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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-21670
CARDINAL REALTY SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
OHIO 31-4427382
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
6954 AMERICANA PARKWAY, REYNOLDSBURG, OHIO 43068
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(Address of principal executive offices) (Zip Code)
(614) 759-1566
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
SHARES OF COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation 8-K is not contained herein, and will not be contained to the best
of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
As of March 20, 1996, the aggregate market value of voting stock held by
non-affiliates (based on total shares outstanding reduced by the number of
shares held by directors, officers, and other affiliates) of the Registrant was
$63,783,413 based on the closing price reported on the National Association of
Securities Dealers Automated Quotation National Market System.
Indicate by check mark whether the Registrant 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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As of March 20, 1996, there were 3,836,666 shares of Common Stock outstanding,
of which 209,982 shares were treasury shares.
The following document is incorporated herein by reference: the Registrant's
Proxy Statement for the 1996 Annual Meeting of Shareholders (into Part III of
this report).
Page 1 of 9 Pages
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PRELIMINARY STATEMENT
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This Form 10-K/A is being filed by Cardinal Realty Services, Inc. (the
"Company") in order to correct certain inaccuracies previously reported in Part
I, Item 3 Legal Proceedings and to update the Exhibit Index of the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1995. In
particular, the inaccuracies referred to involve the Company's statement of the
time upon which the Company first became aware that certain of its properties in
Florida and Georgia had been damaged due to termite infestation as well as
certain other matters regarding the Company's pending legal proceedings
captioned as Cardinal Industries, Inc. v. National Union Fire Insurance Company
of Pittsburgh, PA et al. now pending in the United States District Court for the
Southern District of Ohio, Eastern Division. In accordance with the rules of the
Securities and Exchange Commission, the Company has amended and restated in its
entirety Part I, Item 3 Legal Proceedings and the Exhibit Index of its
previously filed Annual Report on Form 10-K for its fiscal year ended December
31, 1995 under cover of this Form 10-K/A.
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ITEM 3. LEGAL PROCEEDINGS
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In 1991, the Company became aware that certain Properties in Florida
and Georgia had been damaged due to termite infestation. In May 1991, the
Company filed the first of numerous claims regarding the damage with National
Union Fire Insurance Company of Pittsburgh, PA ("National Union"), the insurance
carrier for the affected Properties, and with Associated Lawn and Pest Control,
Inc. ("Associated"), the contractor responsible for providing termite protection
to substantially all of the affected Properties. National Union denied coverage
for the damage on all of such properties (117 of which were Syndicated
Properties). On September 8, 1992, the Company filed an adversary proceeding
against National Union and Associated seeking recovery of the claims under
National Union's insurance policy and Associated's service contract warranties.
The Company is seeking damages for, among other things, repair of the termite
damage, loss of rental income, cost of retreatment and cost of obtaining
adjustment of the claims. In addition, punitive damages for bad faith are being
sought against National Union and a claim for fraud was alleged against
Associated. In December 1994, National Union filed an amended answer to the
Company's complaint which contained counter-claims seeking to reform its
insurance policy in order to exclude coverage for termite damage due to an
alleged mutual mistake, and alleging negligent and intentional spoliation of
evidence. The adversary proceeding has been transferred to the United States
District Court for the Southern District of Ohio, Eastern Division, for further
proceedings under the name Cardinal Industries, Inc. v. National Union Fire
Insurance Company of Pittsburgh, PA, et al. In November 1995, the Company
settled its claims against Associated in exchange for payment of $1,240,000,
portions of which were distributed to legal counsel, the Company and the
affected Properties. The remaining parties are engaged in discovery.
In December 1993, National Union produced reports from its construction
experts, estimating that repair costs may be $31 million for the affected
Properties. Neither the Company nor the majority of the partnerships which own
the affected Properties could bear that level of expense in the absence of a
recovery from National Union. Failure to make the repairs will prevent the
affected Properties from enhancing their revenues, but such failure to repair
has not resulted in, and is not expected to result in, any material
deterioration in revenues. The Company currently expects to recover all, or a
substantial portion of, the repair costs actually incurred by the affected
Properties, but there can be no assurance that the outcome of this litigation
will be favorable, or will fully compensate the Company. Proportionate
litigation costs are being borne by the affected Properties, to the extent of
their ability to pay them.
The Company was named a defendant in an action alleging employment
discrimination on the basis of disability in The Estate of Harold Murphy, et al
v. Cardinal Realty Services, Inc., et al., pending in the United States District
Court for the Southern District of Indiana. On October 27, 1995, a judgment was
entered against the Company based upon a jury award of $365,000 plus legal fees
to be determined. The Company vigorously defended the lawsuit, and has filed a
motion with the Court seeking a judgment in its favor notwithstanding the jury's
verdict, or alternatively to reduce the judgment substantially, which matter is
under advisement by the Court. In addition, the Company has preserved its right
to appeal from the judgment.
