<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14812
EDISON CONTROL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2716367
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
W60 N151 Cardinal Avenue 53012-0326
PO Box 326 (Zip Code)
Cedarburg, Wisconsin
(Address of principal executive offices)
Registrant's telephone number, including area code:
414-377-6565
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
Common stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Aggregate market value of Edison Control Corporation common stock, held by
non-affiliates as of March 31, 1997 was $6,011,496.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 31, 1997: 2,275,933 shares of common stock,
par value $.01 per share.
Documents Incorporated by Reference
1. Portions of Edison Control Corporation's 1996 Annual Report to Shareholders
are incorporated by reference into Parts II and IV of this Form 10-K.
2. Portions of Edison Control Corporation's Notice of Annual Meeting and
Proxy Statement for the Registrant's 1997 Annual Meeting scheduled to be
held on June 10, 1997 are incorporated by reference into Part III of this
Form 10-K.
<PAGE>
PART I
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are "forward-
looking statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects", or words of similar import. Similarly, statements
that describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to
such statements and which could cause actual results to differ materially
from those anticipated as of the date of this report. Shareholders, potential
investors and other readers are urged to consider these factors in evaluating
the forward-looking statements and are cautioned not to place undue reliance
on such forward-looking statements. The forward-looking statements included
herein are only made as of the data of this report and the Company undertakes
no obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Item 1. Business
Edison Control Corporation ( the "Company") was incorporated under the laws of
the State of New Jersey on June 18, 1986 to succeed a limited partnership
organized on October 31, 1979. Until June 21, 1996, the principal operating
business was involved in the design, development, manufacture and sale of
electronic fault indicators. On June 21, 1996, the Company purchased, from
unaffiliated persons, all of the issued and outstanding stock of Construction
Forms, Inc.("ConForms"), CF Ultra Tech, Inc.("Ultra Tech") and CF Gilco,
Inc.("Gilco") and all of the issued and outstanding units of another
affiliate, JABCO, LLC. On October 31, 1996, the Company sold certain net
assets of the electronic fault indicators business to the manager of that
operation. In order to conform the Company's fiscal year to that of ConForms
and its affiliates, the Company changed its fiscal year from a calendar year
to a year ended January 31, resulting in a one-month transition period in 1996.
The Company conducts its business through its subsidiaries. ConForms, the
Company's principal operating unit, designs, manufactures and distributes
concrete pumping systems and accessories. Ultra Tech is engaged in the
manufacturing and marketing of abrasion resistant piping systems. Abrasion
resistant hardened pipe is used extensively in mining, pulp and paper mills,
waste water treatment plants and coal-fired electric utility plants, as well
as in concrete pumping applications. Gilco is engaged in the manufacturing
and marketing of a broad line of concrete, utility and mortar/plaster mixers
for a broad segment of industries.
ConForms
Most of ConForms' manufacturing operations and all of its administrative
functions are located at the Company's 53,000 square foot headquarters in
Cedarburg, Wisconsin, which is approximately 17 miles north of Milwaukee.
ConForms operates two branch warehouses for light manufacturing and
distribution of its products. One warehouse is located in Gardena,
California and the other is located in Newport, Wales, United Kingdom.
ConForms also owns a 50% interest in South Houston Hose Company, a Houston,
Texas based distributor of concrete pumping accessories, industrial hoses and
a variety of fittings for other markets.
ConForms produces a standardized line of concrete pumping components and
accessories compatible with many different types of concrete pumps in order
to be in a position to provide concrete pumpers and distributors with a
complete, high quality line of components and accessories priced lower than if
each component was purchased individually. ConForms believes that a pumping
system designed as a package helps improve the reliability and output of
the pump.
In the 1970s, as concrete pumps became more reliable, available and acceptable
in the United States as the most efficient method of placing concrete;
ConForms worked closely with pump manufacturers and contractors to develop
better engineered products for the rapidly changing industry. The Company
believes that industry standards were largely established around ConForms'
designs. ConForms' objective was to provide high quality components and a
superior level of service to stay at the forefront of the concrete pumping
market. As ConForms continued to grow utilizing quality engineering, patent
protection, tooling and fixtures, manufacturing methods and distribution, it
became difficult for smaller manufacturers to match ConForms' total service
level. The Company believes this strategy has allowed ConForms to increase
its market share to over 50% of the North American market.
ConForms manufactures concrete pumping systems and accessories for many
applications, including use in high rise construction, airport and parking
structures, and bridge and tunnel construction. In addition, ConForms'
products are used extensively on mobile, truck-mounted concrete pumps
equipped with articulating booms. Because of the inherent abrasiveness of
concrete being conveyed under pressure, ConForms' products need to be
replaced periodically and the end-user usually contacts ConForms or a
distributor for high-quality, in-stock replacement components.
ConForms manufactures over 7,000 finished products, although approximately 500
products constitute approximately 80% of ConForms' sales. To its knowledge,
ConForms is the only complete source of system components and accessories
needed to pump and place concrete. ConForms' products include straight pipe
sections in a variety of lengths, diameters, wall thicknesses, degrees of
hardness, and fittings. In addition, ConForms' products include couplings,
reducers, bends, elbows and valves in various sizes and styles. Specially-
made rubber hose in a variety of sizes and configurations is included in
ConForms' product base. The line also includes equipment which is tailor-
made for particular applications, such as bridge-deck spreaders, krete-
placers, hydraulic diversion discharge valves and customized equipment used
in tunnel construction.
Marketing
ConForms' products, which account for approximately 70% of the Company's
sales, are marketed principally through its own sales personnel and
distributors. Besides contact from sales personnel, ConForms also attempts
to maintain a prominent level of market visibility through active membership
in the American Concrete Pumping Association, exhibits at industry trade
shows, direct mail publications to end users and conducting industry safety
seminars. Approximately 95% of all orders are received over the telephone.
Export sales accounted for approximately 22.0% of ConForms' business for the
year ended January 31, 1997, compared to 18.6% in the prior year.
International markets are expected to be an increasing part of the business
in future years.
Customers
ConForms' customer base consists of concrete pump manufacturers (15%),
pumper/dealers (organizations which run a concrete pumping operation but also
act as dealers of concrete pumps and systems) (40%), dealers (25%), pumping
contractors (10%) and various other businesses such as rental yards, general
contractors, pool contractors, ready mix operations, mines, fireproofers and
precast companies (10%).
No customer exceeded 10% of the Company's consolidated sales for the year ended
January 31, 1997.
Competition
ConForms competes with a number of manufacturers in the concrete pumping
components and accessories industry. However, the Company believes that this
competition is very fragmented, with most competitors offering a limited
selection of concrete pumping components and mainly selling against ConForms
on price. ConForms competes by providing a complete line of products,
quality, first class service and engineering assistance. Moreover, the
Company believes that ConForms' patents, manufacturing methods and inventory
stocking strategy provide it with a competitive advantage. Pump
manufacturers also compete by actively promoting their internal wear parts
and piping systems. Also, some customers develop their own in-house
capability to produce some of the products.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning, bending,
heat-treating, painting, sawing, hose coupling, assembly and fixture and tool
making.
Raw materials principally include steel pipe and tubing, rubber hose and
castings. ConForms has long-term relationships with a select group of
suppliers to control costs and ensure material quality and availability.
ConForms does not have any written contractual agreements with any of its
suppliers.
The business has marginally lower sales volume in the fourth quarter; however
working capital requirements are not significantly impacted. Terms of sale
are generally net 30 days.
ConForms has several patents and trademarks; only one, the method of heat-
treating pipe with a wall thickness of under .200 inches, is considered of
significant importance to the Company.
As of March 31, 1997, ConForms order backlog was approximately $800,000, all
of which should be completed prior to the end of the current fiscal year.
Backlog data for the end of the prior year is not available.
Ultra Tech
Ultra Tech was formed in 1989 to help assure ConForms an in-house supply of the
highest quality induction-hardened pipe for its concrete pumping systems. The
Company believes pipe hardened to 600 Brinell (trade name UT600) will typically
last 3 to 4 or more times longer than non-hardened pipe. Since its formation,
Ultra Tech has attempted to establish its own identity in many other markets,
primarily throughout the United States, including the mining industry to
carry phosphate and coal slurries, the pulp and paper industry for various
slurry mixes, the power industry to convey fly ash and coal and the waste
treatment industry to convey sludge.
Ultra Tech has developed a line of hardened pipe products available in varying
diameters, lengths and configurations which prolong the life of a piping
system, regardless of particular wear characteristics found in the pumping
system. The Company uses low alloy steel pipe, advanced heat-treating
technology and metallurgical principles to produce both UT600 induction-
hardened pipe and UT500 quenched and tempered pipe. Both of these products
have a hard, abrasion resistant inner wall and a more ductile outer layer.
For pure abrasion applications, UT600 provides outstanding wear resistance.
UT600 induction-hardened pipe is made from a raw steel pipe of a proprietary
chemistry. The pipe is induction heated, then water quenched on the inner
wall. The result is a pipe which has an inside hardness of 55 to 65 Rockwell
and an outside hardness of 20 to 30 Rockwell. In applications involving impact
or shock loading, the stress relieved UT500 offers more ductility while
maintaining a hard inner wear surface.
In August 1995, Ultra Tech began production at a new 43,000 square foot
state-of-the-art induction-hardening plant owned by its affiliate, JABCO,
LLC in Port Washington, Wisconsin. Port Washington is approximately 25 miles
north of Milwaukee, and 10 miles from Cedarburg. Ultra Tech's new building
and equipment should allow it to expand both the abrasion resistant pipe
market and its share in that market. Ultra Tech's new equipment increases
the size range of pipe it can process from 24 inches to 40 inches in diameter
and reduces processing time by approximately 50%.
Marketing
Ultra Tech products, which account for approximately 15% of the Company's sales,
are marketed through Company sales and marketing personnel, six independent
sales representatives and distributors. Regular advertising is placed in
various trade journals.
Ultra Tech's export sales for the year ended January 31, 1997 accounted for
approximately 7.4% of net sales, compared to 1.3% in fiscal 1995.
Customers
The market for Ultra Tech's products is primarily resource-based industries
such as mining, paper and energy. Secondary influence is felt in the
processing industries such as dredging, foundries, steel, cement, sludge and
grain handling. However, any pneumatic or hydraulic pipeline transporting
solids is a potential customer for Ultra Tech.
No customer exceeded 10% of the Company's consolidated net sales for the year
ended January 31, 1997.
Competition
There are a number of competitors in the piping industry, including mild steel,
duplex steel, plastic pipe, rubber lined pipe, basalt lined pipe, ceramic
lined pipe and cast alloy pipe. Ultra Tech is one of only three North
American competitors in the manufacturing of hardened pipe. Ultra Tech
relies on its efficient manufacturing processes, superior value, quality and
engineering assistance to compete.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning,
bending, heat-treating and sawing.
Raw materials principally include steel pipe in lengths up to 50 feet and
diameters from 2 1/2 to 40 inches. Ultra Tech does not have any written
contractual agreements with any of its suppliers. Raw materials are readily
available from various sources.
Ultra Tech's business is not seasonal. Working capital requirements may be
significant depending on the size of the order. Terms of sale are generally
net 30 days.
Ultra Tech does not depend on patents and trademarks.
As of March 31, 1997, Ultra Tech's order backlog was approximately $190,000,
all of which is to be completed prior to the end of the current fiscal year.
Backlog data for the end of the prior year is not available.
Gilco
In 1989, ConForms acquired the assets of the mixer division of the Gilson
Brothers Company, a well-known manufacturer of construction and utility
mixers. This acquisition allowed ConForms to diversify and expand its
product line and market base in the concrete construction equipment industry.
Gilco is engaged in the design, manufacture and marketing of utility,
concrete and mortar/plaster mixers. Gilco's product lines include
mortar/plaster mixers with capacities of six to twelve cubic feet, concrete
mixers with capacities of one and one-half to nine cubic feet and non-tilt
mixers with capacities of six to sixteen cubic feet.
Gilco's mixers are built to maintain high production with the densest mixes in
the toughest conditions. The mixers feature a square paddle shaft, steel
blades/adjustable wipers and a reinforced tubular steel frame. They also
feature a dual-belt drive and a completely enclosed extra heavy duty gear drive
with automotive style clutch or a fully-automatic hydraulic transmission.
Gilco's new polyurethane liners can be ordered across all mixer lines.
Mixers are driven by gas-powered engines or electric motors.
Gilco occupies a 50,000 square foot factory owned by the Company in Grafton,
Wisconsin. Grafton is approximately 20 miles north of Milwaukee and 5 miles
from Cedarburg.
Marketing
Gilco markets its products, which account for approximately 13% of the
Company's sales, through two inside sales personnel, direct mail, trade
magazine advertisements and referrals. This is in addition to its existing
distributor and retail channels. Gilson mixers are positioned at the high
quality, high price end of the market.
Gilco's export sales accounted for approximately 5% of Gilco's net sales
volume during the year ended January 31, 1997, compared to 2.4% in the prior
year.
Customers
Approximately 40% of Gilco's sales are to construction equipment dealers.
Another 25% is sold direct to masons, plasterers, general contractors and
other end users. Retail outlets account for about 30% of Gilco's business.
The remaining 5% is sold to government agencies, rental yards, and other
equipment manufacturers.
No customer exceeded 10% of the Company's consolidated net sales for the year
ended January 31, 1997.
Competition
Gilco has a few large competitors along with several competitors of similar
size. While a few are only involved with mixers, most have a line of
additional and some-what related construction equipment products. Gilco
competes on the basis of its high quality.
Miscellaneous Data
Principal manufacturing operations include metal fabricating, welding,
burning, bending, assembly and painting.
Raw materials principally include sheet metal, steel, castings, tires and
engines. Gilco does not have any written contractual agreements with any of
its suppliers. All raw materials are readily available.
The business is seasonal with slightly lower sales volume in the fourth
quarter; however, working capital requirements are not significantly
affected. Terms of sale are generally net 30 days.
Gilco's patents and trademarks are not material to Gilco's business.
As of March 31, 1997, Gilco's order backlog was approximately $95,000, all of
which is to be shipped during the current fiscal year. Backlog data for the
end of the prior year is not available.
General Matters
Research and development expenditures are a part of the engineering
department's budget. The estimated total amount spent on research and
development during the year ended January 31, 1997, the one-month transition
period ended January 31, 1996, and the years ended December 31, 1995 and 1994
totaled approximately $190,000, $6,000, $43,000 and $32,000, respectively,
and are expensed as incurred.
The Company believes that compliance with federal, state and local
environmental regulation will not require significant capital expenditures
or materially affect future earnings in 1997.
No portion of the business is subject to renegotiation of profits or
termination of contracts at the election of the United States government.
