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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended September 30, 1995
/ / Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ________________ __, ____
to ___________________ __, ____
Commission File Number: 1-10372
CEDAR GROUP, INC.
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(Name of small business issuer in its charter)
Delaware 23-2577796
- --------------- ----------
(State or other (I.R.S. Employer Identification No.)
jurisdiction of
incorporation
or organization)
500 Rue Notre Dame
Lachine, Quebec CANADA H8S 2B2
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (514) 634-3550
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
----- ----- ----- -----
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. / /
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Issuer's revenues for its most recent fiscal year: $155,750,000.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of December 20, 1995, was approximately $89,400,000,
based upon the closing price on such date on the NASDAQ National Market System
of $6.50. The information provided shall in no way be construed as an
admission that any person whose holdings are excluded from the figure is an
affiliate or that any person whose holdings are included is not an affiliate
and any such admission is hereby disclaimed. The information provided is
included solely for record keeping purposes of the Securities and Exchange
Commission.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the issuer's sole class of common
stock as of December 20, 1995 was 15,343,681 shares.
All dollar amounts included in this Report are shown in U.S. dollars,
unless otherwise indicated.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Cedar Group, Inc. (the "Company"), through its operating subsidiaries,
participates in two principal market segments: infrastructure engineering and
manufacturing services, and industrial specialty fasteners, respectively.
Dominion Bridge Inc. ("Dominion Bridge") and Steen Contractors Ltd.
("Steen") are the Company's principal operating subsidiaries and are involved
in the infrastructure engineering segment, which accounted for approximately
97% of the Company's consolidated revenue during the fiscal year ended
September 30, 1995 ("Fiscal 1995"). Dominion Bridge was acquired from United
Dominion Industries Limited ("UDIL") in April 1994, though pursuant to the
acquisition agreement the transaction was effective from an accounting point of
view from March 9, 1994. Steen was acquired in July 1995 pursuant to a Share
Purchase Agreement whereby the Company acquired 75% of the outstanding common
stock of Steen with the remaining 25% to be purchased in two installments over
the next two years. The acquisition of Steen was given effect from an
accounting point of view from April 1, 1995.
The Company has three operating subsidiaries in the industrial
fastener segment located in the United States, namely, Unimetric Corporation
("Unimetric"), a 70% owned subsidiary involved in the manufacturing of
specialty fasteners for the industrial and aerospace markets, and Banyan
Fastener Corp. and M.S.W. International, Inc. (collectively, the "Fastener
Importers"), both of which are importers and distributors of standard
industrial fasteners.
During the calendar year 1994, the Company disposed of its Canadian
commodity fastener distribution operations, consisting of Edinov Corporation
("Edinov"), George Hegedus Enterprises Ltd., Specialty Fasteners Ltd. and
Atto-Renaud Industries Inc. The disposition of the Canadian commodity
fasteners distribution operations were completed on December 22, 1994, with
effect as at July 1, 1994.
FISCAL 1994 ACQUISITIONS. During the fiscal year ended September 30,
1994 ("Fiscal 1994"), the Company acquired initially an 85% equity interest in
Dominion Bridge (later increased to 100%) and a 70% equity interest in
Unimetric.
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DOMINION BRIDGE. On April 8, 1994, the Company completed the
acquisition of majority ownership of Dominion Bridge, which previously operated
as a division of UDIL. The acquisition became effective March 9, 1994, from an
accounting point of view. Pursuant to the agreement with UDIL, UDIL
transferred substantially all of the assets, liabilities and the business of
its Dominion Bridge division into Dominion Bridge in exchange for all of the
common shares and Cdn. $18,338,000 of Dominion Bridge's Class A Preferred
Shares. Immediately after such transfer, UDIL sold the Company 85% of the
common shares of Dominion Bridge in consideration for an aggregate price of
Cdn. $5,000,000.
Simultaneously with the purchase of the Dominion Bridge common shares,
the Company contributed Cdn $2,000,000 in cash to Dominion Bridge in exchange
for Class B Preferred Shares of Dominion Bridge.
Both the Class A Preferred Shares and the Class B Preferred Shares pay
dividends at the rate of 7.5% per annum, payable quarterly. Class B Preferred
Shares held by the Company are redeemable only after UDIL no longer owns any
Class A Preferred Shares or common shares of Dominion Bridge.
The Class A Preferred Shares held by UDIL, as initially structured,
paid dividends at the rate of 7.5% per annum, payable quarterly, and were
convertible into the Company's Common Stock at a rate of Cdn. $6.00 per share.
The Company has a call option after two years to purchase (or to cause Dominion
Bridge to redeem) the Class A Preferred Shares at the rate of Cdn. $2,000,000
per year. UDIL also has a put option whereby after two years UDIL shall have
the right to put the Class A Preferred Shares to Dominion Bridge at the rate of
Cdn. $2,000,000 per year. The Company also has the right on any day that the
market value of the Company's Common Stock equals or exceeds Cdn. $8.00 to
exchange all or any part of the Class A Preferred Shares held by UDIL for
shares of the Company's Common Stock at a specified exchange rate. The minimum
conversion value must equal the initial face value of the Class A Preferred
Shares plus a 15% premium. In the event that the Company issues shares of
Common Stock in a public offering, the cash proceeds are required to be
utilized in the first instance to pay off one-third of UDIL's remaining Class A
Preferred Shares.
On October 21, 1994, the Company agreed to acquire from UDIL the
Dominion Bridge common and Class A Preferred Shares for cash payments of Cdn.
$18 million (U.S. $13 million), the transfer of certain assets having a book
value of Cdn. $1,368,000, and the waiver of the preferred dividend requirement
for the Company's fourth quarter. As of the date of this Report, the Company
has paid Cdn $8,299,000 (U.S. $6,224,000), transferred the assets and received
all of the common shares of Dominion Bridge held by UDIL and Cdn. $8,785,000
(U.S. $6,558,000) face value of the Class A Preferred Shares. The remaining
balance of the Class A Preferred Shares of Dominion
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Bridge held by UDIL may have been purchased by the Company at their face value
plus a 15% premium at any time to March 31, 1995.
On December 18, 1995 the Company accepted the offer of UDIL to acquire
all remaining preferred shares of DB and the waiver of certain claims and
dividends for aggregate consideration of Cdn. $11,000,000 [U.S. $8,200,000]
consisting of a cash payment of Cdn. $4,500,000 and the issue of up to
1,158,334 common shares of the Company to realize Cdn. $6,500,000. The book
value of these minority interests at September 30, 1995 was $7,166,000. The
excess of the final settlement of $8,200,000 over the book value of $7,166,000
has been charged as a capital transaction in the statement of stockholder's
equity at September 30, 1995 and an increase in minority interest in the amount
of $1,304,000. In this regard, the Company has deposited $4.5 million in trust
with its solicitors.
In consideration of the Company acquiring all of the Class A Preferred
Shares of Dominion Bridge held by UDIL, UDIL has agreed to discharge the
registered security interests that it has over the assets and undertaking of
Dominion Bridge for any indebtedness that may be due to UDIL by Dominion Bridge
including payments made by UDIL for bonding, letters of credit and other
guarantees that UDIL may be a party to. UDIL has also agreed to forgive Cdn.
$961,000 that it claims for interest payments owing under the October 21, 1994
understanding, a further $863,000 of claims allegedly owing by Dominion Bridge
to UDIL and all dividends accruing on the Class A Preferred Shares of Dominion
Bridge.
During Fiscal 1995, in order to raise funds for the purchase of the
securities of Dominion Bridge held by UDIL, certain third-party investors
acquired certain of the Class A Preferred Shares of Dominion Bridge and were
converted into 643,200 shares of Common Stock of the Company at a conversion
price of Cdn. $6.00 per share. Of these shares, 450,000 shares of Common Stock
were acquired by Group Fidutech International, Inc. ("GFI") upon conversion of
Cdn. $2,700,000 worth of Class A Preferred Shares of Dominion Bridge. SEE
"ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
UNIMETRIC CORPORATION. On April 26, 1994, the Company
acquired 70% of the issued common stock of Unimetric from Ateliers de la Haute
Garonne ("AHG"), effective January 1, 1994. Unimetric is a manufacturer of
specialty fasteners for the aerospace and industrial markets.
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The purchase price for the Company's equity interest in Unimetric was
$1,050,000, consisting of a cash payment of $600,000, the issuance of 88,968
shares of Common Stock of the Company and $200,000 for shares of Unimetric 4%
non-cumulative, non-voting preferred shares. In addition, $949,871 of
indebtedness of Unimetric to AHG was converted into Unimetric 4%
non-cumulative, non- voting preferred shares, which were later exchanged for
338,033 shares of Common Stock of the Company. In addition, 71,174 shares of
Common Stock were issued on conversion of $200,000 of the remaining preferred
shares of Unimetric.
FISCAL 1995 ACQUISITION. On July 31, 1995, with effect given from
April 1, 1995, the Company acquired 75% of the outstanding common shares of
Steen Contractors Limited ("Steen") for a cash purchase price of Cdn $6.3
million. Steen is an international engineering company, specializing in prime
mechanical, heating, ventilation, and air conditioning contracts for industrial,
commercial, manufacturing and processing plants. The Company will purchase the
remaining common shares of Steen in two installments. The first installment,
amounting to 15% of Steen's outstanding common shares, will be purchased on May
1, 1996 based upon the net tangible book value per share of Steen at December
31, 1995. The final installment, amounting to 10% of Steen's outstanding common
shares, will be purchased on May 1, 1997 based upon the net tangible book value
per share of Steen at December 31, 1996.
The acquisition of Steen was accounted for under the purchase method
of accounting and has been given effect from April 1, 1995, the date under
which the Company assumed operational control of Steen.
The payment for the purchase price of the common shares of Steen was
obtained by the Company pursuant to a Term Loan Agreement with BT Commercial
Corporation pursuant to which the Company borrowed U.S. $5 million (the "Bridge
Loan"). The Bridge Loan was repaid on October 31, 1995.
DIVESTITURE OF CANADIAN FASTENER BUSINESSES AND STEEL SERVICE CENTER.
Pursuant to an agreement dated as of July 1, 1994, the Company divested its
Canadian commodity fastener distribution businesses that were formerly carried
on by Edinov and its subsidiaries. The divestiture was completed on December
22, 1994 and the Company sold all of the shares that it held in Edinov and all
of the shares of George Hegedus Enterprises Ltd., Atto-Renaud Industries Inc.
and Specialty Fasteners Ltd. which are owned directly or indirectly by Edinov.
In consideration for the sale of these securities, the Company received an
aggregate Cdn $1,000,000 in cash and Cdn $5,135,000 in preferred shares of
3091473 Canada Inc., the company that acquired Edinov. The preferred shares of
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3091473 Canada Inc. bear a cumulative dividend equal to the bank prime rate at
the beginning of each fiscal year and are secured by a pledge of all of that
company's assets. The preferred shares issued to the Company by the acquiror
of its fastener distribution businesses are redeemable at varying amounts
annually through to the year 2009, commencing at Cdn $250,000 in 1995 and 1996
and Cdn $350,000 each year thereafter.
In December 1994, Dominion Bridge also sold its steel service center
division that was operated in the Province of Nova Scotia for gross proceeds of
Cdn $925,000.
DESCRIPTION OF CONSTRUCTION PRODUCTS AND SERVICES SEGMENT
GENERAL DESCRIPTION OF BUSINESS. Dominion Bridge is a multi-trade
general industrial and infrastructure contractor in Canada with its headquarters
in Lachine, Quebec and facilities throughout Canada. Its capabilities include
project and construction management, infrastructure engineering and turnkey
projects. Dominion Bridge participates in both new construction and
repair/maintenance of industrial and energy plants, large commercial or
industrial structures, and heavy engineered products, such as bridges and sports
stadiums. Dominion Bridge has been constructing major projects since 1882. It
has designed and constructed bridges, the steel frames for power plants, steel
mills, sports stadiums, high rise office towers, and process plants. Many of
Dominion Bridge's projects are Canadian landmarks.
Dominion Bridge's services include steel erection, heavy rigging,
mechanical and electrical installation, pipefitting, mill-wrighting, and
construction management. Dominion Bridge also manufactures heavy engineered
products such as bridges, pressure vessels, container cranes, conveyor systems,
and hydraulic gates.
Dominion Bridge's facilities are equipped to pre-blast all structural
shapes and plate sizes, to saw, shear, punch, drill, and flame cut all
structural shapes and all sizes of plate material.
Dominion Bridge's plate shops include rolls for cold plate up to 4
inches thick and hot plate up to 6 inches thick and hydraulic presses of up to
400 tons. The machine shops are equipped with medium and heavy lathes, milling
machines, boring machines and planing machines. The assembly shops are
equipped to pre-heat, post-heat and perform several types of welding, including
manual and semi-automatic, with state of the art welding equipment. Dominion
Bridge's equipment also includes several cranes with capacity up to 165 tons,
hoisting and rigging equipment with
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capacity up to 150 tons, boom trucks, compressors, welding equipment and
barges.
Dominion Bridge's facilities are equipped to receive and ship material
via road and railroad and the Lachine facilities are accessible via the Lachine
Canal to the St. Lawrence Seaway for shipments by barge.
Dominion Bridge maintains a Quality Verification Program which is
certified to meet applicable quality standards.
In addition to Dominion Bridge, the Company also operates in the
infrastructure engineering and manufacturing services business through another
of its operating subsidiaries, Steen Contractors Ltd. ("Steen"). Steen is an
international engineering company, specializing in prime mechanical, heating,
ventilation, and air conditioning contracts for industrial, commercial,
manufacturing and processing plants.
Steen was formed in the early 1920's and over the years, has grown in
its base operations through acquisitions of other operating contractors. Steen
currently consists of Steen Contractors Limited, Les Entrepreneurs Becker, Inc.
and Becker Contractors Limited. In addition to Canadian operations, Steen has
been involved in international and off-shore projects in such areas as South
America, the Middle East, the Caribbean, China and Bermuda.
Currently, among its other day to day operations, Steen is involved in
two major projects. The first project is a joint venture which is presently
contracted to the Hibernia Management and Development Company Ltd. for the
engineering, procurement, fabrication, construction, and installation of
construction site facilities for the Hibernia Development project, an oil and
gas development off the east coast of Newfoundland. The Company anticipates
the joint venture to be completed in 1997.
The second project involves Air Science Corporation of Atlantic City,
New Jersey, in which Steen has a 50% equity interest. In 1995, Air Science and
Zurn/Nepco, a major supplier of co-generation power facilities, formed a joint
venture to bid for a contract to supply the Atlantic City District Heating and
Cooling Plant. The joint venture was selected to be the preferred supplier of
the project and has received approval for substantial preliminary work. The
major contract for this project is scheduled to be awarded in early 1996,
however, there is no assurance at this time that Air Science Corporation will
be the selected contractor.
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BACKLOG. As at the date of this Report, the Company had confirmed
contracts for approximately $120 million to be completed over the next two
years. This figure excludes the joint venture arrangements in the Far East,
which are described in the section "Activities in the Far East", due to project
financings required to be implemented by Dominion Bridge and its prospective
partners and other foreign ventures.
SUPPLIERS. The principal raw material in most of Dominion Bridge's
projects is steel. Steel utilized by Dominion Bridge is supplied by Canadian
mills and is also imported from Europe and Japan. The Company is not dependent
on any single supplier for its raw materials. Although the price of steel
fluctuates, substantially all of Dominion Bridge's steel requirements are
purchased for specific projects and the cost of steel is usually reflected in
the price of the project. As a policy, Dominion Bridge does not maintain
significant raw material inventory not allocated to specific projects.
Steen's operations as a prime mechanical contractor dictate that a
number of raw materials be employed in its operations. Steen uses a number of
suppliers in its operations and is not dependent on any single supplier for its
raw materials.
EMPLOYEES. As of the date of this Report, Dominion Bridge and Steen
employed in the aggregate approximately 1,400 persons, of which approximately
71% are members of a labor union. Dominion Bridge (Lachine), with its
approximately 300 employees, have a collective agreement in place until October,
1997. Dominion Bridge's Manitoba operations with its approximately 40 employees
have a collective agreement in place until March, 1997. Of the 405 Steen
employees, approximately 326 are hourly staff employees, which are covered by a
general construction agreement, by each of their respective trades, to which
Steen is a signatory. The general construction agreements cover all aspects
generally found in collective bargaining agreements. Neither Dominion Bridge
nor Steen have suffered any work stoppages during the last five years and the
Company believes their labor relations to be amicable.
HEALTH AND SAFETY. Health and safety records of contractors continue
to be an important decision criteria of project promoters and owners in the
awarding of contracts. The primary responsibility for safety is that of the
various project managers. Dominion Bridge and Steen also employ Safety and
Quality Assurance Managers.
MARKETING. Dominion Bridge and Steen obtain most of their projects
by competitive bid. Dominion Bridge and Steen employ a full-time marketing work
force. Dominion Bridge and Steen also
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engage agents and consultants to enhance their in-house marketing capabilities.
Dominion Bridge has developed an extensive construction cost database,
which allows Dominion Bridge to calculate construction costs from the limited
engineering details typically available at bid time. Management believes this
database provides an important competitive advantage in that it enables
Dominion Bridge to quickly react in the generally short bid periods that
characterize the current marketplace.
Steen currently has a major number of customers and contracts.
Steen's customers include PCL Constructors, Inc., Ellis-Don Construction
Limited, Magil Construction (Canada) Ltd., and J.W. Lindsay Enterprises
Limited.
Steen currently has a number of contracts to perform various services,
including contracts with The National Trade Centre, Canadian National
Exhibition, Whitby Psychiatric Hospital, Halifax International Airport, The New
Montreal Forum, Dawson College, Bristol Myers Squibb and The Institute for
Marine Sciences. Additionally, through the joint venture, Steen is involved in
the Hibernia project, discussed previously.
FACILITIES. Dominion Bridge owns and operates manufacturing
facilities in four of the Provinces of Canada. In each of these facilities,
Dominion Bridge is equipped to receive and ship material via road and rail. In
the case of the Lachine (Montreal) facility, the Company can ship by water as
it has access to international waterways via the St. Lawrence Seaway.
The largest of the four manufacturing facilities is the 400,000 square
foot facility, located on 40 acres of land in a heavy industrial park in
Lachine, near downtown Montreal, Quebec.
The second largest is a 29 acre site, also in a heavy industrial park,
in Winnipeg, Manitoba. The main building on this particular site is a 150,000
square foot fabrication shop which houses most of Dominion Bridge's bridge
building activity.
In Regina, Saskatchewan, Dominion Bridge owns a 23 acre site which
includes a 35,000 square foot heavy manufacturing facility. This facility has
general heavy manufacturing capability.
In Amherst, Nova Scotia, Dominion Bridge owns a 77,000 square foot
facility from which it operates its fabrication division. Dominion Bridge also
owns an office in downtown Amherst, comprising 16,000 square feet of office
space and 16,000 square feet of land.
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In Nisku, Alberta, a suburb of Edmonton, Dominion Bridge operates a
30,000 square foot manufacturing facility from leased premises. The major
activity in this particular facility is pipe spooling work for the oil and gas
sector.
In addition, Dominion Bridge operates construction offices from leased
premises in the following locations: Richmond, British Columbia; Calgary,
Alberta; Nisku, Alberta; Regina, Saskatchewan; Winnipeg, Manitoba; Oakville,
Ontario and Sudbury, Ontario.
Dominion Bridge has pledged and mortgaged all of its fixed and other
assets as security for a debenture held by UDIL. This debenture secures any
and all indebtedness that may be due by Dominion Bridge to UDIL including
payments made by UDIL under Letters of Credit and guarantees to which UDIL is a
party. The debenture provides that Dominion Bridge may not dispose of its land
and buildings nor pledge its inventories or receivables without the consent of
UDIL, except in the ordinary course of Dominion Bridge's business. UDIL has
subordinated its lien in favor of a line of credit extended to Dominion Bridge
by its principal bank lender. The security interests in favor of UDIL will be
discharged upon redemption, conversion or purchase of the outstanding preferred
shares of Dominion Bridge owned by UDIL. Reference is made to "Description of
Business - Dominion Bridge" and note 6 to the Company's consolidated financial
statements for the year ended September 30, 1995.
Steen operates from leased premises in six locations in the Provinces
of Ontario, Quebec and the Maritimes. From all of these areas, with the
exception of Toronto, Steen carries out all of the mechanical work with its own
facilities and work force, subcontracting only for specialty services, such as
controls, insulation and electrical wiring. In Toronto, the sheet metal work
is subcontracted to independent sheet metal contractors. The other locations
operate sheet metal fabricating facilities equipped with CAD/CAM and automated
duct fabrication machines. All locations prefabricate piping systems and
Steen's facility in Toronto maintains a large pipe fabrication system.
COMPETITION. The markets in which Dominion Bridge and Steen
participate are highly competitive. Many of their competitors are substantially
larger, with greater financial, marketing and other resources than those of the
Company. In some instances, Dominion Bridge and Steen may be limited in their
ability to compete for large projects by their limited bonding ability. UDIL
has agreed to continue its corporate guaranty of Dominion Bridge's performance
bonds which were in existence as of the date of acquisition. As has been the
past practice, Dominion Bridge will use its best
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efforts to bid for projects it cannot handle individually as part of a
consortium.
DESCRIPTION OF FASTENERS SEGMENT
From its inception, the Company has operated in the industrial
fasteners segment. However, since the effectiveness of the Plan of
Reorganization with the shareholders of Edinov on September 30, 1993, all of
the Company's growth has been as a result of various acquisitions, principally
in the infrastructure engineering and manufacturing services segment.
During Fiscal 1994, the Company divested its Canadian commodity
fastener distribution businesses that were formally carried on by Edinov and
its subsidiaries. The divestiture was completed on December 22, 1994
(effective July 1, 1994) and the Company sold all of the shares that it held in
Edinov and all of the shares of George Hegedus Enterprises Ltd., Atto-Renaud
Industries Inc. and Specialty Fasteners Ltd., which were owned directly or
indirectly by Edinov.
Currently, the infrastructure engineering and manufacturing services
business accounts for approximately 97% of all of the revenues of the Company.
The industrial fasteners segment of the Company's business, which accounted for
approximately 3% of sales, has been unprofitable and adversely impacted the
Company's operating income by $1,316,000, decreasing the Company's earnings per
share by $0.09. In an effort to return this segment to profitability, the
Company has made key management changes and marketing and production
improvements which it believes will return this segment to profitability in the
short term.
ACTIVITIES IN THE FAR EAST.
Dominion Bridge, the Company's principal operating subsidiary, has
formalized letter agreements, letters of intent or reached agreements in
principle with respect to six large scale infrastructure projects in the
Province of Sichuan in the Peoples Republic of China. The projects are located
in the two largest cities in the Province, namely Chengdu and Chongqing.
The City of Chengdu is the capital of the Province and is the
political, economic and cultural center of Sichuan with a population of
approximately ten million inhabitants. Chongqing has a population of
approximately fifteen million inhabitants, and in 1992 had a local economy
which ranked it as fifth among major cities in the Peoples Republic of China.
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The first project involves the entry into a joint venture, with
Dominion Bridge and prospective partners owning 70% of the venture, which plans
to build and operate a 700,000 ton per year capacity cement plant with an
estimated construction cost of approximately $85 million. The Chongqing Cement
Plant, a State-owned enterprise, will own the remaining 30% of the joint
venture.
The second project involves Dominion Bridge and prospective partners
entering into a joint venture with the Golden Summit (Group) Stock Co. Ltd. to
build another 700,000 ton per year capacity cement plant in Emei City, a suburb
of Chengdu. The estimated total cost of this project is approximately $85
million.
The third project involves an arrangement with Chengdu Huaxi Electric
Power (Group) Inc. to build a 200 MW pumped hydro storage facility. The fourth
project involves the financing and construction of a 46.83 kilometer express
toll highway between the cities of Chengdu and Jiangyan, a joint venture
arrangement between the Bureau of Communications of Chengdu Municipality and
Dominion Bridge, with an estimated project cost of $90 million.
In addition to the above, Dominion Bridge has, as its fifth project,
signed an agreement to assemble the consortium to finance and build the first
phase of the Chengdu Metro and Light Rail System, with the first phase
consisting of 25 kilometers of track with eleven station stops. The agreement
in principle grants to Dominion Bridge full rights for the financing, design,
construction, operation and management of the first phase of the Chengdu Metro
and Light Rail System, a multi-year project which is estimated to cost
approximately $600 million. The metro system will also involve a joint venture
arrangement which will be 30% owned by the City of Chengdu and 70% by Dominion
Bridge and prospective partners.
