
with the terms and conditions set forth in Section 422 of the Code.
"Meeting Date" means the date of each annual meeting of the shareholders of
the Company at which Directors are elected.
<PAGE> 3
"Nonqualified Option" means a Stock Option other than an Incentive Stock
Option.
"Officer" means an officer of the Company as defined in 17 C.F.R.ss.
240.16a-1(f) as now in effect or hereafter amended.
"Option" or "Stock Option" means a right granted under Article 5, 6 or 7 of
the Plan to a Grantee to purchase a stated number of Shares.
"Option Agreement" means an agreement evidencing an Option substantially in
the form of Exhibit A, Exhibit B or Exhibit C attached hereto.
"Parent" means a parent of a given corporation as such term is defined in
Section 424(e) of the Code.
"Participant" means a person who is eligible to receive an Award under the
Plan.
"Plan" means this Plan as it may be amended or restated from time to time.
"Rule 16b-3" means Rule 16b-3 (17 C.F.R. ss. 240.16b-3) promulgated under
Section 16(b) of the Exchange Act as now in effect or hereafter amended.
"SEC" means the Securities and Exchange Commission.
"Shares" means shares of Common Stock.
"Subsidiary" means a subsidiary of a given corporation as such term is
defined in Section 424(f) of the Code.
"Ten Percent Shareholder" means a person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company. Ownership shall, for the
purposes of the previous sentence, be determined under the rules set forth in
Section 424 of the Code.
"Termination without cause" means a termination by an Employer of the
employment or consulting relationship of a Grantee with the Employer that is not
for cause and is not occasioned by the resignation, death or disability of the
Grantee.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles.
Section 1.3. Effect of Definitions. The definitions set forth in Section
1.1 above shall apply equally to the singular, plural, adjectival, adverbial and
other forms of any of the words and phrases defined regardless of whether they
are capitalized.
ARTICLE 2. ADMINISTRATION.
Section 2.1. Committee. The Plan shall be administered by a committee of
the Board of Directors consisting of three or more Directors, each of whom is a
"non-employee director" as described in paragraph (b)(3)(i) of Rule 16b-3.
Unless the Board of Directors designates another of its committees to administer
the Plan, the Plan shall be administered by a committee consisting of those
members of the Compensation Committee of the Board of Directors who are
non-employee directors, but, if the Compensation Committee is abolished or its
membership does not contain three persons who comply with the requirements of
the first sentence of this Section 2.1, the Board of Directors shall either
reconstitute the Compensation Committee in compliance with, or create another
Committee that complies with, the requirements of the first sentence of this
Section 2.1 to administer the Plan.
<PAGE> 4
Section 2.2. Authority. Subject to the express provisions of the Plan and
in addition to the powers granted by other sections of the Plan, the Committee
has the authority, in its discretion, to (a) determine the Participants, grant
Awards and determine their timing, pricing and amount; (b) define, prescribe,
amend and rescind rules, regulations, procedures, terms and conditions relating
to the Plan; (c) make all other determinations necessary or advisable for
administering the Plan including, but not limited to, interpreting the Plan,
correcting defects, reconciling inconsistencies and resolving ambiguities; (d)
review and resolve all claims of Employees, Consultants, Directors, Grantees,
Holders and Participants; and (e) delegate to the Officers the authority to
select Grantees under Articles 5 and 6 (other than Officers) and grant Awards to
such Grantees having terms and in appropriate amounts determined by the
Committee. The actions and determinations of the Committee on matters related to
the Plan shall be conclusive and binding upon the Company and all Employees,
Consultants, Directors, Grantees, Holders and Participants.
ARTICLE 3. SHARES.
Section 3.1. Number. The aggregate number of Shares in respect of which
Awards may be granted under the Plan shall not exceed 150,000, which number of
Shares is hereby reserved for issuance under the Plan out of the authorized but
unissued Shares.
Section 3.2. Cancellations. If any Awards granted under the Plan are
canceled or terminate or expire for any reason without having been exercised or
matured in full, the Shares related to the unexercised portion of an Award shall
be available again for the purposes of the Plan. If any Shares acquired under
the Plan are forfeited for any reason, the Shares shall be available again for
the purposes of the Plan.
Section 3.3. Anti-Dilution.
(a) If the Shares are split or if a dividend of Shares is paid on the
Shares, the number of Shares on which each then outstanding Award is based and
the number of Shares as to which Awards may be granted under this Plan shall be
increased automatically by the ratio between the number of Shares outstanding
immediately after such event and the number of Shares outstanding immediately
before such event and the Exercise Price thereof shall be decreased
automatically by the same ratio. If the Shares are combined into a lesser number
of Shares, the number of Shares for which each then outstanding Award is based
and the number of Shares as to which Awards may be granted under the Plan shall
be decreased automatically by such ratio and the Exercise Price thereof shall be
increased automatically by such ratio.
(b) If any other change occurs in the Shares, through recapitalization,
merger, consolidation or exchange of shares or otherwise, there shall
automatically be substituted for each Share subject to an unexercised Award and
each Share available for additional grants of Awards, the number and kind of
shares or other securities into which each outstanding Share was changed, and
the Exercise Price shall be increased or decreased proportionally so that the
aggregate Exercise Price for the securities subject to each Award shall remain
the same as immediately before such event. In addition, the Committee may make
such further equitable adjustments in the Plan and the then outstanding Awards
as are deemed necessary and appropriate by the Committee including, but not
limited to, changing the number of Shares reserved under the Plan or covered by
outstanding Awards, the Exercise Price of outstanding Awards and the vesting
conditions of outstanding Awards.
Section 3.4. Source. Except as otherwise determined by the Board of
Directors, the Shares issued under the Plan shall be drawn from the Company's
authorized but unissued Shares. However, Shares which are to be delivered under
the Plan may be obtained by the Company from its treasury, by purchases on the
open market or from private sources, as well as by issuing authorized but
unissued Shares. The proceeds of the exercise of any Award shall be general
corporate funds of the Company. No Shares may be sold under any Option Agreement
for less than the par value thereof. No fractional Shares shall be issued or
sold under the Plan nor will any cash payment be made in lieu of fractional
Shares.
Section 3.5. Rights of a Shareholder. No Holder or other person claiming
under or through any Holder shall have any right, title or interest in or to any
Shares allocated or reserved under the Plan or subject to any Award except as to
such Shares, if any, for which certificates representing such Shares have been
issued to such Holder.
<PAGE> 5
Section 3.6. Securities Laws. No Award shall be exercised nor shall any
Shares or other securities be issued or transferred pursuant to an Award unless
and until all applicable requirements imposed by federal and state securities
laws and by any stock exchanges upon which the Shares may be listed, have been
fully complied with. As a condition precedent to the exercise of an Award or the
issuance of Shares pursuant to the grant or exercise of an Award, the Company
may require the Holder to take any reasonable action to meet such requirements
including providing undertakings as to the investment intent of the Holder,
accepting transfer restrictions on the Shares issuable thereunder and providing
opinions of counsel, in form and substance acceptable to the Company, as to the
availability of exemptions from such requirements.
ARTICLE 4. ELIGIBILITY.
