UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) for the fiscal year ended December 31, 1995
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from to:
Commission file number: I-9418
The Canton Industrial Corporation
(Name of Small Business Issuer in Its Charter)
Nevada 87-0509512
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange
Common Stock ($0.0001 Par Value) Boston Stock Exchange
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's total consolidated revenues for the year ended December 31,
1995, were $2,049,968.
The aggregate market value of the registrant's Common Stock, $0.001 par
value (the only class of voting stock), held by non-affiliates was approximately
$8,705,148 based on the last sale price thereof reported on the consolidated
tape for March 31, 1996.
At March 31, 1996, the number of shares outstanding of the registrant's
Common Stock, $0.001 par value (the only class of voting stock), was 6,148,648.
DOCUMENTS INCORPORATED BY REFERENCE.
NONE
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business..........................................1
Item 2. Description of Property..........................................2
Item 3. Legal Proceedings................................................7
Item 4. Submission of Matters to a Vote of Security-Holders............ 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........10
Item 6. Management's Discussion and Analysis or Plan of Operation.......12
Item 7. Financial Statements............................................15
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................16
PART III
Item 9. Directors and Executive Officers................................16
Item 10. Executive Compensation..........................................18
Item 11. Security Ownership of Certain Beneficial Owners and Management..21
Item 12. Certain Relationships and Related Transactions..................22
Item 13. Exhibits, List and Reports on Form 8-K..........................25
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development.
As used herein, the term "Company" refers to The Canton Industrial
Corporation, a Nevada corporation, and its subsidiaries and predecessors, unless
the context indicates otherwise. Originally incorporated on July 10, 1984 in
Ohio as The Canton Corporation, the Company adopted its present name in May
1985. In September 1984, the Company acquired substantially all of the assets of
a manufacturing plant located in Canton, Illinois (the "Canton Plant"). Under
the direction of prior management, the Company filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code, in the United
States Bankruptcy Court for the Central District of Illinois on February 22,
1988. Current management led the Company's exit from bankruptcy on November 7,
1994 pursuant to the Bankruptcy Court's order of the same date.
Current management obtained controlling ownership of the Company in the
second quarter of 1992. Soon after control changed, the Company formed a wholly
owned subsidiary, Canton Tire Recycling Corporation, an Illinois corporation
("CTR"), to engage in tire recycling operations at the Canton Plant. CTR began
operations on November 5, 1992. During the third quarter of 1993, CTR ceased its
tire recycling operations because the recycling process did not achieve the
planned level of productivity and profitability. This was in large part due to
problems with the tire shredding equipment which did not perform to manufacturer
specifications. Therefore, the Company ceased payment on the shredding equipment
which was then reclaimed by the manufacturer. The Company has filed a complaint
seeking damages against the manufacturer of this equipment. For more information
on this legal proceeding, see "Item 3 Legal Proceedings." Pursuant to the
September 30, 1994 Corporate Acquisitions Agreement and concurrent with the
Company's new focus on financial consulting and real estate acquisitions, the
Company transferred its ownership of CTR to Sabina Services, Inc., a Utah
corporation.
Diversification of the Company's operations began in 1993 when its tire
recycling activities continued to be unprofitable. The Company started
concentrating on providing consulting services and acquiring real estate in the
later half of 1993 and today focuses its operations almost exclusively in these
areas.
Business of Issuer
The Company provides financial consulting services and invests in
undervalued real estate. The Company employs professionals with expertise in
law, accounting, finance, Internet services, and public and investor relations
in its consulting operations. Typically, the Company provides services and
support functions which include advice relating to regulatory compliance,
document preparation, capital formation, financial analysis, promotional
campaigns, debt settlement, and general corporate problem solving.
Prospective clients for the Company's consulting services are located by
the Company's Acquisition Department as well as through advertising and
referrals. This department researches various databases looking for public
companies who are interested in the Company's services. The Company also
advertises its services to private entities seeking to raise capital or become
public corporations. Referrals by current and previous clients have provided the
Company with additional clients.
The Company charges clients monthly fees that vary in both amount and form.
Acceptable payments for these services include cash, securities of the client
company, or some combination of both. This payment arrangement allows many
organizations, especially start-up ventures and those experiencing financial
difficulties, to obtain the Company's services without the use of valuable cash
flows. Acceptable payments and the size of payments the Company charges for its
services vary with the volatility of the clients' securities, the amount and
nature of work involved, and the expenses related to the services being
rendered.
<PAGE>
Entities from many different industries employ the Company's consulting
services and the Company strives to maintain this diversity. The Company
primarily targets distressed public companies and private companies seeking to
become publicly owned. The decision of accepting a prospective client depends on
its financial stability, the type of services needed and the compensation
format. A key to the Company's success is management's ability to improve and
maintain its client base and successfully liquidate its compensation.
Part of the Company's business operations include the acquisition,
management, lease and sale of real estate holdings. The Company has acquired a
wide variety of commercial properties. While most of the Company's real estate
holdings are in Utah, the Company also owns several properties in other parts of
the United States. For further information on the Company's real estate
holdings, see "Item 2 - Properties." The Company hopes to increase revenues
generated from these properties and obtain additional real estate holdings. A
key to the Company's success is the ability of management to locate and acquire
undervalued real estate with little or no cash down and turn such properties
into profitable assets.
The Company has been successful in generating sufficient revenues to
sustain its current operations and intends to expand its current consulting
services and acquisition of additional real estate, with the goal of increasing
revenues. Long range plans are to broaden its client base and to provide
additional consulting services. These plans include the possibility of
conducting promotional seminars focused on the Company's services. Other plans
involve the preparation and development of Internet mall sites within which
organizations can advertise their products and services on individual Internet
locations. The Company also assists private organizations in need of capital by
preparing limited private placement offering documentation.
The Company has three proceedings pending which involve the investigation
of the Company's compliance with local and state environmental laws. The cost
and effect of these proceedings is dependant upon the outcome of the proceedings
and investigations which are currently pending with local and state agencies.
For further information see "Item 3 - Legal Proceedings." The Company is unable
to forecast, and can give no assurance as to the outcome and resulting cost of
these proceedings, if any, and the effect they may have on the Company.
The Company had a total of 56 employees, 40 of whom were full time
employees, on March 31, 1996.
ITEM 2. DESCRIPTION OF PROPERTIES
As used herein, the term "Company" refers to The Canton Industrial
Corporation and its subsidiaries and predecessors, unless the context indicates
otherwise. The Company owns or leases industrial, commercial, warehouse, office,
and undeveloped commercial real estate. The acquisition of properties has not
been limited to any specific geographic area, but has been dictated by the
presenting scenario. Regardless of the type of property, future acquisitions
will not be limited to any specific geographic area. At the end of the fiscal
year the Company owned, leased, or had interests in property in Utah, Illinois,
Virginia, West Virginia, Arizona and Nevada.
The Company's policy is to actively pursue the acquisition of real estate
for investment income and appreciation in property value. During the past year,
the Company has continued to place an emphasis on acquiring property with rental
income and property which management feels is undervalued. Rather than limiting
itself to specific types of real estate, the Company's policy has been to focus
primarily on terms of financing. The Company generally looks for properties that
can be purchased by assuming the existing financing, and by paying the balance
of the purchase price with a nominal cash expenditure and/or, the issuance of
shares in the Company. The Company has been successful in acquiring numerous
properties in this fashion. The Company does not plan to enter into the business
of originating, servicing or warehousing mortgages or deeds of trust, except as
may be incidental to its primary purpose of acquiring real estate.
There is a risk that the Company may lose control of the properties,
(e.g., through foreclosure), if enough funds are not derived from the rental
income for both the financing and operations. Currently, due to expanded
acquisition activity and deficiencies in rental income from the properties
acquired, the Company does not have sufficient rental revenues to cover the debt
service and operating costs of all properties. The Company currently has to use
capital from other sources to fund this deficit. Although management hopes to
increase the occupancy rates and thus increase the rental income so that such
income will cover both operations and debt service, no such assurances can be
made.
<PAGE>
The Company's principal properties having a book value amounting to ten
percent (10%) or more of the total assets of the Company are the Oasis Property,
the Wallace/Bennett Building, and the Plandome Building. The principal
properties are described under separate headings below. The remainder of the
properties are described under the subsequent heading, "Other Properties."
Oasis, Nevada Property
The Oasis, Nevada property consists of over 1,100 acres of mostly vacant
land located in Elko County, Nevada. The property was purchased by the Company
on December 27, 1995. The purchase also included all improvements to the
property that consist of a service station, small retail and food service
operations, and a mobile home park. Also purchased were the water rights of over
sixteen hundred acre feet of water per year. For additional information on this
acquisition, see the Company's Form 8-K filed with the Securities and Exchange
Commission on January 11, 1996.
The property is subject to a Trust Deed with a current principal balance of
$900,000 provided by the seller and a $300,000 Promissory Note payable to an
individual. Under the terms and conditions of the trust deed, during the first
three years an interest only payment is due quarterly, with an interest rate of
seven percent (7%) per annum. After the third year, principal reductions are
required, and are based on the entire loan amount being paid off by the tenth
anniversary date of purchase. There are no pre-payment penalties and the
contract provides for the payoff and reconveyance of specific tracts of land
within the parcels covered by the deed. The promissory note requires only
interest payments at eighteen percent (18%) per annum until the note matures and
becomes due on December 27, 1997. The promissory note contains no penalty for
prepayment. Other than property taxes that will become due and payable, there
are no other encumbrances on the property.
The Company intends to develop the property in the future if additional
financing can be obtained. The Company is of the opinion that this property is
adequately covered by insurance.
The federal tax basis of the property is $1,682,495. The facilities are
being depreciated by straight line method over a period of 31.5 years. The
realty tax rate is .024204 and the annual realty taxes for 1995 were $6,443.
The Wallace Bennett Building, Salt Lake City, Utah
The Wallace-Bennett Building is located at 55-65 West 100 South, Salt Lake
City, Utah. The property was purchased by Wasatch Capital Corporation
("Wasatch") on November 29, 1994. The Company owns twenty percent (20%) of the
common stock of Wasatch. For additional information on the Company's involvement
in Wasatch, see "Item 12 - Certain Relationships and Related Transaction." The
building is a turn-of-the-century, multi-story office building. Currently, only
a portion of the ground floor is rented. The building is adequate for its
current uses, but the additional stories above the ground floor cannot be used
until they have been remodeled and rehabilitated.
The property is subject to a Promissory Note secured by a First Trust Deed
with a current principal balance of $563,195, bearing ten percent (10%) interest
per annum. Total monthly principal and interest payments are $7,929. The note
matures on November 29, 1999 and there are no prepayment provisions. Other than
property taxes that will become due and payable, there are no other encumbrances
on this property.
Plans have been made for remodeling the second, third and fourth floors as
either offices or large, upscale, residential condominiums. The cost for either
project is estimated to be around $1,000,000. Salt Lake County has recently
completed a new convention center at a cost of over $80,000,000 on the block
just to the west of this property. The demand for office and retail space in the
downtown Salt Lake City area has increased significantly over the past few
years, and the new convention center should make the vacant space in the
Wallace-Bennett Building more marketable. The Company is of the opinion that
this property is adequately covered by insurance.
<PAGE>
The current occupancy rate for the rentable ground-level space is 46%. Two
tenants each occupy 10% or more of the rentable square footage, a restaurant and
retail store using 1,719 and 912 square feet, respectively. The tenants are
responsible for all of their own utilities, except water and sewer. Tenants also
pay their pro-rata share of all other operating expenses as well as maintenance
and janitorial services. The average effective rental is $9.58 per square foot.
All of the leases will expire within the next two years, representing $25,980 in
annual revenue. It is presently expected that all of the leases will either be
renewed or replaced with new tenants.
The federal tax basis of the property is $789,391. The building is being
depreciated by the straight-line method depreciation over a period of 31.5
years. The realty tax rate is .016387 and realty taxes for 1995 totaled $6,193.
The Plandome Building, Salt Lake City, Utah
The Plandome Building is located at 69-75 East 400 South, Salt Lake City,
Utah. The building was acquired by Canton Industrial Corporation of Salt Lake
City ("CICSLC") on October 12, 1993. CICSLC was a wholly-owned subsidiary of the
Company until the fourth quarter of 1995 when the subsidiary sold additional
shares of its common stock in a private placement offering pursuant to Rule 504
of Regulation D as promulgated by the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended ("Rule 504"). This offering
effectively diluted the Company's ownership to fifty one percent (51%). For more
information on the Company's involvement with Rule 504 offerings, see "Item 6 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations." This historic three-story building constructed in 1904, contains
15,300 sq. ft. of office and retail space and is eligible to be listed on the
National Register of Historic Places. The building is zoned C-3, a commercial
use classification which is consistent with its current use.
The property is subject to a First Deed of Trust with a current principal
balance of $565,571, providing for interest at an annual rate of nine percent
(9%). Total monthly principal and interest payments are $4,783. The note matures
on October 9, 1999 and can be prepaid any time, without penalty. The property is
also subject to a Second Deed of Trust with a current principal balance of
$100,000, providing for interest at an annual rate of five percent (5%). If
there is no prepayment, the amount due on the maturity date, October 1, 1998,
will be $100,000 plus accrued interest. The note can be prepaid any time,
without penalty. The only other encumbrances on the property are the unpaid 1995
property taxes and unpaid property assessments (portions of which are delinquent
as far back as 1991).
In 1990 the building was substantially renovated, retaining its original
style. No need for additional renovation or restoration is foreseen, and there
are no plans to do so at this time. Directly across the street from the Plandome
Building, the State of Utah started construction on a new $65 million Court
Complex in October 1995. The demand for office and retail space in the downtown
Salt Lake City area has increased significantly over the past few years, and the
opening of the Court Complex should increase demand for office space in the
vicinity of the Plandome Building even further. The Company is of the opinion
that this property is adequately covered by insurance.
The present occupancy rate is forty-nine percent (49%). Two restaurants
each occupy more than 10% of the square footage in the building each (2,712 and
1,584 sq. ft.). The major tenants are responsible for all of their utilities,
except water and sewer. The office space is rented to professional
organizations. The average effective annual rental is $7.16 per square foot. All
of the leases will expire within the next two years, representing $53,568 in
annual revenue. It is presently expected that all of the leases will either be
renewed or replaced with new tenants.
<PAGE>
The federal tax basis of the property is $771,952. The building is being
depreciated by the straight-line method depreciation over a period of 31.5
years. The realty tax rate is .016387 and realty taxes for 1995 totaled $6,225.
OTHER PROPERTIES
The Parkersburg Terminal, Parkersburg, West Virginia
The Parkersburg Terminal is located at 516 Camden Street, Parkersburg, West
Virginia. The terminal is a former fuel transfer station. The property consists
of 4.5 acres on a tributary of the Ohio River and includes a former oil storage
facility and a warehouse with office space. Other than property taxes that will
become due and payable, there are no encumbrances on the property. The property
has been vacant and unused since its acquisition. The Company is subject to
competition in finding tenants or buyers for the property, and there is a
substantial likelihood that the property will remain vacant for some time. The
Company is of the opinion that this property is adequately covered by insurance.
The Company has received notifications from the West Virginia Division of
Environmental Protection (the "WVDEP") alleging that above ground storage tanks
and related hardware on the property were leaking unidentified contents into the
nearby river. These concerns have been addressed by the Company and no further
notifications have been received. Testing performed on the site indicates that
all remaining storage tank contents are crude oil remnants. The test results
have been submitted to the WVDEP and the Company is waiting for an official
response and authorization for the appropriate cleanup activities.
The Canton Plant, Canton, Illinois
The plant is located at 200 East Elm Street, Canton, Illinois. The plant
was acquired by the Company in 1984. The plant is a manufacturing and
warehousing facility formerly owned by the plow division of International
Harvester. Located on the property are brick, steel and glass constructed
buildings with 1,290,366 square feet of interior space, including 1,001,472 sq.
ft. of industrial space, 236,248 sq. ft. of warehouse space and 52,646 sq. ft.
of office space. Portions of the buildings are in disrepair. The site is zoned
for industrial use, and the Company believes that the City of Canton has
generally been cooperative regarding efforts to return the facility to
constructive use.
In June 1994, the Canton Plant, with the exception of 74,000 sq. ft., was
sold to Thistle Properties, Inc., an Illinois corporation then wholly owned by
ATC II, Inc. ("Thistle"), for $825,000 subject to all leases, liens and
encumbrances under a Real Estate Sales Agreement ("RESA"). On May 4, 1995, the
Company served Thistle with a Notice of Default of the Real Estate Lien Note
entered into pursuant to the said RESA. Thistle Properties subsequently informed
the Company that due to its poor financial position, it would be unable to
comply with the terms of the RESA. Thistle proposed to forfeit all payments made
and that the Company foreclose on the security provided by RESA, being 100% of
the stock of Thistle, in exchange for a mutual release of all claims.
The Company subsequently executed a Mutual Release with ATC II and Thistle
effective May 12, 1995. The net effect of the Mutual Release is that Thistle,
which holds the title to the Canton Plant, is now a wholly owned subsidiary of
the Company. This acquisition resulted in a loss of $562,406. A gain on the sale
of $752,467 had been previously recorded by the Company during the third quarter
of 1994. Although the Company hopes to dispose of the Canton Plant in the near
future at an ultimate gain from the Company's perspective, no such assurances
can be given.
The only encumbrances are accumulated property taxes, penalties, and
assessments totaling approximately $207,517 of which portions are delinquent as
far back as 1988. The Company is subject to a proceeding with the State of
Illinois over the cleanup of tires and toxic paint drums on the property (see
"Item 3 - Legal Proceedings"). The Company is exploring a variety of alternative
uses for the property. The Company is of the opinion that this property is
adequately covered by insurance.
<PAGE>
The Canton Building, Salt Lake City, Utah
The Canton Building is located at 202 West 400 South, Salt Lake City, Utah.
The building was acquired by Canton Industrial Property Management Corporation
of Salt Lake City ("CIPMC") in November 1993. CIPMC was a wholly-owned
subsidiary of the Company until the fourth quarter of 1995 when the subsidiary
sold additional shares of its common stock in a private placement offering
pursuant to Rule 504. This offering effectively diluted the Company's ownership
to fifty one percent (51%). For more information on the Company's involvement
with Rule 504 offerings, see "Item 6 - Management's Discussion and Analysis of
Financial Condition and Results of Operations." The building is an 18,000 sq.
ft. office building, consisting of two stories of interior rentable space with
covered ground level parking. The building is constructed of concrete and glass
and is suitable for office use. The Canton Building is zoned C-3, a commercial
use classification which includes its current use.
The property is subject to a First Trust Deed with a current balance of
$167,825, providing for interest at an annual rate of nine percent (9%). Monthly
principal and interest payments are $1,575. The note matures on November 1, 2003
and can be prepaid at any time, without penalty. The property is also subject to
a Second Trust Deed with a current balance of $143,794, providing for interest
at an annual rate of nine percent (9%). Total monthly principal and interest
payments are $1,350. The note matures on November 1, 2003 and can be prepaid at
any time, without penalty. The property is additionally subject to a Third Trust
Deed with a current balance of $60,500, providing for interest at an annual rate
of eighteen percent (18%). Monthly interest only payments were due for the first
six months of the note (August 1995 - January 1996) with principal and interest
payments of $5,000 due beginning February 1996 and continuing each month
thereafter until the note is paid in full. The property is also subject to a
Fourth Trust Deed with a current balance of $57,500, providing for interest at
an annual rate of eighteen percent (18%). Monthly interest only payments are due
for the first six months of the note (October 1995 - March 1996) with principal
and interest payments of $5,000 due beginning April 1996 and continuing each
month thereafter until the note is paid in full.
Present plans are to continue to use and operate the building as an office
building. Improvements have been made to the property, including carpeting,
painting the entire first floor, and repairing the air conditioning system.
Repairs to the ground level parking area are planned; the cost of which is not
expected to exceed $2,500. The currently configured open area office system on
the first floor lends itself to maximum tenant satisfaction for optimal
placement of walls and possible changes for tenants. No other renovations,
improvements or development plans have been made for this property. The Company
is of the opinion that this property is adequately covered by insurance.
Canton's Wild Horse Ranch II, Inc.
In August 1994 the Company acquired 13.22 acres of raw, unimproved land
located in Pima County, Tuscon, Arizona. The property is subject to a Deed of
Trust with a current balance of $59,224, providing for interest at an annual
rate of eight percent (8%). Total monthly principal and interest payments are
$825. A balloon payment of approximately $40,432 plus accrued interest is due in
March 1999. The only other encumbrances on the property are the unpaid 1995
property taxes. There are restrictive covenants placed upon any future
development of the land pertaining to the number of dwellings and the style of
the buildings. The Company is of the opinion that this property is adequately
covered by insurance.
268 West 400 South, Salt Lake City
The building at 268 West 400 South is currently leased as the Company's
headquarters and principal offices. The building has been leased since May 1994
by Canton's Commercial Carpet Corporation ("CCCC"). CCCC was a wholly-owned
subsidiary of the Company until the fourth quarter of 1995 when the subsidiary
sold additional shares of its common stock in a private placement offering
pursuant to Rule 504. This offering effectively diluted the Company's ownership
to fifty one percent (51%). For more information on the Company's involvement
with Rule 504 offerings, see "Item 6 - Management's Discussion and Analysis of
Financial Condition and Results of Operations." The lease contains an option to
purchase the building for $415,000, which expires May 23, 2004. The current
lease payments are applicable towards the purchase price of the property. The
16,000 sq. ft. office building has two stories of office space with ground level
parking underneath. The building is constructed of brick and cinder block
construction and is suitable for office use. The current use of the building is
consistent with its C-3 commercial use zoning classification. The Company
occupies 90% of the building with the remaining 10% leased to an investment
company. Improvements have been made to the property including carpeting,
painting and remodeling the entire second and third floors. The Company is of
the opinion that this property is adequately covered by insurance.
<PAGE>
TAC Warehouse, West Jordan, Utah
The TAC Warehouse is located at 5320 West Wells Park Road, West Jordan,
Utah. The building has been leased since June 1993 by TAC, Inc. ("TAC"). TAC was
a wholly-owned subsidiary of the Company until the fourth quarter of 1995 when
the subsidiary sold additional shares of its common stock in a private placement
offering pursuant to Rule 504. This offering effectively diluted the Company's
ownership to fifty one percent (51%). For more information on the Company's
involvement with Rule 504 offerings, see "Item 6 - Management's Discussion and
Analysis of Financial Condition and Results of Operations." The lease contains
an option to purchase the entire building for $596,000, which expires June 30,
1996. The building has approximately 60,000 sq. ft. of interior space of which
the Company leases approximately 40,000 sq. ft. Portions of the warehouse lack
electricity, heating and other amenities, but are adequate for general
warehousing purposes. 100% of the warehouse is subleased to other tenants. The
Company intends to exercise its option to buy the building, although currently
it does not have the required financing in place and no assurances can be given
that the Company will be able to purchase the property. Upon obtaining financing
arrangements to exercise the option to purchase the warehouse, the Company plans
to provide electricity, plumbing and heating to all areas of the building, and
thereby increase the rental rate. The approximate estimated cost of the
improvements is $50,000. There is currently a shortage of industrial and
warehouse space in the Salt Lake Valley and the Company feels the occupancy rate
will remain high. The Company is of the opinion that this property is adequately
covered by insurance.
Glendale Plaza, Salt Lake City, Utah
The Glendale Plaza is located at 1100 South Glendale Drive, Salt Lake City,
Utah. The Company currently leases the retail shopping plaza and has an option
to purchase the property for $799,000, which expires August 31, 1998. The
Company is entitled to deduct the total amount of principal payments on the
owner's mortgage during the term of the lease. The Company also has an option to
extend the lease for an additional three years. The property contains 76,831
square feet of rentable retail space and approximately 51% is subleased to
tenants. Present plans are to continue to operate the building as a retail
shopping plaza and to increase the occupancy rate. No major renovations,
improvements or development plans have been made for this property. The Company
is of the opinion that this property is adequately covered by insurance.
KMC Plant, Cheriton, Virginia
The former KMC food plant and warehouse ("KMC Plant") is located in the
vicinity of Cheriton, Virginia. In 1993, the Company acquired a note in the
amount of $353,000 bearing interest at twelve percent (12%) secured by a deed of
trust on the KMC Plant. Payments on the note have not been made. The Company
sent notice of default and demand for payment during the first quarter of 1995,
and scheduled a foreclosure sale. Prior to the sale being completed, the owner
of the property filed a Chapter 11 Bankruptcy petition. An agreement with the
owner has been reached whereby the Company would release its claims to the
property or be allowed to proceed with a foreclosure. Payment under the terms of
the agreement is due April 16, 1996. For more information on this situation, see
"Item 3 - Legal Proceedings, KMC Foods, Inc. vs. Potomac Engineering Management
Systems Co.
(PEMSCO)."
<PAGE>
The KMC Plant is located on approximately 65 acres in the vicinity of
Cheriton, Virginia. It has railroad spur access with the Penn Central Railroad.
The property has structures for the manufacture, storage and distribution of
food products. The property is zoned for industrial use. The KMC Plant has been
vacant and unused since the note was acquired and is in disrepair. The property
is subject to an environmental impact investigation by the Virginia State Water
Control Board and related agencies (see "Item 3. Legal Proceedings" Possible
Actions by Governmental Authorities).
The Company does not plan to renovate, restore or improve the property if
it forecloses on the property. Upon foreclosure, the Company intends to attempt
to lease or sell the property, as is. There is significant competition in the
area for tenants or buyers, so there is a substantial likelihood that the
property will remain vacant for some time if foreclosure occurs. The Company is
of the opinion that the owner of the property had the property adequately
insured as of March 31, 1996.
ITEM 3. LEGAL PROCEEDINGS
The following are material pending cases involving the Company.
Bankruptcy Proceedings - This case was filed in the United States
Bankruptcy Court, for the Central Division of Illinois, located in Peoria,
Illinois, Case Number 88-80374, as a voluntary Chapter 11 case on February 22,
1988, by prior management of the Company. A plan of reorganization was approved
and the Company filed a written motion to allow the Company to emerge from
bankruptcy. The Bankruptcy Court scheduled a hearing on that request on November
7, 1994 at which time the Company was successfully discharged by the Bankruptcy
Court.
Keck, Mahin & Cate vs. Canton Industrial Corporation - Keck, Mahin & Cate
("Keck") filed an action in the Tenth Judicial Circuit, State of Illinois,
Peoria County on July 16, 1991. The action was for the recovery of attorney fees
incurred in representing the Company in bankruptcy proceedings. On January 13,
1992, the Court entered judgment against the Company for $85,790.61. The
judgment remains unsatisfied.
State of Illinois vs. The Canton Industrial Corporation - This action is
pending in the Ninth Judicial Circuit, State of Illinois, County of Fulton, Case
No. 93MR45, filed in September of 1993 and amended on January 28, 1994. The
State of Illinois sought the cleanup of tires and toxic paint drums at the site.
The State has raised an issue that 3-5 drums are still located on the site and
is requesting certification of their contents and proper disposal. An Interim
Order for the cleanup of the property was entered and approved by the Court on
March 8, 1994. Pursuant to the Interim Order, the sum of $140,000 was to be
deposited in an escrow account within the State of Illinois by May 15, 1994, to
insure the complete removal of the tires. The Interim Order also required the
clean-up to be completed no later than December 31, 1995. The Company entered
into an agreement for the removal of all tires with Gardens, Inc., who then
sub-contracted with Eco-Systems Inc. Work began to bale the waste tires into
blocks for disposal and use by Eco-Systems, Inc. in August 1995. On September
28, 1995, the Company was informed by the IEPA that it had rejected the
Company's proposed plan for removal and had hired its own contractor to remove
the tires from the site. The Company sought relief from this decision from the
Circuit Court in Fulton County. The Court denied the Company any relief at a
hearing on October 10, 1995. On October 16, 1995, the Company filed an appeal
with the Director of the IEPA, which was also denied. Currently, the State has
concluded work believing that all waste tires have been removed from the site.
The State has informed the Company that it may seek recovery of costs incurred
to remove the tires. The Company believes that the ultimate intent of the
Interim Order, the complete removal of the tires, has been met because either
the tires had been completely removed or reduced to the IEPA's control but not
within the Court's exact specifications. As a result of this technical
non-compliance, the Court may impose penalties of up to $50,000 for
non-compliance with the order and $10,000 per day from the date of the
violation.
<PAGE>
Xeta Corporation vs. The Canton Industrial Corporation. Xeta originally
filed suit in the Northern District of Oklahoma, the suit was later dismissed
based on a lack of jurisdiction. The same suit was refiled on March 8, 1995, in
the United States District Court, in the Central District of Utah, Case Number
95CV-218G. Xeta seeks to recover $116,500 which it contends was fraudulently
transferred to the Company by ATC, a client of its subsidiary CFS, in order to
avoid payment of a judgment held by Xeta against ATC. Richard Surber and Gerald
Curtis, both former officers of ATC, are also named as individual defendants.
The Company has responded to the claims of Xeta by stating that it provided bona
fide services to ATC, and that the bulk of the funds were used for operating
expenditures of ATC. The Company also believes that the expenditures were
incurred in the best business interest of ATC. A Motion for Summary Judgment has
been filed by Xeta to which the Company has filed a response. The Motion is
presently pending before the Court.
Logos International, Inc. vs. Oxytrust I.U. Ltd., Josef Oxenhandler,
Benjamin Oxenhandler and Jack Leathers - This case was filed in the United
States District Court, in the Central District of Utah, Case Number 93-C-840J.
Logos International, Inc. assigned all of its rights and interests in the
foregoing litigation to the Company September 29, 1994. The Company has obtained
a judgment against the defendants for $2.5 million, with interest accruing at 7%
per annum. The Defendants had entered into a purchase agreement to purchase
500,000 shares of the common stock of Logos International, Inc. The stock was
issued to the Defendants, and the Defendants accepted the stock, however they
never paid the purchase price. Defendant Jack Leathers has filed for relief
under Chapter 7 of the Bankruptcy Code. The Company is unsure if it can collect
on the full judgment, or any part thereof.
TAC, Inc., vs. Ozora Corporation and Mark C. Hungerford. Filed on January
25, 1995 in the United States District Court for the Central Division of Utah,
Case Number 95-C-75 G. TAC sought recovery of a promissory note plus the
interest due and/or the recovery of 99,800 shares of class A common stock of
Transcisco Industries, Inc. On May 30, 1995, the Court entered a Judgment
against Ozora and Hungerford which included interest and associated costs. TAC
pursued action to enforce the Judgement, including the filing of liens against
real property in California and Montana. In November of 1995, TAC, Ozora and
Hungerford entered into settlement discussions which continued until the parties
reached an agreement. The agreement calls for Ozora/Hungerford to make an
initial down payment to TAC in November, 1995 and installment payments in
intervals thereafter. Ozora/Hungerford thus far have met the terms of the
agreement, full performance under the agreement was completed on February 13,
1996.