The sixth project involves a joint venture with the China Real Estate
Development Company of Chengdu to build low-income housing in the City of
Chengdu. The land area proposed to be developed consists of 100 acres and is
anticipated to cost approximately $14 million. The China Real Estate
Development Company has covenanted to purchase from the joint venture all
deliverable units which remain unsold within ninety days of their completion at
a 16% premium to the per unit construction cost price.
Dominion Bridge plans to transfer its interest in the joint venture
projects described above into a special purpose company to be formed expressly
to hold its interests in the joint ventures. Dominion Bridge anticipates
managing, operating and overseeing the various joint venture projects.
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The above arrangements contemplate Dominion Bridge and its prospective
private sector partners holding a minimum 70% joint ownership interest in the
various projects. The arrangements respecting the projects outlined above are
at a preliminary stage and details will have to be worked out between Dominion
Bridge and the partners that it will require for the various projects. In
addition, financing arrangements will have to be finalized respecting the
various projects and there is no assurance that Dominion Bridge will be able to
retain the requisite strategic partners to commence and complete any of the
projects that are the subject of the various arrangements indicated above.
The Company anticipates that Dominion Bridge will carefully evaluate
and focus on the first two projects outlined above, with regard to the building
of the two cement plants during Fiscal 1996. In addition, Dominion Bridge is
currently evaluating the building and co-management of a water treatment plant
in Indonesia and final financial details are currently being negotiated
between the prospective partners.
ITEM 2. DESCRIPTION OF PROPERTIES.
Dominion Bridge owns four principal manufacturing facilities in
Lachine, Quebec; Winnipeg, Manitoba; Regina, Saskatchewan and Amherst, Nova
Scotia and leases a manufacturing facility in Nisku, Alberta. In addition,
Dominion Bridge operates construction offices from leased premises in Richmond,
British Columbia; Calgary, Alberta; Oakville, Ontario.
The Lachine plant, located near Montreal, is a 400,000 square foot
manufacturing facility located on 40 acres in a heavy industrial park. The
Winnipeg facility houses a 150,000 square foot fabrication shop located on 29
acres where most of Dominion Bridge's building activities are located.
Steen operates from leased premises in six locations from the
Provinces of Ontario, Quebec and the Maritimes at an aggregate cost per year of
approximately Cdn. $288,000.
Unimetric operates from leased premises in East Providence, Rhode
Island. M.S.W. International, Inc. and Banyan Fastener Corp. have leased
distribution facilities in Illinois and Texas.
The only properties which account for 10% of the Company's
consolidated total assets are the Lachine and Winnipeg facilities, which are
owned free of encumbrance except the lien in favor of UDIL. See "Description
of Business--Dominion Bridge" and "Description of Business--Facilities" and
Note 6 to the Company's
14
<PAGE> 15
consolidated financial statements. These properties are valued in accordance
with the purchase of accounting at their fair market value on the date of
acquisition, March 9, 1994, and are depreciated for income tax purposes on the
straight line method over the estimated useful life of 40 years. Taxes on
these properties are approximately Cdn $433,708 and Cdn $262,512 for the
Lachine and Winnipeg plants, respectively. The Company believes its facilities
are adequate for its current use and has no planned capital improvement plan
for the facilities.
It is the opinion of management that the properties are adequately
covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
From time to time disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company.
Other than as set out below, the Company is not currently involved in
any litigation or proceedings which are material, either individually or in the
aggregate, and, to the Company's knowledge, no other legal proceedings of a
material nature involving the Company are currently contemplated by any
individuals, entities or governmental authorities.
1. The Company commenced an action against Stelco Inc. on
December 20, 1994 in The Ontario Court to obtain a declaration that it is the
rightfall owner of 75% of the common shares of Stelco Fasteners Ltd. and for
damages as a result of a dispute that arose between the parties in connection
with the acquisition by the Company of 75% of the common shares of Stelco
Fasteners Ltd., a company owned by Stelco Inc. The Ontario Court (General
Division) denied the Company's claim in a judgment released on December 21,
1995 and the Company is currently evaluating an appeal of the decision.
2. By complaint dated November 7, 1995, certain shareholders (the
"Plaintiffs") brought a shareholders derivative suit in the Chancery Court of
the State of Delaware against Cedar Group, Inc. and Michel L. Marengere,
Micheline Prud'homme, and Rene Amyot, individually. The complaint alleges
certain interested and self-dealing transactions by Marengere. Plaintiffs seek
judgment for the damages suffered by the Company as a result of the alleged
transactions, costs and expenses of the action, including reasonable attorneys'
fees and any other relief that the
15
<PAGE> 16
Court may deem just and proper. The Company has obtained an extension in which
to file an answer until January 31, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the over-the-counter market
and is included for quotation on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
Since November 4, 1993, the Company's Common Stock has also traded on the
Vancouver Stock Exchange.
The following table sets forth certain information with respect to the
high and low market prices of Cedar Group, Inc.'s Common Stock during Fiscal
1994 (October 1, 1993 to September 30, 1994) and Fiscal 1994 (October 1, 1994
to September 30, 1995).
<TABLE>
<CAPTION>
FISCAL 1994 High Low
- -----------
<S> <C> <C>
First Quarter 3 2 1/2
Second Quarter 4 5/8 2
Third Quarter 5 7/8 3 1/2
Fourth Quarter 7 3/4 5 1/8
FISCAL 1995
- -----------
First Quarter 8 5/32 5 3/4
Second Quarter 6 3/8 3 5/8
Third Quarter 5 3/4 3 5/8
Fourth Quarter 6 1/2 3 7/8
</TABLE>
The Company's Common Stock was traded through the OTC electronic
bulletin board until March 14, 1994, when the Common Stock began trading on
NASDAQ's Small-Cap Market. On September 1, 1994, the Company's Common Stock
was listed on NASDAQ's National Market System.
The high and low prices for the Company's Common Stock are rounded to
the nearest 1/32. Such prices are inter-dealer prices without retail mark-ups
or commissions and may not represent actual transactions.
16
<PAGE> 17
Holders
As of December 20, 1995, the approximate number of holders of record
of the Company's Common Stock was 446. The Company believes the number of
beneficial owners of the Common Stock exceeds 1,100.
Dividends
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It
is the present intention of management to utilize all available funds for
working capital.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
BACKGROUND
From its inception, the Company has operated in the industrial
fasteners segment. However, since the effectiveness of the Plan of
Reorganization with the shareholders of Edinov on September 30, 1993, all of
the Company's growth has been as a result of various acquisitions, principally
in the infrastructure engineering and manufacturing services segment. In
Fiscal 1994, the Company acquired Dominion Bridge and Unimetric and in Fiscal
1995 it acquired Steen. Each of these acquisitions was accounted for in the
Result of Operations from the effective dates of the acquisition which were
March 9, 1994, January 1, 1994 and April 1, 1995, respectively.
During Fiscal 1994, the Company divested its Canadian commodity
fastener distribution businesses that were carried on by Edinov and its
subsidiaries. The divestiture was completed on December 22, 1994 (effective
July 1, 1994) and the Company sold all of the shares that it held in Edinov and
all of the shares of George Hegedus Enterprises Ltd., Atto-Renaud Industries
Inc. and Specialty Fasteners Ltd., which were owned directly or indirectly by
Edinov.
Currently, the infrastructure engineering and manufacturing services
business accounts for approximately 97% of all of the revenues of the Company.
The industrial fasteners segment of the Company's business, which accounted for
approximately 3% of sales, has been unprofitable and adversely impacted the
Company's operating income by $1,316,000, decreasing the Company's earnings per
share by $0.09. In an effort to return this segment to profitability, the
Company has made key management
17
<PAGE> 18
changes and marketing and production improvements which it believes will return
this segment to profitability in the short term.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales for Fiscal 1995 of $155,750,000 were 129% higher than those
for Fiscal 1994 of $67,959,000. This increase is primarily attributable to the
inclusion of a full year of Dominion Bridge's operations during Fiscal 1994 as
opposed to to seven months during Fiscal 1994, as well as the acquisition of
Steen. On a pro-forma basis (as though each of the acquisitions had occured on
October 1, 1993) net sales increased 11% in Fiscal 1995 to $177,459,000 from
$159,162,000.
Gross margin as a percentage of sales was 10.5% in Fiscal 1995 versus
12.7% in Fiscal 1994. Gross margin declined due to the acquisition of Steen,
which operates with a lower gross margin than Dominion Bridge.
Selling, general and administrative expenses increased 90% from
$8,107,000 in Fiscal 1994 to $15,433,000 in Fiscal 1995. The increase was
primarily due to the expensing of approximately $1,691,000 of marketing and
development costs in Asia and Latin America as well as the inclusion of twelve
months of such expenses in Fiscal 1995 for Dominion Bridge versus seven months
in Fiscal 1994. Excluding the extraordinary marketing and development costs
referred to above, selling, general and administrative expenses declined from
11.9% of sales in Fiscal 1994 to 8.8% of sales in Fiscal 1995.
During Fiscal 1995 the Company undertook certain one-time adjustments
which significantly reduced the Company's net income and its earnings per
share. These adjustments included:
i) The expensing in the period of most of the previous and current
year costs associated with various foreign joint ventures
aggregating a total of $1,691,000;
ii) A write-off of $348,000 of certain assets that remained on the
books of the Company at the time of its September 30, 1993 plan
of arrangement which resulted in Cedar Group, Inc.'s exiting
from Chapter 11;
iii) A write-down of $283,000 for certain pension assets that had
been overstated in Fiscal 1994;
18
<PAGE> 19
iv) A reclassification of an aggregate $500,000 of deferred costs
related to the Fiscal 1994 acquisition of Dominion Bridge; and
v) The expensing of $682,000 of financing costs representing the
Company's costs on the Steen transaction.
Furthermore, the Company's income did not include the following
deferred income items;
i) The sum of approximately $2,054,000 of contract gains not
included in income as they are considered contingent gains; and
ii) The deferral by Dominion Bridge of the value of its interests in
a judgement pertaining to mining assets and mineral claims by
approximately $778,000 which the Company plans to realize in
fiscal 1996.
Although the above one-time adjustments have decreased the Company's
income and earnings for the period, management believes that this decision will
enhance the Company's financial position and its balance sheet while
positioning it strongly for its planned expansion program.
Exchange rates used in this discussion for the translation of
financial results for the periods 1994 and 1995 from Canadian to U.S. dollars
were Cdn $1.00 equals US $.7387 and US $.7270 respectively.
A significant portion of the operating profit earned by Steen is
generated by the joint venture, which is scheduled to complete the Hibernia
Project during 1997. Steen is actively pursuing large scale projects to
replace the income which will be lost with the completion of the Hibernia
Project, such as the Atlantic City District Heating and Cooling Plant, although
there can be no assurance that the the completion of the Hibernia Project will
not have a material effect on the Company's results of operations.
FISCAL 1994 COMPARED TO 1993
Net sales for Fiscal 1994 of $67,959,000 were 870% higher than those
for Fiscal 1993 of $7,003,000. This increase is primarily attributable to the
purchase of Dominion Bridge.
In accordance with technical requirements for consolidation under U.S.
GAAP, the Company was obligated to consolidate the results of Dominion Bridge
as of March 9, 1994 and not as at January 1, 1994 as the parties presumed. On
a pro forma basis (as though the Dominion Bridge and Unimetric acquisitions had
occurred as of October 1, 1992), net sales declined to $118,999,000 from
$136,049,000. The decline would be attributable to the Company streamlining
its operations and being more selective in the projects that it undertakes with
a view to increasing its profit margins.
19
<PAGE> 20
Gross margin as a percentage of sales was 12.7% in Fiscal 1994 versus
32.1% in Fiscal 1993. Gross margin declined due to the change in the Company's
business as a result of the acquisition of Dominion Bridge.
Selling, general and administrative expenses increased 225.8% from
$2,488,000 in Fiscal 1993 to $8,107,000 in Fiscal 1994. The increase was
primarily due to acquisition and financing costs related to Dominion Bridge and
to the overall increase in the size of the Company.
A comparative analysis of Dominion Bridge, the Company's principal
operating subsidiary, is as follows:
In 1993, Dominion Bridge before the Company obtained control, lost
$11,293,000 on sales of $125,994,000, and in 1992, it lost $2,926,000 on sales
of $174,672,000. Dominion Bridge, for the seven months since acquisition by
the Company realized an operating profit of $860,000 on sales of $58,181,000
thus achieving an effective turnaround of over $12,153,000 in operating income.
The main components of this turnaround consist of:
a) A reduction in variable costs as a percentage of
sales from 88.4% in 1993 to 76.3% in 1994, reflecting
significant productivity improvements.
b) Significant improvement in gross margin, from a 2.3%
gross margin in 1993 to 10.3% in 1994. In addition,
Dominion Bridge's backlog at September 30, 1994 is
estimated to reflect margins consistent with those
achieved in 1994.
Exchange rates used in this discussion for the translation of
financial results for the periods 1994 and 1995 from Canadian to U.S. dollars
were Cdn $1.00 equals US $.7387 and US $.7270 respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of operating capital have
traditionally been the private placements of the Company's Common Stock and
cash generated by operations. Currently, the Company's
20
<PAGE> 21
cash flow is being generated by the operations of Dominion Bridge and Steen
which are expected to cover the cash flow requirements of the Company. In
addition to the cash generated from operations, the Company has received a line
of credit from a Canadian chartered bank to provide Dominion Bridge with a $12
million revolving line of credit for working capital purposes. No funds have
been advanced on this line of credit which is guaranteed by the Company. Steen
presently has a line of credit of Cdn $7 million, of which Cdn $2.4 million has
been drawn down to date. Furthermore, the Company is continuing to pursue
expansion internally as well as through acquisitions, and, accordingly, may
require additional capital in the form of convertible debt or equity.
In order to complete the transactions for the purchase of Dominion
Bridge and Unimetric, the Company obtained approximately $10.9 million in cash
in March 1994 through a private placement of the Company's securities
consisting of 3,354,346 shares of Common Stock and 3,354,346 two-year share
purchase warrants. The warrants were exercisable on a one for one basis for
shares of Common Stock at US $3.75 for the first year and at US $4.00
thereafter. In July and August 1994, all of the 3,354,346 warrants were
exercised at US $3.75, thereby adding approximately $12.6 million to the
Company's capital resources.
Additionally, the Company has established Cedar Group (TCI) Inc. LLC,
a limited life Company under the laws of the Turks and Caicos Islands, which is
in the process of finalizing an offering consisting of 3,000,000 6% Convertible
Preferred Shares at $8.50 per share. The Preferred Shares are convertible into
shares of Common Stock of the Company, at the option of the holder, at any time
after January 31, 1997 and up until maturity on October 31, 1998 at a price of
$8.50 per share. On the day following the maturity date of October 31, 1998,
all of the remaining unconverted 6% Convertible Preferred Shares will
automatically convert into shares of Common Stock of the Company at a price
equal to the weighted average price of the Company's shares traded on NASDAQ
during the 20 previous trading days. Accordingly, if the weighted average
price of the shares of Common Stock of the Company is greater than $8.50, the
conversion will be $8.50. If the weighted average price is less than $8.50,
then the weighted average price will be the actual conversion price.
Consequently, investors will receive a number of shares of Common Stock of the
Company such that the actual value of those shares is equivalent to an
investor's full investment of $8.50 per Preferred Share.
The proposed private placement by Cedar Group (TCI) Inc., LLC has not
been fully completed, however, $11 million have been received to date in
subscriptions.
21
<PAGE> 22
The Company is subject to a risk of claims for product liability. If
a product liability claim exceeding the Company's insurance coverage or its own
available resources were to be successfully asserted against the Company, it
could have a material adverse effect on the Company's financial condition. The
Company has general liability insurance of approximately $5 million per
occurrence, with a maximum of $5 million of claims payable during any policy
year. There is no assurance that such coverage will be sufficient to fully
insure against claims brought against the Company and its subsidiaries, or that
the Company will be able to maintain such insurance at affordable rates or
obtain additional insurance covering the products.
EFFECT OF INFLATION
The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased during the past
years, the Company does not believe that its operations have been significantly
affected by inflation.
ITEM 7. FINANCIAL STATEMENTS.
The information required by this Item is found immediately following
the signature page to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
22
<PAGE> 23
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Michel L. Marengere 48 Chairman, Chief Executive
Officer and Director
Nicolas Matossian 54 President and Chief Operating
Officer
Rene Amyot 69 Director
Micheline Prud'homme 50 Secretary, Director and Vice
President of Protocol and
Communications
Reynald Lemieux 67 Director
Rt. Hon. Marc Lalonde 65 Director
Louis Berlinguet 69 Director
</TABLE>
Family Relationships
Michel L. Marengere, Chairman, President, Chief Executive Officer and
a Director of the Company, is related by marriage to Micheline Prud'homme, a
director of the Company.
Business Experience
The following is a summary of the business experience of the Company's
directors and executive officers during the past five years and their
directorships, if any, with companies with a class of securities registered
with the Securities and Exchange Commission:
Michel L. Marengere was elected Chairman and Chief Executive Officer
of the Company effective as of October 7, 1993. Mr.
23
<PAGE> 24
Marengere graduated from the University of Ottawa in business administration.
During the previous five years Mr. Marengere was President and Chief Executive
Officer of Edinov. Prior thereto, he has served as Assistant to the President
of several large international companies in strategic planning and development,
mergers and acquisitions and corporate reorganization. Mr. Marengere he has
completed over 125 mergers and acquisitions, joint ventures and strategic
alliances in the fields of life insurance, banking, oil and gas, avionics,
computer, and consulting engineering on behalf of companies such as Industrial
Life, the Bank of Nova Scotia, Systems Development Corporation, Groupe SM,
Ocean Date Systems, Shared Medical Systems and Gulf Oil.
Nicolas Matossian was elected President and Chief Operating Officer of
the Company in April, 1994. Mr. Matossian graduated from Harvard University
with an MBA and acquired his PhD in finance and economics from McGill
University. Prior to joining the Company, Mr. Matossian was the founding
partner of ERA, an economic and management consulting firm which executed
Canadian and international projects for the public and private sector since
1973 for clients such as First National City Bank, Standard Oil, Gulf Oil,
Union Carbide, Royal Trust, Government of Canada, the U.S. Government and the
Auditor General of Canada. He was one of the main architects behind the
Alberta Heritage Development Corporation and was the Managing Director of the
Manitoba Development Corporation. He has been involved in the formulation and
the marketing of public issues, private placements, limited partnerships and
mergers and acquisitions for a number of emerging high growth enterprises in
the resource and technology fields.
Rene Amyot was elected Director of the Company in January, 1994. Mr.
Amyot graduated in law from Laval University in Quebec City and in
international law from Harvard University. Mr. Amyot is a Queen's Counsel in
Canada, a member of the Order of Leopold in Belgium, a former Attache
d'Affaires to the King of Belgium and to the Vatican. Mr. Amyot was formerly
Chairman of Air Canada, and has served on the Board of Directors of the Bank of
Nova Scotia, Rothman's International and several other large international
companies.
Micheline Prud'homme was elected Director and Secretary in January,
1994. Prior thereto, Ms. Prud'homme was President and Director of Services
Multimodes MPH Inc., a private firm specializing in the design of customized
uniforms.
24
<PAGE> 25
Reynald Lemieux was elected Director of the Company in February, 1995.
He graduated in commerce from Laval University and has been involved in real
estate as an owner and developer for the past forty years. He is currently a
director of a number of corporations in the real estate sector and is also the
President and majority shareholder of Placement R.N.S. Inc., a firm
specializing in real estate and other investments. Mr. Lemieux is a member of
the Audit Committee of the Board of Directors.
The Honourable Marc Lalonde was elected as a director of the Company
on March 3, 1995. Mr. Lalonde graduated in law from the University of Ottawa
and received a Masters degree in law from the University of Montreal. He also
attended Oxford University and received a Masters degree in political and
economic sciences. During 1968-1972, Mr. Lalonde served as a director in the
office of the then Canadian Prime Minister, the Honourable Pierre E. Trudeau.
He was elected a member of the Canadian Parliament in 1972 for the District of
Outremont and was also appointed Minister of Health and Welfare. Mr. Lalonde
was then appointed Minister responsible for the Status of Women in Canada
during 1974 to 1979, and in 1977 and 1978 he also served as Minister
responsible for Federal Provincial Relations. In 1978 he was appointed
Minister of Justice and Attorney General of Canada, and in 1980 Mr. Lalonde was
appointed Minister of Energy, Mines and Resources. Mr. Lalonde served as
Canada's Finance Minister in the period 1982-1984, and in December 1989 he
received from the Governor General of Canada the Order of Canada.
In 1984 Mr. Lalonde joined the law firm of Stikeman, Elliott, an
international law firm having offices in Montreal and other locations. In
addition to his law practice, Mr. Lalonde is a
25
<PAGE> 26
member of the Board of Directors of Citibank Canada, Camdev Inc., North-South
Institute, Ressource Orleans Inc., the Hotel Dieu Hospital in Montreal, and is
also a member of the International Advisory Counsil and the Presidium of
Ukraine. In 1992, he received an honourary doctorate degree from the
University of Limbourg in Maastricht for his innovative contributions to the
health sector.
Louis Berlinguet was elected Director of the Company in August, 1995.
He obtained a B.Sc. (Honours) from the University of Montreal in 1947 and a
Ph.D. in Chemistry from Laval University in 1950.
Dr. Berlinguet became an Officer of the Order of Canada (1974), an
Officer at the Order of Quebec (1990), was elected to the Royal Society of
Canada (1969) and was named a Fellow of the Chemical Institut of Canada (1957).
He has received honorary degrees from the Universite du Quebec and the
University de Sherbrooke. In 1981, he was awarded the Jacques Rousseau Prize
and, in 1991, was elected member "emeritus" by l'ACFAS. In 1992, the Order of
Professional Chemists made him a "Compagnon de Lavoisier".
He is now President of the "Conseil de la science et de la technologie
du Quebec" (1990-), president of the Order of Quebec, (1994-) and president of
the Quebec Advisory Committee on the Information Highway (1995-).
Non-Executive Officers and Key Employees
Robert Chartier, Vice President, Corporate Controller, was elected Vice
President, Corporate Comptroller of the Company on October 1, 1994. Mr.
Chartier graduated in accounting from Ecole des Hautes Etudes Commerciales de
Montreal. He holds a C.A. and prior to joining the Company practiced as a
Chartered Accountant in his own firm since 1971. Through a public accounting
firm, acting as Partner and then Senior Partner, he has provided clients with
advisory services in financial management, budgeting and cash control.
Jacques R. Delorme was elected Vice President, Marketing of the
Company on October 1, 1994. Mr. Delorme graduated from Ryerson Institute in
Toronto in computers, attended Concordia University in Montreal taking courses
in economics and marketing and also attended Babson Institute in Chicago
majoring in corporate planning and marketing strategies. He was the founder of
Burotal 2000 Inc., a consulting company involved in the development of computer
projects, both in Canada and internationally. He was also the founding
President of Servidel Inc. a firm that specialized in the development of
strategic alliances and transfer of technologies on an international scale in
countries such as Hungary, France, Zaire, the Philippines, the United States
and Canada.
J. Arthur Gelinas was elected Vice President of the Company effective
October 7, 1993. Mr. Gelinas graduated from Laval University with a Masters
Degree in Commercial Sciences. Prior to his election as Vice President, Mr.
Gelinas was the founding President of Administratique Inc., a management
consulting company involved in the financial and administrative services for
large corporations such as Industrial Life, Systems Development Corporation,
Datacrown and the Industrial Acceptance Corporation.
Steinar Knai was appointed as Vice-President, Corporate Development in
August, 1995. Mr. Knai received an undergraduate degree in business, economics
and law from the St. Gall School of Business, Economics and Political Science
in Switzerland and a masters in Business Administration from the European
Institute of Business Administration located in Fontainebleau, France. Mr Knai
has more than twenty years experience as chief executive, owner or part-owner
of industrial companies in North America and Europe. During the past five
years, he has, through his company, Odinvest Inc., been involved in a
consulting capacity to industrial companies advising on mergers and
acquisitions and assisting companies in turn-around situations.
Chris Theodoropoulos joined the Company as General Counsel in
September 1994 and prior to such time was a partner in the law firm of Smith,
Lyons, Torrance, Stevenson & Mayer, having offices in Toronto and Vancouver.
