<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended JANUARY 31, 1998
----------------
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____________________ to _____________________
Commission File Number 0-22964
---------------
SEL-DRUM INTERNATIONAL, INC.
----------------------------
(Exact name of Small Business Issuer as Specified in Its Charter)
NEW YORK 84-1236134
--------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
501 AMHERST STREET, BUFFALO, NEW YORK 14207-2913
------------------------------------------------
(Address of Principal Executive Offices)
905-335-2766
------------
(Issuer's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
State the number of shares outstanding for each of the issuer's classes
of common equity, as of the latest practicable date:
COMMON STOCK, $.01 PAR VALUE
7,642,500 SHARES ISSUED AND OUTSTANDING AS OF MARCH 16, 1998
Transitional Small Business Disclosure Format (check one:)
Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Unaudited Consolidated Balance Sheets as of January 31, 1998
and July 31, 1997
Unaudited Consolidated Statements of Income for the three
and six months ended January 31, 1998 and January 31, 1997
Unaudited Consolidated Statements of Cash Flow for the six
months ended January 31, 1998 and January 31, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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<PAGE> 3
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS (U.S.$)
CURRENT ASSETS January 31, 1998 July 31, 1997*
- -------------- ---------------- --------------
<S> <C> <C>
Cash and Cash Equivalents $ 553,716 $1,084,954
Accounts receivable, net 1,900,630 2,199,625
Deferred Income Tax Benefit 25,000 25,000
Inventories 3,050,697 3,143,472
Refundable Income Taxes 49,431 38,293
Other Current Assets 66,765 81,485
---------- ----------
TOTAL CURRENT ASSETS 5,646,239 6,572,829
PROPERTY
- --------
Equipment 1,301,620 1,357,641
Vehicles 38,757 24,835
Furniture and Fixtures 50,275 48,465
Leasehold improvements 391,089 414,114
---------- ----------
1,781,741 1,845,055
Less accumulated
Depreciation and Amortization 963,461 919,898
---------- ----------
818,280 925,157
OTHER ASSETS
- ------------
Organization costs, net 7,938 9,096
Purchased and developed technology, net 48,550 55,840
Loans Receivable from Related Parties 226,138 115,421
Deposits 14,402 17,496
---------- ----------
297,028 197,853
---------- ----------
$6,761,547 $7,695,839
========== ==========
* Derived from the July 31, 1997 Form 10-KSB
</TABLE>
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<PAGE> 4
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONT'D)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (U.S.$)
CURRENT LIABILITIES January 31, 1998 July 31, 1997*
- ------------------- ---------------- --------------
<S> <C> <C>
Notes payable to banks $ 744,388 $1,393,185
Current portion of long-term debt 56,129 59,524
Accounts payable 184,691 628,999
Other current liabilities 425,127 258,427
---------- ----------
TOTAL CURRENT LIABILITIES 1,410,335 2,340,135
OTHER LIABILITIES
- -----------------
Long-term debt 60,748 109,072
Deferred income taxes 74,534 31,909
---------- ----------
135,282 140,981
SHAREHOLDERS' EQUITY
- --------------------
Common Stock 771,356 771,356
Preferred stock - Class C 1,280,048 1,280,048
Preferred stock - Class D 3,344,853 3,520,132
---------- ----------
4,624,901 4,800,180
Additional paid in capital 11,915 11,915
Cumulative foreign currency translation
adjustment (199,242) (113,311)
(Accumulated deficit) 7,000 (255,417)
---------- ----------
5,215,930 5,214,723
---------- ----------
$6,761,547 $7,695,839
========== ==========
</TABLE>
*Derived from the July 31, 1997 Form 10-KSB.
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<PAGE> 5
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(U.S.$)
SIX MONTHS ENDED
------------------------------
January 31
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 7,117,077 $ 7,936,034
Cost of goods sold 4,673,496 5,197,291
----------- -----------
GROSS PROFIT 2,443,581 2,738,743
Selling, operating, general and administrative expenses 1,901,510 1,885,405
Provision for bad debts 37,065 28,210
----------- -----------
INCOME FROM OPERATIONS 505,006 825,128
Other income (expense):
Interest Income 12,910 11,413
Interest Expense (35,124) (69,245)
Foreign currency transaction gain (loss) (13,610) 18,096
Fixed Assets Disposal gain (loss) -- 1,154
----------- -----------
(35,824) (38,582)
----------- -----------
INCOME BEFORE INCOME TAXES 469,182 786,546
Income Taxes:
Current 206,765 323,927
Deferred -- --
----------- -----------
206,765 323,927
----------- -----------
NET INCOME $ 262,417 $ 462,619
=========== ===========
Number of common shares outstanding 7,642,500 7,642,500
Net income per common share $ .03 $ .06
=========== ===========
</TABLE>
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<PAGE> 6
SEL-DRUM INTERNATIONAL, INC.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(U.S.$)
QUARTER ENDED
-----------------------------
JANUARY 31
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 3,428,788 $ 3,998,798
Cost of goods sold 2,227,263 2,648,036
----------- -----------
GROSS PROFIT 1,201,525 1,350,762
Selling, operating, general and administrative
expenses 914,143 962,577
Provision for bad debts 18,470 14,513
----------- -----------
INCOME FROM OPERATIONS 268,912 373,672
Other income (expense):
Interest Income 12,714 5,868
Interest Expense (16,942) (31,570)
Foreign currency transaction gain (loss) (18,928) 7,663
Disposal Fixed Asset gain (gain) -- --
----------- -----------
(23,156) (18,039)
----------- -----------
INCOME BEFORE INCOME TAXES 245,756 355,633
Income Taxes:
Current 92,590 150,822
Deferred -- --
----------- -----------
92,590 150,822
----------- -----------
NET INCOME $ 153,166 $ 204,811
=========== ===========
Number of common shares outstanding 7,642,500 7,642,500
Net income per common share $ .02 $ .03
=========== ===========
</TABLE>
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<PAGE> 7
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(U.S.$)
SIX MONTHS ENDED
------------------------------------
JANUARY 31
------------------------------------
CASH FLOWS - OPERATING ACTIVITIES 1998 1997
- ------------------------------------- ----------- -----------
<S> <C> <C>
Net Income $ 262,417 $ 462,619
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Provision for bad debts 37,065 28,210
Depreciation and amortization 104,146 95,557
Deferred income taxes 42,625 _
Gain on Disposal of Property -- (1,154)
Changes in certain assets and liabilities affecting operations:
Accounts receivable 261,930 (431,456)
Inventories 92,775 359,829
Other current assets 3,582 23,685
Deposits 3,094 73
Accounts payable (441,334) (101,536)
Income taxes payable (2,974) (61,797)
Other current liabilities 166,700 (165,912)
----------- -----------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 530,026 208,118
CASH FLOWS - INVESTING ACTIVITIES
- ---------------------------------
Purchases of property (35,507) (37,134)
----------- -----------
NET CASH (USED FOR) INVESTING ACTIVITIES (35,507) (37,134)
CASH FLOWS - FINANCING ACTIVITIES
- ---------------------------------
Redemption of Preferred Shares (175,279) --
Loans receivable - related parties (110,717) (6,859)
Short-term borrowings net (648,797) (398,137)
Repayments on long-term debt (51,719) (121,735)
Proceeds from Disposal of Assets -- 2,804
----------- -----------
NET CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES (986,512) (523,927)
Effect of exchange rate changes on cash (39,245) 4,122
----------- -----------
NET (DECREASE) INCREASE IN CASH (531,238) (348,821)
Cash and Cash Equivalents at beginning of period 1,084,954 1,181,396
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 553,716 $ 832,575
=========== ===========
</TABLE>
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
- --------
Sel-Drum International, Inc., a New York Corporation ("Sel-Drum" or the
"Company") is the successor corporation to Dakota Equities, Ltd., a
publicly-held "blind pool." On February 1, 1995, the Company acquired all the
outstanding common shares of Sel-Drum Imaging Corporation, the parent
corporation of a privately held Canadian corporation which was founded in 1978.
Sel-Drum is a leading independent distributor of high mortality copier
and printer replacement parts and supplies. As one of the largest independent
high mortality copier parts distribution companies in North America, Sel-Drum
provides a link between parts manufacturers, sellers and buyers. Sel-Drum is
also developing strong relationships with suppliers who seek advanced inventory
management and order processing.
Through its Sel-Drum Imaging Corporation subsidiary, the Company has two
wholly-owned subsidiaries, Sel-Drum Corporation (U.S.A), Inc. and Sel-Drum
Corporation. Unless otherwise indicated, all references to "Sel-Drum" or the
"Company" include the Company, Sel-Drum Imaging Corporation, Sel-Drum
Corporation and Sel-Drum Corporation (U.S.A.), Inc. It should be noted that
approximately 50% of the Kelowna Facility's remanufactured product is sold
directly to the other operating divisions. Sel-Drum Corporation (U.S.A.), Inc.
and Sel-Drum Corporation employ a number of sales agents and telemarketers who
contact directly the copier machine dealers throughout North America. There are
approximately 12,000 such dealers marketing various brands of copier products.
The Company estimates that the potential marketplace for high mortality
replacement parts, drums and toner, not controlled by the Original Equipment
Manufacturers ("O.E.M's") to be approximately $675 million in North America.
The Company's primary business is the distribution of high mortality
copier and printer replacement parts, toners, and photoreceptors ("Drums"),
including, to a limited extent, the manufacturing of Drums. On August 1, 1995,
the Company added remanufactured facsimile and printer cartridges to its product
offering through its manufacturing relationship with MKG. The Company markets in
the United States and Canada through a direct network of sales agents and
telemarketers. Outside of North America, the Company is represented by several
distributors with their sales accounting for less than 5% of the total revenues.
The Company amalgamated Micron Imaging Corporation (now the Kelowna Facility)
and Sel-Drum Corporation on November 1, 1996.
On March 7, 1997, the Company and certain principal shareholders
terminated discussions with JRCS Corp. regarding the sale of substantially all
of the outstanding capital stock of the Company.
In late 1997, the Company initiated a strategic plan which was designed
to focus on the longer term growth prospects of the Company. This new strategy
calls for concentrating future efforts to take advantage of the perceived
potential financial returns presented by existing opportunities within the high
mortality copier replacement part and printer part marketplace. The
implementation of this strategy includes programs aimed at bolstering the
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<PAGE> 9
Company's core business. Specifically, the Company is looking at its
under-utilization of the Kelowna Facility with a view toward having the Kelowna
Facility provide limited remanufacturing support and increased distribution
support. This may require some capital expenditures, although to date, the
Company is exploring whether such option is viable.
Additional strategic items include seeking acquisition candidates and a
listing on the Nasdaq stock market or regional exchanges and establishing
integrated data systems, all of which may serve to increase the Company's
budgeted 1998 expenses.
On October 29, 1997, the Company announced that it had hired Raymond C.
Sparks as its new Chief Executive Officer and President, replacing Brian
Turnbull who has agreed to remain with the Company as a full-time consultant.
In December, 1997, the Company reorganized its sales staff and began
implementing this reorganization during the month of January. As a result of
this reorganization of sales staff, the Company expects sales to be flat during
first nine months.
On January 6, 1998, the Shareholders approved the reincorporation of the
Company into New York corporation. The reincorporation became effective on March
6, 1998.
On January 15, 1998, the Company began funding a repurchase of 172
shares of Class C Preferred Stock and 241 shares of Class D Preferred Stock in
the Company's Sel-Drum Imaging Corporation subsidiary held by two of the
Company's principal shareholders. The total purchase price was $300,000, of
which approximately $175,000 was delivered during the quarter ended January 31,
1998.
