<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended SEPTEMBER 30, 1997 Commission file number 0-17804
------------------ ------------
CECO FILTERS, INC.
- --------------------------------------------------------------------------------
DELAWARE 23-2399315
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1027-29 CONSHOHOCKEN ROAD, CONSHOHOCKEN, PA 19428-0683
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-825-8585
------------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class: COMMON, PAR VALUE $.001 PER SHARE OUTSTANDING at 9/30/97 6,867,667
---------------------------------
<PAGE>
CECO FILTERS, INC.
------------------
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
INDEX
-----
Part I - Financial Information:
Condensed consolidated balance sheet as of
September 30, 1997 and December 31, 1996 2
Condensed consolidated statement of operations
for the three-month and nine-month periods ended
September 30, 1997 and 1996 3
Condensed consolidated statement of cash flows
for the nine-month periods ended September 30,
1997 and 1996 4
Notes to condensed consolidated financial statements 5 & 6
Management's discussion and analysis of the
financial condition and results of operations 7 to 10
Part II - Other Information 11
Signature 12
- - 1 -
<PAGE>
CECO FILTERS, INC.
------------------
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 852,243 $ 374,186
Accounts receivable 4,037,775 2,077,045
Inventories 678,793 565,371
Costs and estimated earnings in excess of
billings on uncompleted contracts 234,394 -
Prepaid expenses and other current assets 126,618 40,439
Prepaid income taxes 103,348 -
Deferred income taxes 58,735 58,735
----------- -----------
Total current assets 6,091,906 3,115,776
Property and equipment, net 1,965,159 1,782,087
Intangible assets, at cost, net 2,015,442 88,144
Investment in CECO Environmental Corp. 230,000 230,000
----------- -----------
$10,302,507 $5,216,007
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations $ 1,040,576 $ 400,000
Current portion of long-term debt 323,043 83,100
Current portion of capital lease obligation 5,554 6,043
Accounts payable and accrued expenses 2,216,875 1,205,795
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,873,918 -
Due to former owners of Busch Co. 331,196 -
Accrued income taxes - 276,976
----------- -----------
Total current liabilities 5,791,162 1,971,914
Long-term debt, less current portion 1,825,587 1,132,869
Subordinated note payable, CECO Environmental Corp. 500,000 -
Capital lease obligation, less current portion 5,298 9,882
----------- -----------
8,122,047 3,114,665
----------- -----------
Shareholders' equity:
Common stock, $.001 par value; 20,000,000
shares authorized, 6,867,667 shares issued
and outstanding 6,868 6,868
Capital in excess of par value 915,984 915,984
Retained earnings 1,257,608 1,178,490
----------- -----------
Total shareholders' equity 2,180,460 2,101,342
----------- -----------
$10,302,507 $5,216,007
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- - 2 -
<PAGE>
CECO FILTERS, INC.
------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------ ------------- --------
<S> <C> <C> <C> <C>
Net revenues $4,971,942 $2,195,120 $10,439,429 $6,220,217
---------- ---------- ----------- ----------
Costs and expenses:
Cost of revenues 2,826,672 1,172,444 5,623,699 3,277,633
Selling and administrative 2,239,767 728,168 4,137,533 2,248,916
Management fees, CECO
Environmental Corp. 60,000 60,000 180,000 180,000
Depreciation and amortization 100,556 99,000 299,816 278,318
---------- ---------- ----------- ----------
5,226,995 2,059,612 10,241,048 5,984,867
---------- ---------- ----------- ----------
Income (loss) from operations ( 255,053) 135,508 198,381 235,350
Interest expense ( 17,885) ( 34,390) ( 67,263) ( 118,440)
---------- ---------- ----------- ----------
Income (loss) before provision
(credit) for income taxes ( 272,938) 101,118 131,118 116,910
Provision (credit) for income taxes ( 109,000) 44,192 52,000 52,192
---------- ---------- ----------- ----------
Net income (loss) ($ 163,938) $ 56,926 $ 79,118 $ 64,718
========== =========== ============ ===========
Net income (loss) per share * ($ .02) $ .01 $ .01 $ .01
========== =========== ============ ===========
</TABLE>
* Based on weighted average shares outstanding of 6,867,667 for each period.
See accompanying notes to condensed consolidated financial statements.
- - 3 -
<PAGE>
CECO FILTERS, INC.
------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income $ 79,118 $ 64,718
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 299,816 278,318
(Increase) decrease in operating assets,
net of acquisition of Busch Co.:
Accounts receivable ( 1,960,730) 469,975
Inventories 31,957 ( 24,980)
Costs and estimated earnings in excess of
billings on uncompleted contracts ( 234,394) -
Prepaid expenses and other current assets ( 73,120) ( 62,906)
Prepaid income taxes ( 103,348) -
Increase (decrease) in operating liabilities,
net of acquisition of Busch Co.:
Accounts payable and accrued expenses 1,011,077 ( 386,714)
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,873,918 -
Accrued income taxes ( 276,976) 73,261
Due to former owners of Busch Co. 331,196 -
----------- ---------
Net cash provided by operating activities 978,514 411,672
----------- ---------
Cash flows from investing activities:
Acquisition of Busch Co. allocated to:
Goodwill ( 1,717,421) -
Inventory ( 145,379) -
Equipment ( 131,818) -
Patents ( 92,323) -
Prepaid expenses ( 13,059) -
Additions to property and equipment and intangible assets ( 468,624) ( 72,503)
Advance to officer - ( 25,200)
----------- ---------
Net cash (used in) investing activities ( 2,568,624) ( 97,703)
----------- ---------
Cash flows from financing activities:
Increase in long-term debt 1,000,000 -
Increase in subordinated note payable, CECO Environmental Corp. 500,000 -
Net borrowings (repayment) of short-term obligations 640,576 ( 150,000)
Repayments of long-term debt and capital lease obligation ( 72,409) ( 175,056)
----------- ---------
Net cash provided by (used in) financing activities 2,068,167 ( 325,056)
----------- ---------
Net increase (decrease) in cash 478,057 ( 11,087)
Cash at beginning of period 374,186 184,248
----------- ---------
Cash at end of period $ 852,243 $173,161
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 67,263 $118,440
----------- ---------
Income taxes $ 432,324 $ 23,800
----------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- - 4 -
<PAGE>
CECO FILTERS, INC.
