<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________ to __________
Commission File
Number 0-14229
CROWN ANDERSEN INC.
(Exact name of Registrant as specified in its charter)
Delaware 58-1653577
(State of Incorporation) (I.R.S. Employer
Identification No.)
306 Dividend Drive, Peachtree City, Georgia 30269
(Address of principal executive offices)
(770) 486 2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 Per Share
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(Title of Class)
-------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[x]
At December 12, 1997 there were 1,512,198 shares of the Registrant's common
stock outstanding. The aggregate market value of the Registrant's outstanding
common stock held by non-affiliates of the Registrant as of December 12, 1997
was $10,585,386.
Documents incorporated by reference:
-----------------------------------
Portions of the Registrant's 1997 Annual Report are incorporated by reference in
Part I and Part II hereof. Portions of the Registrant's Proxy Statement for the
1997 Annual Meeting of Stockholders to be held on February 18, 1998 are
incorporated by reference in Part III hereof.
Page 1 of 15
Index of Exhibits on Page 19
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CROWN ANDERSEN INC.
Annual Report on Form 10-K
For the Fiscal Year Ended September 30, 1997
TABLE OF CONTENTS
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PART I
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Item Page
No. No.
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1 Business 3
2 Properties 9
3 Legal Proceedings 10
4 Submission of Matters to a Vote of Security Holders 10
4(A) Executive Officers of the Registrant 10
PART II
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5 Market for the Registrant's Common Equity and Related Stockholder
Matters 11
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition and
Results of Operation 11
8 Financial Statements and Supplementary Data 11
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 11
PART III
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10 Directors and Executive Officers of the Registrant 12
11 Executive Compensation 12
12 Security Ownership of Certain Beneficial Owners and Management 12
13 Certain Relationships and Related Transactions 12
PART IV
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14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 12
Signatures 15
Index to Financial Statement Schedules 19
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PART I
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ITEM 1. BUSINESS
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General
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Crown Andersen Inc. (the "Company" or the "Registrant"), through its
subsidiaries, designs, manufactures, sells and installs a wide range of
industrial air pollution control and air handling systems, and a complete line
of medical, chemical and industrial waste treatment equipment and systems. The
Company is a Delaware corporation formed in October 1985 to acquire and own all
of the stock of Andersen 2000 Inc. (hereinafter referred to as "Andersen") and
Crown Rotational Molded Products, Inc. (hereinafter referred to as "Crown").
The Company served as a holding company for these two subsidiaries starting in
January 1986. At that time, it issued shares of its Common Stock to the
shareholders of Andersen and Crown in exchange for their shares of Andersen and
Crown Common Stock, respectively. Late in fiscal year 1994, the Company sold
the assets of Crown Rotational Molded Products, Inc. and Roanoke Industries,
Inc. (collectively "plastics") and is thus no longer involved in plastics
molding or high integrity tanks and containers.
Andersen is engaged in the design, manufacture, sale, and installation of
specialized industrial pollution control equipment and systems and of medical,
chemical and industrial waste treatment equipment and systems, heat exchanger
and boiler systems, and industrial fans and blowers. Additionally, Andersen's
wholly-owned subsidiary, Montair Andersen bv in Sevenum, Holland ("Montair
Andersen") manufactures and installs industrial equipment similar to the
Andersen equipment for the European, African, Middle Eastern and Far Eastern
markets.
The Company increased its revenues and income from continuing operations in
the period from 1988 through 1992 by introducing new products and providing
specialized, higher margin products and services for specific customer
applications. As an example, the Company expanded its operations to include the
design, manufacture, sale and installation of complex medical, chemical,
municipal and hazardous waste collection, incineration and disposal systems
which require sophisticated engineering services and specialized equipment. As
a result of such strategies, the Company's revenues increased from $15.5 million
in fiscal 1988 to $25.2 million in fiscal 1992, and its income from continuing
operations more than doubled from $816,000 in fiscal 1988 to $1.7 million in
fiscal 1992. However, in fiscal year 1993 revenues and net income declined to
$20.5 million and $0.5 million as a result of decreases in the revenues
generated by the air pollution control products and incinerator businesses, and
an enormous downturn in business at its Dutch operation. Revenues from these
same operations increased to $22.8 million in fiscal 1994 and net income from
the same operations decreased to $0.3 million. The Dutch operation returned to
profitability, but the air pollution control and incinerator businesses did not
recover to 1992 levels in either revenues or net income. The Company made a
major policy decision during fiscal 1994 and brought this to the shareholders
for approval before implementing it. That decision was to exit the plastics
business through a profitable sale of the plastics subsidiaries and to focus on
the environmental businesses in the future. The shareholders approved this
change and the two plastics operations were sold, resulting in a net gain on the
disposal of $1.2 million in fiscal 1994. This resulted in a total net income of
$1.50 million for that year. The financial results were then restated, moving
the plastics business revenues and net income contributions to "discontinued
operations". See "Selected Financial Data," Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company contained in the Company's 1997 Annual
Report and incorporated by reference in Items 6, 7, and 8, respectively, of this
report. In fiscal 1997, revenues increased 5% to $23.0 million and net income
increased to $1.1 million as compared to net income of $0.5 million on revenues
of $22.0 million in fiscal 1996. In fiscal 1996, revenues increased 1.6% to
$22.0 million and net income decreased to $0.5 million as compared to a net
income of $1.4 million in fiscal 1995. Additional information pertaining to the
revenues, operating profit or loss, and identifiable assets for each of the
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Company's geographic areas for the past three fiscal years is incorporated
herein by reference to Note 10 of the Notes to Consolidated Financial Statements
contained in the Company's 1997 Annual Report. The 1997 Annual Report is filed
as Exhibit 13 to this report.
As used herein, unless otherwise indicated, the term "Company" refers to Crown
Andersen Inc. and its subsidiaries, the term "Andersen" refers to Andersen 2000
Inc. and Montair Andersen bv.
Business and Products
---------------------
Andersen began operations in 1971 as a manufacturer of particle sizing
instrumentation used primarily in the air pollution control field. In fiscal
1975, Andersen acquired a limited industrial air pollution control equipment
line. During fiscal 1978, Andersen sold the particle sizing instrumentation
segment of its business and expanded its industrial pollution control equipment
segment. In fiscal 1982, Andersen embarked on a program designed to expand its
industrial manufacturing capabilities into related product areas. As a result
of that program, Andersen began to manufacture and sell heavy duty industrial
fans and condensing heat exchange equipment in fiscal 1983. In fiscal 1984,
Andersen began to design, manufacture, and sell chemical and industrial waste
incineration systems as well as spray dryers and began to offer contract
chemical and mechanical engineering services. At the beginning of fiscal 1985,
Andersen acquired 81% of the outstanding stock of Montair van Stratum bv,
Sevenum, The Netherlands, and renamed the company Montair Andersen bv. Andersen
acquired the remaining 19% of Montair Andersen in fiscal 1991. Montair Andersen
manufactures the same pollution control and chemical and industrial waste
incineration products as Andersen but also manufactures small animal isolators
and glove boxes for radioactive or chemically active materials handling. In
fiscal 1990, Andersen began offering turnkey medical waste incineration plants
to its customers and expanded that business in 1991 and 1992. In fiscal 1994,
Andersen expanded its incineration product line to include a new line of solid
waste incinerators. Materials handling products were also added for waste
processing. In fiscal 1996, Andersen purchased from a former competitor the
technology to manufacture a line of small vertical incinerators, controlled air
incinerators and rotary kiln incinerators.
Andersen's pollution control systems include high efficiency filtration
systems, wet scrubbers for particulate and gaseous emission collection, sulfur
dioxide removal systems for oil and coal-fired steam boilers and steam
generators, odor control systems, gas coolers and condensers, mechanical
collectors for product recovery, industrial water and waste water treatment
systems, spray dryer systems to produce dry powders from waste liquids which are
produced in gas treating systems, heavy duty industrial fans and blowers used
primarily in high pressure and alloy steel applications in industrial plants,
and heat recovery systems which allow heat recovery from gas streams which
previously could not utilize heat recovery equipment because of their dirty or
corrosive nature. These heat recovery systems are used primarily by the
chemical industries and food processing industries.
Andersen's chemical and industrial waste treatment systems include thermal
oxidation systems (incinerators), waste liquid fired boilers, and chemical
treatment systems for which the company furnishes both engineering designs and
equipment as well as turnkey installation services. All of Andersen's medical
waste processing systems are based on thermal oxidation.
Montair Andersen designs, manufactures and sells industrial pollution control
systems, heat exchangers, incineration systems, and small animal isolators and
glove boxes for radioactive and chemically active materials handling. The small
animal isolators are used for animals such as chickens and guinea pigs by
medical research facilities, pharmaceutical research facilities and animal
husbandry facilities. The radioactive and chemically active materials handling
glove boxes are used by nuclear fuels processing facilities, nuclear research
facilities, and medical isotope manufacturing operations. These products are
sold to both industrial plants and research facilities. Montair Andersen also
builds specialized
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industrial machinery for the electronics, aerospace and chemical process
industries and in 1992 began the manufacture of incinerators as well. The
Montair Andersen product line now includes all of the same incineration systems
as Andersen.
Sales and Distribution
----------------------
In general, Andersen's products are marketed to various industrial
manufacturing concerns in the United States by independent sales representatives
in exclusive territories. Sales of Andersen products are made in all regions of
the country, with no one region serving as a dominant market for Andersen
products. International sales result from the efforts of Andersen and Montair
Andersen employees, independent sales representatives in many countries, and by
licensee companies in those countries where the technology has been licensed.
Montair Andersen historically handled sales of its products directly through
employees. This was changed in late 1993 and Montair now uses sales agents in
most countries which it serves.
Facilities And Manufacturing
----------------------------
The corporate offices of the Company are located in a building owned by
Andersen in Peachtree City, Georgia. The corporate offices occupy approximately
2,000 square feet of the building, and the Company makes no payments to Andersen
for the use of this space. The manufacturing facilities operated by each of the
subsidiary companies are described below.
Andersen's manufacturing operations in North America are conducted in
Peachtree City, Georgia. This facility, which is owned by Andersen, has 29,000
square feet of inside manufacturing and office space and 30,000 square feet of
outdoor assembly area. This facility is equipped for heavy steel fabrication
and is located on a three acre tract of property in an industrial park.
Andersen purchased an adjacent property in Peachtree City in 1992 with a 5,000
square feet office building on one acre of property. In 1996, Andersen
purchased another adjacent property with a 3,600 square feet manufacturing
building on 1.5 acres of land.
With the acquisition of the remaining 19% of Montair Andersen during 1991,
Andersen now owns the manufacturing facility in the Netherlands, which is larger
and more modern than the one which it operates in Peachtree City, Georgia. This
plant contains approximately 40,000 square feet of space and is located on 4.8
acres of industrial property in Sevenum, The Netherlands. This facility was
certified under the new world standard ISO-9001. Certification was attained in
fiscal year 1994.
Manufacturing equipment in the Peachtree City location and in the Sevenum,
Holland location is owned by Andersen and Montair Andersen, respectively. With
the exception of extremely heavy plate fabrication (over 1/2" thick), these two
facilities are capable of manufacturing all of the products offered by Andersen
and Montair Andersen. Where use of a subcontract manufacturing facility is
financially more attractive than manufacturing in company owned facilities, a
number of subcontractors are used. Andersen has adopted the practice of
purchasing from more than one of these suppliers on a routine basis in an effort
to insure adequate continuing sources of supply for subcontracted items in the
future. The Company has trained a number of employees in inspection procedures
and in quality control to ensure that these products are properly manufactured
before shipment by the subcontractors.
Most of the products sold by Andersen must be custom engineered for a specific
application. For this reason, Andersen normally does not maintain finished
product in inventory. However, during fiscal 1996, Andersen purchased certain
inventory from a former competitor. Included in this purchase were certain
finished goods that are available for sale as a completed unit. Andersen
inventories some raw materials which can be purchased
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more economically in large quantities, particularly some of the high alloy
stainless steels. Andersen believes that its facilities are adequate for its
current and anticipated foreseeable manufacturing needs.
Foreign Operations And Export Sales
-----------------------------------
Montair Andersen manufactures and ships products to all European countries and
to some countries in the Middle East, Africa and Asia. Montair Andersen also
exports small animal isolators and some of its glove boxes to the United States
and Canada for sale by Andersen.
Andersen uses subcontract manufacturers in some foreign countries when sales
are made into those countries. In particular, it is common for Andersen to use
Canadian subcontract manufacturers for sales in Canada. Most of Andersen's
foreign sales in 1997, however, were manufactured in Andersen's plant in the
United States.
Foreign sales in fiscal 1997, 1996, and 1995 accounted for approximately 86%,
81% and 88%, respectively, of the Company's total revenues from continuing
operations. Foreign sales for fiscal 1997, 1996 and 1995 totaled approximately
$19.9 million, $17.8 million and $19.0 million, respectively.
Licensing
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Andersen has licensed the manufacture of its products in Japan and India.
During fiscal 1976, Andersen licensed a Japanese firm to manufacture and sell
HEAF7 and CHEAF7 gas filtration products in the Far East. Andersen was paid an
initial fee of $70,000 and then established a royalty arrangement for future
sales. The royalty arrangement included a minimum royalty payment on an annual
basis. In late fiscal 1977, Andersen negotiated a transfer of its license to a
second Japanese firm. The second Japanese firm was active in sales of the HEAF7
and CHEAF7 equipment and installed more than 300 systems in Japan under license
from Andersen. This agreement expired in late 1991, and the Japanese licensee
agreed with Andersen to maintain a formal sales cooperation arrangement in Japan
and Korea whereby the Japanese licensee is still allowed use of the HEAF7 and
CHEAF7 technologies in Japan and Korea in exchange for providing sales leads to
Andersen for all other Far Eastern countries.
In fiscal 1986, Andersen negotiated a license agreement with Paramount
Pollution Control Pvt Ltd in Baroda, India. Andersen licensed manufacture of
all of its product lines, including those manufactured by Montair Andersen, to
the Indian firm. This agreement called for an initial payment of $85,000 to
Andersen for initial technical exchange and training, followed by royalties
calculated as a percentage of product sales in India in the future. This
agreement was modified in 1992 and extended through March 1997. A further
extension of this agreement has just been signed for five more years.
Competition
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In the air pollution control field, Andersen competes with three or four
companies of similar size which have similar product lines. In 20 years of
direct competition with these firms, Company management has determined that
these competitors do not have the engineering capabilities that Andersen does,
and most of these companies do not routinely offer auxiliary systems and
installation services with their quotations. Andersen considers the ability to
furnish auxiliary systems and installation as an advantage over its competition.
There are some competitors in the field which are somewhat larger than Andersen
and which may have greater financial resources. However, these larger companies
tend to concentrate on large air pollution control projects associated with
utility plant construction or with large municipal projects. As a result, they
are not routine competitors with Andersen since Andersen does not compete in
these fields.
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In medical, chemical and industrial waste incineration, Andersen competes with
a limited number of companies which have greater financial resources. These
waste incineration systems, however, are purchased primarily on the basis of
advanced design features rather than strictly on price. As a result, Andersen
believes that it can be successful in capturing an increasing market share in
the coming years due to its technological capabilities.
With the possible exceptions of sulfur dioxide removal scrubbing systems for
small industrial boilers, scrubbing equipment for medical, chemical and
industrial waste incinerators, and rotary kiln incinerators for chemical and
hazardous waste, Andersen does not consider itself the dominant supplier in
those industries in which it competes. In industrial boiler sulfur dioxide
removal systems and in scrubbing systems for waste incinerators, Andersen
believes, based on industry publications, published market surveys and trade
association records, that it currently holds a 30% or greater market share in
the United States. Internationally Andersen believes it has captured a 15-20%
market share in rotary kiln incinerators for chemical and hazardous wastes.
In the field of condensing heat exchangers, Andersen frequently competes with
two or three other manufacturers offering somewhat different products for the
same purpose. In most of these cases, price is the determining factor. Demand
for this product line has not been high in recent years due to relatively low
energy costs in industrialized countries.
Principal Customers
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During 1997 one customer accounted for approximately 28% of the Company's
consolidated revenue during fiscal 1997. It is the opinion of management that
the loss of such customers would not have a material adverse effect on the
operations of the Company. Such business is not normally repetitive and,
therefore, is not dependent upon any single customer or individual group of
customers.
Backlog
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The Company's consolidated backlog of firm orders as of the dates set forth
below were as follows:
September 30, 1997 $ 9,171,500
September 30, 1996 $12,299,320
September 30, 1995 $10,952,000
September 30, 1994 $20,088,000
Prior to 1991, the entire backlog of firm orders as of the end of any fiscal
year was manufactured, shipped and recognized during the following fiscal year.
In late fiscal 1991, the pollution control systems segment of the business began
receiving orders requiring in excess of two years to complete.
Andersen and Montair Andersen products are normally built to order and thus
are not inventoried. The large reduction in backlog from 1994 to 1995 is the
result of completion of a $12 million order by Andersen for the government in
1995 and timing in receipt of some large orders pending at year end 1995. The
reduction in backlog from 1996 to 1997 was due to timing in receipt of new
orders.
Raw Materials
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Since the beginning of fiscal 1990, Andersen has encountered no shortages of
alloys used to fabricate its products. Andersen inventories high alloy steels
when substantial discounts can be negotiated by purchasing large quantities and
to avoid delays in fabrication and shipment caused by materials availability
problems. Beyond this, however, Andersen
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generally purchases raw materials after orders are received for those products
which will require those raw materials.
Patents And Trademarks
----------------------
Andersen owns domestic and foreign patents on its HEAF7 and CHEAF7 gas
filtration systems, its sulfur dioxide removal scrubbing systems, a chemical
waste regeneration process for the sulfur dioxide removal system, an
incineration process, and improvements to these product lines which have
occurred in recent years. Andersen was granted patent protection on its
combination spray dryer-scrubber system for air pollution control on
incinerators in 1991. The oldest of the patents expired in 1991 and the newest
expires in 17 years. Andersen holds trademarks on the HEAF7 and CHEAF7 systems,
the SUBDEW7 condensing heat exchanger, and the ANDERSEN7 name. The trademarks
generally expire 20 years from the date of registration but may be renewed for
one or more additional 20 year periods when they first expire.
While Andersen considers its patents to be valuable assets which sometimes
provide a competitive advantage in the marketplace, Andersen does not believe
that the loss of patent protection on any of its products as a result of the
challenge to the validity of such patents would have a material impact on
Andersen's revenues and earnings. In countries such as Germany and Japan, the
patents on Andersen's products are considered to be substantially more important
than they are on the same products in the United States. For this reason,
Andersen works closely with its licensees to insure that any new patent
applications anticipate potential challenges to their validity in the future.
The validity of Andersen's patents on any of its products has never been
challenged, either in the United States or in foreign countries. Although
Andersen is not aware of any basis upon which such patents might be challenged,
there is no assurance that proceedings challenging these patents will not be
instituted in the future.
The Company examines every product which is developed to determine its
patentability. If the equipment or process is determined to be patentable by
the Company, a patent application is filed, not only in the United States but in
those foreign countries where the product is considered saleable. The patents
are particularly valuable when licensing of manufacturers in foreign countries
is considered.