Section 4.1. Article 5. Only Employees who are not members of the Committee
shall be eligible to receive Options under Article 5 below.
Section 4.2. Article 6. Only Consultants shall be eligible to receive
Options under Article 6 below.
Section 4.3. Article 7. Only Directors who are not Employees shall be
eligible to receive Options under Article 7 below.
ARTICLE 5. EMPLOYEES' STOCK OPTIONS.
Section 5.1. Determinations. The Committee shall determine which
Participants shall be granted Options, the number of Shares for which the
Options may be exercised, the times when they shall receive them and the terms
and conditions of individual Option grants (which need not be identical). The
Committee may delegate the authority granted to it in this Section 5.1 pursuant
to clause (e) of Section 2.2 above.
Section 5.2. Exercise Price. The Committee shall determine the Exercise
Price of each Option at the time that it is granted, but in no event shall the
Exercise Price of an Option be less than the Fair Market Value of a Share on the
Date of Grant. If no express determination of the Exercise Price of an Option is
made by the Committee, the Exercise Price thereof is equal to the Fair Market
Value of a Share on the Date of Grant.
Section 5.3. Term. Subject to the rule set forth in the next sentence, the
Committee shall determine the times when an Option vests and the term during
which an Option is exercisable at the time that it is granted. No Option shall
be exercisable after the expiration of ten years from the Date of Grant. If no
express determination of the times when Options are exercisable is made by the
Committee:
(a) each Option shall vest and first become exercisable (subject to the
rule set forth in Section 5.4(c) below) as to 25% of the Shares subject to
such Option on each of the first four anniversaries of the Date of Grant
provided the Grantee has been an Employee continuously during the time
beginning on the Date of Grant and ending on the date when such portion
vests and first becomes exercisable; and
(b) each Option shall lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of ten years from the Date of Grant,
(ii) subject to the rule set forth in Section 5.4(d) below, nine months
after the Grantee ceases to be an Employee because of death or
disability,
(iii) three months after the termination without cause of the Grantee's
employment with all Employers, or
(iv) immediately upon termination of the Grantee's employment with all
Employers by the applicable Employers for cause or by the Grantee's
resignation.
<PAGE> 6
Where both an Incentive Stock Option and a Nonqualified Option are granted, the
number of Shares which become exercisable under clause (a) of the previous
sentence at any time shall be calculated on the basis of the total of the Shares
subject to both Options and the Options shall become exercisable as to that
number of Shares first under the Incentive Stock Option and then under the
Nonqualified Option, unless the rule set forth in Section 5.4(c) below would
defer the exercisability of such Incentive Stock Option, in which case such
Nonqualified Options shall become exercisable first. Notwithstanding the terms
of any Option, the preceding sentence, and Section 5.4, all Options that have
not previously been exercised nor lapsed and ceased to be exercisable, shall
vest fully and become exercisable upon the occurrence of any Change in Control
occurring after the Effective Date if the Grantee is an Employee at the time of
the Change in Control.
Section 5.4. Incentive Stock Options.
(a) The Committee shall determine whether any Option is an Incentive
Stock Option or a Nonqualified Option at the time that it is granted and, if no
express determination is made by the Committee, all Options granted to
Participants who are Employees and who are not Ten Percent Shareholders are
Incentive Stock Options and all Options granted to Ten Percent Shareholders
shall be Nonqualified Options.
(b) If the Committee grants Incentive Stock Options, they shall be on
such terms and conditions as may be necessary to render them "incentive stock
options" pursuant to Section 422 of the Code.
(c) The aggregate Fair Market Value of the Shares, determined as of the
time the Option is granted, which first become exercisable under all Incentive
Stock Options granted under this Plan or any other plan of the Company or any
Parent or Subsidiary of the Company, shall not exceed $100,000 during any
calendar year and, if the foregoing limit would be exceeded in any given
calendar year by the terms of any Incentive Stock Option granted hereunder, the
exercisability of such portion of such Option as would exceed such limit shall
be deferred to the first day of the next calendar year and, if such excess
involves more than one Option, the exercisability of the most recently granted
Option shall be deferred first.
(d) If the employment of a Grantee, who holds an ISO, with any Employer
is terminated because of a "disability" (within the meaning of Section 22(e)(3)
of the Code), the unexercised portion of the ISO may be exercised only within
six months after the date on which employment was terminated, and only to the
extent that such Grantee could have otherwise exercised such ISO as of the date
of termination. If a Grantee, who holds an ISO, dies while employed by an
Employer (or within six months after termination of employment by reason of a
disability or within 30 days after termination of employment without cause), the
unexercised portion of the ISO at the time of death may be exercised only within
six months after the date of death, and only to the extent that the Grantee
could have otherwise exercised such ISO at the time of death. In such event,
such ISO may be exercised by the executor or administrator of the Grantee's
estate or by any Holder.
(e) No Ten Percent Shareholder shall be granted an Incentive Stock
Option unless, at the time such Incentive Stock Option is granted, the Exercise
Price thereof is at least 110% of the Fair Market Value of a Share on the Date
of Grant and the Incentive Stock Option, by its terms, is not exercisable after
the expiration of five years from the Date of Grant.
(f) If a Holder exercises an Incentive Stock Option and disposes of any
of the Shares received by such Holder as a result of such exercise within two
years from the Date of Grant or within one year after the issuance of such
Shares to such Holder upon such exercise, such Holder shall notify the Company
of such disposition and the consideration received as a result thereof and pay
or provide for the withholding taxes on such disposition as required by Section
8.2 below.
(g) An Option that is designated as a Nonqualified Option under this
Plan shall not be treated as an "incentive stock option" as such term is defined
in Section 422(b) of the Code.
<PAGE> 7
Section 5.5. Exercise. An Option shall be exercised by the delivery of the
Option Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised after the Option has become exercisable and before
it has ceased to be exercisable. An Option may be exercised as to less than all
of the Shares purchasable thereunder, but not for a fractional share. No Option
may be exercised as to less than 100 Shares unless it is exercised as to all of
the Shares then available thereunder. If an Option is exercised as to less than
all of the Shares purchasable thereunder, a new duly executed Option Agreement
reflecting the decreased number of Shares exercisable under such Option, but
otherwise of the same tenor, shall be returned to the Holder. The Committee may,
in its sole discretion and upon such terms and conditions as it shall determine
at or after the Date of Grant, permit the Exercise Price to be paid in cash, by
the tender to the Company of Shares owned by the Holder, or by a combination
thereof. If the Committee does not make such determination, the Exercise Price
shall be paid in cash. If any portion of the Exercise Price of an Option is
payable in cash, it may be paid by (a) delivery of a certified or cashier's
check payable to the order of the Company in such amount, (b) wire transfer of
immediately available funds to a bank account designated by the Company or (c)
reduction of a debt of the Company to the Holder. If any portion of the Exercise
Price of an Option is payable in Shares, it may be paid by delivery of
certificates representing a number of Shares having a total fair market value on
the date of exercise equal to or greater than the required amount, duly endorsed
for transfer with all signatures guaranteed by a medallion signature guarantee.
If more Shares than are necessary to pay such Exercise Price based on their fair
market value on the date of exercise are delivered to the Company, it shall
return to the Holder a certificate for the balance of the whole number of Shares
and a check payable to the order of the Holder for any fraction of a Share.