------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
- --------------------------------------------------------------------------------
1. Presentation of Financial Statements
------------------------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary
to present fairly the financial position as of September 30, 1997 and
the results of operations for the three-month and nine-month periods
ended September 30, 1997 and 1996 and cash flows for the nine-month
periods ended September 30, 1997 and 1996. The condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto, together with
management's discussion and analysis of financial condition and
results of operations, contained in the Company's 1996 Annual Report
to stockholders. The results of operations for the nine-month period
ended September 30, 1997 are not necessarily indicative of the
results to be expected for the full year, or any future interim
period.
2. Acquisition of Business
-----------------------
On September 25, 1997, pursuant to an Asset Purchase Agreement, New
Busch Co., Inc., a wholly-owned subsidiary of CECO Filters, Inc.,
acquired substantially all of the assets, and the business, of Busch
Co. ("Busch") for $2,100,000 in cash. Busch, located in Pittsburgh,
Pennsylvania, was engaged in the business of marketing, selling,
designing and assembling ventilation, environmental and
process-related products, and also provided manufacturer's
representative services to certain companies or manufacturers in
support or related businesses. The acquisition was accounted for as a
purchase. The Asset Purchase Agreement provides that, notwithstanding
the actual September 25, 1997 closing date, the closing was deemed to
be effective as of July 1, 1997. The condensed consolidated statement
of operations for the three-month and nine-month periods ended
September 30, 1997, therefore, includes the operations of New Busch
Co. since July 1, 1997.
On a pro forma basis, results of operations for the nine-month
periods ended September 30, 1997 and 1996 would have been as follows,
if the acquisition had been made as of January 1, 1996:
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
----------- -----------
Net sales $17,343,271 $15,033,989
Income before taxes on income 306,713 465,464
Net income 183,853 279,278
Net income per share $.03 $.04
3. Inventories consisted of the following:
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
Raw materials $409,617 $410,949
Finished goods 269,176 154,422
-------- --------
$678,793 $565,371
======== ========
- - 5 -
<PAGE>
CECO FILTERS, INC.
------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
4. Debt
----
In order to finance the Busch Co. acquisition, the Company received
proceeds from the following loans during the three months ended
September 30, 1997:
The bank line-of-credit was increased from $1,250,000 to
$1,500,000. The Company borrowed $1,040,576 from the
line-of-credit. Interest on the bank line-of-credit is at
1/2% over the bank's prime lending rate (effective rate at
September 30, 1997 was 9%).
A bank term loan in the amount of $1,000,000 to be repaid in
48 monthly principal installments of $20,833, plus interest
at 8.75% per annum.
A subordinated, unsecured loan from CECO Environmental Corp.
in the amount of $500,000. Interest only is payable at the
rate of 10% per annum.
5. Related Party Transactions
--------------------------
Management Fees
---------------
The Company incurred management fees amounting to $180,000 during the
nine-month periods ended September 30, 1997 and 1996, pursuant to an
agreement between the Company and CECO Environmental Corp. ("CEC"), a
majority shareholder of the Company. Under such agreement, effective
July 1, 1994, CEC provides management and financial consulting
services to the Company in exchange for a management fee.
6. Recent Accounting Statement
---------------------------
In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options will be excluded. This change is not expected to impact
primary or fully diluted earnings per share for the three-month and
nine-month periods ended September 30, 1997 and 1996.
- - 6 -
<PAGE>
CECO FILTERS, INC.
------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
General
- -------
CECO Filters, Inc. ("CECO") is comprised of the CECO Group of companies - CECO
Filters, Inc., Air Purator Corporation, Compliance Systems International,
Inc., U.S. Facilities Management Company, Inc. and New Busch Co., Inc.
(collectively referred to as "the Company"), which provide innovative
solutions to air quality problems through particle and chemical control
technologies and management services.
CECO manufactures and markets filters known as fiber bed mist eliminators,
designed to trap, collect and remove solid soluble and liquid particulate
matter suspended in an air or other gas stream whether generated from a point
source emission or otherwise. Air Purator Corporation ("APC"), designs and
manufactures high performance filter media and bags for use in high
temperature pulse-jet baghouses, the most effective type of baghouse for
capturing submicron particulate from gas streams. Compliance Systems
International ("CSI") offers innovative patented technologies, Catenary
Grid(R) and Narrow Gap Venturi(TM), designed for use with heat and mass
transfer operations and particulate control. U.S. Facilities Management
Company, Inc. ("USFM") provides facilities management and software, as well as
outsourced plant-wide maintenance management to help customers achieve their
performance goals. On September 25, 1997, CECO acquired substantially all of
the assets of Busch Co. of Pittsburgh, PA, effective July 1, 1997. Busch is
engaged in designing, manufacturing and supplying equipment used to control
the environment in and around industrial plants with a variety of proprietary
and patented technologies.
Results of Operations
- ---------------------
The following table sets forth income line items shown on the condensed
consolidated statement of operations, as a percentage of net sales, for the
periods indicated. This table should be read in conjunction with the condensed
consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost and expenses:
Cost of revenues 56.8 53.4 53.9 52.7
Selling and administrative 45.1 33.2 39.6 36.1
Management fees, CECO Environmental Corp. 1.2 2.7 1.7 2.9
Depreciation and amortization 2.0 4.5 2.9 4.5
------ ------- ------ ------
105.1 93.8 98.1 96.2
------ ------- ------ ------
Income (loss) from operations (5.1 ) 6.2 1.9 3.8
Interest expense ( .4 ) (1.6 ) ( .6 ) (1.9 )
------ ------- ------ ------
Income (loss) before provision (credit)
for income taxes (5.5 ) 4.6 1.3 1.9
Provision (credit) for income taxes (2.2 ) 2.0 .6 .9
------ ------- ------ ------
Net income (loss) (3.3%) 2.6% .8% 1.0%
======= ======= ====== ======
</TABLE>
- - 7 -
<PAGE>
CECO FILTERS, INC.
------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
- --------------------------------------------------------------------------------
Results of Operations - Continued
- ---------------------------------
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996
- -----------------------------------------------------------------------
Revenues were approximately $10.4 million and $6.2 million for the nine-month
periods ended September 30, 1997 and 1996, respectively, representing an
increase of 67.8%. The increase in revenues from 1996 to 1997 resulted
primarily from an increase in sales orders, particularly new orders, which is
a result of the implementation of a target marketing approach, focusing the
Company's efforts on opportunities in markets that are ready for its
specialized systems and services. In addition, the acquisition of Busch Co.,
effective July 1, 1997, had the impact of increasing revenues by $2.7 million.