Canton Financial Services vs. David Dadon and Select Pictures, Ltd. - Filed
November 4, 1994 in the United States District Court for the Central Division,
State of Utah, Case Number 94-C-1080C. The Company seeks payment in the amount
of $225,000 for services rendered under a consulting agreement, two promissory
notes and fraud related to security provided toward payment. A Default has been
entered against Select Pictures after service of process and its failure to file
an answer. In January 1996, the Court signed an order authorizing an attempt to
serve Dadon by certified mail in England. Efforts to secure personal service on
Dadon continue.
Canton Industrial Corporation and Canton Industrial of Salt Lake City vs.
Delamr A. Janovec and KLH Engineering Group, Inc. Filed by the Company on April
19, 1995, in the United States District Court, in the Central District of Utah,
Civil Case No. 2:95 CV 363G. The Company seeks enforcement of the August 31,
1994 Settlement Agreement and Mutual Release to which the Company, Janovec and
KLH were parties. That agreement required the delivery to the Company of
10,994,666 shares of KLH common stock. Mr. Janovec has failed to file a response
on a timely basis in the matter and the court has entered a default against him.
An answer and counterclaim has been filed by KLH, the Company believes that all
issues raised by the counterclaim were either resolved by the Settlement
Agreement or are groundless. In the first quarter of 1996, the court ordered the
case to mediation.
Vincent Liotta vs. Joseph Robert & Co., et al. - Suit filed by Vincent
Liotta ("Liotta") in the United States District Court for the Eastern District
of New York, Civil Case No. CV-95-1659. The allegations relate to damages
resulting from a purchase of ATC stock by Liotta. The Company is named in the
suit based upon its consulting work with ATC which Liotta alleges was
instrumental in his purchase of the stock. Also named as defendants are Canton
Financial Services Corporation, ATC II, Inc., Allen Z. Wolfson individually and
John Does 1-9. An answer has been filed on behalf of the Company and Canton
Financial Services Corporation which denies any involvement in the underlying
transactions.
<PAGE>
The Canton Industrial Corporation vs. Mi-Jack Products, Inc. - Filed by the
Company on July 14, 1995, in the United States District Court, Central District
of Utah, Civil Case No. 2:95 CV 651S. The Company seeks damages from Mi-Jack
Products, Inc. based upon the improper operation of equipment provided to Canton
Tire Recycling for use in its tire recycling operation in Canton, Illinois.
Service has been completed on the defendants who have filed a Motion to Dismiss
alleging a lack of jurisdiction of the Utah court over the matter. The Company
has filed a response and the court will decide the jurisdiction issue prior to
further activity in the suit.
KMC Foods, Inc. vs. Potomac Engineering Management Systems Co. (PEMSCO) -
KMC Foods, Inc., a subsidiary of the Company, has filed a Motion for Relief from
the Automatic Stay in PEMSCO's Chapter 11 bankruptcy case filed in the United
States Bankruptcy Court for the Eastern District of Virginia, Norfolk Division,
Case No. 95-23691-DHA. KMC holds a secured interest in certain real property
owned by PEMSCO. KMC seeks either payment of the obligation or the right to
foreclose its interest in the real property. KMC claims a debt of approximately
$600,000 with interest and PEMSCO has asserted a value of $1.7 million for the
property. The Company has signed a settlement that will result in payment of a
substantial portion of the debt, an agreement to indemnify KMC for any costs of
environmental clean up of the property and payment of KMC's attorney fees in the
matter, or, in the alternative, the lifting of the bankruptcy stay to permit
foreclosure of KMC's interest in the property.
Hi-Tech Mechanical Systems, Inc. vs. The Canton Industrial Corporation -
Hi-Tech Mechanical Systems, Inc. (Hi-Tech") filed suit in the Third Circuit
Court, Salt Lake County, State of Utah, Civil Number 95-0009467. Hi-Tech seeks
recovery for heating and cooling systems repairs in the amount of $10,746. A
Settlement Agreement has been signed by both parties effective September 26,
1995 which provides for full settlement of the claims over a six month period.
The Company has complied with the terms of the Settlement Agreement and the suit
was dismissed in March 1996.
Possible Actions by Governmental Authorities
Virginia Property - Prior to its purchase by the Company, KMC operated a
food processing plant in Cheriton Virginia. For more information on KMC, see
"Item 2 - Description of Properties." The property was sold to PEMSCO and KMC
retained a secured interest in the property. KMC has sought to enforce payment
of the purchase price or the return of the property in PEMSCO's chapter 11
bankruptcy (see "Item 3 - Legal Proceedings"). The Virginia State Water Control
Board (the "VSWCB") has required the preparation of a Site Characterization
Report regarding contamination from underground storage tanks. PEMSCO has agreed
to indemnify KMC from any costs related to the report and related cleanup
required on the property if it is allowed to retain possession. PEMSCO has had
possession and control of the property from the time of conveyance by KMC and
therefore, KMC has been unable to conduct the testing required by the VSWCB. KMC
and the Company expect that, upon settlement of the claim of KMC, PEMSCO will
complete the reports and testing required by the VSWCB and pay all costs of
testing and any related cleanup on the property, although if such a settlement
is not completed, the Company will foreclose on the property.
West Virginia Property - This property, located in the city of Parkersburg,
West Virginia is owned by Canton Tire Recycling of West Virginia, Inc., a wholly
owned subsidiary of the Company. (See "Item 2 - Description of Properties,
Parkersburg Terminal"). The Company has received notifications from the West
Virginia Division of Environmental Protection (the "WVDEP") alleging that above
ground storage tanks and related hardware on the property are leaking
unidentified contents onto the ground and into the nearby river. Corrective
action was taken by the Company and no further notifications have been received.
Testing performed on the site by certified engineers indicates that all
remaining storage tank contents are crude oil remnants. The test results have
been submitted to the WVDEP and the Company is waiting for an official response,
authorization and direction for the appropriate cleanup activities.
<PAGE>
State of Delaware vs. KMC Foods, Inc. KMC received a claim from The
Division of Revenue of the Department of Finance for the State of Delaware in
excess of $300,000. The claim is for alleged taxes due based upon the gross
revenues of KMC for the tax period April 1, 1989 through March 31, 1992. This
tax period is prior to the purchase of KMC by the Company. Prior management of
KMC has assured the Company that the tax does not apply as all sales of products
were outside of the state of Delaware, and thus the Delaware tax is not due.
Efforts continue to provide sufficient documentation to the Delaware authorities
to resolve the liability issue favorably to KMC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1995, the Company did not submit
any matters to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Boston Stock Exchange under the
symbol "CND" on the OTC Bulletin Board under the symbol "CICP." The following
table sets forth the high and low sales prices for the Company's Common Stock as
reported on the Boston Stock Exchange for each quarter of 1994 and 1995, and the
first quarter of 1996:
Quarter High Low
------- ---- ---
1994 First $0.50 $0.13
Second $0.94 $0.31
Third $0.94 $0.19
Fourth $1.31 $0.38
1995 First $0.53 $0.34
Second $0.65 $0.60
Third $0.51 $0.42
Fourth $2.31 $0.50
1996 First $2.44 $0.94
On March 31, 1996, the closing bid and ask price for the Common Stock was
$1.59 by $1.62, respectively.
All Share prices for the first two quarters of 1994 are 1:4 post-reverse
split prices, and the Share prices for the last two quarters of 1994 are 1:4 and
1:10 post-reverse split prices, as described immediately below.
<PAGE>
On October 12, 1992, the Company effected a 1:4 reverse split of the
outstanding shares of its common stock, par value $0.001 per share (the "Common
Stock"), pursuant to a special meeting of the Company's shareholders. The
Company changed its domicile to Nevada on March 9, 1993 through a merger with a
Nevada corporation bearing the exact name as the Company. On April 28, 1993, the
Company's shareholders and board of directors voted to increase the number of
shares of Common Stock authorized for issuance to 100,000,000 shares, and also
authorized for issuance 20,000,000 preferred shares, par value $0.001 per share.
On May 24, 1994, the Company's shareholders approved a proposal to increase
the number of shares of Common Stock authorized for issuance from 100,000,000 to
200,000,000 shares as well as a proposal to effect a 1:10 reverse split of the
Common Stock. The increase in authorized shares became effective on or about
July 26, 1994, while the 1:10 reverse stock split was effective on August 1,
1994. (Unless otherwise noted all amounts of shares issued before these dates
have been restated to reflect both the 1:4 and the 1:10 reverse splits.)
Shareholders
As of March 31, 1996 there were approximately 772 shareholders of record of
Common Stock.
Dividends
The Company has not declared any cash dividends for the last two fiscal
years. Under the terms of the Company's Second Amended Plan of Reorganization,
as modified, no dividends could be paid until the Company's creditors were paid
as specified in the Plan. See "Item 1- Business of Issuer" for more information
on the Company exit from bankruptcy. The Company exited from bankruptcy on
November 7, 1994, and is therefore not restricted from issuing dividends.
However, the Company does not anticipate declaring any cash dividends in the
near future.
A non-cash dividend was declared on March 4, 1996 in the form of one share
of common stock in Oasis Hotel & Casino I and Oasis Hotel & Casino II for every
100 shares of the Company's common stock owned as of the record date March 27,
1996. Every entity owning less than 100 shares of the Company's common stock as
of the record date shall also receive one share of each corporation's common
stock.
An additional non-cash dividend was declared on March 21, 1996 in the form
of one share of common stock in Zahav, Inc. and Cyber Information, Inc. for
every 100 shares of the Company's common stock owned as of the record date April
23, 1996. Every entity owning less than 100 shares of the Company's common stock
as of the record date shall also receive one share of each corporation's common
stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
As used herein, the term "Company" refers to The Canton Industrial
Corporation and its subsidiaries and predecessors, unless the context indicates
otherwise. The Company is continuing to proactively search for ways to expand
its client base for consulting services and its real estate holdings in its
effort to become more profitable. During the 1995 fiscal year, the Company was
engaged by several new clients to perform consulting services. Further, numerous
real estate transactions were initiated, conducted or finalized in 1995, most
notably the purchase and continued development of 1120 acres of land in Oasis,
Nevada.
<PAGE>
Although it recorded a net loss for the fiscal year, the Company believes
that its overall financial condition improved in 1995. Under the direction of
prior management, the Company filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy
Court for the Central District of Illinois on February 22, 1988. The Company
exited from bankruptcy on November 7, 1994 pursuant to the Bankruptcy Court's
order of this same date. For more information on the bankruptcy proceedings, see
"Item 1 - Description of Business."
The Company implemented or improved several employee benefits, including a
401(k) plan, health insurance, and a profit sharing plan. Although the Company
intends on retaining and hopes to improve such benefits, the maintenance of
these is premised on the continued fiscal health of the Company, and no such
assurances can be given.
From 1991 to 1993, the Company, through a wholly owned subsidiary Canton
Tire Recycling ("CTR"), was involved in the recycling of used tires. Although
the operations of CTR ceased during the third quarter of 1993 because the
recycling process did not achieve the planned level of productivity and
profitability, the Company has not extinguished all liabilities stemming from
its ownership of CTR. In 1995, the Company paid approximately $132,000 to remove
a portion of the used tires located on the site formerly used by CTR. Currently,
the State of Illinois has concluded work believing that all used tires have been
removed from the site. The State has informed the Company that it may seek
recovery of costs incurred to remove the tires. For more information on the
State's involvement in this cleanup, see "Item 3 - Legal Proceedings." The
Company expects this issue to be completely resolved by the middle of 1996,
although no such assurances can be given. For more information on CTR, see "Item
1 - Description of Business."
The Cheriton, Virginia property is subject to a consent order in PEMSCO's
Chapter 11 Bankruptcy that governs PEMSCO's continued ownership of the property
and KMC Foods' secured position in the property. PEMSCO has until April 16, 1996
to pay an agreed amount ($550,000) to KMC in full satisfaction of KMC's secured
interest in the property. Such a payment would have a positive material impact
on the Company's short-term liquidity, revenue and income. In the event that
such payment is not received, KMC has the permission of the Bankruptcy Court to
proceed with foreclosure. The Agreement also provides that if PEMSCO retains the
property, it will be responsible for cleaning up the existing environmental
concerns on the property and indemnifying KMC from any liability for the costs
thereof. For more information on the Cheriton property, see "Item 2 -
Description of Property" and "Item 3 - Legal Proceedings."
The Company employs 56 people, including over 30 professionals with
expertise in law, accounting, finance and public relations to support the
Company's operations. The Company was engaged by several new clients to provide
consulting services in 1995 as well as 1994 and will seek further engagements
throughout 1996. The following comprise a summary of the types of consulting
services the Company performs for its clients: document preparation, capital
formation, financial analysis, debt settlement and general corporate problem
solving. Acceptable payments and the size of payments the Company charges for
its services vary with the volatility of the clients' securities, the amount and
nature of work involved, and the expenses related to the services being
rendered.
Consulting fees the Company accepts, in order of frequency, range from the
clients' equity, to cash to other assets. When equity is the form of payment,
the number of shares to be paid is tied to the price of the clients' equity,
when available. The typical value used to determine the number of shares to be
paid is 50% of the stock's price divided by the amount of the Company's fee
because resale of the equity the Company receives is restricted. The Company
accepts equivocal equity with the expectation that its services will assist its
appreciation, thus allowing the Company to be paid and make a return on its
fees.
The number of the Company's clients, the nature of services being rendered
and the type of compensation received from clients vary greatly. At a given
time, the Company may be actively providing consulting services to over 35
clients. Therefore, projecting the revenues that could be produced by the
Company's performance of these services is very difficult. The difficulty of
such projections are futher enhanced because Company receives a majority of its
compensation in the form of equity payments which cannot be readily resold,
thereby limiting the Company's cash flow and reducing its liquidity. The Company
estimates that it, or its subsidiaries, will be able to obtain at least two
additional clients per quarter for a term of no less than one year.
<PAGE>
The Company generates a substantial portion of its cash flows by
liquidating the non-cash assets received as fees for consulting services. As
most fees are paid in the form of equity, the Company's ability to generate cash
flows is somewhat tied to the price of its clients' equity. Therefore, material
fluctuations in the price of clients' equity may materially impact the
short-term and long-term liquidity of the Company.
During the fourth quarter of 1995, four of the Company's wholly owned
subsidiaries conducted private placement offerings of common stock pursuant to
Rule 504 of Regulation D as promulgated by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended ("Rule 504"). Each
subsidiary's business surrounded the ownership, management, lease and sale of
real estate. These offerings diluted the Company's ownership in all four
entities to 51%. The motivation behind these offerings was to allow each
subsidiary to raise funds sufficient for their partial financial independence.
The offering were successful from the perspective that all shares offered were
sold, although the underlying motive has not been achieved as the Company still,
to varying degrees, supports the ongoing operations of the four entities. The
Company has also been structuring Rule 504 offerings for its consulting service
clients.
During 1995, the Company continued selling restricted shares of its common
stock, par value $0.001 ("Common Stock"), to various investors at prices
discounted from prevailing market prices. This practice was utilized to meet
certain financial obligations and to fund portions of the Company's expansion
and improvements. The Company issued 1,594,741 restricted shares of its Common
Stock during 1995 in exchange for cash payments totaling $581,441. The Company
also issued 567,051 restricted shares of its Common Stock during 1995 in
exchange for services rendered to it by various entities. Although no such
assurances can be given, the Company seeks to halt the sale of its stock as a
means of meeting revenue shortfalls.
On August 7, 1995, the Company's board of directors approved a resolution
that authorized Option Agreements and resulting stock issuances, to five non
U.S. entities. The Option Agreements allow these entities to purchase shares of
the Company's common stock pursuant to Regulation S of the Securities Act of
1933, as amended. The quantity of shares included in the respective Options
ranged from 250,000 shares to 385,000 shares, with 1,765,000 total shares
included in the five Options. The exercise price of each option was set at $0.30
per share and they expired one year from the date of approval and was
exercisable in full or in part. Pursuant to these Option Agreements, the
following shares have been exercised to the following entities as of September
30, 1995: 100,001 shares issued to Lexington Sales Corporation, a corporation
organized under the laws of the Isle of Man, with headquarters on the Isle of
Man; 196,668 shares issued to East-West Trading Corporation, a corporation
organized under the laws of the British Virgin Islands, with headquarters in
Nevis, West Indies; 15,000 shares issued to World Financial Securities, a
corporation organized under the laws of the British Virgin Islands, with
headquarters in London, England; and, 98,334 shares issued to Karston
Electronics Ltd., a corporation organized under the laws of the British Virgin
Islands, with headquarters in Tortola, BVI.
On December 11, 1995, the Company's board of directors approved a
resolution that authorized 500,000 shares of the Company's restricted common
stock to Howard Bernstein in consideration of his loan to the Company in the
amount of $500,000.
On June 28, 1995, the Company entered into an agreement with Ms. Prenn Chow
Sau Har, a Hong Kong resident, whereby Ms. Chow purchased 250,000 shares of the
Company's common stock for $140,000 pursuant to an exemption provided by
Regulation S as promulgated by the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended. This capital-for-equity infusion
provided the Company with the funds needed to satisfy its obligations regarding
the clean-up of the Canton Plant. In further consideration for the infusion, the
Company guaranteed the value of the investment at an interest rate of 12% per
annum for a period of one year from the date of the transaction. Subsequently,
on August 4, 1995, the Company was required, by reason of the aforementioned
guarantee, to issue 144,634 additional shares to Ms. Chow to cover shortfalls
occasioned by a drop in the Company's stock price, the exchange conversion rate,
and the prepaid interest. This latter issuance fully discharged the Company's
obligations to Ms. Chow.
<PAGE>
A settlement with Ozora Corporation and Mark Hungerford was executed on
December 12, 1995. See "Item 3 Legal Proceedings" for more information on this
lawsuit. On December 12, 1995, the Company received the first installment of
$25,000, with the balance of $235,000 paid to the Company on February 13, 1996.
Real Estate Holdings
The Company manages its real estate holdings in-house and plans to fill
vacancies for the Company's property holdings in Salt Lake City, Utah. The
Company, as of December 31, 1995 had approximately 37% of its commercial space
vacant, generated approximately $36,000 in gross monthly rents, and operated at
a loss of approximately $5,000 per month. The Company has reduced its real
estate operating losses by approximately $2,000 per month since December 31,
1994. These real estate operations are continued despite the losses for two
reasons. First, the Company hopes to eliminate the losses by increasing the
rental income from the property. Second, these operations are pursued primarily
for appreciation purposes. Thus, while the Company seeks to minimize and reverse
its real estate operating losses, its long term goal is to generate a capital
gain upon disposition sufficient to offset any previous losses, although no such
assurances can be given.
The Company's primary reason for acquiring most of its real estate is for
potential appreciation. It had been anticipated that the Company's real estate
holdings in total would generate approximately $5,000 in profit per month by the
end of 1995 with a 10% vacancy rate. These results have not yet been achieved
because the Company has been unwilling to accept less than prevailing rates for
similar real estate.
The Company is continually searching for additional properties. The amount
the Company is willing to pay for a property is determined by management. The
criteria for purchasing properties is broad. Management's determination of
value, as well as the terms of financing, are critical factors in the Company's
decision to purchase properties. The Company generally searches for properties
that it believes are undervalued and can be financed by assuming an existing
mortgage along with the issuance of equity securities or a nominal amount of
cash as the down payment. This method of financing real estate purchases has
been utilized to preserve the Company's cash flows. The Company has been
successful in acquiring several properties using this method of financing.
Results of Operations
Revenues for 1995 were $2,049,068 compared to $2,371,960 during 1994, a
decrease of $322,892. This decrease was primarily due to a substantial decrease
in consulting revenues during the second quarter of 1995. During the second
quarter, management implemented cost saving measures to adjust to the loss in
revenue. These cost reducing measures included a temporary decrease in the
number of employees and a corresponding decrease in salary and wage costs during
the second and third quarters. As revenues again increased, additional employees
were hired to maintain the quality and level of work for the Company's clients.
The consulting revenues decreased in the second quarter of 1995 when the Company
was unable to begin rendering its consulting services for new clients added late
in the first quarter because the clients failed to provide the necessary
information to the Company in an expedient manner.
In addition, the company changed the method of marketing its services which
resulted in a substantial reduction in selling General and Administrative
expenses another cost saving charge implemented by management. General and
Administrative expenses in 1995 were $1,469,518 compared with $1,880,503 for
1994, a reduction of $410,985.
<PAGE>
These actions by management resulted in a decrease in the operating loss of
$256,795, from a loss of $629,107 in 1994 to a loss of $372,312 in 1995. Profit
before discontinued operations and other items improved by $327,516 from a loss
of $284,705 in 1994 to a profit of $42,811 in 1995 primarily due to managements
policies improving efficiency and reducing costs.
Four of the Company's subsidiaries issued stock during the fourth quarter
of 1995, diluting the company's ownership from 100% to 51%. This resulted in a
gain on issuance of $151,966 and minority interest in loss of $63,500.
During the second quarter of 1995 the Company foreclosed on a property in
Illinois that had been previously sold. This resulted in an extraordinary loss
of $562,406 charged against income in 1995, again on the sale of $752,467 had
been previously reported by the Company during 1994.
Capital resources and liquidity
The Company continued to suffer from a working capital deficiency. The
working capital deficit has increased to $834,294 as of December 31, 1995 from
$653,453 as of December 31, 1994. The increase is primarily due to several
factors: (1) an increase in deferred income of approximately $50,000 due to the
method of accounting for real estate sales on the Nevada property; (2) an
increase in real property taxes; and (3) the accrued liability for environmental
cleanup. Both items 2 & 3 above are a result of the foreclosure on the Canton,
Illinois property.
ITEM 7. FINANCIAL STATEMENTS
{INSERT FINANCIAL IN CONFORMITY WITH REGULATION S-B, ITEM 310(a)}
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheet December 31, 1995.................................F-3
Consolidated Statements of Operations December 31, 1995 and 1994.............F-5
Consolidated Statements of Shareholder's Equity December 31, 1995 and 1994...F-6
Consolidated Statements of Cash Flows December 31, 1995 and 1994.............F-7
Notes to Consolidated Financial Statements December 31, 1995 and 1994........F-8
Independent Auditors' Report on Other Information...........................F-24
Schedules
V Property, Plant and Equipment......................................F-25
VI Accumulated Depreciation of Property, Plant and Equipment..........F-26
F-1
<PAGE>
ANDERSEN ANDERSEN & STRONG, L. C. 941 East 3300 South, Suite 202
Certified Public Accountants and Business Consultants Salt Lake City, UT 84106
Member SEC Practice Section of the AICPA Telephone: (801)486-0096
Fax: (801)486-0098
E-Mail: K Anderson @msn.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
The Canton Industrial Corporation
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of The Canton
Industrial Corporation and Subsidiaries as of December 31, 1995 and the related
consolidated statements of operations, shareholder's equity, and cash flows for
the years ended December 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express and
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Canton
Industrial Corporation and Subsidiaries as of December 31, 1995, and the
consolidated results of their operations, shareholders' equity, and cash flows
for the years ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
/s/ Anderson, Anderson & Strong
Salt Lake City, Utah
April 14, 1996
A member of ACF International with affiliated offices worldwide
F-2
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995
ASSETS
CURRENT ASSETS
<S> <C>
Cash ...................................... $ 18,605
Receivable - brokerage account ............ 3,337
Accounts receivable - trade ............... 248,129
Accounts receivable - related parties ..... 200,017
Note receivable - current (Note 11) ....... 12,000
Inventories - cost ........................ 36,371
Prepaid expenses .......................... 36,677
----------
TOTAL CURRENT ASSETS ......................... 555,136
PROPERTY AND EQUIPMENT
Schedules V and VI ........................ 4,860,260
OTHER ASSETS
Investment - securities (Note 10) ......... 968,396
Mortgages receivable (Note 11) ............ 353,000
Notes receivable - net of current (Note 11) 653,027
Investments - other ....................... 244,321
Deposits .................................. 16,345
Trade and media credits ................... 223,885
----------
TOTAL OTHER ASSETS ........................... 2,458,974
----------
TOTAL ASSETS ................................. $7,874,370
==========
See notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
December 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C>
Notes payable (Note 5) ...................... $ 57,493
Current maturities of long-term debt (Note 5) 149,059
Accounts payable ............................ 328,751
Accounts payable - related parties .......... 17,413
Accrued liabilities (Note 13) ............... 160,000
Interest .................................. 19,330
Real estate taxes and assessments (Note 7) 317,751
Payroll and related taxes payable ......... 143,200
Deferred income ............................. 197,879
TOTAL CURRENT LIABILITIES ...................... 1,390,876
LONG-TERM LIABILITIES
Long-term debt, less current portion (Note 5) 2,764,757
------------
CONTINGENCIES (Note 13) ........................ --
MINORITY INTEREST .............................. 347,923
SHAREHOLDERS' EQUITY
Preferred stock par value $.001; 20,000,000
shares authorized; No shares issued ........ --
Common stock par value $.001; 200,000,000
shares authorized; 5,886,799 shares issued 5,887
Additional paid-in capital .................. 11,428,674
Accumulated deficit ......................... (8,063,747)
TOTAL SHAREHOLDERS' EQUITY ..................... 3,370,814
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..... $ 7,874,370
============
See notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, 1995 and 1994
1995 1994
----------- -----------
<S> <C> <C>
REVENUE ........................................................ $ 2,049,968 $ 2,371,960
COST OF REVENUE ................................................ 952,762 1,120,564
----------- -----------
GROSS PROFIT ................................................... 1,097,206 1,251,396
SELLING GENERAL AND ADMINISTRATIVE ............................. 1,469,518 1,880,503
----------- -----------
OPERATING LOSS ................................................. $ (372,312) $ (629,107)
----------- -----------
OTHER INCOME AND (EXPENSE):
Interest income ............................................. 86,565 133,842
Interest expense ............................................ (256,457) (142,321)
Other income ................................................ 217,420 102,995
Gain (loss) investment securities ........................... 73,425 (502,581)
Gain from sale of property - related parties (Note 8, Item 4) -- 752,467
Gain from issuance of shares by subsidiary .................. 151,966 --
Gain from disposal of subsidiary ............................ 70,544 --
Gain from sale of assets .................................... 71,660 --
----------- -----------
TOTAL OTHER INCOME ............................................. 415,123 344,402
----------- -----------
GAIN (LOSS) BEFORE DISCONTINUED
OPERATIONS AND OTHER ITEMS ................................... 42,811 (284,705)
DISCONTINUED OPERATIONS:
Gain from discontinued operations ........................... 23,912 374,081
----------- -----------
GAIN BEFORE INCOME TAXES,
EXTRAORDINARY ITEMS, AND MINORITY INTEREST .................... 66,723 89,376
PROVISION FOR INCOME TAXES .................................... -- --
----------- -----------
GAIN BEFORE EXTRAORDINARY ITEMS ................................ 66,723 89,376
AND MINORITY INTEREST:
Gain from extinguishment of debt ............................ 13,454 89,023
Loss on foreclosure (Note 16) ............................... (562,406) --
----------- -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST ..................... (482,229) 178,399
----------- -----------
MINORITY INTEREST IN LOSS ................................... 63,500 --
----------- -----------
NET INCOME (LOSS) .............................................. $ (418,729) $ 178,399
=========== ===========
INCOME (LOSS) PER COMMON SHARE
Gain (loss) before discontinued operations
and other items ........................................... $ .01 $ (.11)
Gain from discontinued operations ........................... .01 .14
Extraordinary items ......................................... (.13) .03
----------- -----------
Net income (loss) per weighted average
common share outstanding .................................. $ (.11) $ .06
=========== ===========
Weighted average number of common
shares outstanding (Note 2) ............................... 3,825,264 2,621,243
=========== ===========
See notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995 and 1994
Stock Total
Common Stock Paid-in Subscription Debenture Shareholders'
Shares Amount Capital Deficit Receivable Receivable Equity
---------- ---------- -------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1993 .............. 2,588,258 $ 2,588 $10,466,154 $(7,736,703)$(750,000) $ (250,000) $ 1,732,039
Common stock activity:
Issued for debt ..................... 17,824 18 5,035 -- -- -- 5,053
Issued for assets ................... 63,670 164 101,936 -- -- -- 102,100
Issued for services - related party . 260,402 260 186,293 -- -- -- 186,553
Issued for services ................. 454,844 455 451,520 -- -- -- 451,975
Issued for cash ..................... 697,917 698 426,463 -- -- -- 427,161
Adjust prior periods ................ 100,000 100 (100) -- -- -- --
Cancellations ....................... (92,750) (93) (242,677) -- -- -- (242,770)
Cancel debentures ................... (100,000) (100) -- -- -- 250,000 249,900
Cancel stock subscriptions .......... (1,257,301) (1,257) (975,504) -- 750,000 -- (226,761)
Subsidiary minority interest ............. -- -- (151,000) -- -- -- (151,000)
Deficit of subsidiary acquired ........... -- -- -- (86,714) -- -- (86,714)
Net income for year ...................... -- -- -- 178,399 -- -- 178,399
---------- ----------- ----------- ----------- ---------- ---------- ----------
BALANCES AT DECEMBER 31, 1994 .............. 2,832,864 $ 2,833 $10,268,12 $(7,645,018) -- -- $ 2,625,935
---------- ----------- ----------- ----------- ---------- ---------- ----------
Common Stock activity:
Issued for debt ..................... 241,743 242 82,073 -- -- -- 82,315
Issued for assets ................... 420,000 420 267,330 -- -- -- 267,750
Issued for services - related parties 407,000 407 148,045 -- -- -- 148,452
Issued for services ................. 390,451 390 83,260 -- -- -- 83,650
Issued for cash ..................... 1,594,741 1,595 579,846 -- -- -- 581,441
Net loss for year ........................ -- -- (418,729) -- -- -- (481,729)
---------- ----------- ----------- ----------- ---------- ---------- ----------
BALANCES AT DECEMBER 31, 1995 ............ 5,886,799 $ 887 $11,428,674 $(8,063,747) -- -- 3,307,814
========== =========== =========== =========== ========== ========== ==========
See notes to consolidated financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ................................... $ (418,729) $ 178,399
Adjustments to reconcile net income (loss)
to net cash provided
Gain from debt settlements ........................ (13,454) (89,023)
(Gain) loss from sale of investments .............. (73,425) 502,581
(Gain) from sales to related party (Note 9, Item 4) -- (752,467)
Permanent decline in investments .................. 94,295 --
(Gain) from sale of assets ........................ (71,660) --
(Gain) from sale of subsidiary .................... (70,544) --
(Gain) from issuance of shares of subsidiary ...... (151,966) --
(Gain) from discontinued operations ............... (23,912) --
Loss on foreclosure ............................... 562,406 --
Book value of assets abandoned .................... -- 79,009
Minority interest ................................. (63,500) --
Depreciation and Amortization ..................... 205,937 154,278
Services paid with common stock ................... 232,102 638,528
Common stock issued for assets and debt ........... 82,315 107,153
Decrease (increase) in assets:
Receivables ..................................... (301,967) 51,520
Inventories ..................................... (36,371) --
Prepaid expenses and other ...................... (63,747) 53,905
Investments - other ............................. (74,125) (151,121)
Increase (decrease) in liabilities:
Accounts and notes payable ...................... (8,807) (216,232)
Accrued liabilities ............................. 381,429 (389,314)
Bank overdrafts ................................. -- (33,802)
Deferred income ................................. 51,615 125,477
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ...... $ 237,892 $ 258,891
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .............................. (223,220) (821,806)
Proceeds from sales of investments ................ 258,901 518,837
Purchase of non-current security investments ...... (1,018,691) (276,551)
------------ ------------
NET CASH FLOWS (USED) IN INVESTING ACTIVITIES ......... $ (983,010) $ (579,520)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock for cash ..................... 981,441 427,161
Increase in long term debt ......................... 218,000 --
Reduction of long term debt ........................ (464,727) (83,699)
NET CASH PROVIDED BY FINANCING ACTIVITIES ............. $ 734,714 $ 343,462
------------ ------------
INCREASE (DECREASE) IN CASH ........................... $ (10,404) $ 22,833
CASH AT BEGINNING OF YEAR ............................. 29,009 6,176
------------ ------------
CASH AT END OF YEAR ................................... $ 18,605 $ 29,009
============ ============
See Note 3 for supplementary disclosures
See notes to consolidated financial statements.