Product Warranties
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In connection with most contracts for manufacture and sale of Andersen
equipment, the Company warrants the equipment manufactured to be free from
defects in material and workmanship under normal use and service for a period of
eighteen months after shipment, or one year after completion of erection, or one
year after initial operation, whichever occurs first. Andersen's obligation is
generally limited to the repair or replacement of the defective parts. All
equipment not manufactured by Andersen carries only such warranty, if any, as
given by the manufacturer. In addition, Andersen sometimes provides performance
guarantees for equipment and systems which it furnishes. Each proposed
application is carefully evaluated for its potential risk before such guarantees
are offered to the customer. Warranty and performance guarantee related
expenses are recognized as they are incurred. As of September 30, 1997,
Andersen has established an $1,010,000 reserve for future warranty repairs.
Research And Development
------------------------
Andersen maintains a small development laboratory in its plant. Some of the
research and development activities done by Andersen are conducted in Andersen's
customers' plants utilizing test equipment and systems designed and supplied by
Andersen. The results of such tests enable Andersen to provide the customer
with a guaranteed performance system if the development work is successful. The
customer is typically charged for rental of Andersen's equipment during such
activities, and the customer is allowed to use, in its own plant, any
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developments which result from such testing. Andersen, however, reserves all
rights to patents or other proprietary benefits which might result from such
tests.
Research and development expenses are expensed in the year incurred. There
were no company funded research and development expenses during fiscal years
1997, 1996 and 1995.
Environmental Controls
----------------------
To a large extent, the demand for the Company's products is dependent upon the
enforcement of federal, state, and international regulations regarding air
pollution, water pollution, and general industrial pollution. There has been a
significant increase in enforcement actions related to hazardous waste disposal
during the past three years outside the United States. This enforcement action
has resulted in a greater demand outside the United States for incineration
systems offered by Andersen. This increased enforcement activity should benefit
both Andersen and Montair in fiscal 1998. On the other hand, any relaxation of
environmental laws and regulations by the federal, state, or international
governments or any delay in the implementation of such laws or regulations could
have an adverse effect on the Company's operations.
In November of 1993 the Company's now defunct Thermo-Flood subsidiary was
named a Potentially Responsible Party ("PRP") under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") by the United
States Environmental Protection Agency ("EPA"). This is discussed under Item 3.
Legal Proceedings in this document.
Employees
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The Company and its subsidiaries employed a total of 96 individuals as of
September 30, 1997, including 10 officers, 67 technical and manufacturing
people, and 19 others engaged in financial, sales, and secretarial activities.
Approximately 65% of these people are employed at the Peachtree City, Georgia
facility by either Andersen or by the Company, and 35% are employed at Montair
Andersen's Sevenum, The Netherlands plant.
Seasonal Nature of Business
---------------------------
Andersen's business has never been seasonal.
ITEM 2. PROPERTIES
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Andersen owns six acres of land in Peachtree City, Georgia, with a 15 year
old, 29,000 square feet office and manufacturing facility, a separate 5,000
square feet office building, and a separate 3,600 square feet storage building
located on the land. Andersen owns all of the office furniture and equipment,
all of the manufacturing equipment, and all of the testing equipment at this
facility. Andersen also owns an 80 acre vacant land site in a remote area of
Kern County, California. Andersen processed permit requests through various
state and county agencies in California in fiscal 1982 to enable use of this
property for solid waste disposal from Andersen's scrubber liquid waste
regeneration process. Because of the subsequent slowdown in the oil fields,
Andersen decided to abandon the permit application. Andersen is now interested
in selling the California property.
Montair Andersen owns its facility in Sevenum, The Netherlands, which includes
40,000 square feet of office and manufacturing space located on 4.8 acres of
land. Montair owns all of its manufacturing and office equipment in Sevenum.
The Company's (through a defunct subsidiary - Strutherss Thermo-Flood Corp.)
properties in Winfield, Kansas consisted of six buildings on 13 acres of land,
all of which were owned under capital leases by Thermo-Flood. These facilities
contained approximately 137,400
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square feet of manufacturing space and 20,000 square feet of office area. The
Company abandoned the Thermo-Flood property in 1992. See Item 3. Legal
Proceedings below.
Management believes that the facilities discussed above are adequate for the
current needs of all of the Company's operations for the foreseeable future.
For additional information regarding the Company's property and equipment, see
Note 7 to the Notes to Consolidated Financial Statements contained in the
Company's 1997 Annual Report.
ITEM 3. LEGAL PROCEEDINGS
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A discussion of the Company's pending and threatened litigation and unasserted
claims or assessments is set forth under the caption "Commitments and
Contingencies" (Note 11 to the Consolidated Financial Statements) in the
Company's 1997 Annual Report. Such discussion is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise, during the fourth quarter of fiscal 1997.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
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Set forth below in accordance with General Instruction G(3) to Form 10-K and
Instruction 3 to Item 401(b) of Regulation S-K is information as of December 16,
1997 regarding the executive officers (including executive officers who are also
directors) of the Company.
Occupation During
Name Age The Past Five Years
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Jack D. Brady 54 Chairman of the Board, President and Chief
Executive Officer of the Company since 1985;
Chairman of the Board of Andersen since 1984;
President and Treasurer of Andersen from 1978 to
1995; Executive Vice President of Andersen from
1975 until 1978; Director of Andersen since 1975;
Director of Montair Andersen since 1984.
Milton Emmanuelli 63 Chief Financial Officer of the Company since
September 21, 1992; elected Secretary/Treasurer
of the Company on December 16, 1992, and Con-
troller/Treasurer on December 13, 1994.
Thomas Van Remmen 40 Director of the Company; President of Andersen
since December 2, 1996; General Manager of
Cleaver-Brooks incineration and watertube boiler
division of Aqua-Chem Inc. from 1986 to 1996.
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Occupation During
Name Age The Past Five Years
- ------------------------ --- -----------------------------------------------
Randall H. Morgan 49 Secretary of the Company since 1994;
Secretary/Treasurer from 1985 to 1992; Vice
President and Secretary of Andersen since 1979.
The Company has no paid officers. All officers of the Company are also
officers of one or more subsidiaries and are paid by such subsidiaries. See
"Item 11. Executive Compensation."
The executive officers of the Company and its subsidiaries are elected
annually by the respective Boards of Directors and serve at the discretion of
such Boards.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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Information relating to the market for, holders of and dividends paid on the
Company's common stock is set forth under the caption "Common Stock Information"
in the Company's 1997 Annual Report. Such information is incorporated herein by
reference. The 1997 Annual Report is filed as Exhibit 13 to this report.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected consolidated financial data for the Company for each year of the five
year period ended September 30, 1997 are set forth under the caption "Selected
Financial Data" in the 1997 Annual Report referred to in Item 5 above. Such
financial data are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
- ------------------------------------------------------------------------
A discussion of the Company's financial condition and results of operations is
set forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the 1997 Annual Report referred to in
Item 5 above. Such discussion is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The consolidated balance sheets of the Company as of September 30, 1997 and
1996 and the Company's consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1997, together with the related notes thereto and the report of independent
certified public accountants thereon dated December 12, 1997, are set forth in
the 1997 Annual Report referred to in Item 5 above. Such consolidated financial
statements, notes and reports are incorporated herein by reference. The Company
is not required to furnish the supplementary financial information specified by
Item 302 of Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
- --------------------------------------------------------------------
No independent certified public accountant of the Company has, during the two
fiscal years ended September 30, 1997 or subsequent thereto, resigned, indicated
any intent to resign or been dismissed as the independent certified public
accountants of the Company.
-11-
<PAGE>
There have been no disagreements between the Company and its independent
certified public accountants.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Information relating to the directors of the Company is set forth under the
caption "Election of Directors-Nominees" in the Company's Proxy Statement for
its 1998 Annual Meeting of Stockholders to be held on February 18, 1998. Such
information is incorporated herein by reference. Information relating to the
executive officers of the Company is, pursuant to Instruction 3 of Item 401(b)
of Regulation S-K and General Instruction G(3) of Form 10-K, set forth as Part
I, Item 4(A) of this report under the caption "Executive Officers of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Information relating to management compensation is set forth under the
captions "Election of Directors - Director Compensation" and "Election of
Directors - Executive Compensation" in the Proxy Statement referred to in Item
10 above. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Information relating to ownership of the Company's $0.10 par value common
stock as of January 1, 1998 by (i) any person or group known to the Company to
be the beneficial owner of more than 5% of the Company's outstanding common
stock, (ii) each nominee for election as a director of the Company at the
Company's 1998 Annual Meeting of Stockholders, and (iii) all directors and
officers of the Company as a group is set forth under the captions "Voting -
Principal Stockholders" and "Election of Directors - Nominees" in the Proxy
Statement referred to in Item 10 above. Such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information regarding certain transactions between the Company, its affiliates
and certain other persons is set forth under the caption "Election of Directors
- - Certain Relationships and Related Transactions" in the Company's Proxy
Statement referred to in Item 10 above. Such information is incorporated herein
by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) Documents Filed as Part of This Report:
(1) Financial Statements.
The following consolidated financial statements are incorporated in
Part II, Item 8 of this report from the Company's 1997 Annual Report
referred to in Item 5 above:
Consolidated Balance Sheets as of September 30, 1997 and 1996;
Consolidated Statements of Income for the three fiscal years ended
September 30, 1997;
-12-
<PAGE>
Consolidated Statements of Stockholders' Equity for the three fiscal years
ended September 30, 1997;
Consolidated Statements of Cash Flows for the three fiscal years ended
September 30, 1997;
Summary of Accounting Policies;
Notes to Consolidated Financial Statements;
Report of Independent Certified Public Accountants.
(2) Financial Statement Schedules.
The following financial statement schedules are set forth on pages 17 and 18
of this report. All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission have
been omitted because such schedules are not required under the related
instructions or are inapplicable or because the information required is included
in the consolidated financial statements or notes thereto. See the Index to
Financial Statement Schedules on page 16 hereof.
Report of Independent Certified Public Accountants on Financial Statement
Schedules.
Schedule II - Valuation and Qualifying Accounts and Reserves
(3) Exhibits.
The exhibits listed on the following pages are filed as part of or are
incorporated by reference in this report. Where such filing is made by
incorporation by reference to a previously filed registration statement or
report, such registration statement or report is identified in parentheses.
-13-
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------------------------------------------------------------
<S> <C>
13(a) Certificate of Incorporation of the Company (Exhibit 3(a) to the
Company's Registration Statement on Form S-4, No. 33-684 (the
"Form S-4 Registration Statement")
3(b) Certificate of Amendment of the Certificate of Incorporation of
the Company filed with the Secretary of State of Delaware on March
18, 1987 (Exhibit 3(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1987)
3(c) Bylaws of the Company (Exhibit 3(b) to the Form S-4 Registration
Statement)
4 Common Stock Certificate (Exhibit 4(a) to the Form S-4
Registration Statement)
10(a) Agreement and Plan of Reorganization dated as of September 30,
1985 among the Company, Andersen and Crown (Exhibit 2 to the Form
S-4 Registration Statement)
10(b) 1985 Incentive Stock Option Plan and related form of Option
Agreement (Exhibit 10(a) to the Form S-4 Registration Statement)
10(c) First 1987 Amendment to the 1985 Incentive Stock Option Plan
(Exhibit 10(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1987)
10(d) Executive Option Plan (Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1987)
10(e) Key Employee Stock Option Plan (Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30,
1987)
10(f) 1985 Directors Stock Warrant Plan and related form of Stock
Purchase Warrant (Exhibit 10(b) to the Form S-4 Registration
Statement)
10(g) Cash Incentive Program For Key Employees (Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1987)
10(h) Employment Agreement dated October 1, 1992 between Jack D. Brady
and the Company
10(i) Employment Agreement dated October 1, 1992 between Crown and Jack
C. Hendricks
10(j) Lease between the City of Winfield, Kansas and the City of
Arkansas City, Kansas, as landlord, and Thermo-Flood, as tenant,
dated as of October 1, 1980 and related documents regarding
industrial revenue bonds issued for Thermo-Flood's properties in
Winfield, Kansas (Exhibit 10(p) to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1988)
10(k) Revolving Credit Agreement dated as of July 25, 1989 among the
Company, Andersen, Crown, Thermo-Flood and The Citizens and
Southern National Bank, together with the related Pledge
Agreement, Security Agreement, Special Revolving Credit Note and
Working Capital Revolving Credit Note (Exhibit 10(s) to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1989)
10(l) Purchase Agreement dated April 30, 1991 between the Company and
Josef A.C. van Stratum for the acquisition by the Company of the
remaining 19% of Montair Andersen stock (Exhibit 2 to the
Company's Report on Form 8-K dated April 30, 1991)
10(m) Agreement for the Purchase of Stock dated as of September 13, 1991
among George T. Condy, Lawrence E. Wiegman, Kenneth Kirby and
Crown for the acquisition of the stock of Roanoke by Crown
(Exhibit 2 to the Company's Report on Form 8-K dated September 13,
1991)
10(n) Revolving Credit Agreement Amendment dated as of March 31, 1992
among the Company, Andersen, Crown and Thermo-Flood and
NationsBank of Georgia, N.A. (formerly known as The Citizens and
Southern National Bank)- (See Exhibit 10p)
10(o) Second Amendment to Revolving Credit Agreement among the Company,
Andersen, Crown, Thermo-Flood and NationsBank of Georgia, N.A.
(Formerly known as The Citizens and Southern National Bank) - (See
Exhibit 10p)
10(p) Loan agreement dated as of March 31, 1993 among the Company,
Andersen and Crown and NationsBank of Georgia N.A. (Exhibit 10(u)
to the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993)
10(q) Agreement for Sale of Roanoke Industries, Inc. assets, dated July
19, 1994
10(r) Agreement for Sale of Crown Rotational Molded Products, Inc.
assets, dated July 19, 1994 (Exhibit A to the Company's Notice of
Special Meeting and Proxy Statement 1994)
10(s) Asset Purchase Agreement dated December 21, 1995 between the
Cleaver-Brooks Division of Aqua-Chem and Andersen 2000 Inc. filed
with Form 10Q for quarter ended December 31, 1995
10(t) Commercial Loan Agreement, General Security Agreement, Commercial
Promissory Note, and Revolving Note dated June 28, 1996 between
South Trust Bank of Georgia, N.A. and Crown Andersen Inc. and
Andersen 2000 Inc. filed with Form 10Q for the quarter ended June
30, 1996.
10(u) Loan Documents Modification Agreement dated February 28, 1997
between Crown Andersen Inc., Andersen 2000 Inc., and SouthTrust
Bank of Georgia, N.A., filed with Form 10Q for the quarter ended
March 31, 1997.
10 v 1998 Directors Warrant Plan - Filed herewith
10 w 1998 Incentive Stock Option Plan - Filed herewith
13* 1997 Annual Report - Filed herewith
21 Subsidiaries - Filed herewith
27 Financial Data Schedule - Filed herewith
</TABLE>
- ------------
*Portions of the Company's 1997 Annual Report, as indicated in this Annual
Report on Form 10-K, are incorporated herein by reference. Other than as so
noted herein, the 1997 Annual Report is furnished to the Commission solely for
its information and is not deemed to be "filed" with the Commission or subject
to the liabilities of Section 18 of the Securities Exchange Act of 1934.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fiscal quarter ended
September 30, 1997.
(c) Exhibits:
See Item 14 (a)(3) above.
(d) Financial Statement Schedules:
See Item 14 (a)(2) above.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CROWN ANDERSEN INC.
-------------------
(Registrant)
Date: December 16, 1997 By: /s/ Jack D. Brady
---------------------
Jack D. Brady
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Jack D. Brady Chairman of the Board, December 16, 1997
- ------------------------ President,
Jack D. Brady Principal Executive
Officer and Principal
Financial Officer
/s/ Jack C. Hendricks Director December 16, 1997
- ------------------------
Jack C. Hendricks
/s/ Milton Emmanuelli Controller/Treasurer December 16, 1997
- ------------------------ and Principal Accounting
Milton Emmanuelli Officer
/s/ Richard A. Beauchamp Director December 16, 1997
- ------------------------
Richard A. Beauchamp
/s/ Robert Dressler Director December 16, 1997
- ------------------------
Robert Dressler
/s/ Lester K. Legatski Director December 16, 1997
- ------------------------
Lester K. Legatski
/s/ Thomas Van Remmen Director December 16, 1997
- ------------------------
Thomas Van Remmen
</TABLE>
-15-
<PAGE>
CROWN ANDERSEN INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
----
Report of Independent Certified Public Accountants on
Financial Statement Schedules 17
Schedule Schedule No.
-------- ------------
Valuation and Qualifying Accounts and Reserves II 18
All other schedules have been omitted because they are either not required, not
applicable, or the information has otherwise been supplied.
-16-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
of Crown Andersen Inc.
Peachtree City, Georgia
The audits referred to in our report dated December 12, 1997, relating to the
consolidated financial statements of Crown Andersen Inc. and Subsidiaries, which
is incorporated in Item 8 of the Form 10-K by reference to the Annual Report to
Stockholders for the year ended September 30, 1997, included the audit of the
financial statement schedule listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO SEIDMAN, LLP
Atlanta, Georgia
December 12, 1997
-17-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
=====================================================
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Balance at Additions
beginning of charged to costs Balance at
Description period and expenses Deductions end of period
- ----------- ------------ ---------------- ---------- -------------
<S> <C> <C> <C> <C>
September 30, 1997
- ------------------
Allowance for doubtful accounts $120,380 $25,302 $32,206 $113,476
======== ======= ======= ========
September 30, 1996
- ------------------
Allowance for doubtful accounts $166,192 $16,878 $62,690 $120,380
======== ======= ======= ========
September 30, 1995
- ------------------
Allowance for doubtful accounts $143,607 $87,130 $64,545 $166,192
======== ======= ======= ========
</TABLE>
-18-
<PAGE>
CROWN ANDERSEN INC.
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- --------------------------------------------------------- ----
<S> <C> <C>
3(a) Certificate of Incorporation of the Company (Exhibit 3(a)
to the Company's Registration Statement on Form S-4,
No. 33-684 (the "Form S-4 Registration Statement")
3(b) Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Secretary of
State of Delaware on March 18, 1987 (Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1987)
3(c) Bylaws of the Company (Exhibit 3(b) to the Form S-4
Registration Statement)
4 Common Stock Certificate (Exhibit 4(a) to the Form S-4
Registration Statement)
10(a) Agreement and Plan of Reorganization dated as of
September 30, 1985 among the Company, Andersen and Crown
(Exhibit 2 to the Form S-4 Registration Statement)
10(b) 1985 Incentive Stock Option Plan and related form of Option
Agreement (Exhibit 10(a) to the Form S-4 Registration
Statement)
10(c) First 1987 Amendment to the 1985 Incentive Stock Option Plan
(Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1987)
10(d) Executive Option Plan (Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30,
1987)
10(e) Key Employee Stock Option Plan (Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1987)
10(f) 1985 Directors Stock Warrant Plan and related form of Stock
Purchase Warrant (Exhibit 10(b) to the Form S-4 Registration
Statement)
10(g) Cash Incentive Program For Key Employees (Exhibit 10(g) to
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1987)
10(h) Employment Agreement dated October 1, 1992 between
Jack D. Brady and the Company
10(i) Employment Agreement dated October 1, 1992 between
Crown and Jack C. Hendricks
10(j) Lease between the City of Winfield, Kansas and the City of
Arkansas City, Kansas, as landlord, and Thermo-Flood, as
tenant, dated as of October 1, 1980 and related documents
regarding industrial revenue bonds issued for Thermo-Flood's
properties in Winfield, Kansas (Exhibit 10(p) to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1988)
10(k) Revolving Credit Agreement dated as of July 25, 1989 among
the Company, Andersen, Crown, Thermo-Flood and The Citizens
and Southern National Bank, together with the related Pledge
Agreement, Security Agreement, Special Revolving Credit Note
and Working Capital Revolving Credit Note (Exhibit 10(s)
to the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1989)
10(l) Purchase Agreement dated April 30, 1991 between the Company
and Josef A.C. van Stratum for the acquisition by the
Company of the remaining 19% of Montair Andersen stock
(Exhibit 2 to the Company's Report on Form 8-K dated
April 30, 1991)
10(m) Agreement for the Purchase of Stock dated as of
September 13, 1991 among George T. Condy, Lawrence E.