The Company's backlog of orders at September 30, 1997 was approximately $10
million as compared to approximately $5.8 million at September 30, 1996, an
increase of $4.2 million or 72%. There can be no assurance that order backlog
will be replicated, or increased, or translate into higher revenue in the
future. The success of the Company's business depends on a multitude of
factors that are out of the Company's control. The Company's operating results
can be significantly impacted by the introduction of new products, new
manufacturing technologies, rapid change in the demand for its product,
decrease in the average selling price over the life of a product as
competition increases, and the Company's dependence on the efforts of middle
men to sell a significant portion of its product.
The Company's overall cost of revenues increased as a percentage of sales for
the nine months ended September 30, 1997 (53.9%) compared to the nine months
ended September 30, 1996 (52.7%). The increase is attributed to the impact of
Busch Co. where costs as a percentage of revenues amounted to 64% from July 1,
1997 through September 30, 1997. Without the impact of Busch Co., the cost of
revenues as a percentage of revenues would have been 50.3%. The decrease,
compared to the prior year and without the impact of Busch Co., is attributed
to lower material costs, as well as lower costs incurred to service the
Company's products. The Company continues to use the latest technology
available in an effort to reduce both cost of revenues (and the maintenance of
optimal inventory levels) and operating expenses, and ultimately increase
overall company profits.
The Company's selling and administrative expenses amounted to $4,137,533 for
the nine-month period ended September 30, 1997 compared to $2,248,916 for the
nine-month period ended September 30, 1996, representing an increase of
$1,888,617, or 84%. A significant amount of this increase is attributable to
selling and administrative expenses of Busch Co. Since the effective date of
the acquisition, as well as selling and administrative expenses associated
with USFM which only recently commenced its operations. The selling and
administrative expenses of Busch include a $500,000 charge for a sign-on bonus
to a former officer of Busch Co. in connection with a three-year employment
agreement. A substantial portion of the selling and administrative expenses
are fixed in nature.
During 1994, the Company entered into a management and consulting agreement
with CECO Environmental Corp. ("CEC"), a majority shareholder of the Company.
The terms of the agreement require payment of monthly fees of $20,000 from
January, 1995 through December, 1998 in exchange for management and financial
consulting services involving corporate policies, marketing, strategic and
financial planning, mergers, acquisitions and related matters. The Company
incurred management fees to CEC of $180,000 during each of the nine-month
periods ended September 30, 1997 and 1996.
- - 8 -
<PAGE>
CECO FILTERS, INC.
------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
- --------------------------------------------------------------------------------
Results of Operations - Continued
- ---------------------------------
Interest expense decreased by $51,177, or 43%, during the nine-month period
ended September 30, 1997, when compared to the same period in 1996. The
decrease in interest expense can be attributed to a reduced utilization of the
bank line of credit during the nine months ended September 30, 1997 compared
to the previous year.
The Company earned pre-tax income of $131,118 for the nine-month period ended
September 30, 1997 compared to pre-tax income of $116,910 for the nine-month
period ended September 30, 1996. This change is attributed principally to the
increase in revenues for the nine-month period ended September 30, 1997 with
the comparable period of 1996, offset by the increase in costs and expenses.
The provision for federal and state income taxes for the nine-month periods
ended September 30, 1997 and September 30, 1996 were comparable.
Comparison of Three Months Ended September 30, 1997 to Three Months Ended
September 30, 1996
- -------------------------------------------------------------------------
Revenues were approximately $5 million and $2.2 million for the three-month
periods ended September 30, 1997 and September 30, 1996, respectively,
representing an increase of 126%. The increase in revenues is primarily
attributable to the Busch Co. which accounted for approximately $2.7 million
of the Company's consolidated revenues.
The Company's overall cost of revenues increased as a percentage of sales for
the three months ended September 30, 1997 (56.8%) compared to the three months
ended September 30, 1996 (53.4%). The increase is attributed to the impact of
Busch Co. where costs as a percentage of revenues amounted to 64% from July 1,
1997 through September 30, 1997. Without the impact of Busch Co., the cost of
revenues as a percentage of revenues would have been 48.1%. The decrease,
compared to the prior year and without the impact of Busch Co., is attributed
to lower raw material costs, as well as lower costs incurred to service the
Company's products. The Company continues to use the latest technology
available in an effort to reduce both cost of revenues (and the maintenance of
optimal inventory levels) and operating expenses, and ultimately increase
overall company profits.
The Company's selling and administrative expenses amounted to $2,239,767 for
the three-month period ended September 30, 1997 compared to $728,168 for the
three-month period ended September 30, 1996, representing an increase of
$1,511,599 or 207.6%. A significant amount of this increase is attributable to
selling and administrative expenses of Busch Co. since the effective date of
the acquisition, as well as selling and administrative expenses associated
with USFM which only recently commenced its operations. The selling and
administrative expenses of Busch include a $500,000 charge for a sign-on bonus
to a former officer of Busch Co. in connection with a three-year employment
agreement. Excluding the impact of Busch Co. and USFM, the Company's selling
and administrative expenses have declined for each of the last three quarterly
periods as management continues to focus on its target marketing approach
instituted during the latter part of 1995.
- - 9 -
<PAGE>
CECO FILTERS, INC.
------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
- --------------------------------------------------------------------------------
Comparison of Three Months Ended September 30, 1997 to
Three Months Ended September 30, 1996 - Continued
- ------------------------------------------------------
Interest expense decreased during the three-month period ended September 30,
1997, when compared to the same period in 1996, as a result of reduced
utilization of the bank line of credit.
The Company incurred a pre-tax loss of $272,938 for the three-month period
ended September 30, 1997 compared to pre-tax income of $101,118 for the
three-month period ended September 30, 1996. This change is attributed
principally to the one-time charge incurred for the sign-on bonus described
previously.
The credit for federal and state income taxes for the three-month period ended
September 30, 1997 amounted to $109,000 compared to a provision for federal
and state income taxes of $44,192 for the three-month period ended September
30, 1996.
The Company is very excited about the addition of Busch Co. to its group. One
of our main strategies is to develop an organization that is equipped to
satisfy customers' needs by building an organization with skill sets and core
competencies that provide value added services to them. We plan to continue to
build on this strategy.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
The Company's consolidated cash position increased from $374,186 at December
31, 1996 to $852,243 on September 30, 1997. The increase in cash is
principally the result of cash provided by operations of $978,514 for the nine
months ended September 30, 1997.
During the nine months ended September 30, 1997, the Company increased its
line of credit with a commercial bank from $1,250,000 to $1,500,000. The
amount borrowed as of September 30, 1997, $1,040,576, was used to acquire
Busch Co. The credit facility is available for working capital needs,
investment activities and other general corporate needs. The Company also
entered into a four year, $1,000,000 term loan, with the same bank, the
proceeds of which were used towards the Busch Co. acquisition. In addition,
the Company borrowed $500,000 from CECO Environmental Corp., under a
subordinated loan agreement.