He is a graduate of Trent University and received his legal training at McGill
University, receiving both a B.C.L. and LL.B. in 1982. Mr. Theodoropoulos is a
member of the Law Society of Upper Canada and the Law Society of British
Columbia and has practiced in the corporate and securities areas during the past
ten years.
Legal Proceedings Against Management
Michel L. Marengere, Micheline Prud'homme and Rene Amyot have been
named individually, along with the Company, as defendants in a shareholders
derivative suit by complaint dated November 7, 1995. SEE "ITEM 3. LEGAL
PROCEEDINGS".
Compliance with Section 16(a) of the Exchange Act
To the knowledge of the Company, each of the Company's directors,
executive officers and 10% beneficial owners has complied with the requirements
of Section 16(a) of the Securities Exchange Act of 1934, except that Mr.
Berlinguet failed to file timely a Form 3 upon his election to the Board of
Directors, and Messrs. Marengere and Matossian failed to file Form 4s upon the
grant of options under the Company's stock option plan.
26
<PAGE> 27
ITEM 10. EXECUTIVE COMPENSATION.
The following table discloses, for the fiscal year ended September 30,
1995, individual compensation information relating to the Chief Executive
Officer and the President and Chief Operating Officer of the Company. Other
than the named individuals, there were no other executive officers of the
Company during the fiscal year ended September 30, 1995, which require
disclosure under Item 402 of Regulation S-B. None of the named individuals were
employed by the Company prior to October 1, 1993.
27
<PAGE> 28
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
=================================================================================================================================
Long Term Compensation
Annual Compensation ---------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------------------
Restricted
Other Annual Stock Options LTIP All Other
Name and Compen- Award(s) /SARS Payouts Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) ($) (#) ($) sation ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michel L. Marengere, 1995 360,000 0 0 0 500,000 0 0
Chairman of the 1994 0 0 0 0 175,000 0 228,883
Board of Directors,
Chief Executive
Officer and Director
- ---------------------------------------------------------------------------------------------------------------------------------
Nicolas Matossian, 1995 240,000 0 0 0 300,000 0 0
President and Chief 1994 0 0 0 0 0 0 0
Operating Officer
=================================================================================================================================
The following table discloses individual grants of stock options and freestanding SARs made to the named executive officers.
GRANT OF STOCK OPTIONS
=================================================================================================================================
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
=================================================================================================================================
PERCENT OF
NUMBER OF TOTAL OPTIONS/
SECURITIES SARS GRANTED
UNDERLYING FOR EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE PRICE
NAME GRANTED (#) YEAR ($/SH) EXPIRATION DATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michel L. Marengere 500,000 -- $4.125 February 1, 1998
Nicholas Matossian 365,000 -- $4.125 February 1, 1998
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
The following table shows information regarding the exercise of stock options during Fiscal 1995 by the named
executives and the number and value of any unexercised stock options held by them as of September 30, 1995:
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1995 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
- ---------------------------------------------------------------------------------------------------------------
Number of
Unexercised
Options/SARs at Value of Unexercised
Shares Value FY-end (#) in-the-money Options/
Acquired on Realized Exercisable/ SARs at FY-end ($)
Name Exercise (#) ($) Unexercisable Exercisable/Unexercisable(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michel L. Marengere 0 $0 675,000/0 $1,349,750/0
Nicolas Matossian 0 $0 300,000/0 $ 487,500/0
===============================================================================================================
</TABLE>
- --------------------
(1) The value of the options is calculated based upon the market price of
the Company's Common Stock as of September 30, 1995, $5.75 per share
as reported on NASDAQ.
The Company has no retirement, pension or profit-sharing plans
covering its officers and directors and does not contemplate implementing any
such plans at this time. Although the Company has no formal bonus
arrangements, bonuses will be granted at the discretion of the Board of
Directors.
EMPLOYMENT ARRANGEMENTS
Effective February 1, 1995, the Company entered into employment
agreements with the following individuals to serve as executive officers or as
key employees of the Company: Michel L. Marengere as Chairman and Chief
Executive Officer and Nicolas Matossian as President and Chief Operating
Officer. Effective February 1, 1995, the Company agreed in principle to enter
into an agreement with Robert Chartier as Vice-President, Corporate
Comptroller. In addition, the Company agreed to enter into an agreement with
Steinar Knai as Vice President, Corporate Development.
The employment agreements with Messrs. Marengere and Matossian contain
"change in control" language which provides the executive with certain benefits
if the executive is terminated for "good reason", as that term is defined in
the employment agreements, following a change in control of the Company. The
employment agreements will provide that a "change in control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date
hereof, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); provided, however that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "Person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), except for Michel
29
<PAGE> 30
L. Marengere, or a company controlled by him, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 10% or
more of the combined voting power of the Company's then outstanding securities;
(B) there occurs a contested proxy solicitation of the Company's stockholders
that results in the contesting party obtaining the ability to vote securities
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (C) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another entity,
except to an entity controlled directly or indirectly by the Company, or a
merger, consolidation or other reorganization of the Company in which the
Company is not the surviving entity, or a plan of liquidation or dissolution of
the Company other than pursuant to bankruptcy or insolvency laws is adopted; or
(D) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. Notwithstanding the foregoing, a
"change in control" shall not be deemed to have occurred for purposes of the
employment agreements (i) in the event of a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to, or a merger,
consolidation or other reorganization involving the Company and an executive,
alone or with other officers of the Company, or any entity in which an executive
(alone or with other officers) has, directly or indirectly, at least a 25%
equity or ownership interest or (ii) in a transaction otherwise commonly
referred to as a "management leveraged buyout".
All of the employment agreements will be for a term of three years,
ending January 31, 1998. Under the terms of the employment agreements, Mr.
Marengere and Mr. Matossian will receive a base salary per year of $360,000 and
$240,000, respectively.
DIRECTORS' FEES
Directors of the Company who are not employees of the Company are paid
an annual stipend of $10,000, plus a fee of $500 for each Board or Committee
meeting attended. The aggregate amount of fees paid to all directors during
Fiscal 1995 was $45,000. The Company has, from time to time, granted stock
options to certain directors for their services as a director. During Fiscal
1994, the Company granted options to Messrs. Marengere and Amyot and Ms.
Prud'homme to purchase 175,000, 50,000 and 75,000 shares of Common Stock,
respectively, at an exercise price of $2.68 per share, which expire November
19, 1996.
30
<PAGE> 31
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of December 20, 1995, certain
information concerning the stock ownership of all persons known by the Company
to own beneficially more than 5% of the Company's outstanding Common Stock,
based upon filings with the Securities and Exchange Commission, as well as the
beneficial ownership of such Common Stock, as of such date, of the named
executive officers and directors individually and of all officers and directors
as a group.
31
<PAGE> 32
<TABLE>
<CAPTION>
Name and Address of Shares Owned Beneficially Percentage of
Beneficial Owner and of Record Outstanding Shares(1)
- ------------------- ------------------------- ------------------
<S> <C> <C>
Michel Marengere 2,109,403(2) 11.3%
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Rene Amyot 85,000(3) (4)
2960 Blvd. Laurier
Suite 500
Sante-Foy
Quebec, Canada GIY451
Micheline Prud'homme 80,300(5) (4)
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Nicolas Matossian 415,000(6) 2.5%
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Reynald Lemieux 0 0
1340 Duquet
Sillery
Quebec, Canada G1S 1A9
Rt. Hon. Marc Lalonde 0 0
1155 Rene-Levesque Blvd. West
36th Floor
Montreal, Quebec, Canada H8S 2B2
Louis Berlinguet 0 0
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
All Directors and Officers(7) 3,054,703 16.4%
as a group (10 persons)
- ---------------------------
</TABLE>
(1) Except as otherwise indicated, percentages are presented after
rounding to the nearest tenth, and include the total number of shares
outstanding and the number of shares which each person has the right
to acquire, within 60 days through the exercise of options, pursuant
to Item 403 of Regulation S-B and Rule 13d-3(d)(1), promulgated under
the Securities Exchange Act of 1934. Percentages for the total of all
persons and the total of all officers and directors include all
outstanding shares and all shares which such persons have the right to
acquire within 60 days.
32
<PAGE> 33
(2) Includes 1,631,766 shares held of record by Fidutech Technologies,
Inc. as to which Mr. Marengere has shared voting and investment power.
Mr. Marengere is the sole shareholder of Gestion Edinov Inc. and
Services M.L. Marengere, Inc. which own, in the aggregate, 75% of
Fidutech. Also includes 175,000 immediately exercisable stock options
to purchase shares of the Company's Common Stock held of record by Mr.
Marengere, and includes 500,000 shares of Common Stock that may be
issued pursuant to stock options exercisable at $4.125. Does not
include shares which may be deemed beneficially owned by Mr.
Marengere by virtue of his relationship to Ms. Prud'homme.
(3) 50,000 of which represent immediately exercisable options to purchase
shares of the Company's Common Stock.
(4) Less than 1%
(5) 75,000 of which represent immediately exercisable options to purchase
shares of the Company's Common Stock. Does not include shares which
may be deemed beneficially owned by Ms. Prud'homme by virtue of her
relationship to Mr. Marengere.
(6) Includes 300,000 shares of Common Stock that may be issued pursuant to
stock options.
(7) The shareholders of the Company have authorized the issuance of
800,000 shares of Common Stock to the two executive officers of the
Company, all of which have been issued, and 535,000 shares of Common
Stock to the non-executive officers and key employees of the Company
exercisable over a three year period at a price of $4.125 per share
pursuant to the 1995 Stock Option Plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During Fiscal 1995, the Company advanced $994,000 to a shareholder,
Group Fidutech International Inc. Of this amount, $577,000 was repaid during
the year. The balance of $417,000 is non-interest bearing and has no fixed
repayment terms and was repaid in December 1995.
During Fiscal 1994, the Company advanced $1,734,000 to a shareholder,
Fidutech Technologies Ltd. and its affiliates. Of this amount, $1,155,000 was
assumed by the acquirer of Edinov as of July 1, 1994. The balance of $781,000
is non-interest bearing and has no fixed repayment terms. In December 1995,
Fidutech Technologies Ltd. repaid $84,000 of this balance.
In December, 1994, the Company sold to Groupe Fidutech International,
Inc. ("GFI") Cdn. $2,700,000 of Class A Preferred Shares of Dominion Bridge
which it held. Subsequently, pursuant to the terms of the Class A Preferred
Shares, GFI converted the Cdn. $2,700,000 of Class A Preferred Shares into
450,000 shares of
33
<PAGE> 34
common stock of the Company. Mr. Marengere who is the Chairman and Chief
Executive Officer of the Company, is also the Chairman of GFI and through his
share ownership, beneficially owns 75% of GFI. Additionally, Mr. Amyot who is
a director of the Company, is also a director of GFI and beneficially owns 25%
of GFI.
As of September 30, 1995, a subscription receivable in the aggregate
amount of $1,885,000 was owed to the Company by Mr. Marengere or his
affiliates.
34
<PAGE> 35
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
A. Financial Statements filed as part of this Report:
<S> <C>
Auditors' Report of Ernst & Young, Independent
Auditors, on Company's Financial Statements for
the fiscal years ending September 30, 1995 and 1994
Consolidated Balance Sheet of Cedar Group, Inc.
as at September 30, 1995 and 1994
Consolidated Statement of Operations of Cedar
Group, Inc. for the fiscal years ended
September 30, 1995 and 1994
Consolidated Statement of Cash Flows of Cedar
Group, Inc. for the fiscal years ended
September 30, 1994 and 1993
Consolidated Statement of Stockholders' Equity
for the Fiscal year's ended September 30, 1994
amd 1993.
Notes to Consolidated Financial Statements of
Cedar Group, Inc.
B. The following Exhibits are filed as part of this Report:
</TABLE>
<TABLE>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Reorganization and Amalgamation Agreement dated June 25, 1993 among the Company, Edinov and Fidutech
Technologies Inc. (Incorporated by reference to Exhibit 3 of the Current Report on Form 8-K filed on July
2, 1993).
3.1 (a) Certificate of Incorporation of the Company, filed February 16, 1989 (Incorporated by reference to
Exhibit 3.1 (a) of the Registration Statement on Form S-18 filed on August 23, 1989, Registration
Number 33-30673-A (the "Form S-18")).
3.1 (b) Amended Certificate of Incorporation of the Company, filed July 25, 1989 (Incorporated by reference to
Exhibit 3.1 (b) of the Form S-18).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.1(b) of the Company's Report on Form 10-KSB
for the fiscal year ended September 30, 1994 (the "1994 10-KSB").
4.1 Copy of Specimen Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Form S-18).
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.2 Form of Class A Warrant (Incorporated by reference to Exhibit 4.2 of the Form S-18).
4.3 Registrant's Second Amended Joint Plan of Reorganization (Incorporated by reference to Exhibit 1 of the
Current Report on Form 8-K filed on July 2, 1993).
4.4 Form of Underwriter's Warrant Purchase Agreement (including Form of Warrant) (Incorporated by reference to
Exhibit 4.4 of the Form S-18).
4.5 Form of Warrant Agreement between Company and Continental Stock Transfer and Trust Company (Incorporated by
reference to Exhibit 4.5 of the Form S-18).
4.6 Registrant's Second Amended Joint Disclosure Statement (Incorporated by reference to Exhibit 2 of the
Current Report on Form 8-K filed on July 2, 1993).
4.7 Order Confirming Second Amended Joint Plan of Reorganization of the Debtor dated August 25, 1993
(Incorporated by reference to Exhibit 6 of the Current Report on Form 8-K filed on July 2, 1993).
10.1 Subscription Agreement dated July 26, 1993 between Edinov and Fidutech relating to the purchase of Fidutech
of 777,778 Units (Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-KSB for the
transition period from January 31, 1993 to September 30, 1993).
10.2 Subscription Agreement dated September 15, 1993 between Edinov and Fidutech relating to the purchase of
Fidutech of 266,667 Units (Incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-KSB
for the transition period from January 31, 1993 to September 30, 1993).
10.3 Agreement by and among the Company and Michael Savini dated August 18, 1993 (Incorporated by reference to
Exhibit 10.8 to the Annual Report on Form 10-KSB for the transition period from January 31, 1993 to
September 30, 1993).
10.4 Master Agreement Between United Dominion Industries Limited, Cedar Group, Inc., Edinov Corporation, and
Dominion Bridge Inc. dated March 9, 1994 (incorporated by reference to the Company's Form 8-K, dated April
8, 1994).
10.5 Rollover Agreement Between United Dominion Industries Limited and 3010864 Canada Inc., effective December
31,
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1993 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.6 Share Purchase Agreement Between United Dominion Industries Limited and Cedar Group, Inc., dated March 10,
1994 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.7 Shareholders' Agreement Between United Dominion Industries Limited, Cedar Group, Inc., Edinov Corporation,
and 3010864 Canada, Inc., dated April 8, 1994 (incorporated by reference to the Company's Form 8-K, dated
April 8, 1994).
10.8 Guarantee and Indemnity Agreements Between United Dominion Industries Limited, Cedar Group, Inc., and
Edinov Corporation (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.9 Registration Rights Agreement Between United Dominion Industries Limited and Cedar Group, Inc., dated April
8, 1994 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.10 Hypothecation and Pledge of Securities Agreement between United Dominion Industries Limited and Cedar
Group, Inc. (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.11 United Dominion Industries Limited Security Agreement with 3010864 Canada (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.12 Debenture Between 3010864 Canada and United Dominion Industries Limited, dated April 8, 1994 (incorporated by
reference to the Company's Form 8-K, dated April 8, 1994).
10.13 Services Agreement between the Company and Michel Marengere.
10.14 Services Agreement between the Company and Nicolas Matossian.
10.15 The Company's 1995 Stock Option Plan.
11.0 Statement regarding computation of earnings per share (Incorporated from within the Financial Statements).
21 Subsidiaries
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
C. Reports on Form 8-K
Report on Form 8-K dated July 31, 1995 reporting the
acquisition of Steen, filed with the Commission on
August 14, 1995.
</TABLE>
38
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CEDAR GROUP, INC.
Dated: December 29, 1995
By:/s/ Michel L. Marengere By:/s/ Nicolas Matossian
----------------------- ---------------------------
Chief Executive Officer Principal Financial Officer
By:/s/ Robert Chartier
----------------------------
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-KSB has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michel L. Marengere Chairman of the Board December 29, 1995
- ------------------------ of Directors, Chief
Michel L. Marengere Executive Officer
and Director
/s/ Rene Amyot Director December 29, 1995
- ------------------------
Rene Amyot
/s/ Micheline Prud'homme Secretary and December 29, 1995
- ------------------------ Director
Micheline Prud'homme
/s/ Nicolas Matossian President and December 29, 1995
- ------------------------ Chief Operating
Nicolas Matossian Officer
</TABLE>
39
<PAGE> 40
<TABLE>
<S> <C> <C>
/s/ Robert Chartier Vice President, December 29, 1995
- ------------------------ Corporate Controller
Robert Chartier
/s/ Reynald Lemieux Director December 29, 1995
- ------------------------
Reynald Lemieux
Director
- ------------------------
Rt. Hon. Marc Lalonde
/s/ Louis Berlinguet Director December 29, 1995
- ------------------------
Louis Berlinguet
</TABLE>
40
<PAGE> 41
CONSOLIDATED FINANCIAL STATEMENTS
CEDAR GROUP, INC.
SEPTEMBER 30, 1995
<PAGE> 42
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
CEDAR GROUP, INC.
We have audited the accompanying consolidated balance sheets of CEDAR GROUP,
INC. as of September 30, 1995 and 1994, and the related consolidated statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cedar Group, Inc.
as at September 30, 1995 and 1994, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States .
/s/ Ernst & Young
Montreal, Canada
December 20, 1995
<PAGE> 43
CEDAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
As at September 30
[In thousands of U.S. dollars]
<TABLE>
<CAPTION>
1995 1994
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 4,765 5,578
Term deposits collateralizing bank indebtedness 1,688 --
Investments 2,779 1,039
Accounts receivable, net of allowances of $1,138 in 1995
and $477 in 1994 44,169 21,872
Inventories 12,746 8,293
Prepaid expenses and other assets 1,822 2,509
Current portion of assets transferred under contractual
arrangements -- 739
Due from an officer -- 565
Advances to shareholders 501 --
- -------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 68,470 40,595
- -------------------------------------------------------------------------------------------------
Property, plant and equipment, net 20,661 24,957
Advances to a shareholder 697 781
Assets of business transferred under contractual
arrangements [preferred shares] 3,640 3,792
Pension assets 1,619 2,053
Other assets 1,312 --
- -------------------------------------------------------------------------------------------------
96,399 72,178
=================================================================================================
</TABLE>
<PAGE> 44
CEDAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
[CONTINUED]
As at September 30
[In thousands of U.S. dollars]
<TABLE>
<CAPTION>
1995 1994
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness 1,688 --
Notes payable - bank 5,000 --
Accounts payable 31,075 15,764
Accrued expenses 916 2,034
Customer advances 6,062 5,561
- ------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 44,741 23,359
- ------------------------------------------------------------------------------------------------
Advances from unincorporated joint venture 750 --
Note payable 488 --
Deferred income taxes 5,994 4,984
Accrued post-retirement benefits other than pensions 522 518
Minority interest 10,161 15,464
- ------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, none issued
Common stock, $0.001 par value; 20,000,000 shares
authorized; issued and outstanding:14,990,188 shares
in 1995 and 13,507,918 shares in 1994 15 13
Additional paid-in capital 36,345 31,927
Deficit (874) (1,860)
Cumulative translation adjustment 142 (342)
- ------------------------------------------------------------------------------------------------
35,628 29,738
Subscription receivable (1,885) (1,885)
- ------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 33,743 27,853
- ------------------------------------------------------------------------------------------------
96,399 72,178
================================================================================================
</TABLE>
Commitments and contingencies [note 12]
See accompanying notes
<PAGE> 45
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended September 30
[In thousands of U.S. dollars, except per share data]
<TABLE>
<CAPTION>
1995 1994
$ $
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
SALES 155,750 67,959
- ---------------------------------------------------------------------------------------------------
Cost of sales 139,407 59,295
Selling, general and administrative expenses 15,433 8,107
- ---------------------------------------------------------------------------------------------------
154,840 67,402
- ---------------------------------------------------------------------------------------------------
Profit from operations 910 557
Interest expense, net (406) (341)
Income from operations of joint-venture 2,165 --
Other income 1,236 767
- ---------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 3,905 983
- ---------------------------------------------------------------------------------------------------
Income taxes
Current (300) 70
Deferred 1,993 230
- ---------------------------------------------------------------------------------------------------
1,693 300
- ---------------------------------------------------------------------------------------------------
Income before minority interest 2,212 683
Minority interest - dividends on preferred shares (70) (248)
Minority interest - common stock (122) (19)
- ---------------------------------------------------------------------------------------------------
NET INCOME 2,020 416
===================================================================================================
NET INCOME PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Primary 0.14 0.05
Fully diluted 0.11 0.03
- ---------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING
Primary 14,929,000 8,912,000
Fully diluted 17,688,000 12,064,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE> 46
CEDAR GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON STOCK PAID-IN TRANSLATION SUBSCRIPTION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 5,544,532 5 7,220 (2,276) (21) (1,885)
Issuance of common stock upon exercise of options 162,500 1 302 -- -- --
Issuance of common stock upon exercise of warrants 3,591,706 4 13,191 -- -- --
Issuance of common stock for Unimetric Corp. 88,968 -- 250 -- -- --
Issuance of common stock for stock issue expenses 295,000 -- -- -- -- --
Issuance of common stock through private placement 3,684,346 3 10,898 -- -- --
Issuance of common stock in repayment of debt. 140,866 -- 66 -- -- --
Translation adjustments, net of income taxes of $-0- -- -- -- -- --
-- -- -- -- (321)
Net income for the year -- -- -- 416 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
====================================================================================================================================
</TABLE>
<PAGE> 47
CEDAR GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
[CONT'D]
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON STOCK PAID-IN TRANSLATION SUBSCRIPTION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
Issuance of common stock upon conversion of Dominion
Bridge, Inc. Class A preferred shares 643,200 1 2,848 -- -- --
Issuance of common stock upon conversion of Unimetric
Corporation preferred shares 409,207 1 1,149 -- -- --
Issuance of common stock upon exercise of warrants 284,863 -- 741 -- -- --
Issuance of common stock for services rendered 45,000 -- 170 -- -- --
Issuance of common stock for stock issue expenses 90,000 -- -- -- -- --
Issuance of common stock upon exercise of warrants 10,000 -- 16 -- -- --
Share issue costs -- -- (506) -- -- --
Settlement on acquisition of Minority Interest
[note 3 ii] -- -- -- (1,034) -- --
Translation adjustments, net of income taxes of $-0- -- -- -- -- 484 --
Net loss for the year -- -- -- 2,020 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 14,990,188 15 36,345 (874) 142 (1,885)
====================================================================================================================================
</TABLE>
<PAGE> 48
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended September 30
[In thousands of U.S. dollars]
<TABLE>
<CAPTION>
1995 1994
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) 2,020 416
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities
Depreciation and amortization 3,217 2,224
Common stock issued for services 170 --
Deferred income tax 1,993 230
Deferred pension cost 434 --
Gain on sale of assets (689) (210)
Others - net 300 (263)
Income from operations of a joint venture (2,165) --
Advances from a joint venture 1,189 --
(Increase) decrease in accounts receivable (10,797) (6,594)
(Increase) decrease in prepaid expenses and other assets 806 629
(Increase) decrease in inventories (3,148) 2,390
(Decrease) increase in accounts payable 5,660 (1,529)
(Decrease) increase in customer advances (3,263) (5,132)
- -----------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (4,273) (7,839)
- -----------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Decrease (increase) in investments 2,696 (1,169)
Decrease (increase) in term deposits (1,688) --
Cash consideration paid for acquired businesses (4,476) (4,550)
Cash of acquired businesses 544 --
Purchase of minority interest of subsidiaries (8,298) --
Repayment by (advance to) divested businesses 739 (902)
Repayment by (advance to) to a shareholder (417) (1,734)
Repayment by (advance to) to an officer 565 (565)
Cash payment for purchase of equipment (10) (94)
Proceeds from sale of property and equipment 2,152 604
- -----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,193) (8,410)
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
[CONTINUED]
Year ended September 30
[In thousands of U.S. dollars]
<TABLE>
<CAPTION>
1995 1994
$ $
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 3,493 10,901
Proceeds from exercise of warrants 757 13,195
Proceeds from exercise of options -- 303
Net repayments on line of credit -- (3,408)
Issue of preferred shares of subsidiary to minority interest -- 200
Bank Indebtedness 1,688 --
Note payable 488 --
Note payable-Bank 5,000 --
Payment of other obligations -- (592)
- --------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,426 20,599
- --------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 227 93
- --------------------------------------------------------------------------------------------------
NET CHANGE IN CASH (813) 4,443
Cash, at beginning of year 5,578 1,135
- --------------------------------------------------------------------------------------------------
CASH, AT END OF YEAR 4,765 5,578
==================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest 406 341
Taxes 310 --
- --------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for acquisition of businesses
Fair value of assets acquired [net of cash acquired] -- 2,771
Liabilities assumed and minority interest -- 1,721
- --------------------------------------------------------------------------------------------------
Net assets acquired -- 1,050
Cash outlays -- 800
- --------------------------------------------------------------------------------------------------
Issuance of common stock for acquisitions -- 250
==================================================================================================
Preferred shares received on transfer of assets of divested businesses
Fair value of net assets divested -- 4,531
Cash received -- 739
- --------------------------------------------------------------------------------------------------
Preferred shares of the acquirer of divested businesses -- 3,792
==================================================================================================
Issuance of common stock for services 170 --
- --------------------------------------------------------------------------------------------------
Issuance of common stock in repayment of debt -- 66
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE> 50
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
1. NATURE OF OPERATIONS
Cedar Group Inc., a Delaware corporation registered in Conshohocken,
Pennsylvania, with executive offices in Montreal, Canada, specializes in
international engineering, infrastructure development and project management
and in the manufacture and distribution of specialty industrial and aerospace
fasteners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States,
the most significant of which are outlined below. These principles require the
use of estimates to measure the financial effects of past transactions or
events and the present status of assets and liabilities.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in the consolidation.