Wiegman, Kenneth Kirby and Crown for the acquisition of
the stock of Roanoke by Crown (Exhibit 2 to the Company's
Report on Form 8-K dated September 13, 1991)
10(n) Revolving Credit Agreement Amendment dated as of March 31,
1992 among the Company, Andersen, Crown and Thermo-Flood and
NationsBank of Georgia, N.A. (formerly known as The Citizens
and Southern National Bank)- (See Exhibit 10p)
10(o) Second Amendment to Revolving Credit Agreement among the
Company, Andersen, Crown, Thermo-Flood and NationsBank of
Georgia, N.A. (Formerly known as The Citizens and Southern
National Bank) - (See Exhibit 10p)
10(p) Loan agreement dated as of March 31, 1993 among the Company,
Andersen and Crown and NationsBank of Georgia N.A.
(Exhibit 10(u) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993)
10(q) Agreement for Sale of Roanoke Industries, Inc. assets,
dated July 19, 1994
10(r) Agreement for Sale of Crown Rotational Molded Products,
Inc. assets, dated July 19, 1994 (Exhibit A to the Company's
Notice of Special Meeting and Proxy Statement 1994)
10(s) Asset Purchase Agreement dated December 21, 1995 between
the Cleaver-Brooks Division of Aqua-Chem Inc. and Andersen
2000 Inc. filed with Form 10Q for quarter ended
December 31, 1995
10(t) Commercial Loan Agreement, General Security Agreement,
Commercial Promissory Note, and Revolving Note dated
June 28, 1996 between South Trust Bank of Georgia, N.A.
and Crown Andersen Inc. and Andersen 2000 Inc. filed with
Form 10Q for the quarter ended June 30, 1996
10(u) Loan Documents Modification Agreement dated February 28,
1997 between Crown Andersen Inc. and Andersen 2000 Inc. and
SouthTrust Bank of Georgia, N.A. filed with Form 10Q for
the quarter ended March 31, 1997.
10 v 1998 Directors Warrant Plan - Filed herewith
10 w 1998 Incentive Stock Option Plan - Filed herewith
13* 1997 Annual Report - Filed herewith 20
21 Subsidiaries - Filed herewith 41
27 Financial Data Schedule - Filed Herewith
</TABLE>
- ------------
*Portions of the Company's 1997 Annual Report, as indicated in this Annual
Report on Form 10-K, are incorporated herein by reference. Other than as so
noted herein, the 1997 Annual Report is furnished to the Commission solely for
its information and is not deemed to be "filed" with the Commission or subject
to the liabilities of Section 18 of the Securities Exchange Act of 1934.
Any exhibit will be furnished upon written request to the Company. There is a
charge of $.50 per page to cover expenses for copying and mailing. Requests
should be addressed to Milton Emmanuelli, Crown Andersen Inc., 306 Dividend
Drive, Peachtree City, Georgia 30269.
-19-
<PAGE>
EXHIBIT 10V
-----------
CROWN ANDERSEN INC.
1998 DIRECTORS STOCK WARRANT PLAN
1.
PURPOSE
-------
The Directors Stock Warrant Plan (the "Plan") is intended to provide
additional incentive to those members of the Board of Directors of Crown
Andersen Inc. (the "Company") who are not employees of the Company or any of its
subsidiaries by encouraging them to acquire share ownership in the Company, thus
giving them a proprietary interest in the Company's business and providing them
with a personal interest in the Company's continued success and progress. These
objectives will be promoted through the issuance and sale of warrants to acquire
shares of the Company's common stock pursuant to the terms hereof ("Warrants").
2.
EFFECTIVE DATE OF PLAN
----------------------
This Plan shall take effect upon approval by the shareholders of the
Company.
3.
ADMINISTRATION
--------------
This Plan shall be administered by a committee (the "Warrant
Committee") which shall consist initially of those persons so designated by the
Board of the Directors of the Company (the "Board"). The Warrant Committee
shall consist at all times of not fewer than two members who may, but need not,
also be members of the Board, but no person eligible to purchase Warrants or
stock upon the exercise of Warrants pursuant to this Plan may serve as a member
of the Warrant Committee. The Board from time to time may remove members from,
or add members to, the Warrant Committee. Vacancies on the Warrant Committee,
howsoever caused, shall be filled by the Board. The Warrant Committee shall
select one of its members as Chairman and shall hold meetings at such times and
places as the Chairman shall determine. Minutes of all meetings shall be made
and observed. A majority of the members of the Warrant Committee shall control
its actions at any meeting. The interpretation and construction by the Warrant
Committee of any provision of this Plan or of any Warrant sold pursuant to the
terms hereof shall be final unless otherwise determined by the Board. No member
of the Board or the Warrant Committee shall be liable for any action or
1
<PAGE>
determination made in good faith with respect to this Plan or any Warrant sold
pursuant to the terms hereof.
4.
ELIGIBILITY
-----------
The persons who shall be eligible to purchase Warrants hereunder shall
be Richard A. Beauchamp, Robert Dressler, Lester K. Legatski, and Jack C.
Hendricks who constitute all the members of the Board of the Company who are not
employees of the Company or any of its subsidiaries. Such person or persons to
whom Warrants are sold hereunder are hereinafter individually referred to as
AHolder" and collectively as "Holders." An eligible director may purchase more
than one Warrant, but only on the terms and subject to the restrictions
hereinafter set forth.
5.
STOCK
-----
(a) Authorized Shares. The stock to be issued upon the exercise of
-----------------
Warrants sold pursuant to this Plan shall be the $0.10 par value common stock of
the Company and, at the election of the Committee, may be either treasury stock
or stock original issued for purposes of this Plan. The maximum aggregate
number of shares of stock which may be available and sold pursuant to this Plan
during the term of this Plan shall be 100,000 shares of the common stock of the
Company, subject to adjustment upon changes in capitalization of the Company in
as provided in Paragraph 9 hereof.
(b) Rights of Holder. A Holder of a Warrant shall have no rights as a
----------------
shareholder with respect to any shares subject to a Warrant sold pursuant to
this Plan until the date of the issuance of a stock certificate to such person
for such shares as a result of such person's exercise of such Warrant. Subject
to the provisions set forth in Paragraph 9 hereof, no adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities, or other
property) or distributions or other rights for which the record date is prior to
the date the stock certificate is issued to the older.
2
<PAGE>
6.
SALE OF WARRANTS
----------------
(a) Amount and Price of Warrants. Subject to the terms of this Plan,
----------------------------
Warrants covering up to a maximum of 20,000 shares common stock of the Company
may be purchased by each eligible current direct on or before January 25, 2008.
Any eligible future directors may make such purchase on or before the
termination date of this Plan established pursuant to Paragraph 6(c)(ii) below.
The price for which the Warrants are to be sold shall be the fair market value
thereof prior to their issuance as determined by the Warrant Committee.
(b) Form of Warrant. Each Warrant shall be in writing, in the form
---------------
prepared by the Warrant Committee and executed and dated by the Company, and
shall set forth the terms and conditions of the Warrant in accordance with this
Plan. The Warrant Committee shall present the form of Warrant to the eligible
director, and upon execution of the form of Warrant by the eligible director and
payment of the full purchase price of the Warrant, such Warrant shall be deemed
to have been purchased as of the date of the latest of such events. Payment
shall be in cash or, at the election of the Holder, with common stock of the
Company having a fair market value as of the date of payment equal to the
purchase price, with such fair market value to be determined in accordance with
the provisions of Paragraph 7(a) hereof. The failure of the eligible director
to execute the form of Warrant and pay the full purchase price of the Warrant
within seven (7) days of the date of receipt of the form of Warrant shall render
the Warrant and the form of Warrant null and void.
(c) Limitations on Sale of Warrants. Notwithstanding any provisions to
--------------------------------
the contrary contained herein, no Warrant shall be sold hereunder:
(i) If the sale thereof would cause the maximum aggregate number of
shares of stock of the Company made available under this Plan
during the term of this Plan, or would cause the maximum number
of shares of stock of the Company made available to any eligible
director pursuant to this Plan, to exceed the maximum number of
shares allowed by Paragraphs 5(a) or 6(a), respectively, hereof;
or
(ii) After 5:00 p.m., Atlanta, Georgia time, on the date ten years
subsequent to the Effective Date of this Plan (the "Termination
Date").
3
<PAGE>
7.
VESTING AND EXERCISE OF WARRANTS
--------------------------------
(a) Vesting. Warrants shall vest with respect to each Holder, and
-------
each Holder shall be entitled to exercise Warrants for the purchase of shares of
common stock in accordance with the following schedule.
No. of Shares (Cumulative) Vesting Date
-------------------------- ------------
4,000 December 31, 1998
8,000 December 31, 1999
12,000 December 31, 2000
16,000 December 31, 2001
20,000 December 31, 2002
(b) Exercise Price. In the event a Holder elects to purchase shares
--------------
of common stock of the Company under a Warrant, the exercise price per share
shall be equal to the fair market value of a share of common stock of the
Company on the date said Warrants are purchased. The fair market value per
share of the common stock of the Company for purposes of this Plan shall be the
closing price of the stock on such stock exchange the stock is listed, on the
date preceding the date the Warrant is purchased. If, for any reason, the fair
market value per share of common stock of the Company cannot be ascertained or
is unavailable for the date preceding the date on which the Warrant is
purchased, the fair market value of such stock shall be determined as of the
nearest preceding date on which such fair market value can be ascertained
pursuant to the term hereof.
(c) Exercise Procedure. A Holder who elects to purchase shares of
------------------
common stock by exercising a Warrant shall surrender the Warrant to the Company,
prior to the Termination Date, at the principal offices of the Company,
together with the purchase price for the shares to be purchased. Payment shall
be in cash or, at the election of the Holder, with common stock of the Company
having a fair market value as of the date of payment equal to the purchase
price, with such fair market value to be determined in accordance with the
provisions of Paragraph 7(b) hereof. If exercise for less than full value, the
Holder shall be issued another Warrant for the balance of the shares not
purchased, which shall be subject to all of the terms and conditions of his
original Warrant. The right of exercise shall be limited to whole shares.
4
<PAGE>
8.
TERMS AND CONDITIONS OF WARRANTS
--------------------------------
Each Warrant shall contain terms and conditions as determined in this
Paragraph 8 and also shall incorporate by reference all of the other terms and
conditions set forth in this Plan.
(a) Holder and Number of Shares. Each Warrant shall state the name of
---------------------------
the Holder and the number of shares of stock of the Company which are subject to
the Warrant.
(b) Price. Each Warrant shall set forth the amount which the Holder
-----
must pay to the Company for (i) the Warrant, and (ii) each share of stock
subject to the Warrant, which in each case shall be the fair market value
thereof determined as of the dates and in the manner specified in Paragraphs 6
and 7, respectively, of this Plan.
(c) Vesting, Exercise and Term of Warrants. Each Warrant shall
--------------------------------------
provide that the Warrant may be exercised only in accordance with the vesting
schedule set forth in Section 7(a) hereof and shall be exercised only by
delivery by the Holder to the Warrant Committee of written notice of exercise
executed by the Holder on the exercise form attached as Exhibit "A" to the
Warrant, which exercise form shall identify the Warrant for which the exercise
is being made, together with the number of shares with respect to which the
Holder is exercising the Warrant. The exercise of a Warrant may be for fewer
than the full number of shares of stock subject to such Warrant and, subject to
the other restrictions on exercise set forth herein, the unexercised portion of
a Warrant may be exercised at a later date by the Holder. Notwithstanding any
provisions to the contrary herein set forth, no Warrant shall be exercisable
either in whole or in part:
(i) After the Termination Date; or
(ii) After the date upon which the shareholders of the Company have
voted to liquidate or dissolve the Company.
(d) Medium and Time of Payment. Payments for Warrants and for shares
--------------------------
of common stock upon the exercise of Warrants shall be in cash or, at the
election of the Holder (or his successors pursuant to Paragraph 8(g) below, with
common stock of the Company having a fair market value as of the date of payment
equal to the purchase price, with such fair market value to be determined in
accordance with the provisions of Paragraph 7(a) hereof.
5
<PAGE>
(e) Warrants Non-Transferable. During the lifetime of a Holder, any
-------------------------
Warrant purchased by such Holder shall be exercisable only by such Holder and
shall not be assignable or transferable by him, and subject to Paragraph 8(g)
below, no other person shall acquire any rights therein. No Warrant may be
pledged or hypothecated nor shall any such Warrant be subject to execution,
attachment or similar process.
(f) Termination of Directorship. If the Holder ceases to be a director
---------------------------
of the Company for any reason other than death or legal incapacity, the Company
shall repurchase such Holder's unexercised and outstanding Warrants within 60
days from the effective date of termination of his directorship, provided a
written request for repurchase and the Warrants covered by such request are
delivered to the Company within such period. If no such request is made within
said 60 day period, said Holder's Warrants, upon expiration of said period,
shall become null and void. The repurchase price shall be based upon whichever
of the following is applicable as of the effective date of the termination of
directorship.
(i) If the market value per share of the common stock of the Company
is equal to or above the exercise price per share specified in the
Warrant, the Company shall purchase the Warrant from the Holder a the
price that the Holder originally paid for said Warrant based upon the
number of shares of common stock covered thereby which remain
unexercised and outstanding plus interest at the rate of eight percent
(8%) per annum from date of original purchase to date of repurchase.
(ii) If the market value per share of the common stock of the Company
is less than the exercise price per share specified in the Warrant,
the Company shall purchase the Warrant from the Holder for a price
equal to said market value divided by said exercise price, multiplied
by the Holder's original purchase price for the number of shares of
common stock covered by said Warrant which remains unexercised and
outstanding.
(g) Death or Incapacity of Holder. In the event of the legal
-----------------------------
incapacity or death of a Holder while a director of the Company, an unexercised
Warrant owned by such incapacitated or deceased Holder may be exercised at any
time within one year of the date of declaration of incapacity or death of such
Holder, subject to the restrictions or exercisability set forth in Paragraphs
8(c)(i) and 8(c)(ii) above, by the legal guardian, executors, or administrators
6
<PAGE>
of the estate of the Holder or by any person or persons who shall have acquired
the Warrant directly from the Holder by bequest or inheritance. Such exercise
shall be effected in a accordance with the terms set forth in this Paragraph 8
as if such legal guardian, executor, or administrator was the named Holder. No
Warrant shall be transferable by any Holder otherwise than by will or the laws
of descent and distribution.
(h) Agreement of Holder. Each Holder shall agree to hold all Warrants
-------------------
and all shares of stock acquired by such Holder pursuant to such Holder's
exercise of any Warrant for investment purposes and not with a view to resale or
distribution thereof to the public.
(i) Delivery of Stock Certificates. As promptly as practicable after
------------------------------
the date of exercise of a Warrant the receipt by the Company of full payment
therefor, the Company shall deliver to each Holder a stock certificate
representing the stock of the Company purchased by the Holder pursuant to the
such Holder's exercise of the Warrant.
9.
CHANGES IN CAPITALIZATION
-------------------------
(a) Recapitilizations and Reorganization. In the event that subsequent
------------------------------------
to the Effective Date of this Plan and as a result of a stock split, stock
dividend, combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or other such change, the shares of common stock of the Company
are increased or decreased or change into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation, then (i) there shall be substituted for each share of common stock
subject to an unexercised Warrant (in whole or in part) sold under this Plan the
number and kind of shares of stock or other securities into which each such
share of common stock shall be changed or into which each such share of commons
stock shall be exchanged; (ii) the exercise price per share of commons stock or
unit of securities shall be increased or decreased proportionately so that the
aggregate purchase price for the securities subject to the Warrant shall remain
the same as immediately prior to such event; and (iii) the Committee shall make
such other adjustments to the securities subject to Warrants and the provisions
of the Plan as may be appropriate and equitable. Any such adjustment may
provide for the elimination of fractional shares.
7
<PAGE>
(b) Rights of Holder. Except as hereinabove expressly provided, no
----------------
Holder of a Warrant shall have any rights by reason of any subdivision or
consolidation of shares of stock or any class or the payment of any stock
dividend or any other increase, decrease or change in the number of shares of
stock of the Company of any class by reason of any merger, consolidation,
recapitalization or spinoff of assets or stock of another corporation. Except
as hereinabove expressly provided, any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or purchase price of shares of common stock subject to a Warrant.
The purchase of a Warrant pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.
10.
SECURITIES REGISTRATION; LEGEND
-------------------------------
In the event that the Company shall deem it necessary to register,
under the Securities Act of 1933 or other applicable statutes, any shares with
respect to which a Warrant shall have been exercised, or to qualify any such
shares for exemption from the Securities Act of 1933 under the Rules and
Regulations of the Securities and Exchange Commission or any state securities
statute, then the Company shall take such action at its own expense before
delivery of the certificates representing such shares to a Holder. In any
event, any shares with respect to which a Warrant is exercised shall contain a
legend on the share certificate reflecting all restrictions on transferability
which may be require pursuant to federal and state securities laws.
11.
AMENDMENT, TERMINATION OR SUSPENSION
------------------------------------
In the event the Board shall determine that this Plan is not in the
best interest of the Company or its shareholders for any reason, the Board shall
have the power to add to, amend, or repeal any of the provisions of this Plan,
to suspend the operation of the entire Plan or any of its provisions for any
period or periods or to terminate this Plan in whole or in part. In the event
of any such action, the Warrant Committee shall prepare written procedures
which, when approved by the Board, shall govern the administration of the Plan
8
<PAGE>
resulting from such addition, amendment, repeal, suspension or termination shall
affect, in any way, the rights of the Holders of outstanding Warrants without
the consent of the Holders.
12.
NOTICES
-------
All notices or other communications by a Holder to the Warrant
Committee pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Warrant Committee at
the location, or by the person, designated by the Warrant Committee for the
receipt therof.
13.
TERM OF PLAN
------------
Subject to Paragraph 11 hereof, this Plan shall terminate and the last
date upon which a Warrant may be purchased shall be the Termination Date as
defined in Paragraph 6(c)(ii) hereof.
14.
INDEMNIFICATION OF WARRANT COMMITTEE
------------------------------------
In addition to such other rights of indemnification as they have as
directors or officers of the Company or as members of the Warrant Committee, the
members of the Warrant Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually incurred in connection
with the defense of any action, suit, or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason of any
action taken or failure to act pursuant to or in connection with this Plan or
any Warrant purchased hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit, or proceeding; provided, however, that no Warrant Committee
member shall be indemnified by the Company hereunder in relation to matters as
to which it shall be adjudged in such action, suit or proceeding that such
Warrant Committee member is liable for negligence or misconduct in the
performance of his duties.