The Company's current ratio decreased from 1.6 on December 31, 1996 to 1.05 on
September 30, 1997, primarily as the result of utilization of the line of
credit in connection with the acquisition of Busch Co.
Expenditures for property and equipment and intangible assets amounted to
$468,624, excluding those assets acquired as part of Busch Co., for the nine
months ended September 30, 1997 compared to $72,503 for the nine-month period
ended September 30, 1996. The Company intends to continue to invest in capital
equipment to support continued growth.
The Company believes that the existing sources of liquidity and funds expected
to be generated from operations will provide adequate cash to fund the
Company's anticipated working capital and other cash needs in the short term.
As the Company's business continues to grow in the long term, additional
working capital funds may be required and to the extent these additional funds
are not generated by operations, the Company may attempt to access the debt or
equity markets.
- - 10 -
<PAGE>
CECO FILTERS, INC.
------------------
Part II - Other Information
- --------------------------------------------------------------------------------
Item 5 - Other Information
Effective September 30, 1997, Steven Taub, the President and Chief
Executive Officer of CECO Filters, Inc. (the "Company"), entered into
an employment agreement (the "Agreement") with the Company. The
Agreement provides for base compensation of not less than $225,000
per year, permits termination by either party for cause, contains a
confidentiality agreement and a covenant not to compete from Dr.
Taub. Dr. Taub received options of CECO Environmental Corp. in
connection with his acceptance of the covenant not to compete. He
also agreed to cancel all of his outstanding options to purchase
common stock of the Company.
Item 6 - Exhibits and Reports on Form 8-K
(a) Employment Agreement and Addendum to Employment Agreement
(b) Reports on Form 8-K - September 25, 1997 - Acquisition of
substantially all assets and business of Busch Co.
- - 11 -
<PAGE>
CECO FILTERS, INC.
------------------
SIGNATURE
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CECO FILTERS, INC.
--------------------------------
(REGISTRANT)
DATE
--------------------------
STEVEN I. TAUB, PRESIDENT
--------------------------------
- - 12 -
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is entered into effective the 30th day of September,
1997, by and between STEVEN I. TAUB (hereinafter referred to as the
"Employee"), CECO FILTERS, INC., a Delaware corporation (hereinafter referred
to as the "Employer"), and CECO Environmental Corp., a New York corporation
("CECO").
WITNESSETH:
WHEREAS, Employer is presently employed by Employee as President and
Chief Employee Officer;
WHEREAS, Employer desires, among other things, to continue to employ
Employee in connection with Employer's business and operations and Employee
desires to continue employment on the terms and conditions hereinafter set
forth;
WHEREAS, Employer desires to agree to a buy-out of stock upon death
in consideration for Employee's agreement to not compete with Employer upon
the terms set forth herein; and
WHEREAS, as additional consideration for Employee's agreement not to
compete with Employer, Employee shall receive options for shares of stock of
CECO; and
WHEREAS, the Board of Directors of Employer has determined that this
Agreement is in the best interests of Employer and its shareholders;
NOW, THEREFORE, the parties hereto mutually agree to the following
provisions and covenants covering the terms and conditions of employment:
1. Employment. Employer hereby employs Employee as President and
Chief Employee Officer of Employer, and Employee hereby accepts such
employment, commencing on the date hereof and continuing until June 30, 2002,
subject to the provisions of paragraph 7.
2. Duties.
Duties. Employee shall have responsibility for such duties as may be
reasonably required in the overall management of the business of Employer, as
may be reasonably assigned to him from time to time by the Board of Directors
and generally consistent with the position of President and Chief Executive
Officer. Employee shall devote his best efforts to the performance and
faithful discharge of his duties.
(a) Full-time Employment. Employee shall devote his full business
time and energy to the business and affairs of Employer and shall use his best
efforts to promote the interests of Employer and to perform faithfully and
efficiently his responsibilities in accordance with the terms of this
Agreement.
- 1 -
<PAGE>
3. Base Compensation. In consideration for the services to be
rendered by Employee hereunder during the term of this Agreement, Employer
agrees to pay to Employee and Employee agrees to accept, an amount consisting
of Base Compensation equal to Two Hundred Thousand Dollars ($225,000) per
annum (less all required payroll and withholding taxes), which shall be
payable in equal installments together with the regular payroll of all other
executive employees of Employer. A modification of the Base Compensation may
be made by the mutual agreement of Employer and Employee based on Employee's
performance, the overall profitability of Employer and general economic
conditions.
4. Compensation and Related Matters
(a) Salary. During the period of the Employee's employment hereunder,
the Employer shall pay to the Employee a salary at a rate of not less than
$225,000 per annum in equal installments as nearly as practicable on the
fifteenth day and last day of each month in arrears. This salary may be
increased from time to time in accordance with normal business practices of
the Employer and, if so increased, shall not thereafter during the term of
this Agreement be decreased. Compensation of the Employee by salary payments
shall not be deemed exclusive and shall not prevent the Employee from
participating in any other compensation or benefit plan of the Employer. The
salary payments (including any increased salary payments) hereunder shall not
in any way limit or reduce any other obligation of the Employer hereunder, and
no other compensation, benefit or payment hereunder shall in any way limit or
reduce the obligation of the Employer to pay the Employee's salary hereunder.
(b) Director's Fees. Employer shall pay Employee fees for service as
a Director of the Employer and its subsidiaries and affiliates equal to the
highest fee paid to any other director of the Employer, subsidiary and
affiliate, as the case may be.
(c) IRA. During the term of Employee's employment hereunder, Employer
shall pay to Employee $2,000 per year for an IRA contribution.
(d) Automobile. The Employer shall provide Employee with an
appropriate automobile for use in connection with the business of the
Employer. If Employee declines the use of a Employer automobile, Employee
shall be reimbursed for the use of his personal automobile at the prevailing
lease rate of such vehicle, plus reimbursement of expenses for repairs,
gasoline and insurance with respect to such vehicles, which amount shall not
exceed $600 per month.
(e) Life Insurance. The Employer shall provide, pay to Employee or
shall reimburse Employer in the amount of $2,000 per year to cover the cost of
providing term life insurance policies on the life of Employee, with such
beneficiaries as Employee shall designate, equal to not less than three times
Employee's then current salary.
(f) Major Medical Insurance. The Employer shall provide at its
expense major medical and dental insurance coverage for Employee and his
family.