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<PAGE> 10
RESULTS OF OPERATIONS
- ---------------------
The Company's results of operations are affected by numerous factors
such as general economic conditions, competition and inventory costs. The
largest component of the Company's cost of sales is inventory cost, which may
vary slightly from period to period based upon timing of purchases which
indirectly affect the Company's inventory costs. Unless otherwise indicated, all
dollar amounts listed below are in US currency.
The Company's sales were flat for the three months and six months ended
January 31, 1998. The primary reason for reduction in sales is the Company's
recent reorganization of its internal sales and marketing network.
The following table sets forth for each of the periods presented,
certain income statement data for the Company expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
January 31, January 31, January 31, January 31,
----------- ----------- ----------- -----------
Statement of Operations Data 1998 1997 1998 1997
- ---------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
As a Percentage of Net Sales:
Cost of Goods Sold 65.0 66.3 65.7 65.5
------ ------ ------ ------
Gross Profit 35.0 33.7 34.3 34.5
Selling, General and 26.7 24.0 26.7 23.8
Administrative Expenses
Provision for Bad Debt 0.5 .4 0.5 .3
--- ------ --- -----
Income from Operations 7.8 9.3 7.1 10.4
Other Income (Expense) (.7) (.4) (.5) (.5)
Income Before Taxes 7.1 8.9 6.6 9.9
----- ------ ----- -----
Net Income 4.5 5.1 3.7 5.8
==== ====== ===== ======
</TABLE>
Net sales for the three months ended January 31, 1998 were $3,428,788 as
compared with $3,998,798 for the three months ended January 31, 1997, a decrease
of 14.3%. For the six months ended January 31, 1998, net sales were $7,117,077,
as compared with $7,936,034 for the six months ended January 31, 1997, a
decrease of 10.3%. The decrease in net sales for the three months and six months
ended January 31, 1998 is principally the result of a newly implemented program
designed to enhance the Company's sales and marketing distribution network.
Gross profit margin for the three months ending January 31, 1998 was
35%, as compared to 33.7% for the same period last year. For the six months
ended January 31, 1998, gross profit margin was 34.3% as compared to 34.5% for
the six months ended January 31, 1997. In absolute dollars, gross profit
decreased from $1,350,762 for the three months ended January 31, 1997 to
$1,201,525 for the three months ended January 31, 1998. For the six months ended
January 31, 1998, absolute gross profit dollars decreased to $2,443,581 from
$2,738,743. The decrease in absolute gross profit dollars of $149,237 and
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<PAGE> 11
$295,162 for the three and six month periods, respectively, resulted primarily
from net sales decreases.
Selling, general, and administrative expenses for the three months ended
January 31, 1998 decreased 5% from the prior comparable period. As a percentage
of net sales, selling, general and administrative expenses increased as a result
of decreased sales volume. For the six months ended January 31, 1998, selling,
general and administrative expenses in absolute dollars increased by $16,105 or
.8%. The increases for the six-month period resulted primarily from timing of
sales commissions and bonuses and increased professional expenses due to the
Company's stated strategic plan.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal capital requirements are to fund its working
capital needs and material inventory requirements and to fund the improvement of
facilities, machinery and equipment. Historically the Company has used income
generated by operations as well as bank financing to fund these capital needs.
Net cash provided by operating activities primarily represents net
income plus changes in working capital positions. Net cash provided by operating
activities for the six months ended January 31, 1998 was $530,026.
Net cash used for investing activities represents purchases of property
in connection with the start up of a facsimile and printer cartridge production
operation at the Company's Kelowna, British Columbia facility.
The Company currently has a revolving demand loan arrangement with the
National Bank of Canada in the amount of $3,700,000 (CDN). These borrowings
generally assist the Company with funding of accounts receivable and inventory
purchases. As of January 31, 1998 outstanding borrowings of $744,388 (U.S.)
existed under this arrangement.
Cash flow from operations coupled with cash flow generated by bank
financing has provided the Company with the cash necessary to meet its cash
requirements. Except for certain planned capital expenditures in connection with
computer system upgrades, for the foreseeable future, the Company does not
anticipate any significant cash outlays other than those consistent with past
practices.
YEAR 2000 ISSUE
- ---------------
The Year 2000 issue stems from date coding practices in both software
and hardware. Specifically, hardware and software developers have often used
two-digit numbers rather than four-digit numbers to represent years. This was
done in a conscious effort to provide cost-effective and efficient business
solutions, given resource constraints and requirements in the past.
Consequently, when the year turns to 2000, the software may calculate the date
as 1900 because the century has not been defined.
Management has initiated an enterprise-wide program to prepare the
Company's computer systems and applications for the year 2000. The Company
expects to incur internal
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<PAGE> 12
staff costs as well as consulting and other expenses related to infrastructure
and facilities enhancements necessary to prepare the systems for the year 2000.
The Company is expending significant resources to assure that its computer
systems are reprogrammed in time to effectively deal with transactions in the
year 2000 and beyond. The Company expects to spend as much as $250,000 in order
to get the systems ready for processing in the year 2000. Much of this outlay
will be for new computer equipment and a new core data processing system, which
will be capitalized and amortized over five and three years, respectively. The
core system being considered is a state-of-the-art in-house, client/server based
system. In addition to being Year 2000 ready, the new processing system will
result in immediate cost savings compared with the existing system. The Company
does not expect the amount required to be expensed over the next three to five
years to have a material effect on its financial position or results of
operations. Cost savings from the new system are expected to be completely
offset the entire expenditure within three years. The amount expensed to date is
immaterial.
The Year 2000 problem creates risk for the Company from both unforeseen
problems in its own computer systems and from problems in the computer systems
of third parties with whom the Company transacts business. Failures of the
Company's and/or third parties' computer systems could have a material adverse
impact on the Company's ability to conduct business.
The Company expects its Year 2000 date conversion project to be
completed on a timely basis. However, there can be no assurance that the systems
of other companies on which the Company's systems rely also will be timely
converted or that any such failure to convert by another company would not have
an adverse effect on the Company's systems.
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<PAGE> 13
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On January 6, 1998, the Shareholders of the Company approved the
following proposals at the Annual Meeting:
PROPOSAL 1: TO ELECT DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING:
<TABLE>
<CAPTION>
Authority
For Withheld
--- ----------
<S> <C> <C>
Robert E. Asseltine 6,541,161 200
Brian F. Turnbull 6,541,161 200
Robert M. Orr 6,541,161 200
</TABLE>
PROPOSAL 2: TO APPROVE THE REINCORPORATION OF SEL-DRUM INTERNATIONAL, INC., A
COLORADO CORPORATION ("SEL-DRUM COLORADO"), BY MERGING SEL-DRUM COLORADO INTO A
NEWLY-FORMED NEW YORK SUBSIDIARY, SEL-DRUM INTERNATIONAL, INC.:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C> <C>
6,466,930 100 50 74,281
</TABLE>
PROPOSAL 3: TO APPROVE AND RATIFY THE SELECTION OF MENGEL, METZGER, BARR & CO.
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JULY 31,
1998:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
6,541,211 100 50
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
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<PAGE> 14
SIGNATURES
In accordance with the requirements 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.
SEL-DRUM INTERNATIONAL, INC.
Date March 17, 1998 /s/ Raymond C. Sparks
---------------------
Raymond C. Sparks, President and CEO
Date March 17, 1998 /s/ J. C. Hall
--------------
John C. Hall, Vice President-Finance
- 14 -
<PAGE> 15
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION
Not applicable.
(3) *(a) ARTICLES OF INCORPORATION
Restated Certificate of Incorporation.
*(b) BY-LAWS
Amended and Restated By-laws.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) The documents listed under Item (3) of this Index are
incorporated herein by reference.
(10) MATERIAL CONTRACTS
*(a) Employment Contract dated as of November 1, 1997 between
Sel-Drum International, Inc. and Raymond Sparks.
*(b) Non-Incentive Stock Option Grant granted as of November 3,
1997 by Sel-Drum International, Inc. to Raymond C. Sparks.
*(c) Form of Redemption Agreement by and between 547118 Ontario
Limited, Sel-Drum Imaging Corporation and Sel-Drum
International, Inc.
*(d) Form of Redemption Agreement by and between Robert
Asseltine, Geraldine Asseltine, Sel-Drum Imaging Corporation
and Sel-Drum International, Inc.
(11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Computation can be clearly determined from the Financial Statements
included herein under Item 1.
(15) LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION
Not applicable.
(18) LETTER ON CHANGE IN ACCOUNTING PRINCIPLES
Not applicable.
- 15 -
<PAGE> 16
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE
Not applicable.
(23) CONSENT OF EXPERTS AND COUNSEL
Not applicable.
(24) POWER OF ATTORNEY
Not applicable.
*(27) FINANCIAL DATA SCHEDULE
(99) ADDITIONAL EXHIBITS
Not applicable.
- --------------------------------
* Exhibit filed with this Report
- 16 -
<PAGE> 1
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
SEL-DRUM INTERNATIONAL, INC.
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
The undersigned, Raymond C. Sparks and James M. Jenkins, being the
President and the Assistant Secretary, respectively, of Sel-Drum International,
Inc., hereby certify that:
I. The name of the Corporation is Sel-Drum International, Inc.
II. The Certificate of Incorporation of the Corporation was filed by the
Department of State on November 21, 1997.
III. The Certificate of Incorporation of the Corporation is hereby
amended to effect the amendments specified below, each of which is authorized by
the Business Corporation Law:
A. A new Paragraph "8" of the Certificate of Incorporation, which
provides for shareholder approval by the written consent of the holders
of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize such action at a shareholder
meeting, is hereby added to the Certificate of Incorporation;
B. A new Paragraph "9" of the Certificate of Incorporation, which
provides for shareholder approval of certain actions by a vote of the
holders of a majority of the outstanding shares, is hereby added to the
Certificate of Incorporation;
C. A new Paragraph "10" of the Certificate of Incorporation,
which provides for approval by the Board of Directors of loans or
guarantees of a director that benefit the Corporation, is hereby added
to the Certificate of Incorporation;
so that the text of the Certificate of Incorporation of the Corporation is
hereby restated, as amended hereby, to provide in its entirety as follows:
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
SEL-DRUM INTERNATIONAL, INC.
1. The name of the Corporation is Sel-Drum International, Inc.
2. The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which a corporation may be organized under the
Business Corporation Law, provided that the Corporation is not formed to nor
will it engage in any act or activity requiring the consent or approval of any
state official, department, board, agency or other body without such consent or
approval first being obtained.
3. The office of the Corporation shall be located in the County of Erie,
State of New York.
4. The aggregate number of shares which the Corporation shall have
authority to issue is one hundred ten million (110,000,000) shares, of which a
portion shall be common stock and a portion shall be preferred stock, all as
described below.
A. COMMON STOCK. The aggregate number of common shares which the
Corporation shall have the authority to issue is one hundred million
(100,000,000), each with a par value of $.01 per share, which shares shall be
designated "Common Stock." Subject to all the rights of the Preferred Stock as
expressly provided herein or by law, the Common Stock of the Corporation shall
possess all such rights and privileges as are afforded to capital stock by
applicable law.
B. PREFERRED STOCK. The aggregate number of preferred shares
which the Corporation shall have the authority to issue is ten million
(10,000,000) shares, each with a par value of $.01 per share, which shares shall
be designated "Preferred Stock". Shares of Preferred Stock may be issued from
time to time in one or more series as determined by the Board of Directors. The
Board of Directors is hereby authorized, by resolution or resolutions, to
provide from time to time, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, for a series of the Preferred
Stock. Each such series shall have distinctive serial designations. Before any
shares of any such series of Preferred Stock are issued, the Board of Directors
shall fix and determine, and is hereby expressly empowered to fix and determine
by resolution or resolutions, the voting powers, full or limited, or no voting
powers, and the designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof. Before the issue of any shares of a series established by the Board, a
Certificate of Amendment amending the Certificate of Incorporation adding a
provision stating the number, designation, relative rights, preferences, and
limitations of the shares of the series as fixed by the Board, will be filed as
required by applicable law.