F-7
</TABLE>
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 1: ORGANIZATION AND OPERATIONS
Organization
The Canton Industrial Corporation (the "Company") was incorporated in the State
of Ohio on July 10, 1984 as The Canton Corporation and adopted its present name
in May 1985. Effective May 3, 1993, the Company's domicile was changed to
Nevada.
Operations
The Company provides financial consulting services and invests in undervalued
property. The Company provides services and support functions to its clients
including advice relating to regulatory compliance, document preparation,
capital formation, financial analysis, promotional campaigns, debt settlement,
and general corporate problem solving . Part of the Company's business
operations include the acquisition, management, lease and sale of real estate
holding.
Reorganization
On February 22, 1988, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. On November 7, 1994, the
bankruptcy was discharged.
Basis of Financial Statement Presentation
The Company's financial statements have been presented on the basis that it is a
going concern which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
Company Plans
The Company was discharged from bankruptcy in 1994 and no longer has to allocate
time and resources in this area. Also, a number of unprofitable operations have
been discontinued. This will save time and resources which the Company is now
devoting to profitable activities.
The Company expects to generate sufficient cash flow to cover operating
expenses, to meet its obligations and to generate revenues for expansion as set
forth below:
1.The Company's primary source of revenue is through providing
consulting services. The Company is increasing its client base by
broadening the type and number of clients. The Company currently
targets public companies who are interested in the Company's services
and private entities seeking to raise capital or became a public
corporation. The Company has expanded its range of services to
include large individual estates, non-profit and religious
organizations. In order to acquire additional clients, the Company
has expanded its Acquisition Department, increased its marketing
efforts, and is constantly refining the its techniques for locating
new clients.
F-8
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 1: ORGANIZATION AND OPERATIONS (continued)
Company Plans (continued)
2.The Company is expanding its real estate holdings to include a wide
variety of commercial properties. The Company hopes to increase the
revenues generated from these properties by increasing the occupancy
of available rentable space and has engaged various companies and
individuals to help lease and manage the real estate it owns. Real
estate holdings are also available for sale at prices which will
provide a reasonable return to the Company. Indications are that the
commercial real estate market is continuing to improve and that there
is a good demand for commercial rental space.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies reflect current accounting practices and
conform to generally accepted accounting principles. The following policies
considered to be significant are:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of The
Canton Industrial Corporation and its subsidiaries as summarized in Note 4.
All significant intercompany accounts and transactions have been eliminated in
the consolidation.
Accounting Method
The accompanying financial statements have been prepared on the accrual method
using generally accepted accounting principles applicable to a going concern
which contemplates the realization of assets and the liquidation of liabilities
in the normal course of business. All assets are listed at historical cost.
Income Taxes
The Company reports income and losses for financial reporting and income tax
purposes on the accrual method of accounting in accordance with Financial
Accounting Standards ("FAS") No. 109 with the cumulative effects reflected in
the year ended December 31, 1993. FAS 109 requires deferred tax balances to be
adjusted to reflect the tax rates in effect when those amounts are expected to
become payable or refundable.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Depreciation
expense for 1995 and 1994 was $202,368 and $154,278, respectively. The cost of
assets sold or retired and the related amounts of accumulated depreciation are
removed from the accounts in the year of disposal. Any resulting gain or loss is
reflected in current operations.
Expenditures for maintenance and repairs are expended as incurred; additions and
improvements are capitalized.
Sales of Undeveloped Land
The Company uses the deposit method for reporting sales of certain undeveloped
land. Under this method the effective date of sale is deferred until substantial
cash is collected. Until that time all cash received is accounted for as a
deposit.
F-9
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment Securities
Marketable equity securities are stated at market value in accordance with
financial accounting standard (FAS 115). Valuation of other security investments
is based on acquisition costs. Markdowns are made to reflect significant
impairment in values. During 1995, a markdown was recorded of $94,295.
Common Shares and Income (Loss) Per Common Share
All references to common shares are reflected as adjusted for the 1 for 10
reverse stock split approved on August 2, 1994. Income (loss) per common share
is computed using the weighted average number of common shares outstanding
(3,825,264 shares in 1995 and 2,621,243 shares in 1994).
Income or Loss Per Share
Income or loss per share of common stock is computed based on the weighted
average number of common shares outstanding during the periods shown. The
Company had common stock equivalents (CSE's) outstanding at December 31, 1995
and 1994 in the form of stock purchase options. The options are held by present
and former employees. The inclusion of the outstanding options would not affect
the income or loss per share in 1995 or 1994 and therefore such options have not
been included in the weighted average number of common shares. If all
outstanding options were exercised, the total proceeds would be approximately
$464,000. The Company's outstanding common stock purchase options at December
31, 1995 are as summarized as follows:
Expiration Exercise No. of Shares
Issue Date Date Price Subject to Options
------------- -------- -------- -------------------
10/21/93 10/30/98 $4.44 98,472
09/08/93 09/30/98 $4.44 6,000
Total 104,472
Issuance of Common Stock
The Company frequently issues shares of its common stock to acquire assets,
retire debt and pay for services. When stock is issued for services, the value
of the stock and related services is determined by the Board of Directors. In
the case of settling debt, the market value of the stock, the type and age of
the debt and any other related factors are considered. In the case of assets
acquired, the value is negotiated based on a combination of factors including,
but not limited to:
The significance of the assets to the Company; The
liquidity of the assets; The trading price and volume
of the assets (if a security), etc.
Final approval of the basis for issuance of capital stock is made by the Board
of Directors.
F-10
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 3: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
1. Cash paid for interest was $256,457 in 1994 and $143,348 in 1994.
2. Common stock was issued for the following purposes:
<TABLE>
<CAPTION>
1995
<S> <C>
Shares Amounts
241,743 Issued for debt .................... $ 82,315
420,000 Issued for other assets ............ 267,750
407,000 Issued for services - related party 148,452
390,451 Issued for services ................ 83,650
- - --------- ---------
1,459,194 $ 582,167
========= =========
1994
Shares Amounts
17,824 Issued for debt .................... $ 5,053
75,000 Issued for securities .............. 7,500
88,670 Issued for other assets ............ 94,600
260,402 Issued for services - related party 186,553
454,844 Issued for services ................ 451,975
- - --------- ---------
896,740 $ 745,681
========= =========
</TABLE>
During 1995, the Company incurred mortgage debt of $1,200,000 in connection with
a land acquisition.
During 1994, the Company assumed mortgages of $827,840 related to various
properties.
F-11
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 4: SUBSIDIARIES
Canton Financial Services Corporation
Canton Financial Services Corporation, a Utah corporation, ("CFS"), was formed
by the Company on June 8, 1994. CFS, a wholly-owned subsidiary of the Company,
provides a wide range of consulting services, primarily for public companies.
Canton Personnel, Inc.
Canton Personnel, Inc., a Utah corporation ("CPI), was incorporated by the
Company on January 21, 1994 for the purpose of managing the various personnel
and payroll operations of the Company and its subsidiaries. CPI, a wholly-owned
subsidiary, does not currently have any tangible assets.
Canton Properties I
Canton Properties I, Inc., a Utah corporation ("CPII"), was incorporated by the
Company on May 4, 1994 for the purpose of acquiring, owning and managing the
property it acquires. On June 21, 1994, CPII, a wholly-owned subsidiary of the
Company, purchased a two-thirds undivided interest in the land located at 238
West 400 South, Salt Lake City, Utah. On May 26, 1995, CPII sold its interest in
the property and recorded a gain on the sale of assets of $71,660.
Canton Tire Recycling of West Virginia
Canton Tire Recycling of West Virginia, Inc. ("CTRWV"), was incorporated by the
Company on February 25, 1993 for the purpose of acquiring, owning and managing
the Parkersburg Terminal. CTRWV, a wholly-owned subsidiary of the Company,
purchased the Parkersburg Terminal on May 15, 1993.
Canton's Wild Horse Ranch, Inc.
Canton's Wild Horse Ranch, an Arizona corporation ("CWHR"), was incorporated by
the Company on November 10, 1993 for the purpose of leasing, acquiring, owning
and managing property related to the Wild Horse Ranch. CWHR, a wholly-owned
subsidiary of the Company, has ceased operations due to a lack of profitability.
Canton's Wild Horse Ranch, II
Canton's Wild Horse Ranch, II, an Arizona corporation ("CWHRII"), was
incorporated by the Company on February 3, 1994, for the purpose of expanding
Canton's Wild Horse Ranch. On February 16, 1994 CWHRII, a wholly-owned
subsidiary of the Company, acquired ten acres of raw, unimproved land adjacent
to the Ranch suitable for expansion of the Ranch.
West Jordan Real Estate Holdings, Inc.
West Jordan Real Estate Holding, Inc. ("WJREH"), a Utah corporation, was
incorporated by the Company on June 7, 1994 for the purpose of acquiring, owning
and managing a specific property. On August 31, 1995, WJREH, a wholly-owned
subsidiary of the Company, entered into a lease with an option to purchase a
retail shopping plaza in Salt Lake City, Utah.
Oasis International, Inc.
Oasis International, Inc. ("Oasis"), a Nevada corporation, was incorporated by
the Company on November 20, 1995 for the purpose of acquiring, owning and
managing a specific property. On December 27, 1995, Oasis, a wholly-owned
subsidiary of the Company, purchased land in Elko County, Nevada.
F-12
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 4: SUBSIDIARIES (CONTINUED)
Oasis International Hotel & Casino, Inc.
Oasis International Hotel & Casino, Inc. ("OIHC"), a Nevada corporation, was
incorporated by the Company on November 20, 1995 for the purpose of acquiring,
owning and managing a specific property. On December 27, OIHC, a wholly-owned
subsidiary of the Company, purchased land in Elko County, Nevada.
Oasis Property Management Services, Inc.
Oasis Property Management Services, Inc. ("OPMS"), a Nevada corporation, was
incorporated by the Company on November 20, 1995 for the purpose of operating
the facilities in Elko County, Nevada. On December 27, 1995, OPMS, a
wholly-owned subsidiary of the Company, commenced operation of the facilities in
Elko County, Nevada.
KMC Foods, Incorporated
KMC Foods, Incorporated, a Virginia corporation ("KMC"), was purchased by the
Company in 1993. The Company acquired KMC and the mortgage on the former KMC
food plant and warehouse ("KMC Plant") in exchange for the issuance of the
Company's restricted common stock. The KMC Plant, located on approximately 65
acres in Cheriton, Virginia, has railroad spur access with the Penn Central
Railroad and structures for the manufacture, storage and distribution of food
products on property zoned for industrial use. The KMC Plant has been vacant and
used by the Company since its acquisition. The Company is seeking buyers or
tenants for the building. KMC Foods, Inc. was incorporated on April 12, 1988
under the laws of Virginia.
Canton Industrial Properties Management Corporation of Salt Lake City
Canton Industrial Properties Management, a Utah corporation ("CIPMC"), was
incorporated by the Company on October 30, 1994 for the purpose of acquiring,
owning and managing property. On October 9, 1993, CIPMC purchased an office
building at 202 West 400 South in downtown Salt Lake City. The property is an
18,000 sq. ft. office building with two stories of interior rentable space and
above ground level parking. CIPMC was a wholly-owned subsidiary of the Company
until the fourth quarter of 1995 when the subsidiary sold additional shares in a
private placement offering pursuant to a Regulation D, 504 Offering and diluted
the Company's ownership to fifty one percent (51%).
Canton Industrial Corporation of Salt Lake City
Canton Industrial Corporation of Salt Lake City, a Utah corporation ("CICSLC"),
was incorporated by the Company on September 29, 1993 for the purpose of
acquiring, owning and managing the Plandome Building. On September 30, 1993,
CICSLC acquired the Plandome Building located at 69-75 East 400 South, Salt Lake
City, Utah. CICSLC was a wholly-owned subsidiary of the Company until the fourth
quarter of 1995 when the subsidiary sold additional shares in a private
placement offering pursuant to a Regulation D, 504 Offering and diluted the
Company's ownership to fifty one percent (51%) .
Canton Commercial Carpet Corporation
Canton Commercial Carpet Corporation, a Utah corporation ("CCCC"), was
incorporated by the Company on January 21, 1994 for the purposes of distributing
and wholesaling commercial carpet. On May 23, 1994, CCCC entered into a lease
with an option to purchase real property located at 268 West 400 South in Salt
Lake City, Utah. On February 1, 1995, the Company relocated its corporate
headquarters to this Building. CCCC was a wholly-owned subsidiary of the Company
until the fourth quarter of 1995 when the subsidiary sold additional shares in a
private placement offering pursuant to a Regulation D, 504 Offering and diluted
the Company's ownership to fifty one percent (51%) .
F-13
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 4: SUBSIDIARIES (CONTINUED)
TAC, Inc.
TAC, Inc., a Utah corporation ("TAC"), was formed by Logos International, Inc.
("Logos") an affiliate of the Company, on August 27, 1992. TAC was acquired from
Logos on December 30, 1994 pursuant to a Settlement Agreement (See Note 9).
TAC's operations consisted of asset recovery, pawn and loan, automotive, and
indoor storage businesses. These businesses have been discontinued due to lack
of profitability. TAC has a lease on a portion of a warehouse facility with an
option to purchase the entire facility consisting of approximately 60,000 square
ft. located in West Jordan, Utah. TAC was a wholly-owned subsidiary of the
Company until the fourth quarter of 1995 when the subsidiary sold additional
shares in a private placement offering pursuant to a Regulation D, 504 Offering
and diluted the Company's ownership to fifty one percent (51%) .
Wasatch Capital Corporation
Wasatch Capital Corporation, a Utah corporation ("Wasatch") was incorporated on
June 10, 1991. The Company acquired a 20% interest in Wasatch on December 30,
1994 in exchange for the Company advancing monies to exercise an option to
purchase real estate located at 55-57, 61-65 West 100 South, Salt Lake City,
Utah (the "Bennett Building"). Wasatch is consolidated because the Company,
through its officers, directors and affiliates, exercises significant control
over the decisions and operations of Wasatch. The Company's investment is
secured by the Bennett Building and Wasatch is not allowed to dilute the
Company's interest in Wasatch or lease, sell, exchange, or encumber the property
in any way unless the Company approves
42 Exchange Place - Disposition
42 Exchange Place, Inc., a Utah corporation, was incorporated by the Company on
April 21, 1994, for the purpose of acquiring, owning and managing a specific
property. On September 28, 1994, 42 Exchange Place, a wholly owned subsidiary of
the Company, purchased property located at 42 Exchange Place, Salt Lake City,
Utah. On August 4, 1995, the Company sold this corporation and realized a gain
of $70,544.
Canton Tire Recycling, Inc. - Disposition
On September 30, 1994, the Company transferred ownership of Canton Tire
Recycling Inc., ("CTR"), an Illinois company (formerly, a wholly owned
subsidiary of the Company) to Sabina Services, Inc., a Utah corporation. Sabina
is owned by a former officer of CTR. The transfer resulted in a gain from
disposition of a subsidiary of $329,182. Although Sabina assumed most of the
liabilities, the Company could still be liable for some payroll taxes.
Therefore, $51,186 is still included in accrued payroll taxes of the Company.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
F-14
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995:
1995
-----------
<S> <C>
Mortgage payable, BP&G (10%), monthly payments
of $7,929, due 11/99 ............................................. $ 563,195
Mortgage payable, Rich Bennion, (9%) monthly
payments of $4,780, due 10/99 .................................... 565,571
Mortgage payable, Rick Lucas Keogh (9%)
monthly payments of $1,575, due 11/03 ............................ 167,825
Mortgage payable, Mark Cummings (9%)
monthly payments of $1,350, due 11/03 ............................ 140,000
Mortgage payable, Title Security Agency (8%),
monthly payments of $825, due 2/99 ............................... 59,224
Note payable, Paul R. Rubey (5%), due 10/98 ...................... 100,000
Note payable, Squires Construction (9.75%),
monthly payments of $5,598, due 2/95 ............................. 10,244
Mortgage payable, Solar Logos Foundation, (7%), quarterly
payments of interest only until 1/99, due 7/04 .................. 900,000
Mortgage payable, Howard Bernstein, (18%), monthly payments
of interest only, due 12/97 ..................................... 300,000
Note payable to The Capital Company, (18%), monthly payments
of interest only until 2/96, $5,000 monthly thereafter, due 4/97
60,500 Note payable to The Capital Company, (18%), monthly payments
of interest only until 4/96, $5,000 monthly thereafter, due 3/97. 57,500
Note payable(18%), interest only payments,
due 9/96 ........................................................ 47,250
Total ............................................................. 2,971,309
Current portion ................................................... 206,552
----------
Long-term portion ................................................. $2,764,757
==========
</TABLE>
Scheduled principal reductions are as follows:
December 31, 1997 206,552
December 31, 1998 395,880
December 31, 1999 172,880
December 31, 1999 1,088,932
Thereafter 1,107,137
---------------
$ 2,971,309
F-15
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 6: FEDERAL INCOME TAXES
At December 31, 1995, the Company had net operating loss carryovers of
approximately $3,714,000. The net operating loss carryovers expires as follows:
Expiration
Loss Year Date Amount
------------- ------------- -----------
12/31/91 12/31/2006 $ 1,248,000
12/31/92 12/31/2007 229,000
12/31/93 12/31/2008 1,616,000
12/31/94 12/31/2009 71,000
12/31/95 12/31/2010 550,000
------------
$ 3,714,000
============
At December 31, 1995, the Company has a capital loss carryover of approximately
$1,509,000 which expires December 31, 1998.
No benefit resulting from loss carry forwards has been reported in the financial
statements because the Company believes there is at least a fifty percent (50%)
chance that the carry forwards will expire unused. Accordingly, the tax benefit
of the loss carry forward has been offset by a valuation allowance of the same
amount. The expected tax benefit resulting from applying federal statutory tax
rate to the pretax loss differs from amounts reported in the financial
statements because of the increase in valuation allowance. Certain provisions of
the tax law may limit the net operating loss and capital loss carryovers in the
event of a significant change in ownership of the Company.
NOTE 7: REAL ESTATE TAXES PAYABLE
The Company owes real estate taxes and assessments of approximately $317,751
(including penalties and interest) as of December 31, 1995.
Unpaid property taxes consist of the following:
Canton Plant - Canton, Illinois $ 227,309
202 West 400 South Property - Salt Lake City, Utah 5,737
Pima County Property - Tuscon, Arizona 3,554
Plandome Building - Salt Lake City, Utah 71,450
268 West 400 South Property - Salt Lake City, Utah 6,843
Wallace / Bennett Building - Salt Lake City, Utah 1,399
Parkersburg Terminal - Parkersburg, West Virginia 1,459
---------------------
$ 317,751
=====================
NOTE 8: DEBENTURES RECEIVABLE
During the quarter ended September 30, 1993, the Company sold debentures with a
cost of $2,000,000 for 4,000,000 shares of Logos stock and a note receivable
from Logos in the amount of $1,000,000. This transaction resulted in a loss of
$937,500.
The remaining debentures receivable were canceled during 1994.
F-16
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 9: RELATED PARTY TRANSACTIONS
1. A-Z Professional Consultants, Inc.
During the year ended December 31, 1994, A-Z Professional Consultants, Inc.
("A-Z"), a beneficial owner of more than 5% of the Company's common stock,
advanced approximately $479,000 for operating expenses of the Company. The
company repaid approximately $410,000 to A-Z for such advances.
On January 24, 1994, the Company entered into a Debt Conversion Agreement
with A-Z. The Debt Conversion Agreement settled a loan under which $517,950
was originally loaned to the Company by Abbot Products, Inc. ("Abbot"), a
former affiliate of the Company. A-Z purchased the loan from Abbot and
agreed to accept 59,003 shares of the Company's restricted common stock in
exchange for cancellation of the remaining balance of the loan, equal to
$182,909. The Company's stock given to A-Z under the agreement was
calculated at 25% of the market bid price on the date of the agreement.
Since 1992, A-Z has had agreements with the Company to provide consulting
services, office space, supplies and equipment.
Upon expiration of the prior Amended Management & Consulting Contract, the
Company entered into a new one year Consulting Agreement, dated June 1,
1994 but effective May 7, 1994. Under the Consulting Agreement, the Company
must pay A-Z $8,000 or 20,000 shares of the Company's restricted common
stock each month. Instead of paying cash or issuing stock for services
rendered through August 6, 1994, the Company and A-Z agreed that the
Company would assign its interest in a note made by TAC and transfer carpet
credits to A-Z. The Company's interest in the note and the credits were
valued at $15,424 and $8,810 respectively. On September 30, 1994, A-Z and
the Company terminated the Consulting Agreement. The Company agreed to pay
A-Z for consulting fees earned and expenses incurred through the
termination date and issued 80,000 shares of the Company's common stock in
full settlement. On August 30, 1995 the Company and A-Z entered into a one
year Consulting Agreement whereby the Company agreed to again retain A-Z as
one of its primary consultants.
On December 22, 1995, the Company entered into a Stock Option
Agreement with A-Z. Pursuant to the agreement, the Company granted options
giving the right to purchase a quantity of shares of the Company's common stock
equivalent to 26% of the issued and outstanding shares on the exercise date,
with an established exercise price of $0.59 per share.
2. Logos International, Inc.
1994
On September 22, 1994, Logos International, Inc. ("Logos") entered into a
Debt Settlement Agreement with the Company. Logos was indebted to the
Company $186,382 for cash advances and services rendered to Logos. The
Company accepted assets of equal value in settlement. Those assets included
paintings and stock.
On September 26, 1994, Canton Financial Services Corporation ("CFS")
assumed $100,000 of debt in the form of two promissory notes owed by Logos
to two individuals. In exchange for the assumption of such debt, CFS
accepted stock owned by Logos in four entities.
F-17
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 9: RELATED PARTY TRANSACTIONS (continued)
3. Richard Surber
On September 30, 1994, the Company retained Investment Sanctuary
Corporation, a Utah corporation ("ISC") owned 100% by Richard Surber ("Mr.
Surber"), to provide consulting services. The agreement calls for the
Company to pay ISC $20,000 per month effective January 1, 1995, either in
cash or shares of the Company's restricted common stock valued at one-half
of the average between the low bid and ask price to be paid on quarterly
basis. On May 4, 1995 the Company issued 167,000 shares of its common stock
under the Company's 1994 Stock Option Plan as payment under the agreement.
Mr. Surber entered into several Consulting Agreements to provide various
consulting services to clients, with the assistance of the Company's
consultants and certain employees. Payments were made in shares of the
clients' stock, which were later sold providing income to the Company in
the amount of $134,500.
Mr. Surber entered into a Consulting Agreement with Belmac Corporation on
September 1, 1994 to provide consulting services, with the assistance of
the Company's consultants and certain employees. Belmac canceled the
agreement after payment for initial services was made in 218,182 shares of
Belmac's common stock. The shares were liquidated prior to December 31,
1994.
On December 22, 1995, the Company entered into a Stock Option
Agreement with ISC. Pursuant to the agreement, the Company granted options
giving the right to purchase a quantity of shares of the Company's common stock
equivalent to 25% of the issued and outstanding shares on the exercise date,
with an established exercise price of $0.59 per share.
On June 16, 1994, CFS entered into a Consulting Agreement with Applied
Technology, Inc. ("APTC"). At that time, Mr. Surber was the President and a
Director of APTC. Certain disputes later arose among the Company, CFS,
Richard Surber and APTC and certain other parties related to APTC. On
December 16, 1994, the Company, CFS, Richard Surber and APTC and certain
other parties entered into a Settlement Agreement. The Settlement Agreement
canceled the Consulting Agreement, thereby reducing the amount of proceeds
CFS would have received. CFS received fees earned through November, 1994
totaling approximately $317,000 in cash. Richard Surber received 266,667
shares of APTC's shares of restricted stock as part of the settlement and
resigned from all positions with APTC. The Settlement Agreement was a
mutual release from all claims that arose prior to the date of the
Settlement Agreement.
4. Thistle Properties, Inc. - Foreclosure on Canton Property
On August 23, 1994, but effective June 20, 1994, the company entered into a
Real Estate Sales Agreement ("RESA") with Thistle Properties, Inc.
("Thistle"). On the effective date of both the RESA and an amended RESA,
Richard Surber was an executive officer of Thistle's parent company, ATC
II, Inc., although at the time the agreements were actually executed, Mr.
Surber was not an officer or director of ATC II, Inc. and did not have any
authority to approve or disapprove any transactions being contemplated by
ATC II, Inc. or any of its subsidiaries.
On May 4, 1995 the Company served Thistle with a Notice of Default
of the Real Estate Lien Note entered into pursuant to the amended RESA. The
Company subsequently executed a Mutual Release with ATC II and Thistle effective
May 12, 1995. The net effect of the Mutual Release is that Thistle, which holds
title to the Canton Plant, is now a wholly-owned subsidiary of the Company. This
resulted in a loss of $562,406, a gain on the sale of $752,467 had been
previously recorded by the Company during the third quarter of 1994.
F-18
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 10: INVESTMENT SECURITIES
Company Shares Amount
---------------- ---------- ------------
NobelTek Products, Inc. 2,500,000 1,000
ATC II 2,364,223 26,000
Air Vegas 325,214 32,521
Alaska Glacier 190 1,000
Applied Technology 40,500 49,800
Banyan Mgmt 2,000 347
Banyan Mgmt 2,000 108
Basic Natural Resources 600,000 1,000
BRIA Communications 1,614,721 188,519
Global 86,900 1,000
Hull 1,000,000 1,000
Juniper 23,000 1,610
Logos (nka OMAP) 149,821 21,656
Novamed 95,295 1,000
Oasis Hotel & Casino-I 914,050 85,950
Oasis Hotel & Casino-II 914,050 85,950
Porton 180,000 9,000
Sterling AKG 200 1,000
Tianrong 1,007,159 454,245
Topguard 150,000 1,000
United Entertainment 40,500 1,000
Vu Data 4,000 3,690
-----------
$ 968,396
===========
Marketable equity securities are stated at market value in accordance with
financial accounting standard (FAS 115). Valuation of other security investments
is based on acquisition costs. Markdowns are made to reflect significant
impairment in values. During 1995, a markdown was recorded of $94,295.
F-19
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 11: MORTGAGES AND NOTES RECEIVABLE
PEMSCO
Through the Company's acquisition of KMC Foods, Inc. on June 4, 1993, the
Company acquired a mortgage, payable on demand, in the amount of $353,000
(including accrued interest) and an unsecured note, payable on demand, in the
amount of $122,000 from Potomac Engineering and Management Systems Company, Inc.
("PEMSCO") related to real property in Cheriton, Virginia. In March, 1995,
demand was made for payment of the notes. The Company has not taken title to
this property. Property taxes of $3,707 are unpaid by PEMSCO.
Ozora Corporation
On August 16, 1993, the Company received a promissory note (due November 17,
1993) in the amount of $100,000 from Ozora Corporation, secured by 135,448
shares of Transcisco Industries stock. During 1994, Ozora sold a portion of the
stock and the proceeds were applied to interest due. A suit has been filed to
recover the $100,000 due under the promissory note or the balance of 99,800
shares of Transcisco Industries stock.
Delmar Janovec
On September 30, 1994, the Company received a non-recourse secured promissory
note in the amount of $1,248,046 from Delmar Janovec, secured by shares of KLH
Engineering Group, Inc. stock owned personally by Delmar Janovec. Due to the
non-recourse nature of the note, it was valued on the books at $512,077, the
value of the shares securing the note (25% of the market price of the stock on
September 30, 1994). A portion of the note has been assigned to pay off existing
debt in the amount of $41,250 leaving a balance on the note receivable of
$483,027.
The above receivables are included in the financial statements as follows:
Mortgages receivable:
PEMSCO $ 353,000
$ 353,000
Notes receivable:
PEMSCO $ 122,000
Associated Technologies 60,000
Delmar Janovec 483,027
--------------
$ 665,027
F-20
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 12: MORTGAGES AND NOTES RECEIVABLE
A stock subscription in the amount of $375,000 for 9,836,238 shares was canceled
pursuant to a Settlement Agreement between Metallurgical Industries and the
Company on December 16, 1994.
A stock subscription in the amount of $375,000 for 750,000 shares was also
canceled pursuant to a new agreement with Topguard (U.K.) dated June 16, 1994.
The original Acquisition Agreement was canceled due to the Company's new
philosophy of not acquiring operating companies.
NOTE 13: CONTINGENT LIABILITIES
1. Canton Property - environmental cleanup
A legal action was filed in September, 1993 against the Company seeking the
cleanup of tires and toxic paint drums at the plant in Illinois. This
action seeks the cleanup of tires and toxic paint drums at the Canton,
Illinois Plant. (A previous lawsuit brought against the Company by Coleman
Chemical, Inc. was for the cost of removing the toxic drums located at the
Plant.) An Interim Order for the cleanup of the property was entered and
approved by the court on March 8, 1994. Pursuant to the Interim Order, the
sum of $140,000 was to have been deposited in an escrow account by May 15,
1994 to provide a fund to cleanup the tires. The cleanup fund was to be
established in the State of Illinois and the funds are subject to Court
approval prior to being withdrawn. Cleanup must be completed no later than
December 31, 1995. If the Interim Order is not complied with, the Court may
impose penalties up to $50,000 for the occurrence plus $10,000 per day from
the date of the violation. The Company has not deposited the required
funds, but has been removing tires on an on-going basis (at a rate of
approximately 7,000 tires a week) in conjunction with Thistle Properties,
Inc. ("Thistle"), a purchaser of the property. Upon the sale of the Plant
to Thistle, it assumed all liability relating to the cleanup and will bear
all costs. The Company will remain liable for all environmental problems in
the event Thistle is unable to resolve them.
F-21
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 13: CONTINGENT LIABILITIES (continued)
2. Parkersburg Terminal - environmental investigation
The Parkersburg Terminal is subject to an investigation by the West
Virginia Division of Environmental Protection and has received a Notice of
Violation regarding storage tanks and certain alleged stains and
hydrocarbon contamination at the site. The Notice of Violation requires
that certain tests be performed. The Company has retained an environmental
engineering firm regarding the scope of testing required. Currently it is
estimated that the testing will cost about $8,000. The cost of further
remedial action will depend on the outcome of the tests. The potential
liability will remain uncertain until the testing is completed.