Shares may not be delivered to the Company as payment for the exercise of an
Option if such Shares have been owned by the Holder (together with his or her
decedent or testator) for less than six months or if the disposition of such
Shares would require the giving of a notice under Section 5.4(f) above. Promptly
after an Option is properly exercised, the Company shall issue to the Holder a
certificate representing the Shares purchased thereunder.
Section 5.6. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are not negotiable
instruments or securities (as such term is defined in Article 8 of the Uniform
Commercial Code). Lost and destroyed Option Agreements may be replaced without
bond.
Section 5.7. New Hires. A person to whom the Company is offering employment
may be granted a Nonqualified Option under this Article 5, but any such grant
shall lapse if the person does not subsequently become an Employee pursuant to
such offer.
ARTICLE 6. CONSULTANTS' STOCK OPTIONS.
Section 6.1. Determinations. The Committee shall determine which
Participants shall be granted Options, the number of Shares for which the
Options may be exercised, the times when they shall receive them and the terms
and conditions of individual Option grants (which need not be identical). The
Committee may delegate the authority granted to it in this Section 6.1 pursuant
to clause (e) of Section 2.2 above.
Section 6.2. Exercise Price. The Committee shall determine the Exercise
Price of each Option at the time that it is granted, but in no event shall the
Exercise Price of an Option be less than the Fair Market Value of a Share on the
Date of Grant. If no express determination of the Exercise Price of an Option is
made by the Committee, the Exercise Price thereof is equal to the Fair Market
Value of a Share on the Date of Grant.
<PAGE> 8
Section 6.3. Term. Subject to the rule set forth in the next sentence, the
Committee shall determine the times when an Option vests and the term during
which an Option is exercisable at the time that it is granted. No Option shall
be exercisable after the expiration of ten years from the Date of Grant. If no
express determination of the times when Options are exercisable is made by the
Committee:
(a) each Option shall vest and first become exercisable as to 25% of the
Shares subject to such Option on each of the first four anniversaries of
the Date of Grant provided the Grantee has been a Consultant continuously
during the time beginning on the Date of Grant and ending on the date when
such portion vests and first becomes exercisable; and
(b) each Option shall lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of ten years from the Date of Grant,
(ii) nine months after the Grantee ceases to be a Consultant because of
death or disability, or
(iii) three months after the termination without cause of the Grantee's
consulting relation with the Employer, or
(iv) immediately upon termination of the Grantee's consulting relation
with the Employer for cause or by the Grantee's resignation.
Notwithstanding the terms of any Option, all Options that have not previously
been exercised nor lapsed and ceased to be exercisable, shall vest fully and
become exercisable upon the occurrence of any Change in Control occurring after
the Effective Date if the Grantee is a Consultant at the time of the Change in
Control.
Section 6.4. Not Incentive Stock Options. An Option under this Article 6
shall not be treated as an Incentive Stock Option.
Section 6.5. Exercise. An Option shall be exercised by the delivery of the
Option Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised, after the Option has become exercisable and
before it has ceased to be exercisable. An Option may be exercised as to less
than all of the Shares purchasable thereunder but not for a fractional Share. No
Option may be exercised as to less than 100 Shares unless it is exercised as to
all of the Shares then available thereunder. If an Option is exercised as to
less than all of the Shares purchasable thereunder, a new duly executed Option
Agreement reflecting the decreased number of Shares exercisable under such
Option, but otherwise of the same tenor, shall be returned to the Holder. The
Committee may, in its sole discretion and upon such terms and conditions as it
shall determine at or after the Date of Grant, permit the Exercise Price to be
paid in cash, by the tender to the Company of Shares owned by the Holder or by a
combination thereof. If the Committee does not make such determination, the
Exercise Price shall be paid in cash. If any portion of the Exercise Price of an
Option is payable in cash, it may be paid by (a) delivery of a certified or
cashier's check payable to the order of the Company in such amount, (b) wire
transfer of immediately available funds to a bank account designated by the
Company, or (c) reduction of a debt of the Company to the Holder. If any portion
of the Exercise Price of an Option is payable in Shares, it may be paid by
delivery of certificates representing a number of Shares having a total fair
market value on the date of exercise equal to or greater than the required
amount, duly endorsed for transfer with all signatures guaranteed by a medallion
signature guarantee. If more Shares than are necessary to pay such Exercise
Price based on their fair market value on the date of exercise are delivered to
the Company, it shall return to the Grantee a certificate for the balance of the
whole number of Shares and a check payable to the order of the Holder for any
fraction of a Share. Shares may not be delivered to the Company as payment for
the exercise of an Option if such Shares have been owned by the Holder (together
with his or her decedent or testator) for less than six months. Promptly after
an Option is properly exercised, the Company shall issue to the Holder a
certificate representing the Shares purchased thereunder.
<PAGE> 9
Section 6.6. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are neither negotiable
instruments nor securities (as such term is defined in Article 8 of the Uniform
Commercial Code). Lost and destroyed Option Agreements may be replaced without
bond.
Section 6.7. Article 5. The provisions of Article 5 above shall not apply
to Options granted under this Article 6.
ARTICLE 7. DIRECTORS' OPTIONS.
Section 7.1. Grant.
(a) On each Meeting Date beginning with the annual meeting of
shareholders at which this Plan is approved by the shareholders of the Company,
an Option on five thousand (5,000) Shares or such lesser number as remain
available for granting under Article 3 above shall be granted automatically to
each person who is elected as a Director at the meeting of shareholders held on
such date or at any adjournment thereof and who is eligible to receive Options
under section 4.3 above, provided such person had not previously served as a
Director of the Company since the Effective Date. On any date when a person is
appointed as a Director to fill a vacancy on the Board of Directors, an Option
shall be granted automatically to such person on the number of Shares equal to
5,000 multiplied by a fraction, the numerator of which equals the number of
whole calendar months remaining in the term for which such Director is appointed
at the date of such appointment and the denominator of which equals twenty-four,
provided such person had not previously served as a Director of the Company
since the Effective Date and such person is eligible to receive Options under
section 4.3 above. Each Option granted under this Section 7.1(a) shall vest and
first become exercisable: (i) as to no more than 1,000 of the Shares originally
subject to the Option on the Date of Grant (or such lesser number as remain
subject to the Option in the case of an Option granted to a Director filling a
vacancy); (ii) as to no more than 2,000 of the Shares originally subject to the
Option on the first Meeting Date following such Director's election or
appointment, as the case may be (or such lesser number as remain subject to the
Option in the case of an Option granted to a Director filling a vacancy); and
(iii) as to the remaining 2,000 Shares originally subject to the Option on the
second Meeting Date following such Director's election or appointment, as the
case may be (or such lesser number as remain subject to the Option in the case
of an Option granted to a Director filling a vacancy). The Exercise Price of an
Option granted under this Section 7.1(a) shall be equal to the Fair Market Value
of a Share on the Date of Grant.