CASH AND INVESTMENTS
Cash includes short-term deposits with terms less than 90 days.
Short-term deposits with terms longer than 90 days are stated at cost which
approximate fair market value.
CONSTRUCTION CONTRACTS
Income on construction contracts is recognized on the percentage of completion
basis. Provisions for anticipated losses on uncompleted contracts are made in
the period in which losses are first determinable. Included in accounts
receivable are unbilled receivables related to these contracts of $5,898 and
$2,694 at September 30, 1995 and 1994 respectively.
INVENTORIES
Work in process related to construction contracts is stated at accumulated
costs less amounts charged to income based on the percentage of completion of
individual contracts. Raw materials are stated at the lower of cost [first-in,
first-out] or replacement cost. Finished goods comprise steel and steel
hardware products held for sale and are stated at the lower of cost [first-in,
first-out] or net realizable value.
1
<PAGE> 51
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INVESTMENT IN UNINCORPORATED JOINT VENTURE
The Company's investment in an unincorporated joint venture is accounted for by
the equity method whereby the investment is initially recorded at cost and the
carrying value adjusted thereafter to include the Company's pro rata share of
earnings less drawings received. The company recognized its share of the
unincorporated joint venture's income from acquisition, April 1, 1995 to
September 30, 1995.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including assets that were acquired under
capital leases, are stated at cost. Maintenance and repairs are charged to
expense as incurred. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from their respective accounts
and the resulting gain or loss is reflected in current operations.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets, generally five to seven years for machinery and equipment
and forty years for buildings.
PENSION COSTS
The Company maintains defined benefit pension plans which cover substantially
all of its Canadian employees. Pension plan obligations are valued using the
projected benefit actuarial method and best estimate assumptions. Pension plan
assets are valued at market-related values.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company accrues for benefits such as health care and life insurance
coverage that retired employees are entitled to. The obligation is adjusted on
an annual basis to reflect the expected cost of providing post-retirement
benefits during the years an employee renders service.
2
<PAGE> 52
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE CONTRACTS
All assets and liabilities of the Company's subsidiaries operating outside the
United States are translated into U.S. dollars using current exchange rates and
income statement items are translated using weighted average exchange rates for
the year. The resulting translation adjustment is included as a component of
stockholders' equity. Other foreign currency transaction gains and losses are
included in determining net income.
The Company uses forward foreign exchange contracts primarily to offset the
effects of foreign currency fluctuations related to foreign-denominated
receivables and payables transactions and also to hedge firm sale and purchase
commitments. Gains or losses on forward foreign exchange contracts which hedge
an identifiable foreign currency commitment are deferred and recognized as the
related transactions are settled. Gains or losses on all other forward foreign
exchange contracts, both realized and unrealized, are recognized in determining
net income as incurred.
INCOME TAXES
The Company accounts for income taxes under the liability method. Deferred
taxes reflect the tax consequences on future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts.
NET INCOME PER SHARE
Primary net income per common share is computed by dividing the income
applicable to common shares by the weighted average number of shares of common
stock outstanding and common stock equivalents including the dilutive effect of
options and warrants from the date of grant.
Net income per common share on a fully diluted basis assumes that convertible
preferred shares were converted to common stock at either the beginning of each
year or the date of issuance.
3
<PAGE> 53
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES
[i] ACQUISITION OF STEEN CONTRACTORS LIMITED
Effective April 1, 1995, the Company acquired 75% of the common stock of Steen
Contractors Limited ["Steen"], a Canadian Company engaged in construction
services provided in Canada. The acquisition has been accounted for by the
purchase method and earnings have been included in the results of operations
from the date of the acquisition.
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------
<S> <C>
Current assets 18,505
Fixed assets 255
Other assets 1,235
- ---------------------------------------------------------------------------------
Total assets 19,995
- ---------------------------------------------------------------------------------
Current liabilities 12,056
Other liabilities 1,726
- ---------------------------------------------------------------------------------
Total liabilities 13,782
- ---------------------------------------------------------------------------------
Net assets 6,213
Common shares held by minority shareholders at book value 1,737
- ---------------------------------------------------------------------------------
NET CASH CONSIDERATION PAID 4,476
=================================================================================
</TABLE>
The acquisition was financed by a term loan from Bankers Trust maturing October
31, 1995.
The Company is required to purchase the remaining common shares of Steen in two
instalments. The first instalment amounting to 15% of Steen's outstanding
shares are to be acquired on May 1, 1996 at a price equal to the net book value
per share of Steen on December 31, 1995. The final instalment, amounting to
the remaining 10% of Steen's outstanding shares is to be purchased on May 1,
1997 at a price equal to the net book value per share of Steen on December 31,
1996.
4
<PAGE> 54
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[ii] ACQUISITION OF DOMINION BRIDGE INC.
Effective March 9, 1994, the Company acquired from United Dominion Industries
Limited ["UDIL"] 85% of the common stock of Dominion Bridge Inc. ["DB"], a
Canadian company engaged in construction and engineering services provided in
Canada and Asia. The acquisition has been accounted for by the purchase method
and earnings have been included in the results of operations from the date of
the acquisition.
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------
<S> <C>
Current assets 23,381
Fixed assets 25,632
Other assets 3,525
- ---------------------------------------------------------------------------------
Total assets 52,538
- ---------------------------------------------------------------------------------
Current liabilities 23,765
Other liabilities 10,604
- ---------------------------------------------------------------------------------
Total liabilities 34,369
- ---------------------------------------------------------------------------------
Net assets 18,169
Preferred and common shares held by a minority shareholder 14,419
- ---------------------------------------------------------------------------------
NET CASH CONSIDERATION PAID 3,750
=================================================================================
</TABLE>
The acquisition was financed from existing cash holdings.
The Cdn. $18,338 Class "A" Preferred Shares bearing a cumulative dividend of
7.5%, to be held by UDIL in DB are convertible into the Company's common stock
at a rate of Cdn. $6.00 per share. UDIL shall have registration rights with
respect to such shares after 12 months from the date of issuance. The Company
has a call option after two years to purchase [or to cause DB to redeem] the
Class "A" Preferred Shares at the rate of Cdn. $2,000 per year. UDIL will also
have a put option whereby after two years UDIL shall have the right to put the
Class "A" Preferred Shares to DB at a rate of Cdn. $2,000 per year. The
Company also shall have the right on any day that the market value of the
Company's common stock equals or exceeds Cdn. $8.00 to exchange all or any part
of the Class "A" Preferred Shares held by UDIL for shares of the Company's
stock at a specified exchange rate. The minimum conversion value must equal
the initial face value of the Class "A" Preferred Shares plus a 15% premium.
In the event that the Company issues common equity into the public markets
[registered public equity offerings], the cash proceeds are required to
5
<PAGE> 55
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
be utilized in the first instance to pay off one-third of UDIL's remaining
Class "A" Preferred Shares.
6
<PAGE> 56
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
On October 21, 1994 the Company agreed to acquire the minority holdings of
common and Class "A" preferred shares of DB held by UDIL. The agreement
provides that these interests would be acquired for cash payments of Cdn.
$18,000, the transfer of assets having a book value of Cdn. $1,368 and the
waiver of the preferred dividend requirement for the Company's 1994 fourth
quarter. As of September 30, 1995 the Company has paid Cdn. $8,300,
transferred the assets and received all of the common shares of DB held by UDIL
and Cdn. $8,786 face value of preferred shares. The remaining balance of
preferred shares of DB held by UDIL may be purchased by the Company at face
value plus a 15% premium at any time to March 31, 1995.
All other conditions applicable to the Class "A" Preferred Shares remain in
effect.
On December 18, 1995 the Company accepted the offer of UDIL to acquire all
remaining preferred shares of DB and the waiver of all claims and dividends for
aggregate consideration of Cdn. $11,000 [U.S. $8,200] consisting of a cash
payment of Cdn. $4,500 and the issue of up to 1,158,334 common shares of the
Company to realize Cdn. $6,500. The book value of these minority interests at
September 30, 1995 was $7,166. The excess of the final settlement of $8,200
over the book value of $7,166 has been charged as a capital transaction in the
statement of stockholder's equity at September 30, 1995 and an increase in
minority interest in the amount of $1,034.
The cash payment of $4,500 was paid with funds raised by the issuance of
preferred shares of a newly incorporated subsidiary which are convertible into
the Company's common stock.
[iii] ACQUISITION OF UNIMETRIC CORPORATION
Effective January 1, 1994, the Company acquired from Ateliers de la
Haute-Garonne ["AHG"] 70% of the common stock of Unimetric Corporation
["Unimetric"], a United States manufacturer of specialty fasteners for the
aerospace and industrial markets. The acquisition has been accounted for by
the purchase method and earnings have been included in the results of
operations from the date of the acquisition.
7
<PAGE> 57
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[iii] ACQUISITION OF UNIMETRIC CORPORATION [CONT'D]
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------
<S> <C>
Current assets 1,136
Fixed assets 1,613
Other assets 22
- ---------------------------------------------------------------------------------
Total assets 2,771
- ---------------------------------------------------------------------------------
Current liabilities 539
Long-term debt 356
- ---------------------------------------------------------------------------------
Total liabilities 895
- ---------------------------------------------------------------------------------
Net assets 1,876
Preferred and common shares held by a minority shareholder 826
- ---------------------------------------------------------------------------------
NET CONSIDERATION PAID 1,050
=================================================================================
</TABLE>
The acquisition was financed by:
<TABLE>
$
- ---------------------------------------------------------------------------------
<S> <C>
Issuance of common shares 250
Cash payment 800
- ---------------------------------------------------------------------------------
1,050
=================================================================================
</TABLE>
The cash payment includes $200 which was invested by the minority interest in
preferred shares of Unimetric Corporation.
The 409,207 preferred shares of Unimetric which have a total face value of
$1,150 and a non-cumulative dividend of 4% to be held by AHG were convertible
in whole into the Company's common stock on a one-for-one basis until March 12,
1995.
8
<PAGE> 58
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[iv] PRO-FORMA RESULTS
Set forth below is the Company's unaudited pro forma combined summary of
operations for the years ended September 30, 1995 and 1994 as though each of
the acquisitions had been made on October 1, 1993.
<TABLE>
<CAPTION>
[In thousands except per share data] 1995 1994
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales 177,459 159,162
Net income (loss) 1,114 (2,292)
Per common share
Primary 0.07 (0.26)
Fully diluted 0.06 (0.26)
Average number of common shares and common
share equivalents outstanding
Primary 14,929,000 8,951,000
Fully diluted 17,688,000 8,951,000
- --------------------------------------------------------------------------------------------------
</TABLE>
The unaudited pro forma combined summary of operations has been prepared
utilizing the historical financial statements of the Company and the acquired
businesses. The unaudited pro forma combined summary of operations does not
purport to be indicative of the results which actually would have been obtained
if the acquisitions had been made at the beginning of the Company's 1994 year
or of future results of operations.
The unaudited pro forma combined summary of operations includes the effects of
the purchase price allocation adjustments. The purchase price allocation
adjustments include the adjustment of the net assets acquired to the price paid
for them, including the estimated costs associated with the integration of the
businesses.
9
<PAGE> 59
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[v] DIVESTED BUSINESSES
Effective July 1, 1994, the Company decided to divest the Canadian commodity
fastener distribution businesses, formerly conducted by Edinov. The results of
operations to June 30, 1994 are included in the consolidated statements of
operations and cash flows.
The transaction was completed on December 22, 1994 by the receipt of Cdn.
$1,000 cash and Cdn. $5,135 preferred shares of the acquirer. No gain or loss
was recognized on the transaction. The preferred shares bear a cumulative
dividend equal to the bank prime rate at the beginning of every fiscal year
where a dividend is declared and are collateralized by a pledge of Edinov's
assets. These preferred shares are redeemable at varying amounts annually
through 2009, commencing at Cdn. $250 in 1995 and 1996 and Cdn. $350
thereafter. The Company's ability to realize the value of the preferred shares
is dependent on future operations of the divested businesses.
At September 30, 1994 the cash portion of the consideration received of $739 is
presented in current assets. The consideration applicable to the preferred
shares is presented as "Assets of business transferred under contractual
arrangements [preferred shares]".
4.PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Land 7,157 -- 7,157
Building 4,079 540 3,539
Machinery and equipment 16,636 6,671 9,965
- --------------------------------------------------------------------------------------------------
27,872 7,211 20,661
==================================================================================================
1994
Land 7,093 -- 7,093
Building 3,589 144 3,445
Machinery and equipment 18,705 4,286 14,419
- -------------------------------------------------------------------------------------------------
29,387 4,430 24,957
=================================================================================================
</TABLE>
10
<PAGE> 60
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
5. INVENTORIES
<TABLE>
<CAPTION>
1995 1994
$ $
- ----------------------------------------------------------------------------
<S> <C> <C>
Raw materials 3,443 4,252
Construction contracts, work in process 6,921 2,311
Finished goods 2,382 1,730
- ---------------------------------------------------------------------------
12,746 8,293
===========================================================================
</TABLE>
6. FINANCING ARRANGEMENTS
DB has pledged and mortgaged all of its fixed and other assets as security for
a debenture of Cdn. $100,000 held by UDIL. This debenture secures any and all
indebtedness due by DB to UDIL including payments made by UDIL under letters of
credit and guarantees to which UDIL is a party. The debenture provides that DB
may not dispose of its land and buildings nor pledge its inventories or
receivables without the consent of UDIL.
The security interest in favour of UDIL is to be discharged upon redemption,
conversion or purchase of the outstanding preferred shares of DB [see note
3ii].
As at September 30, 1995, Steen had available a $2,000 Cdn. line of credit
bearing interest at prime plus .25%, none of which had been drawn during the
year. The line of credit is collateralied by Steen's Book Debts.
As at September 30, 1995, DB had available a $5,000 Cdn. line of credit bearing
interest at prime plus .75%. The terms of the line of credit require that all
outstanding balances be fully collateralized by cash term deposits. As at
September 30, 1995 $1,688 ($2,265 Cdn.) was outstanding. Subsequent to year
end DB entered into a new agreement replacing this line of credit with a
$12,000 Cdn. operating loan bearing interest at prime plus 1%. The loan is
collateralized by a general assignment of DB's Inventory and Book Debts.
The highest and lowest drawings under the loan were $3,883 Cdn. and $1,598 Cdn.
and the average balance outstanding during the year was $2,714 Cdn. The
average rate of interest was 8.2%.
On July 31, 1995 the Company entered into an agreement with Bankers Trust
Commercial Corporation to obtain a term loan in the amount of $5,000. This
loan bears interest at prime plus 2% and is collateralized by the Company's
investment in its subsidiary Steen Contractors Limited. Subsequent to year
end, the Company repaid the term loan at its maturity date of October 31, 1995.
11
<PAGE> 61
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
7. ADVANCES FROM UNINCORPORATED JOINT VENTURE
Steen, a Company's subsidiary, owns a 15% interest in an unincorported joint
venture, a mechanical contractor in the oil and gas INDUSTRY.
The Company's share of assets, liabilities, revenue, expenses, gross margin,
and net earnings of this joint venture for the six month period ended September
30, 1995 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
$
- ----------------------------------------------------------
<S> <C>
Assets 1,608
Liabilities 2,358
Revenue 8,319
Expenses 6,400
Gross margin 1,865
Net earnings 1,919
=========================================================
</TABLE>
Steen is jointly and severally liable for all the liabilities of the joint
venture.
Steen's share, since acquisition by Cedar, of the income reported in the
statement of operations consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
$
- ------------------------------------------------------------
<S> <C>
Share of net earnings 1,919
Technology fees 246
- ------------------------------------------------------------
2,165
============================================================
</TABLE>
At September 30, 1995 Steen had received cash advances of $750 in excess of
income recognized, which amount is presented in long-term liabilities.
12
<PAGE> 62
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
8. INCOME TAXES
The provision for income taxes on income from operations comprises the
following elements:
<TABLE>
<CAPTION>
1995 1994
$ $
- -----------------------------------------------------------------------------
<S> <C> <C>
CURRENT
United States - Federal -- --
United States - State -- --
Canada (300) 70
- -----------------------------------------------------------------------------
(300) 70
- -----------------------------------------------------------------------------
<CAPTION>
1995 1994
$ $
- -----------------------------------------------------------------------------
<S> <C> <C>
DEFERRED
United States - Federal (122) --
United States - State (17) --
Canada 2,132 230
- -----------------------------------------------------------------------------
1,993 230
- -----------------------------------------------------------------------------
1,693 300
=============================================================================
</TABLE>
The related income (loss) from operations before income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994
$ $
- ----------------------------------------------------------------------------
<S> <C> <C>
United States (1,246) (381)
Canada 5,151 1,364
- ----------------------------------------------------------------------------
3,905 983
============================================================================
</TABLE>
13
<PAGE> 63
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
8. INCOME TAXES [CONT'D]
Deferred tax liabilities and assets comprise the following elements at
September 30:
<TABLE>
<CAPTION>
1995 1994
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Book over tax value of property and equipment 4,443 5,674
Pension asset 615 788
Operating income from joint venture 1,226 --
Completed Contracts basis 1,334 --
- -------------------------------------------------------------------------------
7,618 6,462
- -------------------------------------------------------------------------------
Deferred tax assets
OPEB obligation 203 199
Rationalization reserves 481 781
Net operating loss carryforward 2,019 1,194
Valuation allowance for operating loss carryforward (1,533) (831)
Other - net 454 135
- -------------------------------------------------------------------------------
1,624 1,478
- -------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES 5,994 4,984
===============================================================================
</TABLE>
The difference between the Company's effective income tax rate and the
statutory rate on income from operations is reconciled below:
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense at U.S. statutory rate 1,367 344
State tax, net of federal tax benefits 234 59
Foreign income taxes at less than statutory rate (155) (35)
Operating losses without tax benefit 162 --
Difference in book-tax asset basis -- (15)
Other 85 (53)
- --------------------------------------------------------------------------------
1,693 300
================================================================================
</TABLE>
14
<PAGE> 64
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
8. INCOME TAXES [CONT'D]
As at September 30, 1995, the Company had unused net operating loss
carryforwards for income tax purposes which expire as follows:
<TABLE>
<CAPTION>
UNITED STATES
FEDERAL
$
- -----------------------------------------------------------------------
<S> <C>
September 30,
2006 600
2007 1,673
2008 1,465
2009 381
2010 340
- -----------------------------------------------------------------------
4,459
=======================================================================
</TABLE>
The benefit of these losses has been recognized in the Company's books. For
financial reporting purposes, a valuation allowance of $1,533 [1994 - $831]
has been recognized to offset the deferred tax assets related to the United
States losses since the use of these losses may be severely limited by the
separate return limitation year rules and change of ownership rules.
15
<PAGE> 65
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
9. BENEFIT PLANS
PENSION PLANS
The Company maintains defined benefit pension plans covering employees at most
Canadian operations. The benefits are based on an average of the employee's
earnings in the years preceding retirement and on credited service. Certain
supplemental unfunded plan arrangements also provide retirement benefits to
specified groups of participants.
The Company's funding policy for these plans is to contribute amounts
sufficient to meet the minimum funding requirements of the regulatory
authorities, plus any additional amounts which the Company may determine to be
appropriate.
The net pension expense for Company-sponsored pension plans consists of the
following components:
<TABLE>
<CAPTION>
1995 1994
$ $
- ----------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits earned during the year 894 881
Interest cost on projected benefit obligation 1,173 1,178
Return on plan assets (1,280) (1,354)
Net amortization 8 --
- ----------------------------------------------------------------------------------
NET PENSION EXPENSE 795 705
==================================================================================
</TABLE>
16
<PAGE> 66
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
9. BENEFIT PLANS [CONT'D]
The reconciliation of the funded status of pension plans is as follows:
<TABLE>
<CAPTION>
1995 1994
$ $
- -------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value 17,305 18,568
Actuarial present value of projected benefit obligations 16,155 15,997
- -------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 1,150 2,571
Unrecognized prior service cost for plan amendments 361 --
Unrecognized net experience loss (gain) 108 (518)
- -------------------------------------------------------------------------------------
NET PENSION ASSET RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET 1,619 2,053
=====================================================================================
</TABLE>
The weighted average of assumptions used in the determination of the projected
benefit obligation is:
<TABLE>
<CAPTION>
1995 1994
% %
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 8.0 8.0
Rate of increases in compensation level 6.0 6.0
Expected long-term rate of return on assets 8.0 8.0
- ---------------------------------------------------------------------------------------
</TABLE>
The assets of the Company-sponsored plans are invested primarily in equities
and bonds.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides post-retirement health care and life insurance
benefits to most Canadian retirees. In general, employees who retire after
attaining age 60 with five years of service are eligible for continued health
care and life insurance coverage. Dependant health care and life insurance
coverage are also available. Most retirees contribute toward the cost of
health care coverage, with the contributions generally varying based on
service. The Company accrues the expected cost of providing post-retirement
benefits during the years an employee renders service.
Net periodic post-retirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1995 1994
$ $
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits earned during the year 1 1
Interest cost on accumulated post-retirement benefit obligation 40 41
</TABLE>
17
<PAGE> 67
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET PERIODIC POST-RETIREMENT BENEFIT COST 41 42
========================================================================================
</TABLE>
18
<PAGE> 68
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
9. BENEFIT PLANS [CONT'D]
At present, there is no prefunding of the post-retirement benefits recognized
under FASB Statement No. 106. The following table presents the status of the
plans reconciled with amounts recognized in the consolidated balance sheet for
the Company's post-retirement benefits:
<TABLE>
<CAPTION>
1995 1994
$ $
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit obligation
Active plan participants 522 518
- ---------------------------------------------------------------------------------------
POST-RETIREMENT BENEFIT LIABILITY RECOGNIZED
IN THE CONSOLIDATED BALANCE SHEET 522 518
=======================================================================================
</TABLE>
For measurement purposes, the assumed weighted average annual rate of increase
per capita cost of health care benefits is 12 percent for 1995 and assumed to
decrease one percent per year to 7 percent in the year 2000 and remain constant
thereafter. The weighted average discount rate used in determining the
accumulated post-retirement benefit obligation was 8 percent at September 30,
1995. The rate of increase on compensation levels assumed was 6 percent.
OTHERS
The Company contributes to defined contribution plans for eligible Canadian
employees in its Steen subsidiary. Company contributions to the plan were $186
in 1995.
10.RELATED PARTY TRANSACTIONS
In 1995 the Company advanced $994 to a shareholder, Group Fidutech
International Inc. Of this amount $577 was repaid during the year. The balance
of $417 is non-interest bearing and has no fixed repayment terms and was repaid
in December 1995.
In 1994 the Company advanced $1,734 to a shareholder, Fidutech Technologies Ltd
and its affiliates. Of this amount, $1,155 was assumed by the acquirer of
Edinov as of July 1, 1994, [note 3v]. The balance of $781 is non-interest
bearing and has no fixed repayment terms. In December 1995, Fidutech
Technologies Ltd. repaid $84 of this balance.