- 2 -
<PAGE>
(g) Disability Insurance. The Employer shall provide, pay to Employee
or reimburse Employee for the cost of providing disability insurance for the
maximum amount available up to Employee's current salary. Employee currently
receives approximately $2352 from Employer per year to purchase disability
insurance. During the term of this Agreement, the amount Employer will pay to
Employee for such premiums shall not exceed $2500 per year.
(h) Other Benefits. To the extent not specifically otherwise provided
herein, the Employer shall maintain in full force and effect, and the Employee
shall be entitled to continue to participate in, all of its employee benefit
plans and arrangements in effect on the date hereof in which the Employee
participates or plans or arrangements providing the Employee with at least
equivalent benefits thereunder (including without limitation each pension and
retirement plan and arrangement, supplemental pension and retirement plan and
arrangement, stock option plan, life insurance and health-and-accident plan
and arrangement, medical insurance plan, disability plan, survivor income
plan, relocation plan and vacation plan). The Employer shall not make any
changes in such plans or arrangements which would adversely affect the
Employee's rights or benefits thereunder, unless such change occurs pursuant
to a program applicable to all employees of the Employer and does not result
in a proportionately greater reduction in the rights of or benefits to the
Employee as compared with any other employee of the Employer. The Employee
shall be entitled to participate in or receive benefits under any employee
benefit plan or arrangement made available by the Employer in the future to
its employees and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to subsection (a) of this
Section. Any payments or benefits payable to the Employee hereunder in respect
of any calendar year during which the Employee is employed by the Employer for
less than the entire such year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed.
5. Reimbursement of Expenses. Employee shall be reimbursed for such
reasonable and authorized expenditures which he may incur in the performance
of his duties hereunder, including all expenses of travel while away from home
on business in service of the Company. Such authorized expenditures will be
reimbursed upon presentation by Employee to Employer of receipts relating
thereto in the form usually required by Employer according to its regular
policy and in conformity with applicable rules and regulations of the Internal
Revenue Service.
6. Vacation, Holidays and Sick Leave. Employee shall be entitled to
up to twenty-five (25) days of paid vacation annually, to be taken at such
time or times and in such number of consecutive days as Employee and Employer
shall mutually agree and in accordance with the regular policy relating to
vacation days for executive and professional employees of Employer. Vacation
days that are not taken within any year shall not cumulate to the following
year.
Employee shall be entitled to such paid holidays and sick leave policy
regularly recognized by Employer for executive personnel.
- 3 -
<PAGE>
7. Termination of Employment.
Employee's employment hereunder may be terminated only under the
circumstances set forth in subsections (a) through (d).
a. Death. Employee's employment hereunder shall terminate upon his
death.
b. Disability. Employer may terminate this Agreement at anytime upon
Employee's Disability. The term "Disability" shall mean that Employee has
become so physically or mentally impaired that he has been unable for a period
of at least 120 consecutive days to substantially perform the duties of his
customary employment with Employer. The determination of a disability
hereunder shall be based on a certificate signed by a licensed physician
retained and paid for by Employer. In the event of a disagreement between
Employee and the physician, the Employee shall appoint a second licensed
physician, and the two (2) licenses physicians shall appoint a third licensed
physician. The decision of the single physician, if there is only one
physician, or a majority of the licensed physicians, if three (3) physicians
are appointed, shall be final and binding on all parties hereto. Employee
agrees to cooperate with the examination by all such physicians. If there are
three (3) physicians appointed, the costs of such proceeding, including the
cost of the Employer's physician, shall be borne equally by the Employer and
the Employee.
c. Cause. Employer may terminate Employee's employment hereunder for
Cause. For purposes of this Agreement, Employer shall have "Cause" to
terminate Employee's employment hereunder (i) if Employee commits any material
breach of this Agreement, including refusal or failure by Employee to perform
his duties hereunder or he is materially negligent or inattentive in the
discharge of his duties (other than any such failure resulting from Employee's
incapacity due to Disability), after demand for performance is delivered to
Employee that specifically identifies the manner in which Employer believes
Employee has not performed his duties and Employee fails to cure such breach
within 30 days of delivery of notice, or (ii) upon the willful engaging by
Employee in misconduct that is materially injurious to Employer, monetarily or
otherwise, (iii) if Employee commits any dishonest or unethical act with
respect to Employer, or (iv) if Employee is found by a court or other tribunal
of proper jurisdiction to have committed or admits having committed any act
involving fraud, embezzlement, moral turpitude, or a felony, whether or not
with respect to Employer. Termination pursuant to this subsection 7(c) shall
be without prejudice to Employer and shall be in addition to all other rights
that Employer may have at law or in equity. For purposes of this Section, no
act, or failure to act, on Employee's part shall be considered "willful"
unless done, or omitted to be done, by him in bad faith and without reasonable
belief that his action or omission was in the best interest of Employer.
d. Termination by Employee. Employee may terminate his employment
hereunder (i) for Good Reason, as defined below, or (ii) if his health should
become impaired to an extent that makes his continued performance of his
duties hereunder hazardous to his physical or mental health or his life,
provided that Employee shall have furnished Employer with a written statement
from a qualified doctor to such effect and provided, further, that, at
Employer's request, Employee shall submit to an examination by a doctor
selected by Employer and such doctor shall have concurred in the conclusion of
Employee's doctor.
- 4 -
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean (i) a change
in control of Employer (as defined below), (ii) a failure by Employer to
comply with any material provision of this Agreement that has not been cured
within thirty (30) days after notice of such noncompliance has been given by
Employee to Employer, or (iii) if Employer relocates to a geographical region
that is unacceptable to Employee, provided, that Employee agrees to be
reasonable in his determination of whether or not the geographical region is
acceptable to him.