Foreign Operations
Information on foreign operations is incorporated by reference to footnote 15
of the consolidated financial statements in the 1996 Annual Report.
Employees
As of January 31, 1997, the Company had 109 active full-time employees.
Item 2. Properties
The following table sets forth certain information with respect to the
Company's principal facilities as of January 31, 1997:
<TABLE>
<CAPTION>
Square feet of
Location Floor Space Description and Principal Use
<S> <S> <S>
Cedarburg, WI (1) 53,000 One-story, masonry and metal-clad, steel
frame office and manufacturing facility
on 6.5 acres used mainly for ConForms'
manufacturing and all office personnel.
Grafton, WI (1) 42,000 One and part two-story, masonry and
metal-clad, steel and wood framed office
and manufacturing facility on 2.2 acres
used mainly for manufacturing Gilco and
Ultra Tech products.
Port Washington,
WI (1) 48,000 One-story and partial mezzanine, masonry
and metal-clad, steel frame office and
manufacturing facility on 8 acres used
mainly for manufacturing Ultra Tech
products.
Gardena, CA (2) 10,000 One-story office and manufacturing
facility used for the distribution and
light manufacturing of ConForms products.
Newport, Wales, United
Kingdom (3) 10,000 One-story office and manufacturing
facility used for the distribution and
light manufacturing of ConForms products.
New York, NY (4) 500 Executive office.
_________
(1) The Company owns these facilities. All these facilities are mortgaged
under the debt agreements.
(2) The Company leases this facility. The lease expires November 31, 1998.
(3) The Company leases this facility. The lease expires October 31, 1998.
(4) The Company leases this facility on a month-to-month basis.
</TABLE>
The Company believes that all of its facilities are in good condition and are
adequate for their intended uses.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending to which the
Company is a party nor were any material legal proceedings concluded during
the fourth quarter of fiscal 1996.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1996.
Part II
Item 5. Market for the Company's Stock and Related Stockholder Matters
The Company's Common Stock trades in the over-the-counter-market (NASDAQ
Symbol: EDCO). The following table sets forth the high and low bid quotation
for the calendar quarter/month shown. The prices quoted represent prices
between dealers in securities without adjustments for mark-ups, mark-downs or
commissions and do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
1995
Quarter High Low
<S> <C> <C>
1st 5.25 4.75
2nd 5.75 4.75
3rd 5.50 4.75
4th 5.25 4.50
</TABLE>
<TABLE>
<CAPTION>
1996
Quarter High Low
<S> <C> <C>
1st 5.25 3 51/64
2nd 9.00 4.00
3rd 7.625 4.00
4th 5.75 3.50
</TABLE>
<TABLE>
<CAPTION>
1997
Month High Low
<S> <C> <C>
January 4.625 4.50
</TABLE>
The approximate number of stockholders of record of the Company's $.01 par
value common stock as of January 31, 1997 was 38.
The Company has not previously paid any dividends on its Common Stock. The
Company intends to follow a policy of retaining all of its earnings to
finance its business and any future acquisitions.
The following information for this Part II is incorporated by reference to the
Company's 1996 Annual Report to Shareholders, as follows:
<TABLE>
<CAPTION>
Item Caption Information Incorporated by Reference to:
<S> <S> <S>
6. Summary of Selected Financial
Data Annual Report, page 7
7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations Annual Report, pages 4 - 6
8. Audited Financial Statements and
Supplemental Data Annual Report, pages 8 - 28
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company had no disagreements with its accountants during the last year.
The Company engaged Deloitte & Touche LLP, ConForms' auditors, on November
15, 1996. All information relating to such change in accountants is
incorporated by reference to the Company's Form 8-K dated November 15, 1996.
Part III
Item 10. Directors and Executive Officers of the Registrant
At January 31, 1997, the names and ages of all executive officers and
directors of the Company and all positions and offices held with the Company
are listed below. There are no family relationships between such persons.
All officers are elected annually by the Board of Directors at the first
Board meeting following each annual meeting of the stockholders. There are
no agreements between any of the officers and any other person pursuant to
election as an officer.
<TABLE>
<CAPTION>
First
Name Office Elected Age
<S> <S> <S> <C>
William B. Finneran Chairman of the Board and Director 1991 55
Jay J. Miller Director 1991 64
John J. Delucca Director 1991 53
Mary E. McCormack President, Chief Executive Officer 1995 43
and Director
Alan J. Kastelic President and Chief Executive Officer
of Construction Forms, Inc. 1996 53
Jay R. Hanamann Secretary, Treasurer and Chief Financial 1996 37
Officer
</TABLE>
William B. Finneran is a Managing Director of Oppenheimer & Co., Inc., an
investment banking firm, and has been employed with them since 1972. Mr.
Finneran is a Director of National Planning Association, a non-profit
advisory board and Covenant House, a non-profit charitable institution.
Jay J. Miller has been a practicing attorney in the State of New York for
more than thirty years. Mr. Miller is Director of Total-Tel USA
Communication, Inc., a provider of long distance telephone service; Vestro
Natural Foods, Inc., a specialty food manufacturer and distributor; and AmTrust
Pacific Ltd., a New Zealand real estate company.
John J. Delucca is Senior Vice President and Treasurer of RJR Nabisco. Mr.
Delucca was Chief Financial Officer of the Hascoe Association, a private
investment company from January 1991 to September 1993, President and Chief
Financial Officer for The Lexington Group from October 1990 to January 1991,
Senior Vice President of Finance and Managing Director of the Trump Group
from May 1988 to October 1990, and Senior Vice President of Finance for
International Controls Corporation from April 1986 to May 1988. Mr. Delucca
is a director of Enzo Biochem, Inc., a genetic research/testing company.
Mary E. McCormack was appointed President and Chief Executive Officer of the
Company on February 1, 1995. Prior to joining the Company, Ms. McCormack was
a Managing Director of Beechtree Capital Partners, Inc., a boutique merchant
banking firm which she co-founded in 1989. From 1983 to 1989, she served in a
variety of capacities for the investment banking and brokerage firm of Advest,
Inc., most recently as Vice President-Corporate Finance. Ms. McCormack is
Director of Star International Holdings, Inc., a manufacturer of commercial
cooking appliances, and the Junior League of Central Westchester, a non-
profit charitable institution.
Alan J. Kastelic was appointed President and Chief Executive Officer of
Construction Forms, Inc. on June 21, 1996 when this Company was acquired by
the Company. Mr. Kastelic had previously been Executive Vice President and
Chief Operating Officer of Construction Forms, Inc. which he joined in 1977.
Prior to joining Construction Forms, Mr. Kastelic was Manufacturing Manager
at Badger Dynamics and Chief Cost Accountant, Material Control Manager and
Manager of Manufacturing at the PCM division of Koehring Corporation.
Jay R. Hanamann was appointed Treasurer and Chief Financial Officer on July
1, 1996. Mr. Hanamann is the Chief Financial Officer of Construction Forms,
Inc. and subsidiaries. He has served in various financial and management
functions with ConForms since July 1990. From 1981 to 1990, he was employed
by the international accounting firm of Deloitte & Touche LLP.
Certain other information is incorporated by reference into this Form 10-K from
the Company's Proxy Statement for its 1997 Annual Meeting of Shareholders.
Item 11. Executive Compensation
All information is incorporated by reference to "Executive Compensation" in the
Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All information is incorporated by reference to "Share Ownership of
Directors, Officers and Certain Beneficial Owners" in the Company's Proxy
Statement for the 1997 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Information related to William B. Finneran's Warrant and the stock purchases
by and option plan issued to Alan J. Kastelic and Jay R. Hanamann is
incorporated by reference to the Company's Proxy Statement for the 1997 Annual
Meeting of Shareholders.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
The consolidated financial statements of the Company, together with the report
thereon of Deloitte & Touche, LLP appear on pages 8 through 28 of the Company's
1996 Annual Report to Shareholders, and are incorporated herein by reference.
(a)(2) Financial Statement Schedules:
Schedules not included have been omitted because they are either not
applicable or the information is presented in the consolidated financial
statements or notes thereto.
(b) Reports on Form 8-K:
During the fourth quarter, the Company changed independent public accountants
and reported the change in a Form 8-K dated November 15, 1996, which is
incorporated herein by reference.
(c) Exhibits:
The Exhibits filed or incorporated by reference herein are as specified in
the Exhibit Index.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
By: /s/ Mary E. McCormack
Mary E. McCormack
President and Chief Executive Officer (Principal Executive Officer)
April 25, 1997
By: /s/ Jay R. Hanamann
Jay R. Hanamann
Secretary, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
April 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form
10-K has been signed below by the following persons on behalf of Edison
Control Corporation and in the capacities and on the dates indicated:
/s/ William B. Finneran
William B. Finneran
Chairman of the Board and Director
April 25, 1997
/s/ Mary E. McCormack
Mary E. McCormack
President, Chief Executive Officer, and Director
April 25, 1997
/s/ Jay J. Miller
Jay J. Miller
Director
April 25, 1997
/s/ John J. Delucca
John J. Delucca
Director
April 25, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
No.
<S> <S>
3.1 Certificate of Incorporation filed June 18, 1986 (incorporated by
reference to the Company's Registration Statement on Form S-18 (File
No. 33-6736-NY) filed on June 24, 1986).
3.2 By-laws of the Company (incorporated by reference to the Company's
Registration Statements on Form S-18 (File No. 33-6736-NY) filed on
June 24, 1986).
4.1 Master Credit Agreement dated June 21, 1996 between Construction
Forms, Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and LaSalle
National Bank (incorporated by reference to the Company's Form 8-K
dated July 8, 1996).
4.2 Loan Agreement dated June 21, 1996 between Construction Forms, Inc.,
CF Ultra Tech, Inc., CF Gilco, Inc., and Bank Audi USA (incorporated
by reference to the Company's Form 8-K dated July 8, 1996).
10.1 * 1986 Stock Option Plan of Company (incorporated by reference to the
Company's Registration Statement on Form S-18 (File No. 33-6736-NY)
filed June 24, 1986).
10.2 * Stock Warrant issued to William Finneran (incorporated by reference to
the Company's 1997 Proxy Statement Exhibit 2).
10.3 * Employment Agreement dated February 1, 1995 between the Company and
Mary E. McCormack (incorporated by reference to the Company's Form
10-K dated March 27, 1996).
10.4 Stock and Unit Purchase Agreement dated June 21, 1996 by and among
Registrant, Construction Forms Acquisition Inc. and the Shareholders
of Construction Forms, Inc., CF Gilco, Inc., and JABCO, LLC
(incorporated by reference to Form 8-K dated July 8, 1996).
10.5 * Employment Agreement dated June 21, 1996 between the Company and
Alan J. Kastelic.
10.6 * Employment Agreement dated June 21, 1996 between the Company and Jay
R. Hanamann.
10.7 * Stock Option Plan dated June 21, 1996 between the Company and Alan J.
Kastelic.
10.8 * Stock Option Plan dated June 21, 1996 between the Company and Jay R.
Hanamann.
13. Pages from 1996 Annual Report to shareholders which are incorporated
by reference to Form 10-K.
16. Letter regarding change in certifying accountant (incorporated by
reference to the Company's Form 8-K dated November 15, 1996).
21. Subsidiaries of Edison Control Corporation.
23. Consent and Opinions of Independent Auditors.
27. Financial Data Schedule.
99. Definitive Proxy Statement for 1997 Annual Meeting of Shareholders
(to be filed within 120 days of January 31, 1997).
<FN>
* Represents a management compensation plan.
</TABLE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated this 21st day of June, 1996, is by and between
Construction Forms Inc., a Wisconsin corporation having an office and place of
business at W60 N151 Cardinal Avenue Cedarburg, Wisconsin 53012 (the
"Company"), and Alan J. Kastelic, an individual residing at 265 Huntington
Drive, Cedarburg, Wisconsin 53012 (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock and Unit Purchase Agreement dated as of June
21, 1996, by and among Edison Control Corporation (the "Purchaser") and the
shareholders of the Company (the "Purchase Agreement"), the Executive is to
enter into an employment agreement with the Company.
NOW, THEREFORE, in order to induce the Purchaser to consummate the
transactions contemplated by the Purchase Agreement and in consideration of
the mutual promises and covenants contained herein, the parties hereto
hereby agree as follows:
Section 1. EMPLOYMENT.
The Company hereby agrees to employ the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions
hereinafter set forth.
Section 2. DUTIES AND AUTHORITY.
(a) General Powers and Duties.
The Executive shall be employed as the President and Chief Executive Officer
of the Company and shall be vested with all the powers typically incident to
that office and necessary to the convenient and effective discharge of the
duties thereof, and as may from time to time be assigned to the Executive by
the Board.
(b) Time and Effort.
The Executive shall devote his full business time and best efforts to the
faithful and efficient performance of his duties to the Company. It is
understood that the Executive may have other passive investments and
directorships so long as they do not interfere with or become inconsistent
with his duties hereunder or require other than minor portions of his time.
The Executive agrees that he will not accept or serve in any directorship
capacity with a for-profit enterprise without the prior approval of the
Company's Board of Directors, which will not be unreasonably withheld.
Section 3. TERM.
The initial term of employment of the Executive hereunder shall commence on
the date hereof and shall continue until June 30, 1998 and renew
automatically from year to year thereafter , unless earlier terminated
pursuant to Section 5 hereof or unless written notice is given by either
party to the other at least 30 days before the end of the original term or
any renewal term that such employment shall cease as of the end of such term
(the "Employment Period").
Section 4. COMPENSATION AND RELATED MATTERS.
In consideration for the services of the Executive to be performed hereunder,
the Company shall compensate the Executive as follows:
(a) Base Salary.
For the services to be rendered by the Executive and in consideration of the
Executive's other undertakings in this Agreement, the Company shall pay to
the Executive a minimum base salary of $147,000 per year. Such base salary
shall be paid (less all applicable tax and other authorized withholdings) in
equal installments in accordance with the Company's then regular payroll
practices. The Executive's base salary shall be periodically reviewed by
the Company's Board of Directors for purposes of determining whether
increases in the base salary are appropriate.
(b) Performance Bonus.
The Company may also pay the Executive, in addition to his base salary, one
or more bonuses per year as additional compensation for the Executive's
services, in an amount to be determined by the Company's Board of Directors.
The payment and amount of any bonus shall be based upon the Company meeting
certain performance objectives, the substance of which shall be communicated
to the Executive as soon as practicable following their determination. The
Board of Directors shall have the sole discretion to award any such bonus
and to determine the time at which such bonus is payable; provided, however
that Executive's minimum bonus will be $60,000 per year through June 30,
1998, with the first $60,000 minimum bonus being paid no later than June 30,
1997 and the second $60,000 minimum bonus being paid no later than June 30,
1998.