SEE NOTE 12 TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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EXHIBIT INDEX
1995 Form 10-K
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2.1 Third Amended Disclosure Statement Pursuant Incorporated by reference to Exhibit
to Section 1125 of Bankruptcy Code to 2.1 to the Company's Registration
Accompany the Plan of Reorganization of Jay Statement on Form 10
Alix, Chapter 11 Trustee for Cardinal Industries, (the "Form 10")
Inc. and its Substantively Consolidated
Subsidiaries and Third Amended Plan of
Reorganization of Jay Alix, Chapter 11 Trustee,
for Cardinal Industries, Inc. and its
Substantively Consolidated Subsidiaries
2.2 Findings of Fact, Conclusions of Law and Order Incorporated by reference to Exhibit
Confirming Third Amended Plan of 2.2 to the Form 10
Reorganization of Jay Alix, Chapter 11 Trustee,
for Cardinal Industries, Inc. and its
Substantively Consolidated Subsidiaries
3.1 Amended and Restated Articles of Incorporation Incorporated by reference to Exhibit
filed September 11, 1992 with the Ohio 3.1 to the Form 10
Secretary of State
3.2 Certificate of Amendment to the Articles of Incorporated by reference to Exhibit
Incorporation filed October 27, 1992 with the 3.2 to the Form 10
Ohio Secretary of State
3.3 Certificate of Amendment to the Articles of Filed as an Exhibit to this Form 10-K
Incorporation filed January 9, 1996 with the on page 66
Ohio Secretary of State
3.4 Amended Code of Regulations Incorporated by reference to Exhibit
3.3 to the Company's Annual Report
on Form 10-K for the fiscal year
December 31, 1993 (the "1993 Form
10-K")
4.1 Form of Common Stock Certificate Incorporated by reference to Exhibit
4.1 to Form 10
10.1 Loan and Security Agreement, dated as of Filed as an Exhibit to this Form 10-K
August 11, 1995, between The Provident Bank on page 72
and the Company and certain of its subsidiaries
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10.2 Cognovit Promissory Note dated August 11, Filed as an Exhibit to this Form 10-K
1995 in the amount of $22,000,000 issued by on page 128
the Company and certain of its subsidiaries in
favor of The Provident Bank.
10.3 Cognovit Promissory Note dated August 11, Filed as an Exhibit to this Form 10-K
1995 in the amount of $3,000,000 issued by the on page 153
Company and certain of its subsidiaries in favor
of The Provident Bank.
10.4 Cognovit Promissory Note dated August 11, Filed as an Exhibit to this Form 10-K
1995 in the amount of $7,000,000 issued by the on page 176
Company and certain of its subsidiaries in favor
of The Provident Bank.
10.5 Agreement for Modification of Management Filed as an Exhibit to this Form 10-K
Agreement dated as of August 11, 1995 among on page 199
Cardinal Apartment Management Group, Inc.,
the Company and certain of its subsidiaries
10.6 Assignment of Management Contracts dated Filed as an Exhibit to this Form 10-K
August 11, 1995 between Cardinal Apartment on page 215
Management Group, Inc. and The Provident
Bank
10.7 Stock Pledge Agreement dated August 11, 1995 Filed as an Exhibit to this Form 10-K
between Cardinal Realty Services, Inc. and The on page 237
Provident Bank
10.8 Stock Pledge Agreement dated August 11, 1995 Filed as an Exhibit to this Form 10-K
between Cardinal Industries of Texas, Inc. and on page 271
The Provident Bank
10.9 Stock Pledge Agreement dated August 11, 1995 Filed as an Exhibit to this Form 10-K
between Cardinal Industries Development on page 279
Corporation and The Provident Bank
10.10 Stock Pledge Agreement dated August 11, 1995 Filed as an Exhibit to this Form 10-K
between Cardinal Realty Company and The on page 287
Provident Bank
10.11 Limited Power of Attorney dated August 11, Filed as an Exhibit to this Form 10-K
1995 by certain subsidiaries of the Company to on page 297
the Company
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10.12 Limited Power of Attorney dated August 11, Filed as an Exhibit to this Form 10-K
1995 by the Company and certain of its on page 300
subsidiaries to The Provident Bank
10.13 Waiver Agreement dated August 11, 1995 Filed as an Exhibit to this Form 10-K
among The Provident Bank and the Company on page 304
and certain of its subsidiaries
10.14 Post Closing Agreement dated as of August 11, Filed as an Exhibit to this Form 10-K
1995 among The Provident Bank and the on page 307
Company and certain of its subsidiaries
10.15 Form of Management Agreement between Incorporated by reference to Exhibit
Cardinal Apartment Management Group, Inc. 10.10 to the Form 10
and certain Properties
10.16 Form of Management Agreement between Filed as an Exhibit to this Form 10-K
Cardinal Apartment Management Group, Inc. on page 312
(which was merged with and into the Company)
and certain of the Properties (as amended
August 11, 1995)
10.17 Form of Partnership Asset Management Incorporated by reference to Exhibit
Agreement between Cardinal Industries Services 10.11 to the Form 10
Corporation and certain Properties