For purposes of this Agreement, a "change in control of Employer"
shall be deemed to have occurred if any "person" as such term is used in
subsections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Exchange
Act"), other than Employer, CECO, or any of the control persons of CECO, as
disclosed in CECO's Form 10-KSB for the year ended December 1, 1996 as
beneficial owners of 10% or more of the outstanding stock of CECO ("Control
Persons"), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Employer
representing 50% or more of the combined voting power of the Employer's then
outstanding securities; provided, however, that a change in control of
Employer shall not be deemed to have occurred (i) as a result of a change in
the identity of less than 50% of the Board of Directors of CECO or of any
Control Person; (ii) the addition of outside directors to the Board of
Directors of CECO or Employer or (iii) of any changes resulting from an action
approved by Employee in his capacity as an officer or director of Employer or
CECO.
e. Notice of Termination. Any termination of Employee's employment by
Employer or by Employee, pursuant to subsections (b) through (d) of this
paragraph 7 shall be communicated by a written Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall (i) indicate the specific termination
provision in this Agreement relied upon, (ii) set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provisions so indicated, and (iii) for a
termination under subsection (d) specify a Date of Termination which shall be
no sooner than 30 days and no later than 60 days following the delivery of the
Notice of Termination.
f. Date of Termination. "Date of Termination" shall mean (i) if
Employee's employment is terminated by his death, the date of his death, (ii)
if Employee's employment terminates pursuant to the expiration of the term
hereof, the last day of Employee's employment hereunder, (iii) if Employee's
employment is terminated pursuant to subsection (b) or (c) above, the date the
Notice of Termination is delivered, and (iv) if Employee's employment is
terminated pursuant to subsection (d) above, the date specified in the Notice
of Termination.
8. Compensation Upon Termination. In the event of termination for
Disability pursuant to 7(b) or 7(d)(ii), Employee shall continue to be
entitled to his Base Compensation for a period of two years after the Date of
Termination; however, all other compensation and benefits hereunder shall
cease upon the Date of Termination, and Employer shall have no further
obligation under this Agreement. In the event of termination for any reason
other than Disability, compensation and benefits hereunder shall cease upon
the Date of Termination, and Employer shall have no further obligation under
this Agreement, except for Employer's obligations pursuant to paragraph 12.
- 5 -
<PAGE>
9. Confidential Information. Employee acknowledges that in connection
with his duties hereunder, Employee will become familiar with certain
confidential aspects of Employer's businesses. Therefore, Employee covenants
to Employer that he shall not during or after the term of his employment
hereunder (i) disclose to any person any information regarding the state of
Employer's affairs or pertaining to Employer's business not generally known to
the public (herein called "Confidential Information"), including without
limitation, projections, data, personnel history, customer information,
customer lists, financial information, marketing techniques and technical
data, or (ii) use any Confidential Information, except, in either case, to the
extent that such disclosure or use is (a) expressly permitted by the terms of
this Agreement, or (b) authorized by the Board of Directors of Employer. At
all times Employee shall use such care in protecting the confidentiality of
the Confidential Information as a reasonable businessman would use in
protecting his own proprietary and confidential information. If applicable
laws require the disclosure or use of Confidential Information, Employee
agrees that he will notify Employer in advance of such disclosure or use and
use reasonable efforts to make such disclosure or use acceptable to Employer.
Upon request of Employer at any time, Employee shall immediately return all
written Confidential Information in his possession to Employer. The
obligations or confidentiality hereunder shall not relate to information
which:
(i) presently is in the public domain;
(ii) hereafter becomes part of the public domain by
publication or otherwise through no action of Employee or any person
or entity subject to confidentiality requirements similar to those
contained in this agreement; or
(iii) hereafter is obtained by Employee from a source other
than Employer which was not hereunder an obligation of
confidentiality to Employer.
Employee hereby acknowledges and agrees that any violation of the provisions
of this paragraph 9 would cause irreparable damage to Employer and its
affiliates. Employee hereby acknowledges and agrees that the provisions of
this paragraph 9 are reasonable and necessary for Employer's protection, and
that Employer shall be entitled to injunctive relief, both temporary and
permanent, without bond, to enforce the provisions of this paragraph 9, which
relief shall be cumulative and not exclusive of any right, remedy or relief
otherwise available to Employer at law or in equity. This paragraph 9 shall
survive termination of this Agreement.
10. Covenant Not to Compete. Employee agrees that (a) during the term
of his employment hereunder and (b) after termination of his employment with
the Employer in accordance with the provisions of this Agreement, provided
Employer complies with its obligations hereunder with respect to such
termination including the requirements to pay compensation to Employee
hereunder, if any, Employee will not, within the continental United States,
directly or indirectly engage in the business of the manufacture and sale of
fiber bed filter and bag house medium pollution control systems or in any
other business competitive with Employer for a period of two (2) years from
the Date of Termination. Directly or indirectly engaging in the business of
the manufacture and sale of fiber bed filter and bag house medium pollution
control systems or in any competitive business shall include engaging in
business as owner, partner or agent, or as employee of any person, firm or
corporation engaged in such business, or being interested directly or
indirectly in any such business conducted by any person, firm, or corporation.
Employee's ownership of less than five percent (5%) of the outstanding voting
securities of any publicly traded company shall not violate the foregoing
prohibition.
- 6 -
<PAGE>
Employee hereby acknowledges and agrees that any violation of the
provisions of this paragraph 10 would cause irreparable damage to Employer and
its affiliates. Employee hereby acknowledges and agrees that the provisions of
this paragraph 10 are reasonable and necessary for Employer's protection, and
that Employer shall be entitled to injunctive relief, both temporary and
permanent, without bond, to enforce the provisions of this paragraph 10, which
relief shall be cumulative and not exclusive of any right, remedy or relief
otherwise available to Employer at law or in equity. This paragraph 10 shall
survive termination of this Agreement. In the event that any of the provisions
of this paragraph 10 are determined by a court of competent jurisdiction to be
contrary to any applicable statute, law, rule or regulation or to be for any
other reason unenforceable as written, Employer expressly agrees that such
court may modify this paragraph 10 or any of its terms so as to permit the
enforcement thereof to the fullest extent permitted by law as thus modified.
11. Intellectual Property Rights. All ideas, inventions, and other
developments or improvements conceived by Employee alone or with others,
during the term of his employment whether or not during working hours,
relating to fiber bed filter and bag house medium pollution control systems,
are the exclusive property of Employer. Employee agrees to assist Employer, at
its expense, to obtain patents on any such patentable ideas, inventions, and
other developments, and agrees to execute all documents necessary to obtain
such patents in the name of Employer, provided Employer wishes to patent or
otherwise exploit such idea, invention or development.
12. Redemption of Employee's Shares Following Death
(a) Life Insurance Policy. Employer or CECO, as determined between
them, shall maintain insurance (the "Policy") on the life of Employee in an
amount not less than Two Million Dollars ($2,000,000,000). Employer or CECO,
as determined between them, shall be the owner and beneficiary of such life
insurance.