(c) Accident Life, Health and Disability Insurance.
Accident, life and disability insurance for the executive and health
insurance for the Executive shall be provided by the Company in accordance
with the terms of the group accident, health and disability insurance plan
maintained by the Company for its full-time, salaried employees.
(d) Retirement Plan.
The Executive shall be entitled to participate in any retirement plan adopted
by the Company for the benefit of its management.
(e) Club Membership.
Pursuant to the Company's policy of paying all dues and assessments of one
country or social club for certain of its key executives, the Company shall,
during the Employment Period, pay all of Executive's dues, assessments and
initiation fees relating to his membership in the North Shore Country Club.
The Company shall also reimburse Executive for all expenses incurred at such
Club on behalf of the Company in accordance with the Company's standard
policy with respect to reimbursement of business expenses.
(f) Reimbursement for Reasonable Business Expenses.
The Company shall reimburse Executive for reasonable expenses incurred by
him in connection with the performance of his duties pursuant to this
Agreement, in accordance with the Company's standard policy with respect to
reimbursement of business expenses, including, but not limited to, travel
expenses, expenses in connection with seminars, professional conventions or
similar professional functions and other reasonable business expenses.
Executive agrees to provide the Company with receipts and/or documentation
sufficient to permit the Corporation to take its full business expense
deduction. The Company shall have no obligation to reimburse the Executive
for expenses claimed for which sufficient receipts and/or documentation are
not provided.
(g) Automobile.
The Company shall provide Executive with full use of an automobile owned or
leased by the Company, comparable in size and quality to the Company
automobile currently used by Executive, for use in carrying out his duties for
both the Company and for use in such additional personal business as Executive
may deem appropriate. The Company agrees to provide adequate insurance for
the automobile and occupants and to pay all maintenance and operating costs
appropriate or necessary to maintain such automobile in prime operating
condition.
Section 5. TERMINATION.
(a) Permitted Termination.
The Executive's employment hereunder shall continue until the end of the term
specified in Section 3 hereof, except that the employment of the Executive
hereunder shall terminate prior to the end of such term (in which case the
"term" of this Agreement shall end on the date of employment termination) by
reason of any one of the following:
(1) Death.
Upon the death of the Executive during the term of his employment hereunder,
the Executive's employment hereunder shall cease. In such event the Company
shall be obligated to pay to the Executive's estate any unpaid base salary
through the date of death and any previously awarded but unpaid bonus.
Amounts payable under this Section shall be payable at the times set forth
in Sections 4(a) and 4(b) hereof.
(2) Total and Permanent Disability.
The Company shall have the right to terminate this Agreement during the
continuance of any Disability of the Executive, as hereafter defined, upon
fifteen (15) days' prior notice to the Executive during the continuance of
the Disability. "Disability" for purposes of this Section 5(a)(2) shall
mean an inability by the Executive to perform a substantial portion of the
Executive's duties hereunder by reason of physical or mental incapacity or
disability for a total of one-hundred eighty (180) days or more in any
consecutive period of three-hundred and sixty-five (365) days, as determined
by the Board in its good faith judgment based upon a medical doctor's report.
In the event of a termination by reason of the Executive's Disability, the
Company shall be obligated to pay the Executive any unpaid base salary
through the date of termination, and any previously awarded but unpaid bonus.
Amounts payable under this Section 5(a)(2) shall be payable at the times set
forth in Section 4(a) and 4(b) hereof.
(3) For Cause.
The Company shall have the right to immediately terminate this Agreement for
"Cause" upon written notice by the Company to the Executive. For purposes
of this Agreement, a termination shall be for Cause only if the Board shall
determine that any one or more of the following has occurred:
(i) the commission by the Executive of a felony, fraud, embezzlement or an
act of serious criminal moral turpitude; or
(ii) the Executive shall have engaged in willful misconduct in connection
with the conduct of the Company's business; or
(iii) the material failure of the Executive to carry out the lawful policies
and directives of the Board to the reasonable satisfaction of the Board, to
the extent that such policies and directives are consistent with this
Agreement and the position of the Executive; or
(iv) the Executive shall have committed a material breach of any one or more
of the provisions of this Agreement and such breach shall have continued in
effect for a period of thirty (30) days after written notice to the
Executive specifying such breach in reasonable detail; or
(v) the Executive voluntarily terminates his employment for reasons other
than those described in Section 5(b) without having Good Reason for
voluntarily terminating his employment.
For purposes of this Agreement, "Good Reason" shall mean (1) the material
diminution of Executive's duties set forth in Section 2 above, (2) the
Company's material breach of any one or more of the provisions of this
Agreement and such breach shall have continued in effect for a period of
thirty (30) days after written notice to the Company specifying such breach
in reasonable detail or (3) the relocation of the offices at which Executive
is principally employed to a location which is more than 50 miles from the
offices at which Executive is principally employed as of the date hereof.
Except with respect to base salary earned by the Executive relating to
periods prior to the termination of the Executive's employment hereunder and
COBRA rights, upon any termination of the Executive's employment hereunder
pursuant to this Section 5(a)(3), the Executive will have no right to any
compensation or benefits from the Company after the effective date of such
termination.
(b) Termination for Other Reason.
If (1) the Executive's employment is terminated by the Company including
notice of nonrenewal at the expiration of the original term or any extension
thereof, other than by reason of death, Disability, or for Cause, or (2) the
Executive voluntarily terminates his employment with the Company for Good
Reason, then (i) the Company shall pay the Executive an amount equal to the
balance of the base salary which the Executive would have received had the
Executive's employment continued through June 30, 1998, which amount shall be
payable at the times and intervals set forth in Section 4 hereof, provided
that the Executive shall receive continuation payments of at least twelve
(12) months base salary following the effective date of termination pursuant
to this Section 5(b); and (ii) the Company shall continue to provide the
Executive with those benefits described in Section 4(c) above which the
Executive would have received had the Executive's employment continued
throughout the term of employment hereunder or any extension thereof (or
provide for a cash payment that is economically equivalent to such benefits),
provided that such benefit continuation shall be for a period of not less
than twelve (12) months following the effective date of termination pursuant
to this Section 5(b). In addition to the foregoing, upon such termination
any and all sums owed by the Company to the Executive under this Agreement
(such as unpaid salary, previously awarded but unpaid bonuses, reimbursements
for travel expenses, or the like) shall be immediately due and payable by the
Company to the Executive.
Section 6. NONCOMPETITION AND NONSOLICITATION.
(a) Noncompetition.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not, directly or indirectly (a) enter into or
engage in any business of the Company, its subsidiaries or affiliates as now
conducted or as contemplated by the Company, its subsidiaries or affiliates,
either on his own account, or as a partner or joint venturer, or as an
employee, agent, consultant, or salesman for any individual or entity, or as
an officer director, or stockholder of a corporation, or as a lender, sales
agent or sales representative or otherwise, within the United States or any
other country, (b) solicit or induce, or cause any business, firm or
corporation to solicit or induce, the employment of, or business with, any of
the present or future employees, agents or customers of the Company, its
subsidiaries or affiliates, or (c) engage in or participate indirectly or
indirectly, any business conducted under any name that shall be the same as
or similar to any trade name used by the Company, its subsidiaries or
affiliates in connection with its business and operations.
Nothing in the foregoing shall be deemed to prohibit Executive from owning
stock, but not otherwise participating in the management, of any corporation
which is listed on a national stock exchange or the NASDAQ National Market
System, provided such stock interest does not exceed five percent (5%) of
the outstanding stock of any class of such corporation.
(b) Nonsolicitation.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not directly or indirectly solicit or
encourage any employee of the Company or its subsidiaries to cease his or her
employment with the Company, its subsidiaries or affiliates or to commit any
act or engage in any activity which would violate the conditions set forth
in Section 6(a) of this Agreement if it were committed or engaged in by the
Executive himself nor shall the Executive induce or attempt to induce any
customer or other person having a business relationship with the Company, its
subsidiaries or affiliates to cease doing business with the Company, its
subsidiaries or affiliates or interfere materially with the relationship
between any such person and the Company, its subsidiaries or affiliates.
(c) Specific Performance.
Executive acknowledges and agrees that (a) irreparable damage would result if
the provisions of Sections 6 hereof were not complied with in accordance with
their respective specific terms, (b) such damage will be incapable of precise
measurement and (c) the Company will not have an adequate remedy at law to
redress the harm which such violation shall cause. Accordingly, Executive
agrees that the Company shall have the right to injunctive relief, in
addition to any other rights or remedies it may have, in respect of any
failure on the part of Executive to comply with provisions of Sections 6
hereof including, but not limited to, temporary restraining orders and
temporary injunctions to restrain any violation of this Agreement by Executive.
Section 7. NON-DISCLOSURE.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not divulge, furnish or make accessible to
anyone any knowledge or information with respect to the Company's product
development plans, financial information regarding the Company, confidential or
secret processes, inventions, discoveries, improvements, formulae, plans,
material devices or ideas or other know-how, whether patentable or not, with
respect to any confidential or secret engineering, development or research
work or with respect to any other confidential or secret aspects of the
Company's business (including, without limitation, customer lists,
instruction manuals, supplier lists and pricing arrangements with customers or
suppliers.
Section 8. MISCELLANEOUS.
(a) Notices.
All notices and other communications hereunder shall be in writing or by
written telecommunication, and shall be deemed to have been duly given if
delivered personally or if mailed by certified written telecommunication, to
the relevant address set forth above, or to such other address as the
recipient of such notice or communication shall have specified to the other
party hereto in accordance with this Section 8.
(b) Severability.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
(c) Waivers.
No delay or omission by either party hereto in exercising any right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege shall preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(d) Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
(e) Entire Agreement.
This Agreement contains the entire understanding of the parties hereto,
supersedes all prior agreements and understandings relating to the subject
matter hereof and shall not be amended except by a written instrument signed
by each of the parties hereto.
(f) Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF WISCONSIN.
(g) Sale, Consolidation or Merger.
In the event of a sale of the stock of the Company, or consolidation or
merger of the Company with or into another corporation or entity, or the sale
of substantially all of the operating assets of the Company to another
corporation, entity or individual, the successor-in-interest shall be deemed
to have assumed all liabilities of the Company under this Agreement.\
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
CONSTRUCTION FORMS, INC. /s/ Alan J. Kastelic
Alan J. Kastelic
By /s/ Allen Duhr
Its President
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated this 21st day of June, 1996, is by and between
Construction Forms Inc., a Wisconsin corporation having an office and place of
business at W60 N151 Cardinal Avenue Cedarburg, Wisconsin 53012 (the "Company"),
and Jay R. Hanamann, an individual residing at N108 W7075 Berkshire Drive,
Cedarburg, Wisconsin 53012 (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock and Unit Purchase Agreement dated as of June
21, 1996, by and among Edison Control Corporation (the "Purchaser") and the
shareholders of the Company (the "Purchase Agreement"), the Executive is to
enter into an employment agreement with the Company.
NOW, THEREFORE, in order to induce the Purchaser to consummate the
transactions contemplated by the Purchase Agreement and in consideration of
the mutual promises and covenants contained herein, the parties hereto hereby
agree as follows:
Section 1. EMPLOYMENT.
The Company hereby agrees to employ the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions
hereinafter set forth.
Section 2. DUTIES AND AUTHORITY.
(a) General Powers and Duties.
The Executive shall be employed as the Chief Financial Officer, Secretary and
Treasurer of the Company and shall be vested with all the powers typically
incident to that office and necessary to the convenient and effective
discharge of the duties thereof, and as may from time to time be assigned to
the Executive by the Board.
(b) Time and Effort.
The Executive shall devote his full business time and best efforts to the
aithful and efficient performance of his duties to the Company. It is
understood that the Executive may have other passive investments and
directorships so long as they do not interfere with or become inconsistent with
his duties hereunder or require other than minor portions of his time. The
Executive agrees that he will not accept or serve in any directorship
capacity with a for-profit enterprise without the prior approval of the
Company's Board of Directors, which will not be unreasonably withheld.
Section 3. TERM.
The initial term of employment of the Executive hereunder shall commence on
the date hereof and shall continue until June 30, 1998 and renew
automatically from year to year thereafter , unless earlier terminated
pursuant to Section 5 hereof or unless written notice is given by either
party to the other at least 30 days before the end of the original term or
any renewal term that such employment shall cease as of the end of such term
(the "Employment Period").
Section 4. COMPENSATION AND RELATED MATTERS.
In consideration for the services of the Executive to be performed hereunder,
the Company shall compensate the Executive as follows:
(a) Base Salary.
For the services to be rendered by the Executive and in consideration of the
Executive's other undertakings in this Agreement, the Company shall pay to
the Executive a minimum base salary of $84,000 per year. Such base salary
shall be paid (less all applicable tax and other authorized withholdings) in
equal installments in accordance with the Company's then regular payroll
practices. The Executive's base salary shall be periodically reviewed by the
Company's Board of Directors for purposes of determining whether increases
in the base salary are appropriate.
(b) Performance Bonus.
The Company may also pay the Executive, in addition to his base salary, one
or more bonuses per year as additional compensation for the Executive's
services, in an amount to be determined by the Company's Board of Directors.
The payment and amount of any bonus shall be based upon the Company meeting
certain performance objectives, the substance of which shall be communicated
to the Executive as soon as practicable following their determination. The
Board of Directors shall have the sole discretion to award any such bonus
and to determine the time at which such bonus is payable; provided, however
that Executive's minimum bonus will be $40,000 per year through June 30,
1998, with the first $40,000 minimum bonus being paid no later than June 30,
1997 and the second $40,000 minimum bonus being paid no later than June 30,
1998.
(c) Accident Life, Health and Disability Insurance.
Accident, life and disability insurance for the executive and health
insurance for the Executive shall be provided by the Company in accordance
with the terms of the group accident, health and disability insurance plan
maintained by the Company for its full-time, salaried employees.
(d) Retirement Plan
The Executive shall be entitled to participate in any retirement plan
adopted by the Company for the benefit of its management.
(e) Reimbursement for Reasonable Business Expenses. The Company shall
reimburse Executive for reasonable expenses incurred by him in connection
with the performance of his duties pursuant to this Agreement, in accordance
with the Company's standard policy with respect to reimbursement of business
expenses, including, but not limited to, travel expenses, expenses in
connection with seminars, professional conventions or similar professional
functions and other reasonable business expenses. Executive agrees to provide
the Company with receipts and/or documentation sufficient to permit the
Corporation to take its full business expense deduction. The Company shall
have no obligation to reimburse the Executive for expenses claimed for which
sufficient receipts and/or documentation are not provided.
(g) Automobile.