9
<PAGE>
Warrant No.___
CROWN ANDERSEN INC.
-------------------
STOCK PURCHASE WARRANT UNDER
----------------------------
1998 DIRECTORS STOCK WARRANT PLAN
---------------------------------
This Stock Purchase Warrant (the "Warrant") certifies that _______________
(the "Holder") is entitled to purchase from Crown Andersen Inc., a Delaware
corporation (the "Company"), subject to the vesting and other terms herein
stated, _______ shares of common stock, par value $0.10 per share (the "Stock"),
of the Company, and upon such purchase to receive a certificate or certificates
representing such shares.
This Warrant is issued under, and is subject to the terms and provisions
of, the Company's 1998 Directors Stock Warrant Plan (the "Plan") and is further
subject to the terms and provisions of any amendments or supplements to such
Plan which may have been or may be duly made by the Company. The Plan and all
amendments and supplements thereto are incorporated herein by reference. A true
copy of the Plan and any supplements and amendments are on file at the principal
office of the Company in Peachtree City, Georgia, and reference is made to the
Plan and any such supplements or amendments in their entirety for a description
of the respective rights, limitations of rights, obligations and duties of the
Company and the Holder and for all other purposes.
1.
SHARES SUBJECT TO WARRANT AND VESTING SCHEDULE
----------------------------------------------
The Holder shall have the right from the date hereof through __________,
_____ [date, year] to purchase a total of 20,000 shares of Stock; provided,
however, that this Warrant shall vest, and the Holder shall be entitled to
exercise this Warrant for the purchase of shares of Stock, only in accordance
with the following schedule:
10
<PAGE>
No. of Shares (Cumulative) Vesting Date
-------------------------- ------------
4,000 December 31, 1998
8,000 December 31, 1999
12,000 December 31, 2000
16,000 December 31, 2001
20,000 December 31, 2002
To the extent that this Warrant is not exercised on or before 5:00 p.m.,
Atlanta, Georgia, Time, on January 25, 2008, it shall expire and the rights of
the Holder shall become void and of no effect.
2.
EXERCISE PRICE
--------------
The price per share payable to the Company on the exercise of the purchase
right evidenced by this Warrant (the "Warrant Price") shall be $________, such
Warrant Price having been determined in accordance with the Plan.
3.
MANNER OF EXERCISE
------------------
This Warrant may be exercised in whole at any time or in part from time to
time for the purchase of the shares of Stock which such Holder is then entitled
to purchase hereunder at the price set forth in Section 2 hereof, as adjusted
under Section 5 hereof. In order to exercise this Warrant in whole or in part,
the Holder shall deliver to the Company:
(a) This Warrant, together with the exercise form, which is attached
hereto as Exhibit A and constitutes a part hereof, duly completed and
executed by the Holder and specifying the number of shares of Stock to
be purchased; and
(b) Payment, by cash or with common stock of the Company, of an amount
equal to the aggregate purchase price of the shares of Stock being
purchased.
Upon receipt thereof, the Company, as promptly as practicable, shall cause
to be executed and delivered to such Holder a certificate or certificates
registered in the name of such Holder and representing the aggregate number of
shares of Stock specified in said exercise form. If this Warrant shall have
11
<PAGE>
been exercised only in part, the Company, at the time of delivery of said
certificate or certificates, will deliver to such Holder a new warrant
evidencing the rights of such Holder to purchase the remaining shares of Stock
called for by this Warrant, which new warrant in all other respects shall be
identical with this Warrant. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation and delivery of stock
certificates under this section. All shares of Stock issuable upon exercise of
this Warrant shall be validly issued, fully paid and nonassessable.
4.
TERMINATION OF DIRECTORSHIP
---------------------------
If the Holder ceases to be a director of the Company for any reason other
than death or legal incapacity, the Company shall repurchase this Warrant from
the Holder, to the extent it remains unexercised and outstanding, within sixty
(60) days from the effective date of termination of his directorship, provided a
written request for repurchase and this Warrant (or any warrant issued in
replacement hereof) are delivered to the Company within said period. If no such
request is made within said 60-day period, this Warrant, upon expiration of said
period, shall become null and void. The repurchase price shall be based upon
whichever of the following is applicable as of the effective date of the
termination of directorship:
(a) If the market value per share of the common stock of the Company is
equal to or above the exercise price per share specified herein, the Company
shall purchase this Warrant from the Holder at the price that he originally paid
for this Warrant based upon the number of shares of common stock covered thereby
which remain unexercised and outstanding plus interest at the rate of eight
percent (8%) per annum from date of original purchase to date of repurchase.
(b) If the market value per share of the common stock of the Company is
less than the exercise price per share specified herein, the Company shall
purchase this Warrant from the Holder for a price equal to said market value
divided by said exercise price, multiplied by the Holder's original purchase
price for the number of shares of common stock covered by this Warrant which
remain unexercised and outstanding.
12
<PAGE>
5.
ADJUSTMENT OF PURCHASE RIGHT
----------------------------
(a) In the event that as a result of a stock split, stock dividend,
combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger, consolidation,
recapitalization or other such change, the shares of common stock of the Company
are increased or decreased or changed into or exchange for a different number or
kind of shares of stock or other securities of the Company or of another
corporation, then (i) there shall be substituted for each share of Stock subject
to this Warrant the number and kind of shares of stock or other securities into
which each such share of Stock shall be changed or into which each such share of
Stock shall be exchanged; (ii) the exercise price per share of common stock or
unit of securities shall be increased or decreased proportionately so that the
aggregate purchase price for the securities subject to this Warrant shall remain
the same as immediately prior to such event; and (iii) the Company shall make
such other adjustments to the securities subject to this Warrant as may be
appropriate and equitable. Any such adjustment may provide for the elimination
of fractional shares.
(b) In the event that the Company, at any time prior to the exercise of
this Warrant, shall dissolve, liquidate or wind up, then all rights under this
Warrant shall terminate on a date fixed by the Company, such date as fixed to be
not earlier than the date of commencement of the proceedings for such
dissolution, liquidation or winding up, not later than thirty (30) days after
such commencement date and in accordance with Section 8(c)(ii) of the Plan.
Notice of such termination of purchase rights shall be given to the Holder
hereof, as the same shall appear on the books of the Company, by mail at least
thirty (30) days prior to such termination date.
(c) Any adjustment to the number of shares issuable under this Section 5
may be to the nearest whole share, and the Company shall not be required to
issue any fractional shares.
13
<PAGE>
6.
Notices
-------
In case the Company proposes:
(a) To pay any stock dividend upon its common stock or make any
distribution (other than the ordinary cash dividends payable out of earnings) or
offer any subscriptions or other rights to the holders of common stock;
(b) To effect any capital reorganization or reclassification of capital
stock of the Company; or
(c) To effect the consolidation, merger, sale of all or substantially all
of the assets, liquidation, dissolution or winding up of the Company, then the
Company shall cause notice of any such intended action to be given to the Holder
hereof.
Any notice or other document required or permitted to be given or delivered
to the Holder shall be sent by certified or registered mail to such Holder at
the following address or such other address as shall have been furnished below
to the Company in writing by such Holder:
________________________
________________________
________________________
________________________
Any notice or other document required or permitted to be given or delivered to
the Company shall be sent by certified or registered mail to 306 Dividend Drive,
Peachtree City, Georgia 30269. A notice shall be deemed to have been received
on the fifth business day after notice has been given as provided in this
Section 6.
7.
RESERVATION OF SHARES
---------------------
The Company agrees at all times to reserve a sufficient number of shares of
common stock to cover the number of shares issuable upon exercise of this and
all other warrants of like tenor then outstanding.
14
<PAGE>
8.
RIGHTS OF HOLDER
----------------
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in this Warrant and are not enforceable
against the Company except to the extent set forth herein.
9.
TRANSFERABILITY
---------------
This Warrant and the shares issuable upon the exercise hereof are being
purchased by the Holder solely for investment and not with a view to resale or
distribution thereof to the public. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except (a) by will or by the laws of
intestacy, (b) otherwise in accordance with Sections 8(e) and (g) of the Plan,
or (c) upon the express prior written consent of the Company. Further, neither
this Warrant, any shares of Stock issuable upon the exercise hereof or any other
security issuable upon the exercise hereof may be offered or sold except in
compliance with the Securities Act of 1933, as amended, and any applicable state
securities laws or regulations then in effect and then only against receipt of
an agreement of such person to whom such offer of sale is made to comply with
the provisions of this section with regard to any resale or other disposition of
such securities.
10.
LEGEND
------
(a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE BUT HAVE
BEEN ISSUED OR SOLD IN RELIANCE ON THE EXEMPTIONS FROM REGISTRATION CONTAINED IN
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AS
AMENDED, AND SECTION 4(2) OF THE 1933 ACT. THESE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO EFFECTIVE
REGISTRATION. STATEMENTS MADE UNDER SUCH ACTS AND EFFECTIVE QUALIFICATION OR
REGISTRATION UNDER ALL OTHER APPLICABLE STATE SECURITIES LAWS AND REGULATIONS OR
PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER SUCH ACTS AND SUCH OTHER
APPLICABLE STATE SECURITIES LAWS OR REGULATIONS, THE AVAILABILITY OF WHICH IS TO
BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
15
<PAGE>
(b) The Company shall cause a legend substantially similar to the foregoing
to be set forth on each certificate representing shares of Stock or any other
securities issued or issuable upon exercise of this Warrant not theretofore
distributed to the public, unless counsel for the Company is of the opinion as
to any such certificate that such legend is unnecessary.
11.
APPLICABLE LAWS
---------------
This Warrant shall be governed by and construed in accordance with the laws
of the State of Delaware.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the _____
day of ______________, ______.
CROWN ANDERSEN, INC.
By:________________________
Chairman of the Board
(SEAL) Attest:______________________
Secretary
16
<PAGE>
EXHIBIT A
---------
Exercise Form
-------------
(To be executed by the registered holder of this Warrant to exercise the right
to purchase common stock of Crown Andersen Inc. evidenced by this Warrant.)
I hereby irrevocably subscribe for _____ shares of common stock, $0.10 par
value per share, of Crown Andersen, Inc. (the "Company") pursuant to and in
accordance with the terms of Stock Purchase Warrant No. __ and herewith make
payment of $_______ for such securities in cash or shares of common stock of
thee Company. I request that a certificate for such securities be issued in my
name and be delivered to me at the address stated below, and, if such number of
shares is not all of the shares purchasable under this Warrant, that a new
Warrant of like tenor for the balance of the shares purchasable under this
Warrant be delivered to me at such address.
Date: _________ Signed: ___________________________________
Name and Address: _________________________
(Please print) _________________________
_________________________
_________________________
Crown Andersen Inc. hereby acknowledges receipt of the above exercise form
and payment this ____ day of _____________, _____.
CROWN ANDERSEN, INC.
By:________________________
Chairman of the Board
(SEAL) Attest:______________________
Secretary
17
<PAGE>
EXHIBIT 10W
-----------
CROWN ANDERSEN INC.
------------------
1998 INCENTIVE STOCK OPTION PLAN
--------------------------------
1.
PURPOSE
-------
This incentive Stock Option Plan (the "Plan") is intended as an incentive
and to encourage stock ownership by certain key executive employees of CROWN
ANDERSEN INC. (the "Company") so they may acquire or increase their proprietary
interest in the success of the Company and to encourage them to remain in the
employ of the Company. It is further intended that this Plan qualify as an
"Incentive Stock Option Plan" and that the options which may be granted
hereunder qualify as "Incentive Stock Options" within the meaning of Section 422
of the Internal Revenue Code of 1954, as amended (the "Code"). Options to
purchase stock of the Company which may be granted to employees of the Company
pursuant to this Plan hereinafter are referred to as "Incentive Stock Options."
2.
EFFECTIVE DATE OF PLAN
----------------------
This Plan shall take effect on the date upon approval by the shareholders
of the Company.
3.
ADMINISTRATION
--------------
This Plan shall be administered by a committee (the "Committee") which
shall consist initially of those persons so designated by the Board of Directors
of the Company (the "Board"). The Committee shall consist at all times of not
less than three members who may, but need not, also be members of the Board.
The Board from time to time may remove members from, or add members to, the
Committee. Vacancies on the Committee shall select one of its members as
Chairman and shall hold meetings at such times and places as the Chairman shall
determine. Minutes of all meetings shall be made and observed. A majority of
the members of the Committee shall control its actions at any meeting. The
interpretation and construction by the Committee of any provision of this Plan
or any Incentive Stock Option granted pursuant to the terms hereof shall be
final unless otherwise determined by the Board. Notwithstanding anything herein
to the contrary, no action taken by the Board or the Committee pursuant to the
terms of this Plan shall be valid unless, at the time of exercise of discretion
with regard to the Plan and at all times within one year prior thereto, a
<PAGE>
majority of the Board and a majority of the Board acting with respect to any
matter concerning such Incentive Stock Option or all of the members of the
Committee, as applicable, are ineligible for selection as a person to whom stock
options may be granted pursuant to this Plan or to whom shares may be allocated
or stock options, stock warrants or stock appreciation rights may be granted
pursuant to any other plan of the Company or any of its affiliates (i.e.,
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 or any successor rule or regulation). No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to this Plan or any Incentive Stock Option granted
pursuant to the terms hereof.
4.
ELIGIBILITY
-----------
The persons who shall be eligible to receive Incentive Stock Options
hereunder shall be such key executive employees (including officers, whether or
not they are directors) of the Company as the Board may select from time to
time. Such person or persons to whom Incentive Stock Options are granted
hereunder shall not exceed fifteen in number and are hereinafter individually
referred to as "Optionee" and collectively as "Optionees." An Optionee may hold
more than one Incentive Stock Option, but only on the terms and subject to the
restrictions hereinafter set forth.
5.
STOCK
-----
(a) Authorized Shares. The stock subject to the Incentive Stock Options
-----------------
which may be granted pursuant to this Plan shall be the $0.10 par value common
stock of the Company and, at the election of the Committee, may be either
treasury stock or stock originally issued for purposes of this Plan. The
maximum aggregate number of shares of stock which may be made available and sold
pursuant to this Plan during the term of this Plan shall be 100,000 shares of
the common stock of the Company, subject to adjustment upon changes in
capitalization of the Company as provided in Paragraph 8 hereof. In the event
that any outstanding Incentive Stock Option for any reason expires, the shares
of stock allocable to the unexercised portion of such Incentive Stock Option may
again be subjected to another Incentive Stock Option granted pursuant to this
Plan.
(b) Rights of Optionee. An Optionee shall have no rights as a shareholder
------------------
with respect to any shares subject to an Incentive Stock Option granted pursuant
-2-
<PAGE>
to this Plan until the date of the issuance of a stock certificate to him for
such shares as a result of such Optionee's exercise of such Incentive Stock
Option. Subject to the provisions set forth in Paragraph 8 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date the stock certificate is issued to the
Optionee.
6.
GRANTING OF OPTIONS
-------------------
(a) Designation of Optionees and Execution of Option Agreements. Incentive
-----------------------------------------------------------
Stock Options may be granted hereunder from time to time and at such times as
may be authorized by the Board. In its authorization of the granting of an
Incentive Stock Option hereunder, the Board shall designate the name of the
Optionee and the number of shares of stock subject to such Incentive Stock
Option. The Committee then shall prepare a written agreement, executed and
dated by the Company, evidencing such Incentive Stock Option (the "Option
Agreement") and setting forth the terms and conditions of the Incentive Stock
Option in accordance with Paragraph 7 below, and shall present the Option
Agreement to the Optionee. Upon execution of the Option Agreement by the
Optionee, such Incentive Stock Option shall be deemed to have been granted with
the date of its granting being the date of execution of the Option Agreement by
the Company. The failure of the Optionee to execute the Option Agreement within
seven days of the date of receipt of same shall render the Option Agreement and
the Incentive Stock Option null and void.
(b) Limitations on Grant of Options. Notwithstanding any provisions to the
-------------------------------
contrary contained herein, no Incentive Stock Option shall be granted hereunder:
(i) If the granting thereof would cause the maximum aggregate
number of shares of stock of the Company made available during
the term of this Plan to exceed the maximum number of shares
allowed by Paragraph 5(a) hereof; or
(ii) After 5:00 p.m., Atlanta, Georgia time, on the date ten years
subsequent to the earlier of the date the Plan is adopted by
the Board or the date the Plan is approved by the holders of a
majority of the outstanding shares of common stock of the
Company; or
-3-
<PAGE>
(iii) If, with respect to any Optionee, the aggregate fair market
value of the stock (determined in accordance with Paragraph 7
hereof as of the date of grant of an Incentive Stock Option)
for which such Optionee may be granted Incentive Stock Options
in any calendar year (pursuant to all Incentive Stock Option
Plans of the Company and its parent and subsidiary
corporations, if any) would exceed an amount equal to
$100,000.
7.
TERMS AND CONDITIONS OF OPTION AGREEMENTS
-----------------------------------------
Each Option Agreement shall contain terms and conditions as determined in
this Paragraph 7 and also shall incorporate by reference all of the other terms
and conditions set forth in this Plan.
(a) Optionee and Number of Shares. Each Option Agreement shall state the
-----------------------------
name of the Optionee and the number of shares of stock of the Company which are
subject to the Incentive Stock Option evidenced by the Option Agreement. The
Optionee and the number of shares subject to the Incentive Stock Option shall be
determined in accordance with Paragraph 6 above.
(b) Option Price. Each Option Agreement shall set forth the amount which
------------
the Optionee must pay to the Company for each share of stock subject to the
Incentive Stock Option (hereinafter referred to as the "Option Price"). The
Option Price for each Incentive Stock Option shall be determined as follows:
(i) For each Optionee who owns 10% or less of the total combined
voting power of all classes of outstanding stock of the
Company at the time the Incentive Stock Option is granted, the
Option Price shall be an amount equal to the fair market value
of the stock subject to the Incentive Stock Option at the time
the Incentive Stock Option is granted, with such fair market
value to be determined as set forth below; or
(ii) For each Optionee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the
Company at the time the Incentive Stock Option is granted, the
Option Price shall be an amount equal to 110% of the fair
market value of the stock subject to the Incentive Stock
-4-
<PAGE>
Option at the time the Incentive Stock Option is granted, with
the fair market value of the stock to be determined as set
forth below.
The fair market value per share of common stock of the Company for purposes of
this Plan shall be the closing price of the stock by NASDAQ the date the
Incentive Stock Option is granted. If, for any reason, the fair market value
per share of common stock of the Company cannot be ascertained or is unavailable
for the date on which the Incentive Stock Option is granted, the fair market
value of such stock shall be determined as of the nearest preceding date on
which such fair market value can be ascertained pursuant to the terms hereof.