The amount due from an officer of $565, outstanding as at September 30, 1994
was repaid in January 1995.
19
<PAGE> 69
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
20
<PAGE> 70
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
11. STOCKHOLDERS' EQUITY
1995
In December, 1994, the Company sold to Groupe Fidutech International, Inc.
("GFI") Cdn. $2,700 of Class A Preferred Shares of Dominion Bridge Inc. which
it held. Subsequently, pursuant to the terms of the Class A Preferred Shares,
GFI converted the Cdn. $2,700 of Class A Preferred Shares into 450,000 shares
of common stock of the Company. GFI is owned by certain officers and directors
of the Company. During the year the Company issued an additional 193,200
shares of its common stock at a price of $4.43 per share upon conversion of
Class A Preferred Shares of Dominion Bridge Inc., in accordance with the terms
of the Preferred Shares. These conversion transactions of Dominion Bridge Inc.
Class A Preferred Shares provided total proceeds of $2,849.
In December 1994, the Company issued 409,207 shares of its common stock at a
price of $2.81 per share upon conversion of preferred shares of Unimetric
Corporation in accordance with the terms of the preferred shares for total
consideration of $1,150.
During the year the Company issued 262,363 shares of its common stock to
Fidutech Technologies Inc. a company owned by an officer of the Company and
22,500 shares to an individual at a price of $2.60 upon exercise of warrants
granted in connection with the September 30, 1993 private placement for
aggregate proceeds of $741.
During the year the Company issued 45,000 shares of its common stock to various
parties for services rendered aggregating $170. The amount has been included
in selling, general and administrative expenses for the year ended September
30, 1995.
During the year the Company issued 90,000 shares of its common stock for
services rendered by underwriters and directors in May 1993.
On February 2, 1995 the Company issued 10,000 shares of its common stock at a
price of $1.68 upon exercise of warrants issued on September 30, 1993.
21
<PAGE> 71
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
11. STOCKHOLDERS' EQUITY [CONT'D]
1994
On March 31, 1994, the Company issued 3,354,346 shares of its common stock at a
price of $3.25 per share, aggregating $10,901 and warrants to purchase
3,354,346 common shares at a price of $3.75 per share; these warrants were
exercised in July 1994, for proceeds aggregating $12,579. The Company issued
to an underwriter 200,000 warrants to purchase an equivalent number of common
shares at a price of $4.00 per share until January 31, 1999. The Company also
issued 330,000 shares of its common stock and 200,000 warrants to purchase
100,000 common shares at a price of $3.25 per share until March 31, 1995 and
100,000 common shares at a price of $3.75 and $4.00 per share if exercised
before March 31, 1995 and March 31, 1996 respectively, to two individuals for
services rendered in connection with the private placement.
On March 31, 1994, the Company issued 88,968 shares of its common stock at a
price of $2.81 per share, aggregating $250, as part of the consideration for
the purchase of 70% of the outstanding shares of Unimetric Corporation common
stock.
On March 1, 1994, the Company issued 140,866 shares of its common stock at a
price of $0.47 per share pursuant to a convertible debenture issued to an
officer for aggregate proceeds of $66.
In 1994, the Company issued 295,000 shares of its common stock for services
rendered by underwriters and directors in connection with stock issuance for
funds raised in 1993.
In 1994, the Company issued 42,500 of its common stock upon exercise of options
granted to underwriters and advisers for aggregate proceeds of $102.
In 1994, the Company issued 237,360 shares of its common stock at a price of
$2.60 per share upon exercise of warrants granted in connection with the
September 30, 1993 private placement for aggregate proceeds of $616.
1993
On September 30, 1993, the company issued to Fidutech Technologies, Inc.
1,044,445 shares of its common stock at a price of $2.25 per share, aggregating
$2,350. The Company received $465 in cash and the balance has been reflected
in stockholders' equity in the accompanying consolidated balance sheets as a
subscription receivable amounting to $1,885.
22
<PAGE> 72
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
11. STOCKHOLDERS' EQUITY [CONT'D]
INCENTIVE PLAN
During the year, the shareholders of the Company authorized the issuance of
options to purchase 800,000 shares of Common Stock to the two executive
officers of the Company and 535,000 shares of Common stock to the non-executive
officers and key employees of the Company exercisable over a three year period
at a price of $4.125 per share pursuant to the 1995 Stock Option Plan.
Transactions involving options are summarized as follows:
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE AGGREGATE
- ---------------------------------------------------------------------------------------------------------------------
# $ $
<S> <C> <C> <C>
OUTSTANDING
SEPTEMBER 30, 1993 130,125 .59 to 1.68 216
Granted 300,000 2.68 804
Cancelled 120,000 .59 to 1.68 201
Exercised 10,125 .59 to 1.68 15
- ---------------------------------------------------------------------------------------------------------------------
OUTSTANDING
SEPTEMBER 30, 1994 300,000 2.68 804
Granted 1,535,000 4.125 6,332
Exercised -- -- --
Cancelled -- -- --
- ---------------------------------------------------------------------------------------------------------------------
OUTSTANDING
SEPTEMBER 30, 1995 1,835,000 2.68 to 4.125 7,136
=====================================================================================================================
</TABLE>
As at September 30, 1995, all options outstanding are exercisable. The options
granted in 1994 were due to expire on November 19, 1995 but were extended to
November 19, 1996.
23
<PAGE> 73
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
12. COMMITMENTS AND CONTINGENCIES
The Company's Canadian subsidiary, DB, periodically enters into forward
exchange contracts to hedge specific anticipated foreign currency inflows. It
does not engage in speculation. The foreign exchange contracts do not subject
the Company to operating risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the transactions being
hedged. As at September 30, 1995 and 1994, the Company had approximately NIL
and $5,040 of foreign exchange contracts outstanding, hedging specific
transactions. The forward exchange contracts generally have maturities which
do not exceed one year and exchange rates are agreed to at the inception of the
contracts. No significant gains or losses are deferred in the consolidated
balance sheet.
The Company leases office and warehouse space under noncancellable operating
leases. Future minimum lease payments under all noncancellable leases for the
years subsequent to September 30, 1995 consist of the following:
<TABLE>
<CAPTION>
$
- -------------------------------------------------------------------------------
<S> <C>
1996 1,035
1997 534
1998 364
1999 292
2000 270
Subsequent to 2000 203
- -------------------------------------------------------------------------------
</TABLE>
Total rent expense for all operating leases amounted to $976 and $834 for the
years ended September 30, 1995 and 1994, respectively.
A number of claims and lawsuits seeking unspecified damages and other relief
are pending against the Company. It is impossible at this time for the Company
to predict with any certainty the outcome of such litigation. However,
management is of the opinion, based upon information presently available, that
it is unlikely that any liability, to the extent not provided for through
insurance or otherwise, would be material in relation to the Company's
consolidated financial position.
24
<PAGE> 74
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
12. COMMITMENTS AND CONTINGENCIES [CONT'D]
During the year, the Company submitted a Claim Notification Letter to a
customer and issued invoices to another customer against which a cash advance
$2,100 was applied. These amounts were originated with a view to recovering
substantial cost increases pertaining to the design manufacture and delivery of
major infrastructure assets. The Company believes that its costs and expenses
claimed are justified and has obtained a third party analysis as to the
reasonability of its claim to the first customer. It has also received
acknowledgment of the invoices issued to the second customer. The value of
these claims has been recognized in sales in the amount of $3,672. While
management believes that the favourable outcome of these claims is probable,
their resolution will involve further negotiation with the clients, or
arbitration, and the ultimate realization may vary from the current estimates.
Effective July 4, 1994 the Company agreed to acquire 75% of the common shares
of Stelco Fasteners Limited ["Fasteners"], a manufacturer of fasteners for the
automotive industry from Stelco Inc. ["Stelco"] for a purchase consideration of
Cdn. $2,000 in cash. Officers of the Company obtained operating and management
control of Fasteners on that date. The shares and consideration were lodged
with a trustee.
The acquisition agreement provided that the Company could propose certain
adjustments to the interest retained by Stelco while Cedar completed its
reorganization of the affairs of Fasteners. Negotiations on these adjustments,
which were agreed to by representatives of Stelco, continued to December 14,
1994.
On December 15, 1994, the Company agreed to all outstanding issues and tendered
the signed ancillary documents, a payment of Cdn. $2,000 and a Cdn. $1,000
loan to Fasteners. Stelco refused to accept the tender.
On December 17, 1994 the Company obtained a Court Order requiring both Stelco
and the Company to remove themselves from operating control of Fasteners. The
Order expired January 5, 1995 at which time Stelco asserted operating control
of Fasteners. The Company maintains that it is the rightful owner of 75% of
the common shares of Fasteners.
In light of these events, the Company adopted a conservative approach and has
not consolidated financial results of Fasteners.
The Company commenced an action against Stelco on December 20, 1994 to obtain a
declaration that the Company is the rightful owner of 75% of the common shares
of Fasteners and for damages and is presently pursuing this action. The
Company is not presently in any position to predict the conclusion of this
pending litigation.
25
<PAGE> 75
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
13. CONCENTRATION OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base and
their dispersion across many different industries. The Company does not
require collateral from its customers. As at September 30, 1995 and 1994, the
Company had no significant concentrations of credit risk.
14. BUSINESS SEGMENTS
The Company operates in the following industry segments:
Construction Products and Services - Design, engineering and construction of
large industrial and commercial structures and construction services.
Fasteners - Design and manufacturing of specialty fasteners targeted at the
aerospace industry and distribution of imported fasteners for industry.
26
<PAGE> 76
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
14. BUSINESS SEGMENTS [CONT'D]
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESS TOTAL
$ $ $ $
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Assets(1) 79,400 5,503 -- 84,903
============================================================================================================
Sales 150,996 4,754 -- 155,750
============================================================================================================
Segment operating income 3,246 (1,316) -- 1,930
Corporate expenses (1,020)
Interest - net (406)
Other income 1,236
Income from operations
of joint venture 2,165
Income tax provision (1,693)
Minority interest - common stock (122)
Minority interest - dividends (70)
- -------------------------------------------------------------------------------------------------------------
Net income 2,020
============================================================================================================
Capital expenditures 244 8 -- 252
============================================================================================================
Depreciation and amortization 2,687 378 -- 3,065
============================================================================================================
</TABLE>
- ---------------------------
(1) Assets exclude $11,496 and $14,038 of corporate amounts in 1995 and 1994
respectively.
27
<PAGE> 77
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
14. BUSINESS SEGMENTS [CONT'D]
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESS TOTAL
$ $ $ $
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Assets(1) 52,990 5,150 -- 58,140
============================================================================================================
Sales 58,181 4,842 4,936 67,959
============================================================================================================
Segment operating income 860 (574) 380 666
Corporate expenses (109)
Interest - net (341)
Other income 767
Income tax provision (300)
Minority interest - common stock (19)
Minority interest - dividends (248)
- -------------------------------------------------------------------------------------------------------------
Net income 416
============================================================================================================
Capital expenditures -- 94 -- 94
============================================================================================================
Depreciation and amortization 1,695 333 96 2,224
============================================================================================================
</TABLE>
- ----------------------------------
(1) Assets exclude $11,496 and $14,038 of corporate amounts in 1995 and 1994
respectively.
28
<PAGE> 78
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 1995
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
14. BUSINESS SEGMENTS [CONT'D]
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
UNITED DIVESTED
STATES CANADA BUSINESS TOTAL
$ $ $ $
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Assets(1) 5,503 79,400 -- 84,903
============================================================================================================
Sales 4,754 150,996 -- 155,750
============================================================================================================
Segment operating income (1,316) 3,246 -- 1,930
============================================================================================================
1994
Assets (1) 5,150 52,990 -- 58,140
============================================================================================================
Sales 4,842 58,181 4,936 67,959
============================================================================================================
Segment operating income (574) 860 380 666
============================================================================================================
</TABLE>
- -----------------------------------
(1) Assets exclude $11,496 and $14,038 of corporate amounts in 1995 and 1994
respectively.
29
<PAGE> 79
EXHIBIT INDEX
[UPDATE]
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Reorganization and Amalgamation Agreement dated June 25, 1993 among the Company, Edinov and Fidutech
Technologies Inc. (Incorporated by reference to Exhibit 3 of the Current Report on Form 8-K filed on July
2, 1993).
3.1 (a) Certificate of Incorporation of the Company, filed February 16, 1989 (Incorporated by reference to
Exhibit 3.1 (a) of the Registration Statement on Form S-18 filed on August 23, 1989, Registration
Number 33-30673-A (the "Form S-18")).
3.1 (b) Amended Certificate of Incorporation of the Company, filed July 25, 1989 (Incorporated by reference to
Exhibit 3.1 (b) of the Form S-18).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.1(b) of the Company's Report on Form 10-KSB
for the fiscal year ended September 30, 1994 (the "1994 10-KSB").
4.1 Copy of Specimen Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Form S-18).
4.2 Form of Class A Warrant (Incorporated by reference to Exhibit 4.2 of the Form S-18).
4.3 Registrant's Second Amended Joint Plan of Reorganization (Incorporated by reference to Exhibit 1 of the
Current Report on Form 8-K filed on July 2, 1993).
4.4 Form of Underwriter's Warrant Purchase Agreement (including Form of Warrant) (Incorporated by reference to
Exhibit 4.4 of the Form S-18).
4.5 Form of Warrant Agreement between Company and Continental Stock Transfer and Trust Company (Incorporated by
reference to Exhibit 4.5 of the Form S-18).
4.6 Registrant's Second Amended Joint Disclosure Statement (Incorporated by reference to Exhibit 2 of the
Current Report on Form 8-K filed on July 2, 1993).
</TABLE>
41
<PAGE> 80
<TABLE>
<S> <C>
4.7 Order Confirming Second Amended Joint Plan of Reorganization of the Debtor dated August 25, 1993
(Incorporated by reference to Exhibit 6 of the Current Report on Form 8-K filed on July 2, 1993).
10.1 Subscription Agreement dated July 26, 1993 between Edinov and Fidutech relating to the purchase of Fidutech
of 777,778 Units (Incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-KSB for the
transition period from January 31, 1993 to September 30, 1993).
10.2 Subscription Agreement dated September 15, 1993 between Edinov and Fidutech relating to the purchase of
Fidutech of 266,667 Units (Incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-KSB
for the transition period from January 31, 1993 to September 30, 1993).
10.3 Agreement by and among the Company and Michael Savini dated August 18, 1993 (Incorporated by reference to
Exhibit 10.8 to the Annual Report on Form 10-KSB for the transition period from January 31, 1993 to
September 30, 1993).
10.4 Master Agreement Between United Dominion Industries Limited, Cedar Group, Inc., Edinov Corporation, and
Dominion Bridge Inc. dated March 9, 1994 (incorporated by reference to the Company's Form 8-K, dated April
8, 1994).
10.5 Rollover Agreement Between United Dominion Industries Limited and 3010864 Canada Inc., effective December
31, 1993 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.6 Share Purchase Agreement Between United Dominion Industries Limited and Cedar Group, Inc., dated March 10,
1994 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.7 Shareholders' Agreement Between United Dominion Industries Limited, Cedar Group, Inc., Edinov Corporation,
and 3010864 Canada, Inc., dated April 8, 1994 (incorporated by reference to the Company's Form 8-K, dated
April 8, 1994).
10.8 Guarantee and Indemnity Agreements Between United Dominion Industries Limited, Cedar Group, Inc., and
Edinov Corporation (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.9 Registration Rights Agreement Between United Dominion Industries Limited and Cedar Group, Inc., dated April
8,
</TABLE>
42
<PAGE> 81
<TABLE>
<S> <C>
1994 (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.10 Hypothecation and Pledge of Securities Agreement between United Dominion Industries Limited and Cedar
Group, Inc. (incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.11 United Dominion Industries Limited Security Agreement with 3010864 Canada (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.12 Debenture Between 3010864 Canada and United Dominion Industries Limited, dated April 8, 1994 (incorporated
by reference to the Company's Form 8-K, dated April 8, 1994).
10.13 Services Agreement between the Company and Michel Marengere.
10.14 Services Agreement between the Company and Nicolas Matossian.
10.15 The Company's 1995 Stock Option Plan.
11.0 Statement regarding computation of earnings per share (Provided in the Financial Statements).
21 Subsidiaries
</TABLE>
43
<PAGE> 1
Exhibit 10.13
SERVICES AGREEMENT
This AGREEMENT (this "Agreement") is made, entered into and executed as of this
1st day of February, 1995, between CEDAR GROUP, INC., a Delaware corporation
(the "Company"), and MICHEL L. MARENGERE, an individual resident in the
Province of Quebec, or companies controlled by him, (referred to herein as the
"Executive").
WHEREAS, the Company considers it essential and in the best interest of its
stockholders to retain the services of Executive on the terms and conditions
provided in this Agreement;
AND WHEREAS, Executive desires to render services to the Company on the terms
and conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, the Company and Executive hereby agree as
follows:
1. Engagement
1.1 Engagement. The Company hereby agrees to engage Executive for
the Term (as hereinafter defined) as Chairman of the Board and Chief Executive
Officer, subject to the direction of the Company's Board of Directors (the
"Board") and in connection therewith, to perform such duties as he shall
reasonably be directed by the Board to perform. In performing such duties
hereunder, Executive shall comply with the policies and procedures as adopted
from time to time by the Board, shall give the Company the benefit of his
special knowledge, skills, contacts and business experience and shall be just
and faithful in the performance of his duties. One of these policies shall be
the availability of the Executive during the preparation and finalization
period for any quarterly financial statement (Form 10-Q)" or year end financial
statement (Form 10-K).
Notwithstanding any provision to the contrary herein, the
Executive agrees that if he is not available during these periods for the
finalization of the quarterly or annual financial statements then the Board or
the CEO may, in its (or his) sole discretion, reduce the annual base
compensation, bonuses and stock options that may be exercised by the Executive
pursuant to the terms of this Agreement.
1.2 Other Office. The Executive may, with the approval of the
Board, from time to time, serve, or continue to serve, and hold any other
offices or positions in, companies or organizations, which, in the Board's
judgment, will not present any conflict of interest with the Company or any of
its affiliates or divisions, or adversely affect the performance of Executive's
duties pursuant to this Agreement.
1.3 Location. The principal location for performance of
Executive's services hereunder shall be in Montreal, Quebec, subject to
reasonable travel requirements during the course of such performance. The
Company will provide accommodations for the Executive during his business
travel on behalf of the Company and pay for the Executive's reasonable travel
and incidental expenses.
<PAGE> 2
- 2 -
2. Engagement Term
2.1 Term. The Term of the Executive's engagement hereunder (the
"Term") shall commence on the date hereof and shall end on the third
anniversary hereof (the "Initial Term"), unless sooner terminated as provided
herein; provided, however that the Term shall be extended and this Agreement
shall be automatically renewed for successive three-year periods unless: (i)
this Agreement is terminated as otherwise provided herein; or (ii) Executive
provides written notice to the Company of his desire not to extend this
Agreement at least ninety (90) days prior to the expiration date of the Term of
this Agreement pursuant to this Section 2.1. Notwithstanding any other
provision to the contrary, if the Company does not renew this Agreement after
the Initial Term, the Executive shall be entitled to receive an additional
minimum amount equal to 12 months of the aggregate base compensation or such
greater amount as may be required by law.
3. Compensation
3.1 Cash Compensation
(a) Base Compensation. During the first year of the
Term, the Company shall pay Executive an aggregate base compensation of U.S.
$360,000.00 payable in equal monthly instalments of U.S. $30,000, inclusive of
any Goods and Services Tax ("GST"). For each annual period after the first
year of the date of this Agreement, the Base Compensation shall be adjusted by
the Compensation Committee of the Board by an amount as the Company and the
Executive may agree upon.
(b) Bonuses. During the Initial Term, Executive will be
eligible to receive a cash bonus ("Bonus") in accordance with, and for each
period (each, a "Payment Year") specified in the Corporate Management Incentive
Plan (the "Plan"). The payment of a Bonus for each Payment Year during the
Initial Term shall be conditioned upon the Company meeting or exceeding the
financial results criteria (the "Targets") as determined by the Board or the
Compensation Committee for its senior executives.
(c) Stock Options. Upon execution and delivery of this
Agreement by the Company and Executive, Executive shall receive an option to
purchase 500,000 shares of Common Stock of the Company. The purchase price for
the shares of Common Stock subject to such option shall be U.S. $4.125 per
share, or such other price as may be agreed upon in writing by the Company and
the Executive. The Executive's options may be transferable to a family trust
and are excercisable at any time during the term.
(d) As a result of an understanding reached between the
Company and the Executive in October, 1993 and in consideration of the
Executive agreeing not to receive any compensation during the fiscal year ended
September 30, 1994, the Company agrees that upon execution and delivery of this
Agreement by the Company and Executive, the Executive shall receive as a bonus
75,000 shares of Common Stock duly registered in the name of the Executive or
as the Executive directs at a deemed price of Cdn.$2.25.
(e) At any time during twelve months from the date of
this agreement, the Executive may acquire an additional up to 75,000 shares of
Common Stock at a price of U.S. $3.25
<PAGE> 3
- 3 -
per share along with share purchase warrants entitling the Executive to
purchase up to a further 75,000 shares of Common Stock at a price of U.S. $3.75
until March 31, 1995 and U.S. $4.00 at any time after March 31, 1995 and up to
September 30, 1996.
3.2 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, including all of the
Executive's travel, hotel, meal and other incidental expenses during the
Executive's travel on behalf of the Company. Executive shall keep detailed and
accurate records of expenses incurred in connection with the performance of his
duties hereunder and reimbursement therefor shall be in accordance with
policies and procedures to be established from time to time by the Board.
3.3 Equipment. The Company at its expense will provide Executive
with exclusive use of a mobile telephone, telecopier and photocopier and the
Company will pay all operating and ownership expenses attendant thereto.
3.4 Car Allowance. The Company at its expense, upon approval by
the Compensation Committee, may provide the Executive with a car allowance of
up to CDN $650 per month and reimburse the Executive for his mileage charges at
a maximum of U.S. 25c. per kilometre.
3.5 Fiscal Services. The Company will reimburse the Executive for
fiscal advice and for tax and accounting assistance in filing yearly returns
for himself, up to a maximum yearly amount of U.S. $5,000.
3.6 Insurance. In addition, the Company will maintain in force
and at its expense a life insurance policy of no less than Cdn.$10 million,
with a double indemnity for accidental death, the beneficiary of that life
insurance policy to be the Company for $8 million and the estate of the
Executive for $2 million.
The Company will also maintain in force and at its expense a
Disability Insurance Policy where the proceeds payable to the Executive in case
of disability shall be equal to three quarter of his base compensation as
stipulated in 3.1(a) at the time of the occurrence of the Executive's
disability, and which shall be paid to the Executive on a monthly basis for the
duration of the disability.
3.7 Pension Plan, Benefits. The Executive may avail himself of
the benefits of a Pension Plan and/or Medical and Dental benefits as are
available in the Company or in a subsidiary of Company.
<PAGE> 4
- 4 -
4. Termination
4.1 General. In addition to the right by the Executive to
terminate this Agreement pursuant to Section 2 hereof, the Company or the
Executive shall have the right to terminate the engagement of Executive as set
forth in this Section 4.
4.2 Termination for Cause. In addition to any other remedies
which the Company may have at law or in equity, the Company may terminate the
Executive's engagement under this Agreement by giving Executive written notice
of such termination upon or at any time following the occurrence of any of the
following events, and each such termination shall constitute a termination for
"cause", provided, however, that Executive has first been given written notice
of the facts or circumstances constituting the determination of "cause" and a
reasonable opportunity (in no event less than 30 days) to cure, rectify or
reverse such facts or circumstances and Executive shall have failed to do so:
(i) any act or failure to act (or
series or combination thereof)
by Executive done with the
intent to harm in any material
respect the interests of the
Company or any affiliate
thereof;
(ii) the commission by Executive of
a felony;
(iii) the perpetration by Executive
of a dishonest act or common
law fraud against the Company
or any affiliate thereof; or
(iv) a grossly negligent act,
insubordination, or failure to
act (or series or combination
thereof) by Executive
detrimental in any material
respect to the interests of the
Company or any affiliate
thereof.