The Company shall provide Executive with full use of an automobile owned or
leased by the Company, comparable in size and quality to the Company
automobile currently used by Executive, for use in carrying out his duties for
both the Company and for use in such additional personal business as Executive
may deem appropriate. The Company agrees to provide adequate insurance for the
automobile and occupants and to pay all maintenance and operating costs
appropriate or necessary to maintain such automobile in prime operating
condition.
Section 5. TERMINATION.
(a) Permitted Termination.
The Executive's employment hereunder shall continue until the end of the term
specified in Section 3 hereof, except that the employment of the Executive
hereunder shall terminate prior to the end of such term (in which case the
"term" of this Agreement shall end on the date of employment termination) by
reason of any one of the following:
(1) Death.
Upon the death of the Executive during the term of his employment hereunder,
the Executive's employment hereunder shall cease. In such event the Company
shall be obligated to pay to the Executive's estate any unpaid base salary
through the date of death and any previously awarded but unpaid bonus.
Amounts payable under this Section shall be payable at the times set forth in
Sections 4(a) and 4(b) hereof.
(2) Total and Permanent Disability. The Company shall have the right to
terminate this Agreement during the continuance of any Disability of the
Executive, as hereafter defined, upon fifteen (15) days' prior notice to the
Executive during the continuance of the Disability. "Disability" for
purposes of this Section 5(a)(2) shall mean an inability by the Executive to
perform a substantial portion of the Executive's duties hereunder by reason of
physical or mental incapacity or disability for a total of one-hundred eighty
(180) days or more in any consecutive period of three-hundred and sixty-five
(365) days, as determined by the Board in its good faith judgment based upon
a medical doctor's report. In the event of a termination by reason of the
Executive's Disability, the Company shall be obligated to pay the Executive
any unpaid base salary through the date of termination, and any previously
awarded but unpaid bonus. Amounts payable under this Section 5(a)(2) shall
be payable at the times set forth in Section 4(a) and 4(b) hereof.
(3) For Cause.
The Company shall have the right to immediately terminate this Agreement for
"Cause" upon written notice by the Company to the Executive. For purposes of
this Agreement, a termination shall be for Cause only if the Board shall
determine that any one or more of the following has occurred:
(i) the commission by the Executive of a felony, fraud, embezzlement or an
act of serious criminal moral turpitude; or
(ii) the Executive shall have engaged in willful misconduct in connection
with the conduct of the Company's business; or
(iii) the material failure of the Executive to carry out the lawful policies
and directives of the Board to the reasonable satisfaction of the Board, to
the extent that such policies and directives are consistent with this
Agreement and the position of the Executive; or
(iv) the Executive shall have committed a material breach of any one or more of
the provisions of this Agreement and such breach shall have continued in effect
for a period of thirty (30) days after written notice to the Executive
specifying such breach in reasonable detail; or
(v) the Executive voluntarily terminates his employment for reasons other than
those described in Section 5(b) without having Good Reason for voluntarily
terminating his employment.
For purposes of this Agreement, "Good Reason" shall mean (1) the material
diminution of Executive's duties set forth in Section 2 above, (2) the
Company's material breach of any one or more of the provisions of this
Agreement and such breach shall have continued in effect for a period of
thirty (30) days after written notice to the Company specifying such breach
in reasonable detail or (3) the relocation of the offices at which Executive
is principally employed to a location which is more than 50 miles from the
offices at which Executive is principally employed as of the date hereof.
Except with respect to base salary earned by the Executive relating to
periods prior to the termination of the Executive's employment hereunder and
COBRA rights, upon any termination of the Executive's employment hereunder
pursuant to this Section 5(a)(3), the Executive will have no right to any
compensation or benefits from the Company after the effective date of such
termination.
(b) Termination for Other Reason.
If (1) the Executive's employment is terminated by the Company including
notice of nonrenewal at the expiration of the original term or any extension
thereof, other than by reason of death, Disability, or for Cause, or (2) the
Executive voluntarily terminates his employment with the Company for Good
Reason, then (i) the Company shall pay the Executive an amount equal to the
balance of the base salary which the Executive would have received had the
Executive's employment continued through June 30, 1998, which amount shall be
payable at the times and intervals set forth in Section 4 hereof, provided that
the Executive shall receive continuation payments of at least twelve (12)
months base salary following the effective date of termination pursuant to
this Section 5(b); and (ii) the Company shall continue to provide the
Executive with those benefits described in Section 4(c) above which the
Executive would have received had the Executive's employment continued
throughout the term of employment hereunder or any extension thereof (or
provide for a cash payment that is economically equivalent to such benefits),
provided that such benefit continuation shall be for a period of not less
than twelve (12) months following the effective date of termination pursuant
to this Section 5(b). In addition to the foregoing, upon such termination
any and all sums owed by the Company to the Executive under this Agreement
(such as unpaid salary, previously awarded but unpaid bonuses, reimbursements
for travel expenses, or the like) shall be immediately due and payable by the
Company to the Executive.
Section 6. NONCOMPETITION AND NONSOLICITATION.
(a) Noncompetition.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not, directly or indirectly (a) enter into or
engage in any business of the Company, its subsidiaries or affiliates as now
conducted or as contemplated by the Company, its subsidiaries or affiliates,
either on his own account, or as a partner or joint venturer, or as an
employee, agent, consultant, or salesman for any individual or entity, or as an
officer director, or stockholder of a corporation, or as a lender, sales agent
or sales representative or otherwise, within the United States or any other
country, (b) solicit or induce, or cause any business, firm or corporation to
solicit or induce, the employment of, or business with, any of the present or
future employees, agents or customers of the Company, its subsidiaries or
affiliates, or (c) engage in or participate indirectly or indirectly, any
business conducted under any name that shall be the same as or similar to any
trade name used by the Company, its subsidiaries or affiliates in connection
with its business and operations.
Nothing in the foregoing shall be deemed to prohibit Executive from owning
stock, but not otherwise participating in the management, of any corporation
which is listed on a national stock exchange or the NASDAQ National Market
System, provided such stock interest does not exceed five percent (5%) of the
outstanding stock of any class of such corporation.
(b) Nonsolicitation.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not directly or indirectly solicit or
encourage any employee of the Company or its subsidiaries to cease his or her
employment with the Company, its subsidiaries or affiliates or to commit any
act or engage in any activity which would violate the conditions set forth in
Section 6(a) of this Agreement if it were committed or engaged in by the
Executive himself nor shall the Executive induce or attempt to induce any
customer or other person having a business relationship with the Company, its
subsidiaries or affiliates to cease doing business with the Company, its
subsidiaries or affiliates or interfere materially with the relationship
between any such person and the Company, its subsidiaries or affiliates.
(c) Specific Performance.
Executive acknowledges and agrees that (a) irreparable damage would result if
the provisions of Sections 6 hereof were not complied with in accordance with
their respective specific terms, (b) such damage will be incapable of precise
measurement and (c) the Company will not have an adequate remedy at law to
redress the harm which such violation shall cause. Accordingly, Executive
agrees that the Company shall have the right to injunctive relief, in addition
to any other rights or remedies it may have, in respect of any failure on the
part of Executive to comply with provisions of Sections 6 hereof including,
but not limited to, temporary restraining orders and temporary injunctions to
restrain any violation of this Agreement by Executive.
Section 7. NON-DISCLOSURE.
During the term of this Agreement and for so long as Executive is receiving
severance compensation from the Company pursuant to Section 5(b) of this
Agreement, the Executive shall not divulge, furnish or make accessible to anyone
any knowledge or information with respect to the Company's product development
plans, financial information regarding the Company, confidential or secret
processes, inventions, discoveries, improvements, formulae, plans, material
devices or ideas or other know-how, whether patentable or not, with respect
to any confidential or secret engineering, development or research work or
with respect to any other confidential or secret aspects of the Company's
business (including, without limitation, customer lists, instruction manuals,
supplier lists and pricing arrangements with customers or suppliers.
Section 8. MISCELLANEOUS.
(a) Notices.
All notices and other communications hereunder shall be in writing or by
written telecommunication, and shall be deemed to have been duly given if
delivered personally or if mailed by certified written telecommunication, to
the relevant address set forth above, or to such other address as the
recipient of such notice or communication shall have specified to the other
party hereto in accordance with this Section 8.
(b) Severability.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
(c) Waivers.
No delay or omission by either party hereto in exercising any right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege shall preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(d) Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
(e) Entire Agreement.
This Agreement contains the entire understanding of the parties hereto,
supersedes all prior agreements and understandings relating to the subject
matter hereof and shall not be amended except by a written instrument signed
by each of the parties hereto.
(f) Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF WISCONSIN.
(g) Sale, Consolidation or Merger.
In the event of a sale of the stock of the Company, or consolidation or
merger of the Company with or into another corporation or entity, or the sale
of substantially all of the operating assets of the Company to another
corporation, entity or individual, the successor-in-interest shall be deemed
to have assumed all liabilities of the Company under this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
CONSTRUCTION FORMS, INC. /s/ Jay R. Hanamann
Jay R. Hanamann
By Allen Duhr
Its President
EDISON CONTROL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
EDISON CONTROL CORPORATION, a New Jersey corporation (the "Company"), hereby
grants to Alan J. Kastelic ("Optionee"), in consideration for services to be
provided, an option to purchase a total of 97,222 shares (the "Shares") of
Common Stock of the Company, at the price determined as provided herein.
1. Nature of the Option.
This Option is a non-qualified option and is not intended to qualify for
incentive stock option special tax benefits to Optionee.
2. Exercise Price.
The exercise price is $3.00 for each share of Common Stock.
3. Exercise of Option.
Subject to Section 6 hereof, this Option shall be exercisable during its term
as follows:
(i) Right to Exercise.
The Options granted hereunder shall vest and become exercisable on the first
anniversary of the date of this Agreement.
(ii) Method of Exercise.
This Option shall be exercisable from time to time by written notice which
shall state the number of Shares in respect of which this Option is being
exercised, and which shall contain or be accompanied by such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may reasonably be required by the
Company. Such written notice shall be signed by Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The written notice shall be accompanied by payment of the exercise price.
No Shares will be issued pursuant to the exercise of this Option unless such
issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed.
(iii) Number of Shares Exercisable.
Each exercise of an Option hereunder shall reduce, pro tanto, the total
number of Shares that may thereafter be purchased under such Option.
4. Optionee's Representations.
In the event the Shares purchasable pursuant to the exercise of this Option
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), at the time this Option is exercised, Optionee shall,
concurrently with the exercise of all or any portion of this Option, deliver
to the Company his Investment Representation Statement in the form attached
hereto as Exhibit A.
5. Method of Payment.
Payment of the exercise price shall be by any of the following, or a
combination thereof:
(i) cash or certified check; or
(ii) if authorized by the Board, surrender to the Company of other shares of
common stock of the Company having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
this Option is being exercised. The fair market value of the shares so
surrendered shall be determined by the Board in its sole discretion;
provided, however, that where there is a public market for the common stock,
the value per Share shall be the mean of the bid and asked prices of the
common stock on the last business day prior to the date of exercise, as
reported on the date of exercise in The Wall Street Journal (or, if not so
reported, as otherwise reported in the National Association of Securities
Dealers Automated Quotation (NASDAQ) System) or, in the event the common
stock is listed on a stock exchange, the value per Share shall be the mean of
the highest and lowest sales price of the common stock on such exchange on
the last business day prior to the date of exercise, as reported in The Wall
Street Journal.
6. Restrictions on Exercise.
This Option may not be exercised if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
7. Termination of Status as an Employee.
If Optionee's employment is terminated by the Company for Cause at any time,
Options granted hereunder (both unvested Options and vested but unexercised
Options) shall immediately terminate. If Optionee's employment is terminated by
the Company at any time for a reason other than for Cause, Options granted
herewith (both invested Options and vested, but unexercised Options) shall
be immediately exercisable for a period of three (3) months from the date of
termination of employment. If Optionee voluntarily terminates his employment
with the Company at any time, unvested Options shall immediately terminate
and vested Options shall be immediately exercisable for a period of three (3)
months from the date of termination of employment.
For purposes of this Agreement, a termination shall be for Cause only if the
Board of Directors of the Company shall determine that any one or more of the
following has occurred:
(i) the commission by the Optionee of a felony, fraud, embezzlement or an act
of serious criminal moral turpitude; or
(ii) the Optionee shall have committed a material breach of any one or more
of the management policies and directives of the Company and such breach shall
have continued in effect for a period of thirty (30) days after written
notice to the Optionee specifying such breach in reasonable detail.
8. Disability of Optionee.
Notwithstanding the provisions of Section 7 above, if Optionee is unable to
continue his employment with the Company as a result of his permanent and
total disability (as defined in Section 22(e)(3) of the Code), he may, but
only within three (3) months from the date of termination of employment or
consulting relationship, exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise this Option at such date, or if he does not exercise it
within the time specified herein, this Option shall terminate.
9. Death of Optionee.
Upon the death of Optionee, this Option shall terminate and be of no further
effect, except that if Optionee's death occurs during the term of this Option
and at the time of his death, Optionee was an Employee of the Company and had
been in continuous status as an Employee since the date of grant of the
Option, this Option may be exercised, at any time within three (3) months
following the date of Optionee's death, by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only as to the number of Shares subject to this Option as to which the right
to exercise had accrued to the Optionee at the date of death.
10. Non-Transferability of Option.
This Option may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
him. The terms of this Option shall be binding upon the executors,
administrators, heirs and successors of Optionee.
11. Term of Option.
This Option may not be exercised more than ten (10) years from the date of
grant of this Option.
12. Registration.
This Company shall register the shares on a registration statement on Form
S-8 within one year of the date hereof.
DATE OF GRANT: June 21, 1996
EDISON CONTROL CORPORATION
a New Jersey corporation
By: /s/ Mary E. McCormack
Name: Mary E. McCormack
Title: President
Agreed to this 21st day of
June, 1996.
By: Alan J. Kastelic
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER:
SELLER: EDISON CONTROL CORPORATION
COMPANY: EDISON CONTROL CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company, the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired all such information about the Company as I deem necessary
and appropriate to enable me to reach an informed and knowledgeable decision
to acquire the Securities. I am purchasing these Securities for my own
account for investment and not with a view to, or for the resale in
connection with, any "distribution" thereof for purposes of the Securities Act
of 1933, as amended ("Securities Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment
intent as expressed herein.
(c) I further understand that the Securities may not be sold publicly and
must be held indefinitely unless they are subsequently registered under the
Securities Act or unless an exemption from registration is available. I am
able, without impairing my financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss on my investment.