(b) If a Director receiving an Option under Section 7.1(a) is not the
beneficial owner of at least 1,000 Shares (as determined by reference to Rule
13d-3 of the Securities and Exchange Act of 1934, but(excluding Options
hereunder), as of the first Meeting Date following such Director's election,
such Director shall exercise such Option with respect to at least 1,000 Shares
on such Meeting Date, provided such exercise can be effected in compliance with
all applicable laws, rules and regulations.
(c) On each Meeting Date which occurs after the annual meeting of
shareholders at which this Plan is approved by the shareholders of the Company,
an Option on such number of Shares as are specified below, or such lesser number
as remain available for granting under Article 3 above, shall be granted
automatically to each Director whose term of office as a director expires on
such date or continues through such date or who is reelected for a subsequent
term on such Meeting Date and who is eligible to receive Options under Section
4.3 above. The number of Shares as to which an Option shall be granted under
this Section 7.1(b) shall be determined as follows. If the Company's total
income before taxes for the fiscal year immediately preceding the Meeting Date
(the "Performance Year"), as reflected in the Company's audited financial
statements, exceeds the Company's total income before taxes for the fiscal year
one year earlier, as reflected in the Company's audited financial statements, by
that percentage specified in the table below, a Director otherwise eligible to
receive an Option under this Section 7.1(c) shall be granted an Option on that
number of Shares as specified in the table below.
<PAGE> 10
- ----------------------------------------------------------
Increase in
Total Income
before Taxes Number of Shares
- ----------------------------------------------------------
No increase No Shares
- ----------------------------------------------------------
An increase of less than 10% 1,000
- ----------------------------------------------------------
10%-- 20% 2,000
- ----------------------------------------------------------
20.1%-- and above 3,000
- ----------------------------------------------------------
Each Option granted under this Section 7.1(c) shall vest and first become
exercisable as to 50% of the Shares originally subject to the Option on each
Meeting Date, beginning on the Date of Grant. Notwithstanding the foregoing, an
Option granted under this Section 7.1(c) to a Grantee who is not reelected as a
director upon expiration of term shall vest and become exercisable as to 100% of
the Shares subject to the Option on the Date of Grant. The Exercise Price of an
Option granted under this Section 7.1(c) shall be equal to the Fair Market Value
of a Share on the Meeting Date occurring in the Performance Year.
Section 7.2. Term.
(a) each Option shall lapse and cease to be exercisable upon the earliest
of:
(i) the expiration of ten years from the Date of Grant,
(ii) nine months after the Grantee ceases to be a Director because of
his death or disability,
(iii) immediately upon resignation by the Grantee as a Director, or
(iv) one year after the Grantee ceases to be a Director for any reason
other than his death, disability or resignation.
Notwithstanding the foregoing or the terms of any Option, all Options that have
not previously been exercised nor lapsed and ceased to be exercisable shall vest
fully and become exercisable upon the occurrence of any Change in Control
occurring after the Effective Date if the Grantee is a Director at the time of
the Change in Control.
Section 7.3. Not Incentive Stock Options. An Option under this Article 7
shall not be treated as an Incentive Stock Option.
Section 7.4. Exercise. An Option shall be exercised by the delivery of the
Option Agreement therefor, with the notice of exercise attached thereto properly
completed and duly executed by the Holder, to the Treasurer of the Company,
together with the aggregate Exercise Price for the number of Shares as to which
the Option is being exercised, after the Option has become exercisable and
before it has ceased to be exercisable. An Option may be exercised as to less
than all of the Shares purchasable thereunder but not for a fractional Share. No
Option may be exercised as to less than 100 Shares unless it is exercised as to
all of the Shares then available thereunder. If an Option is exercised as to
less than all of the Shares purchasable thereunder, a new duly executed Option
Agreement reflecting the decreased number of Shares exercisable under such
Option, but otherwise of the same tenor, shall be returned to the Holder. The
Exercise Price shall be paid in cash by (a) delivery of a certified or cashier's
check payable to the order of the Company in such amount, (b) wire transfer of
immediately available funds to a bank account designated by the Company, or (c)
reduction of a debt of the Company to the Holder. Promptly after an Option is
properly exercised, the Company shall issue to the Holder a certificate
representing the Shares purchased thereunder.
Section 7.5. Option Agreement. Promptly after the Date of Grant, the
Company shall duly execute and deliver to the Grantee an Option Agreement
setting forth the terms of the Option. Option Agreements are neither
<PAGE> 11
negotiable instruments nor securities (as such term is defined in Article 8 of
the Uniform Commercial Code). Lost and destroyed Option Agreements may be
replaced without bond.
Section 7.6. Articles 2 and 5. The provisions of Articles 2, 5, 8.5, 8.6
and 8.7 hereof shall not apply to Options granted under this Article 7.
ARTICLE 8. PROVISIONS APPLICABLE TO ALL TYPES OF AWARDS.
Section 8.1. Corporate Mergers and Acquisitions. The Committee may grant
Awards having terms and conditions which vary from those specified in the Plan
if such Awards are granted in substitution for, or in connection with the
assumption of, existing options granted by another business entity and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a merger or consolidation of or acquisition of
substantially all of the assets or stock of another business entity that is not
a Subsidiary of the Company prior to such acquisition, with or by the Company or
its Subsidiaries.
Section 8.2. Withholding. The Company shall have the right to withhold from
any payments due under any Award or due to any Holder from the Company as
compensation or otherwise the amounts of any federal, state or local withholding
taxes not paid by the Holder at the time of the exercise or vesting of any Award
or upon a disposition of Shares received upon the exercise of an Incentive Stock
Option. If cash payments sufficient to allow for withholding of taxes are not
made at the time of exercise or vesting of an Award, the Holder exercising such
Award shall pay to the Company an amount equal to the withholding required to be
made less the withholding otherwise made in cash or, if allowed by the Committee
in its discretion and pursuant to rules adopted by the Committee consistent with
Section 5.5 above, Shares previously owned by the Holder. The Company may make
such other provisions as it deems appropriate to withhold any taxes the Company
determines are required to be withheld in connection with the exercise of any
Award or upon a disqualifying disposition of Shares received upon the exercise
of an Incentive Stock Option, including, but not limited to, the withholding of
Shares from an Award upon such terms and conditions as the Committee may
provide. The Company may require the Holder to satisfy any relevant withholding
requirements before issuing Shares or delivering any Award to the Holder.
Section 8.3. Disability. If a Grantee who is an Employee or a Consultant is
absent from work because of a physical or mental disability, for purposes of the
Plan such Grantee will not be considered to have ended his or her employment or
consulting relationship with the Company while such Grantee has that disability,
unless he or she resigns or terminates such relationship or the Committee
decides otherwise. If a Grantee who is a Director is absent from meetings of the
Board of Directors because of a physical or mental disability, for purposes of
the Plan such Grantee will not be considered to have ended his or her service
with the Board of Directors while such Grantee has that disability, unless he or
she resigns or is not re-elected by the shareholders.
Section 8.4. Merger of the Company. If the Company merges or consolidates
with or sells substantially all of its assets to a person that was not one of
its affiliates before such transaction, or any such unaffiliated person or
corporation has publicly announced a tender offer to purchase more than 20% of
the outstanding voting securities of the Company, the Committee, in its
discretion, may provide that, for a period of 30 days, not extending beyond the
ten year period referred to in Sections 5.3 and 6.3 above and the five year
period referred to in Section 5.4(e) above, from the date of execution of the
acquisition agreement in final definitive form or the announcement of such
offer, notwithstanding the provisions of any Award, any Award may be exercised
in whole or in part during such 30 day period or that upon the termination of
such 30 day period any such Award shall expire and be null and void.