Upon the early termination of Executive's engagement under this
Agreement by the Company for "cause", the Company shall pay to Executive (i) an
amount equal to Executive's Base Compensation accrued through the effective
date of termination at the rate in effect at the time notice of termination is
given, payable at the time such payment is due; (ii) the sum of U.S. $1.00; and
(iii) at the time such payments are due, all other amounts to which Executive
is entitled hereunder (including expense reimbursement amounts to which
Executive is entitled hereunder or amounts under any benefit plan of the
Company, but expressly excluding any Bonus (or portion thereof) in respect of
the fiscal year in which this Agreement is so terminated or any fiscal year of
the Company thereafter).
4.3 Incapacity of Executive. Subject to applicable law, if
Executive shall become ill or be injured or otherwise become incapacitated such
that, in the opinion of the Board, he cannot fully carry out and perform his
duties hereunder, and such incapacity shall continue for a period of 45
consecutive days, the Board may, at any time thereafter, by giving Executive
20-days' prior written notice, fully and finally terminate his engagement under
this Agreement. Termination under this Section 4.3 shall be effective as of
the date provided in such notice, which date shall not be fewer than 180 days
after such notice is delivered to Executive or his representative, and the
Company shall pay Executive his Base Compensation accrued to the effective date
of termination at the rate in effect at the time of such notice, payable at the
time such payment is due. Upon payment of (i)
<PAGE> 5
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such accrued Base Compensation; and (ii) all other amounts to which Executive
may be entitled hereunder including, without limitation, (A) any Bonus to which
the Executive would have been entitled pursuant to Section 3.1(b) hereof
(prorated for the period up to the effective date of termination), provided the
Company meets or exceeds the Targets set forth on Exhibit "A" hereto, (B) any
expense reimbursement amounts accrued to the effective date of termination, (C)
a sum to be determined by the Compensation Committee, and (D) any amounts under
any other benefit plan of the Company, in each case at the time such payments
are due.
4.4 Death of Executive. This Agreement shall automatically
terminate upon the death of Executive. Upon the early termination of this
Agreement as a result of death, the Company shall pay Executive's estate: (i)
an amount equal to Executive's Base Compensation accrued through the effective
date of termination at the rate in effect at the effective date of termination,
payable at the time such payment is due; and (ii) all other amounts to which
Executive is entitled hereunder, including, without limitation, (A) any Bonus
to which the Executive would have been entitled pursuant to Section 3.1(b)
hereof (prorated for the period up to the effective date of termination),
provided the Company meets or exceeds the Targets set forth on Exhibit "A"
hereto, (B) any expense reimbursement amounts accrued to the effective date of
termination, (C) sum to be determined by the Compensation Committee (D) any
amounts under any other benefit plan of the Company, in each case at the time
such payments are due. The executor(s) of the Executive shall have one year
from the date of deat of the Executive to exercise the stock options outlined
in section 3.1 (c) of this Agreement.
4.5 Termination by Executive. Executive may, with or without
cause, terminate his engagement under this Agreement by giving the Company at
least 60 days' prior written notice of such termination (which may be waived by
the Company).
4.6 Termination by Executive for Good Reason. Executive may
terminate his engagement under this Agreement for "good reason" (as hereinafter
defined) at any time from the date hereof or within 12 months of the date of a
"change in control" (as hereinafter defined) of the Company. For purposes of
this Agreement, "good reason" shall mean, unless Executive shall have consented
in writing thereto, to any of the following:
(i) A reduction in Executive's title, duties, responsibilities
or status, as compared to such title, duties, responsibilities
or status immediately prior to the change in control or as
the same may be increased after the change in control;
(ii) The assignment to Executive of duties inconsistent with
Executive's office on the date of the change in control or as
the same may be increased after the change in control;
(iii) A reduction by the Company in Executive's Base
Compensation or other benefits, including stock options, as in
effect immediately prior to the change in control or as the
same may be increased after the change in control;
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(iv) A requirement that Executive relocate anywhere not
acceptable to Executive or the imposition on Executive of
business travel obligations substantially greater than those
contemplated under this Agreement;
(v) The failure by the Company to continue in effect any
compensation or benefit plan or program in which Executive is
participating at the time of the change in control (or plans
providing Executive with substantially similar benefits), or
the taking of any action by the Company which would adversely
affect Executive's participation in or materially reduce his
benefits under any of such plans or deprive him of any
material fringe benefit enjoyed by him at the time of the
change in control;
(vi) The adoption or pursuit by the Company or the Board or
its Chairman of one or more policies or practices which, in
the opinion of Executive, are contrary to the ethics,
traditions, policies or practices of the Company; or
(vii) The material breach by the Company of its agreements or
obligations under this Agreement; or
(viii) A change in the Board of the Company or in its
executives or senior officers as would result in the Executive
being instructed as to his duties by someone other than the
present Board of Directors of the Company, namely, Michel L.
Marengere, Rene Amyot and Micheline Prud'homme and any other
directors that the Executive may consent to constituting a
majority of the Board.
Upon such termination by Executive of his engagement for "good reason"
following a change in control of the Company, or as otherwise stipulated above
or if the Executive's engagement under this Agreement is terminated without
cause by the Company, the Company shall pay to executive: (i) an amount equal
to Executive's Base Compensation payable for the remainder of the Term at the
time such payments are due at the rate in effect on the date of termination;
and (ii) all other amounts to which Executive is entitled, including (A) any
Bonus to which Executive would have been entitled for the remainder of the Term
pursuant to Section 3.1(b) hereof, (B) any expense reimbursement amounts
accrued to the effective date of termination, and (C) any amounts under any
other benefit plan of the Company, in each case at the time such payments are
due; and (iii) within ten days after the date of termination an amount equal to
three times Executive's annual Base Compensation in effect at the date of
termination. Moreover, for three years following the date of termination, the
Company shall continue to provide Executive with all fringe benefits (other
than payment of mobile telephone and gasoline expense) he was receiving as of
the date of termination, including, without limitation, all health, life and
disability insurance and automobile benefits he was receiving immediately prior
to the date of termination. In addition, the Executive shall be entitled to
exercise the Stock Options granted pursuant to Section 3.1 (c) herein at any
time during the remainder of the term or, at the option of the Company, at any
time during the term, to purchase the options at a price per share equal to the
difference between the excercise price of such stock options and the closing
price of the Company's shares of Common stock on NASDAQ on the date of
termination
<PAGE> 7
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or deemed termination of the Executive's engagement. If the Executive requests
the Company to purchase such options, the Company shall make payment within ten
(10) days of such request.
For purposes of this Agreement, a "change in control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date
hereof, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); provided, however that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "Person" (as such term is
used in Section 13(d) and Section 14(d) of the Exchange Act), except for Michel
L. Marengere, or a company controlled by him, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 19% or
more of the combined voting power of the Company's then outstanding securities;
(B) there occurs a contested proxy solicitation of the Company's shareholders
that results in the contesting party obtaining the ability to vote securities
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (C) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another
entity, except to an entity controlled directly or indirectly by the Company,
or a merger, consolidation or other reorganization of the Company in which the
Company is not the surviving entity, or a plan of liquidation or dissolution of
the Company other than pursuant to bankruptcy or insolvency laws is adopted; or
(D) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. Notwithstanding the foregoing, a
"change in control" shall not be deemed to have occurred for purposes of this
Agreement (i) in the event of a sale, exchange, transfer or other disposition
of substantially all of the assets of the Company to, or a merger,
consolidation or other reorganization involving the Company and Executive,
alone or with other officers of the Company, or any entity in which Executive
(alone or with other officers) has, directly or indirectly, at least a 25%
equity or ownership interest or (ii) in a transaction otherwise commonly
referred to as a "management leveraged buy-out".
Clauses (A) and (B) in the preceding paragraph to the contrary
notwithstanding, the Board may, by resolution adopted by at least two-thirds of
the directors who were in office at the date a change in control occurred,
declare that a change in control described in clause (A) or (B) has become
ineffective for purposes of this Agreement if all of the following conditions
then exist: (i) the declaration is made prior to the death, disability or
termination of engagement of Executive and within 120 days of the change in
control; and (ii) no Person, except for Michel L. Marengere, either is the
beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's
outstanding securities or has the ability or power to vote securities
representing 10% or more of the combined voting power of the Company's then
outstanding securities. If such a declaration shall be properly made, no
benefits shall be payable hereunder as a result of such prior but now
ineffective change in control, but benefits shall remain payable and this
Agreement shall remain enforceable as a result of any other change in control
unless it is similarly declared to be ineffective.
4.7 Notwithstanding the termination of the Executive for any
reason pursuant to Subsections 4.2, 4.3, 4.4, 4.5 or 4.6 of this Agreement, the
Executive will, in addition to all other
<PAGE> 8
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benefits conferred hereunder, be able to exercise any of the share purchase
warrants referred to in Subsection 3.1(e) at any time up to their expiry on
March 31, 1996.
5. Covenants
5.1 Covenant Not to Compete. Executive recognizes and
acknowledges that the Company is placing its confidence and trust in Executive.
Executive, therefore, covenants and agrees that during the applicable
Non-Compete Period (as defined below) Executive shall not, either directly or
indirectly, without the prior written consent of the Board:
A. Engage in or carry on any business or in any way
become associated with any business which is similar
to or is in competition with the Business of the
Company (as such term is used and defined herein).
As used in this Section 5, the term "Business of the
Company" shall include all business activities in
which the Company is now engaged, including but not
limited to, infrastructure engineering and shall
further include any business in which the Company is
engaged at any time during the Term;
B. Solicit the business of any person or entity, on
behalf of himself or any other person or entity,
which is or has been at any time during the term of
this Agreement a customer or supplier of the Company
including, but not limited to, former or present
customers or suppliers with whom Executive has had
personal contact during, or by reason of, his
relationship with the Company;
<PAGE> 9
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C. Be or become an employee, agent, consultant,
representative, director or officer of, or be
otherwise in any manner associated with, any person,
firm, corporation, association or other entity which
is engaged in or is carrying on any business which is
similar to or in competition with the Business of the
Company;
D. Solicit for engagement or employ any person employed
by the Company at any time during the 12-month period
immediately preceding such solicitation or
engagement; or
E. Be or become a shareholder, joint venturer, owner (in
whole or in part), partner, or be or become
associated with or have any proprietary or financial
interest in or of any firm, corporation, association
or other entity which is engaged in or is carrying on
any business which is similar to or in competition
with the Business of the Company. Notwithstanding
the preceding sentence above, passive equity
investments by Executive of 5% or less of an equity
interest (on a fully diluted basis) in any entity or
affiliated group of any entity which is engaged in or
is carrying on any business which is similar to or in
competition with the Business of the Company shall
not be deemed to violate this Section 5.1.
Executive hereby recognizes and acknowledges that the existing
Business of the Company extends throughout Canada and the United States of
America, and therefore agrees that the covenants not to compete contained in
this Section 5.1 shall be applicable in and throughout such states, as well as
throughout such additional areas or states in which the Company may be (or has
prepared written plans to be) doing business as of the date of termination of
Executive's engagement. Executive further warrants and represents that,
because of his varied skill and abilities, he does not need to compete with the
Business of the Company and that this Agreement will not prevent him from
earning a livelihood and acknowledges that the restrictions contained in this
Section 5.1 constitute reasonable protections for the Company.
As used in this Section 5.1, "Applicable Non-Compete Period" shall
mean:
(i) unless and until the Executive's engagement under this
Agreement is terminated prior to the scheduled end of the Term, the period
beginning on the date hereof and ending on the date which is 365 days after the
scheduled end of the Term (as such Term may be extended from time to time
pursuant to Section 2.1 hereof);
(ii) if the Executive's engagement under this Agreement is
terminated pursuant to Section 4.2 hereof or Section 4.3 hereof or for any
other reason (other than as set forth in clause (iii) below), the period
beginning on the date hereof and ending on the date which is 365 days after the
scheduled end of the Term (as such Term may be extended from time to time
pursuant to Section 2.1 hereof);
(iii) if the Executive's engagement under this Agreement is
terminated without "cause", the period beginning on the date hereof and ending
on the date of the scheduled end of the Term (as such Term may be extended from
time to time pursuant to Section 2.1 hereof);
<PAGE> 10
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(iv) if on or prior to the date of the scheduled end of
the Term (as such Term may be extended from time to time pursuant to Section 2.1
hereof), the Executive rejects an offer by the Company to extend this Agreement
pursuant to Section 2.1 hereof on reasonable terms, the period beginning on the
date hereof and ending on the date which is 365 days after the scheduled end of
the Term (as such Term may be extended from time to time pursuant to Section
2.1 hereof); and
(v) if the Company elects not to extend this Agreement
pursuant to Section 2.1 hereof, the period beginning on the date hereof and
ending on the date of the scheduled end of the Term (as such Term may be
extended from time to time pursuant to Section 2.1 hereof).
5.2 Trade Secrets and Confidential Information. Executive
recognizes and acknowledges that certain information including, without
limitation, information pertaining to the financial condition of the Company,
its systems, methods of doing business, agreements with customers or suppliers
or other aspects of the Business of the Company or which is sufficiently secret
to derive economic value from not being disclosed ("Confidential Information")
may be made available or otherwise come into the possession of Executive by
reason of his engagement with the Company. Accordingly, Executive agrees that
he will not (either during or after the term of his engagement with the
Company) disclose any Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
or make use to his personal advantage or to the advantage of any third party,
of any Confidential Information, without the prior written consent of the
Board. Executive shall, upon termination of engagement, return to the Company
all documents which reflect Confidential Information (including copies
thereof). Notwithstanding anything heretofore stated in this Section 5.2,
Executive's obligations under this Section 5.2 shall not, after termination of
Executive's engagement with the Company, apply to information which has become
generally available to the public without any action or omission of Executive
(except that any Confidential Information which is disclosed to any third party
by an employee or representative of the Company who is not authorized to make
such disclosure shall be deemed to remain confidential and protectable by
Executive under this Section 5.2).
5.3 Records. All files, records, memoranda and other documents
regarding former, existing or prospective customers of the Company or relating
in any manner whatsoever to Confidential Information or the Business of the
Company (collectively, "Records"), whether prepared by Executive or otherwise
coming into his possession, shall be the exclusive property of the Company.
All Records shall be immediately placed in the physical possession of the
Company upon the termination of Executive's engagement with the Company, or at
any other time specified by the Board. The retention and use by Executive of
duplicates in any form of Records is prohibited after the termination of
Executive's engagement with the Company.
5.4 Breach. Executive hereby recognizes and acknowledges that
irreparable injury or damage shall result to the Company in the event of a
breach or threatened breach by Executive of any of the terms of provisions of
this Section 5, and Executive therefore agrees that the Company shall be
entitled to an injunction restraining Executive from engaging in any activity
constituting such breach or threatened breach. Nothing contained herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to the Company at law or in equity for such breach or threatened
breach, including but not limited to, the recovery of damages from Executive
and, if Executive is an employee of the Company, the termination of his
engagement with the Company in accordance with the terms and provisions of this
Agreement.
<PAGE> 11
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5.5 Survival. Notwithstanding the termination of the engagement
of Executive or the termination of this Agreement, the provisions of this
Section 5 shall survive and be binding upon Executive unless a written
agreement which specifically refers to the termination of the obligations and
covenants of this Section 5 is executed by the Company.
6. Miscellaneous
6.1 Notices. Any notices to be given hereunder by either party to
the other may be effected either by personal delivery in writing, via facsimile
transmission or by mail, registered or certified, postage prepaid with return
receipt requested. Notices shall be addressed to the parties as follows:
If to the Company: Cedar Group, Inc.
500 Rue Notre Dame
Lachine, Quebec H8S 2B2
If to the Executive: Michel L. Marengere
29 Montee du Golf
St-Dunctan du Lac Beauport, Quebec
G0A 2C0
Any party may change his or its address by written notice in
accordance with this Section 6.1. Notices delivered personally shall be deemed
communicated as of actual receipt; notices sent via facsimile transmission
shall be deemed communicated as of receipt by the sender of written
confirmation of transmission thereof; mailed notices shall be deemed
communicated as of three days after proper mailing.
6.2 Inclusion of Entire Agreement Herein. This Agreement
supersedes any and all other prior or contemporaneous agreements, either oral
or in writing, between the parties hereto with respect to the subject matter
hereof and contains all of the covenants and agreements between the parties
with respect to engagement of Executive by the Company.
6.3 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
6.4 Waivers. No waiver at any time of any term or provision of
this Agreement shall be construed as a waiver of any other term or provision of
this Agreement, and a waiver at any time of any term or provision of this
Agreement shall not be construed as a waiver at any subsequent time of the same
term or provision.
6.5 Amendments. Except as otherwise provided in Section 6.6
hereof, no amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing by each party hereto.
6.6 Severability and Limitation. All agreements and covenants
contained herein are severable and in the event any of them shall be held to be
invalid by any competent court, this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein. Should any court or
other legally constituted authority determine that for any such agreement or
<PAGE> 12
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covenant to be effective that it must be modified to limit its duration or
scope, the parties hereto shall consider such agreement or covenant to be
amended or modified with respect to duration and/or scope so as to comply with
the orders of any such court or other legally constituted authority, and as to
all other portions of such agreement or covenants they shall remain in full
force and effect as originally written.
6.7 Headings. All headings set forth in this Agreement are
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions hereof.
6.8 Assignment. The Company shall have the right to assign this
Agreement and to delegate all of its rights, duties and obligations hereunder
to any entity which controls the Company, which the Company controls or which
may be the result of the merger, consolidation, acquisition or reorganization
of the Company and another entity. Executive agrees that this Agreement is
personal to him and his rights and interests hereunder may not be assigned, nor
may his obligations and duties hereunder be delegated (except as to delegation
in the normal course of operation of the Company), and any attempted assignment
or delegation in violation of this provision shall be void.
6.9 Arbitration. All controversies which may arise between the
parties hereto including, but not limited to, those arising out of or related
to this Agreement shall be determined by binding arbitration applying the laws
of the State of Delaware as set forth in Section 6.3 hereof. Any arbitration
pursuant to this Agreement shall be conducted in New York, New York before the
American Arbitration Association in accordance with its arbitration rules. The
arbitration shall be final and binding upon all the parties (so long as the
award was not procured by corruption, fraud or undue means) and the
arbitrator's award shall not be required to include factual findings or legal
reasoning. Nothing in this Section 6.9 will prevent either party from
resorting to judicial proceedings if interim injunctive relief under the laws
of the State of Delaware from a court is necessary to prevent serious and
irreparable injury to one of the parties.
6.10 Counterparts. This Agreement may be executed via facsimile
transmission signature and in counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and the same
instrument.
6.11 Board of Director Determinations. All matters to be
determined by the Board pursuant to the terms of this Agreement shall be
determined by the members of the Board without the vote of Executive, if he is
then a member of the Board.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Consulting Agreement as of the day and year first
above written.
CEDAR GROUP, INC.
By:
------------------------------
Name:
Title:
<PAGE> 13
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EXECUTIVE
---------------------------------
<PAGE> 1
Exhibit 10.14
SERVICES AGREEMENT
This AGREEMENT (this "Agreement") is made, entered into and executed as of this
1st day of February, 1995, between CEDAR GROUP, INC., a Delaware corporation
(the "Company"), and NICOLAS MATOSSIAN, an individual resident in the Province
of Quebec and his personal holding company, Grey Horse Resources (Canada) Ltd.
(Nicolas Matossian and Grey Horse Resources (Canada) Ltd., are hereafter
referred to herein as the "Executive").
WHEREAS, the Company considers it essential and in the best interest of its
stockholders to retain the services of Executive on the terms and conditions
provided in this Agreement;
AND WHEREAS, Executive desires to render services to the Company on the terms
and conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, the Company and Executive hereby agree as
follows:
1. Engagement
1.1 Engagement. The Company hereby agrees to engage Executive for
the Term (as hereinafter defined) as President and Chief Operating Officer,
subject to the direction of the Company's Chief Executive Officer (the "CEO")
and in connection therewith, to perform such duties as he shall reasonably be
directed by the CEO to perform. In performing such duties hereunder, Executive
shall comply with the policies and procedures as adopted from time to time by
the CEO, shall give the Company the benefit of his special knowledge, skills,
contacts and business experience and shall be just and faithful in the
performance of his duties. One of these policies shall be the availability of
the Executive during the preparation and finalization period for any quarterly
financial statement (Form 10-Q)" or year end financial statement (Form 10-K).
1.2 Other Office. The Executive may, with the approval of the
CEO, from time to time, serve, or continue to serve, and hold any other offices
or positions in, companies or organizations, which, in the Board's judgment,
will not present any conflict of interest with the Company or any of its
affiliates or divisions, or adversely affect the performance of Executive's
duties pursuant to this Agreement.
1.3 Location. The principal location for performance of
Executive's services hereunder shall be in Montreal, Quebec, subject to
reasonable travel requirements during the course of such performance. The
Company will provide accommodations for the Executive during his business
travel on behalf of the Company and pay for the Executive's reasonable travel
and incidental expenses.
2. Engagement Term
2.1 Term. The Term of the Executive's engagement hereunder (the
"Term") shall commence on the date hereof and shall end on the third
anniversary hereof (the "Initial Term"), unless sooner terminated as provided
herein; provided, however that the Term shall be extended and this Agreement
shall be automatically renewed for successive three-year periods unless: (i)
this Agreement is terminated as otherwise provided herein; or (ii) Executive
provides written notice to the Company of his desire not to extend this
Agreement at least ninety (90) days prior to the expiration date of the Term of
this Agreement pursuant to this Section 2.1. Notwithstanding any
<PAGE> 2
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other provision to the contrary, if the Company does not renew this Agreement
after the Initial Term, the Executive shall be entitled to receive an
additional minimum amount equal to 12 months of the aggregate base compensation
or such greater amount as may be required by law.
3. Compensation
3.1 Cash Compensation
(a) Base Compensation. During the first year of the
Term, the Company shall pay Executive an aggregate base compensation of U.S.
$240,000.00 payable in equal monthly instalments of U.S. $20,000.00, inclusive
of any Goods and Services Tax ("GST") that may be applicable. For each annual
period after the first year of the date of this Agreement, the Base
Compensation shall be adjusted by the Compensation Committee of the Board by an
amount as the Company and the Executive may agree upon.
(b) Bonuses. During the Initial Term, Executive will be
eligible to receive a cash bonus ("Bonus") in accordance with, and for each
period (each, a "Payment Year") specified in the Corporate Management Incentive
Plan (the "Plan"). The payment of a Bonus for each Payment Year during the
Initial Term shall be conditioned upon the Company meeting or exceeding the
financial results criteria (the "Targets") as determined by the Board or the
Compensation Committee for its senior executives.
(c) Stock Options. Upon execution and delivery of this
Agreement by the Company and Executive, Executive shall receive an option to
purchase 300,000 shares of Common Stock of the Company. The purchase price for
the shares of Common Stock subject to such option shall be U.S. $ 4.125 per
share, or such other price as may be agreed upon in writing by the Company and
the Executive. The Executive's options may be transferable to a family trust
and are excercisable at any time during the term.
(d) As a result of an understanding reached between the
Company and the Executive in October, 1993, the Company agrees that upon
execution and delivery of this Agreement by the Company and Executive, and in
consideration of the Executive having assisted the Company in raising capital
and other ventures, the Executive shall receive as a bonus 50,000 shares of
Common Stock duly registered in the name of the Executive or as the Executive
directs at a deemed price of Cdn.$2.25.
(e) At any time during the twelve months from the date of
this Agreement, the Executive may acquire an additional up to 50,000 shares of
Common Stock at a price of U.S. $3.25 per share along with share purchase
warrants entitling the Executive to purchase up to a further 50,000 shares of
Common Stock at a price of U.S. $3.75 until March 31, 1995 and U.S. $4.00 at
any time after March 31, 1995 and up to September 30, 1996.
3.2 Expenses. The Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement, including all of the
Executive's travel, hotel, meal and other incidental expenses during the
Executive's travel on behalf of the Company. Executive shall keep detailed and
accurate records of expenses incurred in connection with the performance of his
duties hereunder and reimbursement therefor shall be in accordance with
policies and procedures to be established from time to time by the Board.
<PAGE> 3
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3.3 Equipment. The Company at its expense will provide Executive
with exclusive use of a mobile telephone, telecopier and photocopier and the
Company will pay all operating and ownership expenses attendant thereto.
3.4 Car Allowance. The Company at its expense, upon approval by
the Compensation Committee, may provide the Executive with a car allowance of
up to CDN $650 per month and reimburse the Executive for his mileage charges at
a maximum of U.S. 25c. per kilometre.