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<PAGE> 3
5. The Secretary of State of the State of New York is hereby designated
as the agent of the Corporation upon whom process in any action or proceeding
against it may be served, and the address to which the Secretary of State shall
mail a copy of process in any action or proceeding against the Corporation which
may be served upon the Secretary of State is 700 Midtown Tower, Rochester, New
York 14604-2070.
6. No shareholder of the Corporation shall be entitled as of right to
purchase or receive any new or additional shares of any class, whether now or
hereafter authorized, or any other securities convertible into, or carrying
options or warrants to purchase, shares of any class; and all such new or
additional shares and all such other securities convertible into, or carrying
options or warrants to purchase, shares may be issued or disposed of by the
Board of Directors to such holders and on such terms as it, in its absolute
discretion, may deem advisable.
7. A member of the Corporation's Board of Directors shall not be
personally liable to the Corporation or its shareholders for damages for any
breach of duty in his or her capacity as such; provided, however, that the
foregoing shall not be construed to eliminate (a) the liability of any director
if a judgment or other adjudication adverse to such director establishes that
such director's acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law, or that such director personally
gained in fact a financial profit or other advantage to which he or she was not
legally entitled, or that such director's acts violated Section 719 of the
Business Corporation Law (concerning liability of directors in certain cases),
or (b) the liability of any director for any act or omission prior to the
adoption of this Paragraph. If the Business Corporation Law is amended after
adoption of this Paragraph to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of any director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Business Corporation Law as so amended. Any repeal or
modification of this Paragraph by the shareholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
8. As provided by Section 615 of the New York Business Corporation Law,
as amended by Section 33 of L. 1997, Ch. 449, whenever shareholders are required
or permitted to take any action by vote, such action may be taken without a
meeting on written consent, setting forth the action so taken, signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
9. The following actions may be authorized at a meeting of the
shareholders by a vote of the holders of a majority of the outstanding shares:
A. The authorization by the shareholders to amend the
Corporation's Certificate of Incorporation to strike out a provision
that restricts the board in its management of the business of the
Corporation or that transfers to one or more shareholders or to one or
more persons or corporations to be selected by him or them all or any
part of the management otherwise within the authority of the board, as
provided by Section 620 of the New York Business Corporation Law, as
amended by Section 35 of L. 1997, Ch. 449.
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<PAGE> 4
B. The authorization by the shareholders to amend the
Corporation's Certificate of Incorporation to change the proportion of
directors that shall constitute a quorum for the transaction of business
or of any specified item of business, as provided by Section 709 of the
New York Business Corporation Law, as amended by Section 42 of L. 1997,
Ch. 449.
C. The authorization by the shareholders of a plan of merger or
consolidation, as provided by Section 903 of the New York Business
Corporation Law, as amended by Section 53 of L. 1997, Ch. 449 and
Section 4 of L. 1997, Ch. 494.
D. The authorization by the shareholders of the sale, lease,
exchange or other disposition of all or substantially all assets of the
Corporation, if not made in the usual or regular course of the business
actually conducted by the Corporation, as provided by Section 909 of the
New York Business Corporation Law, as amended by Section 58 of L.
1997, Ch. 449.
E. The authorization by the shareholders of a plan of binding
share exchange between the Corporation and another corporation, as
provided by Section 913 of the New York Business Corporation Law, as
amended by Section 61 of L. 1997, Ch. 449.
F. The authorization by the shareholders of the dissolution of
the Corporation, as provided by Section 1001 of the New York Business
Corporation Law, as amended by Section 63 of L. 1997, Ch. 449.
10. The Corporation may lend money to or guarantee the obligation of a
director if the board determines that the loan or guarantee benefits the
corporation and approves the specific loan or guarantee or a general plan
authorizing loans or guarantees, as provided by Section 714 of the New York
Business Corporation Law, as amended by Section 45 of L. 1997, Ch. 449.
IV. The restatement of the Certificate of Incorporation effected hereby
was authorized by the vote of the Board of Directors of the Corporation,
followed by the vote of the holders of at least a majority of all outstanding
shares entitled to vote thereon at a meeting of shareholders of the Corporation.
IN WITNESS WHEREOF, we have signed this Certificate this 27th day of
February, 1998, and hereby affirm the truth of the statements contained herein
under penalties of perjury.
/s/ Raymond C. Sparks
----------------------------------
Raymond C. Sparks,
President
/s/ James M. Jenkins
----------------------------------
James M. Jenkins,
Assistant Secretary
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<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
OF
SEL-DRUM INTERNATIONAL, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
Corporation shall be held on the first Tuesday of January of each year, or if a
legal holiday, on the next business day thereafter, or on such date and at such
time as may be fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of shareholders may be held at any
time in the interval between annual meetings. Special meetings may be called by
the President, or by request of a majority of the Board of Directors, or by the
Secretary upon the written request of the holders of not less than 25 percent of
the shares outstanding and entitled to vote at the meeting, which written
request shall state the purpose or purposes of the meeting and the matters
proposed to be acted on thereat. In the event that a special meeting of
shareholders is called by the Secretary upon such written request, such
requesting shareholders shall pay the reasonably estimated costs of preparing
and mailing notices of such meeting. Nothing contained herein shall limit the
right and power of directors or shareholders to require a special meeting for
the election of directors pursuant to section 603 of the Business Corporation
Law.
SECTION 3. PLACE OF MEETINGS. Each meeting of shareholders shall be held at the
principal office of the Corporation or at such other place within or without the
State of New York as the Board of Directors may from time to time determine.
SECTION 4. NOTICE OF MEETINGS. Written notice of the date, time and place each
meeting of shareholders, indicating that it is being issued by or at the
direction of the person or persons calling the meeting, shall be given
personally or by mail (as hereinafter provided), not less than ten days nor more
than 60 days before the date fixed for the meeting, to each shareholder entitled
to vote at the meeting. In the case of each special meeting of shareholders,
such notice shall also state the purpose or purposes of the meeting, and at the
special meeting no business shall be acted upon which is not related to the
purpose or purposes stated in the notice of the meeting. If at any meeting of
shareholders action is proposed to be taken which would, if taken, entitle
shareholders fulfilling the requirements of section 623 of the Business
Corporation Law to receive payment for their shares, the notice of such meeting
shall also include a statement of that purpose and to that effect and shall be
accompanied by a copy of said section 623 or an outline of its material terms.
Each notice of meeting of shareholders shall be given to a shareholder by
delivering it to him in person, or by placing it in the United States mail,
first-class postage prepaid and addressed to him at his address as it appears on
the books of the Corpo-
<PAGE> 2
ration, unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some other address,
in which event it shall be mailed to the address designated in such request.
Notice of meeting as required by this Section need not be given to any
shareholder who submits, in person or by proxy, whether before or after the
meeting, a signed waiver of notice. The attendance, in person or by proxy, of
any shareholder at a meeting without protesting prior to the conclusion of the
meeting the lack of notice to him of such meeting, shall constitute a waiver of
notice by him. No notice of an adjourned meeting of shareholders need be given
unless the Board of Directors fixes a new record date for the adjourned meeting.
SECTION 5. RECORD DATES. For the purpose of determining the shareholders
entitled to notice of or to vote at a meeting of shareholders or any adjournment
thereof, the Board of Directors may fix a date of record which shall not be more
than 50 days nor less than ten days before the date of such meeting. For the
purpose of determining shareholders entitled to express consent to or dissent
from any proposal without a meeting, or for determining shareholders entitled to
receive payment of a dividend or the allotment of any rights, or for any other
action, the Board of Directors may fix a date of record which shall not be more
than 50 days prior to such action.
SECTION 6. QUORUM. At each meeting of shareholders, in order to constitute a
quorum there shall be present in person or represented by proxy shareholders
holding a majority in number of the shares of the Corporation outstanding and
entitled to vote thereat; but if there be no quorum, the holders of such shares
so present or represented may by majority vote adjourn the meeting from time to
time (but not for a period of more than 30 days at any one time) without notice
other than by announcement at the meeting, until a quorum shall attend. At any
such adjournment at which a quorum shall attend, any business may be transacted
which might have been transacted at the meeting as originally called. When a
quorum is once present, it is not broken by the subsequent withdrawal of any
shareholder.
SECTION 7. VOTING. At each meeting of shareholders, each shareholder entitled to
vote thereat may vote in person or by proxy, and shall have one vote for each
share standing in his name on the books of the Corporation. Upon demand of one
or more shareholders holding in the aggregate ten percent of the shares present
in person or represented by proxy and entitled to vote at the meeting, voting
shall be by ballot. A plurality of the votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take any other
action, except as may otherwise by provided by these By-laws.
SECTION 8. PROXIES. Every proxy shall be in writing, subscribed by the
shareholder giving the same, or his duly authorized attorney, and dated. No
proxy which is dated more than 11 months before the meeting at which it is
offered shall be accepted, unless such proxy shall, on its face, name a longer
period for which it is to remain in force.
SECTION 9. CONDUCT OF MEETINGS. Each meeting of shareholders shall be presided
over by the President of the Corporation or, in his absence, by the Chairman of
the Board (if any) or, in the absence of both of them, by an Executive Vice
President (if any) or, in the absence of all such officers, by a chairman chosen
at the meeting. The Secretary of the Corporation or, in his absence, a person
chosen by the chairman of the meeting, shall act as secretary of the meeting.
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<PAGE> 3
SECTION 10. ACTION WITHOUT A MEETING. Whenever shareholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the holders of
outstanding shares entitled to vote thereon having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled vote thereon were present and voted. Such
written consent shall have the same effect as a vote of the shareholders
entitled to vote thereon.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. ELECTION AND POWERS. The Board of Directors shall have the management
and control of the business and affairs of the Corporation. The directors shall
be elected by the shareholders entitled to vote thereon at each annual meeting
of shareholders, and each director shall serve until his successor is duly
elected or appointed and qualifies, unless his directorship shall be earlier
vacated by his death, resignation or removal as provided by this Article.
SECTION 2. NUMBER. The number of directors constituting the entire Board of
Directors shall be such number, not less than one, as shall be designated from
time to time by the shareholders or by a majority vote of the entire Board. In
the absence of such designation, the number of directors constituting the entire
Board shall be one. As used in these By-laws, the term "entire Board" shall mean
the total number of directors which the Corporation would have if there were no
vacancies.
SECTION 3. VACANCIES. Vacancies on the Board of Directors (including any
vacancies resulting from an increase in the number of directors) created for any
reason except the removal of one or more directors by the shareholders, may be
filled by vote of the Board of Directors. If the number of directors then in
office is less than a quorum, such vacancies may be filled by a majority vote of
the directors then in office. A successor director elected under this Section
shall hold office for the unexpired portion of the term of the director whose
place was vacated. In the event of an increase in the number of directors, each
additional director elected under this Section shall hold office until his
successor has been duly elected or appointed and shall have qualified.
SECTION 4. REMOVAL. Any one or more directors may be removed from office, with
or without cause, by the shareholders entitled to vote in the election of
directors. Any vacancy on the Board resulting from such removal may be filled by
the shareholders entitled to vote in the election of directors, and any
successor director elected to fill such vacancy shall hold office for the
unexpired portion of the term of the director who was removed.
SECTION 5. MEETINGS. Regular meetings of the Board of Directors shall be held at
such times as the Board may from time to time determine. Special meetings of the
Board of Directors shall be held at any time, upon call by the Chairman of the
Board, the President or at least one-third of the directors then in office.