Section 8.5. Surrender and Exchange. The Committee may permit the voluntary
surrender of all or a portion of any Award to be conditioned upon the granting
to the Holder of a new Award for the same or a different number of Shares as the
Award surrendered, or may require such voluntary surrender as a condition
precedent to a grant of a new Award to such Holder. Subject to the provisions of
the Plan, such new Award shall be exercisable at the price, during the period
and on such other terms and conditions as are specified by the Committee at the
time the new Award is granted. Upon surrender, the Award surrendered shall be
canceled and the Shares previously subject to it shall be available for the
grant of other Awards.
<PAGE> 12
Section 8.6. Acceleration. Notwithstanding anything else in the Plan, the
Committee may, in its sole discretion, at any time or from time to time
thereafter, accelerate the time at which any Options become exercisable or waive
any provisions of the Plan relating to the manner of payment or procedures for
the exercise of any Option. Any such acceleration may be made effective (a) with
respect to one or more or all Grantees, (b) with respect to some or all of the
Shares subject to an Option of any Grantee or (c) for a period of time ending at
or before the expiration date of any Option.
Section 8.7. Actions by Committee After Grant. The Committee shall have,
subject to the written consent of the Holder where the action impairs or
adversely alters the rights of the Holder, the right, at any time and from time
to time after the Date of Grant of any Award, to modify the terms of any Award.
ARTICLE 9. GENERAL PROVISIONS.
Section 9.1. No Right to Employment. Nothing in the Plan or any Award or
any instrument executed pursuant to the Plan will confer upon any Grantee any
right to continue to be employed by or provide services to the Company or affect
the right of the Company to terminate the employment of any Grantee or its other
relationship with any Grantee. Nothing in the Plan or any Option or any
instrument executed pursuant to the Plan will confer upon any Grantee any right
to continue to be a Director of the Company or affect the right of the
shareholders to terminate the directorship of any Grantee.
Section 9.2. Limited Liability. The liability of the Company under this
Plan or in connection with any exercise of any Award is limited to the
obligations expressly set forth in the Plan and in the grant of any Award, and
no term or provision of this Plan nor of any Award shall be construed to impose
any duty, obligation or liability on the Company not expressly set forth in the
Plan or any grant of any Award.
Section 9.3. Assumption of Awards. Upon the dissolution or liquidation of
the Company, or upon a reorganization, merger or consolidation of the Company
with one or more other entities as a result of which the Company is not the
surviving entity, or upon a sale of substantially all the assets of the Company
to another entity, any Awards outstanding theretofore granted or sold hereunder
must be assumed by the surviving or purchasing entity, with appropriate
adjustments as to the number and kind of shares and price. Nothing in this
Section 9.3 shall be deemed to alter or supersede any provision of the Plan
relating to the vesting or maturity of Awards upon a Change in Control.
Section 9.4. No Transfer. No Award or other benefit under the Plan may be
sold, pledged or otherwise transferred other than by will or the laws of descent
and distribution; and no Award may be exercised during the life of the Grantee
to whom it was granted except by such Grantee.
Section 9.5. Expenses. All costs and expenses incurred in connection with
the administration of the Plan including any excise tax imposed upon the
transfer of Shares pursuant to the exercise of an Award shall be borne by the
Company.
Section 9.6. Notices. Notices and other communications required or
permitted to be made under the Plan shall be in writing and shall be deemed to
have been duly given only if personally delivered or if sent by first class mail
addressed (a) if to a Holder, at his or her residence address set forth in the
records of the Company, or (b) if to the Company, to its President at its
principal executive office.
Section 9.7. Third Parties. Nothing herein expressed or implied is intended
or shall be construed to give any person other than the Holders any rights or
remedies under this Plan.
<PAGE> 13
Section 9.8. Saturdays, Sundays and Holidays. Where this Plan authorizes or
requires a payment or performance on a Saturday, Sunday or public holiday, such
payment or performance shall be deemed to be timely if made on the next
succeeding business day; provided, however, that this Section 9.8 shall not be
construed to extend the ten year period referred to in Sections 5.3 and 6.3
above or the five year period referred to in Section 5.4(e) above.
Section 9.9. Rules of Construction. The captions and section numbers
appearing in this Plan are inserted only as a matter of convenience. They do not
define, limit or describe the scope or intent of the provisions of this Plan. In
this Plan words in the singular number include the plural, and in the plural
include the singular; and words of the masculine gender include the feminine and
the neuter and, when the sense so indicates, words of the neuter gender may
refer to any gender.
Section 9.10. Governing Law. The validity, terms, performance and
enforcement of this Plan shall be governed by laws of the State of Ohio that are
applicable to agreements negotiated, executed, delivered and performed solely in
the State of Ohio.
Section 9.11. Effective Date of the Plan. The Plan shall become effective
upon its approval by the affirmative vote of the holders of a majority of the
outstanding Shares present or represented and entitled to vote at a meeting of
the shareholders of the Company. Awards may be granted by the Committee before
such approval, but all Awards so granted shall be conditioned on such approval
and shall be void if such approval is not given within 12 months after the
Effective Date.
Section 9.12. Amendment and Termination. No Award shall be granted under
the Plan more than ten years after the Effective Date. The Board of Directors
may at any time terminate the Plan or make such amendment of the Plan as it may
deem advisable; provided, however, that, to the extent required by Rule 16b-3 or
Section 422 of the Code, no amendment shall be effective without the approval of
the shareholders of the Company by the affirmative vote of the holders of a
majority of the outstanding Shares present or represented and entitled to vote
at a meeting of shareholders duly held, if it were to:
(a) materially increase the benefits accruing to Holders under the
Plan;
(b) increase the aggregate number of Shares which may be issued under
the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan; or
(d) change the designation of employees or class of employees eligible
to receive Options under the Plan.
and, further, provided, however, that no amendment or termination of the Plan
shall be effective to alter or impair the rights of a Holder under any Award
made before the adoption of such amendment or termination by the Board of
Directors, without the written consent of such Holder. No termination or
amendment of this Plan or any Award nor waiver of any right or requirement under
this Plan or any Award shall be binding on the Company unless it is in a writing
duly entered into its records and executed by a duly authorized Officer. The
provisions of Article 7 of this Plan setting forth the formulae that determine
the Exercise Price of Options granted hereunder, the number of Shares as to
which they are exercisable, the times when they are granted and the persons who
are Grantees may not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
<PAGE> 1
Exhibit 10.6
PH GROUP INC. EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The PH Group Inc. Employee Stock Purchase Plan (the "Plan") is designed
to encourage employees of PH Group Inc. (the "Company"), where
permitted by applicable laws and regulations, to acquire an equity
interest in the Company through the purchase of shares of the common
stock, no par value, of the Company ("Common Stock"). These purchases
are intended to establish a closer identification of employee, Company
and shareholder interests and to provide employees with a direct means
of participating in the Company's growth and earnings. It is
anticipated that Plan participation will motivate employees to remain
in the employ of the Company and give greater efforts on behalf of the
Company.