(b) Redemption Procedures. For purposes of this paragraph 12, the
"Redeeming Party" shall be (i) CECO with respect to Shares that are shares of
CECO, and (ii) Employer with respect to Shares that are shares of Employer. In
the event of termination of Employee's employment pursuant to Section 7(a),
the Redeeming Party upon the request of Employee's estate, spouse, direct
descendant of Employee or trust for the benefit of Employee's spouse or direct
descendant owning Shares, as defined in Section 12(e), and any other person
who acquired Shares by bequest or inheritance or otherwise by reason of the
death of Employee (individually, a "Electing Party" and collectively the
"Electing Parties") shall use the net proceeds of the Policy required pursuant
to this paragraph 12 to redeem Shares, to be redeemed at a price equal to the
"Redemption Price". The "Redemption Price" per Share shall mean the lesser of
(i) the market value per Share, based on the last sale price per share on the
date of Employee's death of the common stock of Employer or CECO, as
applicable, or if such stock is not traded on a national securities exchange
or quoted on NASDAQ, based on the average of the closing bid and ask price per
share, or if Employee's death shall occur on a date other than a date on which
national securities exchanges are open, the last sale price on the first day
on which national securities exchanges were open prior to the date of
Employee's death, or (ii) the amount equal to the net proceeds received by
CECO or Employer, as the case may be, of the Policy, divided by the number of
Shares. The redemption of an Electing Party's Shares pursuant to this
paragraph shall be governed by the following procedures:
- 7 -
<PAGE>
(i) The Electing Party, or if there is more than one
Electing Party, the Electing Parties, shall provide written notice to
the Redeeming Party ("Election Notice") not more than one hundred
eighty (180) days following the date of Employee's death that the
Electing Party desires to have redeemed by the Redeeming Party
pursuant to this paragraph all, but not less than all, of the Shares.
In the event that Employer and CECO have not received Election
Notices for all of the Shares within such period, the Redeeming Party
shall so notify any Electing Parties who delivered Election Notices,
and Employer and CECO shall not be obligated to redeem any of the
Shares.
(ii) In the event that Employer and CECO have received
Election Notices for all of the Shares, the Redeeming Party shall
within forty (40) days following receipt of the last received
Election Notice (A) designate a Redemption Agent which, at the option
of the Redeeming Party, shall either be CECO or a corporation or
association (i) organized and doing business under the laws of the
United States or any state, (ii) subject to supervision or
examination by federal or state authority, and (iii) having the power
to exercise corporate trust powers, and (B) designate a Redemption
Date which shall be not more than two hundred forty (240) days
following the date of Employee's death, subject to subsection
12(b)(iv). The Redeeming Party shall notify the Electing Parties of
the Redemption Date and the identity of the Redemption Agent within
forty-five (45) days following the receipt of the last received
Election Notice.
(iii) The Electing Parties shall deposit in trust with the
Redemption Agent the Shares no less than two days prior to the
Redemption Date, with duly executed stock powers for transfer of the
Shares to the Redeeming Party. In the event all of the Shares are not
so deposited, Employer shall have no obligation to redeem any Shares,
and all Shares deposited shall be returned to the Electing Party who
deposited such Shares.
(iv) The Redeeming Party shall on or before the Redemption
Date deposit in trust with the Redemption Agent cash in the amount
equal to the Redemption Price, provided such Redemption Party has
received the net proceeds of the Policy from the insurer. In the
event the Redeeming Party has not received such net proceeds at least
four days prior to the Redemption Date, the Redeeming Party shall so
notify the Electing Parties. The Redemption Date in such event shall
be deemed to be 10 business days following the Redeeming Party's
receipt of the net proceeds of the Policy. Upon receipt of such
proceeds, the Redeeming Party shall notify the Electing Parties of
the Redemption Date.
(v) On the Redemption Date, the Redemption Agent shall issue
a check payable to each Electing Party equal to the Redemption Price
of the Shares such Electing Party deposited.
(c) Proceeds Less Than Redemption Price. Notwithstanding anything
herein to the contrary, a Redeeming Party shall be obligated to redeem Shares
only to the extent that such Redeeming Party receives net proceeds from the
Policy. In no event shall CECO be required to purchase shares of Employer from
an Electing Party, nor shall Employer be required to purchase shares of CECO
from an Electing Party other than out of the net proceeds received from the
Policy.
- 8 -
<PAGE>
(d) Redemption Agent Fees. The fees of the Redemption Agent shall be
paid by the Electing Parties on a pro rata basis based on the number of Shares
redeemed.
(e) Definition of Shares. "Shares" or "Share" shall mean (i) the
shares of Common Stock of Employer (par value $.001) and of CECO owned by
Employee on the date of this Agreement or subsequently acquired by Employee
prior to the Date of Termination, together with any other securities which are
issued with respect thereto by way of exchange, conversion, reclassification,
dividend or distribution, and (ii) any shares of Employer and CECO acquired by
the estate of Employee after the death of Employee pursuant to the exercise of
options held by Employee (the "Options") at the time of his death (or any
person who acquired the right to exercise such options by bequest or
inheritance or otherwise by reason of the death of Employee).
(f) Terminated Options. All unexercised Options shall automatically
terminate as of two days prior to the Redemption Date, notwithstanding the
terms of the Stock Option Plan or agreement to which such Options are subject.
(g) All or Nothing. Employee acknowledges that the Shares shall be
redeemed on an all or nothing basis and that Employer and CECO shall not be
obligated to purchase any Shares unless all of the Shares owned by Employee at
the time of his death are presented for redemption in accordance with the
terms of this Paragraph 12.
13. CECO Options.
(a) CECO Options. As additional consideration for the non-competition
agreement of Employee set forth in Paragraph 10 herein, Employee shall receive
approximately 210,520 options for shares of stock of CECO (the "CECO
Options"). The exercise price per share of stock for the CECO Options shall be
the market value of a share of stock of CECO on the date hereof. The market
value of the stock of CECO shall be based on the closing price per share, or
if such stock is not traded on a national securities exchange or quoted on
NASDAQ, the average of the closing bid and ask price per share. The CECO
Options shall otherwise contain substantially the same terms as the Employer
Options. Upon receipt of the CECO Options the Employer Options shall be
cancelled.
(b) Lock-up Agreement. Commencing with the date that Employee is
permitted pursuant to Rule 144 of the Securities Act of 1933 to sell his
shares of stock of CECO that were exchanged for shares of stock of Employer
("Release Date"), Employee shall not sell in excess of one-half of one percent
(.5%) of the total number of issued and outstanding shares of CECO in any one
fiscal quarter for one year after the Release Date, and thereafter shall not
sell in excess of one percent (1%) of the total number of issued and
outstanding shares of CECO in any one fiscal quarter, provided, however, that
in the event Employee terminates his employment hereunder pursuant to Section
7(d) because of a change in control of Employer, the terms of this section
13(b) shall terminate as of the Date of Termination. The terms of this section
13(b) shall otherwise survive termination of this Agreement. For purposes of
this Section 13(b), "sell" shall mean any transfer, including the sale, loan,
assignment, pledge, hypothecation, or other disposition of the stock of CECO,
entering into a contract for the sale of such stock or the short sale of such
stock.