I understand that the Company is under no obligation to register the
Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has purchased
and made full payment for, within the meaning of Rule 144, the securities to
be sold; and, in the case of an affiliate, or of a non-affiliate who has held
the securities less than three years (3) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(e) I further understand that at the time I wish to sell the Securities there
may be no public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144, and that, in such event,
I would be precluded from selling the Securities under Rule 144 even if the
two-year minimum holding period had been satisfied. I understand that the
Company is under no obligation to make Rule 144 available.
(f) I further understand that in the event all of the applicable requirements
of Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the Securities and Exchange Commission has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such person and
their respective brokers who participate in such transactions do so at their
own risk.
Signature of Purchaser:
Date: , 19 _
EDISON CONTROL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
EDISON CONTROL CORPORATION, a New Jersey corporation (the "Company"), hereby
grants to Jay Hanamann ("Optionee"), in consideration for services to be
provided, an option to purchase a total of 48,611 shares (the "Shares") of
Common Stock of the Company, at the price determined as provided herein.
1. Nature of the Option.
This Option is a non-qualified option and is not intended to qualify for
incentive stock option special tax benefits to Optionee.
2. Exercise Price.
The exercise price is $3.00 for each share of Common Stock.
3. Exercise of Option.
Subject to Section 6 hereof, this Option shall be exercisable during its term
as follows:
(i) Right to Exercise.
The Options granted hereunder shall vest and become exercisable on the first
anniversary of the date of this Agreement.
(ii) Method of Exercise.
This Option shall be exercisable from time to time by written notice which shall
state the number of Shares in respect of which this Option is being
exercised, and which shall contain or be accompanied by such other
representations and agreements as to the holder's investment intent with
respect to such Shares of Common Stock as may reasonably be required by the
Company. Such written notice shall be signed by Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The written notice shall be accompanied by payment of the exercise price.
No Shares will be issued pursuant to the exercise of this Option unless such
issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed.
(iii) Number of Shares Exercisable.
Each exercise of an Option hereunder shall reduce, pro tanto, the total
number of Shares that may thereafter be purchased under such Option.
4. Optionee's Representations.
In the event the Shares purchasable pursuant to the exercise of this Option
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), at the time this Option is exercised, Optionee shall,
concurrently with the exercise of all or any portion of this Option, deliver
to the Company his Investment Representation Statement in the form attached
hereto as Exhibit A.
5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof:
(i) cash or certified check; or
(ii) if authorized by the Board, surrender to the Company of other shares of
common stock of the Company having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
this Option is being exercised. The fair market value of the shares so
surrendered shall be determined by the Board in its sole discretion;
provided, however, that where there is a public market for the common stock,
the value per Share shall be the mean of the bid and asked prices of the
common stock on the last business day prior to the date of exercise, as
reported on the date of exercise in The Wall Street Journal (or, if not so
reported, as otherwise reported in the National Association of Securities
Dealers Automated Quotation (NASDAQ) System) or, in the event the common
stock is listed on a stock exchange, the value per Share shall be the mean of
the highest and lowest sales price of the common stock on such exchange on
the last business day prior to the date of exercise, as reported in The Wall
Street Journal.
6. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any
applicable law or regulation.
7. Termination of Status as an Employee.
If Optionee's employment is terminated by the Company for Cause at any time,
Options granted hereunder (both unvested Options and vested but unexercised
Options) shall immediately terminate. If Optionee's employment is terminated
by the Company at any time for a reason other than for Cause, Options granted
herewith (both invested Options and vested, but unexercised Options) shall be
immediately exercisable for a period of three (3) months from the date of
termination of employment. If Optionee voluntarily terminates his employment
with the Company at any time, unvested Options shall immediately terminate
and vested Options shall be immediately exercisable for a period of three (3)
months from the date of termination of employment.
For purposes of this Agreement, a termination shall be for Cause only if the
Board of Directors of the Company shall determine that any one or more of the
following has occurred:
(i) the commission by the Optionee of a felony, fraud, embezzlement or an
act of serious criminal moral turpitude; or
(ii) the Optionee shall have committed a material breach of any one or more
of the management policies and directives of the Company and such breach
shall have continued in effect for a period of thirty (30) days after written
notice to the Optionee specifying such breach in reasonable detail.
8. Disability of Optionee.
Notwithstanding the provisions of Section 7 above, if Optionee is unable to
continue his employment with the Company as a result of his permanent and
total disability (as defined in Section 22(e)(3) of the Code), he may, but
only within three (3) months from the date of termination of employment or
consulting relationship, exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise this Option at such date, or if he does not exercise it
within the time specified herein, this Option shall terminate.
9. Death of Optionee.
Upon the death of Optionee, this Option shall terminate and be of no further
effect, except that if Optionee's death occurs during the term of this Option
and at the time of his death, Optionee was an Employee of the Company and had
been in continuous status as an Employee since the date of grant of the
Option, this Option may be exercised, at any time within three (3) months
following the date of Optionee's death, by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only as to the number of Shares subject to this Option as to which the right
to exercise had accrued to the Optionee at the date of death.
10. Non-Transferability of Option.
This Option may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
him. The terms of this Option shall be binding upon the executors,
administrators, heirs and successors of Optionee.
11. Term of Option.
This Option may not be exercised more than ten (10) years from the date of
grant of this Option.
12. Registration.
This Company shall register the shares on a registration statement on Form
S-8 within one year of the date hereof.
DATE OF GRANT: June 21, 1996
EDISON CONTROL CORPORATION
a New Jersey corporation
By: /s/ Mary E. McCormack
Name: Mary E. McCormack
Title: President
Agreed to this 21st day of
June, 1996.
By: /s/ Jay R. Hanamann
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER:
SELLER: EDISON CONTROL CORPORATION
COMPANY: EDISON CONTROL CORPORATION
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company, the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired all such information about the Company as I deem necessary
and appropriate to enable me to reach an informed and knowledgeable decision
to acquire the Securities. I am purchasing these Securities for my own
account for investment and not with a view to, or for the resale in
connection with, any "distribution" thereof for purposes of the Securities
Act of 1933, as amended ("Securities Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein.
(c) I further understand that the Securities may not be sold publicly and
must be held indefinitely unless they are subsequently registered under the
Securities Act or unless an exemption from registration is available. I am
able, without impairing my financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss on my investment.
I understand that the Company is under no obligation to register the
Securities. In addition, I understand that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-
affiliate who has held the securities less than three years (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(e) I further understand that at the time I wish to sell the Securities there
may be no public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144, and that, in such event,
I would be precluded from selling the Securities under Rule 144 even if the
two-year minimum holding period had been satisfied. I understand that the
Company is under no obligation to make Rule 144 available.
(f) I further understand that in the event all of the applicable requirements
of Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the Securities and Exchange Commission has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such person and
their respective brokers who participate in such transactions do so at their
own risk.
Signature of Purchaser:
Date: , 19 _
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Fiscal 1996 was a year of change for Edison Control Corporation (the
"Company"). On June 21, 1996, the Company acquired Construction Forms, Inc.,
a leading Wisconsin-based manufacturer of concrete pumping systems, abrasion-
resistant piping systems, and concrete and plaster/mortar mixers. On October
31, 1996, Edison sold its faulted circuit indicator business to its manager.
On November 15, 1996, the Company changed its fiscal year end to January 31,
1997 to conform with the year end of the acquired companies. Accordingly,
the financial statements reflect the change in year end and a one-month
transition period.
RESULTS OF OPERATIONS
Fiscal 1996 versus Fiscal 1995 Operations
Net sales for the year ended January 31, 1997 ("fiscal 1996") totaled
$13,604,340 compared to $791,502 for the year ended December 31, 1995
("fiscal 1995"). Net sales of the acquired companies from June 21, 1996
accounted for $12,717,228 of the total net sales. On a pro forma basis,
net sales of the acquired companies increased 7.2% from $19,789,192 in fiscal
1995 to $21,221,335 in fiscal 1996. The increase was due to increased export
and domestic volume of the concrete pumping systems business.
Gross profit percentage was 32.4% for fiscal 1996 compared to 16.5% for
fiscal 1995. The gross profit percent of the acquired companies was 33.0% for
fiscal 1996.
Selling, engineering and administrative expenses for fiscal 1996 increased to
$3,238,168 compared to $729,267 in 1995. As a percent of sales, the amount
decreased from 92.1% in 1995 to 23.8% in fiscal 1996. The acquired companies
selling, engineering and administrative expenses for fiscal 1996 were
$2,406,711 or 18.9% of net sales of the acquired companies.
Stock option amortization of $455,691 related to options for 167,611 shares
of the Company's common stock granted to the acquired companies' management
in June 1996. The difference between the $3.00 option price and the $7.50
market price at time of grant is being amortized over the one year vesting
period. The Company expects to recognize $298,558 of amortization in fiscal
1997.
Intangible amortization of $187,536 relates principally to the goodwill and
organizational/finance costs associated with the acquisition. The Company
anticipates $314,400 of amortization in fiscal 1997.
Operating earnings for fiscal 1996 were $531,702 or 3.9% of net sales
compared to an operating loss of $598,622 in 1995. The acquired companies
accounted for $1,596,362 of operating earnings for fiscal 1996.
Net investment earnings, which includes interest, dividends, and realized and
unrealized gains or losses on trading securities, decreased from $4,096,645
in 1995 to $33,279 for fiscal 1996. A majority of this decrease was related
to the decline in value of Glenayre Technologies, Inc. stock held by the
Company. The Company realized significant gains on sales of this stock
during the year, but also incurred significant unrealized losses on the stock
during the year.
Interest expense increased to $775,762 for fiscal 1996 from $0 in fiscal
1995. This change related to the debt incurred on the acquisition. Interest
expense is expected to increase in fiscal 1997 due to a full year of borrowing.
The loss on sale of net assets for $434,166 related to the sale, on October
31, 1996 of certain net assets of the electronic fault indicator business.
The Company anticipated continued operating losses in the future from this
business and, accordingly, decided to dispose of its assets.
Stock warrant amortization of $594,097 related to a warrant granted to the
principal stockholder in connection with this stockholder's personal guaranty
of subordinated debt incurred in connection with the Company's acquisition of
Construction Forms and its affiliates. The warrant was granted for 500,000
shares of the Company's common stock at $1.60 per share. At the time the
transaction was negotiated in April 1996, the Company's Common Stock was
$4.00 per share and on the date the acquisition was consummated on June 21,
1996, the closing price in said market for the Company's Common Stock was
$7.50 per share. In approving the transaction, the Board of Directors
received an opinion of Commonwealth Associates, an independent investment
banking firmm that the Warrant issued for the limited guarantee and collateral
was fair, from a financial point of view, to the holders of the Company's
Common Stock. The difference between the Warrant price and the fair market
value at the time the transaction was negotiated is being amortized over the
three year term of the subordinated debt. Amortization of $400,000 is
expected in fiscal 1997.
The net loss for the year was principally due to the loss on sale of net
assets and the amortization of goodwill, financing costs, stock options and
stock warrants. Excluding these items, the Company would have had net income
of approximately $270,000, or $.11 per share.
1995 versus 1994
Net sales for fiscal 1995 totaled $791,502, a decrease of $652,502 or 45.2%,
compared with 1994. While sales prices remained stable in 1995, the sales
decrease was due in part to a decline in the sale of the Company's products
for export. Sales in Mexico in 1994 were $229,219 versus $36,093 in 1995,
an 84% decrease. Sales domestically decreased as well, primarily due to
sales to Jacksonville Electric Authority from $261,648 in 1994 and decreasing
to $0 in 1995. This decline was partly attributable to an excess inventory
condition at Jacksonville Electric Authority. Management also believes the
decreased 1995 unit volume was a result of decreased spending by the
Company's electric utility customers for products such as faulted circuit
indicators which are not essential for the generation and distribution of
electric power.
Gross profit margins decreased to 16.5% in fiscal 1995 from 30.4% in fiscal
1994. The decrease was due to reduced unit volume and the allocation of
overhead cost over the unit volume.
Selling, general and administrative expenses were $729,267 in fiscal year
1995, an increase of $52,410, or 7.2% from 1994. As a percentage of sales,
selling, general and administrative expenses increased to 92% of sales in
1995, from 47% of sales in 1994. This increase is a result of increased
salary, rent and other administrative expenses related to the hiring of a
President and Chief Executive Officer in February, 1995. Selling expenses
remained constant at 14% of sales.
The operating loss before interest and dividends, realized gains and
unrealized gains (losses) on trading securities was $598,622 in fiscal year
1995 compared to $238,179 in fiscal 1994, an increase in the loss of
$360,443. The increase in the operating loss was due to decreased sales
volume, decreased gross profit margin and increased selling, general and
administrative expenses.
Interest and dividends, net of security fees and commissions, for fiscal year
1995 was $39,598 compared to $187,818 in fiscal year 1994, a decrease of
$148,220 or 78.9%. This decrease was due to fewer dividend generating
securities. Realized gains on the sale of trading securities for 1995 was
$2,214,145 as compared to $712,530 for 1994. The increase of $1,501,615 or
210.7% was due to increased trading activities. In addition, 1995 included
unrealized gains on trading securities of $1,842,902 as compared to losses of
$193,830 in 1994. The increase in unrealized gains was mainly attributable
to an upward-market trend.
The effective tax rate increased to 40% in 1995 as compared to 18% in 1994
due to the remaining tax-loss carry forward being utilized in fiscal 1994.
Net income of $2,082,582 or $.95 per share for fiscal year 1995 increased
from $1,830,347 or $.85 per share in fiscal year 1994 for a difference of
$252,235.
Cash increased $1,199,095 from $821,901 in fiscal 1994 to $2,020,996 in 1995.
This increase is significantly a result of cash provided by operations of
$1,122,000 which was generated from the sale of trading securities and
proceeds from the exercise of $117,000 of stock options.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $7,234,818 for fiscal 1996, compared
to $1,122,000 for fiscal 1995. The increase was mainly due to the sale of
trading securities to finance the acquisition of Construction Forms, Inc. and
its affiliates. The reduction of inventories of the acquired companies to
accommodate the leveraged position of the Company also contributed to the
increase.
Net working capital of $11,554,170 at January 31, 1997 increased $1,254,295,
or 12.2%, from the December 31, 1995 levels of $10,299,875. The current
ratio at January 31, 1997 was 3.9:1 compared to 5.73:1 at December 31, 1995.
The change was mainly due to changes in cash, trading securities and debt
used to finance the acquisition and increased net working capital of the
acquired companies.
Cash used in investing activities for fiscal 1996 was $19,274,791 compared to
$39,905 in fiscal 1995. This change was the result of the acquisition of
Construction Forms, Inc. and its affiliates. The purchase price of
approximately $20,550,000, including acquisition costs, was funded by
$4,800,000 of the Company's available resources, with the remaining amount
funded from available bank borrowings. Capital expenditures increased by
$376,435 principally due to the acquired companies' activities.