3. Xeta Corporation
Xeta is seeking recovery of funds alleged to have been improperly
transferred to the Company by ATC II, Inc. ("ATC") The amount sought by
Xeta is $116,000, an amount equal to that transferred by ATC to the Company
for consulting services and other expenses incurred for the benefit of ATC.
The Company believes that it provided bona fide services to ATC and intends
to contest the case vigorously.
4. Cheriton Virginia Property - Environmental Problem
KMC Foods, Inc. holds a promissory note secured by real property in the
city of Cheriton, Virginia. The Virginia State Water Control Board has
notified KMC that there was a leaking underground storage tank on the
property and that there may be other related contamination problems. A full
evaluation of the extent of the problem and the related costs of cleanup
has not been produced by the current title holder to the property. A
written demand for payment of the note secured by the property has been
served upon the title holder. Discussions are continuing with regard to
settlement of the note and the issues raised by the state of Virginia.
5. NICA vs. The Canton Industrial Corporation
A suit was filed against the Company in California on December 30, 1994.
NICA is seeking to recover damages of approximately $20,000 related to a
contract with another party. The Company had denied all liability and will
vigorously defend itself against the claims asserted in the lawsuit.
Management believes such suit to be groundless.
NOTE 14: LEASE COMMITMENTS
The Company is obligated under three operating leases of approximately $15,460
per month on three buildings it rents. One lease is for ten years expiring May,
2004, the second is for 42 months, expiring July, 1996, and the third is for 3
years expiring August, 1998. During 1995, $140,540 was paid for rent which is
included in the statements of operations under the caption General and
Administrative expenses.
Scheduled rent payments are as follows:
December 31, 1996 $ 154,343
December 31, 1997 123,143
December 31, 1998 100,492
December 31, 1999 55,192
December 31, 2000 55,192
Thereafter 183,960
$ 672,322
The Company has treated the leases as operating leases. The Company does have an
option to purchase all three buildings.
F-22
<PAGE>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995
NOTE 15: EMPLOYEE STOCK OPTION PLAN
During 1995, the Company established a new stock option plan for its employees
and consultants. Under the plan, up to 1,000,000 shares can be issued. In 1995,
no shares were issued under the plan and no options were granted.
During 1994, the Company established a new stock option plan for its employees
and consultants. Under the plan, up to 500,000 shares can be issued. In 1994,
203,584 shares were issued under the plan. In 1995, the Company issued the
balance of the shares under the plan.
NOTE 16: LOSS ON FORECLOSURE
On August 23, 1994, but effective June 20, 1994, the company entered into a Real
Estate Sales Agreement ("RESA") with Thistle Properties, Inc. ("Thistle"). On
the effective date of both the RESA and an amended RESA, Richard Surber was an
executive officer of Thistle's parent company, ATC II, Inc., although at the
time the agreements were actually executed, Mr. Surber was not an officer or
director of ATC II, Inc. and did not have any authority to approve or disapprove
any transactions being contemplated by ATC II, Inc. or any of its subsidiaries.
On May 4, 1995 the Company served Thistle with a Notice of Default of the Real
Estate Lien Note entered into pursuant to the amended RESA. The Company
subsequently executed a Mutual Release with ATC II and Thistle effective May 12,
1995. The net effect of the Mutual Release is that Thistle, which holds title to
the Canton Plant, is now a wholly-owned subsidiary of the Company. This resulted
in a loss of $562,406, a gain on the sale of $752,467 had been previously
recorded by the Company during the third quarter of 1994.
F-23
<PAGE>
ANDERSEN ANDERSEN & STRONG, L. C. 941 East 3300 South, Suite 202
Certified Public Accountants and Business Consultants Salt Lake City, UT 84106
Member SEC Practice Section of the AICPA Telephone: (801)486-0096
Fax: (801)486-0098
E-Mail: K Anderson @msn.com
Board of Directors and Shareholders
The Canton Industrial Corporation
Salt Lake City, Utah
Our examinations of the basic financial statements presented in the preceding
section of this report were made primarily to from an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of The Canton Industrial Corporation and Subsidiaries, the
results of their operations or cash flows in conformity with generally accepted
accounting principles. The following information consisting of Schedule V and
Schedule VI is included to comply with reporting requirements of the Securities
and Exchange Commission. Such data was subjected to the audit procedures applied
in the examination of the basis financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Andersen Andersen & Strong
Salt Lake City, Utah
April 14, 1996
F-24
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance at Balance
Beginning Additions at end
of Period at Cost Retirement of Period
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Land ....................................... $ 117,500 $ 542,590 $ 42,900 $ 617,190
Leasehold improvements ..................... - 0 - 26,698 - 0 - 26,698
Building and Structures .................... 2,034,385 588,541 389,525 2,233,401
Machinery and Equipment .................... 629,439 - 0 - 129,439 500,000
Furniture and Fixtures ..................... 3,783 90,175 172 93,786
Trucks and Trailers ........................ 13,975 - 0 - 13,975 - 0 -
---------- ---------- ---------- ----------
$2,799,082 $1,248,004 $ 576,011 $3,471,075
========== ========== ========== ==========
Year ended December 31, 1995:
Land ....................................... $ 617,190 $1,734,150 $ 104,840 $2,246,500
Leasehold improvements ..................... 26,698 - 0 - - 0 - 26,698
Building and Structures .................... 2,233,401 399,078 114,155 2,518,324
Machinery and Equipment .................... 500,000 98,374 - 0 - 598,374
Furniture and Fixtures ..................... 93,786 26,728 2,401 118,113
---------- ---------- ---------- ----------
$3,471,075 $2,258,330 $ 221,396 $5,508,009
========== ========== ========== ==========
</TABLE>
F-25
<PAGE>
<TABLE>
<CAPTION>
THE CANTON INDUSTRIAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
Balance at Balance
Beginning Additions at end
of Period at Cost Retirement of Period
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Land ....................................... $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements ..................... - 0 - 3,949 - 0 - 3,949
Building and Structures .................... 208,065 85,470 142,592 150,943
Machinery and Equipment .................... 67,355 57,498 11,103 113,750
Furniture and Fixtures ..................... 121 9,626 92 9,655
Trucks and Trailers ........................ - 0 - - 0 - - 0 - - 0 -
---------- ---------- ----------- -----------
$ 275,541 $ 156,543 $ 153,787 $ 278,297
========== ========== =========== ===========
Year ended December 31, 1995:
Land ....................................... $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Leasehold Improvements ..................... 3,949 (1) 4,428 - 0 - 8,377
Building and Structures .................... 150,943 (2) 262,827 906 412,864
Machinery and Equipment .................... 113,750 (3) 88,580 - 0 - 202,330
Furniture and Fixtures ..................... 9,655 14,895 372 24,178
---------- ----------- ----------- -----------
$ 278,297 $ 370,730 $ 1,278 $ 647,749
========== =========== =========== ===========
</TABLE>
Includes amounts acquired from subsidiary:
(1) $154,943
(2) 13,339
(3) 80
---
$168,362
F-26
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 30, 1995 the Company received the resignation of its
independent auditor Smith & Company.
Neither of Smith & Company's reports on the financial statements for the
past two years contained an adverse opinion nor disclaimer of opinion, nor were
they modified as to uncertainty, audit scope or accounting principles. However,
the financial statements included in the Company's annual report on Form 10-KSB
for the year ended December 31, 1993, prepared by Smith & Company, included a
single sentence expressing Smith & Company's doubt as to the Company's ability
to continue as a going concern.
There were no disagreements between Smith & Company and the Company on any
matter of accounting principles, financial statement disclosure or auditing
scope or procedure during the two most recent fiscal years and subsequent
period.
On January 2, 1996, the Company's board of directors engaged Andersen,
Andersen & Strong, L.C. to serve as the Company's new independent auditors.
Andersen, Andersen & Strong are located at:
Andersen, Andersen & Strong, L.C.
Certified Public Accountants and Business Consultants
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
There were no consultations with the newly engaged accountant during the
last two fiscal years or subsequent interim period regarding any of the
information in Item 304(a)(2)(I) or 304(a)(2)(ii).
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
<TABLE>
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
---------------------------- ------- -------------------------------------------------------
<S> <C> <C> <C>
Richard D. Surber 23 Director and Chief Executive Officer
Philip Lamb 37 Director
Lorin Pace 70 Director
Steven A. Christensen 45 President
Kevin S. Woltjen 26 Vice President
Susan S. Waldrop 26 Chief Financial Officer and Secretary/Treasurer
Allen Wolfson 50 Control Person
</TABLE>
Richard D. Surber was appointed to the Board of Directors of the Company in
June 1992 and was appointed as its Chief Executive Officer in March 1994. He
also served as the Company's President from March 1994 to August 1995 and was
its Secretary from June 1992 to March 1994. Since 1991, Mr. Surber has been a
professional consultant for various public and private companies. Mr. Surber is
a graduate of the University of Utah with B.S. in Finance and is currently
attending the University of Utah, College of Law. Mr. Surber is also the
President and sole director of A-Z Professional Consultants, Inc. ("A-Z"), and
the nephew of Allen Z. Wolfson. Mr. Surber is a director of several private
corporations. Mr. Surber was a director of Eurotronics Holdings Incorporated, a
Utah corporation f/k/a Hamilton Exploration Co., Inc., from June 1995 until
December 1995, and was a director of OMAP Holdings Incorporated, a Utah
corporation f/k/a Logos International, Inc., from March 1992 through December
1995. For more information on Mr. Surber, see "Item 12 - Certain Relationships
and Related Transactions."
Philip Lamb was appointed to the Board of Directors in January 1995 to fill
a vacancy left by the resignation of Donald Hodges. Prior to that time he was an
employee of the Company from October 1994 to January 1995, working to obtain
financing for new purchases and other funding needed by clients of the Company.
Currently, and since January 1995, Mr. Lamb has been employed with Green-Tree
Financial Services as the market representative for Utah. From 1993 to 1994, Mr.
Lamb worked as a Loan Officer for Pacific Rim Financial Services. Prior to
joining Pacific Rim, Mr. Lamb had been a Branch Area Manager for Zions First
National Bank in Salt Lake City, Utah. His duties included managing a successful
group of branches for the bank, supervising all lending operations at his branch
and managing day to day operations of the bank. Mr. Lamb is also the owner of
Mountain West Management, a rental property management firm in Orem, Utah.
Lorin Pace was appointed to the Board of Directors in April 1995 to fill a
vacancy created by the departure of Ruairidh Campbell. Mr. Pace served as a
representative of the Utah House of Representatives from 1964-1986; Speaker of
the House from 1969-1970; House Minority Leader, 1971-1972; a member of the Utah
State Senate from 1986-1990; and was a practicing attorney from 1953-1993. Since
1993, Mr. Pace has worked as an independent consultant. Mr. Pace received his
B.S. in Mathematics and B.A. in Spanish from the University of Utah and Brigham
Young University, respectively, and his law degree from the University of Utah
College of Law.
Steven A. Christensen was appointed as the president of the Company in
August 1995. Mr. Christensen has been employed by the Company as a consultant
and as in-house legal counsel since December 1994. Mr. Christensen has been an
attorney since 1979, and is licensed to practice law in the following states:
Colorado, Wyoming and Utah. As managing shareholder of Holm & Christensen, P.C.,
Mr. Christensen obtained experience in civil litigation, business law, living
trusts, estates, corporations and adoption litigation. Mr. Christensen also has
experience in offshore trusts and asset protection law. In addition, Mr.
Christensen served as general counsel to the Denver Museum of Natural History
and currently is an officer and director of numerous private corporations. Mr.
Christensen received his B.A. from Brigham Young University and a Juris Doctor
from the University of Denver, College of Law.
Kevin S. Woltjen was appointed Vice President of the Company in August 1995
by the Board of Directors and has been employed as a consultant and as in-house
legal counsel by the Company since November 1994. Mr. Woltjen has been an
attorney licensed to practice law in the State of Illinois since 1994. Between
1991 and 1994, Mr. Woltjen studied for and received degrees of Juris Doctor and
Masters of Business Administration, With Distinction, from DePaul University in
Chicago, Illinois. Mr. Woltjen received a B.A. in History from Southern
Methodist University in Dallas, Texas.
Susan S. Waldrop was appointed Chief Financial Officer and
Secretary/Treasurer of the Company in October 1995 by the Board of Directors and
has been employed by the Company as an accountant since June 1994. Between 1987
and 1990, Ms. Waldrop worked as an accountant and office manager for a title
insurance company and a building materials supplier, while studying for a B.S.
in Accounting. Between 1990 and 1994, Ms. Waldrop studied for and received
degrees of B.S. in Accounting and Masters of Professional Accountancy from Weber
State University in Ogden, Utah.
<PAGE>
Allen Wolfson has never been named as an officer or director of the
Company. He does, however, have significant influence and "control" (as defined
in Rule 12b-2 of the Securities Exchange Act of 1934) over the affairs of the
Company and is sole owner of A-Z Professional Consultants, Inc., formerly one of
the Company's largest shareholders. Mr. Wolfson is the uncle of Richard Surber.
Mr. Wolfson obtained a B.S. in Marketing from the University of Southern
Florida in 1968 and in 1970 he graduated with an M.A. in Distributive Vocational
Education. Mr. Wolfson has worked 59 credit hours towards an MBA from Troy State
University in Montgomery, Alabama. He has also been a licensed general
contractor and a real estate agent and developer. Mr. Wolfson has consulted for
A-Z Professional Consultants, Inc. since April 11, 1990. Mr. Wolfson has been a
professional consultant for various public and private companies for 20 years.
In 1986, Mr. Wolfson was convicted of violating 18 U.S.C. ss.371; 18 U.S.C.
ss.ss.1001 and 1002; and 18 U.S.C. ss.ss.1014 and 1002 in the U.S. District
Court for the Middle District of Florida, Tampa Division (the "Florida Court").
Mr. Wolfson was on probation for these offenses until May 1995. In February
1995, a complaint was filed with the Florida Court alleging that Mr. Wolfson had
violated the terms of the probation. The Florida Court changed the jurisdiction
of the matter to the U.S. District Court for the District of Utah, Central
Division (the "Utah Court"). The Utah Court heard the matter in August 1995 and
on October 20, 1995, Senior U.S. District Court Judge Bruce S. Jenkins ruled
that a violation of the original terms of the probation had occurred. This
finding effectively revoked Mr. Wolfson's probation. On January 25, 1996, a
sentencing hearing was held before the Utah Court. At this hearing the Utah
Court imposed a three year sentence, suspended pursuant to additional terms of
probation. As orally indicated, Mr. Wolfson's probation now expires on January
25, 1999. As of March 31, 1996, no written order had been entered by the Utah
Court encompassing the specific terms of Mr. Wolfson's probation. For more
information on Mr. Wolfson, see "Item 12 - Certain Relationships and Related
Transactions."
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company,
the Company is not aware of any person who, at any time during the fiscal year
ended December 31, 1995, was a director, officer, or beneficial owner of more
than ten percent of the Common Stock of the Company, and who failed to file on a
timely basis reports required by Section 16(a) of the Securities Exchange Act of
1934 during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
No compensation in excess of $100,000 was awarded to, earned by, or paid to
any executive officer of the Company during 1995.
The following two tables and the accompanying notes provide summary
information for each of the last three fiscal years concerning cash and non-cash
compensation paid or accrued by the Company to Ramon Smullin, the Company's
President and Chief Executive Officer from June 1992 until his resignation in
August, 1993; Alan D. Hansen, the Company's Chief Executive Officer from the
1993 Annual Meeting through the end of 1993; and Richard Surber, the Company's
Chief Executive Officer from March 1994 to present.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Award(s) Options Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
($) ($) ($) ($) SARs(#) ($) ($)
Alan D. Hansen 1995 - - - - - -
Former CEO & 1994 - - 54,000 15,000 - -
V.P. 1993 22,615 - 22,165 12,500 18,500 - -
Ramon Smullin 1995 - - - - - - -
Former CEO 1994 - - - 48,000 100,000 - -
1993 9,180 - - 127,167 9,859 - -
Richard Surber 1995 30,000 - - - - - 41,677(1)
Former President 1994 21,000 - - 50,000 - - -
and Current CEO 1993 - - - - - - -
</TABLE>
(1) This compensation was paid to Mr. Surber, personally, in the form of 87,000
shares of the Company's Common Stock in consideration of consulting services
rendered by Mr. Surber pursuant to a consulting agreement between the Company
and Investment Sanctuary Corporation, a Utah corporation, of which Mr. Surber is
president and sole director and shareholder. The shares issued to Mr. Surber
were issued pursuant to a Form S-8 Registration Statement and Reoffer Prospectus
filed with the Securities and Exchange Commission on May 9, 1995.
During the fiscal year ended December 31, 1993, the Company established a
Stock Option Plan ("the 1993 Plan") for its employees and consultants. Under the
1993 Plan, options to purchase 6,000,000 shares were allowed to be granted. The
1993 Plan was registered with the Securities and Exchange Commission ("SEC")
pursuant to a Form S-8 Registration Statement. During the year ended December
31, 1994, the Company established a Stock Option Plan ("the 1994 Plan"), for its
employees and consultants. The 1994 Plan was registered with the SEC pursuant to
a Form S-8 Registration Statement. Under the 1994 Plan, options to purchase
500,000 shares were allowed to be granted. As of December 31, 1995, all shares
included in the 1993 and 1994 Plans had been issued.
In January 1996, the Company established a Stock Option Plan (the "1996
Plan") for its employees and consultants. The 1996 Plan was registered with the
SEC pursuant to a Form S-8 Registration Statement. Under the 1996 Plan, options
to purchase 1,000,000 shares of the Company's Common Stock may be granted. The
1996 Plan is designed to provide compensation and incentive bonuses to the
Company's employees and consultants who, due to current financial constraints of
the Company, cannot be adequately compensated in cash. As of March 31, 1996, no
options had been granted pursuant to the 1996 Plan.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of Securities % of Total Options/SARs Exercise or Expiration
Name Underlying Options/SARs Granted to Employees in Fiscal Base Date
Granted(#) Year Price($/Share)
<S> <C> <C> <C> <C>
Investment 3,309,586 25% 0.59 December 22,
Sanctuary 2000
Corporation
A-Z Professional 3,441,969 26% 0.59 December 22,
Consultants, Inc. 2000
</TABLE>
(1) On December 22, 1995 the Company granted Investment Sanctuary Corporation an
option to purchase an amount of shares equivalent to 25% of the issued and
outstanding shares of the Company's Common Stock at the time of exercise. To
date none of the options have been exercised. The option expires five years from
the date of the grant. See "Item 12 - Related Transactions" for a further
explanation of this transaction. This amount reflects the number of shares of
the Company's Common Stock which would be issued to ISC assuming the options had
been exercised on March 31, 1996.
(2) On December 22, 1995 the Company granted A-Z Professional Consultants, Inc.
an option to purchase an amount of shares equivalent to 26% of the issued and
outstanding shares of the Company's Common Stock at the time of exercise. To
date none of the options have been exercised. The option expires five years from
the date of the grant. See "Item 12 - Related Transactions" for a further
explanation of this transaction. This amount reflects the number of shares of
the Company's Common Stock which would be issued to A-Z assuming the options had
been exercised on March 31, 1996.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the stock
ownership as of March 31, 1996, with respect to (I) each person who is known to
the Company to be the beneficial owner of more than 5 percent of the Company's
Common Stock; (ii) all directors; and (iii) directors and executive officers of
the Company as a group (the notes accompanying the information in the table
below are necessary for a complete understanding of the figures):
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of class
<S> <C> <C> <C>
Common Stock A-Z Professional 3,601,969(1) 27.2%(3)
($0.001 par value) Consultants, Inc.
268 West 400 South, Suite
306
Salt Lake City, Utah 84101
Common Stock Investment Sanctuary 3,309,586(2) 25.0%(3)
($0.001 par value) Corporation
268 West 400 South, Suite
305
Salt Lake City, Utah 84101
Common Stock Philip Lamb 267 *
($0.001) par value
Common Stock Lorin Pace 267 *
($0.001) par value
Common Stock Richard D. Surber 3,408,986(2) 25.8%(3)
($0.001) par value 268 West 400 South, Suite
300
Salt Lake City, Utah 84101
Common Stock Directors and Executive 3,412,420(2) 25.8%(3)
($0.001) par value Officers as a Group
(6 persons)**
</TABLE>
<PAGE>
* Ownership represents less than 0.1% of the Common Stock.
** Three of the Company's executive officers have management contracts that
provide for their receipt of options to purchase shares of the Common Stock. As
of March 31, 1996, no options to purchase shares of Common Stock have been
granted to any of these officers, although the Company expects to do so shortly.
For more information on these management contracts, see Exhibits 10(ii)(e), (f)
and (g) which are incorporated herein by this reference.
(1) Includes 3,441,969 shares considered to be beneficially owned by A-Z
Professional Consultants stemming from the terms of a Stock Option Agreement,
dated December 22, 1995. Pursuant to this agreement, A-Z Professional
Consultants was granted an option to purchase a quantity of shares equivalent to
26% of the Company's issued and outstanding common stock on the date of the
agreement. For more information on this agreement, see the paragraph immediately
subsequent to these notes listed under "Changes in Control."
(2) Includes 2,900 shares owned by Susan S. Waldrop, the Company's Chief
Financial Officer and Secretary-Treasurer. Also includes 2,929,584 shares
considered to be beneficially owned by Investment Sanctuary Corporation ("ISC")
as of December 28, 1995, stemming from the terms of a Stock Option Agreement,
dated December 22, 1995. Richard D. Surber is the sole shareholder, officer and
director of ISC and therefore is considered to be an indirect beneficial owner
of ISC's shares. Pursuant to this agreement, A-Z Professional Consultants was
granted an option to purchase a quantity of shares equivalent to 25% of the
Company's issued and outstanding common stock on the date of the agreement. For
more information on this agreement, see the paragraph immediately subsequent to
these notes listed under "Changes in Control."
(3) These percentages reflect the exercise of all options granted pursuant to
two Stock Option Agreements dated December 22, 1995. If all such options, there
would be, as of March 31, 1996, 13,238,343 shares of the Company's Common Stock
issued and outstanding. For more information on this agreement, see the
paragraph immediately subsequent to these notes listed under "Changes in
Control."
Changes in Control
On December 22, 1995, the Company entered into two Stock Option
Agreements (the "Agreements"), one with A-Z Professional Consultants, Inc., a
Utah corporation ("A-Z"), and one with Investment Sanctuary Corporation, a Utah
corporation ("ISC") whose president, sole director and officer is Richard
Surber, the Company's chief executive officer and one of its directors. Pursuant
to the Agreements, the Company granted options (the "Options") to A-Z and ISC
giving each the respective right to purchase a quantity of shares of the
Company's Common Stock equivalent to 26% and 25% of the issued and outstanding
shares on the exercise date. The Options can be exercised in full or in part in
accordance with the terms of the Agreements and any Stock Option Plan the
Company may have in effect at the time of exercise. Notice must be delivered to
the Company setting forth the number of shares to be optioned together with
either: (a) a certified check or bank check payable to the Company; or (b) other
consideration acceptable to the Company, which consideration shall be approved
by the board of directors of the Company, with the exclusion of a promissory
note, which shall not be acceptable. The Options were granted to compensate
Richard Surber, Allen Z. Wolfson, ISC and A-Z for consulting services rendered
to the Company as well as to entice them to continue to perform such services
for the Company. Although Allen Z. Wolfson and Richard D. Surber may be deemed
to currently control the Company, the granting of the Options may result in a
further change of control of the Company to Allen Z. Wolfson and Richard D.
Surber.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Allen Wolfson (A-Z Professional Consultants, Inc. -
"A-Z")
During the last two years, the Company has completed several
transactions with A-Z, a Utah corporation whose sole shareholder is Allen Z.
Wolfson. For more information on Mr. Wolfson, see "Item 9 - Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act." Richard Surber, the Company's Chief Executive Officer and one of
its directors, is also the president and sole director of A-Z. For more
information on Mr. Surber, see "Item 9 - Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act." By virtue of his positions with A-Z, Mr. Surber may be deemed to have an
indirect interest in transactions with A-Z. Mr. Wolfson is the uncle of Mr.
Surber.
Since 1992, A-Z has had agreements with the Company to provide
consulting services, office space, supplies and equipment. The first such
agreement was entered into in June 1992 and extended on substantially similar
terms for an additional year by an Amended Management & Consulting Contract,
dated May 7, 1993. Under these contracts, the Company was obligated to pay A-Z
fees of 5,000 shares or $8,000 per month for services rendered after June 30,
1993. Additionally, A-Z was entitled to a bonus of ten percent of any
transactions brought to closing as a result of A-Z's services or efforts ("Ten
Percent Bonus"). The Company issued 27,105 shares of its restricted Common Stock
and paid $120,000 to A-Z during 1993. On April 7, 1994 the Company and A-Z
entered into an Amendment to the Amended Management & Consulting Contract
("Amendment") because of the difficulties in determining the value of the Ten
Percent Bonus, the possibility of legal action and other issues with the Ten
Percent Bonus. Pursuant to the Amendment, the Ten Percent Bonus provision was
removed completely from the Amended Management & Consulting Contract. Pursuant
to the Amendment, the Company no longer owes any portion of the Ten Percent
Bonus to A-Z and is not obligated to make payments to A-Z relating to the Ten
Percent Bonus.
Upon expiration of the Amended Management & Consulting Contract the
Company entered into a new one year Consulting Agreement, dated June 1, 1994 but
effective May 7, 1994. Under the Consulting Agreement, the Company agreed to pay
A-Z $8,000 or 20,000 shares of the Company's restricted Common Stock each month.
Instead of paying cash or issuing stock for services rendered through August 6,
1994, the Company and A-Z agreed the Company would assign its interest in a note
made by TAC and transfer carpet credits to A-Z. The Company's interest in the
note and the credits were valued at $15,424.35 and $8,810.06. On September 30,
1994, A-Z and the Company terminated the Consulting Agreement. The Company
agreed to pay A-Z for consulting fees earned and expenses incurred through the
termination date.
On May 1, 1995, the Company and A-Z entered into a Settlement Agreement
to settle the fees and expenses earned and incurred by A-Z but unpaid as of the
date A-Z's June 1, 1994 Consulting Agreement terminated. Pursuant to this
Settlement Agreement, the Company issued Allen Z. Wolfson, personally, 80,000
shares of its Common Stock. On August 30, 1995 the Company and A-Z entered into
a one year Consulting Agreement whereby the Company agreed to again retain A-Z
as one of its primary consultants.
On December 22, 1995, the Company entered into two Stock Option
Agreements, one with A-Z Professional Consultants, Inc., a Utah corporation
("A-Z"), and one with Investment Sanctuary Corporation, a Utah corporation whose
president, sole director and officer is Richard Surber, the Company's chief
executive officer and one of its directors the Company (the "Agreements").
Pursuant to the Agreements, the Company granted options (the "Options") to A-Z
and ISC giving each the respective right to purchase a quantity of shares of the
Company's Common Stock equivalent to 26% and 25% of the issued and outstanding
shares on the exercise date. The exercise price of the Options was established
in the Agreements at $0.59 per share. The Options can be exercised in full or in
part in accordance with the terms of the Agreements and any Stock Option Plan
the Company may have in effect at the time of exercise. Notice must be delivered
to the Company setting forth the number of shares to be optioned together with
either: (a) a certified check or bank check payable to the Company; or (b) other
consideration acceptable to the Company, which consideration shall be approved
by the board of directors of the Company, with the exclusion of a promissory
note, which shall not be acceptable. The Options were granted to compensate
Richard Surber, Allen Z. Wolfson, ISC and A-Z for consulting services rendered
to the Company as well as to entice them to continue to perform such services
for the Company. The granting of the Options effectively gives control of the
Company to Allen Z. Wolfson and Richard D. Surber.
On December 30, 1994, the Company entered into a Stock Purchase and
Debt Settlement Agreement with Wasatch Capital Corporation ("Wasatch"). Under
the terms of the agreement, the Company advanced Wasatch $208,702 which enabled
Wasatch to exercise an option to purchase real estate located as 55-57, 61-65
West 100 South, Salt Lake City, Utah (the "Bennett Building"). Throughout the
course of the year the Company advanced Wasatch an additional $67,849 for
improvement and other expenses related to the Bennett Building. In exchange for
these funds the Company accepted a 20% interest in Wasatch. The Company's
investment is secured by the Bennett Building and Wasatch is not allowed to
dilute The Company's interest in Wasatch or lease, sell, exchange, or encumber
the property in any way unless the Company approves. Wasatch is an affiliate of
A-Z because of A-Z's 60% ownership interest.
Additionally, Mr. Richard Surber is the president and sole director of Wasatch.
<PAGE>
Transactions involving Richard Surber (Investment Sanctuary Corporation -
"ISC")
On September 30, 1994, the Company retained ISC to provide consulting
services for the Company. The agreement called for the Company to pay ISC
$20,000 per month, either in cash or shares of the Company's restricted Common
Stock valued at one-half of the average between the low bid and ask price to be
paid on quarterly basis. The Company and ISC subsequently agreed that payments
for services rendered by ISC would not begin accruing until January 1, 1995.
On May 4, 1995 the Company, A-Z, ISC, Richard D. Surber and Allen Z.
Wolfson entered into an Assignment and Acknowledgment (the "Assignment"). The
Assignment related to services ISC had rendered to the Company between January
and April 1995 pursuant to a September 30, 1994 Consulting Agreement by and
between ISC and the Company. ISC assigned all rights to fees from the Company to
Richard Surber and Allen Z. Wolfson personally. Mr. Surber and Mr. Wolfson were
the primary consultants who performed the consulting services for the Company on
behalf of ISC pursuant to the Consulting Agreement. Pursuant to the Assignment,
the Company agreed to issue 167,000 shares of its Common Stock under the
Company's 1994 Stock Option Plan. On May 9, 1995, the Company issued Mr. Surber
87,000 shares and Mr. Wolfson 80,000 shares.
Other Transactions involving Richard Surber ("ATC II, Inc.")
The Company's sale of the Canton Plant to Thistle could be considered a
related party transaction. On the effective date of both the Real Estate Sales
Agreement ("RESA") and an amended RESA (the "ARESA"), June 20, 1994, Richard
Surber was an executive officer and director of Thistle's parent company, ATC
II, Inc., although at the time the agreements were actually executed, Mr. Surber
was not an officer or director of ATC II, Inc. and did not have any authority to
approve or disapprove any transactions being contemplated by ATC II, Inc. or any
of its subsidiaries. For more information on the Canton Plant, see "Item 2 -
Description of Properties" and "Item 3 Legal Proceedings."
Other Transactions involving Richard Surber ("Belmac Corporation")
Richard Surber entered into a Consulting Agreement with Belmac
Corporation ("Belmac") on September 1, 1994. A-Z had located this opportunity
for Mr. Surber. Under the terms of this contract Mr. Surber, with the assistance
of the Company's consultants and certain employees, was to assist Belmac in
locating acquisitions and business opportunities. In exchange for these
services, Belmac agreed to issue 218,182 shares of its common stock and grant to
Mr. Surber options to purchase 1,200,000 shares of its common stock. Belmac
subsequently canceled the agreement. However, the 218,182 shares were issued to
ISC on behalf of Mr. Surber who then transferred and assigned all rights to
these shares and the proceeds therefrom to the Company for payment of consulting
services rendered by the Company's consultants relating to Belmac. The Belmac
stock was liquidated and $37,000 of the proceeds therefrom were paid to A-Z for
a finder's fee.