- 9 -
<PAGE>
14. General.
(a) Conflicts. Employee hereby warrants that he is not now under any
legal or contractual obligation that would conflict in any manner whatsoever
with the obligations and duties by him herein undertaken, and that the
execution of this Agreement will not breach any agreement to which Employee is
presently a party.
(b) Construction. This Agreement shall be governed by, and be
construed in accordance with, the laws of the State of Pennsylvania.
(c) Notices. Any notices required or permitted to be given hereunder
shall be sufficient if in writing and if either delivered in person, or sent
by certified or registered mail, return receipt requested, or by recognized
international overnight courier, addressed to the parties as follows:
If to Employer: CECO Filters, Inc.
-------------- P.O. Box 683
Conshohocken, PA 19428
Attention:_______________
with a copy to: Phillip DeZwirek
-------------- 505 University Avenue
Toronto, Ontario
CANADA M5G 1X3
If to Employee: Steven I. Taub
-------------- 1325 Centennial Road
Penn Valley, PA 19072
If to CECO: CECO Environmental Corp.
---------- 505 University Avenue
Toronto, Ontario
CANADA M5G 1X3
Attention: Phillip DeZwirek
Any such notice shall be deemed delivered when (i) delivered in person, (ii)
two (2) business days after being deposited with a recognized international
overnight courier, or (iii) five (5) business days after being deposited in
the mail, postage prepaid, by certified or registered mail. Either party may
change the address to which such notices are to be addressed by notice thereof
to the other party in the manner set forth above.
(d) Waiver of Breach. The waiver by Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee thereof, and any delay by Employer
in enforcing or any failure by Employer to enforce any of its rights hereunder
shall not constitute a waiver of such rights or be deemed to establish a
custom or course of dealing between Employer and Employee.
- 10 -
<PAGE>
(e) Modifications; Entire Agreement. This Agreement may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge
is sought. This agreement sets forth the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes the terms of any prior agreement or discussion between the parties
hereto covering the same subject matter.
(f) Severability. If any one or more of the provisions of this
Agreement shall be held by a court of competent jurisdiction or other
authority to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby; such court or other authority
is hereby authorized and directed to modify or amend the invalid, illegal or
unenforceable provision to the minimum extent necessary to render it valid and
enforceable and to achieve as fully as lawful the intention of such provision,
and such provision, as so modified or amended, shall be valid and binding upon
the parties.
(g) References; Counterparts. Whenever necessary or proper herein,
the singular imports the plural or vice versa, and masculine, feminine and
neuter expressions are interchangeable. Any reference to paragraph numbers in
this Agreement shall be deemed to be references to paragraphs in this
Agreement. The paragraph titles used herein are provided for information
purposes only and shall affect neither the meaning of the terms nor the intent
of the parties. This Agreement may be executed in one or more counterparts,
all of which shall be deemed to be one original document.
(h) Assignability. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
personal representatives, heirs and legatees, except that Employee may not
assign or transfer his rights or delegate his duties hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
EMPLOYEE: EMPLOYER:
CECO FILTERS, INC.
By:
- --------------------------------- -----------------------------
Steven I. Taub Phillip DeZwirek, Chairman of
the Board and Vice President
CECO ENVIRONMENTAL CORP.
By:
--------------------------------
Phillip DeZwirek, Chief
Employee Officer
- 11 -
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement (the "Employment Agreement")
between Steven I. Taub ("Employee"), Ceco Filters, Inc. ("Employer"), and Ceco
Environmental Corp. ("CECO") is dated the 30th day of September, 1997.
1. This Addendum is hereby made a part of the Employment Agreement.
All capitalized terms not defined herein shall have the meaning ascribed to
them in the Employment Agreement.
2. Pursuant to Paragraph 13(a) of the Employment Agreement, Employee
hereby cancels all unexercised options for shares of stock of Employer that he
owns directly or indirectly and agrees that all such options are null and
void.
3. Employee represents and warrants that he has not gifted, sold or
otherwise transferred or disposed of any options for shares of stock of
Employer.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Addendum as of the date first above written.
EMPLOYEE: EMPLOYER:
CECO FILTERS, INC.
By:
- --------------------------------- -----------------------------
Steven I. Taub Phillip DeZwirek, Chairman of
the Board and Vice President
<PAGE>
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement (the "Employment Agreement")
between Steven I. Taub ("Employee"), Ceco Filters, Inc. ("Employer"), and Ceco
Environmental Corp. ("CECO") is dated the 30th day of September, 1997.
4. This Addendum is hereby made a part of the Employment Agreement.
All capitalized terms not defined herein shall have the meaning ascribed to
them in the Employment Agreement.
5. Pursuant to Paragraph 13(a) of the Employment Agreement, Employee
hereby cancels all unexercised options for shares of stock of Employer that he
owns directly or indirectly and agrees that all such options are null and
void.
6. Employee represents and warrants that he has not gifted, sold or
otherwise transferred or disposed of any options for shares of stock of
Employer.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Addendum as of the date first above written.
EMPLOYEE: EMPLOYER:
CECO FILTERS, INC.
/s/ Steven I. Taub By: /s/ Phillip DeZwirek
- --------------------------------- -----------------------------
Steven I. Taub Phillip DeZwirek, Chairman of
the Board and Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CECO FILTERS, INC. AND SUBSIDIARIES AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 852,243
<SECURITIES> 0
<RECEIVABLES> 4,037,775
<ALLOWANCES> 0
<INVENTORY> 678,793
<CURRENT-ASSETS> 6,091,906
<PP&E> 3,657,235
<DEPRECIATION> 1,692,076
<TOTAL-ASSETS> 10,302,507
<CURRENT-LIABILITIES> 5,791,162
<BONDS> 2,648,630
0
0
<COMMON> 6,868
<OTHER-SE> 2,173,592
<TOTAL-LIABILITY-AND-EQUITY> 10,302,507
<SALES> 10,439,429
<TOTAL-REVENUES> 10,439,429
<CGS> 5,623,699
<TOTAL-COSTS> 10,241,048
<OTHER-EXPENSES> 67,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,263
<INCOME-PRETAX> 131,118
<INCOME-TAX> 52,000
<INCOME-CONTINUING> 79,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,118
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