Cash provided by financing activities in fiscal 1996 of $12,166,288 was
primarily due to the issuance of debt related to the acquisition and
subsequent payments of debt. The Company's debt to capitalization ratio at
January 31, 1997 was 55.4% compared to 0% at December 31,1995. The Company
maintains various debt agreements which are described in more detail in the
footnotes to the consolidated financial statements. Required principal
payments in fiscal 1997 are expected to be approximately $869,000. The
Company entered into a two year $10,000,000 interest rate cap/floor
agreement to reduce the impact of changes in interest rate borrowings under
its variable rate debt. The agreement, which expires December 10, 1998,
maintains a cap rate of 7% (90 day LIBOR) and a floor rate of 4.5%.
The Company believes that it can fund proposed capital expenditures and
operational requirements from operations and currently available cash and
cash equivalents, investments, trading securities and existing bank credit
lines. Proposed capital expenditures for the fiscal year ending January 31,
1998 are expected to total approximately $500,000, as compared to $416,340
for fiscal 1996.
The Company intends to continue to expand its businesses, both internally and
through potential acquisitions. The Company currently anticipates that any
potential acquisitions would be financed primarily by internally generated
funds or additional borrowings.
<PAGE>
Summary of Selected Financial Data
Edison Control Corporation
<TABLE>
<CAPTION>
Year Ended
January 31, Year Ended December 31,
1997 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Statement of Operations
Net sales 13,604,340 791,502 1,444,004 1,195,807 1,611,297
Cost of sales 9,191,243 660,857 1,005,326 851,701 1,193,232
Gross profit 4,413,097 130,645 438,678 344,106 418,065
Selling, engineering
and administrative 3,238,168 729,267 676,857 651,267 762,953
Operating income (loss) 531,702 (598,622) (238,179) (307,161) (344,888)
Realized gains on
trading securities 2,802,490 2,214,145 712,530 545,742 133,648
Unrealized gains (losses)
on trading securities (2,854,059) 1,842,902 (193,830) 0 0
Interest, dividends and
other income 84,848 39,598 187,818 305,390 326,426
(Loss) earnings from
continuing operations (731,028) 2,082,582 1,830,347 543,971 115,186
Cumulative effect of
change in accounting
principle, net of
income taxes 0 0 1,447,567 0 0
Net (loss) earnings (731,028) 2,082,582 1,830,347 543,971 115,186
Per common share
(Loss) earnings before
cumulative effect of
change in accounting
principle (0.33) 0.95 0.18 0.25 0.05
Cumulative effect of
change in accounting
principle, less taxes 0 0 0.67 0 0
Net (loss) earnings (0.33) 0.95 0.85 0.25 0.05
Book value 5.98 4.86 3.89 3.02 2.76
At Year End
Working capital 11,554,170 10,299,875 8,101,993 6,256,984 5,674,025
Property, plant and
equipment-net 7,077,228 65,687 65,618 88,999 127,647
Total assets 34,060,105 12,553,489 9,332,572 6,444,468 5,951,247
Long-term debt 16,907,424 0 0 0 0
Stockholders' equity 13,601,241 10,375,912 8,176,330 6,345,983 2,802,012
Weighted average common
shares and common share
equivalents 2,210,849 2,189,633 2,149,500 2,140,599 2,100,000
Common stock
outstanding 2,275,933 2,136,000 2,100,000 2,100,000 2,100,000
<FN>
Note: As discussed in the Management's Discussion and Analysis of Financial
Condition and Results of Operations, significant changes were made to
the Company's core business in fiscal 1996.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Edison Control Corporation:
We have audited the accompanying consolidated balance sheet of Edison Control
Corporation and subsidiaries (the "Company") as of January 31, 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended and the one-month transition period ended
January 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of the
Company for the years ended December 31, 1995 and 1994 were audited by other
auditors whose report, dated February 14, 1996, expressed an unqualified
opinion on those statements and included an explanatory paragraph that
described a change in the method of accounting for debt and equity securities
as discussed in Note 1 to the consolidated financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 31,
1997, and the results of their operations and their cash flows for the year
then ended and the one-month transition period ended January 31, 1996, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 7, 1997
<PAGE>
EDISON CONTROL CORPORATION
Consolidated Balance Sheets
January 31, 1997 and December 31, 1995
<TABLE>
<CAPTION>
Assets 1997 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) 772,008 2,020,996
Investments (Note 1) 284,000 284,000
Trading securities (Notes 1 and 4) 4,751,688 9,838,998
Accounts receivable, less allowance of $292,000
and $0, respectively (Note 1) 2,713,308 55,398
Receivable from affiliate (Note 6) 156,035 0
Inventories (Notes 1 and 5) 5,316,948 230,318
Prepaid expenses and other current assets 197,576 47,739
Deferred compensation (Notes 1 and 11) 298,558 0
Deferred financing costs (Note 11) 983,333 0
Total current assets 15,473,454 12,477,449
Investment in and advances to affiliate
(Note 6) 340,054 0
Other assets:
Prepaid pension (Note 10) 385,021 0
Deferred financing costs (Note 11) 1,372,591 0
Deferred income taxes (Note 8) 0 10,350
Total other assets 1,757,591 10,350
Property, plant and equipment (Note 1):
Cost:
Land 343,059 0
Building and improvements 2,672,111 75,038
Machinery and equipment 4,383,674 364,942
Construction in progress 7,322 0
Total property, plant and equipment 7,406,166 439,980
Less - accumulated depreciation (328,938) (374,293)
Property, plant and equipment, net 7,077,228 65,687
Goodwill (net of amortization of $135,484)
(Note 1) 9,154,833 0
Organizational/finance costs (net of
amortization of $54,125) (Note 1) 256,945 0
TOTAL ASSETS 34,060,105 12,553,486
<FN>
See notes to consolidated financial statements.
<PAGE>
<CAPTION>
Liabilities and Stockholders' Equity 1997 1995
<S> <C> <C>
Current liabilities:
Trade accounts payable 868,088 924
Accrued compensation 606,010 0
Taxes other than income taxes 38,119 0
Other accrued expenses (Note 7) 529,896 51,701
Income taxes payable (Note 8) 9,077 518,728
Deferred income taxes (Note 8) 245,000 1,606,221
Deferred compensation (Notes 1 and 11) 754,250 0
Current maturities on long-term debt (Note 9) 868,844 0
Total current liabilities 3,919,284 2,177,574
Long-term debt-less current maturities (Note 9) 16,038,580 0
Deferred income taxes (Note 8) 501,000 0
Total liabilities 20,458,864 2,177,574
Stockholders' equity (Note 11):
Preferred stock, $.01 par value; 1,000,000
shares authorized, none issued 0 0
Common stock, $.01 par value; 10,000,000 shares
authorized, issued and outstanding 2,275,933
and 2,136,000 shares, respectively 22,759 21,360
Additional paid-in capital 10,016,435 6,143,334
Retained earnings 3,453,331 4,211,218
Foreign currency translation adjustments 108,716 0
Total stockholders' equity 13,601,241 10,375,912
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 34,060,105 12,553,486
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
EDISON CONTROL CORPORATION
Consolidated Statements of Operations
Years ended January 31, 1997, December 31, 1995, 1994
and one-month transition period ended January 31, 1996
<CAPTION>
One-Month
Year Ended Ended Year Ended
January 31, January 31, December 31, December 31,
<S> <C> <C> <C> <C>
Net sales 13,604,340 63,564 791,502 1,444,004
Cost of goods sold 9,191,243 54,046 660,857 1,005,326
Gross profit 4,413,097 9,518 130,645 438,678
Other operating expenses:
Selling, engineering and
administrative expenses 3,238,168 83,009 729,267 676,857
Stock option amortization
(Note 11) 455,691 0 0 0
Goodwill and
organizational/finance
cost amortization
(Note 1) 187,536 0 0 0
Total other operating
expenses 3,881,395 83,009 729,267 676,857
Operating earnings (loss) 531,702 (73,491) (598,622) (238,179)
Other expense (income):
Interest expense 775,762 0 0 0
Realized (gains) losses
on trading securities (2,802,490) (600,496) (2,214,145) (712,530)
Unrealized losses (gains)
on trading securities 2,854,059 583,345 (1,842,902) 193,830
Interest and
miscellaneous income (84,848) (10,481) (39,598) (187,818)
Loss on sale of assets,
net (Note 2) 434,166 0 0 0
Stock warrant
amortization (Note 11) 594,097 0 0 0
Equity in earnings of
affiliate (Note 6) (18,016) 0 0 0
Total other expense
(income) 1,752,730 (27,632) (4,096,645) (706,518)
(Loss) earnings before
income taxes (credit)
and cumulative effect
of change in accounting
principle (1,221,028) (45,859) 3,498,023 468,339
Income taxes (credit)
(Note 8) (490,000) (19,000) 1,415,441 85,559
(Loss) earnings before
cumulative effect of
change in accounting
principle (731,028) (26,859) 2,082,582 382,780
Cumulative effect of change
in accounting principle,
less income taxes of
$962,635 0 0 0 1,447,567
Net (loss) earnings (731,028) (26,859) 2,082,582 382,780
(Loss) earnings per common
share and common share
equivalentS:
(Loss) earnings before
cumulative effect of
change in accounting
principle (0.33) (0.01) 0.95 0.18
Cumulative effect of
change in accounting
principle 0 0 0 0.67
Net (loss) earnings (0.33) (0.01) 0.95 0.85
Weighted average common
shares and common share
equivalents 2,210,849 2,136,000 2,189,633 2,149,500
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
EDISON CONTROL CORPORATION
Consolidated Statements of Stockholders' Equity
Years ended January 31, 1997, December 31, 1995, 1994
and one-month transition period ended January 31, 1996
<CAPTION>
Foreign
Additional Currency
Common Stock Paid-in Retained Translation
Shares Amount Capital Earnings Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
Balances, January
1, 1994 2,100,000 21,000 6,026,694 298,289 0 6,345,983
Net earnings 0 0 0 1,830,347 0 1,830,347
Balances, December
31, 1994 2,100,000 21,000 6,026,694 2,128,636 0 8,176,330
Stock options
exercised 36,000 360 116,640 0 0 117,000
Net earnings 0 0 0 2,082,582 0 2,082,582
Balances, December
31, 1995 2,136,000 21,360 6,143,334 4,211,218 0 10,375,912
Net (loss) 0 0 0 (26,859) 0 (26,859)
Balances, January
31, 1996 2,136,000 21,360 6,143,334 4,184,359 0 10,349,053
Stock issued at
acquisition
(Note 11) 114,933 1,149 860,851 0 0 862,000
Stock warrants
issued
(Note 11) 0 0 2,950,000 0 0 2,950,000
Stock options
exercised
(Note 11) 25,000 250 62,250 0 0 62,500
Foreign currency
translation
adjustment 0 0 0 0 108,716 108,716
Net (loss) 0 0 0 (731,028) 0 (731,028)
Balances, January
31, 1997 2,275,933 22,759 10,016,435 3,453,331 108,716 13,601,241
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
EDISON CONTROL CORPORATION
Consolidated Statements of Cash Flows
Years ended January 31, 1997, December 31, 1995, 1994
and one-month transition period ended January 31, 1996
<CAPTION>
One-Month
Year Ended Ended Year Ended
January 31, January 31, December 31, December 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Operating activities:
Net (loss) earnings (731,028) (26,859) 2,082,582 1,830,347
Adjustments to reconcile net
(loss) to net cash provided
by (used in) operating
activities:
Depreciation of plant and
equipment 328,421 2,389 39,836 38,512
Amortization 1,235,253 0 0 0
Provision for doubtful
accounts 10,127 0 0 0
Realized (gain) on trading
securities (2,802,490) (600,409) (2,214,145) (712,530)
Unrealized loss (gain) on
trading securities 2,854,059 583,345 (1,842,902) 193,830
Purchases of trading
securities (9,003,912) (3,436,325) (16,653,501) (8,282,783)
Proceeds from the sales of
trading securities 15,409,029 2,084,100 18,501,000 8,908,423
Cumulative effect of change
in accounting principle 0 0 0 (2,410,202)
Loss on sale of assets 396,318 0 0 0
Equity in earnings of
affiliate (18,016) 0 0 0
Changes in assets and
liabilities, net of acquired
companies:
Accounts receivable (140,961) (40,958) 170,748 (40,213)
Receivable from affilate 44,973 0 0 0
Inventories 1,417,211 4,493 19,139 (4,578)
Prepaid expenses and other
assets 23,928 7,500 (458) 20,530
Prepaid pension 57,577 0 0 0
Trade accounts payable (71,315) 20,876 (68,527) 16,264
Accrued compensation 78,084 8,283 0 0
Taxes, other than income
taxes (44,774) 0 0 0
Accrued expenses 101,490 (9,413) 14,323 (7,920)
Income taxes (538,285) 216,000 351,054 167,674
Deferred income taxes (1,370,871) (235,000) 722,851 873,020
Net cash provided by (used
in) operating activities 7,234,818 (1,422,065) 1,122,000 590,374
Investing activities:
Additions to plant and
equipment (416,340) 0 (39,095) (15,131)
Maturities of certificates
of deposit 0 0 0 95,000
Payments received on advance
to affiliate 45,823 0 0 0
Proceeds from sale of
assets 9,819 0 0 0
Payment for the purchase of
acquired companies, net of
cash acquired 18,914,093
Net cash (used in) provided
by investing activities (19,274,791) 0 (39,905) 79,869
Financing activities:
Proceeds from issuance of
long-term debt 16,540,000 0 0 0
Payments on long-term debt (4,531,936) 0 0 0
Proceeds from issuance of
common stock 95,724 0 0 0
Stock options exercised 62,500 0 117,000 0
Net cash provided by
financing activities 12,166,288 0 117,000 0
Effect of exchange rate
changes on cash 46,762 0 0 0
Net increase (decrease) in
cash and cash equivalents 173,077 (1,422,065) 1,199,095 670,243
Cash and cash equivalents,
beginning of period 598,931 2,020,996 821,901 151,658
Cash and cash equivalents,
end of period 772,008 598,931 2,020,996 821,901
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest 773,954 0 0 0
Income taxes, net of
refunds 1,419,070 0 341,536 0
Supplemental scheduled of non-cash investing and financing activities:
Stock issued under separate
agreement which offset a
portion of purchase price
of acquired companies 766,274 0 0 0
Notes receivable offset
against purchase price
of acquired companies 332,400 0 0 0
Fair value of warrants
issued in connection with
financing of acquisition 2,950,000 0 0 0
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
EDISON CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1997, DECEMBER 31, 1995, 1994
AND ONE-MONTH TRANSITION PERIOD ENDED JANUARY 31, 1996
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include
the accounts of Edison Control Corporation ("Edison") and subsidiaries, all
of which are wholly owned (collectively, the "Company"). All material
intercompany accounts and transactions have been eliminated in consolidation.