2. DEFINITIONS
The following words or terms, when used herein, shall have the
following respective meanings:
"Closing Price" refers to the closing price on the last business day of
each quarter.
"Committee" shall refer to the committee appointed by the Company Board
of Directors to administer this Plan.
"Administrator" refers to plan administration and oversight and may be
done in-house or by an appropriate third party, i.e. transfer agent or
broker.
"Effective Date" means April 1, 1998, the first Enrollment Date under
the Plan.
"Employee" refers to all full-time and part-time employees, employed by
the Company on a continuous basis .
"Enrollment Date" refers to April 1, 1998, the first Enrollment Date
under the Plan, and the first day of each quarter thereafter.
"Enrollment Period" refers to the designated period that precedes each
Enrollment Date during which employees eligible to participate are
provided the opportunity to enroll in the Plan. (An employee may enroll
any time but deductions for stock will not begin until the first pay
period at the beginning of each quarter).The Enrollment Period is
approximately two weeks in duration and, generally, will expire
approximately 10 to 14 days prior to the Enrollment Date. The exact
dates for each Enrollment Period will be communicated to all eligible
employees prior to the Enrollment Period.
"Employee Contribution Amounts" refers to the amounts contributed by
employees via payroll deduction.
<PAGE> 2
"Exercise Date" refers to the last stock trading day each quarter or
the day an employee requests a certificate be issued.
"Fair Market Value" refers to the Closing Market Price on either the
first or last stock trading day in the Participation Period as
determined in accordance with Section 9.
"Participant" refers to any employee meeting the eligibility
requirements specified in Section 5 who has enrolled in the Plan.
"Participation Period" refers to a three month or quarterly periods:
1/1, 4/1, 7/1 and 9/1.
"Plan" shall refer to this PH Group Inc. Employee Stock Purchase Plan.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Employee Stock Purchase Plan
Committee (the "Committee") appointed by the Board of Directors of the
Company (the "Board"), which Committee shall consist of at least three
(3) persons, who need not be members of the Board. The members of the
Committee shall supervise the administration and enforcement of the
Plan according to its terms and provisions and shall have all powers
necessary to accomplish these purposes and discharge its duties
hereunder including, but not limited to, the power to interpret the
Plan, to make factual determinations and resolve issues of eligibility,
stock price determination, or any other issues arising under the Plan
or as a result of participation of Participants in the Plan.
The Committee may act by majority decision of its members at a regular
or special meeting of the Committee or by decision reduced to writing
and signed by all members of the Committee without holding a formal
meeting. Vacancies in the membership of the Committee arising from
death, resignation or other inability to serve shall be filled by
appointment by the Board as soon as possible. All decisions by the
Committee shall be final and conclusive and binding upon all
Participants and the Company.
4. NATURE AND NUMBER OF SHARES
The Common Stock subject to issuance under the terms of the Plan shall
be shares of the Company's authorized but unissued shares. The
aggregate number of shares that may be issued under the Plan shall not
exceed 250,000 shares of Common Stock. If the total number of shares
that Employees elect to purchase under the Plan exceeds the share
available, the Committee will allot shares among Employees.
In the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the
capital structure of the Company, the Committee may make such
adjustment, if any, as it deems appropriate in the number, kind and
purchase price of the
-2-
<PAGE> 3
shares available for purchase under the Plan and in the maximum number
of shares that may be issued under the Plan, subject to the approval of
the Board and in accordance with Section 19 of the Plan.
If the Company is acquired in a transaction whereby it is not the
surviving entity or all or substantially all of the Company's assets
are acquired, the Committee shall determine a Plan termination date.
This date shall precede the expected effective date of such acquisition
by not more than sixty (60) days. Employee Contribution Amounts
accumulated during the period between the most recent Enrollment Date
and Plan termination date shall be used to purchase shares for
Participants in the manner provided in Section 9 utilizing the Plan
termination date as the Exercise Date for determining the purchase
price for shares of Common Stock. In the event the Plan is terminated
and the acquisition transaction is not consummated, the Plan may be
reactivated on a date determined by the Committee.
5. ELIGIBILITY REQUIREMENTS
Each Employee, except as described in the next following paragraph,
shall become eligible to participate in the Plan in accordance with
this Section 5 on the first Enrollment Date following employment by the
Company. Participation in the Plan is voluntary.
The following Employees are not eligible to Participate in the Plan:
i) Employees who have not completed at least three months of
continuous service with the Company as of the Enrollment Date.
6. ENROLLMENT
Each Employee of the Company who thereafter becomes eligible to
participate may enroll in the Plan anytime with payroll deduction
toward stock purchase effective the first pay period of each quarter.
In order to enroll, an eligible Employee must complete, sign and submit
the appropriate forms to the Company's Human Resources Department.
Continued enrollment in subsequent periods shall be automatic and no
additional documentation is required, unless a Participant desires to
revise the Employee Contribution Amount for the subsequent
Participation Period. Employee Contribution Amounts shall remain
constant if not changed at the Employee's request during an Enrollment
Period. In order to terminate Plan participation, at any time, or
change Employee Contribution Amounts, the participant must complete,
sign and submit the appropriate forms to the Company's Human Resources
Department during an Enrollment Period.
7. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will
constitute the grant by the Company to the Participant of the right to
purchase shares of Common Stock under the Plan. Re-enrollment or
continued enrollment by a Participant in the Plan will
-3-
<PAGE> 4
constitute a grant, on the Enrollment Date on which such re-enrollment
or continued enrollment occurs, by the Company to the Participant of a
new right to purchase shares of Common Stock. A Participant who has not
terminated employment shall have shares of Common Stock automatically
purchased for him or her on the applicable Exercise Date, the last
business day of each quarter. The participant shall automatically be
re-enrolled in the Plan for subsequent Participation Periods at the
same Employee Contribution Amount, unless the Participant notifies the
Company's Human Resources Department on the appropriate forms that he
or she elects not to re-enroll or desires to change his or her Employee
Contribution Amount. A Participant who has suspended payroll deductions
during any Participation Period must re-enroll on the appropriate forms
to participate in the Plan in any future Participation Periods.
Each right to purchase shares of Common Stock under the Plan during any
participation Period shall have the following terms:
i) the right to purchase shares of Common Stock during any
Participation Period shall expire on the earlier of (A) the
completion of the purchase of shares on the Exercise Date or (B)
the date on which the Participant terminates employment;
ii) in no event shall the right to purchase shares of Common Stock
during any Participation Period extend beyond three months
from the Enrollment Date;
iii) payment for shares purchased shall be made only with amounts
contributed through payroll deductions;
iv) purchase of shares shall be accomplished only in accordance with
Section 9;
v) the price per share shall be determined as provided in
Section 9;
vi) the maximum amount an employee may spend in one participation
period (quarter) shall not exceed $12,500.00; and
vii) the right to purchase shares of Common Stock shall in all
respects be subject to the terms and conditions of the Plan, as
interpreted by the Committee from time to time.