(c) Exercise and Term of Incentive Stock Options. Each Option Agreement
--------------------------------------------
shall provide that the Incentive Stock Option may be exercised only by delivery
by the Optionee to the Committee of written notice of exercise executed by the
Optionee on the exercise form attached as Exhibit A to the Option Agreement,
which exercise form shall identify the Incentive Stock Option for which the
exercise is being made, together with the number of shares with respect to which
the Optionee is exercising the Incentive Stock Option. The exercise of an
Incentive Stock Option may be for less than the full number of shares of stock
subject to such Incentive Stock Option, but such exercise shall not be made for
less than 25% of the number of shares of stock initially subject to such
Incentive Stock Option. Subject to the other restrictions on exercise set forth
herein, the unexercised portion of an Incentive Stock Option may be exercised at
a later date by the Optionee. The 25% requirement set forth above shall not
apply to any exercise of an incentive Stock Option whereby all remaining shares
of stock subject to such Incentive Stock Option are exercised. Notwithstanding
any provisions to the contrary herein set forth, no Incentive Stock Option shall
be exercisable either in whole or in part:
(i) After the expiration of five years from the date upon which such
Incentive Stock Option was granted;
(ii) While there is outstanding all or any unexercised portion of an
Incentive Stock Option which was granted to the same Optionee on a
date prior to the granting of the Incentive Stock Option to which
this Paragraph 7(c)(ii) applies. For purposes hereof, any
unexercised portion of an Incentive Stock Option shall be treated as
outstanding until such Incentive Stock Option is exercised in full
or becomes unexercisable by reason of lapse of time pursuant to
Paragraph 7(c)(i) above, and a disclaimer of any outstanding
-5-
<PAGE>
Incentive Stock Option, in whole or in part, or a mutual termination
of such Incentive Stock Option by the Optionee and the Company shall
not operate to cause such Incentive Stock Option to cease to be
outstanding for the purposes of this Paragraph 7(c)(ii);
(iii) By any Optionee who was not, at all times during the period
beginning on the date of the grant of the Incentive Stock Option and
ending on the day three months before the proposed date of exercise
of the Incentive Stock Option, an employee of the Company, except if
such discontinuance of employment was caused by the death of the
Optionee (provided that in the case of an Optionee whose
discontinuance of employment was caused as a result of the
disability of the Optionee, as defined in Section 105(d)(4) of the
Code, rather than the three-month period set forth herein, such
period shall be one year). Whether authorized leave of absence or
absence for military or governmental service shall constitute a
discontinuance of employment for purposes hereof shall be determined
by the Committee, which determination, unless overruled by the
Board, shall be final and conclusive; or
(iv) After the date upon which the shareholders of the company have voted
to liquidate or dissolve the Company.
(d) Incentive Stock Options Non-Transferable. During the lifetime of an
----------------------------------------
Optionee, any Incentive Stock Option granted to such Optionee shall be
exercisable only by him and shall not be assignable or transferable by him, and,
subject to Paragraph 7(e) below, no other person shall acquire any rights
therein.
(e) Death of Optionee and Transfer of Incentive Stock Option. In the
--------------------------------------------------------
event of the death of an Optionee while in the employ of the Company or within a
period of three months after the termination of his employment with the Company,
any unexercised Incentive Stock Option owned by such deceased Optionee may be
exercised at any time within one year of the death of such Optionee, subject to
the restrictions on exercisability set forth in Paragraphs 7(c)(k), 7(c)(ii) and
7(c)(iv) above, by the executors or administrators of the estate of the Optionee
or by any person or persons who shall have acquired the Incentive Stock Option
directly from the Optionee by bequest or inheritance. Such exercise shall be
effected in accordance with the terms set forth in this Paragraph 7 as if such
executor, administrator or legatee was the named Optionee. No Incentive Stock
-6-
<PAGE>
Option shall be transferable by any Optionee otherwise than by will or the laws
of descent and distribution.
(f) Medium and Time of Payment. The Option Price shall be payable by the
--------------------------
Optionee (or his successors in accordance with Paragraph 7(e) above) upon the
exercise of the Incentive Stock Option and shall be paid in cash or, at the
election of the Optionee (or his successors pursuant to Paragraph 7(e) above),
with common stock of the Company having a fair market value as of the date of
the exercise of the Incentive Stock Option equal to the Option Price, with such
fair market value to be determined in accordance with the provisions of
Paragraph 7(b) hereof.
(g) Agreement of Optionee. Each Optionee shall agree to hold all of the
---------------------
shares of stock acquired by him pursuant to his exercise of any Incentive Stock
Option for investment purposes and not with a view to resale or distribution
thereof to the public. Each Optionee shall agree that he shall make no
disposition of any shares of stock acquired by him pursuant to an exercise of
any Incentive Stock Option within two years from the date of the grant of such
Incentive Stock Option nor within one year after the transfer of such shares to
him resulting from the exercise of an Incentive Stock Option.
(h) Delivery of Stock Certificates. As promptly as practicable after the
------------------------------
date of exercise of an Incentive Stock Option and the receipt by the Company of
full payment therefor, the Company shall deliver to each Optionee a stock
certificate representing the stock of the Company purchased by the Optionee
pursuant to his exercise of the Incentive Stock Option.
8.
CHANGES IN CAPITALIZATION
-------------------------
(a) Action by Company. Subject to any required action by the shareholders
-----------------
of the Company, the number of shares subject to each outstanding Incentive Stock
Option and the number of shares available under the Plan shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock of the Company resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of outstanding shares effected without receipt of
consideration by the Company. If any adjustment hereunder would create a
fractional share or the right to acquire a fractional share, such fractional
share shall be disregarded, and the number of shares available under the Plan or
-7-
<PAGE>
the number of shares subject to any outstanding Incentive Stock Option shall be
the next lower number of shares, rounding all fractions downward.
(b) Reorganization. Subject to any required action by the shareholders of
--------------
the Company, in the event the Company is a party to a merger, consolidation,
recapitalization or other reorganization ("Reorganization"), a corresponding
adjustment shall be made in the amount and class of securities available under
the Plan and a corresponding adjustment shall be made with respect to each
outstanding Incentive Stock Option such that the amount and class of securities
subject to each Incentive Stock Option outstanding at the time of the
Reorganization shall be adjusted so as to correspond with the amount and class
of securities to which a holder of the same number of shares of the common stock
of the Company would be entitled to receive upon the Reorganization. As an
example, if, at the time of the Reorganization, a holder of ten shares of the
common stock of the Company would be entitled to receive five shares of common
stock and five shares of preferred stock upon the Reorganization, then the
amount and class of securities subject to each Incentive Stock Option
outstanding at the time of the Reorganization would be five shares of the common
stock and five shares of preferred stock. The Option Price for each of the
securities subject to each Incentive Stock Option outstanding at the time of a
Reorganization shall be determined by allocating, for each such Incentive Stock
Option, the aggregate Option Price, as determined pursuant to Paragraph 7(b)
hereof, of all shares of common stock subject to such Incentive Stock Option
after the Reorganization, such allocation to be executed in a reasonable and
equitable manner as determined by the Committee. The Option Price for the
securities subject to each Incentive Stock Option granted subsequent to a
Reorganization shall be determined in accordance with the method set forth in
Paragraph 7(b) hereof, and if the Option Price cannot be determined in
accordance with the method set forth in Paragraph 7(b) hereof, the Board shall
devise a formula for the good faith determination of the Option Price such that
the Incentive Stock Option shall continue to constitute an "Incentive Stock
Option" as defined by Section 422 of the Code. Nothing set forth herein shall
prevent an Optionee from exercising (subject to the restrictions on exercise set
forth in Paragraph 79c) hereof) any Incentive Stock Option in whole or in part
at any time prior to the effectuation of a Reorganization to which the Company
is a party.
(c) Par Value. In the event of a change in the capital stock of the
---------
Company as presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a different
par value or without par value, the shares resulting from any such change shall
be deemed to be the common stock of the Company within the meaning of this Plan.
-8-
<PAGE>
(d) Adjustment by Committee. To the extent that the foregoing adjustments
-----------------------
relate to stock or securities of the Company, such adjustments shall be made by
the Committee, whose determination in that regard shall be final, biding and
conclusive, provided that each Incentive Stock Option granted pursuant to this
Plan shall not be adjusted in a manner that causes the Incentive Stock Option to
fail to continue to qualify as an "Incentive Stock Option" issued pursuant to an
"Incentive Stock Option Plan" within the meaning of Section 422 of the Code.
(e) Optionee Rights. Except as hereinabove expressly provided, no
---------------
Optionee shall have any rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase, decrease or change in the number of shares of stock of the Company of
any class by reason of any merger, consolidation, recapitalization or spinoff of
assets or stock of another corporation. Except as hereinabove expressly
provided, any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
Option Price of shares of common stock subject to an Incentive Stock Option.
The grant of an Incentive Stock Option pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustment, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
9.
SECURITIES REGISTRATION; LEGEND
-------------------------------
In the event that the Company shall deem it necessary to register, under
the Securities Act of 1933 or other applicable statutes, any shares with respect
to which an Incentive Stock Option shall have been exercised, or to qualify any
such shares for exemption from the Securities Act of 1933 under the Rules and
Regulations of the Securities and Exchange Commission or any state securities
statute, then the Company shall take such action at its own expense before
delivery of the certificates representing such shares to an Optionee. In the
event the shares of stock of the Company shall be listed on any national stock
exchange at the time of the exercise of an Incentive Stock Option pursuant to
this Plan, then whenever required, the Company shall register the shares with
respect to which such Incentive Stock Option is exercised under the Securities
Exchange Act of 1934 and 7under any applicable state securities statute and
shall make prompt application for the listing on such stock exchange of such
shares, at the sole expense of the Company. In any event, any shares with
-9-
<PAGE>
respect to which an Incentive Stock Option is exercised shall contain a legend
on the share certificate reflecting all restrictions on transferabililty which
may be required pursuant to federal and state securities laws.
10.
AMENDMENT, TERMINATION OR SUSPENSION
------------------------------------
In the event the Board shall determine that this Plan does not qualify as
an "Incentive Stock Option Plan" pursuant to Section 422 of the Code or that
this Plan is not in the best interest of the Company or its shareholders for any
reason, the Board shall have the power to add to, amend or repeal any of the
provisions of this Plan, to suspend the operation of the entire Plan or any of
its provisions for any period or periods or to terminate this Plan in whole or
in part. In the event of any such action, the Committee shall prepare written
procedures which, when approved by the Board, shall govern the administration of
the Plan resulting from such addition, amendment, repeal, suspension or
termination. Notwithstanding the above provisions, no such addition, amendment,
repeal, suspension or termination shall affect, in any way, the rights of the
Optionees of outstanding Incentive Stock Options without the consent of the
Optionee nor may any change in the Plan be made without the prior approval of
the holders of a majority of the outstanding common stock of the Company if such
change would cause the Plan to fail to qualify as an "Incentive Stock Option
Plan" pursuant to Section 422 of the Code.
11.
NOTICES
-------
All notices or other communications by an Optionee to the Committee
pursuant to or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Committee at the location, or
by the person, designated by the Committee for the receipt thereof.
12.
TERM OF PLAN
------------
Subject to Paragraph 10 hereof, this Plan shall terminate and the last date
upon which an Incentive Stock Option may be granted shall be the date ten years
subsequent to the earlier of the date of adoption of this Plan by the Board or
the date this Plan is approved by the holders of a majority of the outstanding
common stock of the Company.
-10-
<PAGE>
13.
INDEMNIFICATION OF COMMITTEE
----------------------------
In addition to such other rights of indemnification as they may have as
directors or officers of the Company or as members of the Committee, the members
of the Committee shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees, actually incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act pursuant to or in connection with this Plan or any
Incentive Stock Option granted hereunder, and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit or proceeding; provided, however, that no Committee member
shall be indemnified by the Company hereunder in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his duties.
-11-
<PAGE>
Incentive Stock Option No. ___
CROWN ANDERSEN INC.
-------------------
OPTION AGREEMENT FOR
--------------------
1998 INCENTIVE STOCK OPTION PLAN
--------------------------------
This Option Agreement is entered into by and between CROWN ANDERSEN INC.
(the "Company") and _________________ (the "Optionee") in accordance with the
terms and conditions of the 1998 Incentive Stock Option Plan adopted by the
Company (the "ISO Plant"), a copy of which is on file at the principal office of
the Company.
W I T N E S S E T H :
WHEREAS, as an incentive and to encourage stock ownership in the Company,
the Company and the Optionee desire to set forth the terms and conditions of
this Option Agreement pursuant to the ISO Plan;
NOW, THEREFORE, for and in consideration of the premises and mutual
promises herein contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:
1.
OPTION OF SHARES
----------------
The Optionee shall have the right from the date hereof through the term
hereof to purchase _____ shares of the $.10 par value common stock of the
Company (such _____ shares hereinafter referred to as the "Optioned Shares" and
this option hereinafter referred to as the "ISO"), with the terms of exercise of
such ISO and the other terms and conditions relative to such ISO being set forth
below.
2.
OPTION PRICE
------------
The price per share for each of the Optioned Shares to be paid by the
Optionee shall be $______ (hereinafter referred to as the "Option Price"), such
Option Price having been determined in accordance with the ISO Plan.
-12-
<PAGE>
3.
EXERCISE AND TERM OF OPTION
---------------------------
This ISO may be exercised only be delivery by the Optionee to the Company
or the Company's delegate of written notice of exercise executed by the Optionee
on the exercise form set forth as Exhibit A attached hereto and made a part
hereof, which exercise form shall identify this ISO, together with the number of
shares with respect to which the Optionee is exercising the ISO. The Optionee
may exercise this ISO for less than the full number of the optioned Shares, but
such exercise shall not be made for less than 25% of the number of Optioned
Shares. Subject to the other restrictions on exercisability set forth herein
and in the ISO Plan, the unexercised portion of the Optioned Shares may be
exercised at a later date by the Optionee, and the 25% requirement set forth
above shall not apply to any exercise of this ISO whereby all of the remaining
optioned Shares are exercised. Notwithstanding any provisions to the contrary
herein set forth, this ISO shall not be exercisable either in whole or in part:
(i) after the expiration of five years from the date of the grant of
this ISO, such grant date being the date of this Agreement;
(ii) while there is outstanding all or any unexercised portion of an
option granted in accordance with the ISO Plan to the Optionee on a
date prior to the grant date hereof. For the purposes hereof, any
unexercised portion of a prior option granted pursuant to the ISO
Plan shall be treated as outstanding until such option is exercised
in full or becomes unexercisable by reason of lapse of time only,
and a disclaimer of any outstanding option granted in accordance
with thee ISO Plan, in whole or in part, or a mutual termination of
such option by the Optionee and the Company shall not operate to
cause such option to cease to be outstanding for the purposes of
this Paragraph 3(ii);
(iii) if the Optionee was not, at all times during the period beginning on
the grant date hereof and ending on the date three months before the
proposed date of exercise of this ISO, an employee of the Company,
except if such discontinuance of employment was caused by the death
of the Optionee (provided that in case of discontinuance of
employment caused as a result of the disability of the Optionee as
-13-
<PAGE>
defined in the ISO Plan, rather than the three-month period set
forth herein, such period shall be one year); whether authorized
leave of absence or absence for military or governmental service
shall constitute a discontinuance of employment for purposes hereof
shall be determined by the Company; or
(iv) after the date upon which the shareholders of the Company have voted
to liquidate or dissolve the Company.
4.
OPTION NON-TRANSFERABLE
-----------------------
During the lifetime of the Optionee, this ISO shall be exercisable only by
the Optionee and shall not be assignable or transferable by the Optionee and,
subject to Paragraph 5 below, no other person shall acquire any rights in this
ISO.
5.
DEATH OF OPTIONEE AND TRANSFER OF OPTION
----------------------------------------
In the event of the death of the Optionee while in the employ of the
Company or within a period of three months after the termination of his
employment with the Company, all or any unexercised portion of this ISO owned by
the deceased Optionee may be exercised at any time within one year of the death
of the Optionee, subject to the restrictions on exercisability set forth in
Paragraphs 3(i), 3(ii) and 3(iv) above, by the executors or administrators of
the estate of the Optionee or by any person or persons who shall have acquired
the ISO directly from the Optionee by bequest or inheritance. Such exercise
shall be effected in accordance with the terms set forth in Paragraph 3 as if
such executor, administrator or legatee was the Optionee herein. This ISO shall
not be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution.
6.
MEDIUM AND TIME OF PAYMENT
--------------------------
The Option Price shall be payable by the Optionee (or his successors in
accordance with Paragraph 5 above) upon exercise of the ISO and shall be paid in
cash or, at the election of the Optionee (or his successors pursuant to
Paragraph 5 above), with common stock of the Company having a fair market value
-14-
<PAGE>
as of the date of the exercise of the ISO equal to the Option Price, such fair
market value to be determined in accordance with the provisions of the ISO Plan.
7.
AGREEMENT OF OPTIONEE
---------------------
The Optionee hereby agrees to hold all of the Optioned Shares acquired by
him pursuant to his exercise of this ISO for investment purposes and not with a
view to resale or distribution thereof to the public. Optionee hereby agrees
that he shall make no disposition of any of the Optioned Shares acquired by him
pursuant to the exercise of this ISO within two years from the date of grant of
this ISO or within one year after the transfer of such Optioned Shares to him
resulting from the exercise of this ISO.
8.
DELIVERY OF STOCK CERTIFICATES
------------------------------
As promptly as practicable after the date of exercise of this ISO and the
receipt by the Company of full payment therefor, the Company shall deliver to
the Optionee a stock certificate representing the stock of the Company purchased
by the Optionee pursuant to his exercise of this ISO.
9.
OTHER TERMS AND CONDITIONS
--------------------------
In addition to the terms and conditions set forth herein, this ISO is
subject to and governed by the other terms and conditions set forth in the ISO
Plan, and such other terms and conditions hereby are incorporated by reference
thereto.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
this ____ day of __________________, ______.
COMPANY:
CROWN ANDERSEN INC.
BY:____________________________
(CORPORATE SEAL) ATTEST:________________________
OPTIONEE:
_______________________________
-16-
<PAGE>
EXHIBIT A
---------
The undersigned Optionee hereby exercises his option to purchase with
respect to ___ shares subject to the Option Agreement between Crown Andersen
Inc. and the undersigned Optionee dated _________________, _______, being
Incentive Stock Option No._______, and the undersigned Optionee hereby delivers,
together with this written statement of exercise, the full Option Price with
respect to the exercised shares.
This ____ day of _________________, _____.
OPTIONEE:
_______________________________
Crown Andersen Inc. hereby acknowledges receipt of the above notice of
exercise and payment of the Option Price this ____ day of ________________,
______.
CROWN ANDERSEN INC.
BY:____________________________
(CORPORATE SEAL) ATTEST:________________________
-17-
<PAGE>
CROWN ANDERSEN INC.
1997
ANNUAL
REPORT
<PAGE>
MESSAGE TO SHAREHOLDERS
By every measure, except common stock price, 1997 was an excellent year for
Crown Andersen Inc. Revenues increased 5% from 1996 and earnings per share
increased 162%. Stockholders' equity increased $753,928 to $13,882,319 or $9.18
per share. Net income after tax was 5.0% of revenues, which might very well
rank the Company at the top in the United States among environmental equipment
manufacturing firms. With all of these positives, the Company's common stock
has traded at between 70% and 80% of book value throughout the year. Something
is wrong with this picture! That something is partially the result of a
complete absence of coherent environmental policy in the United States, rampant
litigation which seems never to be resolved, especially in the United States,
and an investment community perception that Crown Andersen is somehow in
businesses similar to those of WMX Corp. and BFI. None of these are valid
reasons for the stock trading below book value. The lack of coherent
environmental legislation in the United States has forced most of the
manufacturers to whom we sell our products to move out of the United States and
build their plants in more accommodating countries. We simply followed them to
these more accommodating countries and sold them the same products we would have
sold in the United States. We are one of the few companies in the United States
successful in this endeavor. We believe we have adequately reserved for any
litigation related expenses and we would be happy to settle all outstanding
legal issues through arbitration, rather than litigation, if the plaintiffs in
the cases would recognize that negotiated settlements are almost always
beneficial to both parties.