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<PAGE> 4
SECTION 6. PLACE OF MEETINGS. Each meeting of the Board of Directors shall be
held at the principal office of the Corporation or at such other place, within
or without the State of New York, as the Board may from time to time determine.
SECTION 7. NOTICE OF MEETING. Written notice of the date, time and place of each
regular and special meeting of the Board of Directors shall be given to each
director either (a) by delivering the same to him personally, or sending the
same to him by telecopier, telex, telegraph or similar mode of communication, or
leaving the same at his residence or usual place of business, in each case at
least 24 hours before the meeting, or (b) by placing the same in the United
States mail, first-class postage prepaid, or delivering the same to a reputable
express mail delivery service, and addressed to him at his last known address
according to the records of the Corporation, in either case at least three days
before the meeting. No notice of any adjourned meeting of the Board of Directors
need be given other than by announcement at the meeting.
SECTION 8. WAIVER OF NOTICE. Notice of any meeting of the Board of Directors
need not be given to any director who submits a signed written waiver thereof
whether before, during or after the meeting, nor to any director who attends the
meeting without protesting, either prior thereto or at its commencement, the
lack of notice to him.
SECTION 9. QUORUM. A majority of the entire Board shall be necessary to
constitute a quorum for the transaction of any item of business at each meeting
of the Board of Directors; but if at any meeting there be less than a quorum
present, a majority of those directors present may adjourn the meeting from time
to time without notice other than by announcement at the meeting, until a quorum
shall attend. At any such adjournment at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 10. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken by the Board of Directors or by any committee thereof at a duly held
meeting may be taken without a meeting if all members of the Board of Directors
or of the committee, as the case may be, consent in writing to the adoption of
resolutions authorizing the action. Such resolutions and such written consents
shall be filed with the minutes of the proceedings of the Board of Directors or
of the committee.
SECTION 11. PERSONAL ATTENDANCE BY CONFERENCE COMMUNICATION EQUIPMENT. Any one
or more members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or of such committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
SECTION 12. COMPENSATION. Directors shall not receive compensation for their
services in that capacity, but by resolution of the Board of Directors a fixed
sum and reimbursement of expenses may be paid to directors for attendance at
each meeting of the Board. Nothing herein shall be construed to preclude a
director from serving the Corporation in any other capacity and receiving
compensation therefor.
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<PAGE> 5
SECTION 13. EXECUTIVE COMMITTEE AND OTHER COMMITTEES. The Board of Directors
may, in its discretion and by a majority vote of the entire Board, appoint an
Executive Committee, or one or more other committees of the Board, to consist of
three or more directors, as the Board of Directors may from time to time
determine. The Executive Committee shall have and may exercise between meetings
of the Board all the powers of the Board of Directors in the management and
control of the business and affairs of the Corporation, and other committees of
the Board shall have such powers as are conferred upon them by the Board of
Directors, except that neither the Executive Committee nor any other committee
shall have power: (a) to recommend to shareholders any action requiring
shareholder approval; (b) to fill vacancies on the Board of Directors or on any
committee thereof; (c) to fix compensation of directors for service on the Board
of Directors or on any committee thereof; (d) to adopt, amend or repeal by-laws;
(e) to amend or repeal any resolution of the Board of Directors which is not by
its terms made amendable or repealable by such committee; or (f) to remove, or
fix the compensation of, any officer who is elected by the Board of Directors.
In the absence of any member of the Executive Committee or of any other
committee of the Board, the members thereof present at any meeting may appoint a
director previously so designated by the Board of Directors as a committee
alternate to act in place of such absent member. The Board of Directors shall
have the power at any time to change the membership of the Executive Committee
or of any other committee of the Board, to fill vacancies in such committee or
to dissolve it. A majority of the members of the Executive Committee or of any
other committee of the Board shall constitute a quorum for the transaction of
any item of business of such committee. The Executive Committee and each other
committee of the Board may make other rules for the conduct of its business, and
may appoint such subcommittees and assistants, as may from time to time be
necessary, unless the Board of Directors shall provide otherwise.
ARTICLE III. OFFICERS
SECTION 1. ELECTION OF OFFICERS. The Board of Directors shall elect or appoint a
President and a Secretary of the Corporation, and may elect or appoint a
Chairman of the Board from among the directors, one or more Vice Presidents, a
Treasurer and such other officers as it shall determine. Each officer shall
serve at the pleasure of the Board of Directors and until his successor is duly
elected or appointed and qualifies, or until his earlier death, resignation or
removal as provided by this Article. Any two offices may be held by the same
person. Any vacancies in any office may be filled by the Board of Directors.
SECTION 2. ASSISTANT AND SUBORDINATE OFFICERS. The Board of Directors may from
time to time elect or appoint one or more Assistant Secretaries, one or more
Assistant Treasurers and such other subordinate officers or agents of the
Corporation as it may deem proper, each of whom shall hold office at the
pleasure of the Board of Directors and shall have such powers and duties as are
assigned to him by the Board.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed at any time,
with or without cause, by the Board of Directors.
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<PAGE> 6
SECTION 4. COMPENSATION. The Board of Directors shall fix the compensation of
all officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such officers (other than the
President) as the Board may specify.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be one,
shall preside at all meetings of the Board of Directors and shall perform such
other duties as the Board of Directors may direct.
SECTION 6. PRESIDENT. The President shall be the Chief Executive Officer of the
Corporation and shall, subject to the direction of the Board of Directors, have
the general management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no Chairman of the
Board, or in his absence or inability to act, the President shall also perform
all duties of the Chairman of the Board subject, however, to the control of the
Board of Directors.
SECTION 7. VICE PRESIDENTS. Any one or more of the Vice Presidents may be
designated by the Board of Directors as an Executive Vice President. At the
request of the President, or in his absence or inability to act, the Executive
Vice President shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be more than
one, the Board of Directors may determine which one or more of the Vice
Presidents shall perform any of such duties or exercise any of such functions;
if such determination is not made by the Board of Directors, the President may
make such determination; otherwise, any of the Vice Presidents may perform any
of such duties or exercise any of such functions. Each Vice President shall have
such other powers and duties as may be properly designated by the Board of
Directors and the President.
SECTION 8. SECRETARY. The Secretary shall keep full minutes of all meetings of
shareholders and of the Board of Directors in books provided for that purpose.
He shall see that all notices are duly given in accordance with the provisions
of these By-laws or as required by law. He shall be the custodian of the records
and of the corporate seal of the Corporation and he shall affix the corporate
seal to all documents the execution of which on behalf of the Corporation is
duly authorized by the Board of Directors, and when so affixed he may attest the
same. The Secretary shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
SECTION 9. TREASURER. The Treasurer shall keep correct and complete books and
records of account of the Corporation. Subject to the control and supervision of
the Board of Directors and the President, or such other officer as the Board of
Directors and the President may designate, the Treasurer shall: establish and
execute programs for the provision of the capital required by the Corporation;
maintain banking arrangements to receive, have custody of and disburse the
Corporation's moneys and securities; invest the Corporation's funds as required;
obtain insurance coverage as required; and direct the granting of credit by and
the collection of accounts due to the Corporation. The Treasurer shall have such
other powers and duties as may be properly designated by the Board of Directors
and the President.
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<PAGE> 7
ARTICLE IV. SHARE CERTIFICATES
SECTION 1. FORM AND SIGNATURES. The interest of each shareholder of the
Corporation shall be evidenced by certificates for shares in such form as the
Board of Directors may from time to time prescribe. The share certificates shall
be signed by the Chairman of the Board or the President or a Vice President, and
by the Secretary or the Treasurer or an Assistant Secretary or Assistant
Treasurer, sealed with the corporate seal of the Corporation, and countersigned
and registered in such manner, if any, as the Board of Directors may prescribe.
When any share certificate is countersigned by a transfer agent or registered by
a registrar, other than the Corporation itself or its employee, the signatures
of such officers, and the corporate seal, may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office before the share certificate is issued,
such certificate may be issued by the Corporation with the same effect as if
such person had not ceased to hold such office.
SECTION 2. TRANSFER OF SHARES. Shares of the Corporation shall be transferred on
the books of the Corporation upon surrender, by the registered holder thereof,
in person or by his attorney, of one or more certificates for the same number of
shares, accompanied by a proper assignment or powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by each
certificate to be the owner of the shares represented thereby, with such proof
of authenticity of the signature as the Corporation, or its agents, may
reasonably require. Such certificate shall have affixed thereto all stock
transfer stamps required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares.
SECTION 3. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any mutilation, loss, theft or destruction thereof. The Board of
Directors may, in its discretion, cause one or more new certificates, for the
same number of shares in the aggregate, to be issued to such holder upon
surrender of the mutilated certificate or, in case of loss, theft or destruction
of the certificate, upon satisfactory proof of such loss, theft or destruction
and the deposit of indemnity by way of bond or otherwise in such form and amount
and with such surety or security as the Board of Directors may require to
indemnify the Corporation and its transfer agent and registrar, if any, against
loss or liability by reason of the issuance of such new certificates; but the
Board of Directors may, in its discretion, refuse to issue such new certificates
save upon the order of a court having jurisdiction therein.
SECTION 4. STOCK LEDGERS. The stock ledgers of the Corporation, containing the
name and address of each shareholder and the number of shares held by each,
shall be maintained at the principal office of the Corporation, or if there be a
transfer agent, at the office of such transfer agent, as the Board of Directors
shall determine.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one or more
transfer agents and one or more registrars of its shares or of any class or
classes of its shares whose respective duties the Board of Directors may from
time to time determine.
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<PAGE> 8
ARTICLE V. INDEMNIFICATION
SECTION 1. GENERALLY. Each person who was or is made a party to or is threatened
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or his testator or
intestate (a) is or was a director or officer of the Corporation or (b) is or
was a director or officer of the Corporation who serves or served, in any
capacity, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise at the request of the Corporation (hereinafter
an "indemnitee"), shall be indemnified and held harmless by the Corporation
against all expense, liability and loss, including without limitation ERISA
excise taxes or penalties, judgments, fines, penalties, amounts paid in
settlement (provided the Board of Directors shall have given its prior consent
to such settlement, which consent shall not be unreasonably withheld by it) and
reasonable expenses, including attorneys' fees, suffered or incurred by such
indemnitee in connection therewith, and such indemnification shall continue as
to an indemnitee who has ceased to be a director or officer and shall inure to
the benefit of the indemnitee's heirs and fiduciaries; provided, however, that
no indemnification may be made to or on behalf of any director or officer if his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated or otherwise
disposed of, or if he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. Notwithstanding the foregoing,
except as contemplated by Section 3 of this Article, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors.
SECTION 2. ADVANCEMENT OF EXPENSES. All expenses reasonably incurred by an
indemnitee in connection with a threatened or actual proceeding with respect to
which such indemnitee is or may be entitled to indemnification under this
Article shall be advanced to him or promptly reimbursed by the Corporation in
advance of the final disposition of such proceeding, upon receipt of an
undertaking by him or on his behalf to repay the amount of such advances, if
any, as to which he is ultimately found not to be entitled to indemnification
or, where indemnification is granted, to the extent such advances exceed the
indemnification to which he is entitled. Such person shall cooperate in good
faith with any request by the Corporation that common counsel be used by the
parties to any proceeding who are similarly situated unless to do so would be
inappropriate due to an actual or potential conflict of interest.
SECTION 3. PROCEDURE FOR INDEMNIFICATION.
(a) Not later than 30 days following final disposition of a proceeding
with respect to which the Corporation has received written request by an
indemnitee for indemnification pursuant to this Article or with respect to which
there has been an advancement of expenses pursuant to Section 2 of this Article,
if such indemnification has not been ordered by a court, the Board of Directors
shall meet and find whether the indemnitee met the standard of conduct set forth
in Section 1 of this Article and, if it finds that he did, or to the extent it
so finds, the Board shall authorize such indemnification.