3.5 Fiscal Services. The Company will reimburse the Executive for
fiscal advice and for tax and accounting assistance in filing yearly returns
for himself, up to a maximum yearly amount of U.S. $5,000.
3.6 Insurance. The Company will maintain in force and at
its expense a Key man Life Insurance Policy of no less than $5 million dollars,
with a double indemnity in the case of accidental death. In the event of the
death of the Executive, the beneficiaries of that insurance policy shall be
respectively the Company to the extent of 80% (eighty percent) of the total
proceeds of the policy and the estate of the Executive to the extent of 20% of
the total proceeds of the policy.
The Company will also maintain in force and at its expense a
Disability Insurance Policy where the proceeds payable to the Executive in case
of disability shall be equal to three quarters of his base compensation as
stipulated in 3.1(a) at the time of the occurrence of the Executive's
disability, and which shall be paid to the Executive on a monthly basis for the
duration of the disability.
3.7 Pension Plan, Benefits. The Executive may avail himself of
the benefits of a Pension Plan and/or Medical and Dental benefits as are
available in the Company or in a subsidiary of Company.
4. Termination
4.1 General. In addition to the right by the Executive to
terminate this Agreement pursuant to Section 2 hereof, the Company or the
Executive shall have the right to terminate the engagement of Executive as set
forth in this Section 4.
4.2 Termination for Cause. In addition to any other remedies
which the Company may have at law or in equity, the Company may terminate the
Executive's engagement under this Agreement by giving Executive written notice
of such termination upon or at any time following the occurrence of any of the
following events, and each such termination shall constitute a termination for
"cause", provided, however, that Executive has first been given written notice
of the facts or circumstances constituting the determination of "cause" and a
reasonable opportunity (in no event less than 30 days) to cure, rectify or
reverse such facts or circumstances and Executive shall have failed to do so:
(i) any act or failure to act (or series or combination
thereof) by Executive done with the intent to harm in any
material respect the interests of the Company or any affiliate
thereof;
<PAGE> 4
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(ii) the commission by Executive of a felony;
(iii) the perpetration by Executive of a dishonest act or
common law fraud against the Company or any affiliate thereof;
or
(iv) a grossly negligent act, insubordination, or failure to
act (or series or combination thereof) by Executive
detrimental in any material respect to the interests of the
Company or any affiliate thereof.
Upon the early termination of Executive's engagement under this
Agreement by the Company for "cause", the Company shall pay to Executive (i) an
amount equal to Executive's Base Compensation accrued through the effective
date of termination at the rate in effect at the time notice of termination is
given, payable at the time such payment is due; (ii) the sum of U.S. $1.00; and
(iii) at the time such payments are due, all other amounts to which Executive
is entitled hereunder (including expense reimbursement amounts to which
Executive is entitled hereunder or amounts under any benefit plan of the
Company, but expressly excluding any Bonus (or portion thereof) in respect of
the fiscal year in which this Agreement is so terminated or any fiscal year of
the Company thereafter).
4.3 Incapacity of Executive. Subject to applicable law, if
Executive shall become ill or be injured or otherwise become incapacitated such
that, in the opinion of the Board, he cannot fully carry out and perform his
duties hereunder, and such incapacity shall continue for a period of 45
consecutive days, the Board may, at any time thereafter, by giving Executive
20-days' prior written notice, fully and finally terminate his engagement under
this Agreement. Termination under this Section 4.3 shall be effective as of
the date provided in such notice, which date shall not be fewer than 180 days
after such notice is delivered to Executive or his representative, and the
Company shall pay Executive his Base Compensation accrued to the effective date
of termination at the rate in effect at the time of such notice, payable at the
time such payment is due. Upon payment of (i) such accrued Base Compensation;
and (ii) all other amounts to which Executive may be entitled hereunder
including, without limitation, (A) any Bonus to which the Executive would have
been entitled pursuant to Section 3.1(b) hereof (prorated for the period up to
the effective date of termination), provided the Company meets or exceeds the
Targets set forth on Exhibit "A" hereto, (B) any expense reimbursement amounts
accrued to the effective date of termination, (C) a sum to be determined by the
Compensation Committee, and (D) any amounts under any other benefit plan of the
Company, in each case at the time such payments are due.
4.4 Death of Executive. This Agreement shall automatically
terminate upon the death of Executive. Upon the early termination of this
Agreement as a result of death, the Company shall pay Executive's estate: (i)
an amount equal to Executive's Base Compensation accrued through the effective
date of termination at the rate in effect at the effective date of termination,
payable at the time such payment is due; and (ii) all other amounts to which
Executive is entitled hereunder, including, without limitation, (A) any Bonus
to which the Executive would have been entitled pursuant to Section 3.1(b)
hereof (prorated for the period up to the effective date of termination),
provided the Company meets or exceeds the Targets set forth on Exhibit "A"
hereto, (B) any expense reimbursement amounts accrued to the effective date of
termination, (C) sum to be determined by the Compensation Committee (D) any
amounts under any other benefit plan of the Company, in each case at the time
such payments are due. The executor(s) of the Executive shall have one year
from
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the date of the death of the Executive to exercise the stock options outlined
in section 3.1 (c) of this Agreement.
4.5 Termination by Executive. Executive may, with or without
cause, terminate his engagement under this Agreement by giving the Company at
least 60 days' prior written notice of such termination (which may be waived by
the Company).
4.6 Termination by Executive for Good Reason. Executive may
terminate his engagement under this Agreement for "good reason" (as hereinafter
defined) at any time from the date hereof for reasons outlined below or within
12 months of the date of a "change in control" (as hereinafter defined) of the
Company. For purposes of this Agreement, "good reason" shall mean, unless
Executive shall have consented in writing thereto, to any of the following:
(i) A reduction in Executive's title, duties,
responsibilities or status, as compared to such title, duties,
responsibilities or status immediately prior to the change in
control or as the same may be increased after the change in
control;
(ii) The assignment to Executive of duties inconsistent with
Executive's office;
(iii) A reduction by the Company in Executive's Base
Compensation or other benefits, including stock options;
(iv) A requirement that Executive relocate anywhere not
acceptable to Executive or the imposition on Executive of
business travel obligations substantially greater than those
contemplated under this Agreement;
(v) The failure by the Company to continue in effect any
compensation or benefit plan or program in which Executive is
participating at the time of the change in control (or plans
providing Executive with substantially similar benefits), or
the taking of any action by the Company which would adversely
affect Executive's participation in or materially reduce his
benefits under any of such plans or deprive him of any
material fringe benefit enjoyed by him at the time of the
change in control;
(vi) The adoption or pursuit by the Company or the Board or
its Chairman of one or more policies or practices which, in
the opinion of Executive, are contrary to the ethics,
traditions, policies or practices of the Company; or
(vii) The material breach by the Company of its agreements or
obligations under this Agreement; or
(viii) A change in the Board of the Company or in its
executives or senior officers as would result in the Executive
being instructed as to his duties by someone other than Michel
L. Marengere.
<PAGE> 6
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Upon such termination by Executive of his engagement for "good reason"
following a change in control of the Company or as otherwise stipulated above
or if the Executive's engagement under this Agreement is terminated without
cause by the Company, the Company shall pay to executive: (i) an amount equal
to Executive's Base Compensation payable for the remainder of the Term at the
time such payments are due at the rate in effect on the date of termination;
and (ii) all other amounts to which Executive is entitled, including (A) any
Bonus to which Executive would have been entitled for the remainder of the Term
pursuant to Section 3.1(b) hereof, (B) any expense reimbursement amounts
accrued to the effective date of termination, and (C) any amounts under any
other benefit plan of the Company, in each case at the time such payments are
due; and (iii) within ten days after the date of termination an amount equal to
three times Executive's annual Base Compensation in effect at the date of
termination. Moreover, for three years following the date of termination, the
Company shall continue to provide Executive with all fringe benefits (other
than payment of mobile telephone and gasoline expense) he was receiving as of
the date of termination, including, without limitation, all health, life and
disability insurance and automobile benefits he was receiving immediately prior
to the date of termination. In addition, the Executive shall be entitled to
exercise the Stock Options granted pursuant to Section 3.1 (c) herein at any
time during the remainder of the Term or, at the option of the Company, at any
time during the term, to purchase the options at a price per share equal to the
difference between the excercise price of such stock options and the closing
price of the Company's shares of Common stock on NASDAQ on the date of
termination or deemed termination of the Executive's engagement. If the
Executive requests the Company to purchase such options, the Company shall make
payment within ten (10) days of such request.
For purposes of this Agreement, a "change in control" shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A, as in effect on the date
hereof, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); provided, however that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "Person" (as such term is
used in Section 13(d) and Section 14(d) of the Exchange Act), except for Michel
L. Marengere, or a company controlled by him, is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 19% or
more of the combined voting power of the Company's then outstanding securities;
(B) there occurs a contested proxy solicitation of the Company's shareholders
that results in the contesting party obtaining the ability to vote securities
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (C) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to another
entity, except to an entity controlled directly or indirectly by the Company,
or a merger, consolidation or other reorganization of the Company in which the
Company is not the surviving entity, or a plan of liquidation or dissolution of
the Company other than pursuant to bankruptcy or insolvency laws is adopted; or
(D) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. Notwithstanding the foregoing, a
"change in control" shall not be deemed to have occurred for purposes of this
Agreement (i) in the event of a sale, exchange, transfer or other disposition
of substantially all of the assets of the Company to, or a merger,
consolidation or other reorganization involving the Company and Executive,
alone or with other officers of the Company, or any entity in which Executive
(alone or with other officers) has, directly or indirectly, at least a 25%
equity or ownership interest or (ii) in a transaction otherwise commonly
referred to as a "management leveraged buy-out".
<PAGE> 7
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Clauses (A) and (B) in the preceding paragraph to the contrary
notwithstanding, the Board may, by resolution adopted by at least two-thirds of
the directors who were in office at the date a change in control occurred,
declare that a change in control described in clause (A) or (B) has become
ineffective for purposes of this Agreement if all of the following conditions
then exist: (i) the declaration is made prior to the death, disability or
termination of engagement of Executive and within 120 days of the change in
control; and (ii) no Person, except for Michel L. Marengere, either is the
beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's
outstanding securities or has the ability or power to vote securities
representing 10% or more of the combined voting power of the Company's then
outstanding securities. If such a declaration shall be properly made, no
benefits shall be payable hereunder as a result of such prior but now
ineffective change in control, but benefits shall remain payable and this
Agreement shall remain enforceable as a result of any other change in control
unless it is similarly declared to be ineffective.
4.7 Notwithstanding the termination of the Executive for any
reason pursuant to Subsections 4.2, 4.3, 4.4, 4.5 or 4.6 of this Agreement, the
Executive will, in addition to all other benefits conferred hereunder, be able
to exercise any of the share purchase warrants referred to in Subsection 3.1(e)
at any time up to their expiry on March 31, 1996.
5. Covenants
5.1 Covenant Not to Compete. Executive recognizes and
acknowledges that the Company is placing its confidence and trust in Executive.
Executive, therefore, covenants and agrees that during the applicable
Non-Compete Period (as defined below) Executive shall not, either directly or
indirectly, without the prior written consent of the Board:
A. Engage in or carry on any business or in any way
become associated with any business which is similar
to or is in competition with the Business of the
Company (as such term is used and defined herein).
As used in this Section 5, the term "Business of the
Company" shall include all business activities in
which the Company is now engaged, including but not
limited to, infrastructure engineering and shall
further include any business in which the Company is
engaged at any time during the Term;
B. Solicit the business of any person or entity, on
behalf of himself or any other person or entity,
which is or has been at any time during the term of
this Agreement a customer or supplier of the Company
including, but not limited to, former or present
customers or suppliers with whom Executive has had
personal contact during, or by reason of, his
relationship with the Company;
C. Be or become an employee, agent, consultant,
representative, director or officer of, or be
otherwise in any manner associated with, any person,
firm, corporation, association or other entity which
is engaged in or is carrying on any business which is
similar to or in competition with the Business of the
Company;
<PAGE> 8
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D. Solicit for engagement or employ any person employed
by the Company at any time during the 12-month period
immediately preceding such solicitation or
engagement; or
E. Be or become a shareholder, joint venturer, owner (in
whole or in part), partner, or be or become
associated with or have any proprietary or financial
interest in or of any firm, corporation, association
or other entity which is engaged in or is carrying on
any business which is similar to or in competition
with the Business of the Company. Notwithstanding
the preceding sentence above, passive equity
investments by Executive of 5% or less of an equity
interest (on a fully diluted basis) in any entity or
affiliated group of any entity which is engaged in or
is carrying on any business which is similar to or in
competition with the Business of the Company shall
not be deemed to violate this Section 5.1.
Executive hereby recognizes and acknowledges that the existing
Business of the Company extends throughout Canada and the United States of
America, and therefore agrees that the covenants not to compete contained in
this Section 5.1 shall be applicable in and throughout such states, as well as
throughout such additional areas or states in which the Company may be (or has
prepared written plans to be) doing business as of the date of termination of
Executive's engagement. Executive further warrants and represents that,
because of his varied skill and abilities, he does not need to compete with the
Business of the Company and that this Agreement will not prevent him from
earning a livelihood and acknowledges that the restrictions contained in this
Section 5.1 constitute reasonable protections for the Company.
<PAGE> 9
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As used in this Section 5.1, "Applicable Non-Compete Period" shall
mean:
(i) unless and until the Executive's engagement under
this Agreement is terminated prior to the scheduled end of the Term, the period
beginning on the date hereof and ending on the date which is 365 days after the
scheduled end of the Term (as such Term may be extended from time to time
pursuant to Section 2.1 hereof);
(ii) if the Executive's engagement under this Agreement
is terminated pursuant to Section 4.2 hereof or Section 4.3 hereof or for any
other reason (other than as set forth in clause (iii) below), the period
beginning on the date hereof and ending on the date which is 365 days after the
scheduled end of the Term (as such Term may be extended from time to time
pursuant to Section 2.1 hereof);
(iii) if the Executive's engagement under this
Agreement is terminated without "cause", the period beginning on the date
hereof and ending on the date of the scheduled end of the Term (as such Term
may be extended from time to time pursuant to Section 2.1 hereof);
(iv) if on or prior to the date of the scheduled end of
the Term (as such Term may be extended from time to time pursuant to Section
2.1 hereof), the Executive rejects an offer by the Company to extend this
Agreement pursuant to Section 2.1 hereof on reasonable terms, the period
beginning on the date hereof and ending on the date which is 365 days after the
scheduled end of the Term (as such Term may be extended from time to time
pursuant to Section 2.1 hereof); and
(v) if the Company elects not to extend this Agreement
pursuant to Section 2.1 hereof, the period beginning on the date hereof and
ending on the date of the scheduled end of the Term (as such Term may be
extended from time to time pursuant to Section 2.1 hereof).
5.2 Trade Secrets and Confidential Information. Executive
recognizes and acknowledges that certain information including, without
limitation, information pertaining to the financial condition of the Company,
its systems, methods of doing business, agreements with customers or suppliers
or other aspects of the Business of the Company or which is sufficiently secret
to derive economic value from not being disclosed ("Confidential Information")
may be made available or otherwise come into the possession of Executive by
reason of his engagement with the Company. Accordingly, Executive agrees that
he will not (either during or after the term of his engagement with the
Company) disclose any Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
or make use to his personal advantage or to the advantage of any third party,
of any Confidential Information, without the prior written consent of the
Board. Executive shall, upon termination of engagement, return to the Company
all documents which reflect Confidential Information (including copies
thereof). Notwithstanding anything heretofore stated in this Section 5.2,
Executive's obligations under this Section 5.2 shall not, after termination of
Executive's engagement with the Company, apply to information which has become
generally available to the public without any action or omission of Executive
(except that any Confidential Information which is disclosed to any third party
by an employee or representative of the Company who is not authorized to make
such disclosure shall be deemed to remain confidential and protectable by
Executive under this Section 5.2).
5.3 Records. All files, records, memoranda and other documents
regarding former, existing or prospective customers of the Company or relating
in any manner whatsoever to
<PAGE> 10
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Confidential Information or the Business of the Company (collectively,
"Records"), whether prepared by Executive or otherwise coming into his
possession, shall be the exclusive property of the Company. All Records shall
be immediately placed in the physical possession of the Company upon the
termination of Executive's engagement with the Company, or at any other time
specified by the Board. The retention and use by Executive of duplicates in
any form of Records is prohibited after the termination of Executive's
engagement with the Company.
5.4 Breach. Executive hereby recognizes and acknowledges that
irreparable injury or damage shall result to the Company in the event of a
breach or threatened breach by Executive of any of the terms of provisions of
this Section 5, and Executive therefore agrees that the Company shall be
entitled to an injunction restraining Executive from engaging in any activity
constituting such breach or threatened breach. Nothing contained herein shall
be construed as prohibiting the Company from pursuing any other remedies
available to the Company at law or in equity for such breach or threatened
breach, including but not limited to, the recovery of damages from Executive
and, if Executive is an employee of the Company, the termination of his
engagement with the Company in accordance with the terms and provisions of this
Agreement.
5.5 Survival. Notwithstanding the termination of the engagement
of Executive or the termination of this Agreement, the provisions of this
Section 5 shall survive and be binding upon Executive unless a written
agreement which specifically refers to the termination of the obligations and
covenants of this Section 5 is executed by the Company.
6. Miscellaneous
6.1 Notices. Any notices to be given hereunder by either party to
the other may be effected either by personal delivery in writing, via facsimile
transmission or by mail, registered or certified, postage prepaid with return
receipt requested. Notices shall be addressed to the parties as follows:
If to the Company: Cedar Group, Inc.
500 Rue Notre Dame
Lachine, Quebec H8S 2B2
If to the Executive: N.V. Matossian
Suite 3416
1155 Rene-Levesque Blvd. Ouest
Montreal, Quebec H3B 3T3
Any party may change his or its address by written notice in
accordance with this Section 6.1. Notices delivered personally shall be deemed
communicated as of actual receipt; notices sent via facsimile transmission
shall be deemed communicated as of receipt by the sender of written
confirmation of transmission thereof; mailed notices shall be deemed
communicated as of three days after proper mailing.
6.2 Inclusion of Entire Agreement Herein. This Agreement
supersedes any and all other prior or contemporaneous agreements, either oral
or in writing, between the parties hereto with respect to the subject matter
hereof and contains all of the covenants and agreements between the parties
with respect to engagement of Executive by the Company.
<PAGE> 11
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6.3 Law Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
6.4 Waivers. No waiver at any time of any term or provision of
this Agreement shall be construed as a waiver of any other term or provision of
this Agreement, and a waiver at any time of any term or provision of this
Agreement shall not be construed as a waiver at any subsequent time of the same
term or provision.
6.5 Amendments. Except as otherwise provided in Section 6.6
hereof, no amendment or modification of this Agreement shall be deemed
effective unless and until executed in writing by each party hereto.
6.6 Severability and Limitation. All agreements and covenants
contained herein are severable and in the event any of them shall be held to be
invalid by any competent court, this Agreement shall be interpreted as if such
invalid agreements or covenants were not contained herein. Should any court or
other legally constituted authority determine that for any such agreement or
covenant to be effective that it must be modified to limit its duration or
scope, the parties hereto shall consider such agreement or covenant to be
amended or modified with respect to duration and/or scope so as to comply with
the orders of any such court or other legally constituted authority, and as to
all other portions of such agreement or covenants they shall remain in full
force and effect as originally written.
6.7 Headings. All headings set forth in this Agreement are
intended for convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or of any of the provisions hereof.
6.8 Assignment. The Company shall have the right to assign this
Agreement and to delegate all of its rights, duties and obligations hereunder
to any entity which controls the Company, which the Company controls or which
may be the result of the merger, consolidation, acquisition or reorganization
of the Company and another entity. Executive agrees that this Agreement is
personal to him and his rights and interests hereunder may not be assigned, nor
may his obligations and duties hereunder be delegated (except as to delegation
in the normal course of operation of the Company), and any attempted assignment
or delegation in violation of this provision shall be void.
6.9 Arbitration. All controversies which may arise between the
parties hereto including, but not limited to, those arising out of or related
to this Agreement shall be determined by binding arbitration applying the laws
of the State of Delaware as set forth in Section 6.3 hereof. Any arbitration
pursuant to this Agreement shall be conducted in New York, New York before the
American Arbitration Association in accordance with its arbitration rules. The
arbitration shall be final and binding upon all the parties (so long as the
award was not procured by corruption, fraud or undue means) and the
arbitrator's award shall not be required to include factual findings or legal
reasoning. Nothing in this Section 6.9 will prevent either party from
resorting to judicial proceedings if interim injunctive relief under the laws
of the State of Delaware from a court is necessary to prevent serious and
irreparable injury to one of the parties.
6.10 Counterparts. This Agreement may be executed via facsimile
transmission signature and in counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and the same
instrument.
<PAGE> 12
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6.11 Board of Director Determinations. All matters to be
determined by the Board pursuant to the terms of this Agreement shall be
determined by the members of the Board without the vote of Executive, if he is
then a member of the Board.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Consulting Agreement as of the day and year first
above written.
CEDAR GROUP, INC.
By:
-------------------------------------
Name:
Title:
EXECUTIVE
----------------------------------------
<PAGE> 1
Exhibit 10.15
CEDAR GROUP, INC.
1995 STOCK OPTION PLAN
ARTICLE I
PURPOSE
1.1 PURPOSE. The purpose of the 1995 Stock Option Plan (this
"Plan") is to strengthen the ability of Cedar Group, Inc. (the "Company") to
attract, motivate, and retain employees of superior ability and to more closely
align the interests of the nonemployee directors and management of the Company
with those of its shareholders by relating capital accumulation to increases in
shareholder value.
ARTICLE II
GENERAL DEFINITIONS
2.1 "Agreement" - The written instrument evidencing the grant to a
Participant of an Award. Each Participant may be issued one or more Agreements
from time to time, containing one or more Awards.
2.2 "Award" - Any award granted under this Plan.
2.3 "Board" - The Board of Directors of the Company.
2.4 "Code" - The Internal Revenue Code of 1986, as amended.
2.5 "Committee" - The Committee which the Board appoints to
administer this Plan.
2.6 "Common Stock" - The common stock of the Company as described
in the Company's Certificate of Incorporation, as amended, or such other stock
as shall be substituted therefor.
2.7 "Company" - Cedar Group, Inc., or any successor to the
Company.
2.8 "Date of Grant" - The date on which the granting of an Award
is authorized by the Committee, unless another date is specified by the
Committee or by a provision in this Plan applicable to the Award.
2.9 "Director" - A member of the Board who is not an Employee.
2.10 "Disposition" - Any sale, transfer, encumbrance, gift,
donation, assignment, pledge, hypothecation, or other disposition, whether
similar or dissimilar to those previously enumerated, whether voluntary or
involuntary, and whether during the Participant's lifetime or upon or after his
or her death, including, but not limited to, any disposition by operation of
law, by court order, by judicial process, or by foreclosure, levy, or
attachment.
<PAGE> 2
Page 2
2.11 "Employee" - Any employee (including officers) of the Company
or a Subsidiary.
2.12 "Exchange Act" - The Securities Exchange Act of 1934, as
amended.
2.13 "Fair Market Value" - The average of the reported high and low
sales price of the Common Stock (rounded up to the nearest one-tenth of a
dollar) on the date on which Fair Market Value is to be determined (or if there
was no reported sale on such date, the next preceding date on which any
reported sale occurred) on the principal exchange or in such other principal
market on which the Common Stock is trading.
2.14 "Incentive Stock Option" - A Stock Option intended to satisfy
the requirements of Section 422(b) of the Code.
2.15 "Limited Stock Appreciation Right" or "Limited Right" - The
rights specified in Article VIII.
2.16 "Nonqualified Stock Option" - A Stock Option other than an
Incentive Stock Option.
2.17 "Participant" - A key Employee selected by the Committee to
receive an Award or a Director who has received an Award pursuant to Article X.
2.18 "Retirement" - Employment separation on account of early,
normal, or late retirement.
2.19 "Rule 16b-3" - Rule 16b-3 shall have the meaning assigned in
Section 4.1.
2.20 "Securities Act" - The Securities Act of 1933, as amended.
2.21 "Stock Option" - An award of a right to purchase Common Stock
pursuant to Article VII.
2.22 "Subsidiary" - A "subsidiary corporation" as defined in
Section 424(f) of the Code that is a subsidiary of the Company.
ARTICLE III
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 COMMON STOCK AUTHORIZED. Subject to the provisions of this
Article and Article XI, the total aggregate number of shares of Common Stock
that may be issued, transferred or exercised pursuant to Awards shall not
exceed 1,500,000 shares.