Other Transactions involving Richard Surber ("Applied Technology")
On June 16, 1994, Canton Financial Services Corporation entered into a
Consulting Agreement with Applied Technology, Inc. ("APTC"). At that time Mr.
Surber was the president and a director of APTC. Certain disputes later arose
among the Company, CFSC, Richard Surber and APTC and certain other parties
related to APTC. On December 16, 1994, the Company, CFSC, Richard Surber and
APTC and certain other parties entered into a Settlement Agreement. The
Settlement Agreement canceled the Consulting Agreement. CFSC received fees
earned through November 1994 totaling approximately $300,000, $17,000 in
additional cash, certain oil wells owned by APTC, and all monies received to
that date. Richard Surber resigned from all positions with APTC and as a
settlement for his resignation, he received 266,667 shares of APTC's restricted
stock. The Settlement Agreement contained a mutual release from all claims that
arose prior to the date of the Settlement Agreement
<PAGE>
Other Transactions involving Richard Surber ("Logos International, Inc.,
n/k/a OMAP Holdings Inc.")
During the last two years, the Company has completed several
transactions with a Nevada corporation formerly known as Logos International,
Inc. ("Logos"), but now known as OMAP Holdings Incorporated ("OMAP"). Logos
merged with OMAP International Incorporated, a Nevada corporation ("OII"), on
October 23, 1995, pursuant to a Stock Exchange Agreement by and among Logos,
OII, and the shareholders of OII, and changed its name to its present name OMAP.
Richard Surber, at all relevant times until Logos' merger with OII was an
executive officer and director of Logos. By virtue of his former positions with
Logos, Mr. Surber may be deemed to have an indirect material interest in these
transactions with Logos. However, Mr. Surber does not beneficially own a
material amount of OMAP's equity securities.
On September 22, 1994, Logos entered into a Debt Settlement Agreement
with the Company. Logos was indebted to the Company in the amount of $186,382,
for cash advances and services rendered to Logos. The Company accepted assets,
paintings and stocks, of equal value as settlement.
On September 26, 1994, Canton Financial Services Corporation, a wholly
owned subsidiary of the Company ("CFSC"), assumed $100,000 worth of Logos debt
in the form of two promissory notes. The debt was owed to two individuals that
the Company does business with on an ongoing basis. In exchange for the
assumption of debt, CFSC accepted stocks owned by Logos in four different
entities.
The Company continues to perform consulting services on behalf of OMAP
and believes that its relationship with OMAP will prove to be beneficial. The
Company currently has nominal ownership interest in OMAP.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits beginning on page 31 of this Form
10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter
ended December 31, 1994. However, on January 3, 1996, the Company filed a
Form 8-K describing a change in control of the Company and a change in the
Company's certifying accountant. Further, on January 11, 1996, the Company
filed a Form 8-K describing an acquisition of assets.
[THIS SPACE LEFT INTENTIONALLY BLANK]
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, this 12th day of April 1996
The Canton Industrial Corporation
/s/ Steven A. Christensen
Steven A. Christensen, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ Richard Surber Chief Executive Officer & Director April 14, 1996
Richard D. Surber
/s/ Steven A. Christensen President April 14, 1996
Steven A. Christensen
/s/ Susan S. Waldrop Chief Financial Officer
Susan S. Waldrop & Secretary-Treasurer April 14, 1996
/s/ Phillip Lamb Director April 14, 1996
Phillip Lamb
/s/ Lorin Pace Director April 14, 1996
Lorin Pace
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE DESCRIPTION
NO. NO.
2 * Articles of Merger of The Canton Industrial Corporation (an
Ohio corporation) into The Canton Industrial Corporation (a
Nevada corporation), filed in Nevada on May 3, 1993
(Incorporated by reference from Exhibit No. 2 of the Company's
Form 10-KSB for the year ended December 31, 1993).
3(i) * Articles of Incorporation of the Company (note that these
were amended by the Articles of Merger constituting Exhibit 2
to this Form 10-KSB). Incorporated herein by reference from
Exhibit No. 3(i) to the Company's Form 10-KSB for the year
ended December 31, 1993).
3(ii) ?? By-Laws of the Company, as amended.
4(a) * Form of certificate evidencing shares of "Common Stock" in
the Company. (Incorporated from Exhibit 4(a) to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1994).
4(b) * Form of certificate evidencing shares of "Preferred" stock
in the Company. (Incorporated herein by reference from Exhibit
No. 4(b) to the Company's Form 10-KSB for the year ended
December 31, 1993).
10(i) *Exhibits
MATERIAL CONTRACTS
10(i)(a) * Agreement, dated September 30, 1993, between Canton
Industrial Corporation of Salt Lake City and the Didamus
Corporation. (Incorporated herein by reference from Exhibit
No. 10(i)(c) to the Company's Form 10-KSB for the year ended
December 31, 1993).
10(i)(b) * Real Estate Sales Agreement, effective September 30, 1993,
between the Company and Metallurgical Industries, Inc.
(Incorporated herein by reference from Exhibit No. 10(i)(f) to
the Company's Form 10-KSB for the year ended December 31,
1993).
10(i)(c) * Addendum to the Real Estate Sales Agreement, executed
February 7, 1994 but effective September 30, 1993, between the
Company and Metallurgical Industries, Inc. (Incorporated
herein by reference from Exhibit No. 10(i)(g) to the Company's
Form 10-KSB for the year ended December 31, 1993).
10(i)(d) * Share Purchase Agreement, dated February 25, 1994, between
the Company and Kevin Eric Camp. (Incorporated herein by
reference from Exhibit No. 10(i)(i) to the Company's Form
10-KSB for the year ended December 31, 1993). 10(i)(e) * 1993
Stock Option Plan for the Company, dated August 20, 1993.
(Incorporated herein by reference from Exhibit No. 10(i)(s) to
the Company's Form 10-KSB for the year ended December 31,
1993).
10(i)(f) * Amendment to Real Estate Sales Agreement between the Company
and Thistle Properties, Inc. dated August 23, 1994.
(Incorporated from Exhibit 10(i)(t) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(g) * Consulting Agreement dated September 1, 1994, between
Richard Surber and Belmac Corporation. (Incorporated from
Exhibit 10(i)(x) to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994).
10(i)(h) * Offshore Securities Subscription Agreement effective
November 25, 1994, between the Company and World Financial
Securities Ltd. (Incorporated from Exhibit 10(i)(z) to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
10(i)(i) * Offshore Securities Subscription Agreement effective
November 25, 1994, between the Company and Tamarisk Enterprise
Ltd. (Incorporated from Exhibit 10(i)(bb) to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1994).
10(i)(j) * Agreement for Purchase of Stock Warrants dated December 1
,1994, between the Company and East-West Trading Corporation.
(Incorporated from Exhibit 10(i)(cc) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(k) * Agreement for Purchase of Stock Warrants dated December 1,
1994, between the Company and Lexington Sales Corporation Ltd.
(Incorporated from Exhibit 10(i)(dd) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(l) * Real Estate Sales Agreement, dated November 15, 1993,
between the Company and J&M Evans. (Incorporated herein by
reference from Exhibit No. 10(i)(ee) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(m) * Settlement Agreement dated December 16 ,1994, between the
Company, Applied Technology, Canton Financial Services
Corporation, Richard Surber and other parties. (Incorporated
from Exhibit 10(i)(ff) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10(i)(n) * Settlement Agreement dated December 16, 1994, between the
Company, A-Z Professional Consultants, Inc., Metallurgical
Industries, Inc., Ira L. Friedman and Richard T. Johnson.
(Incorporated from Exhibit 10(i)(gg) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(o) * Stock Purchase Agreement dated December 30, 1994, between
the Company and Wasatch Capital Corporation. (Incorporated
from Exhibit 10(i)(ii) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10(i)(p) * Assignment Agreement dated December 31 ,1994, between the
Company and A-Z Professional Consultants, Inc. (Incorporated
from Exhibit 10(i)(jj) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10(i)(q) * Corporate Acquisition Agreement dated December 30, 1994,
between the Company and Panorama International, Inc.
(Incorporated from Exhibit 10(i)(ll) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(r) * Debt Conversion Agreement, dated January 24, 1994, between
the Company and A-Z Professional Consultants, Inc.
(Incorporated herein by reference from Exhibit No. 10(i)(oo)
to the Company's Form 10-KSB for the year ended December 31,
1993).
10(i)(s) * Consulting Agreement, effective January 1, 1994, between the
Company and Stephen Cole. (Incorporated herein by reference
from Exhibit No. 10(i)(rr) to the Company's Form 10-KSB for
the year ended December 31, 1993).
10(i)(t) * Consulting Agreement, dated February 7, 1994 but effective
as of September 1, 1993, between the Company and Metallurgical
Industries, Inc. (Incorporated herein by reference from
Exhibit No. 10(i)(ss) to the Company's Form 10-KSB for the
year ended December 31, 1993).
10(i)(u) * Addendum to Consulting Agreement, dated February 7, 1994 but
effective as of September 1, 1993, between the Company and
Metallurgical Industries, Inc. (Incorporated herein by
reference from Exhibit No. 10(i)(tt) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(v) * Asset Purchase Agreement, dated March 8, 1994, between the
Company and Metallurgical Industries, Inc. (Incorporated
herein by reference from Exhibit No. 10(i)(ww) to the
Company's Form 10-KSB for the year ended December 31, 1993).
10(i)(w) * Consulting Agreement, effective January 27, 1994, between
the Company and Robert Sparrow. (Incorporated herein by
reference from Exhibit No. 10(i)(xx) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(x) * Stock Option Agreement, Dated February 4, 1994, between the
Company and Charles H. Brodzki. (Incorporated herein by
reference from Exhibit No. 10(i)yy) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(y) * Consulting Agreement, effective February 7, 1994, between
the Company and Charles H. Brodzki. (Incorporated herein by
reference from Exhibit No. 10(i)(zz) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(z) * Real Estate Purchase Contract, dated October 8, 1993,
between the Company and Mark Cummings. (Incorporated herein by
reference from Exhibit No. 10(i)(aaa) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(aa) * Real Estate Sales Agreement, dated January 24, 1994, between
the Company and NobleTek Products, Inc. (Incorporated herein
by reference from Exhibit No. 10(i)(bbb) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(bb) * Amended Real Estate Sales Agreement, dated March 2, 1994,
between the Company and NobleTek Products, Inc.(Incorporated
herein by reference from Exhibit No. 10(i)(ccc) to the
Company's Form 10-KSB for the year ended December 31, 1993).
10(i)(cc) * Employment Agreement, dated March 16, 1994, between the
Company and Alan R. Josselyn. (Incorporated herein by
reference from Exhibit No. 10(i)(uuu) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(dd) * Consulting Agreement, dated January 7, 1994, between the
Company and Fredrick Denies. (Incorporated herein by reference
from Exhibit No. 10(i)(vvv) to the Company's Form 10-KSB for
the year ended December 31, 1993).
10(i)(ee) * Stock Purchase Agreement, dated February 18, 1994, between
the Company and Dr. Robert Youngblood. (Incorporated herein by
reference from Exhibit No. 10(i)(www) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(ff) * Stock Option Agreement, dated March 4, 1994, between the
Company and James M. Bathras. (Incorporated herein by
reference from Exhibit No. 10(i)(xxx) to the Company's Form
10-KSB for the year ended December 31, 1993).
10(i)(gg) * Lease between 258 West 4th South Partnership and Canton's
Commercial Carpet Corporation dated May 23, 1994.
(Incorporated from Exhibit 10(i)(yyy) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10(i)(hh) ?? Mutual Release of All Claims dated May 12, 1995, between
the Company, ATC II, Inc. and Thistle Properties.
10(i)(ii) ?? Agreement of Sale and Purchase dated March 23, 1995,
between the Company and Associated Technologies, Inc.
10(i)(jj) ?? Settlement Agreement dated May 1, 1995, between the
Company, A-Z Professional Consultants, Inc. and Allen Wolfson.
10(i)(kk) ?? Assignment and Acknowledgment dated May 4, 1995, between
the Company, Investment Sanctuary, Allen Wolfson and Richard
Surber.
10(i)(ll) ?? Purchase Agreement dated May 23, 1995, between Canton
Properties I, Inc., a subsidiary of the Company, and Asset
Recovery, Inc.
10(i)(mm) ?? Settlement Agreement dated December 12, 1995, between TAC,
Inc., a subsidiary of the Company, Ozora Corporation and Mark
C. Hungerford.
10(i)(nn) * Real Estate Sales Contract dated December 14, 1995 betweent
the Solar Logos Foundation and Oasis International Hotel &
Casino, Inc., jointly with Oasis International Corporation.
(Incorporated from Exhibit 10(i)(a) to the Company's Current
Report on Form 8-K filed with the Commission on January 11,
1996).
10(i)(oo) * Agreement relating to water rights dated December 14, 1995,
between the Solar Logos Foundation and Oasis International
Hotel and Casino and Oasis International Corporation.
(Incorporated from Exhibit 10(i)(b) to the Company's Current
Report on Form 8-K filed with the Commission on January 11,
1996).
10(i)(pp) * Promissory Note dated December 27, 1995, between Oasis
International Corporation and the Solar Logos Foundation.
(Incorporated from Exhibit 10(i)(c) to the Company's Current
Report on Form 8-K filed with the Commission on January 11,
1996).
10(i)(qq) * Trust Deed Note dated December 27, 1995, between Oasis
International Hotel and Casino, Inc. and Howard Bernstien.
(Incorporated from Exhibit 10(i)(d) to the Company's Current
Report on Form 8-K filed with the Commission on January 11,
1996).
10(i)(rr) * Stock Option Agreement dated December 22, 1995, between the
Company and A-Z Professional Consultants, Inc. (Incorporated
from Exhibit 10(i)(b) to the Company's Current Report on Form
8-K filed with the Commission on January 3, 1996).
10(i)(ss) * Stock Option Agreement dated December 22, 1995, between the
Company and Investment Sanctuary Corporation. (Incorporated
from Exhibit 10(i)(c) to the Company's Current Report on Form
8-K filed with the Commission on January 3, 1996).
MANAGEMENT CONTRACTS & COMPENSATORY PLANS/ARRANGEMENTS 10(ii) Exhibits
10(ii)(a) * Amended Management & Consulting Contract, dated May 7, 1993,
between the Company and A-Z Professional Consultants, Inc.
(Incorporated herein by reference from Exhibit No. 10(ii)(d)
to the Company's Form 10-KSB for the year ended December 31,
1993).
10(ii)(b) * Consulting Agreement dated June 1, 1994, but effective May
7, 1994, between the Company and A-Z Professional Consultants,
Inc. (Incorporated from Exhibit 10(i)(b) to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1994).
10(ii)(c) * Termination Agreement dated September 30, 1994, between the
Company and A-Z Professional Consultants, Inc. (Incorporated
from Exhibit 10(i)(c) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10(ii)(d) * Consulting Agreement dated August 30, 1995 between the
Company and A-Z Professional Consultants, Inc. (Incorporated
from Exhibit 10(i)(a) to the Company's Current Report on Form
8-K filed with the Commission on January 3, 1996).
10(ii)(e) ?? Employment Agreement dated December 5, 1995 but effective
August 30, 1995 between the Company and Steven A. Christensen.
10(ii)(f) ?? Employment Agreement dated December 5, 1995 but effective
August 30, 1995 between the Company and Kevin S. Woltjen.
10(ii)(g) * Employment Agreement dated November 10, 1995, but effective
October 4, 1995 between the Company and Susan S. Waldrop.
(Incorporated from Exhibit 10(i)(a) to the Company's Quarterly
Report on Form 10-QSB for the period ended September 30,
1995).
10(ii)(h) * Stock Option Agreement dated December 22, 1995, between the
Company and A-Z Professional Consultants, Inc. (Incorporated
from Exhibit 10(i)(b) to the Company's Current Report on Form
8-K filed with the Commission on January 3, 1996).
10(ii)(i) * Stock Option Agreement dated December 22, 1995, between the
Company and Investment Sanctuary Corporation. (Incorporated
from Exhibit 10(i)(c) to the Company's Current Report on Form
8-K filed with the Commission on January 3, 1996).
27 ?? Financial Data Schedule.
99 * ORDER allowing MOTION FOR FINAL DECREE in the Company's
voluntary bankruptcy petition dated November 8, 1994, but
effective November 7, 1994. (Incorporated from Exhibit of like
number r from the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994).
99(a) ?? ORDER dated March 4, 1995, from the West Virginia Division
of Environmental Protection.
99(b) ?? CONTEMPT ORDER dated May 31, 1995 from the Circuit Court
for the Ninth JudicialCircuit, Fulton County, Illinois.
* Previously filed as indicated and incorporated herein by reference.
<PAGE>
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
The Canton Industrial Corporation
*****
ARTICLE I.
Offices
Section 1. PRINCIPAL AND REGISTERED OFFICE. The principal and
registered office for the transaction of the business of the corporation is
hereby fixed and located at 10 West 100 South, Suite 710, Salt Lake City, Utah
84101. The Corporation may have such other offices, either within or without the
State of Nevada as the Board of Directors may designate or as the business of
the Corporation may require from time to time.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time
be established by the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
Meetings of Shareholders
Section 1. MEETING PLACE. All annual meetings of shareholders and all
other meetings of shareholders shall be held either at the principal office or
at any other place within or without the State of Nevada which may be designated
either by the board of directors, pursuant to authority hereinafter granted to
said board, or by the written consent of all shareholders entitled to vote
thereat, given either before or after the meeting and filed with the Secretary
of the corporation
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on the third Monday of April each year, at the hour of 10:00 o'clock
a.m. of said day commencing with the year 1994, provided, however, that should
said day fall upon a legal holiday then any such annual meeting of shareholders
shall be held at the same time and place on the next day thereafter ensuing
which is not a legal holiday.
Written notice of each anuual meeting signed by the president or vice
president, or the secretary, or an assistant secretary, or by such other person
or persons as the directors shall designate, shall be given to each shareholder
entitled to vote thereat, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of corporation or given by him to the corporation for the
purpose of notice. If a shareholder gives no address, notice shall be deemed to
have been given to him, if sent by mail or other means of written communication
addressed to the place where the principal office of the corporation is
situated, or if published at least once in some newspaper of general circulation
in the county in which said office is located. All such notices shall be send to
each shareholder entitled thereto not less than ten (10) nor more than sixty
(60) days before each annual meeting, and shall specify the place, the day and
the hour of such meeting, and shall also state the purpose or purposes for which
the meeting is called.
Failure to hold the annual meeting shall not constitute dissolution or
forfeiture of e corporation, and a special meeting of the shareholders may take
the place thereof.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes whatsoever, may be called at any time by the president
or by the board of directors, or by one or more shareholders holding not less
that 10% of the voting power of the corporation. Except in special cases where
other express provision is made by statute, notice of such special meetings
shall be given in the same manner as for annual meetings of shareholders.
Notices of any special meeting shall specify in addition to the place, day and
hour of such meeting, the purpose or purposes for which the meeting is called.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholder's
meeting, or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but in the absence of
a quorum, no other business may be transacted at any such meeting.
When any shareholders' meeting, either~ or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary to
give any notice of an adjournment or of the business to transacted at an
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled to vote
has been absent from any meeting of shareholders, whether or special, an entry
in the minutes to the effect that notice has been duly given shall be conclusive
and incontrovertible evidence that due notice of such meeting was given to such
shareholders, as required by law and the By-Laws of the corporation.
Section 6. VOTING. At all special meetings of stockholders entitled to
vote thereat, every holder of stock issued to a bona fide purchaser of the same,
represented by the holders thereof, either in person or by proxy in writing,
shall have one vote for each share of stock so held and represented at such
meetings, unless the Articles of Incorporation of the company shall otherwise
provide, in which event the voting rights, powers and privileges prescribed in
the said Articles of Incorporation shall prevail. Voting for directors and, upon
demand of any stockholder, upon any question at any meeting shall be by ballot.
Section 7. QUORUM. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
Section 8. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, either annual or special, however called and given notice thereof,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before of after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, sign a written Waiver of Notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of this meeting.
Section 9. PROXIES. Every person entitled to vote or execute consents
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the shareholder executing it specifies therein the length
of time for which such proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
Section 10. SHAREHOLDER ACTION WITHOUT A MEETING. Any action required
or permitted to be taken at a meeting of the stockholders may be taken without a
meeting if a written consent thereto is signed by stockholders holding at least
a majority of the voting power, except that if a different proportion of voting
power is required for such an action at a meeting, then that proportion of
written consents is required. In no instance where action is authorized by this
written consent need a meeting of stockholders be called or notice given. The
written consent must be filed with the proceedings of the stockholders.
ARTICLE III.
Board of Directors
Section 1. POWERS. Subject to the limitations of the Articles of
Incorporation or the By-Laws, and the provisions of Nevada Corporate Law as to
action to be authorized or approved by the shareholders, and subject to the
duties of directors as prescribed by the By-Laws, all corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be controlled by the board of directors. Without prejudice to
such general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to wit:
A. To select and remove all the other officers, agents and employees of
the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or the By-Laws, fix
their compensation, and require from them security for faithful service.
B. To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefore not inconsistent
with law, with the Articles of Incorporation or the By-Laws, as they may deem
best.
C. To change the principal office for the transaction of the business
if it becomes necessary or useful; to fix and locate from time to time one or
more subsidiary offices of the corporation within or without the State of
Nevada, as provided in Article I, Section 2, hereof; to designate any place
within or without the State of Nevada for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to alter the form of such seal
and of such certificates from time to time, as in their judgment they may deem
best, provided such seal and such certificates shall at all times comply with
the provisions of law.
D. To authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as may be lawful, in consideration of money paid,
labor done or services actually rendered, contracts for services to be
performed, debts or securities canceled, or tangible or intangible property
actually received, or in the case of shares issued as a dividend, against
amounts transferred from surplus to stated capital.
E. To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefore, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefore.
F. To appoint an executive committee and other committees and to
delegate to the executive committee any of the powers and authority of the board
in management of the business and affairs of the corporation, except the power
to declare dividends and to adopt, amend or repeal By-Laws. The executive
committee shall be composed of one or more directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors of the corporation shall be two (2).
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each meeting of shareholders, but if any such meeting is not held, or the
directors are not elected thereat, the directors may be elected at any special
meeting of shareholders. All directors shall hold office until their respective
successors are elected.
Section 4. VACANCIES. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, and each director so elected shall hold office until
his successor is elected at an or a special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
annual or special meeting of shareholders at which any director or directors are
elected to elect the full authorized number of directors to be voted for at that
meeting
The shareholders may elect a director or directors' at any time to fill
any vacancy or vacancies not filled by the directors. If the board of directors
accept the resignation of a director tendered to take effect at a future time,
the board or the shareholders shall have the power to elect a successor to take
office with the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
ARTICLE IV
Meetings of the Board of Directors
Section 1. PLACE OF MEETING. Regular meetings of the board of directors
shall be held at any place within or without the State of Nevada which has been
designated from time to time by resolution of the board or by written consent of
all members of the board. In the absence of such designation regular meeting
shall be held at the principal office of the corporation. Special meetings of
the board may be held either at a place so designated, or at the principal
office. Failure to hold an annual meeting of the board of directors shall not
constitute forfeiture or dissolution of the Corporation.
Section 2. ORGANIZATION MEETING. Immediately following each annual
meeting of shareholders, the board of directors shall hold a regular meeting for
the purpose of organization, election or officers, and the transaction of other
business. Notice of such meeting is hereby dispensed with.
Section 3. OTHER REGULAR MEETINGS. Other regular meetings of the board
of directors shall be held without call unless one director agrees not to have
this regular meeting, on the First Monday of each month at the hour of 3:00
o'clock p.m. of said day; provided, however, should said day fall upon a legal
holiday, then said meeting shall be held at the same time on the next day
thereafter ensuing which is not a legal holiday. Notice of all such regular
meetings of the board of directors is hereby dispensed with.
Section 4. SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes shall be called at any time by the president, or, if
he is absent or unable or refuses to act, by any vice president or by any two
directors.
Written notice of the time and place of special meetings shall be
delivered personally to the directors or sent to each director by mail charges
prepaid, addressed to him at his address as it is shown upon the records of the
corporation, or if it is not shown on such records or is not readily
ascertainable, at the place in which the meetings of the directors are regularly
held. In case such notice is mailed or telegraphed, it shall be deposited in the
United States mail or delivered to the telegraph company in the place in which
the principal office of the corporation is located at least forty-eight (48)
hours prior to the time of the holding of the meeting. In case such notice is
delivered as above provided, it shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery as above provided shall be due, legal and personal
notice to such director.
Section 5. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent directors, if the time
and place be fixed at the meeting adjourned.
Section 6. ENTRY OF NOTICE. Whenever any director has been absent from
any special meeting of the board of directors, an entry in the minutes to the
effect that notice has been duly given shall be conclusive and incontrovertible
evidence that due notice of such special meeting was given to such director, as
required by law and the By-Laws of the corporation.
Section 7. WAIVER OF NOTICE. The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though a meeting had been duly held after regular call and notice, if a
quorum be present, and if, either before or after the meeting, each of the
directors not present sign a written waiver of notice or a consent to holding
such meeting or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 8. QUORUM. A majority of the authorized number of directors
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present, shall be regarded as the act of the board of directors, unless a
greater number be required by law or by the Articles of Incorporation.
Section 9. ADJOURNMENT. A quorum of the directors may adjourn any
directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum, a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the board.
Section 10. FEES AND COMPENSATION. Directors shall not receive any
stated salary for their services as directors, but by resolution of the board, a
fixed fee, with or without expenses of attendance may be allowed for attendance
at each meeting. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation therefore.
Section 10. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at a meeting of the board of directors a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all the members of the board or of the committee. The
written consent must be filed with the proceedings of the board of committee.
ARTICLE V.
Officers
Section 1. OFFICERS. The officers of the corporation shall be a
president, and a Secretary/Treasurer. The corporation may also have, at the
direction of the board of directors, a chairman of the board, one or more vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
and such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article. Officers other than president and chairman of the
board need not be directors. Any person may hold two or more offices.
Section 2. ELECTION. The officer of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by the board of directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The board of directors may
appoint such other officers as the business of the corporation may require, each
of whom shall hold office for such period, have such authority and perform such
duties as are provided in the By- Laws or as the board of directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the board.
Any officer may resign at any time by giving written notice to the
board of directors or to the president, or to the secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there
shall be such an officer, shall, if present, president at all meetings of the
board of directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the board of directors or prescribed by
the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board, or if there be none, at all meetings of
the board of directors. He shall be ex-officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents, in order of their rank as fixed by the board of
directors, or if not ranked, the vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the By-Laws.
Section 9. SECRETARY. The secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the board of
directors may order, or all meetings of directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office,
a share register, or a duplicate share register, showing the names of the
shareholders and their addresses; the number and classes of shares held by each;
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the board of directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or the By-Laws.
Section 10. TREASURER. The treasurer shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any director.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or the By-Laws.
ARTICLE VI.
Miscellaneous
Section 1. RECORD DATE AND CLOSING STOCK BOOKS. The board of directors
may fix a time, in the future, not~exceeding fifteen (15) days preceding the
date of any meeting of shareholders, and not exceeding thirty (30) days
preceding the date fixed for the payment of any dividend or distribution, or for
the allotment of rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of the shareholders
entitled to notice of and to vote at any such meeting, or entitled to receive
any such dividend or distribution, or any such allotment of rights, or to
exercise the rights in respect to any such change, conversion or exchange of
shares, and in such case only shareholders of record on the date so fixed shall
be entitled to notice of and to vote at such meetings, or to receive such
dividend, distribution or allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares of the books of the
corporation after any record date fixed as aforesaid. The board of directors may
close the books of the corporation against transfers or shares during the whole,
or any part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register or
duplicate share register, the books of account, and minutes of proceedings of
the shareholders and directors shall be open to inspection upon the written
demand of any shareholder of the holder of a voting trust certificate, at any
reasonable time, and for a purpose reasonably related to his interests as a
shareholder, or as the holder of a voting trust certificate, and shall be
exhibited at any time when required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such inspection may be made in
person or by an agent of attorney, and shall include the right to make extracts.
Demand of inspection other than at a shareholders' meeting shall be made in
writing upon the president, secretary or assistant secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the board of directors.
Section 4. REPORT. The board of directors of the corporation shall
cause to be sent to the shareholders not later than one hundred twenty (120)
days after the close of the fiscal or calendar year annual report.
Section 5. CONTRACTS ETC., HOW EXECUTED. The board of directors, except
as in the By-Laws otherwise provided, may authorize any officer or officers,
agent or agents, to enter into any contract, deed or lease or execute any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances; and unless so authorized by
the board of directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or the pledge
its credit to render it liable for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
shareholder when any such shares are fully paid up. All such certificates shall
be signed by the president or a vice president and the secretary or an assistant
secretary, or be authenticated by facsimiles of the signature of the president
and secretary or by a facsimile of the signatures or the president and the
written signature of the secretary or an assistant secretary. Every certificate
authenticated by a facsimile of a signature must be countersigned by a transfer
agent or transfer clerk.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS. The
president or any vice president and the secretary or assistant secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation or
corporations may be exercised either by such officers in person or by any person
authorized so to do by proxy or power of attorney duly executed by said of
officers.
Section 8. INSPECTION OF BY-LAWS. The corporation shall keep in its
principal office for the transaction of business the original or a copy of the
By-Laws as amended, or otherwise altered to date, certified by the secretary,
which shall be open to inspection by the shareholders at all reasonable times
during office hours.
Section 9. INDEMNIFICATION. The corporation shall indemnify its
officers and directors for any liability including reasonable costs of defense
arising out of any act or omission of any officer or director on behalf of the c
oration to the full extent allowed by the laws of the state of Utah.
ARTICLE VII
Amendments
Section 1. POWER OF SHAREHOLDERS. New By-Laws may be adopted or these
By-Laws may be amended or repealed by the vote of shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of shareholders as
provided in Section 1 of this Article VII to adopt, amend or repeal By-Laws,
By-Laws other than a By-Law or amendment thereof changing the authorized number
of directors may be adopted, amended or repealed by the board of directors.
Certificate of Secretary
The undersigned does hereby certify that the undersigned is the Secretary of The
Canton Industrial Corporation, a corporation duly organized and existing under
and by virtue of the laws of the State of Nevada; that the above and foregoing
By-Laws of said corporation were duly and regularly adopted as such by the Board
of Directors of said corporation at the first meeting of said Board, which was
duly and regularly held on the 30th day of March, 1993, and that the above
foregoing By-Laws are now in full force and effect.