(b) Such standard shall be found to have been met unless (i) a judgment
or other final adjudication adverse to the indemnitee established that the
standard of conduct set forth in
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<PAGE> 9
Section 1 of this Article was not met, or (ii) if the proceeding was disposed of
other than by judgment or other final adjudication, the Board of Directors finds
in good faith that, if it had been disposed of by judgment or other final
adjudication, such judgment or other final adjudication would have been adverse
to the indemnitee and would have established that the standard of conduct set
forth in Section 1 of this Article was not met.
(c) If the Board of Directors fails or is unable to make the
determination called for by paragraph (a) of this Section 3, or if
indemnification is denied, in whole or part, because of an adverse finding by
the Board of Directors, or because the Board of Directors believes the expenses
for which indemnification is requested to be unreasonable, such action, inaction
or inability of the Board of Directors shall in no way affect the right of the
indemnitee to make application therefor in any court having jurisdiction
therein. In such action or proceeding, or in a suit brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking,
the issue shall be whether the indemnitee met the standard of conduct set forth
in Section 1 of this Article, or whether the expenses were reasonable, as the
case may be (not whether the finding of the Board of Directors with respect
thereto was correct). If the judgment or other final adjudication in such action
or proceeding establishes that the indemnitee met the standard set forth in
Section 1 of this Article, or that the disallowed expenses were reasonable, or
to the extent that it does, the Board of Directors shall then find such standard
to have been met or the expenses to be reasonable, as the case may be, and shall
grant such indemnification, and shall also grant to the indemnitee
indemnification of the expenses incurred by him in connection with the action or
proceeding resulting in the judgment or other final adjudication that such
standard of conduct was met, or if pursuant to such court determination such
person is entitled to less than the full amount of indemnification denied by the
Corporation, the portion of such expenses proportionate to the amount of such
indemnification so awarded. Neither the failure of the Board of Directors to
have made timely a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth in Section 1 of
this Article, nor an actual determination by the Board of Directors that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct.
In any suit brought by the indemnitee to enforce a right to indemnification, or
by the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not entitled to
indemnification, under this Article or otherwise, shall be on the Corporation.
(d) A finding by the Board of Directors pursuant to this Section 3 that
the standard of conduct set forth in Section 1 of this Article has been met
shall mean a finding (i) by the Board of Directors acting by a quorum consisting
of directors who are not parties to such proceeding, or (ii) if such a quorum is
not obtainable, or if obtainable, such a quorum so directs, by the Board of
Directors upon the written opinion of independent legal counsel that
indemnification is proper in the circumstances because the applicable standard
of conduct has been met, or by the shareholders upon a finding that such
standard of conduct has been met.
SECTION 4. CONTRACTUAL ARTICLE. The rights conferred by this Article are
contract rights which shall not be abrogated by any amendment or repeal of this
Article with respect to events occurring prior to such amendment or repeal and
shall, to the fullest extent permitted by law, be retroactive to events
occurring prior to the adoption of this Article. No amendment of the
- 9 -
<PAGE> 10
Business Corporation Law, insofar as it may reduce the permissible extent of the
right of indemnification of an indemnitee under this Article, shall be effective
as to such person with respect to any event, act or omission occurring or
allegedly occurring prior to the effective date of such amendment, irrespective
of the date of any claim or legal action in respect thereof. This Article shall
be binding on any successor to the Corporation, including without limitation any
person or entity which acquires all or substantially all of the Corporation's
assets.
SECTION 5. NON-EXCLUSIVITY. The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which any person covered hereby
may be entitled other than pursuant to this Article. The Corporation is
authorized to enter into agreements with any such person providing rights to
indemnification or advancement of expenses in addition to the provisions
therefor in this Article, and the shareholders and the Board of Directors are
authorized to adopt, in their discretion, resolutions providing any such person
with any such rights.
SECTION 6. INSURANCE. The Corporation may, to the extent authorized from time to
time by the Board of Directors, maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or of any
other corporation, partnership, joint venture, trust or other enterprise against
any expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
this Article or applicable law.
SECTION 7. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and the advancement of expenses to
any employee or agent of the Corporation with the same scope and effect as
provided by this Article to directors and officers of the Corporation.
ARTICLE VI. FINANCES
SECTION 1. DIVIDENDS. The Board of Directors, in its sole discretion, may
declare dividends on the shares of the Corporation, payable upon such dates as
the Board of Directors may designate.
SECTION 2. RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums, as the
Board of Directors, in its sole discretion, may from time to time deem proper as
a reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose or purposes as the Board of Directors shall deem conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve or reserves in the manner in which it was created.
SECTION 3. BILLS, NOTES, ETC. All checks or demands for money and notes or other
instruments evidencing indebtedness or obligations of the Corporation shall be
made in the name
- 10 -
<PAGE> 11
of the Corporation and shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
ARTICLE VII. AMENDMENTS
SECTION 1. POWER TO AMEND. By-laws of the Corporation may be adopted, amended or
repealed by the shareholders entitled to vote in the election of directors. In
addition, by-laws of the Corporation may be adopted, amended or repealed by the
Board of Directors by a majority vote of the entire Board, but any by-law
adopted by the Board of Directors may be amended or repealed by such
shareholders.
SECTION 2. NOTICE OF AMENDMENT AFFECTING ELECTION OF DIRECTORS. If any by-law
regulating an impending election of directors is adopted, amended or repealed by
the Board of Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of directors the by-law so adopted,
amended or repealed, together with a concise statement of the changes made.
ARTICLE VIII. IN GENERAL
SECTION 1. DEFINITIONS.
(a) As used in these By-laws, the term "Business Corporation Law" shall
mean the Business Corporation Law of the State of New York, as it may from time
to time be amended.
(b) Wherever used in these By-laws, the masculine pronoun shall include
the feminine and the neuter, as appropriate in the context.
SECTION 2. CONSTRUCTION. The provisions of these By-laws shall at all times be
subject to the provisions of applicable law in effect from time to time and the
provisions of the Certificate of Incorporation of the Corporation, as it may
from time to time be amended. In the event of any necessary conflict between any
provision of these By-laws and any provision of applicable law then in effect,
such provision of law shall control. In the event of any necessary conflict
between any provision of these By-laws and any provision of the Certificate of
Incorporation then in effect, such provision of the Certificate of Incorporation
shall control. The Article and Section headings of these By-laws are for
convenience of reference only and do not form a part hereof and do not in any
way modify, interpret or construe the intention expressed hereby.
* * * * *
- 11 -
<PAGE> 1
EXHIBIT 10(a)
EMPLOYMENT CONTRACT
THIS AGREEMENT made as of 1st day of November, 1997.
BETWEEN:
SEL-DRUM INTERNATIONAL, INC.
----------------------------
Hereinafter called the "Company"
of the FIRST PART,
- - and -
RAYMOND SPARKS
--------------
Hereinafter called the "Executive"
of the SECOND PART,
WHEREAS the Company desires to employ the services of the Executive in
connection with the conduct of the Company's business;
AND WHEREAS the Executive desires to be employed by the Company;
AND WHEREAS the Executive recognizes and acknowledges that the
Executive's position with the Company will provide the Executive with access to
the Company's customers and/or its confidential and proprietary business
information.
NOW THEREFORE IN CONSIDERATION of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, hereby agree, as follows:
1. Employment.
----------
The Company shall employ the Executive, and the Executive shall serve
the Company in the capacity and on the terms specified in this Agreement. Since
the Executive is a citizen of the United States of America, and accordingly must
be authorized by the Government of Canada to work within Canada, this Agreement
and the employment of the Executive by the Company shall be subject to and
conditional upon the issuance of such approval or authorization by the
Government of Canada. The Company shall make best efforts on an ongoing basis
during the term of this Agreement in providing assistance to the Executive in
<PAGE> 2
2
securing employment authorization or such other necessary authorization from
Employment and Immigration Canada, as required on an ongoing basis, including
but not limited to, providing the Executive with a letter setting out an offer
of employment.
2. Period.
------
(a) This Agreement shall commence on the date hereof and, subject to
the other provisions hereof, shall continue for a period of
three (3) years, being fully completed on October 31, 2000
("Term"). At the end of the Term, this Agreement shall continue
for an additional one (1) year period if the Company shall give
the Executive written notice of its intention to extend the
Agreement for such period at least thirty (30) days prior to the
end of the Term; provided, however, the salary for such renewal
period shall be agreed upon by the parties by no later than ten
(10) days prior to the end of the Term failing which this
Agreement shall be fully completed on October 31, 2000.
(b) A renewal of this Agreement as provided for in paragraph 2(a)
shall not include any further right of renewal.
(c) The Executive's continuous period of employment by the Company
shall be deemed to have commenced on November 1, 1997.
3. Duties and Performance.
-----------------------
During the continuance of this Agreement, the Executive:
(a) shall serve the Company in the position of President and Chief
Executive Officer (or in such capacity as may from time to time
be mutually agreed upon) and shall perform and render such duties
and services as are customarily performed and rendered by one
holding such position. The Executive shall be located at and
principally work from the Company's offices in Burlington,
Ontario;
(b) shall report to the Board of Directors of the Company ("Board")
or as delegated by the Board;
(c) shall perform and render all of the duties and services that may
be required of and from the Executive consistent with the
responsibilities and authority of his position and pursuant to
the terms and conditions hereof, faithfully, industriously, to
the best of his ability, experience and talents, and to the
reasonable satisfaction of the Board, shall comply with the
advice, directions, orders, policies, regulations and standards
of the Board as promulgated from time to time;
(d) may be required in pursuance of his employment to be engaged in
work on behalf of the Company or any parent, subsidiary or
affiliate of the Company from time to time ("collectively, the
"Group"); and
<PAGE> 3
3
(e) shall devote his entire work time, attention, knowledge, skills,
energies and best efforts to the performance and rendition of his
duties and services hereunder, and to the furtherance of the
business and interests of the Company and the Group.
4. Remuneration.
-------------
(a) As remuneration for his services hereunder, the Company shall pay
the Executive, and the Executive agrees to accept, a base salary
of $125,000.00 (U.S.), or at such other rate as may from time to
time be mutually agreed upon in writing. Such base salary shall
be payable in accordance with the Company's usual payment policy
and practices, but not less frequent than monthly. Base salary
shall be subject to any applicable federal, provincial and local
withholding taxes and deductions.
(b) A bonus may be payable, at the end of the second year and/or the
end of the third year of this Agreement, based upon mutually
agreed upon performance targets, if any. No bonus shall be
payable with regard to the first year of this Agreement.
(c) A relocation allowance of $25,000.00 (U.S.) shall be paid to the
Executive at such time as the authorization to work in Canada has
been issued, as aforestated, and the Executive has taken up
full-time residence in Canada. This allowance shall be a one-time
payment as reimbursement for all expenses incurred by the
Executive in assuming employment in and moving to Canada.
5. Expenses.
---------
During the continuance of this Agreement, the Executive shall be
entitled:
(a) to be reimbursed for all reasonable out-of-pocket expenses which
he has properly incurred in performing his duties and obligations
under this Agreement upon receipt by the Company of satisfactory,
itemized accounts and receipts of all such expenditures which
shall not be in excess of any limitation established for such
expenditures by the Company; and
(b) to a car allowance in the amount of $750.00 (U.S.) per month.
From this car allowance, the Executive is to make all car lease
payments (if any). The Company will reimburse the Executive for
gas, oil, parking and car insurance expenses which the Executive
incurs in the course of executing his duties under this
Agreement. Payment will be made within thirty days of receipt by
the Company of invoices documenting these expenses.