8. METHOD OF PAYMENT
Payment of shares of Common Stock shall be made as of the applicable
Exercise Date with amounts contributed through payroll deductions
collected over the Plan's designated Participation Period, with the
first such deduction commencing with the payroll period ending after
the Enrollment Date. Each Participant will authorize such deductions
from his or her pay for each month during the Participation Period. No
changes in monthly deduction amounts are permitted subsequent to the
Enrollment Period other than ceasing ongoing payroll deductions for the
remainder of the Participation Period. Payroll deductions will be made
in equal installments on each of the first two payrolls of each
-4-
<PAGE> 5
month during the Participation Period. No lump sum or prepayments are
permitted. Employees may select any monthly Employee Contribution
Amount as long as the following requirements are met:
i) at least $5.00 is deducted each pay period;
ii) amount selected is a multiple of $5.00;
iii) total amount deducted does not exceed Employee's net pay of
their base salary; and
iv) the aggregate of monthly deduction amounts does not exceed
$12,500.00 in any Participation Period (under this Plan and
under all other similar stock purchase plans of the Company or
any Subsidiary). If for any reason a Participant's
contributions to the Plan exceed $12,500.00 during any
Participation Period, such excess amounts shall be refunded to
the Participant as soon as practicable after such excess has
been determined to exist.
A Participant may suspend payroll deductions at any time during a
Participation Period by giving written notice to the Company's Human
Resources Department on the appropriate forms, which will be processed
effective for the first payroll period that is administratively
feasible. In such case, the Participant's account balance shall still
be used to purchase Common Stock at the end of the Participation
Period. Any Participant who suspends payroll deductions during any
Participation Period cannot resume payroll deductions during such
period and must re-enroll in the Plan during a Subsequent Enrollment
Period in order to participate in any future Participation Periods.
Except in the case of termination of employment, the amount in a
Participant's account at the end of any Participation Period shall be
applied to the purchase of shares, as provided in Section 9.
9. PURCHASE OF SHARES
The right to purchase shares of Common Stock granted by the Company
under the Plan is for the term of a Participation Period. The price to
be paid for the Common Stock to be purchased at the expiration of such
Participation Period shall be determined as the Closing Price on the
last trading day in the Participation Period or the last business day
of the quarter (Exercise Date). Fractional shares shall be held until
the next period.
The number of shares of Common Stock, including fractional shares,
purchased on behalf of a Participant shall be recorded in the stock
trading account established for each Participant as soon as
administratively feasible, but no later than five (5) business days
following the last business day of the preceding Participation Period.
The number of shares purchased shall be computed by dividing the
aggregate Employee Contribution Amount by the price for the Common
Stock determined in the manner described in the
-5-
<PAGE> 6
preceding paragraph. Participants shall be treated as the record owners
of the shares, with all rights of a shareholder, effective as of the
date the shares are posted to the Participant's stock trading account.
Any fees associated with maintaining these stock trading accounts shall
be the obligation of the Company.
10. WITHDRAWAL OF SHARES
The record of shares of Common Stock purchased shall be maintained in
an individual stock trading account established at the on behalf of the
Participant until the shares are either withdrawn or sold. A
Participant may elect to withdraw all shares held in his or her account
any time (without withdrawing from the Plan) by giving notice to the
company. Upon receipt of such notice, the administrator will arrange
for either (a) the issuance and delivery of all shares held in the
Participant's account as soon as administratively feasible or (b) the
sale of the shares, as described by the Participant.
Certificates shall be issued only in the following situations:
i) if the Participant requests a certificate; or
ii) if the Participant terminates employment with the Company and
requests a certificate.
iii) the minimum number of shares that may be issued in a
certificate, except for termination of employment share
issuance, is twenty-five (25).
In both of these cases, the Participant will be required to notify
the company and pay an issuance fee. The share certificate will be
issued to the Participant as soon as administratively feasible after
the receipt by the administrator of the required form and payment of
the issuance fee.
Fractional shares shall be as follows: For share withdrawals, only
whole shares will be certified and issued to Participants. A payment
will be made to the Participant for any fractional shares owned by
the Participant. This payment shall be computed using the Closing
Market Price of a share of Common Stock on the date the withdrawal is
processed by the Designated Broker. For shares sold, Participants
shall receive credit for all whole and fractional shares at the
actual price for which the shares were sold.
11. INCOME TAX OBLIGATIONS
Participants shall be responsible for all personal income obligations
associated with selling shares of Common Stock purchased through this
Plan. The Committee recommends that each Participant seek competent,
professional tax advice prior to enrolling in the Plan to ensure he or
she fully understands the tax consequences resulting from stock sales.
-6-
<PAGE> 7
12. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by the Company. Employee Contribution
Amounts collected prior to the date of termination of employment shall
be paid in cash. The cash shall be delivered to the Participant as soon
as administratively feasible following the end of the Participation
Period in which the Participant's employment terminates. Employee
Contribution Amounts for Participants who are on a Leave of Absence
will be used to purchase Common Stock at the conclusion of the
Participation Period in accordance with Section 9.
13. DEATH OF A PARTICIPANT
As soon as administratively feasible after receiving notification of
the death of a Participant, Employee Contribution Amounts collected
prior to the date of termination of employment shall be paid in cash to
the Participant's estate. No additional shares of Common Stock may be
purchased on behalf of a Participant after notification of death is
received. All assets in a Participant's Stock trading account will
remain in the Participant's account until the person whom the
Participant has elected a joint tenant, with or without right of
survivorship, or the representative of the Participant's estate
requests delivery thereof from the administrator and submits such
documentation as may be required to show proof of entitlement thereto.
14. ASSIGNMENT
The rights of a Participant under the Plan shall not be assignable or
otherwise transferable by the Participant except by will or the laws of
descent and distribution. No purported assignment or transfer of any
rights of a Participant under the Plan, whether voluntary or
involuntary, by operation of law or otherwise, shall vest in the
purported assignee or transferee any interest or right therein
whatsoever, but immediately upon such assignment or transfer, or any
attempt to make the same, such rights shall terminate and become of no
further effect. If the foregoing provisions of this Section 14 are
violated, the Participant's election to purchase Common Stock shall
terminate and the only obligation of the Company remaining under the
Plan shall be to pay the person entitled thereto the Employee
Contribution Amount then credited to the Participant's account. No
Participant may create a lien on any funds, securities, rights or other
property held for the account of the Participant under the Plan, except
to the extent permitted by will or the laws of descent and distribution
if beneficiaries have not been designated. A Participant's right to
purchase shares of Common Stock under the Plan shall be exercisable
only during the Participant's lifetime and only by him or her.
15. COSTS
The Company will pay all expenses incident to establishing and
administering the Plan. Expenses to be incurred by Participants shall
be limited to brokerage fees relating to
-7-
<PAGE> 8
sales of stock from the Participant's account (as described herein),
issuance fees (as described in Section 10) and any personal income tax
obligations.
16. REPORTS
At least quarterly, the Company shall provide or cause to be provided
to each Participant a report of their Employee Contribution Amounts and
the shares of Common Stock purchased with such Employee Contribution
Amounts by that Participant on each Exercise Date.