Regarding the association between Crown Andersen Inc. and the garbage haulers
and landfill operators, there simply is no comparison. We are involved in the
design, sale and installation of engineered products, with substantial
proprietary content. One need only examine our profit margins, compared with
those in the waste hauling and landfill businesses, to see the difference. We
have one of the strongest balance sheets in the environmental field in the
United States. The fundamentals are excellent. We are obviously concerned
about the dramatic downturn in the Asian economies and the impact on our
international business. However, we have demonstrated in past years our ability
to shift focus quickly and to overcome adverse economic developments. We look
forward to maintaining our growth trends into 1998 and we look forward to a
stock market which will recognize us for our efforts.
Respectfully submitted,
Jack D. Brady
Chairman and President
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Figures)
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations $23,144 $22,027 $21,673 $14,104 $12,818
Revenues from discontinued operations $ - $ - $ - $ 8,681 $ 7,851
Income (loss) from continuing operations $ 1,149 $ 455 $ 1,366 $ (298) $ (191)
Income from discontinued operations $ - $ - $ - $ 620 $ 551
Gain on disposal of discontinued operations $ - $ - $ - $ 1,179 $ -
Earnings (loss) per share:
Continuing operations $ 0.76 $ 0.29 $ 0.87 $ (0.19) $ (0.12)
Discontinued operations $ - $ - $ - $ 0.40 $ 0.35
Gain on disposal of discontinued
operations $ - $ - $ - $ 0.75 $ -
Cumulative effect of accounting change $ - $ - $ - $ - $ 0.07
Net Income $ 0.76 $ 0.29 $ 0.87 $ 0.96 $ 0.30
Total Assets $21,386 $22,448 $20,985 $19,290 $17,716
Long-term debt $ 775 $ 1,505 $ 621 $ 1,174 $ 1,737
Cash dividends declared per common share $ - $ - $ - $ - $ -
</TABLE>
BUSINESS INFORMATION
Crown Andersen Inc. is a holding company for Andersen 2000 Inc., headquartered
in Peachtree City, Georgia, and Montair Andersen bv, headquartered in Sevenum,
The Netherlands. The Company, through these subsidiaries, is involved in the
design, manufacture, sale and installation of industrial pollution control
systems, medical, chemical and hazardous waste disposal systems, heat recovery
systems, industrial air handling systems, spray dryer systems.
The Company's pollution control systems include high efficiency air filtration
systems, wet scrubbers for particulate and gaseous emission collection, sulfur
dioxide removal systems for oil and coal fired steam boilers and steam
generators, odor control systems, gas coolers and condensers, mechanical
collectors for product recovery, and industrial water and waste water treatment
systems. The Company's heat recovery systems include two different types of
products. The first is a proprietary condensing heat exchange system which is
used to recover waste heat from gas streams which are dirty or corrosive. The
second is a direct contact heat exchanger, which is a modification of the
Company's wet scrubbing systems.
In the air handling systems line, the Company manufactures industrial fans and
blowers for high pressure and alloy steel applications. Spray dryers include
those used for industrial chemical manufacturing and those used for disposal of
waste liquids to produce a dry end product. The hazardous waste disposal
systems include incinerators and waste liquid evaporators used for chemical,
medical and commercial waste disposal applications and complete turnkey plants
for waste disposal.
The Company's products are marketed to various industrial and manufacturing
concerns throughout the world by independent sales representatives and by direct
employees of the Company. In addition, the Company licenses foreign
manufacturers in India and Japan to manufacture and market its equipment in
those countries and in adjacent countries. As a percentage of revenues, sales
and operations outside the United States accounted for approximately 85.6% of
the Company's total revenues in fiscal 1997. This compares to approximately
80.7% and 88.0% of the Company's total revenues in fiscal 1996 and 1995,
respectively. Foreign sales for fiscal 1997, 1996 and 1995 totaled
approximately $19.9 million, $17.8 million and $19.0 million, respectively.
For information pertaining to revenues, income (loss) before taxes and
identifiable assets for each of the Company's geographic areas for the past
three fiscal years, see Note 10 of the Notes to Consolidated Financial
Statements.
-2-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Crown Andersen Inc. (Crown Andersen or the Company) is a publicly-traded
holding company for Andersen 2000 Inc. (Andersen) and, through Andersen, owns
all of the outstanding stock of Montair Andersen bv (Montair). The Company is
engaged exclusively in the pollution control and waste processing businesses.
In fiscal 1997, revenues increased 5% to $23.1 million from $22.0 million in
fiscal 1996. Net income increased 152% to $1,148,982 from $455,054 in fiscal
1996. Fiscal 1996 results were adversely affected by substantial cost overruns
incurred by Andersen on two major overseas projects.
Foreign revenues (including export sales by Andersen and sales by Montair)
accounted for 86.1% and 80.7% of total revenues in fiscal years 1997 and 1996,
respectively. Foreign sales transactions are generally guaranteed by bank
letters of credit. The Company has little or no foreign currency exposure on
sales by Montair as its contracts are payable in Dutch Guilders, its local
currency. As of September 30, 1997, the Company has cumulative currency
adjustments of $109,826. This amount has been reflected as a line item in the
equity section of the balance sheet. (See "Consolidated Statement of
Stockholders' Equity.")
The Company is involved in certain litigation. See Note 11 to the Consolidated
financial Statements for a discussion.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of $4,894,371 at September 30, 1997 decreased
$306,425 from the September 30, 1996 balance of $5,200,796. The decrease was
primarily attributable to a reduction in payables and long-term debt. Cash
provided by operating activities amounted to $598,616. Net income plus
depreciation and amortization and provision for valuation of soil processor unit
totaling $1,768,967 more than offset increases in receivables and decreases in
payables.
Cash provided by investing activities totaled $252,109. This amount includes
collection of notes receivable of $300,000 and a reduction in restricted cash of
$112,000, partly offset by capital expenditures of $161,073.
Cash used for financing activities totaled $1,146,202 and reflects a reduction
of long-term debt of $943,755 and the purchase of treasury stock of $202,447.
Both Montair and Andersen realized positive operating cash flow in fiscal 1997
as a result of profitable operations at both locations.
As disclosed in Note 5 to the Consolidated Financial Statements, during 1994
the Company repossessed certain equipment sold under a lease arrangement. The
Company has reduced the carrying value of this asset to $670,000 as of September
30, 1997 and it is reflected as equipment held for resale in the accompanying
consolidated balance sheet. The Company is attempting to market this equipment
for sale.
As indicated in Note 11 of the Notes to the Consolidated Financial Statements,
the Company is one of several defendants in a legal action brought by various
holders of Industrial Revenue Bonds issued by the cities of Winfield and
Arkansas City, Kansas concerning the development of industrial property near
Winfield, Kansas. The Company believes that it has meritorious defenses to the
litigation due to the fact that Crown Andersen was not a party to the
bondholder's agreement, such agreement having been entered into by Struthers
Thermo-Flood Corporation ("STFC") prior to STFC being acquired by the Company.
In response to the lawsuit, STFC filed a liquidation proceeding under Chapter 7
of the Federal Bankruptcy Act. The Trustee in Bankruptcy abandoned the property
on September 17, 1992. The Bankruptcy Court entered an order of no distribution
on February 10, 1994. STFC was dissolved in March 1995. In the opinion of
management of the Company and its counsel, two possible outcomes exist. The
first and more likely is a ruling from the court or a jury in favor of the
Company, resulting in no significant financial effect upon the Company. A
second and less likely is a ruling by the court or a jury against the Company,
in an amount of the past due lease payments of approximately $1,900,000 plus
interest and attorneys fees, less any proceeds from a sale of the property.
This net amount is estimated not to exceed $1,000,000. If a judgement were to
be rendered against the Company for such amount, payment would be made using the
Company's existing cash reserves or from funds available under its credit
facility.
As of September 30, 1997, the Company had no borrowings against its $5.0
million line of credit and the $0.4 million credit facility available to
Montair. The amount of $4.2 million remained available for borrowing under
these credit facilities as $1.3 million in letters of credit are outstanding
against the U.S. line of credit. Because of this credit facility, profitable
operations, and the retention of cash from prior years, the Company has adequate
cash reserves to meet its short-term cash needs.
Under the current loan agreement, the Company is required to obtain the bank's
consent to pay cash dividends, purchase treasury stock, or to sell assets which
constitute collateral. The Company obtained permission to purchase up to
$400,000 of treasury stock. A total of $319,760 in treasury stock has been
purchased as of September 30, 1997.
-3-
<PAGE>
In the year 2000, many computer programs with date sensitive software may
recognize year 2000 as the year 1900. This could result in a system failure or
miscalculations causing disruption in processing business transactions. The
Company has been informed that their accounting software is year 2000 compliant.
However, there can be no guarantees that all the Company's systems that will be
effected have been identified.
As of September 30, 1997, the Company's equity in its Montair operation had
declined in value by $214,648 from September 30, 1996 as a result of a decrease
in the foreign currency translation adjustment, reflecting a 16% increase in the
U.S. dollar against the Dutch guilder.
RESULTS OF OPERATIONS
Revenues:
Revenues of $23,143,672 in fiscal 1997 increased $1,117,164 (5.1%) from fiscal
1996 revenues of $22,026,508. The increase in revenues was largely attributable
to Andersen. Foreign sales (including export sales by Andersen and sales by
Montair) were $19.9 million and $17.8 million for fiscal years 1997 and 1996,
and accounted for 86% and 81% of revenues in fiscal years 1997 and 1996,
respectively. All changes in revenues are related to the quantity of products
sold, not to pricing changes.
The Company continues to rely on the international market for most of its
revenues. Demand for the Company's products in the domestic market has remained
low over the last three years because of uncertainty in changes in United States
regulations. While there are some uncertainties in the foreign markets because
of currency problems in countries where the Company does business, to date, the
Company has not experienced a decline in bidding activity. Asian slowdowns have
been offset by both domestic activity and activity in South America.
The Company believes it can at least maintain the current revenue levels in
fiscal 1998, based on current building activity.
Revenues of $22,026,508 in fiscal 1996 increased $353,339 (1.6%) from fiscal
1995, primarily as a result of a revenue increase of 26% at Montair where higher
than ordinary margins were realized in second quarter 1997 projects.
Cost of Sales:
Cost of sales increased $421,578 (2.4%) to $18,195,528 in fiscal 1997 from
fiscal 1996 costs of $17,773,950, primarily as a result of higher revenues
resulting in a 2% improvement in gross margin. The margin improvement was
largely attributable to the Montair operations.
In fiscal 1996, cost of sales increased $1,278,974 (8%) from 1995 levels as a
result of substantial cost overruns on two Andersen projects and a large
warranty expense incurred at Montair.
Selling, General and Administrative Costs:
Selling, general and administrative costs in fiscal 1997 decreased $300,100
(8.0%) to $3,463,862 from the 1996 levels. The decrease is primarily
attributable to U.S. operations and reflects decreases in commissions,
advertising, travel, and professional fees. Commission expenses do not directly
co-relate to revenue level as they do not apply to all projects and commission
rates vary. As a percentage of revenues, selling, general and administrative
costs were 15.0%, 17.1% and 14.9% of revenues for fiscal years 1997, 1996 and
1995, respectively.
In fiscal 1996, these expenses increased $535,990 (16.6%), as a result of
increases in commissions, salaries and professional fees at the U.S. operation.
Interest and Other (Income) Expenses:
Interest and other (income) expenses for fiscal 1997 resulted in a credit of
$109,200 compared to a credit of $183,858 for fiscal 1996. The lower credit of
$74,658 is primarily attributable to lower interest income, higher interest
expense and higher bad debt expense. The change of $16,505 in fiscal 1996 from
fiscal 1995 reflected lower bad debt expense and slightly higher net interest
costs.
Taxes on Income:
In fiscal 1997, the effective tax rate was 27.9%, compared to 32.3% in fiscal
1996. The fiscal 1995 rate was 35.5%. The lower tax rate of 27.9% in fiscal
1997 reflects tax savings resulting from the Company's significant foreign
export revenues and its participation in a shared foreign sales corporation.
Net Income
The increase in net income of $693,928 (152%) in fiscal 1997 was attributable
to higher revenues, an increase in gross margin of 2% and lower selling, general
and administrative costs.
The average shares and equivalent shares outstanding were 1,516,466, 1,560,618
and 1,561,635 for fiscal years 1997, 1996 and 1995. The unexercised options and
warrants are antidilutive for all periods.
-4-
<PAGE>
Effects of Inflation:
During fiscal 1997 and fiscal 1996, the Company has not experienced any
abnormal increases in costs of materials or supplies for manufacturing in any of
its domestic operations. In most cases the Company has been successful in
passing materials cost increases on to its customers. The Company continues to
incur cost increases associated with travel related expenses, primarily in air
fares.
-5-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1997 1996
-------------- ------------
<S> <C> <C>
ASSETS (Note 8)
CURRENT:
Cash and cash equivalents $ 4,894,371 $ 5,200,796
Receivables:
Trade, less allowance of $113,476 and $120,380 for
possible losses 2,683,989 2,655,281
Other 139,595 48,403
Income taxes 43,602 294,960
Costs and estimated earnings in excess of billings on
uncompleted contracts (Note 1) 5,836,898 6,121,410
Inventories (Note 2) 2,566,179 1,955,127
Prepaid expenses 66,581 126,688
Current maturities of long-term note receivable (Note 3) 300,000 300,000
Deferred income taxes 432,114 403,935
----------- -----------
TOTAL CURRENT ASSETS 16,963,329 17,106,600
RESTRICTED CASH (Note 4) 1,036,000 1,148,000
NOTE RECEIVABLE, less current maturities (Note 3) 490,000 790,000
EQUIPMENT HELD FOR RESALE (Note 5) 670,000 1,031,554
PROPERTY AND EQUIPMENT, less accumulated depreciation (Note 6) 1,661,962 1,862,639
DEFERRED INCOME TAXES (Note 8) 433,942 280,944
OTHER ASSETS 130,732 228,717
----------- -----------
$21,385,965 $22,448,454
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 7) $ - $ -
Accounts payable 4,069,018 5,099,140
Accruals:
Income taxes (Note 8) -
Compensation 350,986 303,201
Warranty 1,009,700 939,000
Miscellaneous 394,314 336,170
Billings on uncompleted contracts in excess of cost and
estimated earnings (Note 1) 117,721 13,419
Current maturities of long-term debt (Note 7) 494,736 738,253
Deferred income taxes (Note 8) 189,254 249,225
----------- -----------
TOTAL CURRENT LIABILITIES 6,625,729 7,678,408
LONG-TERM DEBT, less current maturities (Note 7) 775,000 1,504,533
DEFERRED INCOME TAXES (Note 8) 102,917 137,122
----------- -----------
TOTAL LIABILITIES 7,503,646 9,320,063
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY: (Notes 7 and 9)
Common Stock, $.10 par; shares authorized 5,000,000; issued
1,561,635; outstanding 1,512,198 and 1,544,635 156,164 156,164
Additional paid-in capital 2,905,801 2,905,801
Treasury stock; 49,437 and 17,000 shares, at cost (319,760) (117,313)
Retained earnings 11,030,288 9,881,306
Foreign currency translation adjustment 109,826 302,433
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,882,319 13,128,391
----------- -----------
$21,385,965 $22,448,454
=========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
-6-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Contracts $21,074,139 $20,112,990 $20,305,645
Sales 2,030,197 1,881,427 1,328,546
Other 39,336 32,091 38,978
----------- ----------- -----------
23,143,672 22,026,508 $21,673,169
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of contracts and sales 18,195,528 17,773,950 16,494,976
Selling, general and administrative 3,463,862 3,763,962 3,227,972
Interest and other (income) expense (109,200) (183,858) (167,353)
----------- ----------- -----------
21,550,190 21,354,054 19,555,595
----------- ----------- -----------
Income from operations before taxes
on income 1,593,482 672,454 2,117,574
TAXES ON INCOME (NOTE 9) 444,500 217,400 751,500
----------- ----------- -----------
NET INCOME $ 1,148,982 $ 455,054 $ 1,366,074
=========== =========== ===========
AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 1,516,466 1,560,618 1,561,635
=========== =========== ===========
EARNINGS PER SHARE $ 0.76 $ 0.29 $ 0.87
=========== =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
-7-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
-------------------- Paid-In Retained Treasury Translation
Shares Amount Capital Earnings Stock Adjustment
--------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1994 1,561,635 $156,164 $2,905,801 $ 8,060,178 $ - $ 289,552
Net income - - - 1,366,074 -
Change in translation adjustment - - - - - 111,760
--------- -------- ---------- ----------- --------- ---------
BALANCE, SEPTEMBER 30, 1995 1,561,635 156,164 2,905,801 9,426,252 - 401,312
Net income - - - 455,054 -
Purchase of treasury stock (17,000) - - - (117,313) -
Change in translation adjustment - - - - - (98,879)
--------- -------- ---------- ----------- --------- ---------
BALANCE, SEPTEMBER 30, 1996 1,544,635 156,164 2,905,801 9,881,306 (117,313) 302,433
Net income - - - 1,148,982
Purchase of treasury stock (40,000) - - - (246,875)
Issuance of treasury stock 7,563 - - - 44,428
Change in translation adjustment - - - - - (192,607)
--------- -------- ---------- ----------- --------- ---------
BALANCE, SEPTEMBER 30, 1997 1,512,198 $156,164 $2,905,801 $11,030,288 $(319,760) $ 109,826
========= ======== ========== =========== ========= =========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
-8-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------
1997 1996 1995
------------- ------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from operations $ 1,148,982 $ 455,054 $ 1,366,074
Items in income from operations not affecting cash:
Depreciation and amortization 258,431 279,086 318,552
Provision for valuation of soil processor unit 361,554 360,000 360,000
Deferred income taxes (228,560) (352,563) (930,997)
Loss on sales of fixed assets 893 (14,698) (20,992)
Cash provided by (used for)
Trade and other receivables (316,478) 2,722,972 (2,589,007)
Refundable income taxes 14,220 134,983 (42,010)
Costs and estimated earnings in excess of billings
on uncompleted contracts 284,512 (261,758) (1,021,392)
Inventories (635,290) (276,656) 153,363
Prepaid expenses 56,133 (85,747) 105,240
Accounts payable (863,577) 486,689 1,356,135
Accrued expenses 445,098 (194,080) 336,167
Billings on uncompleted contracts in excess of
costs and estimated earnings 104,302 (177,298) 166,567
Other (31,604) (100,624) 12,031
----------- ----------- -----------
Cash provided by (used for) operating activities 598,616 2,975,360 (430,269)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash (Note 4) 112,000 (1,148,000) -
Proceeds on sale of plastics segment, net of selling and
cost of $254,780 in 1995 - - 4,960,260
Collection of note receivable 300,000 100,000 -
Proceeds from sale of fixed assets 1,182 35,748 98,886
Capital expenditures (161,073) (402,830) (109,834)
----------- ----------- -----------
Cash provided by (used for) investing activities 252,109 (1,415,082) 4,949,312
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in notes payable - - (339,064)
Proceeds from long term loan - 1,000,000 -
Reduction in long-term debt (943,755) (956,644) (579,381)
Retirement of common stock (202,447) (117,313) -
----------- ----------- -----------
Cash used for financing activities (1,146,202) (73,957) (918,445)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (10,948) (37,162) 13,380
----------- ----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (306,425) 1,449,159 3,613,978
Balance at beginning of year 5,200,796 3,751,637 137,659
----------- ----------- -----------
BALANCE AT END OF YEAR $ 4,894,371 $ 5,200,796 $ 3,751,637
=========== =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
-9-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
NATURE OF BUSINESS
Crown Andersen Inc. (Crown Andersen) is a publicly traded holding company for
Andersen 2000 Inc. (Andersen). Andersen owns all of the outstanding stock of
Montair Andersen bv (Montair). Andersen and Montair are engaged primarily in
the business of designing, manufacturing and selling specialized industrial
equipment including industrial pollution control systems, medical and hazardous
waste disposal systems, heat recovery systems, industrial air handling systems
and spray dryer systems. The Company performs periodic credit evaluations of
its customers' financial condition and generally does not require collateral.