10.18 Form of Extended Partnership Administration Incorporated by reference to Exhibit
Agreement between Cardinal Industries, Inc. 10.12 to the Form 10
and certain Properties
10.19 Form of Agreement for Tax Appeal Services Incorporated by reference to Exhibit
between the Company and certain Properties 10.13 to the Form 10
10.20 Asset Purchase Agreement dated April 24, Incorporated by reference to Exhibit
1991, among Economy Lodging Systems, Inc., 10.14 to the Form 10
HMS Property Management Group, Inc.,
Cardinal Industries, Inc. and Cardinal Industries
Services Corporation
10.21 Lease, dated September 24, 1992, between the Incorporated by reference to Exhibit
Company and the Americana Investment 10.15 to the Form 10
Company
10.22 Term Lease Master Agreement and Term Lease Incorporated by reference to Exhibit
Supplement, dated October 6, 1992, between 10.16 to the Form 10
the Company and IBM Credit Corporation
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10.23 Bankruptcy Court Orders, entered June 28, 1990 Incorporated by reference to Exhibit
and July 27, 1990, approving Trustee's First 10.17 to the Form 10
Employee Retention Plan
10.24 Bankruptcy Court Order, entered April 3, 1992, Incorporated by reference to Exhibit
approving Trustee's Second Employee Retention 10.18 to the Form 10
Plan
10.25 Description of Cash Bonus Plan of the Company Incorporated by reference to Exhibit
10.28 to the Form 10
10.26 1992 Incentive Equity Plan of the Company, as Filed as an Exhibit to this Form 10-K
amended (effective November 30, 1995) on page 318
10.27 Tax Obligation Loan Program of the Company Incorporated by reference to Exhibit
10.30 to the Form 10
10.28 Form of Deferred Shares Agreement for Incorporated by reference to Exhibit
Employees of the Company 10.31 to the Form 10
10.29 Form of Restricted Shares Agreement for Key Incorporated by reference to Exhibit
Employees of the Company 10.32 to the Form 10
10.30 Form of Restricted Shares Agreement for Incorporated by reference to Exhibit
Executive Officers of the Company 10.33 to the Form 10
10.31 Form of Non-Qualified Stock Option Agreement Incorporated by reference to Exhibit
for Participants in Trustee's Employee Retention 10.33 to the Form 10
Plan
10.32 Forms of Non-Qualified Stock Option Incorporated by reference to Exhibit
Agreement for Non-Employee Directors 10.36 to the Form 10 and Schedule
"I" of Exhibit B to the Company's
Proxy Statement for its Annual
Meeting of Shareholders on
November 30, 1995
10.33 Form of Indemnification Agreement between Incorporated by reference to Exhibit
Registrant and its officers and directors 10.37 to the Form 10
10.34 Undeliverable Distributions Trust dated as of Incorporated by reference to Exhibit
September 11, 1992, between Registrant and 10.38 to the Form 10
James H. Bownas, Trustee
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10.35 401(k) Plan of Registrant Incorporated by reference to Exhibit
10.41 to the Form 10
10.36 Premium Finance Agreement dated September Filed as an Exhibit to this Form 10-K
12, 1995 between the Company and on page 331
Transamerica Insurance Finance Corporation
10.37 Premium Finance Agreement dated December 4, Filed as an Exhibit to this Form 10-K
1995 between the Company and First Premium on page 333
Services, Inc.
10.38 Employment Agreement dated as of December Filed as an Exhibit to this Form 10-K
1, 1995 between the Company and John B. on page 335
Bartling, Jr., President and Chief Executive
Officer of the Company
10.39 Severance Agreement and Mutual Release dated Filed as an Exhibit to this Form 10-K
as of January 16, 1996 between the Company on page 376
and James H. Bownas, Former Vice
President/General Counsel of the Company
10.40 Consulting Agreement dated as of January 19, Filed as an Exhibit to this Form 10-K
1996 between the Company and James H. on page 384
Bownas
10.41 Consulting Agreement dated January 29, 1996 Filed as an Exhibit to this Form 10-K
between the Company and Robert E. Pausch, on page 390
Former Vice President/Finance of the Company
10.42 Severance Agreement and Mutual Release dated Filed as an Exhibit to this Form 10-K
as of February 29, 1996 between the Company on page 402
and David E. Williams, Vice
President/Apartment Operations of the
Company
11.1 Statement re: computation of per share earnings See Index to Financial Information -
Note 1 in the Notes to Consolidated
Financial Statements
21.1 Subsidiaries of Registrant Filed as an Exhibit to this Form 10-K
on page 411
22.1 Published Report Regarding Matters Submitted Filed as an Exhibit to this Form 10-K
to Vote of Security Holders on page 413
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SIGNATURES
Pursuant to requirements of Rule 12b-15 under the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
CARDINAL REALTY SERVICES, INC.
(Registrant)
Date: June 6, 1996 By: /s/ John B. Bartling, Jr.
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John B. Bartling, Jr., President and
Chief Executive Officer
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