3.2 LIMITATION OF SHARES. For purposes of the limitations
specified in Section 3.1, the following principles apply: (a) a decrease in the
number of shares which thereafter may be
<PAGE> 3
Page 3
issued or transferred for purpose of Section 3.1 shall result from the delivery
of shares of Common Stock upon exercise of a Stock Option or Limited Stock
Appreciation Right in any manner; (b) shares of Common Stock with respect to
which Stock Options and Limited Stock Appreciation Rights expire, are cancelled
without being exercised, or are otherwise terminated may be regranted under
this Plan; and (c) if any shares of Common Stock related to an Award are not
issued or, for any reason, cease to be issuable or are forfeited, such shares
of Common Stock shall no longer be charged against the limitation provided for
in Section 3.1 and shall be available again for the grant of Awards.
3.3 SHARES AVAILABLE. At the discretion of the Board or
the Committee, the shares of Common Stock to be delivered under this Plan shall
be made available either from authorized and unissued shares of Common Stock or
shares of Common Stock controlled by the Company, or both; provided, however,
that absent such determination by the Board or the Committee to the contrary,
in whole or in part, the shares shall consist of the Company's authorized but
unissued Common Stock.
3.4 AWARD ADJUSTMENTS. Subject to the limitations set forth in
Article XIII, the Committee may make any adjustment in the exercise price or
the number of shares subject to, or the terms of, a Nonqualified Stock Option
or Limited Stock Appreciation Right. Such adjustment shall be made by
amending, substituting or cancelling and regranting an outstanding Nonqualified
Stock Option or Limited Stock Appreciation Right with the inclusion of terms
and conditions that may differ from the terms and conditions of the original
Nonqualified Stock Option or Limited Stock Appreciation Right. If such action
is effected by amendment, the effective date of such amendment shall be the
date of the original grant.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.1 COMMITTEE. This Plan shall be administered by the Committee,
which shall consist of two or more Directors of the Company, all of whom are
"disinterested persons," as such term is defined under the rules and
regulations adopted, from time to time, by the Securities and Exchange
Commission pursuant to Section 16(b) of the Exchange Act, including
specifically but without limitation, Rule 16b-3 or any successor rule thereto.
The Committee may, in its discretion, delegate its duties under this Plan to
such agents as it may appoint from time to time, provided that the Committee
may not delegate its duties with respect to making Awards to Participants
subject to Section 16(b) of the Exchange Act. The members of the Committee
shall serve at the pleasure of the Board, which shall have the power, at any
time and from time to time, to remove members from the Committee or to add
members thereto. Vacancies on the Committee, however caused, shall be filled
by action of the Board.
4.2 POWERS. The Committee has discretionary authority to
determine the key Employees to whom, and the time or times at which, Awards
shall be granted. The Committee also has authority to determine the amount of
shares of Common Stock that shall be subject to each Award (other than Awards
to Directors), and the terms, conditions, and limitations of each
<PAGE> 4
Page 4
Award, subject to the express provisions of this Plan. The Committee shall
have the discretion to interpret this Plan and to make all other determinations
necessary for Plan administration. The Committee has authority to prescribe,
amend and rescind any rules and regulations relating to this Plan, subject to
the express provisions of this Plan. All Committee interpretations,
determinations, and actions shall be in the sole discretion of the Committee
and shall be binding on all parties. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in this Plan or in any
Agreement in the manner and to the extent it shall deem expedient to carry it
into effect, and it shall be the sole and final judge of such expediency.
4.3 AWARD TERMS. Awards shall be evidenced by an Agreement and
may include any terms and conditions consistent with this Plan, as the
Committee may determine.
4.4 NO LIABILITY. No member of the Board or the Committee shall
be liable for any action or determination made in good faith by the Board or
the Committee with respect to this Plan or any Award under this Plan.
ARTICLE V
ELIGIBILITY
5.1 PARTICIPATION. Subject to Section 5.3, Participants shall be
selected from the key Employees of the Company and its Subsidiaries. Such
designation may be by individual or by class.
5.2 INCENTIVE STOCK OPTION ELIGIBILITY. No person shall be
eligible for the grant of an Incentive Stock Option who owns (within the
meaning of Section 422(b) of the Code), or would own immediately before the
grant of such Incentive Stock Option, directly or indirectly, stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary.
5.3 BOARD PARTICIPATION. Any Director (who is not an Employee of
the Company or a Subsidiary) shall be granted Awards under this Plan pursuant
to Article X.
5.4 LIMIT ON AWARDS. Awards to any Employee under this Stock
Option Plan shall not exceed in the aggregate 500,000 Stock Options (with or
without tandem Limited Rights) during any period of 12 consecutive months. The
number of Limited rights, if any, granted pursuant to Section 11.2 shall count
toward the aggregate limit.
ARTICLE VI
FORMS OF AWARDS
6.1 AWARD ELIGIBILITY. The forms of Awards under this Plan are
Stock Options as described in Article VII and Limited Stock Appreciation Rights
as described in Article VIII. The Committee may, in its discretion, permit
holders (other than Directors) of Awards under this Plan to surrender
outstanding Awards in order to exercise or realize the rights under other
<PAGE> 5
Page 5
Awards, or in exchange for the grant of new Awards or require holders of Awards
to surrender outstanding Awards as a condition precedent to the grant of new
Awards.
ARTICLE VII
STOCK OPTIONS
7.1 EXERCISE PRICE. The exercise price of Common Stock under each
Stock Option shall be equal to 100 percent of the Fair Market Value of the
Common Stock on the Date of Grant.
7.2 TERM. Stock Options may be exercised as determined by the
Committee, provided that Incentive Stock Options may in no event be exercised
later than 10 years from the Date of Grant or granted later than 10 years from
the date of adoption of this Plan. During the Participant's lifetime, only the
Participant may exercise an Incentive Stock Option. The Committee may amend
the terms of an Incentive Stock Option at any time to include provisions that
have the effect of changing such Incentive Stock Option to a Nonqualified Stock
Option, or vice-versa (to the extent any such change is permitted by applicable
law).
7.3 METHOD OF EXERCISE. Upon the exercise of a Stock Option, the
exercise price shall be payable in full in cash or an equivalent acceptable to
the Committee. No fractional shares shall be issued pursuant to the exercise
of a Stock Option, and no payment shall be made in lieu of fractional shares.
At the discretion of the Committee and provided such payment can be effected
without causing the Participant to incur liability under Section 16(b) of the
Exchange Act, the exercise price may be paid by assigning and delivering to the
Company shares of Common Stock or a combination of cash and such shares equal
in value to the exercise price. Any shares so assigned and delivered to the
Company in payment or partial payment of the exercise price shall be valued at
the closing market price of the Common Stock on the principal exchange or in
such other principal market on which the Common Stock is trading on the
exercise date.
In addition, at the request of the Participant and to the
extent permitted by applicable law, the Company in its discretion may
selectively approve arrangements with a brokerage firm under which such
brokerage firm, on behalf of the Participant, shall pay to the Company the
exercise price of the Stock Options being exercised, and the Company, pursuant
to an irrevocable notice from the Participant, shall promptly deliver the
shares being purchased to such firm.
7.4 LIMITATION ON INCENTIVE STOCK OPTIONS. With respect to
Incentive Stock Options, the aggregate Fair Market Value (determined at the
Date of Grant) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under all stock option plans of the Company and its Subsidiaries) shall
not exceed $100,000, or such other amount as may be prescribed under the Code
or applicable regulations or rulings from time to time.
<PAGE> 6
Page 6
ARTICLE VIII
LIMITED STOCK APPRECIATION RIGHTS
8.1 GRANT. The grant of Limited Stock Appreciation Rights under
this Plan shall be subject to the terms and conditions of this Article VIII and
shall contain such additional terms and conditions, not inconsistent with the
express provisions of this Plan, as the Committee shall deem desirable. A
Limited Right is a stock appreciation right which is effective only upon a
Change in Control (as defined in Section 11.2) and is payable only in cash.
The amount of payment to which any grantee of such a Limited Right shall be
entitled upon exercise shall be equal to the difference between the exercise
price per share of any Common Stock covered by a Stock Option in connection
with, whether or not in tandem, such Limited Right and the "Market Price" of a
share of Common Stock. For purposes of this Section 8.1, the term "Market
Price" shall mean the greater of (i) the highest price per share of Common
Stock paid in connection with the Change in Control and (ii) the highest price
per share of Common Stock reflected on the NASDAQ - National Market System
during the sixty-day period prior to the Change in Control. If the Limited
Rights are exercised, the tandem Stock Options shall cease to be exercisable to
the extent of the Common Stock with respect to which such Limited Rights are
exercised.
ARTICLE IX
FORFEITURE AND EXPIRATION OF AWARDS
9.1 TERMINATION. Subject to the express provisions of this Plan
and the terms of any applicable Agreement, the Committee, in its discretion,
may provide for the forfeiture or continuation of any Award for such period and
upon such terms and conditions as are determined by the Committee in the event
that a Participant ceases to be an Employee. In the absence of Committee
action or contrary provisions in an Agreement, the following rules shall apply:
(a) with respect to Stock Options, in the event of
Retirement, the Stock Options shall continue to vest according to the original
schedule, but no Stock Options may be exercised after the expiration of the
earlier of the remaining term of such Stock Options or 36 months (12 months in
the case of Incentive Stock Options) following the date of Retirement; in the
event of permanent and total disability, the Stock Options shall continue to
vest according to the original schedule, but no Stock Options may be exercised
after the expiration of the earlier of the remaining term of such Stock Options
or 12 months following the date of permanent and total disability; in the event
of death, Stock Options held at the time of death by the Participant may be
exercised by the estate or beneficiary of such Participant until the expiration
of the earlier of the remaining term of such Stock Options or three years from
the date of death; in the event of the Participant's voluntary separation of
employment, the Stock Options shall terminate and be forfeited as of the date
of separation of employment; in the event of the Participant's involuntary
separation of employment, the Stock Options shall be exercisable until the end
of the period of the Participant's receipt of installments of severance pay, if
any, from the Company; in the event of an involuntary separation of employment
without severance pay or if
<PAGE> 7
Page 7
severance pay is paid in a lump sum, the Stock Options shall not be exercisable
after the date of separation of employment;
(b) with respect to Limited Rights, in the event of
Retirement or permanent and total disability, the Limited Rights shall continue
in effect for six months following separation of employment, and such Limited
Rights may be exercised during such six-month period; in the event of the
Participant's death or voluntary separation of employment, the Limited Rights
shall terminate as of the date of separation of employment; provided that
Limited Rights pursuant to Section 8.1 may be exercised in accordance with
their terms by the holder thereof who separated from employment following a
Change in Control, without respect to the separation of employment of such
holder.
9.2 LEAVE OF ABSENCE. With respect to an Award, the Committee
may, in its sole discretion, determine that any Participant who is on leave of
absence for any reason shall be considered to still be in the employ of the
Company, provided that rights to such Award during a leave of absence shall be
limited to the extent to which such rights were earned or vested when such
leave of absence began.
ARTICLE X
GRANT OF STOCK OPTIONS
AND LIMITED RIGHTS TO (NONEMPLOYEE) DIRECTORS
10.1 GRANT. On the first Tuesday of each January, commencing
January 5, 1996, each Director shall be granted automatically an Award
consisting of (a) a Nonqualified Stock Option to purchase shares of Common
Stock and (b) with respect to such number of shares of Common Stock, a Limited
Right, subject to applicable law. In respect to any Award under this Section
10.1, the Limited Right component of the Award shall be exercisable only as set
forth in Section 8.1 of this Plan. The number of shares of Common Stock to be
subject to each Nonqualified Stock Option granted automatically under this
Section 10.1 commencing January, 1996 and thereafter during the term of this
Plan (subject to adjustment as provided in Section 11.1) shall be 10,000 shares
of Common Stock provided that the Company shall have been profitable in the
prior fiscal year.
The foregoing provisions of this Section 10.1 shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act or the rules thereunder.
10.2 TERMINATION. If a Director's service with the Company
terminates by reason of permanent and total disability or retirement from
active service as a director of the Company, any Award held by such Director
may be exercised for a period of three years from the date of such termination
or until the expiration of the Award, whichever is shorter, to the extent to
which the individual would on the date of exercise have been entitled to
exercise the Award if such individual had continued to serve as a Director. If
a Director's service with the Company terminates by reason of death or under
mutually satisfactory conditions, or if a Director dies
<PAGE> 8
Page 8
within the three-year period following termination by reason of permanent and
total disability or retirement from active service as a director of the Company
or within the one-year period following termination under mutually satisfactory
conditions, any Award held by such Director may be exercised for a period of
one year from the date of such termination or post-termination death, as the
case may be, or until the expiration of the stated term of the Award, whichever
is shorter, to the extent to which the individual would on the date of exercise
have been entitled to exercise the Award if such individual had continued to
serve as a Director. All applicable provisions of this Plan not inconsistent
with this Article X shall apply to Awards granted to Directors; provided,
however, that the Committee may not exercise discretion under any provision of
this Plan with respect to Awards granted under this Article X to the extent
that such discretion is inconsistent with Rule 16b-3. The maximum number of
shares of Common Stock as to which Nonqualified Stock Options may be granted to
any Director under this Plan shall be 500,000 shares of Common Stock (as
constituted on September 5, 1995).
ARTICLE XI
ADJUSTMENT PROVISIONS
11.1 SHARE ADJUSTMENTS. If the number of outstanding shares of
Common Stock is increased, decreased, or exchanged for a different number or
kind of shares or other securities, or if additional, new, or different shares
or other securities are distributed with respect to such shares of Common Stock
or other securities through merger, consolidation, sale of all or substantially
all of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
distribution with respect to such shares of Common Stock or other securities,
an appropriate adjustment in order to preserve the benefits or potential
benefits intended to be made available to the Participants may be made, in the
discretion of the Committee, in all or any of the following: (i) the maximum
number and kind of shares provided in Section 3.1; (ii) the number and kind of
shares or other securities subject to then outstanding Awards; and (iii) the
price for each share or other unit of any other securities subject to then
outstanding Awards. The Committee may also make any other adjustments, or
take such action as the Committee, in its discretion, deems appropriate in
order to preserve the benefits or potential benefits intended to be made
available to the Participants. Any fractional share resulting from such
adjustment may be eliminated.
11.2 CORPORATE CHANGES. Subject to Article XIII, upon (i) the
dissolution or liquidation of the Company; (ii) a reorganization, merger, or
consolidation (other than a merger or consolidation effecting a reincorporation
of the Company in another state or any other merger or consolidation in which
the shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of the Company and their proportionate interests
therein immediately prior to the merger or consolidation) of the Company with
one or more corporations, following which the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation in a
transaction in which the shareholders of the parent of the Company and their
proportionate interests therein immediately after the transaction are not
substantially identical to the shareholders of the Company and their
proportionate interests therein immediately prior to
<PAGE> 9
Page 9
the transaction); (iii) the sale of all or substantially all of the assets of
the Company; or (iv) the occurrence of a Change in Control, subject to the
terms of any applicable Agreement, the Committee serving prior to the date of
the applicable event may, to the extent permitted in Section 3.1 of this Plan,
in its discretion and without obtaining shareholder approval, take any one or
more of the following actions with respect to any Participant:
(a) accelerate the exercise dates of any or all
outstanding Awards;
(b) grant Limited Rights to holders of outstanding Stock
Options;
(c) pay cash to any or all holders of Stock Options in
exchange for the cancellation of their outstanding Stock Options;
(d) grant new Awards to any Participants; or
(e) make any other adjustments or amendments to
outstanding Awards or determine that there shall be substitution of new Awards
by such successor employer corporation or a parent or subsidiary company
thereof, with appropriate adjustments as to the number and kind of shares or
units subject to such awards and prices.
For purposes of this Plan and subject to the last sentence of
this paragraph, a "Change in Control" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A, as in effect on the date hereof, promulgated
under the Exchange Act; provided that, without limitation, a Change in Control
shall be deemed to have occurred if (a) any "Person" (as such term is used in
Section 13(d) and Section 14(d) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (b) there occurs a contested proxy solicitation of the
Company's shareholders that results in the contesting party obtaining the
ability to vote securities representing 30% or more of the combined voting
power of the Company's then outstanding securities; (c) there occurs a sale,
exchange, transfer or other disposition of substantially all of the assets of
the Company to another entity, except to an entity controlled directly or
indirectly by the Company, or a merger, consolidation or other reorganization
of the Company in which the Company is not the surviving entity, or a plan of
liquidation or dissolution of the Company other than pursuant to bankruptcy or
insolvency laws is adopted; or (d) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board cease for
any reason to constitute at least a majority thereof unless the election, or
the nomination for election by the Company's shareholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period. Notwithstanding the
foregoing, a "Change in Control" shall not be deemed to have occurred for
purposes of this Plan (i) in the event of a sale, exchange, transfer or other
disposition of substantially all of the assets of the Company to, or a merger,
consolidation or other reorganization involving the Company and, the
Participant, alone or with other Participants, or any entity in which the
Participant (alone or with other Participants) has, directly or indirectly,
<PAGE> 10
Page 10
at least a 5% equity or ownership interest or (ii) in a transaction otherwise
commonly referred to as a "management leveraged buy-out."
Clause (a) of the preceding paragraph to the contrary
notwithstanding, a Change in Control shall not be deemed to have occurred if a
Person becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities solely as the result of an acquisition by
the Company or any Subsidiary of the Company of voting securities of the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of the combined voting power of the Company's then outstanding securities;
provided, however, that if a Person becomes the beneficial owner of 20% or more
of the combined voting power of the Company's then outstanding securities by
reason of share purchases by the Company or any Subsidiary and shall, after
such share purchases by the Company or a Subsidiary, become the beneficial
owner, directly or indirectly, of any additional voting securities of the
Company, then a Change in Control of the Company shall be deemed to have
occurred with respect to such Person under clause (a) of the preceding
paragraph.
Clauses (a) and (b) of the second preceding paragraph to the
contrary notwithstanding, the Board may, by resolution adopted by at least
two-thirds of the directors who were in office at the date a Change in Control
occurred, declare that a Change in Control described in said clauses (a) or (b)
has become ineffective for purposes of this Plan if all of the following
conditions then exist: (i) the declaration is made prior to the death,
disability or termination of employment of the Participant and within 120 days
of the Change in Control; and (ii) no Person, either is the beneficial owner,
directly or indirectly, of securities of the Company representing 10% or more
of the combined voting power of the Company's outstanding securities or has the
ability or power to vote securities representing 10% or more of the combined
voting power of the Company's then outstanding securities. If such a
declaration shall be properly made, no actions or adjustments may be taken or
made under this Section 11.2 as a result of such prior but now ineffective
Change in Control, but such actions or adjustments may be taken or made and
this Plan shall remain enforceable as a result of any other Change in Control
unless it is similarly declared to be ineffective.
11.3 BINDING DETERMINATION. Adjustments under Sections 11.1 and
11.2 shall be made by the Committee, and its determination as to what
adjustments shall be made and the extent thereof shall be final, binding, and
conclusive.
ARTICLE XII
GENERAL PROVISIONS
12.1 NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any
instrument executed pursuant to this Plan shall confer upon any Participant any
right to continue in the employ of the Company or a Subsidiary or affect the
Company's or a Subsidiary's right to terminate the employment of any
Participant at any time with or without cause.
<PAGE> 11
Page 11
12.2 SECURITIES REQUIREMENTS. No shares of Common Stock shall be
issued or transferred pursuant to an Award unless all applicable requirements
imposed by federal and state laws, regulatory agencies, and securities
exchanges upon which the Common Stock may be listed have been fully complied
with. As a condition precedent to the issuance of shares pursuant to the grant
or exercise of an Award, the Company may require the Participant to take any
reasonable action to meet such requirements.
12.3 NO RIGHT TO STOCK. No Participant and no beneficiary or other
person claiming under or through such Participant shall have any right, title,
or interest in any shares of Common Stock allocated or reserved under this Plan
or subject to any Award except as to such shares of Common Stock, if any, that
have been issued or transferred to such Participant.
12.4 WITHHOLDING. The Company or a Subsidiary, as appropriate,
shall have the right to deduct from all Awards paid in cash any federal, state,
or local taxes as required by law to be withheld with respect to such cash
payments. In the case of Awards paid in Common Stock, the Participant or other
person receiving such Common Stock may be required to pay to the Company or a
Subsidiary, as appropriate, the amount of any such taxes which the Company or
Subsidiary is required to withhold with respect to such Common Stock. Also, at
the discretion of the Committee and provided such withholding can be effected
without causing the participant to incur liability under Section 16(b) of the
Exchange Act, the Participant may (i) direct the Company or Subsidiary to
withhold from the shares of Common Stock to be issued or transferred to the
Participant the number of shares necessary to satisfy the Company's or
Subsidiary's obligation to withhold taxes, such determination to be based on
the shares' Fair Market Value as of the date on which tax withholding is to be
made, (ii) deliver sufficient shares of Common Stock (based upon the Fair
Market Value at the date of withholding) to satisfy the withholding
obligations, or (iii) deliver sufficient cash to satisfy the withholding
obligations. Participants who elect to use such a stock withholding feature
must make the election at the time and in the manner prescribed by the
Committee.
12.5 NO DISPOSITION. No Award under this Plan may be the subject
of any Disposition (excluding shares of Common Stock with respect to which all
restrictions have lapsed), other than by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder. Any attempted Disposition in violation of this provision
shall be void and ineffective for all purposes.
12.6 SEVERABILITY; CONSTRUCTION. If any provision of this Plan is
held to be illegal or invalid for any reason, then the illegality or invalidity
shall not affect the remaining provisions hereof, but such provision shall be
fully severable and this Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein. Headings and subheadings
are for convenience only and not to be conclusive with respect to construction
of this Plan.
<PAGE> 12
Page 12
12.7 GOVERNING LAW. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
State of Delaware, except as may be required by applicable federal law.
12.8 OTHER DEFERRALS. The Committee may permit selected
Participants to elect to defer payment of Awards in accordance with procedures
established by the Committee including, without limitation, procedures intended
to defer taxation on such deferrals until receipt (including procedures
designed to avoid incurrence of liability under Section 16(b) of the Exchange
Act). Any deferred payment, whether elected by the Participant or specified by
an Agreement or by the Committee, may require forfeiture in accordance with
stated events, as determined by the Committee.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 AMENDMENTS; SUSPENSION; TERMINATION. The Board may at any
time amend, suspend (and if suspended, may reinstate) or terminate this Plan;
provided, however, that after the shareholders have approved this Plan in
accordance with Section 14.1, the Board may not, without approval of the
shareholders of the Company, amend this Plan so as to (a) increase the number
of shares of Common Stock subject to this Plan except as permitted in Article
XI or (b) reduce the exercise price for shares of Common Stock covered by
Stock Options granted hereunder below the applicable price specified in Article
VII of this Plan; and provided further, that the Board may not modify, impair
or cancel any outstanding Award without the consent of the affected
Participant.
ARTICLE XIV
DATE OF PLAN ADOPTION
14.1 DATE OF PLAN ADOPTION. This Plan has been adopted by the
Board on February 1, 1995, subject to shareholder approval. If the requisite
shareholder approval is not obtained, then the Plan shall become null and void
ab initio and of no further force or effect. This Plan shall continue in
effect with respect to Awards granted before termination of this Plan and until
such Awards have been settled, terminated or forfeited.
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
M.S.W. International, Inc. Pennsylvania
Banyan Fastener Corp. Delaware
Cedar Warehousing, Inc. Delaware
Dominion Bridge, Inc. Canada
Unimetric Corporation Rhode Island
Steen Contractors Ltd. Ontario
______________________________ ____________________
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 4,765
<SECURITIES> 2,779
<RECEIVABLES> 44,169
<ALLOWANCES> 1,138
<INVENTORY> 12,746
<CURRENT-ASSETS> 68,470
<PP&E> 20,661
<DEPRECIATION> 7,211
<TOTAL-ASSETS> 96,399
<CURRENT-LIABILITIES> 44,741
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 33,728
<TOTAL-LIABILITY-AND-EQUITY> 96,399
<SALES> 155,750
<TOTAL-REVENUES> 155,750
<CGS> 139,407
<TOTAL-COSTS> 154,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 618
<INTEREST-EXPENSE> 406
<INCOME-PRETAX> 3,905
<INCOME-TAX> 1,693
<INCOME-CONTINUING> 2,212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,020
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