CONSOLIDATION
The financial statements include the accounts of Crown Andersen Inc. and its
subsidiaries discussed above. All material intercompany accounts and
transactions have been eliminated.
FOREIGN CURRENCY TRANSLATION
Foreign currencies have been translated into United States dollars for
inclusion in the financial statements under the provisions of Statement No. 52
of the Financial Accounting Standards Board. Accordingly, assets and
liabilities of Montair are translated using the exchange rate in effect at the
balance sheet date. Results of operations of Montair are translated using the
average exchange rates prevailing throughout the period. The effect of the
difference in these rates is included in stockholders' equity as the foreign
currency translation adjustment.
USE OF ESTIMATES IN THE PREPARATION OF 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.
Certain Significant Estimates and Vulnerability Due to Certain Concentrations
The following are significant estimates made by management:
The Company contracts are accounted for under the percentage of completion of
contract method of accounting. Under this method, the percentage of contract
revenue to be recognized currently is based on management's estimates of costs
incurred and an estimate of total estimated costs. These estimates are reviewed
by management monthly and adjusted. However, due to uncertainties inherent in
the estimation process, actual results could differ from those estimates.
Due to the relatively large nature of the Company's typical contract,
individual contracts may represent significant portions of trade receivables and
costs and estimated earnings in excess of billings on completed contracts.
During fiscal year 1997, one contract represented 38 percent of trade
receivables. Additionally, two contracts represented 73 percent of costs and
estimated earnings in excess of billings on completed contracts; both of these
latter two contracts are supported by irrevocable letters of credit.
At September 30, 1997, approximately $1,800,000 of inventories were purchased
as part of a December 1995 acquisition of a product line of a former competitor.
Management has developed a program to reduce this inventory to desired levels
over the near term and believes no loss will be incurred on the disposition of
such inventory. No estimate can be made of a range of amounts of loss that are
reasonably possible should that program not be successful.
Crown Andersen's policy is to reduce the carrying value of certain specialized
equipment held for sale for changes in the market value of such equipment.
During fiscal year 1997, the Company charged $361,554 to operations. During
each of fiscal years 1996 and 1995, the Company charged $360,000 to operations.
The Company believes that this equipment will be sold in the near future and no
loss will be incurred in the disposition of the equipment. See Note 5.
The Company is involved in certain litigation which may result in losses to
the Company. See Note 11.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's principal financial instruments, as contemplated under SFAS No.
107, are represented by its receivables and its notes payable. A majority of
the Company's receivables are short-term in nature and bear interest at rates
which the Company believes represent current market rates, that is, rates at
which the Company currently renews or extends funds, accordingly, carrying value
is deemed to approximate fair value. The Company notes payable bear interest at
rates which change periodically with market interest rates, accordingly,
carrying value is deemed to approximate fair value.
INVENTORIES
Inventories are valued at the first-in, first out (FIFO) basis and consists of
incineration equipment, raw materials and supplies to be used on job sites.
Maintenance and office supplies are not inventoried.
-10-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
REVENUE RECOGNITION
For financial reporting purposes, income from long-term contracts is reported
on the percentage of completion method. Under this method, the percentage of
contract revenue to be recognized currently is based on the ratio of costs
incurred to date to total estimated contract costs, after giving effect to the
most recent estimates of costs to complete. Provision is made for any losses on
an individual contract basis in the period in which losses are first
determinable. Contracts are reported primarily on the percentage of completion
method for income tax purposes, except for contracts of Montair which are
reported on the completed contract method for Dutch income tax purposes. Sales
of products and services are recorded when the product is shipped or the service
is rendered to the customer.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Expenditures for additions are
capitalized while expenditures for maintenance and repairs are charged to
expense as incurred. For financial reporting purposes, buildings and equipment
are depreciated using primarily the straight-line method. For tax purposes,
equipment is depreciated using accelerated methods. The estimated useful lives
of the assets range from 3-15 years for equipment and 10-30 years for buildings.
TAXES ON INCOME
Income taxes are calculated using the liability method specified by Statement
of Accounting Standards No. 109, "Accounting For Income Taxes". Deferred income
taxes reflect the impact of temporary differences between the amount of assets
and liabilities for financial reporting purposes and such amounts as measured by
tax laws and regulations. Deferred tax assets are reflected net of valuation
allowances, if any, if it is more likely than not that such assets will be
realized.
U.S. income taxes are not provided on the accumulated undistributed earnings
of Montair as it is the Company's intention to indefinitely reinvest such
earnings and not to transfer them in a taxable transaction. The deferred taxes
attributable to the undistributed earnings of Montair are not significant.
STOCK OPTIONS AND WARRANTS
Proceeds from the sale of common stock issued on exercise of options and
warrants are credited to common stock at par value, and the excess amounts
received and tax benefits are credited to additional paid-in capital at the time
the options and warrants are exercised.
During fiscal 1997, the Company has adopted the disclosure-only positions of
SAFS No. 123, "Accounting for Stock Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its stock option plans. The adoption of SFAS No. 123 did not have any material
effect on the Company's earnings for the periods presented in these financial
statements.
EARNINGS PER SHARE
Earnings per share are computed on the basis of the weighted average number of
shares outstanding during each year. It is assumed that all dilutive stock
options are exercised at the later of the beginning of each year or the time of
issuance and that the proceeds are used to purchase shares of the Company's
common stock at the average market price during the period.
RESEARCH AND DEVELOPMENT
Research and development expenditures are expensed in the year incurred.
During 1996, 1995 and 1994 there were no research and development expenditures.
WARRANTY COSTS
The Company warrants its products generally for a period of one year after
shipment or installation. Provision for estimated warranty cost is recorded at
the time of installation.
EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan in which all employees can contribute a portion
of their pre-tax wages into investment accounts for retirement. The
contributions are matched 27% by the Company up to 7% of gross wages. The
Company has charged plan contributions to operations when due and has funded the
plan accordingly. No additional contributions are required, but the Company can
make contributions from profits at its discretion. Contributions for 1997, 1996
and 1995 totaled approximately $22,690, $21,397 and $18,295, respectively.
STATEMENTS OF CASH FLOWS
Cash and cash equivalents include interest bearing checking accounts and bank
certificates of deposit with original maturities of three months or less.
Interest payments on debt were approximately $101,504, $91,275 and $119,000 for
the years ended September 30, 1997, 1996 and 1995, respectively. Income taxes
paid were approximately $466,000, $845,000 and $1,562,000 during the same
periods. During fiscal 1997, the Company acquired certain inventories from a
former competitor in exchange for $1,000,000 cash and $1,020,000 note, payable
to the former competitor.
-11-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CONTRACTS IN PROGRESS
Information relative to contracts in progress is as follows:
<TABLE>
<CAPTION>
September 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Costs and estimated earnings of $6,539,071 and $7,947,080 $24,450,994 $ 34,632,738
Billings applicable thereto (18,731,817) (28,525,447)
------------ ------------
Net Amount $ 5,719,177 $ 6,107,991
============ ============
Included in the accompanying balance sheets in:
Current assets $ 5,836,898 $ 6,121,410
Current liabilities (117,721) (13,419)
------------ ------------
Net Amount $ 5,719,177 $ 6,107,991
============ ============
</TABLE>
NOTE 2. INVENTORIES
Inventories were $2,566,179 and $1,955,127 as of September 30, 1997 and
September 30, 1996. Included in inventories at September 30, 1997 and 1996 is
approximately $1,761,000 related to incineration equipment purchased from a
former competitor.
NOTE 3. NOTE RECEIVABLE
During 1994, the Company sold the net assets of its plastics business to a
single buyer for $7.1 million. Approximately $5.9 million was received in cash
and the remainder was due from the buyer under a $1.2 million note agreement.
This note bears interest at 7% per annum. Principal is payable in seven
installments over 60 months. Two payments of $50,000 each were received by the
Company during March and September 1996 and two payments of $150,000 each were
received during March and September 1997. As of September 30, 1997, the balance
due under the note was $790,000. Two payments of $150,000 each are due on March
29, 1998 and September 29, 1998. The final payment of $490,000 is due on
September 30, 1999.
NOTE 4. RESTRICTED CASH
As of September 30, 1997, $1,036,000 of the Company's short-term cash
investments were held by banks as collateral for outstanding letters of credit.
The letters of credit expire through 1999. (See Note 7).
NOTE 5. EQUIPMENT HELD FOR SALE
On September 30, 1992, the Company sold a soil processor unit under a
financing-type lease arrangement. As a result of the customer's default, the
Company, during 1994, terminated the lease and repossessed the equipment. On
September 30, 1994, the Company reclassified this asset as equipment held for
sale and reduced its carrying value from approximately $2.1 million to $1.8
million. The Company employs an outside appraiser and reviews the carrying
value of this unit on a periodic basis. During fiscal years 1997 and 1996, the
carrying value of this unit has been reduced to $670,000 and $1,031,554,
respectively. These adjustments to the carrying value have been charged to
operations in each respective year.
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------
1997 1996
-------------- -----------
<S> <C> <C>
Land $ 452,347 $ 481,037
Buildings 1,945,121 2,117,595
Machinery and equipment 975,071 1,074,110
Office furniture and fixtures 991,493 1,055,028
Vehicles 94,752 97,355
----------- -----------
4,458,784 4,825,125
Less accumulated depreciation (2,796,822) (2,962,486)
----------- -----------
Net property and equipment $ 1,661,962 $ 1,862,639
=========== ===========
</TABLE>
Depreciation expense amounted to $221,805, $249,086 and $283,805 for the
fiscal years ended September 30, 1997, 1996 and 1995 respectively.
-12-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
September 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
7.375% mortgage note, payable to a bank $3,022
quarterly, plus interest, through July 2012,
paid in 1997 $ - $ 302,963
Non-interest bearing,discounted to 8.25% note,
payable to a corporation; face amount of
$1,020,000; due December 31, 1997 394,736 964,823
Note, payable to a bank in 31 monthly payments
of $8,333 plus interest at the prime rate
(8.25% at September 30, 1996), balance
of $741,667 payable on February 28, 1999 875,000 975,000
---------- ----------
TOTAL 1,269,736 2,242,786
Less current maturities 494,736 738,253
---------- ----------
Total long-term debt $ 775,000 $1,504,533
========== ==========
</TABLE>
All assets of the U.S. Company are pledged as collateral on the note payable
and the U.S. revolving line of credit.
The Company has a $5.0 million line of credit with a U.S. bank which expires
February 28, 1998. As of September 30, 1997, letters of credit amounting to
$1.3 million had been issued against this line of credit and the amount of $3.7
million remained available for borrowings. The Company also has a $400,000 line
of credit at a Dutch bank. Property and equipment, inventories and trade
accounts receivable at Montair totaling $2,829,762 at September 30, 1997 are
pledged as collateral to one Dutch bank for the Dutch line-of-credit. No
borrowings had been made against this Dutch line of credit as of September 30,
1997.
The weighted average interest rate on the U.S. line-of-credit was
approximately 8.38% and 8.25% during 1997 and 1996, respectively. In connection
with the U.S. bank credit agreement, the Company is required to maintain certain
financial statement covenants. The Company's U.S. bank line-of-credit and term
loan limits the Company's ability to pay dividends on its stock, purchase
treasury stock, or sell assets which constitute collateral, so long as any of
the collateralized obligations remain unpaid or the agreement is in effect.
The weighted average interest rate on a Dutch line-of-credit during fiscal
1997 and 1996 was approximately 9.0% for both years. Interest expense for all
debt during fiscal 1997, 1996 and 1995 totalled approximately $170,880, $91,300,
and $119,000 respectively.
Future maturities of long-term debt are payable $494,736 in fiscal 1998 and
$775,000 in fiscal 1999.
NOTE 8. TAXES ON INCOME
The components of income (loss) before taxes on income consisted of the
following:
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------
1997 1996 1995
---------- -------- ----------
<S> <C> <C> <C>
U.S. Operations $1,097,696 $548,450 $2,007,123
The Netherlands Operations 495,786 124,004 110,451
---------- -------- ----------
$1,593,482 $672,454 $2,117,574
========== ======== ==========
</TABLE>
-13-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. TAXES ON INCOME (CONTINUED)
Significant components of the provision for income taxes attributable are as
follows:
<TABLE>
<CAPTION>
Year ended September 30,
------------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Current:
Federal $ 462,426 $ 397,817 $1,444,426
Foreign 191,506 136,754 (12,938)
State 19,812 37,004 178,387
--------- --------- ----------
673,744 571,575 1,609,875
--------- --------- ----------
Deferred (reduction):
Federal (177,032) (249,941) (833,384)
Foreign (20,972) (91,250) 60,429
State (31,240) (12,984) (85,420)
--------- --------- ----------
(229,244) (354,175) (858,375)
--------- --------- ----------
Total taxes on income $ 444,500 $ 217,400 $ 751,500
</TABLE>
Deferred income taxes reflect the impact of "temporary differences" between
the amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The sources of temporary
differences and their effect on deferred taxes are as follows:
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
---------------------------- -----------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Alabama net operating loss $ 13,342 $ - $ - $ -
Deferred gain on sale of
plastics business - 127,868 - 161,697
Valuation allowance -
equipment held for resale 433,942 - 281,420 -
Warranty accrual 342,000 - 308,321 -
Work in process - 140,842 - 189,809
Property and equipment - 23,461 - 17,947
Compensation accruals 45,612 - 38,235 -
Allowance for accounts
receivable, inventories
and other 31,160 - 56,903 16,894
-------- -------- -------- --------
$866,056 $292,171 $684,879 $386,347
</TABLE>
The effective tax rates on income from continuing operations before taxes on
income differs from the federal statutory rates. The following summary
reconciles taxes at the federal statutory rates with the effective rates:
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Taxes on income at statutory rate 34.0% 34.0% 34.0%
Increase (reduction) in taxes realized from:
Foreign tax difference (0.1) 0.4 0.5
State income taxes, net of federal tax benefit 0.1 2.3 2.9
Permanent differences 0.7 - -
Foreign sales corporation (3.9) - -
Other (2.9) (4.4) (1.9)
---- ---- ----
Taxes on income at the effective rate 27.9% 32.3% 35.5%
==== ==== ====
</TABLE>
NOTE 9. STOCK OPTIONS AND WARRANTS
Crown Andersen has an incentive stock option plan and a directors stock
warrant plan. The incentive plan is limited to employees, and options granted
thereunder are exercisable upon issuance and expire five years from the date of
grant. The directors stock warrant plan is to compensate non-employee
directors for their services on the Board and committees of the Board. Under
the plan, each non-employee director has the right to purchase warrants for up
to 10,000 shares of common stock. Each year warrants vest for the purchase of
1,000 shares until all warrants are vested. During fiscal year ended September
30, 1997, warrants for the purchase of 10,000 shares of common stock were
repurchased from retiring directors and at September 30, 1997, 10,000 warrants
are vested.
No options were granted during the fiscal year ended September 30, 1997. As
of September 30, 1997 there were 48,800 shares outstanding under the Incentive
Stock Option Plan at an average exercise price of $7.00 and warrants to purchase
15,000 shares of common stock at an average price of $10.50. No more options or
warrants can be granted as both the options and warrants plans have expired.
The Company has adopted the disclosure-only provision of SFAS No. 123,
"Accounting for Stock-Based Compensation." The fair value of stock options
granted in fiscal year ended September 30, 1996 and earnings per share
disclosure is the estimated present value at grant date using the Black-Scholes
option pricing model with the following weighted average assumptions: zero
dividend yield; expected volatility of 37.0%; a risk-free interest rate of
5.05%; and expected option life of five years. No proforma disclosures showing
the effect on net income and earnings per share has been issued as the amounts
are not material to operations and do not effect earnings per share.
-14-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK OPTIONS AND WARRANTS (CONTINUED)
The following tables summarize activity on stock options and warrants:
<TABLE>
<CAPTION>
OPTIONS WARRANTS
-------------------------------- --------------------------------
Weighted Average Weighted Average
No. Of Shares Exercise Price No. Of Shares Exercise Price
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Outstanding At September 30, 1995 76,300 $ 8.58 42,688 $ 9.49
Granted 12,000 7.50
Expired Or cancelled (5,900) 8.22 (17,688) 12.13
------- ------ ------- ------
Outstanding At September 30, 1996 82,400 8.44 25,000 11.15
Granted - -
Expired Or Cancelled (33,600) 10.55 (10,000) 12.13
------- ------ ------- ------
Outstanding At September 30, 1997 48,800 7.00 15,000 $10.50
======= ====== ======= ======
</TABLE>
Weighted average fair value of options granted during the year ended:
September 30, 1996 $4,565
September 30, 1997 $ -
The weighted average remaining life of options and warrants outstanding at
September 30, 1997 was 3.91 years. The range of exercise prices was $6.13 -
$12.13.
NOTE 10. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company's operations comprise a single industry segment, pollution control
systems. Information regarding the Company's geographic segments of its
operations is set forth below.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
1997 1996 1995
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Revenues:
U.S. operations
Domestic $ 3,217 $ 4,255 $ 2,614
Export 14,954 11,991 14,472
The Netherlands operations 4,973 5,781 4,587
------- ------- -------
Total $23,144 $22,027 $21,673
======= ======= =======
Income (loss) before taxes:
U.S. operations $ 1,098 $ 548 $ 2,008
The Netherlands operations 496 124 110
------- ------- -------
Total $ 1,594 $ 672 $ 2,118
======= ======= =======
Identifiable assets:
U.S. operations $18,686 $18,899 $18,051
The Netherlands operations 2,610 3,549 2,934
------- ------- -------
Total $21,296 $22,448 $20,985
======= ======= =======
</TABLE>
During fiscal year 1997 one customer accounted for 28% of the Company's
consolidated revenues and in 1996 two customers accounted for 35% (18% and 17%)
of the consolidated revenues. In fiscal 1995 two customers accounted for 62%
(45% and 17%) of the Company's consolidated revenue. It is management's opinion
that the loss of such customers would not have a material adverse effect of the
Company's operations. Historically the Company has not been dependent on
repetitive business.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Effective June 30, 1989, the operations of the Company's Struthers Thermo-
Flood Corporation (STFC) subsidiary were substantially curtailed due to
continuing financial problems resulting primarily from significant losses on two
waste heat boiler contracts. The STFC technology was sold to the Babcock &
Wilcox Company on January 19, 1990. During fiscal 1992, STFC vacated the leased
Kansas property after it was discovered that it had been contaminated with
organic solvents prior to the time of the acquisition of STFC by the Company.