Nature of Operations - The Company is currently comprised of four operating
segments. Construction Forms ("ConForms") is a leading manufacturer and
distributor of systems of pipes, couplings and hoses and other equipment used
for the pumping of concrete. ConForms manufactures a wide variety of
finished products which are used to create appropriate configurations of
systems for various concrete pumps. Ultra Tech manufactures abrasion
resistant piping systems for use in industries such as mining, pulp and
paper, power and waste treatment. Gilco produces a line of concrete and
plaster/mortar mixers. JABCO primarily leases property and equipment to
Ultra Tech.
The Company's principal market is North America with limited sales activity
in Europe.
Cash Equivalents - The Company considers all temporary investments with
maturities of three months or less when acquired to be cash equivalents.
Investments - Investments consist of certificates of deposit with maturities
in excess of three months and are recorded at cost which approximates market.
The Company intends to hold the certificates until maturity.
Trading Securities - Debt and equity securities purchased and held
principally for the purpose of selling them in the near term are classified
as "trading securities" and reported at fair value with unrealized gains and
losses included in earnings. The cost of securities sold is based on the
first-in, first-out method.
Accounting Change - In May 1993, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company adopted the
provisions of the new standard for securities held as of or acquired after
January 1, 1994. The cumulative effect as of January 1, 1994 of adopting
Statement No. 115 increased net income by $1,447,567 (net of $962,635 in
deferred income taxes), or $.67 per share.
Accounts Receivable - Accounts receivable are stated net of an allowance for
doubtful accounts and finance charges.
Inventories - Inventories are stated at the lower of cost (principally
last-in, first-out method) or market.
Property, Plant and Equipment - Property, plant and equipment is stated at
cost. Expenditures for major renewals and improvements are capitalized,
while maintenance and repairs, which do not significantly improve the related
asset or extend its useful life, are charged to expense as incurred. For
financial reporting purposes, plant and equipment is depreciated primarily by
the straight-line method over the estimated useful lives of the assets.
Depreciation claimed for income tax purposes is computed by accelerated
methods.
Goodwill and Intangible Assets - Goodwill represents the excess of the
purchase price over the fair value of identifiable net assets of acquired
companies and is amortized on a straight-line basis over 40 years. The
Company assesses the carrying value of goodwill at each balance sheet date.
Consistent with Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of", such assessments include, as appropriate, a comparison of
the estimated future nondiscounted cash flows anticipated to be generated
during the remaining amortization period of the goodwill to the net carrying
value of goodwill. The Company recognizes diminution in value of goodwill,
if any, on a current basis. Organizational/finance costs are amortized over
their economic useful lives ranging from three to twenty years.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Management believes the carrying amount
of financial instruments is a reasonable estimate of the fair value of these
instruments.
Translation of Foreign Currencies - Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States dollars
at average rates of exchange prevailing during the period. Adjustments
resulting from the translation of financial statements of the foreign
operations are included as foreign currency translation adjustments in the
stockholders' equity section of the accompanying consolidated balance sheets.
Revenue Recognition - The Company recognizes revenue upon shipment of products.
Research and Development - Amounts expended for research and development for
the year ended January 31, 1997, the one-month transition period ended
January 31, 1996, and the years ended December 31, 1995 and 1994 totaled
approximately $190,000, $6,000, $43,000 and $32,000, respectively, and are
expensed as incurred.
Net (Loss) Earnings Per Common Share and Common Share Equivalent - Net (loss)
earnings per common share and common share equivalent is computed based upon
the weighted average number of common shares and common share equivalents
(stock options and warrants) outstanding during the year. Common share
equivalents from dilutive stock options and warrants were calculated using
the treasury stock method. Common share equivalents (stock options and
warrants) are antidilutive for the year ended January 31, 1997 and period
ended January 31, 1996.
Accounting Pronouncements - Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation" was issued in 1995.
The Company has elected to continue to account for stock-based compensation
under Accounting Principles Board Opinion No. 25 as allowed by SFAS No. 123.
Reclassifications - Certain reclassifications have been made to the prior
years' financial statements to conform with the current year presentation.
2. ACQUISITIONS AND DISPOSITIONS
On June 21, 1996, the Company purchased all of the issued and outstanding
stock of Construction Forms, Inc. and subsidiaries and JABCO, LLC for an
aggregate cash consideration of approximately $20,550,000. The acquisition
was accounted for as a purchase transaction with the purchase price allocated
to the fair value of specific assets acquired and liabilities assumed.
Accordingly, the results of operations have been included since the date of
the acquisition. Resultant goodwill is being amortized over 40 years. The
purchase price was allocated as follows:
<TABLE>
<S> <C>
Receivables 2,810,237
Inventory 6,699,256
Property, plant and equipment 6,990,408
Goodwill 9,290,317
Prepaid pension 442,598
Cash and other assets 1,714,648
Liabilities assumed (7,397,464)
Total 20,550,000
</TABLE>
The following unaudited pro-forma results of operations give effect to the
acquisition as if it had occurred at the beginning of the fiscal year for
each of the periods presented:
<TABLE>
<CAPTION>
Year Ended
January 31, December 31,
1997 1995
<S> <C> <C>
Net sales 22,810,447 20,580,694
Net (loss) earnings (681,643) 607,565
Net (loss) earnings per common share (0.30) 0.21
</TABLE>
The unaudited pro-forma information is not necessarily indicative of either
results of operations that would have occurred had the purchase been made at
the beginning of each fiscal year or of future results of operations of the
combined companies.
On October 31, 1996, the Company sold certain net assets of its electronic
fault indicator operation. In return, the Company received cash of $10,000,
a $275,000 promissory note bearing interest at an annual rate of 8.25%, and
a five year warrant to purchase 20% of the capital stock of the new company.
It is management's opinion that the possibility of collection of any
principal or interest on the note receivable is remote and, accordingly, has
reserved the total balance of the note and will not record any interest
income until received. The total loss on the sale of these net assets was
$434,166, including the note receivable reserve.
3. CHANGE IN FISCAL YEAR
The Company changed its fiscal year end from December 31 to January 31 in
order to correspond with the fiscal year of the acquired companies.
4. TRADING AND MARKETABLE SECURITIES
Trading securities at January 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market
<S> <C> <C> <C>
Common Stocks:
Computer Associates International, Inc. 10,000 630,000 453,750
Deisgner Holdings, Inc. 10,000 165,000 141,250
Electronic Data Systems Corp. 10,000 441,250 460,000
General Motors Corp. 10,000 532,500 610,000
Glenayre Technologies, Inc. 50,000 1,163,961 962,500
Healthsource 10,000 138,750 132,500
Panavision 6,400 139,750 120,000
Sun International Hotels 5,100 259,475 181,688
US Trust Corporation 20,000 659,125 1,690,000
Total 4,129,811 4,751,688
</TABLE>
Trading securities at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market
<S> <C> <C> <C>
Common Stocks:
Chase Manhattan 13,600 629,625 821,100
Exel Ltd. - Ord. 10,000 537,500 608,750
Glenayre Technologies, Inc. 65,000 1,355,175 4,046,250
Ivax Corporation 35,745 354,542 1,018,733
Made Networks NV 7,340 242,500 328,465
3COM Corporation 10,000 461,250 466,250
US Trust Corporation 20,000 659,125 995,000
Wang Laboratories, Inc., New 35,000 618,750 581,875
York International 17,500 776,250 822,500
Total Common Stocks 5,634,717 9,688,923
Preferred Stock:
Bankamerica Corp. 5,800 145,000 150,075
Total 5,779,717 9,838,998
</TABLE>
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
January 31, December 31,
1997 1995
<S> <C> <C>
Raw materials 2,737,369 217,651
Work-in-process 617,615 0
Finished goods 2,016,964 12,667
Subtotal 5,371,948 230,318
Less-reserve to reduce carrying
value to LIFO cost (55,000) 0
Net inventories 5,316,948 230,318
</TABLE>
6. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company owns 50% of the outstanding common stock of South Houston Hose
Company and accounts for the investment by the equity method. The Company
had sales of approximately $685,000 to the affiliate during 1996. Summary
unaudited financial information as of January 31, 1997 and the year then
ended is as follows:
<TABLE>
<S> <C>
Current assets 934,399
Noncurrent assets 49,930
Current liabilities 306,198
Noncurrent liabilities 41,555
Stockholders' equity 636,576
Net sales 2,239,949
Net earnings 94,070
</TABLE>
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
Year Ended
January 31, December 31,
<S> <C> <C>
Group benefits 190,680 0
Warranty 151,000 0
Legal and professional 78,500 0
Interest 57,268 0
Selling commissions 17,475 2,907
Other 34,973 4,621
Total 529,861 51,701
</TABLE>
8. INCOME TAXES
Deferred income taxes are provided on temporary differences relating to
reporting expenses in different periods for financial statement and income
tax purposes and differences in bases of assets and liabilities. Such
differences relate primarily to unrealized gain (losses) on investments,
depreciation expense, inventory costs, bad debt expense, warranty costs,
insurance, compensation and pension expense.
The provision for income taxes (credit) is as follows:
<TABLE>
<CAPTION>
One-Month
Year Ended Ended Year Ended Year Ended
January 31, January 31, December 31, December 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
Currently payable:
Federal 718,871 184,000 506,616 128,924
State 162,000 32,000 185,974 46,250
Subtotal 880,871 216,000 692,590 175,174
Deferred:
Federal (1,120,871) (200,000) 556,595 (69,127)
State (250,000) (35,000) 166,256 (20,488)
Subtotal (1,370,871) (235,000) 722,851 (89,615)
Total (490,000) (19,000) 1,415,441 85,559
</TABLE>
Temporary differences which gave rise to the deferred tax assets
(liabilities) included the following items at January 31, 1997 and
December 31, 1995:
<TABLE>
<CAPTION>
1997 1995
<S> <C> <C>
Deferred tax assets:
Compensation and other employee benefits 290,000 0
Inventory items 0 400
Book reserves and other items 6,000 0
Fixed assets 0 9,950
Net operating loss carryforwards 140,000 0
Deferred financing 207,000 0
Vacation pay 63,000 0
Subtotal 706,000 10,350
Deferred tax liabilities:
Inventory items (543,000) 0
Unrealized gains (243,000) (1,606,221)
Fixed assets (516,000) 0
Pension benefit (150,000) 0
Subtotal (1,452,000) (1,606,221)
Net deferred tax liability (746,000) (1,595,871)
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory rates
to income tax expense is:
<TABLE>
<CAPTION>
One-Month
Year Ended Ended Year Ended
January 31, January 31, December 31, December 31,
<S> <C> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State taxes, net of federal
tax benefit 4.8% 5.7% 7.0% 4.3%
Goodwill (3.8)% 0.0% 0.0% 0.0%
Dividends received
deduction 1.3% 2.9% (0.5)% (3.1)%
Effect of utilization of
loss carryforward and
change in valuation
allowance 0.0% 0.0% 0.0% (13.7)%
Reversal of provision for
taxes not necessary in the
future 4.5% 0.0% 0.0% 0.0%
Other, net (0.7)% (1.2)% 0.0% (3.2)%
Effective tax rate 40.1% 41.4% 40.5% 18.3%
</TABLE>
At January 31, 1997, the Company has net operating loss carryforwards for
Federal and state income tax purposes of approximately $280,000 and $500,000,
respectively, expiring in 2012.
9. LONG-TERM DEBT
Long-term debt, less current maturities consisted of the following at
January 31, 1997:
<TABLE>
<S> <C>
Industrial revenue bonds 3,000,000
Bank revolving credit loan 3,800,000
Bank overadvance term loan 3,281,944
Subordinated bank loan 6,798,300
Obligation to former officer 27,180
Total debt 16,907,424
Less current portion (868,844)
Total long-term debt 16,038,580
</TABLE>
The Industrial Revenue Bonds ("IRB") were issued to finance construction of a
new production facility in Port Washington, Wisconsin. A total of $3,000,000
was issued for the facility and is due in annual installments of $125,000
from February 1997 through February 2000, $150,000 from February 2001 through
February 2005, and $175,000 from February 2006 through February 2015. The
interest rate at January 31, 1997 approximated 3.65%.
The master credit agreement, which expires June 21, 1999, allows for revolving
credit borrowings not to exceed $6,000,000. Borrowings, which are based on
qualified assets, bear interest at either the prime rate plus .50% or the
LIBOR rate plus 1.25% on the first $1,800,000 of debt (6.91% at January 31,
1997) and the LIBOR rate plus 2.00% on amounts in excess of $1,800,000 (7.66%
at January 31, 1997).
Also under the master credit agreement, the Company maintains an overadvance
term loan. Monthly principal payments of $59,722 are required by the
agreement. Borrowings bear interest at either the prime rate plus .375% or
the LIBOR rate plus 3.1%. The interest rate at January 31, 1997 was 8.625%.
The agreement calls for additional principal payments based on excess cash
flow as defined in the agreement.
The terms under the master credit agreement, among other provisions, require
the Company to maintain a minimum current ratio, tangible net worth, and
fixed charge ratio, and restricts the Company to a maximum debt to worth
ratio. Substantially all of the Company's assets are collateralized under
the above debt agreements.
The Company has a loan agreement with a bank which provides for subordinated
borrowings up to $6,800,000 through June 22, 1999. Borrowings bear interest
at the bank's LIBOR rate plus 1.25%. On January 31, 1997, the interest rate
was 6.81%. The loan is secured by substantially all of the assets of the
Company and is guaranteed by the principal stockholder of Edison.
The Company has an obligation to a former officer due in September 1997.
Interest is payable annually at 6%.
The Company has entered into a two year $10,000,000 interest rate cap/floor
agreement to reduce the impact of changes in interest rate borrowings under
its variable rate debt. The agreement maintains a cap rate of 7% (90 day
LIBOR) and a floor rate of 4.5%. The Company paid a fee of $32,500 related
to the cap/floor agreement and is amortizing the fee over the life of the
agreement. The interest rate cap/floor agreement expires December 10, 1998.
Annual principal payments for the next five years on long-term debt are as
follows:
<TABLE>
<CAPTION>
Year Revolving Overadvance Obligation
Ending Credit Term Subordinated to Former
January 31, IRB Loan Loan Bank Loan Officer Total
<S> <C> <C> <C> <C> <C> <C>
1998 125,000 0 716,664 0 27,180 868,844
1999 125,000 0 716,664 0 0 841,664
2000 125,000 3,800,000 1,848,616 6,798,300 0 12,571,916
2001 125,000 0 0 0 0 125,000
2002 150,000 0 0 0 0 150,000
Thereafter 2,350,000 0 0 0 0 2,350,000
Total 3,000,000 3,800,000 3,281,944 6,798,300 27,180 16,907,424
</TABLE>
10. EMPLOYEE RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan, which relates
to the acquired companies, covering substantially all full-time employees.