17. RIGHTS AS A SHAREHOLDER
A Participant shall have no rights as a shareholder under his or her
rights to purchase Common Stock until he or she becomes a shareholder
as herein provided. A Participant will become a shareholder with
respect to shares for which payment has been completed as provided in
Section 9 effective as of the date the shares are posted to the
Participant's stock trading account.
18. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time as permitted by
law, with the exception that the provisions of the Plan (including,
without limitation, the provisions of Sections 8 and 9) that constitute
a formula award for purposes of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"), may not be amended more than once
every six (6) months, other than to comply with changes in the Code, or
the rules thereunder. No amendment shall be effective unless within one
(1) year after the change is adopted by the Board it is approved by the
holders of a majority of the voting power of the Company's outstanding
shares:
i) if and to the extent such amendment is required to be approved
by shareholders to continue the exemption provided for in Rule
16b-3 (or any successor provision).
19. BOARD AND SHAREHOLDER APPROVAL; EFFECTIVE DATE
The Plan was approved by the Board on January 21, 1998. The Plan will
become effective as of April 1, 1998, (subject to the timely meeting of
all related compliance requirements).
20. GOVERNMENTAL APPROVALS OR CONSENTS
The Plan and any offering or sale made to Employees under the Plan are
subject to any governmental approvals or consents that may be or become
applicable in connection therewith. Subject to the provisions of
Section 18, the Board may make such changes in the Plan and include
such terms in any offering under the Plan as may be desirable to comply
with the rules or regulations of any governmental authority.
-8-
<PAGE> 9
21. NO ADDITIONAL PURCHASE RIGHTS OR EMPLOYMENT RIGHTS
Other than for rights to purchase Common Stock under the Plan, the Plan
does not, directly or indirectly, create any right for the benefit of
any Employee or class of Employee to purchase any shares under the
Plan, or create in any Employee or class of Employee any right with
respect to continuance of employment with the Company, and it shall not
be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, any Employee's employment at any time.
22. EFFECT OF PLAN
The provisions of the Plan shall, in accordance with its terms, be
binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees
thereof. heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such Employee.
23. GOVERNING LAW
The laws of the state of Ohio will govern all matters relating to the
Plan except to the extent superseded by the laws of the United States
or the property laws of any particular state.
24. NO PAYMENT OF INTEREST
No interest will be paid or allowed on any Employee Contribution
Amounts or amounts credited to the account of any Participant.
25. OTHER PROVISIONS
The agreement to purchase shares of Common Stock under the Plan shall
contain such other provisions as the Committee and the Board shall deem
advisable, provided that no such provision shall in any way conflict
with the terms of the Plan.
NOTE: Determine whether to allow officers to purchase and assess
whether 16b-3 exemption should be sought by complying with
Section 423.
-9-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (Registration No. 333-45717) dated January 23, 1998, and
Registration Statement on Form S-8 (Registration No. 333-46617) dated February
19, 1998, of our report dated February 6, 1998, with respect to the financial
statements of PH Group Inc. included in this Annual Report on Form 10-KSB for
the year ended December 31, 1997.
/s/ GREENE & WALLACE, INC.
---------------------------------
March 30, 1998.
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ KENNETH P. FURLONG
--------------------------------
Kenneth P. Furlong
-13-
<PAGE> 2
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ MICHAEL W. GARDNER
--------------------------------
Michael W. Gardner
-14-
<PAGE> 3
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to
act in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ BOB BINSKY
---------------------------
Bob Binsky
-15-
<PAGE> 4
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ ALIDA L. BREEN
------------------------------
Alida Breen
-16-
<PAGE> 5
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ DAVID H. MONTGOMERY
---------------------------
David H. Montgomery
-17-
<PAGE> 6
POWER OF ATTORNEY
The undersigned who is a director or officer of PH Group Inc., an Ohio
corporation (the "Company");
Does hereby constitute and appoint Charles T. Sherman to be his agent and
attorney-in-fact;
With the power to act fully hereunder and with full power of substitution to act
in the name and on behalf of the undersigned;
To sign and file with the Securities and Exchange Commission the Annual
Report on Form 10-KSB or other appropriate form and any amendments thereto
relating to such Annual Report; and
To execute and deliver any instruments, certificates or other documents which
he shall deem necessary or proper in connection with the filing of such
Annual Report or amendments thereto, and generally to act for and in the
name of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
The agent named above is hereby empowered to determine in his discretion the
times when, the purposes for which, and the names in which, any power
conferred upon him herein shall be exercised and the terms and conditions
of any instrument, certificate or document which may be executed by him
pursuant to this instrument.
This Power of Attorney shall not be affected by the disability of the
undersigned or the lapse of time.
The validity, terms and enforcement of this Power of Attorney shall be
governed by those laws of the State of Ohio that apply to instruments
negotiated, executed, delivered and performed solely within the State of
Ohio.
IN WITNESS WHEREOF, I have executed this Power of Attorney this 20th day of
March, 1998.
/s/ TERRY L. SANBORN
---------------------------------
Terry Sanborn
-18-
<PAGE> 1
Exhibit 24.2
CERTIFICATE
I, KENNETH J. WARREN, hereby certify that I am the duly elected
Secretary of PH Group Inc., an Ohio corporation (the "Corporation"), and do
further certify that the following resolution was duly adopted by the Board of
Directors of the Corporation at a meeting duly called and held on January 21,
1998, and that such resolution has not been amended or rescinded, and is in full
force and effect:
RESOLVED, that each officer and director who may be required to execute
an annual report on Form 10-K or Form 10-KSB (whether on behalf of the Company
or as an officer or director thereof or otherwise) or any amendment or
supplement thereto be, and each of them hereby is, authorized to execute a power
of attorney appointing Charles T. Sherman, his or her true and lawful attorney
and agent to execute in his or her name, place and stead (in any such capacity)
the annual report and all amendments or reports necessary or in connection
therewith, and to file the same with the Securities and Exchange Commission, to
have full power and authority to do and to perform in the name and on behalf of
each of said officers and directors, or both, as the case may be, every act
which is necessary or advisable to be done as fully, and to all intents and
purposes, as any such officer or director might or could do in person; ...
Dated this 30th day of March, 1998.
/s/ KENNETH J. WARREN
------------------------------
Kenneth J. Warren
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000035305
<NAME> PH GROUP, INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 7,789
<SECURITIES> 0
<RECEIVABLES> 2,834,678
<ALLOWANCES> 0
<INVENTORY> 2,790,172
<CURRENT-ASSETS> 5,976,937
<PP&E> 2,106,875
<DEPRECIATION> 1,112,086
<TOTAL-ASSETS> 8,294,577
<CURRENT-LIABILITIES> 5,808,303
<BONDS> 376,835
0
0
<COMMON> 11,350
<OTHER-SE> 1,772,673
<TOTAL-LIABILITY-AND-EQUITY> 8,294,577
<SALES> 13,752,009
<TOTAL-REVENUES> 13,752,009
<CGS> 9,844,240
<TOTAL-COSTS> 9,844,240
<OTHER-EXPENSES> (49,639)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,570
<INCOME-PRETAX> 936,146
<INCOME-TAX> 331,300
<INCOME-CONTINUING> 604,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 604,846
<EPS-PRIMARY> .43
<EPS-DILUTED> .37
</TABLE>