6. Benefit Plans.
--------------
<PAGE> 4
4
The Company agrees that the Executive shall be entitled to customary
employee benefits provided by the Company to other senior personnel upon his
qualification for and in accordance with the terms and conditions of the plans
and programs established and implemented by the Company. Subject to the terms of
such plans or programs and federal and provincial laws applicable thereto, the
Executive acknowledges that the Company may change, alter or eliminate, without
the Executive's consent, any and all of such benefits at any time.
7. Vacations and Statutory Holidays.
---------------------------------
The Executive shall be entitled in each calendar year, other than 1997,
to the following vacations and paid holidays:
(a) three (3) weeks vacation will full salary to be taken at such
reasonable time or times as may be approved by the Company; and
(b) paid statutory holidays in accordance with the personnel policies
of the Company.
8. Illness and Disability.
-----------------------
(a) The Company shall continue to pay the Executive at his normal
rate of pay during any periods of absence resulting from sickness
or injury up to an aggregate maximum of ninety (90) working days
during the Term and the renewal, if any; provided however, the
Company may require the Executive to provide medical certificates
in accordance with the personnel policy of the Company.
(b) If the Executive is participating in the short-term disability
program of the Company, if any, it is expressly understood
between the parties that any payments made to the Executive by
the Company during any temporary disability will be reduced by
the amount the Executive is entitled to receive from the
disability program of the Company in accordance with the
provisions of any group policy issued to the Company.
9. Termination.
------------
Notwithstanding paragraph 2(a) of this Agreement:
(a) The Executive's employment by the Company shall terminate if the
Executive fails to obtain or maintain his status to work in
Canada, or dies.
(b) The Executive's employment by the Company shall terminate on
October 31, 2000 unless this Agreement has been extended by the
Company in accordance with paragraph 2(a) of this Agreement.
<PAGE> 5
5
(c) The Executive's employment by the Company shall terminate on
October 31, 2001 if this Agreement has been extended by the
Company in accordance with paragraph 2(a) of this Agreement.
(d) The Executive's Employment by the Company may be terminated by
the Company at any time, and for any reason, including just
cause, during the Term or the extension, if any, of the Term;
provided that without restricting in any way the meaning or
definition of "just cause", it is understood that with respect
to the obligations and duties of the Executive as set out in or
referred to in this Agreement, termination of the Executive for
"just cause" shall entail a material breach of this Agreement by
the Executive.
(e) If the Company terminates the employment of the Executive for
just cause, the Executive shall not be entitled to notice or
severance pay or any other compensation whatsoever.
(f) If the Company terminates the employment of the Executive as
provided in paragraph 9(d) (other than for just cause) prior to
the expiry of the Term, or the extension of it, the Executive
undertakes to use his best efforts to obtain alternative
employment and the Company agrees to continue the Executive's
salary and benefits until the earlier of the date the Executive
obtains alternative employment or the expiry of a period of one
year from the date of the termination of the Executive's
employment. Where the Executive obtains alternative employment
prior to the end of the one year period aforestated, the Company
shall also pay to the Executive an amount equal to fifty percent
(50%) of the Executive's remaining base salary, from the date he
obtains alternative employment to the end of the one year period
aforestated. For the purposes of this paragraph, alternative
employment shall mean both employment of the Executive by a new
employer or commencement of or participation by the Executive in
any business venture, provided that the commencement of or
participation by the Executive in any business venture shall not
include any inquiry, meetings, or negotiations by the Executive
with any person(s) or corporation(s) of a general nature where
no firm commitment or binding arrangement exists between the
Executive and such person(s) or corporation(s) for the
commencement of or participation by the Executive in such
business venture.
(g) Upon the termination of this Agreement for any reason, the
Executive shall:
(i) immediately return to the Company all papers, documents,
books, accounts, drawings, credit cards, keys, computer
software, and other property belonging to, or relating
to the business of, the Company or any company in the
group which are then in the possession or control of the
Executive;
(ii) immediately return to the Company any company
automobile; and
<PAGE> 6
6
(iii) upon the Company's request, immediately in writing
resign any directorship or other office which the
Executive may hold in the Company or any company in the
Group without compensation for loss thereof and transfer
any nominee or other shares owned by the Company or any
such company in the Group to such person or company as
the Company shall nominate.
(h) Notwithstanding the termination of this Agreement for any
reason, the provisions of Paragraphs 9(e), 9(f), 10(c), 10(d),
10(e), 10(f), 10(g) and 11, as and if applicable, shall continue
in full force and effect.
10. Restraints on the Executive's Activities.
-----------------------------------------
(a) During the continuance of this Agreement, the Executive shall not
be, directly or indirectly, engaged, concerned or interested in
any capacity in any other trade, business or occupation, except:
(i) as the owner of securities which are held for investment
only, which are listed on a recognized stock exchange, and
which do not exceed five percent (5%) in nominal value of
the securities of that class ("Approved Ownership"); or
(ii) with the prior written consent of the Company, which
consent shall not be unreasonably withheld. A request for
such written consent shall include the detail of any
proposed concern and/or interest.
(b) During the continuance of this Agreement, the Executive shall
comply with all applicable laws, regulations and rules in force
from time to time relating to trading of shares of stock of the
Company, and shall obtain the prior written consent of the Board
before effecting a trade of shares of stock of the Company;
provided that the provisions of this subparagraph 10(b) shall
not in any way limit, restrict or diminish the terms and
provisions of the non-incentive stock option granted to the
Executive pursuant to a Non-Incentive Stock Option Grant dated
as of November 3rd, 1997.
(c) During the term of the employment of the Executive with the
Company and at all times thereafter, the Executive shall keep
confidential and shall not at any time use, for his own or
another's advantage or disclose to any person, firm or company
any trade secrets, business methods or confidential information
concerning the business, financial status or affairs of the
Company or any company in the Group, including but not limited
to, customer or supplier lists, trade processes or materials,
price lists, pricing, costings, new product or business plans
("Confidential Information") which may have come to the
Executive's knowledge during his employment hereunder provided,
however, this restriction shall not prevent:
<PAGE> 7
7
(i) any disclosure or use authorized by the Board, required by
law, or made to enable the Executive to perform his duties
hereunder, or
(ii) the use of the personal skills of the Executive in any
business in which he may be lawfully engaged, subject to
the terms of this Paragraph 10, after termination of this
Agreement; or
(iii) the use of Confidential Information that is in or comes
into the public domain in any way without breach of this
Agreement by the Executive.
(d) During the term of this Agreement and for the period ending one
(1) year after the actual date of termination of employment
("Covenant Period"), the Executive shall not, whether alone or
jointly with another, and whether directly or indirectly,
solicit or endeavor to entice away, knowingly offer employment
to, knowingly employ, or offer or conclude any contract for
services with, any person who is employed by the Company or any
company in the Group at the date of the termination of the
Executive's employment and who has been employed in skilled or
managerial work at any time during the period of one (1) year
preceding the date of the termination of the Executive's
employment by the Company or any company in the Group.
(e) Recognizing that the Company's business success is dependent
upon the Confidential Information and business relationships
which the Company entrusts to its employees, the Executive
agrees that during the term of his employment and for the
Covenant Period, the Executive shall not, directly or
indirectly:
(i) call upon or solicit any customer of the Company or the
Group, or prospective customers with whom the Executive
had access to Confidential Information or had involvement
in development, or cause or attempt to cause any such
customer or prospective customer to divert, terminate,
limit or in any manner modify or fail to enter into, any
actual or potential business relationship or contract with
the Company or the Group;
(ii) cause or attempt to cause any supplier or prospective
supplier of the Company or the Group to divert, terminate,
limit or in any manner modify or fail to enter into any
actual or potential relationship or contract with the
Company or the Group.
(f) Each provision of this Paragraph 10 constitutes an entirely
separate and independent restriction. The Executive acknowledges
and agrees that the duration, extent and application of each
respective restriction of this Paragraph 10 is no greater than
is reasonable and necessary for the protection of the interests
of the Company, but that if any arbitrator or court of competent
jurisdiction shall determine that the period, the scope, or the
territory covered by, or any other provision of, this covenant
pursuant to this Paragraph 10 is unreasonable, such
<PAGE> 8
8
provision shall not be deemed to be null and void and of no
effect but shall be reformed by such arbitrator or court to
impose a reasonable period, reasonable scope, reasonable distance
limitation or reasonable other provision, as the case may be.
(g) In the event of a breach by the Executive of his obligations and
covenants hereunder, the Company shall be entitled to temporary
and/or permanent injunctive relief against the Executive, in
addition to any and all other rights or remedies which it may
have, including damages and reasonable solicitor's fees. The
Executive hereby expressly acknowledges that the harm which might
result to the Company's goodwill or its relationships with
customers, or as a result of the disclosure or use of the
Confidential Information, is irreparable.
(h) In addition to any other rights and remedies which the Company
may have, if the Executive breaches any of his obligations
pursuant to this Paragraph 10 at any time during the period of
payment under Paragraph 9(f), the Company shall immediately cease
to have any liability for such salary payments, or for provision
of benefits during or for the applicable period under the
provisions of Paragraph 9(f), which obligations by the Company
shall become null and void and of no further force and effect.
11. Inventions.
-----------
The Executive has a special obligation to further the interests of the
Company and the Group. Accordingly, if the Executive makes, develops, modifies,
or discovers any discovery, invention, improvement or process in the course of
his employment for the Company or the Group (the "Discovery"), he shall:
(a) immediately provide full details of the Discovery to the Company;
(b) not disclose any details of the Discovery to any third party
without prior written consent of the Company;
(c) if required by the Company during or after the termination of
this Agreement, do all that is necessary to obtain patent or
other protection of the Discovery in any country specified by the
Company; and
(d) hold in trust for the Company all rights in the Discovery.
12. Miscellaneous.
-------------
(a) This Agreement shall supersede all prior agreements made between
the parties hereto relating to the employment of the Executive.
<PAGE> 9
9
(b) Except as stated herein,
(i) this Agreement contains the entire agreement of the
parties as to its subject matter; and
(ii) neither party has entered into this Agreement in
reliance upon any oral representation, warranty or
inducement leading to the signature hereof.
(c) The various provisions of this Agreement are severable and, if
any provision is held to be invalid or unenforceable by any court
of competent jurisdiction, then such invalidity or
unenforceability shall not affect the remaining provisions
hereof.
(d) No modifications or amendment of any of the provisions of this
Agreement shall be effective unless in writing specifically
referring hereto, and signed by the parties.
13. Notice.
-------
All notices and other communications hereunder shall be in writing and
shall be hand-delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to the addresses as follows:
to the Company: with a copy to:
Sel-Drum International, Inc. Ross & McBride
c/o Sel-Drum Corporation Barrister & Solicitors
1370 Artisans Court P.O. Box 907
Burlington, Ontario Hamilton, Ontario
L7L 5Y2 L8N 3P6
Attention: Messrs. Brian Turnbull/ Attention: Messrs. Peter R. Tice/
Robert Asseltine Paul D. Paradis
to the Executive:
Raymond Sparks
16 Great Oak Lane
Pittsford, New York
U.S.A. 14534
or to such other address as shall be furnished in writing by either party to the
other party. All notices and other communications hereunder given in the manner
provided above shall be deemed effective on the date of hand delivery or two (2)
days after deposit in the mail.
<PAGE> 10
10
14. No Waiver.
----------
No failure on the part of either party at any time to require the
performance by the other party of any term hereof shall be taken or held to be a
waiver of such term or in any way affect such party's right to enforce such
term, and no waiver on the part of either party of any term hereof shall be
taken or held to be a waiver of any other term hereof or the breach thereof.