The plan provides for benefits based on years of service and compensation.
The following table sets forth the plan's funded status and amounts
recognized in the Company's financial statements at January 31, 1997:
<TABLE>
<CAPTION>
1997
<S> <C>
Actuarial present value of benefit obligations:
Accumulated beneit obligation, including vested beneftis of
$1,992,192 2,024,083
Projected benefit obligation for service rendered to date 2,843,888
Plan assets at fair value, primarily pooled common stock and
bond funds, stocks and bonds 3,521,295
Plan assets in excess of projected benefit obligation 677,407
Unrecognized net gain from past experience different from that
assumed (292,386)
Prepaid pension expense recognized in the consolidated balance
sheet at January 31, 1997 385,021
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.5% and 6% for the year ended January 31, 1997. The expected rate of
return on plan assets is 8.0% for the year ended January 31, 1997. The
Company's funding policy is to contribute annually amounts within the limits
which can be deducted for Federal income tax purposes. No contributions were
made to the Plan during the year ended January 31, 1997.
Pension expense consisted of the following components for the year ended
January 31, 1997:
<TABLE>
<S> <C>
Service cost-benefits earning during the year 65,707
Interst on projected benefit obligation 119,475
Actual return on plan assets (gain) loss (369,579)
Net amortization and deferral 241,974
Net periodic pension expense 57,577
</TABLE>
The Company also has a retirement savings and thrift plan (401(k) plan),
which relates to the acquired companies, covering substantially all of its
employees. Under the 401(k) plan, the Company contributes amounts based on
employee contributions. Amounts charged to earnings for the plan for the
year ended January 31, 1997 was $42,831.
11. EMPLOYEE STOCK OPTION PLANS
The Company adopted a 1986 Stock Option Plan (the "Plan") for the benefit of
directors, officers and key employees of the Company. Pursuant to the Plan,
as amended, these persons may be granted options to purchase up to an
aggregate of 150,000 shares of Common Stock. The Board of Directors may
authorize the granting of options under the Plan, and may determine to whom
the options may be granted, the number thereof, the option price and the
exercise period. The price for incentive stock options, which may be granted
under the Plan and which meet the requirements of Section 422A of the
Internal Revenue Code, as amended, will not be less than the fair market
value of the Common Stock on the date the option is granted (100% of such
fair market value for an optionee who holds more than 10% of the outstanding
shares of the capital stock of the Company). The price for non-statutory
options shall be fixed in the discretion of the Board of Directors and in no
event will the option price for any non-statutory option granted be less than
85% of the fair market value of the Common Stock on the date of grant. The
maximum exercise period for any option under the Plan is ten years from the
date the option is granted (five years for an optionee who holds more than
10% of the outstanding shares of the capital stock of the Company). In
November 1987, the Board of Directors issued non-statutory options to
purchase an aggregate of 90,000 shares at an exercise price of $2.50 per
share ("2.50 options"). In 1989, the Company issued non-statutory options
to purchase an additional 60,000 shares at an exercise price of $1.22 per
share. In November 1996, William Finneran purchased 25,000 shares of his
options.
In June 1993, the Board of Directors granted non-statutory options to
purchase 18,000 shares each to Clark H. Bailey, Gerald B. Cramer, John J.
Delucca and Jay J. Miller, and 35,000 shares to William B. Finneran,
Directors of the Company, at an exercise price of $2.50 per share, vesting
50% at June 5, 1994 and 50% at June 4, 1995 ("vesting $2.50 options"). In
June 1995, Clarke H. Bailey exercised his option and purchased 18,000 shares.
In July 1993, the Board of Directors granted a non-statutory option to
purchase 18,000 shares to John M. Sanzo, a Director of the Company, at an
exercise price of $4.00 per share, vesting 50% at July 15, 1994 and 50% at
July 15, 1995 ("vesting $4.00 options"). In October 1994, the Board of
Directors resolved that the stock option, heretofore, granted to Mr. John M.
Sanzo to be fully vested notwithstanding any term of said option to the
contrary and that said option would expire 120 days following the
effectiveness of a Registration Statement on Form S-8 under the Securities
Act of 1993, as amended. In June 1995, John M. Sanzo exercised his option
and purchased 18,000 shares.
In October 1995, the 1986 Stock Option Plan was amended to increase by
200,000 the number of shares of common stock authorized for issuance,
thereunder to a total of 350,000 shares.
In February 1995, the Board of Directors authorized and on October 17, 1995,
the stockholders approved, a grant to the Company's President and Chief
Executive Officer of an option to purchase up to 200,000 shares of common
stock pursuant to the 1986 Option Plan at an exercise price of $4.00 per
share, vesting 33% each at date of grant, on February 1, 1996, and on
February 1, 1997, respectively.
In February 1996, nonqualified options for 17,500 shares were granted to
three individuals for services rendered at an exercise price of $4.50 per
share. The options are exercisable up to the close of business on December
31, 1999.
In connection with the issuance of the subordinated debt, the principal
stockholder of the Company provided collateral to a bank to support a
guaranty of repayment by the Company of the principal and interest on the
loan. The arrangement was made to reduce the cost of borrowed funds from
that which would have been otherwise obtainable by the Company from
unaffiliated "mezzanine" lenders. In consideration of his providing such
collateral, the Company issued, subject to stockholder approval, a ten (10)
year Warrant to purchase 500,000 shares of Common Stock exercisable at a
price of $1.60 per share. At the time the transaction was negotiated,
Common Stock was quoted at approximately $4.00 per share. On the date
the ConForms acquisition was consummated, which was the grant date, the
closing sale price for the Common Stock in the over-the-counter market was
$7.50 per share. The difference between the Warrant price and the fair
market value at the time the transaction was negotiated is being amortized
over the three year term of the subordinated debt.
In connection with the ConForms acquisition, the Company entered into
agreements for the sale for investment of an aggregate of 114,933 shares of
Common Stock for a total purchase price of $862,000 to key management
personnel of ConForms and its affiliates. In addition, the Company granted
ten year nonqualified options to purchase an aggregate of 167,611 shares of
Common Stock exercisable at $3.00 per share to key personnel. Such options
vest fully on the first anniversary of the closing of the acquisition. On
the date of the grant of the options, the closing sale price for the Common
Stock was $7.50 per share. The difference between the option price and the
fair market value at the time of grant is being amortized over the one year
vesting period.
The Company has adopted the disclosure-only provisions of SFAS No.123,
"Accounting for Stock-Based Compensation," but continues to apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
all of its plans. Compensation expense was $1,049,788, $0, and $0 for the year
ended January 31, 1997, the one-month transition period ended January 31,
1996, and the year ended December 31, 1995, respectively. If the Company had
elected to recognize compensation costs for the options/warrants issued after
December 15, 1994 in accordance with SFAS No. 123, net (loss) earnings and
net (loss) earnings per share would have changed to the pro forma amounts as
follows:
<TABLE>
<CAPTION>
Year One-Month Year
Ended Ended Ended
January 31, January 31, December 31,
1997 1996 1995
<S> <S> <C> <C> <C>
Net (loss) earnings
As reported: (731,028) (26,859) 2,082,582
Pro forma: (2,128,210) (26,859) 2,000,075
Net (loss) earnings per share
As reported: (0.33) (0.01) 0.95
Pro forma: (0.96) (0.01) 0.91
</TABLE>
The fair value of stock options/warrants used to compute and disclose pro
forma net (loss) earnings and pro forma net (loss) earnings per share is the
estimated present value at grant date using the Black Scholes option pricing
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Year One-Month Year
Ended Ended Ended
January 31, January 31, December 31,
1997 1996 1995
<S> <C> <C> <C>
Dividend yeild 0% 0% 0%
Expected volatility 53% 46% 46%
Risk-free interest rate (6 year) 5.35% 5.35%
Risk-free interest rate (5 year) 6.65%
Risk-free interest rate (3 year) 5.07% 5.07%
Risk-free interest rate (2 year) 6.29%
</TABLE>
Stock option/warrant activity is summarized as follows:
<TABLE>
<CAPTION>
Weighted One-Month Weighted
Year Ended Average Ended Average
January 31, Exercise January 31, Exercise
1997 Price 1996 Price
Options/warrants outstanding,
beginning of period 314,000 3.46 314,000 3.46
Options/warrants granted 685,111 2.02 0 0
Options/warrants exercised (25,000) 2.50 0 0
Options/warrants outstanding,
end of period 974,111 2.47 314,000 3.46
Options/warrants exercisable,
end of period 739,833 2.21 180,666 3.05
Price range per share 1.60 - 4.50 2.50 - 4.00
<CAPTION>
Year Weighted Year Weighted
Ended Average Ended Average
December 31, Exercise December 31, Exercise
1995 Price 1994 Price
<S> <C> <C> <C> <C>
Options/warrants outstanding,
beginning of period 150,000 2.68 150,000 2.68
Options/warrants granted 200,000 4.00 0 0
Options/warrants exercised (36,000) 3.25 0 0
Options/warrants outstanding,
end of period 314,000 3.46 150,000 2.68
Options/warrrants exercisable 180,666 3.05 96,500 2.78
Price range per share 2.50 - 4.00 2.50 - 4.00
</TABLE>
12. VALUATION ACCOUNTS
The Company had no valuation accounts as of December 31, 1995. The
acquisition on June 21, 1996 included various valuation accounts. Activity
related to these valuation accounts for the year ended January 31, 1997 is
as follows:
<TABLE>
<CAPTION>
Deductions
for bad debts
written off,
Additions inventory
Balance charged to disposed of, Balance,
Beginning Acquired costs and or warranty End of
Valuation Accounts of Period Companies expenses claims Period
<S> <C> <C> <C> <C> <C>
Allowance for doubt-
ful accounts and
finance charges 0 304,026 10,127 (22,153) 292,000
Excess and obsolete
inventory reserve 0 770,000 2,500 0 772,500
Notes receivable
reserve 0 0 275,000 0 275,000
Warranty reserve 0 174,466 42,360 (65,826) 151,000
</TABLE>
13. COMMITMENTS
The Company has entered into employment agreements with three of its executives.
Minimum salaries to be paid to these individuals for the years ended January
31, 1998 and 1999 are $495,000 and $145,000, respectively.
The Company leases warehouse facilities expiring at various dates through
November 1998. Future minimum lease payments required under these
noncancelable operating lease agreements are approximately as follows:
<TABLE>
<CAPTION>
Year Ending
January 31,
<S> <C>
1998 109,480
1998 86,700
Total 196,180
</TABLE>
Total rent expense for the year ended January 31, 1997, one-month transition
period ended January 31, 1996 and the years ended December 31, 1995 and 1994
was approximately $137,000, $6,000, $49,000, and $45,000, respectively.
14. RELATED PARTY TRANSACTIONS
At January 31, 1997, Edison held in its investment portfolio 50,000 shares
of common stock of Glenayre Technologies, Inc. which were purchased during
1993, 1995 and 1996 at a cost of $1,163,961 and have a market value at
January 31, 1997 of $962,500. The Chairman of the Board of Glenayre
Technologies, Inc. is a former member of the Board of Directors of the Company.
15. FOREIGN OPERATIONS
Foreign operations information for the year ended January 31, 1997 follows:
<TABLE>
<CAPTION>
United United
States Kingdom Total
<S> <C> <C> <C>
Net sales to unaffiliated customers 12,158,482 1,445,858 13,604,340
Operating earnings 498,279 33,423 531,702
Identifiable assets 31,936,230 2,123,875 34,060,105
Depreciation and amortization 1,548,701 14,973 1,563,674
Capital expenditures 355,401 60,939 416,340
</TABLE>
16. CONTINGENCIES AND LITIGATION
The Company is involved in various legal proceedings which have arisen in the
normal course of business. Reserves are recorded when the occurrence of loss
is probable and can be reasonably estimated. In the opinion of management,
the resolution of these contingencies will not have a materially adverse
effect on the Company's financial condition or results of operations.
EXHIBIT 21
SUBSIDIARIES OF EDISON CONTROL CORPORATION
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION TRADE NAMES
<S> <C> <C>
Construction Forms, Inc. Wisconsin CF, ConForms, Construction
Forms, CF Pipejoint
CF Ultra Tech, Inc. Wisconsin UTI, UT, Ultra Tech
CF Gilco, Inc. Wisconsin GC, Gilco, Gilson
JABCO, LLC Wisconsin JABCO
</TABLE>
EXHIBIT 23
CONSENT AND OPINIONS OF INDEPENDENT AUDITORS
REPORT OF INDEPENDENT AUDITORS
The Stockholders and The Board of Directors of Edison Control Corporation
We have audited the balance sheet of Edison Control Corporation as of
December 31, 1995 and the related statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statments are free
of material mistatement. 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 signficant
estimates made by management, as well as the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Edison Control Corporation
at December 31, 1995, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1994 the Company changed
its method of accounting for equity and debt securities.
MetroPark, New Jersey Ernst & Young LLP
February 14, 1996
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8), pertaining to the 1986 Stock Option Plan of Edison Control
Corporation of our report dated February 14, 1996, with respect to the 1995
and 1994 financial statements of Edison Control Corporation included in the
Annual Report (Form 10-K) for the year ended January 31, 1997 filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Metro Park, New Jersey
April 28, 1997
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference on Form S-8 of Edison Control
Corporation 1986 Stock Option Plan of our report dated April 7, 1997, appearing
in the Annual Report on Form 10-K of Edison Control Corporation for the year
ended January 31, 1997 and the one-month transition period ended January 31,
1996.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 772008
<SECURITIES> 5035688
<RECEIVABLES> 3161343
<ALLOWANCES> 292000
<INVENTORY> 5316948
<CURRENT-ASSETS> 15473454
<PP&E> 7406166
<DEPRECIATION> 328938
<TOTAL-ASSETS> 34060105
<CURRENT-LIABILITIES> 3919284
<BONDS> 16038580
0
0
<COMMON> 22759
<OTHER-SE> 13578482
<TOTAL-LIABILITY-AND-EQUITY> 34060105
<SALES> 13604340
<TOTAL-REVENUES> 13604340
<CGS> 9191243
<TOTAL-COSTS> 3881395
<OTHER-EXPENSES> 1752730
<LOSS-PROVISION> 292000
<INTEREST-EXPENSE> 775762
<INCOME-PRETAX> (1221028)
<INCOME-TAX> (490000)
<INCOME-CONTINUING> (731028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (731028)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