Dated: 3/29/93
/s/ Richard Surber, Secretary
Richard Surber Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE BY-LAWS
OF
THE CANTON INDUSTRIAL CORPORATION
THIS AMENDMENT TO THE BY-LAWS OF THE CANTON INDUSTRIAL CORPORATION
("Amendment") is made and entered into this 17th day of May, 1995 by The Canton
Industrial Corporation (the "Corporation").
WHEREAS, the Corporation adopted those certain Bylaws of The Canton
Industrial Corporation effective March 29, 1993 ("By-Laws"); and
RESOLVED, the Corporation desires to amend the By-Laws as set forth
below.
NOW, THEREFORE, as duly authorized by the Board of Directors of the
Corporation, the By-Laws are hereby amended as follows:
1. Article VI, Section 4 of the By-Laws is hereby deleted and replaced
in its entirety by the following:
The board of directors of the corporation shall cause to be sent to the
shareholders not later than two hundred ten (210) days from the close
of the fiscal or calendar year, an informative letter to the
shareholders regarding the years operating results.
2. Article VI, Section 9 of the By-Laws is hereby deleted and replaced
in its entirety by the following:
The corporation shall indemnify its officers and directors for any
liability including reasonable costs of defense arising out of an act
or omission of any officer or director on behalf of the corporation to
the full extent allowed by the laws of the State of Nevada.
3. Except as modified hereby, the By-Laws of the Corporation are
unchanged and remain in full force and effect.
IN WITNESS WHEREOF, this Amendment is executed the day and year first
above written.
The Canton Industrial Corporation
/s/ Richard Surber
Richard Surber, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE BY-LAWS
OF
THE CANTON INDUSTRIAL CORPORATION
THIS AMENDMENT TO THE BY-LAWS OF THE CANTON INDUSTRIAL Corporation
("Amendment") is made and entered into this 5th day of December, 1995 by The
Canton Industrial Corporation (the "Corporation").
WHEREAS, the Corporation adopted those certain By-Laws of the
Corporation effective March 29, 1993 ("By-Laws"); and
RESOLVED, the Corporation desires to amend the By-Laws as set forth
below.
NOW THEREFORE, as duly authorized by the Board of Directors of the
Corporation, the By-Laws are hereby amended as follows:
1. Article II, Section 1 of the By-Laws is hereby deleted and
replaced in its entirety by the following:
MEETING PLACE. All bi-annual meetings of shareholders and
other meetings of shareholders shall be held either at the
principal office or at any other place within or without the
State of Nevada which may be designated either by the board of
directors, pursuant authority hereinafter granted to said
board, or by written consent of shareholders entitled to vote
thereat, given either before or after the meeting and filed
with the secretary of the Corporation.
2. Article 11, Section 2 of the By-Laws is hereby deleted and
replaced in its entirety by the following:
BI-ANNUAL MEETINGS. The bi-annual meetings of shareholders
shall be held on the third Monday of April every even numbered
year, at the hour of 10:00 a. m. of said day commencing with
the year 1994, provided however, that should said day fall
upon a legal holiday then any such bi-annual meeting of
shareholders shall be held at the same time and place on the
next day thereafter ensuing which is not a legal holiday.
Written notice of each bi-annual meeting, signed by the
president or vice president, or the secretary, or an assistant
secretary, or by such other person or persons as the directors
shall designate, shall be given to each shareholder entitled
to vote thereat, either personally or by mail or other means
of written communication, charges pre-paid, addressed to such
shareholder at his address appearing on the books of the
Corporation, or given by him to the Corporation for the
purposes of notice. If a shareholder gives no address, notice
shall be deemed to & have been given to him, if sent by mail
or other means of written communication addressed to the place
where the principal office of the Corporation is situated, or
if published at least once in some newspaper of general
circulation in the county in which said office is located. All
such notices shall be sent to each shareholder entitled
thereto not less than ten (10) nor more than sixty (60) days
before each bi-annual meeting, and shall specify the place,
the day and the hour of such meeting, and shall also state the
purpose or purposes for which the meeting is called.
Failure to hold the bi-annual meeting shall not constitute
dissolution or forfeiture of the Corporation, and special
meeting of the shareholders may take the place thereof.
3. Article V, Section 1 is hereby deleted in its entirety and
replaced by the following:
The officers of the Corporation shall be a president, and a
secretary/treasurer. The Corporation may also have, at the
direction of the board of directors, a chairman of the board,
one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions
of Section 3 of this Article. Officers of the Corporation,
other than the chairman of the board if there shall be such an
officer, need not be directors.
Any person may hold two or more offices.
4. Except as modified hereby, the By-Laws of the Corporation
are unchanged and remain in full force and effect.
IN WITNESS WHEREOF, these Amendments are executed the day and year as stated
above.
The Canton Industrial Corporation
/s/ Richard Surber
Richard Surber, Director
/s/ Phil Lamb
Phil Lamb, Director
/s/ Lorin Pace
Lorin Pace, Director
MUTUAL RELEASE OF ALL CLAIMS
This Mutual Release of all claims ("Release") is made and entered into this 12th
day of May, 1995, by and between Canton Industrial Corporation, a Nevada
Corporation ("Canton"), ATC II, Inc. ("ATC II"), and Thistle Properties, Inc.,
an Illinois Corporation and a wholly owned subsidiary of ATC II, Inc.
("Thistle") with reference to the following facts:
A. Pursuant to a Real Estate Sales Agreement (RESA)("Agreement") dated
August 23, 1994 and effective June 20, 1994 (as amended by the Amendment to Real
Estate Sales Agreement (ARESA) of even date and effectiveness, Canton sold to
Thistle certain real and personal property known as the Canton Plant located at
260 East Elm, Canton, Illinois.
B. The purchase price under the RESA/AREASA was secured by the Canton
Plant and 100% of ATC II, Inc. Stockholding in Thistle under the aegis of a Real
Estate Lien Note ("Note")(as amended) dated December 20, 1994 entered into
between Thistle and Canton. By the terms of this Note, Thistle was obligated to
make interest only payments monthly with the entire balance due on or before
October 15, 1999. Under Clause 5(a) of the Note, default in payments on interest
or principal automatically triggered the acceleration clause and made the entire
unpaid balance immediately due and payable.
C. Thistle Properties has recently received a Notice of Default of Real
Estate Lien from Canton Industrial Corporation.
D. After due deliberations by the Board of Directors of ATC II, Inc.,
and extensive consideration of the financial position of ATC II, Inc. And
Thistle, with the knowledge that neither ATC II, Inc. nor Thistle can bear the
financial burden of meeting the obligations under the Note or comply with (and
thus bear the financial consequences of) the Interim Consent Order entered into
on March 8, 1994 requiring the environmental clean-up of the Canton Plant, ATC
II, Inc., Thistle Properties and Canton have agreed that in consideration for
the release of the former's financial obligations under the RESA/ARESA and Note,
the transfer of the ATC II, Inc. Stockholding in Thistle to Canton, and the
release of all claims by ATC II to any assets of Thistle Properties, the parties
shall furnish mutual releases as set forth below.
NOW THEREFORE, in consideration of the mutual releases to be furnished
by each party to the other(s), the parties agree as follows:
1. Canton agrees that the consideration tendered by ATC II, Inc. and
Thistle and accepted by Canton is in complete and full satisfaction of any and
all past, present and future obligations, debts and liabilities (whether known
or unknown, foreseen or unforeseen or previously accrued or unaccrued) including
but not limited to, rights of actions, judgments, executions, suits, accounts,
covenants, indemnifications, claims and demands whatsoever, in law or in equity,
owned by or in favor of Canton, and its affiliates, and their respective legal
representatives, successors, assigns, officers, directors, agents and partners
against Thistle and ATC II, Inc. or their affiliates relating to the Agreement
or any related agreements.
<PAGE>
2. To the extent that claims are released in this Release each of the
parties hereto hereby waive all rights each of the parties may have against the
other in such released claims. The import of this provision has been fully
explained to them by their respective attorneys, and they nevertheless elect to
and hereby do release each of the other parties from all claims they may have
against them, whether known or unknown, arising from and limited to the subject
matter of the Agreement, as described hereinbefore, and each of the parties
hereto fully understands that if the facts each relied on with respect to this
Release are hereafter found to be other than or different from the facts now
believed by them to be true, they expressly accept and assume the risk of such
possible differences in fact and agree that this Release shall be and remain
effective as to the released claims, notwithstanding any such difference.
3. The parties acknowledge that they entered into this Release
voluntarily with full knowledge of its significance and legal effect and without
inducement from or reliance upon any information, data, or representation of any
kind whatsoever supplied by the other party hereto, or their affiliates, and
they warrant and represent that they have full authority to execute this
Release. Each party has had full opportunity to investigate all facts and
information necessary to enter into this Release and does so based upon such
investigation. The signatories to this Release warrant and represent that they
possess full authority to execute this Release on behalf of their respective
principals, the parties hereto.
4. In the event of any litigation relating to the enforcement or
interpretation of this Release, the prevailing party shall be entitled to
reasonable attorneys' fees and costs of litigation.
5. This Release shall be binding upon and benefit the affiliates,
successors, assigns and legal representatives of the parties hereto.
6. This Release shall be interpreted and governed by the laws of the
State of Utah. The language of all parts of this Release shall in all cases be
construed as a whole, according to its fair meaning, and not strictly for or
against any of the parties.
7. The provisions of this release are severable, and if any part of it
be found to be unenforceable, the other parts shall remain fully valid and
enforceable. This Release shall survive the termination of any arrangements
herein.
8. This document constitutes the entire agreement between the parties
hereto regarding the subject matter hereof, and supersedes all other prior
agreements, representations and covenants, written or oral, with respect
thereto.
9. The releases of and by ATC II, Inc. And Thistle and of and by Canton
pursuant to this Release shall be deemed to extend to and constitute releases by
Canton to ATC II, Inc. And its affiliates.
IN WITNESS WHEREOF, the parties have executed this Release on the date
first above written.
CANTON INDUSTRIAL CORPORATION THISTLE PROPERTIES, INC.
/s/ Richard Surber /s/ Dr. Gerald Curtis
Richard D. Surber, President Dr. Gerald Curtis, President
ATC II, Inc.
/s/ Dr. Gerald Curtis
Dr. Gerald Curtis, President
AGREEMENT OF PURCHASE AND SALE
This Agreement of Purchase and Sale ("Agreement") is entered into by
and between The Canton Industrial Corporation, a Nevada corporation ("Seller")
and Associated Technologies, Inc., a Pennsylvania corporation ("Buyer") on this
23rd day of March, 1995.
1. SALE.
Seller does hereby agree to sell to Buyer and Buyer does
hereby agree to purchase from Seller full legal right, title and
interest to each and every item listed in Exhibit A attached hereto
(the "Assets").
2. PURCHASE PRICE AND PAYMENT TO SELLER.
A. PURCHASE PRICE. The purchase price (hereinafter "Purchase
Price") to be paid by Buyer to Seller for the Assets is $60,000 plus
10% of the net profit of Buyer for the next five (5) years which term
shall begin on the date of this Agreement. To verify the net profit of
Buyer for the next five (5) years, Buyer shall disclose to Seller its
annual financial statements within 30 days after the end of Buyer's
fiscal year.
B. PAYMENT. The Purchase Price shall be payable in five annual
payments of $12,000 in addition to 10% of the net profit of Buyer for
each year with the first payment due on March 1, 1996. Each subsequent
payment shall be due on this same date in 1997, 1998, 1999, with the
final payment due on this date in the year 2000. Buyer may also make
payments in any amount before such due dates without penalty. Whenever
Seller receives the full Purchase Price, even if before scheduled by
this Agreement, Seller's right to receive 10% of the net profit of
Buyer shall immediately cancel.
C. SECURITY INTEREST. Buyer will accommodate Seller's filing,
in Philadelphia County, of a form UCC-1 securing Seller's interest in
the Assets until the full Payment Price is received by Seller, at which
time Seller will cause said security interest to be revoked. Buyer will
also use reasonable efforts to assist Seller's procurement of the
Release included as Exhibit B containing the notarized signature of
J.M.T. Mach. Co. Inc. (the Assets' current Landlord), stipulating that
Seller has an interest in the Assets superior to J.M.T. Mach. Co. Inc.
's interest.
3. TITLE TO THE ASSETS.
Within thirty (30) days of Seller's receipt of the full
purchase price, Seller shall convey to Buyer title to the Equipment,
free and clear of all liens, encumbrances and claims.
<PAGE>
4. SELLER'S REPRESENTATION AND WARRANTIES.
A. Seller is a duly organized and validly existing Nevada
corporation and has power and authority to own its properties and to
transact the business in which it is engaged and has the right, power,
legal capacity and authority to enter into and perform its obligations
under this Agreement.
B. Each representation and warranty of Seller contained in or
given in connection with this Agreement shall to the best knowledge of
Seller, have been true and correct in all material respects on the date
of this Agreement and again on and as of the Closing as if then made or
given, except to the extent such warranties and representations may
have been affected by changes specifically permitted or contemplated by
this Agreement.
5. BUYER'S REPRESENTATIONS AND WARRANTIES.
A. Buyer is a duly organized and validly existing Pennsylvania
corporation and has power and authority to own its properties and to
transact the business in which it is engaged and has the right, power,
legal capacity and authority to enter into and perform its obligations
under this Agreement.
B. Each representation and warranty of Buyer contained in or
given in connection with this Agreement shall to the best knowledge of
Buyer, have been true and correct in all material respects on the date
of this Agreement and again on and as of the Closing as if then made or
given, except to the extent such warranties and representations may
have been affected by changes specifically permitted or contemplated by
this Agreement.
C. Until this Agreement is entered into and the transactions
contemplated herein have been completed, Buyer agrees (a) not to
transfer, assign, or distribute in any way, other than in the ordinary
course of business, any of the assets currently in its possession or to
in any way substantially alter, or allow to be substantially altered,
the value of Buyer or the stock of Buyer, and (b) to continue operating
Buyer in substantially the same manner in which it is currently being
operated without the prior written consent of Seller.
6. REMEDIES.
Upon any breach of this Agreement by Buyer which breach is not
remedied within ten (10) days after Seller's notice, (a) Buyer shall
forfeit any and all payments made to Seller pursuant to this Agreement
as well as any and all rights and interests in Equipment provided by
this Agreement, (b) Seller shall seek an injunction to recover
Equipment, and (C) Buyer shall provide to Seller reasonable access to
Equipment for Seller's removal.
<PAGE>
7. NOTICES.
Whenever any party hereto shall desire to give or serve upon
the other any notice, demand, request or other communication, each such
notice, demand, request or other communication shall be in writing and
shall be given or served upon the other party by personal service,
overnight delivery by a recognized express company with acknowledgment
of receipt by addressee, or by first class United States mail, postage
prepaid, return receipt requested, addressed as follows:
TO BUYER: ASSOCIATED TECHNOLOGY
9988 GANTRY ROAD
PHILADELPHIA, PA 19115
ATTENTION: TONY GEONNOTTI
TO SELLER: THE CANTON INDUSTRIAL CORPORATION
268 WEST 400 SOUTH, SUITE 300
SALT LAKE CITY, UT 84101
ATTENTION: RICHARD SURBER
Any such notice, demand, request or other communication shall
be deemed to have been received upon personal delivery thereof or the
date on which receipt is acknowledged.
8. ATTORNEY'S FEES.
In the event that any party to this Agreement is required to
employ counsel or utilize its in-house counsel to enforce any of the
terms of this Agreement the prevailing party shall be entitled to
recover its reasonable attorneys' fees and court costs incurred.
9. COMPLETE AGREEMENT, EXHIBITS.
All understandings, communications and agreements heretofore
had between the parties are merged in this Agreement, which alone fully
and completely expresses the agreement of the parties. This Agreement
has been entered into after full investigation of the facts by both
parties and neither party has relied on any statement or representation
not embodied in this document. All Exhibits referred to and attached to
this Agreement are incorporated herein and form a part of this
Agreement as is set forth in full therein.
<PAGE>
10. GOVERNING LAW.
This Agreement shall be governed under the laws of the State
of Utah.
11. COUNTERPARTS, HEADINGS AND DEFINED TERMS.
This Agreement may be executed in several counterparts each of
which shall be an original, but all of such counterparts shall
constitute one such Agreement. The headings used herein are for
convenience only and are not to be construed to be part of this
Agreement. The terms "Buyer" and "Seller" as used herein shall include
the plural as well as the singular. If more than one person or entity
is named a "Buyer" the obligations of such persons or entities are
joint and several. As used herein the term "to the best knowledge" or
any similar phrase shall be deemed to include the assurance that such
knowledge is based upon a diligent investigation.
12. TIME OF THE ESSENCE.
Time is of the essence of this Agreement.
13. WAIVER AND SURVIVAL.
The waiver by one party of the performance of any covenant,
condition or promise shall not invalidate this Agreement, nor shall it
be considered to be a waiver by it of any other covenant, condition or
promise. The waiver by either or both parties of the time for
performing any act shall not constitute a waiver of the time for
performing any other act or an identical act required to be performed
at a later time. The representations, warranties, covenants, and
agreements of the parties contained herein shall survive the Closing
and shall not be merged into the Closing Documents.
<PAGE>
14. THIRD PARTIES.
Nothing contained in this Agreement, expressed or implied, is
intended to confer upon any person, other than the parties hereto and
their permitted successors or assigns, any rights or remedies under or
by reason of this Agreement.
15. SEVERABILITY.
In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
un-enforceability shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
16. ADDITIONAL DOCUMENTS.
Each party hereto agrees to perform any further acts and to
execute and deliver any further documents which may be reasonably
necessary to carry out the provisions of this Agreement.
17. ASSIGNMENT: BINDING EFFECT.
This Agreement is not assignable by either party without the
written consent of the other party. This Agreement shall be binding
upon the heirs, executors, administrators successors and assigns of
Seller and Buyer.
IN WITNESS WHEREOF, the parties hereto have entered in this Agreement
as of the date first set forth above.
THE CANTON INDUSTRIAL CORPORATION ASSOCIATED TECHNOLOGY
By: /s/ Richard Surber By: /s/ Anthony R. Geonotti
Richard Surber, President Tony Geonnotti, President
SELLER BUYER
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
QTY. ITEM DESCRIPTION ....................... PRICE TOTAL
<S> <C> <C> <C>
1 2 LOCKERS .............................. 60.00 60.00
1 HEALD #75A GRINDER W/15"SWING .......... 400.00 400.00
1 AIR HOSE & REEL ........................ 40.00 40.00
1 SHIPMATE #5A240 SHRINK
WRAP MACHINE ........................... 2500.00 2500.00
1 71 PC ASST. GRINDING STONES & SHELF 25.00 25.00
1 BLANC HARD GRINDER W/MAGNETIC
TABLE 10-16 ............................ 2600.00 2600.00
1 BLANCHARD GRINDER W/MAGNETIC
TABLE 11-16 ............................ 3700.00 3700.00
1 MILLPORT #28 MILLING PRESS W/MIT ....... 2700.00 2700.00
1 SUNNE HONING MACHINE # MBC-1800 ........ 4800.00 4800.00
1 H5 DRILL PRESS ......................... 525.00 525.00
1 H5 DRILL PRESS ......................... 525.00 525.00
1 LOCK COLLOET FIXTURES .................. 40.00 40.00
1 ASST. HOWA ACCS ........................ 100.00 100.00
1 SURFACE PLATE .......................... 25.00 25.00
1 2 TOOL LOCKERS ......................... 25.00 25.00
1 19 ASST. TOOL HOLDERS .................. 25.00 25.00
1 2 TRAYS, PIN GAUGES .................... 50.00 50.00
1 2 BX. PIN GAUGES ....................... 75.00 75.00
1 TELESCOPING GAUGES ..................... 20.00 20.00
1 2 PC. CALIPER .......................... 40.00 40.00
1 DUMORE AUTOMATIC DRILL HEAD ............ 50.00 50.00
1 TOOLING GUES W/DAEWOOD PANES ........... 20.00 20.00
1 ANGLE LG. ANGLE ........................ 100.00 100.00
1 3 PC. SMALL ANGLES ..................... 55.00 55.00
1 1 MED. & 3 SM. ANGLES .................. 55.00 55.00
5 STEEL TABLES ........................... 10.00 50.00
1 SURFACE PLATE 18 x 12 x 2 .............. 40.00 40.00
1 SURFACE PLATE 18 x 12 x 3 .............. 40.00 40.00
1 SURFACE PLATE 24 x 18 x 4 .............. 80.00 80.00
1 AMANO MJR 8000 TIME CLOCK & RACKS ...... 125.00 125.00
1 HEALD #72A GRINDER W/15" SWING ......... 700.00 700.00
1 HEALD #72A GRINDER W/15" SWING ......... 700.00 700.00
1 SURFACE PLATE .......................... 175.00 175.00
1 WASINO GANGSTER LATHE D.C .............. 3500.00 3500.00
1 WASINO GANGSTER LATHE D.C. S.5 ......... 3500.00 3500.00
1 WASINO GANGSTER LATHE SYSTEM 5 ......... 3500.00 3500.00
1 STEEL SHELF & STEEL CABINET ............ 50.00 50.00
1 COMBINATON LOT: 802, 803 ............... 50.00 50.00
1 CONTENTS OF SHELVING ................... 50.00 50.00
1 COMBINATION LOT: 805, 806, 807 ......... 25.00 25.00
1 GRENBY INT'L GRINDER ................... 175.00 175.00
1 HEALD #72A GRINDER W/15" SWING ......... 380.00 380.00
1 KBC MDL. #LF800G GRINDER 14" WHEEL
11" SWING .............................. 1300.00 1300.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER ..................... 150.00 150.00
1 HARVEL CAM GRINDER W/HYD ............... 150.00 150.00
1 HARVEL CAM GRINDER W/HYD ............... 150.00 150.00
1 RUR 800 GRINDER ........................ 1200.00 1200.00
1 ELITE M-1000 GRINDER ................... 1500.00 1500.00
1 HEALD #72A GRINDER W/15" SWING ......... 200.00 200.00
1 HEALD #72A GRINDER W/15" SWING ......... 200.00 200.00
1 BROWN & SHARP GRINDER #20 30" WHEEL
13" SWING .............................. 800.00 800.00
1 FARREL SELLERS ......................... 450.00 450.00
1 BLUEPRINT CABINET ...................... 50.00 50.00
ITEM(S) TOTAL 39275.00
</TABLE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Agreement"), effective May 1, 1995, is
entered into by and among The Canton Industrial Corporation, a Nevada
corporation, with principal offices at 268 West 400 South, Suite 300, Salt Lake
City, Utah 84101 ("Canton"), A-Z Professional Consultants, a Utah corporation
("A-Z"), and Allen Wolfson, an individual residing in Salt Lake City, Utah
("Wolfson") (Canton, A-Z and Wolfson to be collectively referred to as the
"Parties").
Recitals
A. A-Z and Canton entered into a Consulting Agreement on June 1, 1994, a copy of
which is attached as Exhibit A, whereby A-Z was to provide advice and consulting
services to Canton (the "Consulting Agreement"). Canton was to pay for such
services with, at its option, monthly payments of either 200,000 (pre-August
1994 10-1 reverse stock split, now equivalent to 20,000) shares of Canton's
common stock or $8,000 in lawful funds.
B. The Consulting Agreement was mutually canceled by a Termination Agreement
dated September 30, 1994, a copy of which is attached as Exhibit B, by and
between Canton and A-Z (the "Termination Agreement"), after services were
provided between June 1994 - September 1994, for four months.
C. The Parties hereby agree that Wolfson personally and exclusively rendered
services on behalf of A-Z to Canton for the duration of the Consulting
Agreement. The Parties further agree that Wolfson, personally and exclusively,
is therefore entitled to receive the remuneration due from Canton for such
services. Canton hereby opts to make payment in the form of common stock in the
amount of 80,000 shares, representing four months of services at 20,000 shares
per month, reflecting Canton's August 1994 stock split.
D. To date, the only form of payment made by Canton in return for services which
were provided pursuant to the Consulting Agreement was the issuance, effective
December 19, 1994, of 80,000 free-trading shares of its common stock pursuant to
Form S-8 of the Securities Exchange Act of 1934 ("Form S-8"), 40,000 to each of
A-Z's designees, the David Michael Irrevocable Trust and the Alexander W.
Senkovski Irrevocable Trust (such trusts to be hereinafter referred to as the
"Children's Trusts"). Canton acknowledges that it erroneously authorized and
Canton's transfer agent, IDATA, erroneously issued, such shares because Form S-8
does not allow free-trading shares to be issued to anyone other than a natural
person. Since the shares were essentially issued to A-Z, who then assigned them
to the Children's Trusts, and A-Z is not a natural person, the shares are not in
conformity to Form S-8, and are therefore invalid. The shares issued to A-Z's
designees, the Children's Trusts, have been canceled, which means Canton has not
paid and Wolfson has not received anything for the services rendered pursuant to
the Consulting Agreement.
<PAGE>
E. As payment for the services Wolfson rendered to Canton, Canton will issue
Wolfson 80,000 shares of its common stock pursuant to Form S-8.
F. Upon Wolfson's receipt of 80,000 shares of Canton's commons stock, A-Z will
formally waive its right to receive any compensation from Canton for services
the latter received pursuant to the Consulting Agreement.
Agreement
NOW THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and agreements contained herein, and in reliance on the representations and
warranties set forth in this Agreement, the benefits to be derived herein and
for other valuable consideration, the sufficiency of which is hereby expressly
acknowledged, the Parties agree as follows:
1. The Parties agree that Canton received four months of services (June 1994 -
September 1994) pursuant to the Consulting Agreement for which Canton agreed to
pay, at its option, either 20,000 post reverse stock split shares of its common
stock (the Consulting Agreement actually provided for the option to pay 200,000
shares, but due to Canton's August 1994 10-1 reverse stock split, the current
equivalent is 20,000) or $8,000 in lawful funds. Canton has chosen to pay in
common stock for the four months of services and therefore must legally issue
80,000 shares of its common stock before its obligations under the Consulting
Agreement are extinguished.
2. The Parties agree that Wolfson personally and exclusively performed the
services Canton received pursuant to the Consulting Agreement, and consequently
that Wolfson is personally and exclusively entitled to receive the remuneration
Canton owes for the five months of services it received pursuant to the
Consulting Agreement.
3. Canton had agreed to issue 80,000 free-trading shares of its common stock to
A-Z pursuant to Form S-8, who assigned such rights to the Children's Trusts.
Canton caused the issuance of 80,000 to the Children's Trusts as payment for the
services Wolfson rendered. However, such issuance was improper because Form S-8
only allows the issuance of free-trading shares to natural persons. Although
formally issued to the Children's Trusts, the shares were actually issued to A-Z
who then assigned them to the Children's Trusts. Due to the fact A-Z is not a
natural person the shares are not in conformity to Form S-8 and are therefore
invalid. Canton has therefore authorized its transfer agent to cancel the 80,000
shares issued to the Children's Trusts, meaning that Canton has not paid and
Wolfson has not received anything for the services rendered pursuant to the
Consulting Agreement.
<PAGE>
4. The Parties agree that upon Canton's issuance of 80,000 shares of its common
stock to Wolfson pursuant to Form S-8, the Consulting Agreement will be complete
and all rights and obligations discharged.
IN WITNESSETH WHEREOF, the signatures of the Parties below evidence
their execution of this Settlement Agreement.
A-Z Professional Consultants The Canton Industrial Corporation
/s/ Richard Surber /s/ Richard Surber
Richard Surber, President Richard Surber, President
Allen Z. Wolfson
/s/ Allen Z. Wolfson
ASSIGNMENT AND ACKNOWLEDGMENT
THIS ASSIGNMENT and acknowledgment are entered into by and among The
Canton Industrial Corporation, a Nevada corporation ("Canton"), Investment
Sanctuary Corporation, a Utah corporation ("Investment"), Allen Wolfson, an
individual residing in Salt Lake City, Utah ("Wolfson"), and Richard Surber, an
individual residing in Salt Lake City, Utah ("Surber") this 4th day of May 1995
(Canton, Investment, Wolfson and Surber to be collectively referred to
hereinafter as the "Parties")
Recitals
A. Canton and Investment entered into a Consulting Agreement on September 30,
1994 (the "Agreement"), by which the latter would provide advice, analysis and
consulting services relating to the former's management, growth and public
communications. Canton was to compensate Investment with monthly payments of, at
Canton's option, either $20,000 shares of its common stock, the price of such
stock to he determined by the average of the bid and ask price for the month
during which the services were rendered, or twenty thousand dollars ($20,000) in
lawful funds.
B. Investment waived its right to payment for services rendered through December
31, 1994, but has to date not received compensation for services provided to
Canton since January 1, 1995, meaning Canton is indebted for four months of
services.
C. The Parties agree that all services rendered since January 1995 pursuant to
the Agreement were rendered by Wolfson and Surber (the "Consultants"),
personally and exclusively, as consultants of Investment. Because of the
exclusive performance of these services by the Consultants, Investment and
Canton agree that the Consultants should personally and directly receive the
compensation Canton owes pursuant to the Agreement.
D. Investment hereby acknowledges that the Consultants are personally and
exclusively entitled to receive any and all compensation due from Canton
pursuant to the Agreement for services rendered since January 1995, and
Investment hereby assigns any and all rights it has to receive such compensation
pursuant to the Agreement to the Consultants.
E. As Canton desires to make such compensation in the form of common stock, the
Consultants will be issued $20,000 worth of Canton's common stock~ for each of
four months beginning January 1995, and this issuance will bring Canton's
compensatory obligations relative to the Agreement current to date.
<PAGE>
Assignment and Acknowledgment
NOW THEREFORE, based on the foregoing premises, which are incorporated
herein by this reference, and for and in consideration of the mutual covenants
and Assignments and Acknowledgments contained herein, and in reliance on the
representations and warranties set forth in this Assignment and Acknowledgment,
the benefits to be derived herein and for other valuable consideration, the
sufficiency of which is hereby expressly acknowledged, the Parties agree as
follows:
1. Pursuant to the Agreement, Canton is indebted for receiving four
months, January 1995 - April 1995, of services pursuant to the
Agreement. Investment waived its right to payment for services rendered
beginning on September 30, 1994 through December 31, 1994.
2. The Parties agree that all services rendered since January 1995
pursuant to the Agreement were rendered by the Consultants, personally
and exclusively, and therefore the Consultants should personally and
exclusively receive the compensation Canton owes pursuant to the
Agreement.
3. In furtherance of the agreement listed in the preceding paragraph,
Investment hereby acknowledges that the Consultants are personally and
exclusively entitled to receive any and all compensation due from
Canton pursuant to the Agreement for services rendered since January
1995, and Investment hereby assigns any and all rights it has to
receive such compensation pursuant to the Agreement to the Consultants.