15. Benefit and Assignment.
-----------------------
The Executive acknowledges that the duties and services to be performed
and rendered by him are unique and personal; accordingly, the Executive may not
assign any of his rights or delegate any of his duties hereunder without the
prior written consent of the Company which may be withheld in its sole and
absolute discretion. The rights and obligations of the Company hereunder shall
be assignable and shall enure to the benefit of, and be binding upon, the
successors and assigns of the Company.
16. Construction.
--------------
Whenever a singular word is used herein, it shall also include the
plural wherever required by the context, and vice versa; and whenever any gender
is used herein, it shall also include the other genders wherever required by the
context. The terms and conditions hereof shall be interpreted and construed in
accordance with their usual and customary meanings, and the parties hereby
expressly waive and disclaim, in connection with the interpretation and
construction hereof, any rule of law or procedure requiring otherwise,
specifically including, but not limited to, any rule of law to the effect that
ambiguous or conflicting terms or conditions contained herein shall be
interpreted and construed against the party whose counsel prepared this
Agreement or any earlier draft hereof.
17. Arbitration and Governing Law.
------------------------------
Except for the enforcement of any rights to equitable relief to which
the parties consent to jurisdiction in the courts of the Province of Ontario,
the Executive and the Company agree that any dispute, controversy or claim
arising out of, based upon or relating to Executive's employment, this Agreement
or the breach, termination or invalidity thereof, including claims for tortious
interference, other tortious or statutory claims (including claims for
discrimination or discharge based upon race, sex, age, religion, disability or
other prohibited grounds), claims against any parent or affiliate of the Company
or any director, officer or employee of the Company or any of its parents or
affiliates, and claims arising out of, based upon or relating to Paragraph 10 of
this Agreement, whether arising before, during or after termination of
Executive's employment or this Agreement, shall be resolved by binding
arbitration before one (1) arbitrator pursuant to the rules of The Arbitration
and Mediation Institute of Ontario for commercial arbitration. Judgment on the
award rendered by the
<PAGE> 11
11
arbitrator may be entered in any court having jurisdiction thereof. This
Agreement shall be interpreted in accordance with the governed by the laws of
Ontario. Except as provided under the law and/or the provisions of Paragraphs
10(f) and 12(c) herein, the arbitrator shall have no authority to alter, amend,
modify or change this Agreement. Each party shall bear their own costs of
arbitration regardless of which party prevails in such arbitration. If the
Company is required to enforce the terms of this Agreement or otherwise seek
relief against the Executive under the terms of this Agreement or any third
party arising from or related to the terms hereof shall pay the solicitor's fees
of the Company.
18. Captions.
---------
The captions herein are for convenience and identification purposes
only, are not an integral part hereof, and are not to be considered in the
interpretation of any part hereof.
19. Counterparts.
-------------
This Agreement may be executed in separate counterparts, each of which
shall be an original, but all of such counterparts shall together constitute but
one and the same instrument.
The parties have entered into this Employment Agreement based solely
upon the terms and conditions set out herein. This Agreement contains a binding
arbitration provision which may be enforced by the parties.
IN WITNESS WHEREOF the Company and the Executive have each executed this
Agreement as of the day and in the year first written.
SIGNED, SEALED & DELIVERED )SEL-DRUM INTERNATIONAL, INC.
in the presence of: )
)
)
/s/ Karmel Sakran )/s/ Brian Turnbull
- --------------------- )--------------------------
Barrister & Solicitor )Authorized Signing Officer
1327 Ontario Street )
Burlington, Ontario )
L7S 1E9 )/s/ Raymond Sparks
)---------------------------
)Raymond Sparks
<PAGE> 1
EXHIBIT 10(b)
SEL-DRUM INTERNATIONAL, INC.
NON-INCENTIVE STOCK OPTION GRANT
This non-incentive stock option, granted as of November 3, 1997 (the
"Option") is granted by SEL-DRUM INTERNATIONAL, INC. ("Sel-Drum" or the
"Company") to RAYMOND C. SPARKS (the "Optionee"), the Chief Executive Officer
and President of the Company.
1. Shares Subject to Option
-------------------------
The Company hereby grants to the Optionee an option to
purchase 250,000 shares of its Common Stock, no par value per share (the
"Optioned Shares") at a price of $.40 per share (the "Option Price"), in
accordance with and subject to all the terms and conditions contained herein.
2. Term and Exercise of Option
---------------------------
The Option shall terminate at the close of business on
November 3, 2000, and may be exercised only by the Optionee or, to the extent
provided in Section 3(c) hereof, by his legal representative.
The Option Price of each share purchased shall be paid (i) in cash,
certified check or a bank cashiers check; or (ii) by delivery of other shares of
the Company's Common Stock owned by the Optionee, which shall be valued at their
fair market value on the day of exercise of the Option; or (iii) in any
combination of the two forms of payment.
This Option is not an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as from time to time amended,
and, therefore, in addition to payment of the Option Price for each share
purchased, the Optionee shall pay the amount of federal and state withholding
taxes determined by the Committee named in Section 1 of the Plan (or by the
Committee's designate) to be owing with respect to the compensation income that
the Optionee will realize upon each share purchased.
The Company, upon fulfillment of the requirements for exercise,
including receipt of the payment of the purchase price and all applicable
withholding taxes, shall deliver the shares purchased hereunder to the Optionee.
3. Terms and Conditions of Exercise
--------------------------------
Each exercise and purchase of shares pursuant to the Option
shall be subject to the following terms and conditions:
<PAGE> 2
(a) The Option shall immediately vest with respect to all
250,000 shares.
(b) The Optionee shall have remained in the continuous employ
of or affiliation with the Company from the date the Option was granted until
the date of exercise, provided that, if the Optionee's employment or affiliation
terminates for any cause other than death, the Optionee may purchase in whole or
in part within 30 days after termination of employment or affiliation the shares
available to him on his termination date provided that the expiration date of
the Option as to such shares shall not have occurred.
(c) If the Optionee dies, then his legal representative or the
person or persons to whom his rights under the Option shall pass by will or by
the applicable laws of descent and distribution shall be entitled, subject to
the condition that no Option shall be exercisable after the expiration of three
years from the date it was granted, within twelve months after the date of his
death, to exercise the Option to the extent that the Optionee would have been
entitled to exercise the Option on the date of his death.
(d) The Optionee shall not exercise the Option during the
period ending six months from the date of the grant of the Option and shall hold
the Optioned Shares for investment and not with a view to, or for resale in
connection with, any public distribution of such shares, and if requested, shall
deliver to the Company appropriate certificates to that effect. This restriction
shall terminate upon the registration of such shares under Federal and state
securities laws.
(e) In the event that the Company, upon the advice of counsel,
deems it necessary to list upon official notice of issuance any shares to be
issued pursuant to the Plan on a national securities exchange or to register
under the Securities Act of 1933 or other applicable federal or state statute
any shares to be issued pursuant to the Plan, or to qualify any such shares for
exemption from the registration requirements of the Securities Act of 1933 under
the Rules and Regulations of the Securities and Exchange Commission or for
similar exemption under state law, then the Company shall notify the Optionee to
that effect and no Optioned Shares shall be issued until such registration,
listing or exemption has been obtained.
4. Option Non-Transferable
-----------------------
The Option may not be transferred by the Optionee or by
operation of law other than by will or by the laws of descent and distribution.
It may be exercised during the lifetime of the Optionee only by him.
5. Right to Terminate
------------------
Nothing contained in the Option Grant shall restrict the right
of the Company to terminate the employment or affiliation of the Optionee at any
time.
- 2 -
<PAGE> 3
6. Dissolution or Reorganization
-----------------------------
If the Company proposes to dissolve or to liquidate or
proposes to merge or consolidate with or into any other corporation, or to sell
substantially all of its assets, whether for cash or stock, any option granted
under the Plan may, at the discretion of the Board, either be adjusted so as to
apply to the securities to which the holder of the number of shares of Common
Stock of the Company subject to the option would have been entitled by reason of
such merger, consolidation or sale, or terminate as of the date to be fixed by
the Board. Nevertheless, if the Board determines to terminate any such option,
not less than 30 days written notice of the date so fixed shall be given to each
optionee and each optionee shall have the right, during the 30-day period
preceding such termination, to exercise his option as to all or any part of the
shares covered thereby including shares as to which such option would not
otherwise be exercisable.
7. Restrictions on Transfer of Stock
---------------------------------
The Shares of stock issued on exercise of the Option shall be
subject to any restrictions on transfer then in effect pursuant to the
Certificate of Incorporation or By-laws of the Company and to any other
restrictions or provisions attached hereto and made a part hereof or set forth
in any other contract or agreement binding on the Optionee.
8. Notice Concerning Disposition of Shares
---------------------------------------
If the Option granted hereby is an incentive stock option, any
disposition by the Optionee of the Optioned Shares purchased under the Option
within two years from the date of grant or within one year after their transfer
to the Optionee will deprive the Optionee of certain tax benefits with respect
to the Option which might otherwise be available.
9. Status of Option
----------------
This Option is not an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as from time to
time amended.
IN WITNESS WHEREOF, this Stock Option Grant has been executed as of the
date first above written.
SEL-DRUM INTERNATIONAL, INC.
By: /s/ Robert Asseltine
--------------------------------
Robert Asseltine
Chairman
- 3 -
<PAGE> 1
EXHIBIT 10(c)
REDEMPTION AGREEMENT
THIS AGREEMENT is made as of this day of January, 1998, by and among
547118 ONTARIO LTD. ("Seller") and SEL-DRUM IMAGING CORPORATION ("SDIC") and
SEL-DRUM INTERNATIONAL, INC. ("Sel-Drum"), a Colorado corporation with a
principal place of business at 501 Amherst Street, Buffalo, New York 14207-2913
(SDIC and Sel- Drum are sometimes collectively referred to as the
"Corporation").
W I T N E S S E T H
WHEREAS, Seller wishes to have certain shares of Class D Preferred Stock
(aka Special Shares) in SDIC redeemed upon the terms and conditions set forth in
this Agreement; and
WHEREAS, after thorough deliberation by the Board of Directors, Sel-Drum
has determined that it is in the best interests of the Corporation to redeem
certain shares of Class D Preferred Stock (aka Special Shares) of Seller in SDIC
upon the terms and conditions set forth herein; and
WHEREAS, the parties desire to enter into such other agreements as are
necessary as the result of the redemption of Seller's interests;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, the parties to this Agreement agree as follows:
1. REDEMPTION
(a) REDEMPTION OF SHARES. Upon the terms and conditions
hereinafter set forth, Seller will transfer and deliver to the Corporation
certificates representing 241 of the shares of SDIC's Class D Preferred Stock
(aka Special Shares) owned by Seller (the "Shares"), all duly endorsed, or with
stock powers duly executed and attached, and the Corporation shall redeem the
Shares from Seller.
(b) REDEMPTION PRICE. The total redemption price to be paid by
the Sel-Drum to the Seller for the Shares shall be One Hundred Seventy-Five
Thousand, Two Hundred Seventy-Nine Dollars and 30/100 ($175,279.30) payable in
the form of a bank or certified check.
2. SELLER'S REPRESENTATIONS AND WARRANTIES
(a) STOCK OWNERSHIP. As of the date of this Agreement, Seller is
the lawful owner of record and beneficially of all of the Shares, free and clear
of all pledges, liens, encumbrances, claims, security interests and other
charges of any nature whatsoever, including without limitation any agreements,
subscriptions, options, warrants, calls,
<PAGE> 2
commitments or rights of any character granting to any person, corporation or
other entity any interest in, or right to acquire from Seller at any time, or
upon the happening of any stated event, any shares of the outstanding capital
stock of the Corporation owned by Seller. Seller has the full legal power,
authority and capacity required by law to transfer and deliver the Shares of the
Corporation in accordance with this Agreement free and clear of all pledges,
liens, encumbrances, claims, security interests and other charges of any nature
whatsoever.