STFC filed for Chapter 7 bankruptcy protection on August 12, 1992, and the
trustee completed liquidation of STFC during February 1994. STFC was dissolved
in fiscal year 1995. Litigation has arisen in connection with the property
formerly leased by STFC. See Textron Investment Company et al v Crown Andersen
below.
(a) The Company has employment agreements with three officers with expiration
dates through 2001. Under the terms of the agreements, the salaries range from
$63,000 to $160,000, and can increase 5% per year if certain levels of
consolidated net earnings are attained. Upon termination by the employer for
any reason other than disobedience, dishonesty, disloyal insubordination by the
employee, or upon termination in connection with certain dissolutions or changes
in ownership of employer, the employee will receive a minimum payment of twice
the annual salary at the time of termination.
(b) The Company has the following pending or threatened litigation and
unasserted claims or assessments:
S-P Construction Company, et al, v. Andersen 2000 Inc., et al. This claim,
- -------------------------------------------------------------
first filed in June 1987, involves a suit by various insurance companies for
subrogation of claims paid by them to the owners (and others) of an electric
power cogeneration plant in Medford, Oregon. Andersen 2000 Inc. (Andersen 2000)
was one of numerous subcontractors on this job. Andersen 2000 supplied a
venturi scrubbing system and other related equipment for the plant, which are
alleged to have been defective, contributing to
-15-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENCIES (continued)
the plant's alleged failure to operate as expected. Plaintiffs' claim against
Andersen 2000 is for in excess of $1,145,310, which includes the sales price of
the equipment supplied by Andersen 2000 and other damages. Andersen 2000's
primary defenses are that the equipment was not defective, that the equipment
operated as designed, and that any failure of the plant to perform as hoped for
is due to the owners' or operator's failure to burn fuel of the grade required
by the boilers (supplied by another company) which in turn affected the
performance of the Andersen 2000 air pollution control units.
In 1995, the case was taken off a State Court of Medford, Oregon trial
calendar in order for the insurance companies and their Underwriters to pursue
claims against their insureds for overpayment and fraudulent submission of
insurance claims. A stay was entered in the Medford, Oregon State Court case.
The insurance companies' related claims have now gone to trial and/or been
resolved via dispositive motion. The United States Court of Appeals for the
Ninth Circuit has affirmed an order from the United States District Court of
California which granted dispositive motions of insured's Biomass One, L.P. and
S-P Construction.
Counsel for Underwriters could ask that the stay in the above-styled case be
lifted, and the case would proceed to trial. To date there has been no effort
by counsel for underwriters to do so. The trial court has entered an order
previously which bifurcated for early trial the issues involved with applicable
guaranties and the fuel specifications which applied to the guaranties. S-P
Construction seeks additional damages resulting from the terminated power
contract which Andersen will argue are precluded by the contract. The
likelihood of an unfavorable outcome at this time can still not be estimated.
The Company remains optimistic, and in their opinion, the final resolution of
this matter will not result in a materially adverse effect on the Company's
financial statements or its operations.
Textron Investment Management Company, et al. v. Crown Andersen Inc., Struthers
- -------------------------------------------------------------------------------
Thermo-Flood Corporation, et al. This case involves a suit by various holders
- -------------------------------
of Industrial Revenue Bonds issued by the Cities of Winfield and Arkansas City,
Kansas concerning the development of industrial property near Winfield, Kansas.
Beginning in October of 1980, Struthers Thermo-Flood Corporation ("STFC") was
a tenant at the property in question pursuant to a 20-year lease. The lease
payments made by STFC were to be used to retire bonds issued to the above named
bondholders. In June of 1987, Crown Andersen acquired the stock of STFC from
Struthers Wells Corporation. At the time of Crown Andersen's acquisition of the
stock of STFC, soil and groundwater at the leased property were heavily
contaminated due in part to operations conducted on adjacent property by a
division of the General Electric Company. The contamination of the leased
property was not known to, discovered by, or reported to Crown Andersen at the
time of its acquisition of the stock of STFC, although it appears that the
existence of the contamination was well-known to the landlord (the Cities of
Winfield, Kansas and Arkansas City, Kansas) and to Struthers Wells Corporation.
In the sale to Crown Andersen, Struthers Wells Corporation represented that
there were no violations of law relating to the property and no claims against
the property. In March of 1990, the Kansas Department of Health made a public
finding that the soil and groundwater contamination at the property constituted
a hazard to human health.
After operations at STFC began to decline, STFC management attempted to market
the leased property. To date, all prospective purchasers have declined to
acquire STFC's interest in the lease upon being informed of the extent of the
soil and groundwater contamination., Thus, STFC has been unable to find a buyer
for its interest in the property, and the cost to clean up the property will
very likely exceed its value.
Because of the finding of the Kansas Department of Health referred to above,
and because any commercial use of the property by STFC has been completely
frustrated by the existence of the contamination, on March 24, 1992, STFC gave
notice to the landlords and the bondholders of its intention to abandon the
property.
Following STFC's abandonment of the property, and its failure to pay the next
lease payment when it became due, the bondholders filed the referenced lawsuit.
In response to the lawsuit STFC has filed a liquidation proceeding under Chapter
7 of the Bankruptcy Code. The trustee in bankruptcy abandoned the property on
September 17, 1992. The bankruptcy court entered an order of no distribution on
February 10, 1994. Additionally, the filing of a petition under Chapter 7 of
the Bankruptcy Code resulted in a complete and permanent transfer of control
from Crown Andersen to the Bankruptcy Trustee. The above items led to the
Company not including STFC in the Company's consolidated financial statements.
STFC was dissolved on March 27, 1995.
Crown Andersen has filed an Answer denying any liability to the bondholders,
principally on the grounds of lack of privity of contract between Crown Andersen
and the bondholders. Crown Andersen has also filed cross-claims against
Struthers Wells Corporation and the Cities asserting claims for, among other
things, concealment, misrepresentation and breach of the warranties and
representations in the Stock Purchase Agreement by which Crown Andersen acquired
STFC from Struthers Wells. Struthers Wells Corporation, a co-defendant in the
case, filed a petition for Chapter 11 in the United States Bankruptcy Court for
the Western District of Pennsylvania. Discovery has been completed in this
case. Crown Andersen filed a motion for summary judgment. A mediation occurred
in the fall of 1995 without resolution, although settlement conversations have
ensued. A trial date has been indefinitely postponed.
The Plaintiffs have dismissed their claims against the Cities and in return
the Cities have dismissed all claims against Crown Andersen. The remaining
claim of the Plaintiffs against Crown Andersen is based upon the alleged
indemnification of Struthers Wells Corporation for unpaid balance of Struthers
Thermo-Flood lease payments. The Company believes that Struthers Wells
Corporation is not entitled to indemnification.
On February 3, 1995, Plaintiffs amended their petition to assert claims for
(1) liability for payment of the Industrial Revenue Bond based upon a theory of
estoppel; (2) liability for the financial obligations of STFC based upon a
theory that Crown Andersen was the "alter ego" of STFC; and (3) damages for
Crown Andersen's preference over other creditors in the liquidation of the
assets of STFC. Crown Andersen filed an answer denying liability under the
theories set forth in the Amended Petition. Motions for summary judgment which
are pending before the court may resolve the issue of Crown Andersen's
liability.
-16-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
A mediation was held and the case was not resolved. The impartial mediator
intimated during the mediation that he believed some of the Plaintiffs' claims
had some merit. Plaintiffs and the Company submitted proposed orders on the
cross-motions for summary judgment on August 15, 1997 and October 6, 1997,
respectively. The court has not ruled on the motions and has not indicated when
a ruling could be forthcoming. While no determination of the outcome of this
matter can be guaranteed, the Company intends to continue to defend this action
vigorously.
In the opinion of management of the Company and its legal counsel, two
possible outcomes exist. The first and more likely is a ruling from the court
or a jury in favor of the Company, resulting in no significant financial effect
upon the Company. A second and less likely is a ruling by the court or a jury
against the Company, in an amount of the past due lease payments of
approximately $1,900,000 plus interest and attorneys fees, less any proceeds
from a sale of the property. This net amount is estimated not to exceed
$1,000,000.
The Company believes that the first outcome is more likely to occur and
therefore believes the final resolution of this matter will not result in a
material adverse effect on the Company's financial statements or its operations.
United States Environmental Protection Agency v. Struthers Thermo-Flood
- -----------------------------------------------------------------------
Corporation. STFC was named as a potentially responsible party ("PRP") under
- -----------
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
by the United States Environmental Protection Agency ("EPA") in November, 1993.
The potential exposure to Crown Andersen or STFC as a PRP is unknown at this
time. A factual defense to any liability on the part of STFC or Crown Andersen
is that neither party contributed to the contamination upon or around the
Property at any time during Crown Andersen's ownership of STFC. Discovery and
environmental testing have revealed that STFC, during its ownership by Struthers
Wells, may have contributed to the contamination upon and around the Property.
The involvement by the EPA strengthens the basis for Crown Andersen's defenses
against liability for the unpaid balance of STFC's lease payments, interest and
attorneys' fees, which should be the ultimate exposure of the Company in this
lawsuit. Additional parties may be named as defendants in this lawsuit based
upon their potential liability for the contamination upon and around the
Property due to the depreciation of the market value and loss of the use of the
Property.
No adversarial actions have been pursued against STFC in this case, subsequent
to the PRP letter of notification. A revised plan for remediation of the
contamination at Strother Field has been completed, but not provided to the
Company at this time.
The evidence to date indicates that the contamination upon the STFC property,
if contributed by STFC, was the result of activities conducted by STFC prior to
its purchase by Crown Andersen. If the EPA or PRPs attempt to join a parent of
STFC into the case, Struthers Wells Corporation was the parent of STFC during
the time any releases could have occurred upon the property by STFC. The
Company believes that no liability would accrue to the Company beyond STFC,
which is in Chapter 7 bankruptcy.
Crown Andersen has not been formally named as a PRP at this time.
Furthermore, based upon the available information, it does not appear likely
that Crown will be held responsible for any liability which may be attributed to
STFC for cleanup costs. However, there is a chance that the EPA or a PRP may
bring an action in the future which attempts to recover cleanup costs from Crown
Andersen. The Company and its legal counsel believe a suit by the EPA or a PRP
would not have merit, under the available information. The Company believes
that the final resolution of this matter will not result in a material adverse
effect on the Company's financial statements or its operations.
Georgia Gulf Corporation v. Andersen 2000 Inc. On October 16, 1996, Georgia
- ----------------------------------------------
Gulf Corporation ("Georgia Gulf") filed suit against Andersen alleging that
Andersen has violated a contractual agreement by and between the parties, dated
on our about November 9, 1990, pursuant to which Andersen agreed to design,
supply, and install a natural gas and hazardous liquid waste fired boiler at the
Georgia Gulf plant in Plaquemine, Louisiana. Georgia Gulf alleges that Andersen
warranted that the project would be free from defects in material and
workmanship and would perform in accordance with the project specifications.
Georgia Gulf further alleges, however, that the project was defective as to its
design, workmanship and/or materials and, as a result, failed to perform in
accordance with the project specifications so as to constitute a breach of
warranty and breach of contract by Andersen, resulting in damages to Georgia
Gulf in excess of $10,000,000. The $10,000,000 figure is a modification of the
former $3,000,000 claim as prayed for in Georgia Gulf's original complaint.
Relying in part on allegations made in the related federal lawsuit filed by
Andersen against the Nebraska Boiler Company, Georgia Gulf moved for partial
summary judgment on the issue of liability. The district court granted Georgia
Gulf's motion and rendered summary judgment in favor of Georgia Gulf on June 18,
1997 on the issue of liability only. On October 29, 1997, Andersen filed its
original brief to the Court of appeals for the First Circuit of Louisiana
alleging that jury questions remain as to various affirmative defenses.
Subsequent to the court's granting of summary judgment in its favor and after
Andersen filed its notice of appeal, Georgia Gulf filed an amended complaint on
October 15, 1997. In its amended complaint, Georgia Gulf increased the amount
of damages it is seeking to include both past and future lost profits in the
amount of $10,000,000 allegedly resulting from the shutdown of the boiler for
repair work. In addition, Georgia Gulf has added Andersen's insurance carrier,
Twin City Fire Insurance Company , as a defendant to this action. Andersen has
filed a suspensive appeal bond in the district court in the sum of $400,000,
pending the appeal of this action to the Court of Appeals for the First Circuit
of Louisiana.
An answer to the amended complaint was filed and discovery is continuing. The
Company expects to be able to limit the Plaintiff's recovery in this case, if
any, because Plaintiff's actual damages are minimal. The Company believes that
the final resolution of this matter will not result in a material adverse effect
on the Company's financial statements or its operations.
The Company is involved in various additional litigation matters arising in
the ordinary course of business. Management believes that the final resolution
of these matters will not result in a material adverse effect on the Company's
financial statements and its operations.
-17-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share" which
provides guidance for calculation of earnings per share. This statement is
effective for interim and annual periods that end after December 15, 1997 and,
when adopted, is not expected to have a material impact on earnings per share as
of September 30, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS 130 is effective for financial statements for period beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
The FASB has issued SFAS No. 131 "Disclosures About Segments of an Enterprise
and Related Information." This statement provides guidelines for disclosure of
financial performance data for identifiable business units and is effective for
fiscal years beginning after December 15, 1997, and when adopted, will not
affect the Company's current disclosures.
-18-
<PAGE>
CROWN ANDERSEN INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
of Crown Andersen Inc.
Peachtree City, Georgia
We have audited the accompanying consolidated balance sheets of Crown Andersen
Inc. and Subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 1997. 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 audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Crown
Andersen Inc. and Subsidiaries as of September 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
December 12, 1997
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
COMMON STOCK INFORMATION (UNAUDITED)
The Company's common stock is traded in the NASDAQ National Market System
under the NASDAQ symbol "CRAN". The following table shows the quarterly high
and low closing sale prices of the Company's common stock for the past two
fiscal years as reported by NASDAQ. The Company had approximately 228
shareholders of record as of December 9, 1997, in addition to approximately
1,800 beneficial holders.
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1997
---------------------
HIGH LOW
----- -----
<S> <C> <C>
FISCAL QUARTER
First $6.63 $5.63
Second 7.00 5.38
Third 7.00 5.75
Fourth 8.25 6.38
YEAR ENDED
SEPTEMBER 30, 1996
---------------------
HIGH LOW
----- -----
FISCAL QUARTER
First $8.75 $5.63
Second 8.75 5.38
Third 7.75 5.75
Fourth 7.38 6.38
</TABLE>
No cash dividends have ever been paid by the Company or any of its
subsidiaries. The Company's ability to pay cash dividends is restricted by the
terms of a loan agreement with a bank. See Note 7 of the Notes to Consolidated
Financial Statements.
-19-
<PAGE>
CROWN ANDERSEN INC.
<TABLE>
<S> <C> <C>
CORPORATE OFFICERS AND DIRECTORS SUBSIDIARIES TRANSFER AGENT
JACK D. BRADY ANDERSEN 2000 INC. Wachovia Bank and Trust Company
Chairman of the Board, President, 306 Dividend Dr. Winston-Salem, North Carolina 27102
and Chief Executive Officer Peachtree City, GA 30269
(770) 486-2000 LEGAL COUNSEL
JACK C. HENDRICKS FAX: (770) 487 5066
Vice Chairman of the Board Decker & Hallman, P.C.
Atlanta, Georgia
RICHARD A. BEAUCHAMP Jack D. Brady
Director Chairman and CEO AUDITORS
(President, Ameritruck
Distribution Corp.) Thomas Van Remmen BDO Seidman, LLP
(Contract transportation company) President and COO Atlanta, Georgia
ROBERT DRESSLER Kenny M. Graves ANNUAL MEETING
Director Senior Vice President
(Managing Director, Corporate The 1998 Annual Meeting of
Finance John M. Golumbeski Stockholders will be held on
Raymond James and Vice-President, Manufacturing February 18, 1998, at 10:00 a.m. at
Associates, Inc.) the Company's corporate offices,
(Investment bankers) Jay Kaufman 306 Dividend Drive, Peachtree City,
Vice-President, Purchasing Georgia.
LESTER K. LEGATSKI
Director Randall Morgan
(President, CelTech, Inc.) Vice-President, Finance and
(Development and application of Controller/Treasurer
membrane technology for liquid
separations) Joseph Grable
Vice-President, Automation
THOMAS VAN REMMEN
Director William J. Bales
(President of Andersen 2000 Inc.) Vice-President, Engineering
MILTON EMMANUELLI Milton Emmanuelli
Chief Financial Officer and Secretary
Controller/Treasurer
RANDALL MORGAN MONTAIR ANDERSEN BV
Secretary Heuvelsestraat 14
5976 NG
Sevenum, Holland
31 77 467 2473
TELEX: 58783 MONTA NL
FAX: 31 77 467 3012
A.T.J. Wagemans
Managing Director
Jack D. Brady
Director
Rene Francken
Manager, Administration And Sales
Johan Grubben
Manager, Engineering
</TABLE>
================================================================================
FORM 10-K REPORT
A copy of the Company's Annual Report on Form 10-K to the Securities and
Exchange Commission for the fiscal year ended September 30, 1997, is available
to stockholders at no charge upon written request. Please send requests to:
Milton Emmanuelli, Chief Financial Officer
Crown Andersen Inc.
306 Dividend Drive, Peachtree City, Georgia 30269
-20-
<PAGE>
EXHIBIT 21 - SUBSIDIARIES
-------------------------
CROWN ANDERSEN INC.
A Delaware Corporation
306 Dividend Drive
Peachtree City, Georgia 30269
Phone: (770) 486 2000
Fax: (770) 487 5066
Andersen 2000 Inc.
A Delaware Corporation
306 Dividend Drive
Peachtree City, Georgia 30269
Phone: (770) 486 2000
Fax: (770) 487 5066
Montair Andersen bv
A Netherlands Registered Corporation
And Wholly Owned Subsidiary Of
Andersen 2000 Inc.
Heuvelsestraat 14
5967 NG Sevenum
The Netherlands
Phone: 77 467 2473
Fax: 77 467 3012
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,894,371
<SECURITIES> 0
<RECEIVABLES> 2,797,465
<ALLOWANCES> 113,476
<INVENTORY> 2,566,179
<CURRENT-ASSETS> 16,963,329
<PP&E> 1,661,962
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,385,965
<CURRENT-LIABILITIES> 6,625,729
<BONDS> 775,000
0
0
<COMMON> 156,164
<OTHER-SE> 13,726,155
<TOTAL-LIABILITY-AND-EQUITY> 21,385,965
<SALES> 23,104,336
<TOTAL-REVENUES> 23,143,672
<CGS> 18,195,528
<TOTAL-COSTS> 21,550,166
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (109,200)
<INCOME-PRETAX> 1,593,482
<INCOME-TAX> 444,500
<INCOME-CONTINUING> 1,593,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,148,982
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