4. Canton hereby chooses to compensate the Consultants in the form of
common stock, rather than in lawful funds and will cause to be issued
$20,000 worth of Canton's common stock for each of four months
beginning January 1995, half in each Consultant's name pursuant to Form
S-8 of the Securities Exchange Act of 1934. The stock price used to
determine the quantity of shares the Consultants will receive is based
on the average of the bid and ask price for each month during which the
services were rendered. The following table contains the bid and ask
prices for each month services are being compensated herein and
contains the number of shares due for each month, which is derived by
figuring the quantity of shares needed each month to equal $20,000
worth of Canton's common stock:
<TABLE>
<CAPTION>
Number of
Month Bid Price Ask Price Average Price Shares Due
<S> <C> <C> <C> <C>
January 1995 $0.4 1375 $0.4375 $0.4256 46,990
February 1995 0.5626 0.3125 0.4375 45,714
March 1995 0.6000 0.28125 0.4406 45,390
April 1995 0.8750 0.46875 0.6718 29.767
TOTAL SHARES PAYABLE = 167,771
</TABLE>
<PAGE>
The Parties agree that for convenience purposes the total shares
payable to the Consultants as full compensation for their services
rendered to Canton during January thru April of 1995 will be 167,000,
with Surber to receive 87,000 shares and Wolfson to receive 80,000
shares of Canton's common stock issued pursuant to Form S-8.
5. Investment agrees that execution of the above actions will relieve
Canton from any compensatory obligations owed to Investment for
services rendered for the months January 1995, February 1995, March
1995, and April 1995 to Canton pursuant to the Agreement.
IN WITNESSETH WHEREOF, the below signatures evidence the Parties
execution of this Settlement Assignment.
The Canton Industrial Corporation Investment Sanctuary Corporation
/s/ Richard Surber /s/ Richard Surber
Richard Surber, President Richard Surber, President
Richard Surber Allen Wolfson
/s/ Richard Surber /s/ Allen Wolfson
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of this 23 day of May, 1995, by and
between CANTON PROPERTIES I, INC. , 202 West 400 South, Suite 100, Salt Lake
City, UT 84101 ("Seller"), and ASSET RECOVERY, INC., 79 South Main Street, Suite
1100, Salt Lake City, Utah 84111 ("Purchaser").
RECITALS
WHEREAS, Seller is the owner of a 2/3rds fee interest in a certain
parcel of land located 230 West 400 South, Salt Lake City, Utah (the "Subject
Property"); and,
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase the Subject Property from Seller on the terms and conditions
hereinafter more fully set out.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and conditions of
this Agreement, the parties agree as follows:
ARTICLE I
The Property
1.1 The Property. Subject to the terms and provisions of this
Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase
from Seller, the Subject Property, located at 230 West 400 South, Salt Lake
City, Utah , more particularly described as follows:
BEGINNING at the Southwest corner of Lot 1, Block 49, Plat "A", Salt
Lake City Survey, and running thence North 165 feet; thence East 165
feet; thence South 165 feet; thence West 165 feet to the point of
BEGINNING.
1.2 Easements and Licenses. The Subject Property shall include such
easements and licenses held by the Seller for ingress and egress from the parcel
to be sold (regardless of whether such rights are included in the above legal
description), including, but not limited to vehicle access, parking and
utilities.
<PAGE>
ARTICLE II
Purchase Price
2.1 Purchase Price. The total purchase price for the Subject Property
shall be ONE HUNDRED FORTY NINE THOUSAND FIVE HUNDRED DOLLARS ($149,500.00), to
be paid or evidenced at the Closing as defined herein, subject to any credits
provided for in this Agreement.
2.2 Earnest Money Deposit. Upon opening of escrow, Purchaser shall
deposit with the title Company described in Section 2.3 below the sum of Five
Thousand Dollars ($5,000.00) as an Earnest Money Deposit to be credited against
the Purchase Price. Purchaser shall have until June 9, 1995 ("Due Diligence
Period"), in which to examine title, to review zoning and land use requirements,
to conduct traffic studies, to inspect the Property, to conduct tests, including
environmental, soils, percolation and engineering tests, in order to determine
in its sole discretion whether the Property is suitable for Purchaser's uses and
purposes. In the event that at the end of the Due Diligence Period Purchaser
shall determine that the Property is not acceptable after having made its
inspections, title review and tests, the Purchaser shall notify the Seller on or
before June 9, 1995, that it will not be closing, and the Earnest Money Deposit
shall be forfeited.
2.3 Escrow. Within three (3) business days after the full execution of
this Agreement, an escrow shall be opened with Ms. Victoria Walker, Escrow
Officer of First American Title Company of Utah, 330 East 400 South, Salt Lake
City, Utah 84111 ("Title Company").
ARTICLE III
Title and Existing Lease
3.1 Title Binder. Seller shall, within ten (10) days of the date of
this Agreement furnish to Purchaser a title commitment for an ALTA Owner's
Policy of Title Insurance (the "Title Binder"), issued through the title
Company, describing the land, listing Purchaser as the prospective named insured
and showing as the policy amount "$149,500".
3.2 Review of Title. Purchaser shall have ten (10) days from the
receipt of the title Binder (the "Review Period"), in which to notify Seller of
any objections Purchaser has to any matters shown or referred to in the title
Binder. Any title encumbrances or exceptions which are set forth in the Title
Binder and to which Purchaser does not object within the Review Period (as to
the Title Binder), shall be deemed to be permitted exceptions to the status of
Seller's title (the "Permitted Exceptions"). With regard to items to which
Purchaser does object within the Review Period, Seller shall have a period of
ten (10) days from the date of Purchaser's notice, in which to cure objections.
If Seller is unwilling or unable to cure such objections within the ten (10) day
period, Purchaser may at Purchaser's option waive the objections not cured, or
terminate this Agreement by written notice to Seller. In the event that the
Title Binder discloses the existence of liens against the Subject Property or
the Seller, Purchaser shall have subject to Seller's reasonable prior agreement,
the right to apply whatever portion of the Purchase Price necessary to remove
such liens at Closing. Notwithstanding the above, the existing trust deed
against the property shall be paid off and removed of record by utilizing
purchase money funds paid by Seller as part of the Purchase Price.
3.3 Existing Lease. The Subject Property is subject to that certain
Ground Lease dated October 1, 1975, among Carl M. Lollin and Virginia S. Lollin,
his wife; John F. Lollin and Pauline M. Lollin, his wife; and Dianthalin M.
Verange (aka Dianthalin Solomon), as Lessors, and Harold N. Wilkinson and Lurene
G. Wilkinson, his wife; and Brent R. Dyer and Carol Lynn Dyer, his wife, as
Lessees ("Lease"). Seller agrees to assign its right as Landlord under the Lease
to Purchaser at Closing.
<PAGE>
ARTICLE IV
Representations and Warranties
4.1 Inspection. Purchaser and its authorized representatives shall have
the right to inspect the Subject Property. In connection with such inspection
(including soils and environmental tests), Purchaser agrees to indemnify and
hold harmless Seller against all claims, losses, actions or causes of action
which may be suffered by Seller in connection with the presence on the Subject
Property of Purchaser or any of its agents or representatives.
4.2 Environmental Status. Seller agrees to provide to Purchaser copies
of any environmental studies which may have been performed by Seller on or near
the Subject Property. Purchaser shall have the right to prepare an Expanded
Phase I Environmental Assessment covering the Subject Property (the "Report"),
Purchaser shall have fifteen (15) days in which to examine the Report. In the
event that Purchaser determines that the Subject Property has environmental
problems, or in the event that the Report suggests a Phase II Environmental
Assessment ("Phase II Report"), Purchaser shall have the right to perform the
Phase II Report. After Purchaser has concluded its environmental studies, it
shall notify Seller in writing setting forth the environmental defects and the
suggested actions for remediation. Seller shall then have the option to perform
the remediation suggested in the Report (or Phase II Report if applicable), or
to notify Purchaser that Seller is unwilling to perform such remediation. In the
event that Seller refuses to correct the environment problems set forth in the
Reports, Purchaser shall have the option to perform the remediation or to
terminate this Agreement.
4.3 Representations and Warranties of Seller. Seller hereby represents
and warrants as of the date hereof and agrees to represent and warrant as of the
Closing Date that:
(a) There is no pending condemnation or similar proceeding
affecting the Subject Property or any portion thereof, and Seller has
not received any written notice and has no knowledge that any such
proceeding is contemplated.
(b) Seller is not prohibited from consummating the
transactions contemplated in this Agreement, by any law, regulation,
agreement, instrument, restriction, order or judgment.
(c) Seller has full right, title, authority and capacity to
execute and perform this Agreement and to consummate all of the
transactions contemplated herein.
<PAGE>
(d) Seller has no actual knowledge of environmental problems
concerning the Subject Property and has not received notification from
any federal, state or local agency as to any environmental deficiencies
related to the Subject Property.
(e) Seller has not received notice of nor has any actual
knowledge of any violation of any statute, ordinance, rule or
regulation of any governmental authority in connection with its
ownership and use of the Subject Property, nor has it received notice
from any such governmental authority requiring any work to be done
affecting the Subject Property.
4.4 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants as of the date hereof and agrees to represent and
warrant as of the closing date that Purchaser has full power and authority to
enter into and perform the terms of this Agreement. Neither the execution and
delivery of this Agreement nor its performance by Purchaser will conflict with
or result in the breach of any contract, agreement, law, rule or regulation to
which Purchaser is a party of by which Purchaser is bound.
ARTICLE V
Conditions Precedent to Closing
5.1 Conditions Precedent to Purchaser's Obligation to Close.
Purchaser's obligation to consummate the transactions contemplated hereunder is
conditioned upon satisfaction of each of the following conditions at or prior to
the Closing (or such earlier date as is specified with respect to a particular
condition):
(a) Survey and Title Use. Purchaser shall have approved the Title
Binder provided by Seller.
(b) Inspections. The condition of the Subject Property shall meet the
approval of Purchaser, In Purchaser's sole judgment and discretion, based upon
on-site inspections of the subject Property to be made by Purchaser or
Purchaser's representatives. Such inspections of the Subject Property by
Purchaser or Purchaser's representatives are to be conducted in such a manner as
not to physically damage the Subject Property.
(c) Continuing Warranties. None of the representations and warranties
of Seller set forth in Article IV hereof shall be untrue or inaccurate in any
material respect.
(d) Performance. Seller shall not have failed to perform or comply with
any of its agreements or obligations in a material manner and within the periods
provided herein.
(e) Conveyance to Mark Elardo. This sale is contingent upon Purchaser
closing its transaction with Mark Elardo for the conveyance by Purchaser of the
leasehold interest in the property. Said conveyance may take place
contemporaneously with Closing. In event that Mark Elardo does not close with
the Purchaser on or before June 9, 1995, Purchaser shall notify Seller of
Elardo's failure to close and Seller shall direct the Title Company to refund
the Earnest Money Deposit to Purchaser and this Agreement shall terminate.
<PAGE>
In the event that all of the above conditions are not satisfied by June
9, 1995, Purchaser may terminate this Agreement by written notice to Seller. In
the event of such termination, the parties shall have no further rights or
obligations towards each other hereunder, and except for the contingency set
forth in 5.1(e) above, the Earnest Money Deposit shall be forfeited. In the
event the above conditions have not been satisfied three (3) days prior to
Closing and this Agreement has not been terminated, all such conditions (except
paragraph 5.1(e) or Seller's inability to deliver marketable title at Closing),
shall be deemed to have been waived by Purchaser.
ARTICLE VI
Closing
6.1 Time and Place of Closing. Provided that all of the conditions of
this Agreement shall have been satisfied the Closing shall take place at the
Title Company on June 9, 1995, or such other date as may be mutually agreed to
by the parties.
6.2 Events of Closing. At the closing:
(a) Seller shall deliver to Purchaser the following:
(1) A Special Warranty Deed (in form and substance reasonably
acceptable to Purchaser and Purchaser's counsel) duly executed and
acknowledged by Seller, conveying to Purchaser Seller's 2/3rds interest
in the Subject Property, in indefeasible fee simple; and,
(2) a commitment from the Title Company to issue its Standard
Owner's Policy of Title Insurance issued by the Title Company
conforming to the requirements of Article III above insuring
Purchaser's title in indefeasible fee simple in the amount of the
purchase price and containing no exceptions other than the Permitted
Exceptions; and,
(3) documentation of the authority and capacity of Seller and
its representatives to enter into the transaction contemplated
hereunder as Purchaser or Title Company may reasonably require; and,
(4) an assignment of all of Canton's right, title and interest
in the Lease.
(b) Purchaser shall deliver to Seller the following:
<PAGE>
(1) The consideration required pursuant to Article II above,
in cash or by Purchaser's certified or cashier's check in U.S. funds
available immediately to Seller; and,
(2) documentation of the authority and capacity of Purchaser
and its representatives to enter into the transaction contemplated
hereunder as Seller or Title Company may reasonably require; and,
(3) a release by Purchaser which is effective to release
Canton from any and all claims Purchaser has or may have against Canton
for its tortious interference with Purchaser's attempt to sell its
leasehold interest in the property. The form of the release and the
contents therein shall disclose that the cause of action is only an
allegation and that Canton and its agents and consultants deny any
wrongdoing or liability with regard to said allegations.
6.3 Expenses. Seller shall pay one-half of the escrow fee charged by
the Title Company, the recording fees, the premium for the Owner's Policy of
Title Insurance, and its own attorneys' fees. Purchaser shall pay one-half of
the escrow fee charged by the title Company and its own attorney's fees. Except
as otherwise provided in this Section, all other expenses hereunder shall be
paid by the party incurring such expenses.
6.4 Pro-rations. Real property taxes, Downtown Alliance Assessments and
special assessments, if any, shall be the obligation of the Purchaser.
ARTICLE VII
Termination, Default and Remedies
7.1 Permitted Termination. If this Agreement is terminated by either
party pursuant to a right expressly given it to do so hereunder, this Agreement
shall be terminated and neither party shall have any further rights or
obligations hereunder.
7.2 Default by Seller. Seller shall be in default hereunder upon the
occurrence of any one or more of the following events: (a) Any of Seller's
warranties or representations set forth herein are untrue or inaccurate in any
material respect.
(b) Seller shall fail to meet, comply with or perform any
material covenant, agreement, or obligation on its part required,
within the time limits and in the manner required in this Agreement,
for any reason other than a Permitted Termination.
<PAGE>
7.3 Default by Purchaser. Purchaser shall be in default hereunder if
Purchaser shall fail to deliver at the closing any of the items required of
Purchaser in Article VI hereof, for any reason other than a default by Seller
hereunder or a Permitted Termination.
7.4 Attorneys' Fees. If it shall be necessary for either
Seller or Purchaser to employ an attorney to enforce its rights pursuant to this
Agreement because of a default under this Agreement, the defaulting party shall
reimburse the non-defaulting party for reasonable attorneys' fees.
ARTICLE VIII
Brokerage Commission
Seller and Purchaser represent to each other that neither of them has
had any dealings with a broker in connection with the sale of the Subject
Property as herein provided or the negotiation of this Agreement and that
neither has any liability for brokerage fees or a commission in connection
therewith.
ARTICLE IX
Miscellaneous
9.1 Notices. All notices, demands, requests and other communications
required or permitted hereunder shall be in writing, and shall be by registered
or certified mail and deemed to be delivered when posted (except where receipt
is specified in this Agreement), addressed to the addressee at its address set
forth below or at such other address as such party may have specified
theretofore by notice delivered in accordance with this Section and actually
received by the addressee;
If to Seller: CANTON PROPERTIES I, INC.
202 West 400 South, Suite 100
Salt Lake City, UT 84101
Attention: Richard D. Surber
If to Purchaser: ASSET RECOVERY, INC.
79 South Main Street, Suite 1100
Salt Lake City, UT 84111
Attention: Brian Jeppesen
9.2 Survival. All warranties, representations and agreements contained
herein or arising out of the sale of the Subject Property by Seller to Purchaser
shall be valid as of the closing date.
<PAGE>
9.3 Governing Law; Venue. The laws of the State of Utah shall govern
the validity, enforcement, and interpretation of this Agreement.
9.4 Integration; Modification; Waiver. This Agreement constitutes the
complete and final expression of the agreement of the parties relating to the
Subject Property, and supersedes all previous contracts, agreements, and
understandings of the parties, either oral or written, relating to the Subject
Property.. This Agreement cannot be modified, or any of the terms hereof waived,
except by an instrument in writing (referring specifically to this Agreement)
executed by the party against whom enforcement of the modification or waiver is
sought.
9.5 Counterpart Execution. This Agreement may be executed in several
counterparts, each of which shall be fully effective as an original and all of
which together shall constitute one and the same instrument.
9.6 Headings; Construction. The headings which have been used
throughout this Agreement have been inserted for convenience of reference only
and do not constitute matter to be construed in interpreting this Agreement.
Words of any gender used in this Agreement shall be held and construed to
include any other gender and words in the singular number shall be held to
include the plural, and vice versa, unless the context requires otherwise. The
words "herein," "hereof," "hereunder" and other similar compounds of the word
"here" when used in this Agreement shall refer to the entire Agreement and not
to any particular provision or section.. If the last day of any time period
stated herein shall fall on a Saturday, Sunday or legal holiday, then the
duration of such time period shall be extended so that it shall end on the next
succeeding day which is not a Saturday, Sunday or legal holiday.
9.7 Invalid Provisions. If any one or more of the provisions of this
Agreement, or the applicability of any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provision shall not be affected thereby.
9.8 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Seller and Purchaser, and their respective heirs, personal
representatives, successors, receivers, trustees and permitted assigns. Except
as expressly provided herein, nothing in this Agreement is intended to confer on
any person, other than the parties hereto and their respective heirs, personal
representatives, successors and assigns, any rights or remedies under or by
reason of this Agreement.
9.9 Further Acts. In addition to the acts recited in this Agreement to
be performed by Seller and Purchaser, Seller and Purchaser agree to perform or
cause to be performed at the Closing or after the Closing any and all such
further acts as may be reasonably necessary to consummate the transactions
contemplated hereby.
<PAGE>
ARTICLE X
Expiration
Unless acceptance of this Agreement is signed by all parties and a
signed copy is delivered in person, by mail or facsimile to the Purchaser by May
23, 1995, at 4:00 p.m. Mountain Daylight Time, or unless this Agreement has been
previously withdrawn by the originating party, this Agreement shall be
considered to be withdrawn at the date and time specified above.
DATED as of the date and year first above written.
SELLER: PURCHASER:
CANTON PROPERTIES I, INC. ASSET RECOVERY, INC.
/s/ Richard Surber, President /s/ David R. Golden
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("this Agreement:) is made this 12 day of
December, 1995, by and between Ozora Corporation, a Delaware Corporation
("Ozora"), Mark C. Hungerford ("Hungerford"), and TAC, Inc., a Utah Corporation
("TAC").
PREMISES
A. TAC has filed a lawsuit and obtained a judgment in the United States District
Court for the Central Division District of Utah, cause no. 95-C-75 G seeking
payment of an interest bearing promissory note payable to TAC by Ozora, ("the
suit").
B. Ozora seeks to resolve the debt and all issues raised by TAC in the suit
through the payment in cash of $250,000 (Two hundred fifty thousand and no/100
dollars).
C. TAC and Ozora agree that the settlement of the lawsuit and release of the
judgment will extend to all parties to the suit, including any parties heirs and
assigns.
D. Ozora, Hungerford and TAC neither admits and each does specifically deny any
and all liability to any party arising from any and all claims, demands,
damages, actions, causes of action or legal action of any nature, known or
unknown, that have arisen, or may arise, due the matters recited in the pending
law suit.
E. Ozora desires to satisfy its debt and all obligations with TAC by payment of
the $250,000.
AGREEMENT
1. BASED ON THE ABOVE PREMISES, WHICH ARE HEREBY INCORPORATED BY
REFERENCE, AND in consideration of the mutual promises contained herein, the
benefits to be derived by each party hereunder and other good and valuable
consideration, the sufficiency of which is hereby expressly acknowledged, Ozora,
Hungerford and TAC agree that Ozora will transfer to TAC the sum of $250,000
(Two hundred fifty thousand and no/100 dollars), without interest, not later
than the 15th day of March, 1996. This amount is to paid by a payment of not
less than $25,000 upon the execution of this agreement, a payment of $60,000 not
later than February 1, 1996, the balance of said funds to be paid not later than
3:00 p.m. Mountain Standard Time on the 15th day of March, 1996, all payments
shall be by certified check or in cash, however if the real property located at
49 Ivy Drive, Ross, California is sold prior to that date, the then remaining
balance is due at the time of closing and upon request by Hungerford's attorney,
TAC agrees to provide information as to the then remaining balance due to the
escrow agent.
<PAGE>
2. TAC will, upon receipt of the agreed upon funds, release all claims
it has asserted with respect to the 99,800 shares of class A common stock of
Transcisco Industries, Inc. and release in full any claim or right it may have
under the judgment granted in the suit.
3. Any failure to fully perform by payment as specified herein shall be
considered a breach of this agreement and the parties agree and stipulate the
damage to TAC for such a failure would be in the amount of $10,000 which Ozora
and Hungerford agree to pay to TAC in addition to the amounts set forth above by
March 15, 1996.
4. Ozora and Hungerford agree that upon the execution of this agreement
to withdraw their Motion to Set Aide Default Judgment as filed in the suit.
5. TAC agrees to appear at the contempt hearing set for December 13,
1995 and will announce to the court that all matters in dispute between the
parties hereto have been resolved and that TAC seeks no relief from the Court
for any action of the parties related to the Supplemental Proceedings ordered by
the Court in the suit and that the Settlement Agreement resolves and satisfies
TAC's request for sanctions. In the event the Court requires either Ozora or
Hungerford to pay any amount to TAC representing attorney fees or costs, that
amount upon payment to TAC will be credited to the balance due hereunder.
6. In the event that the funds agreed to be paid hereunder are not paid
in full by March 15, 1996 TAC would then be permitted to resume with efforts to
collect the then remaining balance due as provided for by the Judgment of the
Court.
7. For and in consideration of the agreements set forth herein, each of
the parties, for itself and for its heirs, personal representatives, successors
and assigns, hereby releases the other from any and all liability, whatsoever,
known or unknown, contingent or matured, which each had or has against the other
from the beginning of time until the date of this instrument and particularly,
but not by way of limitation of the foregoing, arising out of the transactions
made the basis of the suit set out herein above.
8. At any time prior to March 15, 1996, this Agreement may be amended
by a writing signed by all parties hereto, with respect to any of the terms
contained herein, and any term or condition of this agreement may be waived or
the time for performance thereof may be extended by a writing signed by the
party or parties for whose benefit the provision is intended.
<PAGE>
9. This agreement constitutes the entire agreement between the parties
with regard to the subject matter herein. It is expressly understood that the
provisions herein shall act as a bar to any party hereunder seeking recovery for
alleged representations and or omissions not specifically referred to herein.
This agreement may not be varied, modified or amended except in writing as
provided for herein.
10. The interpretation and enforcement of this Agreement, and any
disputes, civil action, or other legal proceedings arising from or related to
this Agreement, shall be governed by the laws of the State of Utah, any
conflicts-of-law provision of any state to the contrary notwithstanding. Ozora
irrevocably consents to the jurisdiction of the state and federal courts located
in the State of Utah in any disputes, civil action, or other legal proceeding
arising from or related to this Agreement.
Dated this 12 day of December, 1995.
IN WITNESSETH WHEREOF, the parties have executed this Settlement
Agreement.
Ozora Corporation and TAC, Inc.
Mark C. Hungerford
By: /s/ Mark C. Hungerford By: /s/ BonnieJean C. Tippetts
Title: its President Title: Secretary
By: /s/ Mark C. Hungerford
Title:
CANTON INDUSTRIAL CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective as of the 4 day of August,
1995 between The Canton Industrial Corporation, a Nevada corporation (the
"Corporation"), and Steven A. Christensen (the "Executive"), all parties
principal place of business being 268 West 400 South, Suite 300, Salt Lake City,
Utah 84101.
WITNESSETH
The Executive is the President of the Corporation and possesses an intimate
knowledge of the business and affairs of the Corporation. The Corporation
recognizes the Executive's contribution to the growth and success of the
Corporation and desires to assure to the Corporation the continued benefits of
the Executive's expertise and knowledge. The Executive, in turn, desires to
continue in full-time employment with the Corporation on the terms provided
herein.
Accordingly, in consideration of the mutual covenants and representations
contained herein, the parties hereto agree as follows:
1. Employment of Executive.
1.1. Duties and Status.
(a) The Corporation hereby engages the Executive as an
Executive employee for the period (the "Employment Period") specified in Section
4, and the Executive accepts such employment, on the terms and conditions set
forth in this Agreement. During the Employment Period, the Executive shall
exercise such authority and perform such executive duties as are commensurate
with the authority being exercised and duties being performed by the Executive
for the Corporation immediately prior to the effective date of this Agreement,
provided, however, that Executive shall not without his written consent be
assigned duties that are materially inconsistent with his training, experience
and abilities nor to an executive position which is materially inconsistent with
this criteria.
(b) During the Employment Period, the Executive shall (i)
render such services to the Corporation and its affiliates as are reasonably
required by the Board of Directors of the Corporation and as may be required by
virtue of the office(s) and positions Executive holds subject to the standards
and criteria set forth herein, and (ii) accept such additional office or offices
to which he may be elected by the Board of Directors of the Corporation,
provided that the performance of the duties of such office or offices shall be
consistent with the scope of the duties provided for in subsection (a) of this
Section 1.1.
(c) The Executive will be required to perform the services and
duties provided for in subsection (a) of this Section 1.1 only at the location
where the Executive was employed immediately prior to the effective date of this
Agreement or such other location of the principal executive offices of the
Corporation in the current metropolitan area as the Board of Directors of the
Corporation may designate, unless Executive receives additional compensation to
move to another location, including payment for all expenses associated with
said move. The Executive shall be entitled to vacation, leave of absence, and
leave for illness or temporary disability in accordance with the policies of the
Corporation in effect, which shall not be less favorable than those in effect at
the date of this Agreement.
<PAGE>
1.2. Compensation and General Benefits. As compensation for his
services under this Agreement, the Executive shall be compensated as follows:
(a) The Corporation shall pay the Executive a beginning annual
salary of $45,000.00. In addition to the monetary compensation the Corporation
shall pay Executive a quantity of shares of The Canton Industrial Corporation's
common stock equal in value to the Executives annual salary, currently
$45,000.00, payable quarterly at the average bid price for the ten day period
preceding the end of each month during which the Executive serves as such, or
the closing bid price of each quarter, whichever is lower, fractional shares
shall be rounded up to the nearest whole share. The Executive shall also be
entitled to other bonuses as they become available, to be reviewed by the Board
of Directors on a periodic basis to determine the amount of the bonus, as well
as participation in all transactions entered into by the Corporation. Such
salary shall be subject to normal periodic review on a bi-annual basis. The
stock received by the Executive shall be issued under applicable exemptions from
registration, including Form S-8. If, for any reason said stock cannot be issued
pursuant to an exemption which would allow free tradeability of said shares,
then the Executive shall be issued restricted shares of Canton's Common Stock,
with the value based on one quarter (1/4) of the average of the high bid price
and the high ask price for the quarter during which the services were rendered.
Said payment for shares of the Corporation's common stock shall be in an amount
equaling one-fourth of the then annual salary of the Executive (e.g. currently
1/4 of $45,000 = $11,250). Said restricted shares shall not be subject to
dilution, and should the Corporation cause a reverse split of any nature, the
number of shares issued to Executive shall retain the same percentage as prior
to the split.
(b) The Executive shall be eligible to participate in such
profit-sharing, bonus, incentive, or any other transactions in which an employee
or consultant of the Corporation receives, or may receive, additional
compensation, including, but not limited to, receipt of stock in other
organizations (such as the 504 incentives type of compensation, etc.), and
performance award programs which provide opportunities to receive compensation
which are the greater of opportunities (i) then provided by the Corporation to
executives, and or other employees with reasonably comparable authority and
duties (and in any event not lesser than those provided to executives or regular
employees with junior authority or duties), or (ii) available to the Executive
immediately prior to the effective date of this Agreement. The Executive's
annual base salary shall not be less than that of any other employee of the
Corporation. The cash value of the corporation's shares of common stock the
Executive shall be entitled to receive under this Section 1, and sub-paragraphs
thereto, shall increase by the same cash value increase in the Executive's
annual salary.
(c) The Executive shall be entitled to receive employee
benefits, including, without limitation, pension, disability, group life,
sickness, accident and health insurance programs, including payment by the
Corporation of all of the Executives current health insurance premiums,
split-dollar life insurance programs, and prerequisites provided by the
Corporation to executives which are the greater of the employee benefits and
prerequisites (i) then provided by the Corporation to executives with comparable
authority or duties (and in any event not lesser than those provided to
executives or employees with junior authority or duties), or (ii) available to
the Executive immediately prior to the effective date of this Agreement, all in
accordance with Corporation's Employee Manual. Furthermore, the Executive shall
have additional paid vacation time as follows: first year of employment two
weeks; one to two years of employment three weeks; three or more years four
weeks.
2. Competition; Confidential Information. The Executive and the
Corporation recognize that due to his prior experience and the nature of his
prior association with the Corporation and of his engagements hereunder, and the
relationship of the Executive to the Corporation, the Executive has had access
to, and has acquired, will have access to, and will acquire, and has assisted
in, and may assist in developing confidential and proprietary information
relating to the business and operations of the Corporation and its affiliates
and subsidiaries, including, without limiting the generality of the foregoing,
information with respect to their present and prospective products, systems,
customers, agents, processes, and sales and marketing methods. The Executive
acknowledges that such information has been and will continue to be of central
importance to the business of the Corporation and its affiliates and that
disclosure of it to or its use by others could cause substantial loss to the
Corporation. The Executive and the Corporation also recognize that an important
part of the Executive's duties will be to develop good will for the Corporation
and its affiliates through his personal contact with customers, agents and
others having business relationships with the Corporation and its affiliates,
and that there is a danger that this good will, a proprietary asset of the
Corporation and its affiliates, may follow the Executive if and when his/her
relationship with the Corporation is terminated. The Executive accordingly
agrees as follows:
<PAGE>
2.1. Non-Competition.
(a) Except for reasons as stated in subsection 2.1 (b), during
the Employment Period and for a period of two years thereafter the Executive
will not, directly or indirectly, either individually or as owner partner,
agent, employee, consultant or otherwise, except for the account of and on
behalf of the Corporation or their affiliates, engage in any activity
competitive with the business of the Corporation or its affiliates, nor will he,
in competition with the Corporation or its affiliates, solicit or otherwise
attempt to establish for himself or any other person, firm or entity, any new
business relationships with any person, firm or corporation which is, at the
time this Agreement is entered into, or during his time in office, a customer or
employee of the Corporation or one of its affiliates.
(b) Executive may accept employment by a competitor or client
of the Corporation, if two times the Executive's annual compensation is paid to
the Corporation by the competitor, or client. Prior to the Executive accepting
such position Executive shall give at least two weeks notice unless otherwise
agreed by the Corporation and Executive. All other provisions set forth in 2.1
(a) shall remain in effect irrespective of this exception.
(c) Nothing in this Section 2 shall be construed to prevent
the Executive from owning, as an investment, more than 15% of a class of equity
securities issued by any competitor of the Corporation or its affiliates and
publicly traded and registered under Section 12 of the Securities Exchange Act
of 1934.
(d) Nothing in this Agreement shall be construed to prevent
the Executive from engaging in the continued practice of law.
2.2. Trade Secrets. The Executive will keep confidential any trade
secrets or confidential or proprietary information of the Corporation and its
affiliates, which are now known to him or which hereafter may become known to
him, as a result of his employment or association with the Corporation and shall
not at any time directly or indirectly disclose any such information to any
person, firm or corporation, or use the same in any way other than in connection
with the business of the Corporation or its affiliates during and at all times
after the expiration of the Employment Period. For purposes of this Agreement,
"trade secrets or confidential or proprietary information" means information
unique to the Corporation or any of its affiliates which has a significant
business purpose and is not known or generally available from sources outside
the Corporation or any of its affiliates, or typical of industry practice.
3. Corporation's Remedies for Breach. It is recognized that damages in
the event of breach of paragraph 2 by the Executive would be difficult, if not
impossible, to ascertain, and it is, therefore, agreed that the Corporation, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any breach, and the Executive hereby waives
any and all defenses he may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief,
with the sole exception of the ability of the Executive to practice law. The
existence of this right shall not preclude any other rights and remedies at law
or in equity which the Corporation may have.
<PAGE>
3.1. Payment for Termination. Should the Corporation terminate the
Executive's employment during the term of this agreement without sufficient
cause as defined herein, the Executive shall be entitled to 30 days of full
compensation due to him under his contract with the Corporation, including
issuance of such stock in The Canton Industrial Corporation, along with the
appropriate percentages of any transactions closed or being worked on by the
Corporation to which the Executive would otherwise have been eligible to receive
through continued employment, all of which together constitute "compensation"
for the purposes of this paragraph. All compensation due normally payable in
cash is payable in cash on the day of termination, all compensation due normally
payable in stock shall be delivered within fifteen (15) days of termination. The
stock issued will be valued pursuant to paragraph 1.2 (a).
4. Employment Period; Certain Rights.
4.1 Duration. The Employment Period shall commence on the date of this
Agreement and shall continue for one year . The Employment Period may be renewed
from year to year by agreement executed in writing prior to each such
anniversary.
4.2 Termination. This Agreement may be terminated at will by either
party. Executive is required to give two weeks notice, unless subsequently
agreed to by the Corporation. The Corporation shall be subject to section 3.1 in
the event the Executive is terminated without cause, and shall pay no severance
for termination with cause.
(a) Disability/Retirement. If, as a result of the Executive's
incapacity due to physical or mental illness or infirmity, the
Executive shall have been absent from the full-time performance of his
employment duties with the Corporation for forty-five (45) consecutive
days during the term of this agreement the Corporation reserves the
right to terminate this agreement.
(b) Cause. Termination by the Corporation of the Executive's employment
for "cause" shall mean termination upon:
(i) the continued failure by the Executive to perform
substantially all of his duties with the Corporation (other
than any such failure resulting from incapacity due to
physical or mental illness, or infirmity or any such actual or
anticipated failure after issuance of a Notice of Termination)
within a reasonable period of time after a written demand for
substantial performance is delivered to you by the
Corporation, which demand specifically identifies the manner
in which the Corporation believes that the Executive has not
substantially performed his duties. For purposes of this
paragraph "a reasonable period of time" means a period of not
less then 10 working days, nor more than 20 working days.
<PAGE>
5. Indemnity. The Corporation agrees to indemnify and hold harmless the
Executive from and against any and all losses, claims, damages, expenses,
liabilities, or actions to which the Executive may become subject, and will
provide a legal defense at no cost to the Executive, or should a conflict arise
between a defense available to the Corporation and another Defendant and the
Executive, the Corporation shall reimburse the Executive for any legal or other
expenses reasonably incurred by him in connection with investigating or
defending any claims or actions, whether or not resulting in liability, insofar
as such losses, claims, damages, expenses, liabilities, including any and all
costs, fees, attorneys fees, or judgments entered against him, and agree to
defend said Executive from all causes of action which may be initiated against
the Executive as a result of his position with the Corporation, and or the
performance of his duties with the Corporation, or any of its' affiliates or
subsidiaries, including, but not limited to, all outstanding withholding taxes,
state taxes, unpaid corporate obligations, litigation, administrative
investigations, existing or future claims of any nature.
6. Successors; Binding Agreement.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger consolidation or otherwise; to all or
substantially all of the business and/or assets of the Corporation to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Corporation in the same amount and on the same terms as set forth in
section (3) of this Agreement. .
(b) This Agreement shall bind and inure to the benefit of and be
enforceable by the Corporation and the Executive and our respective
personal or legal representatives, executors, administrators,
successors, assigns, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement in accordance with the most recent beneficiary
designation which the Executive may have executed and delivered to the
Corporation after the date of this Agreement, and in the absence of any
such designation, the payments shall be made to his estate.
(c) If the Executive's employment is continued with a successor
(whether directly or indirectly) to all or substantially all of the
business and assets of the Corporation and such successor assumes the
obligations of the Corporation under this Agreement, the Executive will
not be entitled to any severance benefits under this Agreement solely
by reason of the assumption of this Agreement and the termination of
his employment with the Corporation in connection with such succession.
7. Enforcement of Agreement. The Corporation will not at any time
contest the validity or enforceability of this Agreement.
<PAGE>
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement (except that all notices to the Corporation shall be directed to the
attention of its President) or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that any notice
of change in address shall be effective only upon receipt.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and an authorized officer of the Corporation. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Utah. All references to sections of the Code shall be deemed also
to refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state, or local law.
10. Prior Agreements. This Agreement contains the entire understanding
between the parties hereto with respect to the terms and conditions of the
Executives employment and severance benefits and supersedes any prior agreement
between the Corporation (or any predecessor of the Corporation) and the
Executive with respect to the subject matter hereof. If there is any discrepancy
or conflict between this Agreement and any plan, policy or program of the
Corporation regarding any term or condition of severance benefits, the language
of this Agreement shall govern.
11. Validity. This invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. Binding Agreement. This Agreement shall be effective as of the date
hereof and shall be binding upon and inure to the benefit of the Executive, his
heirs, personal and legal representatives, guardians and permitted assigns. The
rights and obligations of the Corporation under this Agreement shall inure to
the benefit of and shall be binding upon any successor or assignee of the
Corporation.
14. Entire Agreement. This Agreement constitutes the entire
understanding of the Executive and the Corporation with respect to the subject
matter hereof and supersedes any and all prior understandings written or oral.
This Agreement may not be changed, modified, or discharged orally, but only by
an instrument in writing signed by the parties.
IN WITNESS WHEREOF, the parties have executed, sealed and delivered this
Agreement as of the date first above written.
ATTEST: The Canton Industrial Corporation
/s/ Matthew G. Colvin By: /s/ Richard Surber
12/5/95
WITNESS: Executive: /s/ Steven A. Christensen
/s/ Matthew G. Colvin 12/5/95
<PAGE>
Exhibit A to Contract of August 4, 1995 CIC & Steven A. Christensen
Non-exclusive example of supplementary stock benefits to be made to Executive
1. United Entertainment Systems
2. Hytek
3. Oneida
4. Tianrong
5. Perma-Tech
6. Oasis
7. Zahava
8. WJRE
9. AltaChem, etc.
THE CANTON INDUSTRIAL CORPORATION
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective as of the 17th day of
August 1995 between The Canton Industrial Corporation, a Nevada corporation (the
"Corporation"), and Kevin S. Woltjen (the "Executive"), all parties' principal
place of business being 268 West 400 South, Suite 300, Salt Lake City, Utah
84101.
WITNESSETH
The Executive is the Vice-President of the Corporation and possesses an
intimate knowledge of the business and affairs of the Corporation. The
Corporation recognizes the Executive's contribution to the growth and success of
the Corporation and desires to assure to the Corporation the continued benefits
of the Executive's expertise and knowledge. The Executive, in turn, desires to
continue in full-time employment with the Corporation on the terms provided
herein.
Accordingly, in consideration of the mutual covenants and representations
contained herein, the parties hereto agree as follows:
1. Employment of Executive.
1.1. Duties and Status.
(a) The Corporation hereby engages the Executive as the
Vice-President of the Corporation and Executive employee for the period (the
"Employment Period") specified in Section 4, and the Executive accepts such
employment, on the terms and conditions set forth in this Agreement. During the
Employment Period, the Executive shall exercise such authority and perform such
executive duties as are commensurate with the authority being exercised and
duties being performed by the Executive for the Corporation immediately prior to
the effective date of this Agreement, provided, however, that Executive shall
not without his written consent be assigned duties that are materially
inconsistent with his training, experience and abilities nor to an executive
position which is materially inconsistent with this criteria.
(b) During the Employment Period, the Executive shall (i)
render such services to the Corporation and its affiliates as are reasonably
required by the Board of Directors of the Corporation and as may be required by
virtue of the office(s) and positions Executive holds subject to the standards
and criteria set forth herein, and (ii) accept such additional office or offices
to which he may be elected by the Board of Directors of the Corporation,
provided that the performance of the duties of such office or offices shall be
consistent with the scope of the duties provided for in subsection (a) of this
Section 1.1.
(c) The Executive will be required to perform the services and
duties provided for in subsection (a) of this Section 1.1 only at the location
where the Executive was employed immediately prior to the effective date of this
Agreement or such other location of the principal executive offices of the
Corporation in the current metropolitan area as the Board of Directors of the
Corporation may designate, unless Executive receives additional compensation to
move to another location, including payment for all expenses associated with
said move and the Executive agrees in writing to such move. The Executive shall
be entitled to vacation, leave of absence, and leave for illness or temporary
disability in accordance with the policies of the Corporation in effect, which
shall not be less favorable than those in effect at the date of this Agreement.
1.2.. Compensation and General Benefits. As compensation for his services
under this Agreement, the Executive shall be compensated as follows:
<PAGE>
(a) From the date first appearing above until November 1,
1995, the Corporation shall pay the Executive a salary equivalent to $35,000
annually, and in addition to the monetary compensation, a quantity of shares of
the Corporation's common stock equivalent to $35,000, net of any applicable
exercise price payments required by the options underlying the issuance of such
shares, payable quarterly at the average bid price over the 10 day period
preceding the end of each month during which the Executive serves, or the
closing bid price of each quarter, whichever is lower, fractional shares shall
be rounded up. Such stock and bonuses shall be payable an/or issued no later
than 10 days after the close of each quarter. The Executive's salary becomes
effective immediately prior to the effective date of this Agreement. The stock
received by the Executive shall be issued under applicable exemptions from
registration, including Form S-8, or issued pursuant to Rule 144, if no
registration form is available to the Corporation.
(b) After November 1, 1995, the compensation paid by the
Corporation to the Executive shall increas to an annual salary of $42,500, and
in addition to the monetary compensation, a quantity of shares of the
Corporation's common stock equivalent to $27,500, net of any applicable exercise
price payments required by the options underlying the issuance of such shares,
payable quarterly at the average bid price over the 10 day period preceding the
end of each month during which the Executive serves, or the closing bid price of
each quarter, whichever is lower, fractional shares shall be rounded up. Such
salary shall be subject to normal periodic review at least biannually based on
the policies of the Corporation and the Executive's contributions to the
enterprises. This annual salary shall be increased by $5,000 within six (6)
months and every six months until the Executive has a minimum base salary level
equal to the highest paid attorney in the Corporation. The cash value of the
Corporation's shares the Executive shall be entitled to receive under this
Section 1.2 shall increase by the same cash value increase in the Executive's
annual salary. Such stock and bonuses shall be payable an/or issued no later
than 10 days after the close of each quarter. The stock received by the
Executive shall be issued under applicable exemptions from registration,
including Form S-8, or issued pursuant to Rule 144, if no registration form is
available to the Corporation.
(c) The Executive shall be eligible to participate in such
profit-sharing, bonus, incentive, or any other transactions in which an employee
of the Corporation receives, or may receive, additional compensation, including,
but not limited to, receipt of stock in other organizations (such as the 504
incentives type of compensation, etc.), and performance award programs which
provide opportunities to receive compensation which are the greater of
opportunities (i) then provided by the Corporation to Executives, and to other
employees with reasonably comparable authority and duties (and in any event not
lesser than those provided to executives or regular employees with junior
authority or duties), or (ii) available to the Executive immediately prior to
the effective date of this Agreement.
(d) The Executive shall be entitled to receive employee
benefits, including, without limitation, pension, profit sharing, disability,
group life, sickness, accident and health insurance programs and split-dollar
life insurance programs, and prerequisites provided by the Corporation to
Executives which are the greater of the employee benefits and prerequisites (i)
then provided by the Corporation to Executives with comparable authority or
duties (and in any event not lesser than those provided to executives with
junior authority or duties), or (ii) available to the Executive immediately
prior to the effective date of this Agreement, all in accordance with the
Corporation's Employee Manual. Additionally, the Executive's personal health
insurance shall be paid in full be the Corporation and the Executive shall be
entitled to additional paid vacation time in the amount of fifteen (15) business
days during the term of this Agreement.
<PAGE>
2. Competition; Confidential Information. The Executive and the
Corporation recognize that due to the nature of his prior association with the
Corporation and of his engagements hereunder, and the relationship of the
Executive to the Corporation, both in the past and in the future hereunder, the
Executive has had access to and has acquired, will have access to and will
acquire, and has assisted in and may assist in developing, confidential and
proprietary information relating to the business and operations of the
Corporation and its affiliates, including, without limiting the generality of
the foregoing, information with respect to their present and prospective
products, systems, customers, agents, processes, and sales and marketing
methods. The Executive acknowledges that such information has been and will
continue to be of central importance to the business of the Corporation and its
affiliates and that disclosure of it to or its use by others, could cause
substantial loss to the Corporation. The Executive and the Corporation also
recognize that an important part of the Executive's duties will be to develop
good will for the Corporation and its affiliates through his personal contact
with customers, agents and others having business relationships with the
Corporation and its affiliates, and that there is a danger that this good will,
a proprietary asset of the Corporation and its affiliates, may follow the
Executive if and when his/her relationship with the Corporation is terminated.
The Executive accordingly agrees as follows:
2.1. Non-Competition.
(a) Unless the Corporation terminates the Executive's
employment, during the Employment Period and for a period of two years
thereafter the Executive will not, directly or indirectly, either individually
or as owner partner, agent, employee, consultant or otherwise, except for the
account of and on behalf of the Corporation or their affiliates, engage in any
activity competitive with the business of the Corporation or its affiliates, nor
will he, in competition with the Corporation or its affiliates, solicit or
otherwise attempt to establish for himself or any other person, firm or entity,
any new business relationships with any person, firm or corporation which is, at
the time this Agreement is entered into, or during his time in office, a
customer or employee of the Corporation or one of its affiliates.
(b) Executive may accept employment or any position in
subjective 2.1 (a), if two times Executive's salary is paid to the Corporation
prior to the Executive accepting any such positions as discussed in 2.1
(c) Nothing in this Section 2 shall be construed to prevent
the Executive from owning, as an investment, not more than 15% of a class of
equity securities issued by any competitor of the Corporation or its affiliates
and publicly traded and registered under Section 12 of the Securities Exchange
Act of 1934.
(d) Nothing in this Agreement shall be construed to prevent
the Executive from engaging in the practice of any type of law.
2.2. Trade Secrets. The Executive will keep confidential any trade
secrets or confidential or proprietary information of the Corporation and its
affiliates, which are now known to him or which hereafter may become known to
him as a result of his employment or association with the Corporation, and shall
not at any time directly or indirectly disclose any such information to any
person, firm or corporation, or use the same in any way other than in connection
with the business of the Corporation or its affiliates during and at all times
after the expiration of the Employment Period. For purposes of this Agreement,
"trade secrets or confidential or proprietary information" means information
unique to the Corporation or any of its affiliates which has a significant
business purpose and is not known or generally available from sources outside
the Corporation or any of its affiliates or typical of industry practice.
<PAGE>
3. Corporation's Remedies for Breach. It is recognized that damages in
the event of breach of paragraph 2 by the Executive would be difficult, if not
impossible, to ascertain, and it is, therefore, agreed that the Corporation, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any breach, and the Executive hereby waives
any and all defenses he may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief,
with the sole exception of the ability of the Executive to practice law. The
existence of this right shall not preclude any other rights and remedies at law
or in equity which the Corporation may have.
3.1. Payment for Termination. Should the Corporation terminate the
Executive's employment during the term of this agreement without sufficient
cause as defined herein, the Executive shall be entitled to 30 (thirty) days of
full compensation due to him under his contract with the Corporation, including
issuance of such stock in The Canton Industrial Corporation along with the
appropriate percentages of any transactions closed by the Corporation to which
the Executive would otherwise have been eligible to receive through continued
employment, all of which together constitute "compensation" for the purposes of
this paragraph. Said compensation shall be delivered on the day of termination,
of which salary must be paid in cash while all other compensation may be paid in
cash or free-trading stock at the Corporation's option.
4. Employment Period; Certain Rights.
4.1 Duration. The Employment Period shall commence on the date of this
Agreement for one year. The Employment Period may be renewed from year to year
by agreement executed in writing prior to each such anniversary.
4.2. Termination. This Agreement may be terminated at will by either party.
Executive shall give two weeks notice. The Corporation shall be subject to
section 3.1 in the event the Executive is terminated without sufficient cause
and no severance shall be remitted for termination with cause.
(a) Disability/Retirement. If, as a result of the Executive's
incapacity due to physical or mental illness or infirmity, the
Executive shall have been absent from the full-time performance of his
employment duties with the Corporation for forty-five (45) consecutive
days. The Corporation reserves the right to terminate employment with
fifteen (15) days notice.
(b) Cause. Termination by the Corporation of the Executive's employment
for "cause" shall mean termination upon failure by the Executive to
perform substantially all of his duties with the Corporation (other
than any such failure resulting from incapacity due to physical or
mental illness or infirmity, or any such actual or anticipated failure
after issuance of a Notice of Termination within a reasonable period of
time after a written demand for substantial performance is delivered to
the Executive by the Corporation, which demand specifically identifies
the manner in which the Corporation believes that the Executive has not
substantially performed his duties.
5. Indemnity. The Corporation agrees to indemnify and hold harmless the
Executive from and against any and all losses, claims, damages, expenses,
liabilities, or actions to which the Executive may become subject, and will
provide a legal defense at no cost to the Executive, or should a conflict arise
between a defense available to the Corporation and another Defendant and the
Executive, the Corporation shall reimburse the Executive for any legal or other
expenses reasonably incurred by him in connection with investigating or
defending any claims or actions, whether or not resulting in liability, insofar
as such losses, claims, damages, expenses, liabilities, including any and all
costs, fees, attorneys fees, or judgments entered against him, and agree to
defend said Executive from all causes of action which may be initiated, whether
or not he is still employed by the Corporation, against the Executive as a
result of his position with the Corporation, and or the performance of his
duties with the Corporation or any of its' affiliates, subsidiaries, or clients
in any way, including, but not limited to, all outstanding withholding taxes,
state taxes, unpaid corporate obligations, litigation, administrative
investigations, existing or future claims of any nature.
<PAGE>
6. Successors; Binding Agreement.
(a) The Corporation will require any successor whether direct or
indirect, by purchase, merger consolidation or otherwise; to all or
substantially all of the business and/or assets of the Corporation to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the
Corporation in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive terminated his
employment for Good Reason, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective
shall be deemed the Date of Termination.
(b) This Agreement shall bind and inure to the benefit of and be
enforceable by the Corporation and the Executive and his respective
personal or legal representatives, executors, administrators,
successors, assigns, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement in accordance with the most recent beneficiary
designation which the Executive may have executed and delivered to the
Corporation after the date of this Agreement, and in the absence of any
such designation, the payments shall be made to his estate.
(c) If the Executive's employment is continued with a successor
(whether directly or indirectly) to all or substantially all of the
business and assets of the Corporation and such successor assumes the
obligations of the Corporation under this Agreement, the Executive will
not be entitled to any severance benefits under this Agreement solely
by reason of the assumption of this Agreement and the termination of
his employment with the Corporation in connection with such succession.
7. Enforcement of Agreement. The Corporation will not at any time
contest the validity or enforceability of this Agreement.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement (except that all notices to the Corporation shall be directed to the
attention of its President) or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that any notice
of change in address shall be effective only upon receipt.
<PAGE>
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and an authorized officer of the
Corporation. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Utah. All references to sections of the Code shall
be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state, or local law.
10. Prior Agreements. This Agreement contains the entire understanding
between the parties hereto with respect to the terms and conditions of the
Executive's employment and severance benefits and supersedes any prior agreement
between the Corporation (or any predecessor of the Corporation) and the
Executive with respect to the subject matter hereof. If there is any discrepancy
or conflict between this Agreement and any plan, policy or program of the
Corporation regarding any term or condition of severance benefits, the language
of this Agreement shall govern.
11. Validity. This invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13. Binding Agreement. This Agreement shall be effective as of the date
hereof and shall be binding upon and inure to the benefit of the Executive, his
heirs, personal and legal representatives, guardians and permitted assigns. The
rights and obligations of the Corporation under this Agreement shall inure to
the benefit of and shall be binding upon any successor or assignee of the
Corporation.
14. Entire Agreement. This Agreement constitutes the entire
understanding of the Executive and the Corporation with respect to the subject
matter hereof and supersedes any and all prior understandings written or oral.
This Agreement may not be changed, modified, or discharged orally, but only by
an instrument in writing signed by the parties.
IN WITNESS WHEREOF, the parties have executed, sealed and delivered
this Agreement as of the date first above written.
ATTEST: The Canton Industrial Corporation
By: /s/ Richard D. Surber
Richard D. Surber, Chief Executive Officer
WITNESS: Executive: /s/ Kevin S. Woltjen
Kevin S. Woltjen
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S DECEMBER 31,
1995 ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 18,605
<SECURITIES> 0
<RECEIVABLES> 463,483
<ALLOWANCES> 0
<INVENTORY> 36,371
<CURRENT-ASSETS> 555,136
<PP&E> 5,508,009
<DEPRECIATION> 647,749
<TOTAL-ASSETS> 7,874,370
<CURRENT-LIABILITIES> 1,390,876
<BONDS> 0
0
0
<COMMON> 5,887
<OTHER-SE> 3,364,917
<TOTAL-LIABILITY-AND-EQUITY> 7,874,370
<SALES> 0
<TOTAL-REVENUES> 2,049,968
<CGS> 0
<TOTAL-COSTS> 952,762
<OTHER-EXPENSES> 1,469,518
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,457
<INCOME-PRETAX> 66,723
<INCOME-TAX> 0
<INCOME-CONTINUING> (548,952)
<DISCONTINUED> 23,912
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (418,729)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
ORDER
ISSUED UNDER THE
HAZARDOUS WASTE MANAGEMENT ACT
WEST VIRGINIA CODE, CHAPTER 22, ARTICLE 18
AND THE WATER POLLUTION CONTROL ACT
WEST VIRGINIA CODE, CHAPTER 22, ARTICLE 11
ORDER NUMBER MM-04-95
TO: Mr. Michael Golightly
Canton Industrial Corporation
Suite 100, 202 West, 400 South
Salt Lake City, Utah 84101
ATTENTION: MR. MICHAEL GOLIGHTLY
1
This Order is issued by the Director of the Division of Environmental
Protection through his authorized representatives, the Chief of the Office of
Waste Management and the Chief of the office of Water Resources (hereinafter,
the "Chiefs") under the authority of the West Virginia Code, as amended
(hereinafter, the "Code"), Chapter 22, Articles 11 and 18 to the Canton
Industrial Corporation and Canton Tire Recycling WV, Inc. (Hereinafter,
"Canton"). Under this Order, Canton agrees to undertake all actions required by
the terms and conditions of this Order and consents to and will not contest the
Chiefs' jurisdiction regarding this Order. However, Canton does not admit to any
factual and legal determinations made by the Chiefs in this Order and reserves
all rights and defenses available regarding liability or responsibility in any
proceedings regarding Canton other than proceedings, either administrative or
civil, to enforce this Order.
<PAGE>
BASIS FOR ORDER
In April or May of 1993, Canton purchased the property at 516 Camden
Street in Parkersburg, formerly known as B-T Energy Corporation and owned by
Trans-Capital Investment Group, Inc.
On February 7, 1994, authorized representatives of the Chiefs conducted
a Compliance Evaluation Inspection at Canton to evaluate Canton's state of
compliance with the West Virginia Hazardous Waste Management Regulations
(hereinafter, the "Regulations").
On February 24, 1994, Canton received a Compliance Evaluation
Inspection Report (hereinafter, "CEI Report") which contained a Notice of
Violation (hereinafter, "NOV"). The CEI Report noted that Canton had failed to
make a hazardous waste determination on wastes at the facility, in violation of
Section 3.21.a.B. of the Regulations, formerly cited in the NOV as Section
6.1.2. of the Regulations.
The NOV required, among other things, that Canton conduct a hazardous
determination on all wastes at the facility within forty-five days of receipt of
the NOV.
Canton responded to the NOV with a letter dated March 16, 1994 claiming
that the tank bottom wastes stored at the facility are exempt from regulation as
hazardous wastes and indicating that Canton had retained Kemron Environmental
Services to act as their advisor in this matter. Canton requested an unspecified
extension to the NOV's time frame.
Authorized representatives of the Chiefs granted no extension to the
time frame in the NOV.
On April 12, 1994, Canton received a letter from an authorized
representative of the Chiefs explaining why the tank bottom wastes in question
were not exempt from Regulation and re-emphasizing the requirement to conduct a
hazardous waste determination on the wastes at the facility.
Canton responded with a second letter dated May 16, 1994 again
indicating that Canton had retained Kemron Environmental Services as their
advisor and again asking for an unspecified extension to the NOV's time frame to
"work on another compliance plan".
On February 6, 1995, an authorized representative of the Chiefs sent a
NOV to Canton indicating that Canton was allowing industrial wastewater to flow
into waters of the State without having a valid Water Pollution Control permit,
in violation of Chapter 22, Article 11, Section 8 of the Code.
<PAGE>
REQUIREMENTS OF ORDER
Now, therefore, in accordance with Chapter 22, Article 18, Section 15,
and Chapter 22, Article 11, Section 15, it is hereby agreed between the parties
and ORDERED by the Chiefs as follows:
1. Upon the effective date of this Order, Canton shall initiate a
hazardous waste determination on all wastes at the site, in
compliance with Section 3.2.1.a.B of the Regulations, and
shall complete the requirements of the NOV dated February 7,
1994.
2. For the violations cited in this Order, Canton shall pay an
administrative settlement as follows:
Canton shall pay $1,000.00 (one thousand dollars) to the West
Virginia hazardous Waste Management Fund.
Canton shall pay $1,000.00 (one thousand dollars) to the West
Virginia Water Quality Management Fund.
<PAGE>
Canton shall pay both $1,000.00 (one thousand dollars) amounts
specified above on or before June 1, 1995, and Canton shall
continue to pay $1,000.00 monthly to each fund on or before
the first day of each month thereafter for a period of three
months or until Canton has completed the following actions:
a. Canton shall fulfill Requirement #1 of this Order.
b. Canton shall properly contain all materials on site and
take all necessary steps to cease further discharge into
waters of the State.
c. Canton shall provide adequate containment for the four
drums holding waste absorbent materials which are currently
stored on site.
d. Canton shall properly contain all waste absorbent material
and booms from the barge-loading facility.
e. Canton shall analyze the waste absorbent material and the
waste oil in the oil/water separator prior to disposal and
shall lawfully dispose of the wastes.
f. Canton shall purge all load lines to prevent further
discharge of wastes to the environment. g. In the event
that Canton continues to operate a wastewater treatment
system, Canton shall apply for and obtain a West Virginia
National Pollution Discharge Elimination System Permit
(hereinafter, "WV/NPDES Permit") from the Office of Water
Resources.
<PAGE>
g. In the event that Canton continues to operate a wastewater
treatment system, Canton shall apply for and obtain a West
Virginia National Pollution Discharge Elimination System
Permit (hereinafter, "WV/NPDES Permit") from the Office of
Water Resources.
3. Canton shall send written certification to the Chiefs upon
fulfillment of Requirements #2a. Through #2g. If Canton has
not fulfilled Requirements #2a through #2g at the end of the
three month time frame, Canton shall be subject to any and all
applicable penalties provided in the Code.
4. The Chiefs reserve all rights and defenses which they may have
pursuant to any legal authority as well as right to raise, as
basis for supporting such legal authority or defenses, facts
other than those enumerated in the Basis for Order.
5. Canton hereby waives its right to appeal this Order under the
provisions of Chapter 22, Article 11, Section 21 and Chapter
22, Article 18, Section 20 of the Code.
6/13/95 /s/ Richard Surber
Effective Date Canton Industrial Corp
Richard Surber, President
/s/ Mark A. Scott /s/ G. Maxwell Robertson
Mark A. Scott, Chief G. Maxwell Robertson, Chief
Office of Water Resources Office of Waste Management
IN THE CIRCUIT COURT FOR THE NINTH JUDICIAL CIRCUIT
FULTON COUNTY, ILLINOIS
PEOPLE OF THE STATE OF ILLINOIS, )
)
Plaintiff, )
)
vs. ) No. 93 MR 45
)
CANTON INDUSTRIAL CORPORATION, )
)
Defendant. )
CONTEMPT ORDER
THIS CAUSE coming on to be heard upon the petition of the plaintiff,
PEOPLE OF THE STATE OF ILLINOIS, for the adjudication of contempt, and the Court
being fully advised in the premises, having considered all evidence and
argument, does find the defendant to be in indirect civil contempt of this court
for having substantially failed and wilfully refused to comply with certain
provisions of the interim consent order entered in the above-styled cause on
March 24, 1994.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the defendant CANTON
INDUSTRIAL CORPORATION shall timely perform the following actions by the
deadlines imposed herein in order to purge itself of contempt:
1) Remove pursuant to proper authorization all hazardous wastes from
the facility for appropriate disposal and fully comply with the RCRA closure
plan no later than ninety (90) days after entry of this contempt order;
2) Remove all tires from the facility for appropriate disposal no later
than December 31, 1995, according to the following priority: first, whole tires
located or stored outside of any building; next, whole tires located or stored
within any building; and lastly, partial or shredded tires. Beginning the month
following entry of this contempt order, 30,000 tires (by count or weight) shall
be removed each month;
<PAGE>
3) Deposit $140,000 in an escrow account in an Illinois institution
within thirty (30) days after entry of this contempt order. These funds shall
remain on deposit until released by the court after all tires have been removed
and the RCRA closure plan has been fully implemented. These funds shall be
subject to forfeiture and/or penalty imposition as determined by the court. 4)
Report to the Attorney General's Office on the 15th of each month in writing as
to the activities undertaken the previous month to comply with these
requirements. IT IS FURTHER ORDERED that the defendant shall pay $14,000 to the
Illinois Environmental Protection Trust Fund on or before December 31, 1995,
unless the defendants have purged themselves of contempt by meeting the
deadlines (through December 31, 1995) imposed in this order. The defendant shall
within 10 days of the entry of this order pay to the Attorney General an award
of attorney's fees in the amount of $600.00. This payment shall be made by
certified check payable to "Treasurer, State of Illinois for deposit in the
State Projects and Court Ordered Distribution Fund of the Attorney General's
Office.
Dated: 5/31/95
Entered: 5/31/95 /s/ Charles H. Wilhelm
Judge Charles H. Wilhelm