(b) VALIDITY OF CONTEMPLATED TRANSACTION. Neither the execution
and delivery of this Agreement by Seller nor his consummation of the
transactions contemplated hereby will contravene or violate, be in conflict with
or result in the breach (with or without the giving of notice or lapse of time,
or both), of any term, condition, or provision of any note agreement,
instrument, indenture, contract, lease, agreement or other document or
understanding (written or oral) to which Seller is a party or by which he or any
of his properties or assets, including the Shares, may be bound or affected.
3. CORPORATION'S REPRESENTATIONS AND WARRANTIES
(a) SEL-DRUM AND SDIC REPRESENTATIONS AND WARRANTIES. Each of
Sel-Drum and SDIC jointly and severally represents and warrants to Seller as
follows:
(b) Each corporation is a corporation duly incorporated,
validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated and has all
necessary corporate power, and is duly authorized to carry
out the transactions contemplated by this Agreement.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will
not violate or conflict with any provisions of the
Certificate of Incorporation or the By-laws of either
corporation or violate any order, judgment, award, decree
or contract or agreement of any kind or nature to which
the Corporation is a party or is subject.
(d) Each corporation has taken all action required by law, its
Certificate of Incorporation and its By-laws, or
otherwise, to authorize and approve the execution,
delivery and performance of this Agreement.
(e) Each corporation has sufficient surplus as of the date
hereof so that payment can be made without violating any
Corporate Law of any jurisdiction requiring that Sellers'
interest be redeemed only out of surplus.
4. CLOSING
Unless otherwise agreed upon in writing by the parties hereto,
the Closing shall take place on January 31, 1998 at the Canadian offices of
Sel-Drum International, Inc., 1370 Artisans Court, Burlington, Ontario L7L 5Y2
(the "Closing").
- 2 -
<PAGE> 3
5. MISCELLANEOUS
(a) FURTHER ASSURANCES. Each party shall cooperate with the
others, take such further action, and execute and deliver such further
documents, as may be reasonably requested by the other parties in order to carry
out the terms and purposes of this Agreement.
(b) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
several representations, warranties and covenants of the parties herein
contained, and the provisions hereof by which their terms are to be performed
after the date hereof, shall survive the execution and delivery of this
Agreement and shall be effective regardless of any investigation which may have
been or may be made at the time by or on behalf of the party to whom such
representations, warranties, covenants and agreements are made.
(c) AMENDMENT AND WAIVER. This Agreement may be amended only by a
writing executed by all of the parties hereto. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein, shall be
effective unless evidenced by an instrument in writing duly executed by the
parties sought to be charged therewith. No failure on the part of any party to
exercise, and no delay in exercising, any of its rights hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by any party of
any rights preclude any other or future exercise thereof or the exercise of any
other right.
(d) ASSIGNMENT. No party shall assign or attempt to assign any of
its rights or obligations under this Agreement without the prior written consent
of each of the other parties hereto.
(e) BINDING EFFECT. Subject to the provisions of (d) above, this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement creates no rights of
any nature in any party not a party hereto.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
agreements made and to be performed entirely within such state and without
regard to principles of conflicts of laws.
(g) EFFECT OF AGREEMENT. This Agreement, and those other
agreements and documents to be executed at closing pursuant to the terms of this
Agreement, set forth the entire understanding of the parties, and supersedes any
and all prior agreements, arrangements and understandings, whether written or
oral, relating to the subject matter hereof.
(h) HEADINGS; COUNTERPARTS. The section headings of this
Agreement are for convenience of reference only and do not form a part hereof,
and do not in any way modify, interpret or construe the intention of the
parties. This Agreement may be executed in one or
- 3 -
<PAGE> 4
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by registered or certified mail, return receipt requested, postage
prepaid or to such other address as any party shall have specified by notice in
writing to the holder.
(j) If to the Seller: 547118 Ontario Ltd.
c/o Sel-Drum International, Inc.
1370 Artisans Court
Burlington, Ontario L7L 5Y2
Attention: Brian Turnbull
(k) If to Sel-Drum Sel-Drum International, Inc.
or SDIC: 1370 Artisans Court
Burlington, Ontario L7L 5Y2
Attention: Raymond C. Sparks,
President
with copies to: Ross & McBride
Barrister & Solicitors
P.O. Box 907
Hamilton, Ontario L8N 3P6
Attention: Messrs. Peter R. Tice/
Paul D. Paradi
Harter, Secrest & Emery LLP
700 Midtown Tower
Rochester, New York 14604-2070
Attention: James M. Jenkins, Esq.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date above first written.
547118 ONTARIO LTD.
By:
------------------------------------
Brian Turnbull
Its:
SEL-DRUM INTERNATIONAL, INC.
By:
------------------------------------
Raymond C. Sparks, President
SEL-DRUM IMAGING CORPORATION
By:
------------------------------------
Raymond C. Sparks, President
- 5 -
<PAGE> 1
Exhibit 10(d)
REDEMPTION AGREEMENT
THIS AGREEMENT is made as of this day of January, 1998, by and among
ROBERT ASSELTINE ("Seller"), GERALDINE ASSELTINE ("Consenting Party") and SEL-
DRUM IMAGING CORPORATION ("SDIC") and SEL-DRUM INTERNATIONAL, INC. ("Sel-
Drum"), a Colorado corporation with a principal place of business at 501 Amherst
Street, Buffalo, New York 14207-2913 (SDIC and Sel-Drum are sometimes
collectively referred to as the "Corporation").
W I T N E S S E T H
WHEREAS, Seller wishes to have certain shares of Class C Preferred Stock
(aka Special Shares) in SDIC redeemed upon the terms and conditions set forth in
this Agreement; and
WHEREAS, after thorough deliberation by the Board of Directors, Sel-Drum
has determined that it is in the best interests of the Corporation to redeem
certain shares of Class C Preferred Stock (aka Special Shares) of Seller in SDIC
upon the terms and conditions set forth herein; and
WHEREAS, the parties desire to enter into such other agreements as are
necessary as the result of the redemption of Seller's interests;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, the parties to this Agreement agree as follows:
1. REDEMPTION
(a) REDEMPTION OF SHARES. Upon the terms and conditions
hereinafter set forth, Seller will transfer and deliver to the Corporation
certificates representing 172 of the shares of SDIC's Class C Preferred Stock
(aka Special Shares) owned by Seller (the "Shares"), all duly endorsed, or with
stock powers duly executed and attached, and the Corporation shall redeem the
Shares from Seller.
(b) REDEMPTION PRICE. The total redemption price to be paid by
the Sel-Drum to the Seller for the Shares shall be One Hundred Twenty-Five
Thousand, Ninety-Five Dollars and 60/100 ($125,095.60) payable in the form of a
bank or certified check.
2. SELLER'S REPRESENTATIONS AND WARRANTIES
(a) STOCK OWNERSHIP. As of the date of this Agreement, Seller is
the lawful owner of record and beneficially of all of the Shares, free and clear
of all pledges, liens,
<PAGE> 2
encumbrances, claims, security interests and other charges of any nature
whatsoever, including without limitation any agreements, subscriptions, options,
warrants, calls, commitments or rights of any character granting to any person,
corporation or other entity any interest in, or right to acquire from Seller at
any time, or upon the happening of any stated event, any shares of the
outstanding capital stock of the Corporation owned by Seller. Seller has the
full legal power, authority and capacity required by law to transfer and deliver
the Shares of the Corporation in accordance with this Agreement free and clear
of all pledges, liens, encumbrances, claims, security interests and other
charges of any nature whatsoever.
(b) VALIDITY OF CONTEMPLATED TRANSACTION. Neither the execution
and delivery of this Agreement by Seller nor his consummation of the
transactions contemplated hereby will contravene or violate, be in conflict with
or result in the breach (with or without the giving of notice or lapse of time,
or both), of any term, condition, or provision of any note agreement,
instrument, indenture, contract, lease, agreement or other document or
understanding (written or oral) to which Seller is a party or by which he or any
of his properties or assets, including the Shares, may be bound or affected.
3. CORPORATION'S REPRESENTATIONS AND WARRANTIES
(a) SEL-DRUM AND SDIC REPRESENTATIONS AND WARRANTIES. Each of
Sel-Drum and SDIC jointly and severally represents and warrants to Seller as
follows:
(b) Each corporation is a corporation duly incorporated,
validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated and has all
necessary corporate power, and is duly authorized to carry
out the transactions contemplated by this Agreement.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will
not violate or conflict with any provisions of the
Certificate of Incorporation or the By-laws of either
corporation or violate any order, judgment, award, decree
or contract or agreement of any kind or nature to which
the Corporation is a party or is subject.
(d) Each corporation has taken all action required by law, its
Certificate of Incorporation and its By-laws, or
otherwise, to authorize and approve the execution,
delivery and performance of this Agreement.
(e) Each corporation has sufficient surplus as of the date
hereof so that payment can be made without violating any
Corporate Law of any jurisdiction requiring that Sellers'
interest be redeemed only out of surplus.
-2-
<PAGE> 3
4. CLOSING
Unless otherwise agreed upon in writing by the parties hereto,
the Closing shall take place on January 31, 1998 at the Canadian offices of
Sel-Drum International, Inc., 1370 Artisans Court, Burlington, Ontario L7L 5Y2
(the "Closing").
5. MISCELLANEOUS
(a) CONSENTING PARTY'S APPROVAL. Consenting Party hereby waives
any rights, title or interests she may have to receive payments for her Shares
in connection with this redemption.
(b) FURTHER ASSURANCES. Each party shall cooperate with the
others, take such further action, and execute and deliver such further
documents, as may be reasonably requested by the other parties in order to carry
out the terms and purposes of this Agreement.
(c) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
several representations, warranties and covenants of the parties herein
contained, and the provisions hereof by which their terms are to be performed
after the date hereof, shall survive the execution and delivery of this
Agreement and shall be effective regardless of any investigation which may have
been or may be made at the time by or on behalf of the party to whom such
representations, warranties, covenants and agreements are made.
(d) AMENDMENT AND WAIVER. This Agreement may be amended only by a
writing executed by all of the parties hereto. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein, shall be
effective unless evidenced by an instrument in writing duly executed by the
parties sought to be charged therewith. No failure on the part of any party to
exercise, and no delay in exercising, any of its rights hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by any party of
any rights preclude any other or future exercise thereof or the exercise of any
other right.
(e) ASSIGNMENT. No party shall assign or attempt to assign any of
its rights or obligations under this Agreement without the prior written consent
of each of the other parties hereto.
(f) BINDING EFFECT. Subject to the provisions of (d) above, this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement creates no rights of
any nature in any party not a party hereto.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
agreements made and to be performed entirely within such state and without
regard to principles of conflicts of laws.
-3-
<PAGE> 4
(h) EFFECT OF AGREEMENT. This Agreement, and those other
agreements and documents to be executed at closing pursuant to the terms of this
Agreement, set forth the entire understanding of the parties, and supersedes any
and all prior agreements, arrangements and understandings, whether written or
oral, relating to the subject matter hereof.
(i) HEADINGS; COUNTERPARTS. The section headings of this
Agreement are for convenience of reference only and do not form a part hereof,
and do not in any way modify, interpret or construe the intention of the
parties. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by registered or certified mail, return receipt requested, postage
prepaid or to such other address as any party shall have specified by notice in
writing to the holder.
(k) If to the Seller: Robert Asseltine
Sel-Drum International, Inc.
1370 Artisans Court
Burlington, Ontario L7L 5Y2
(l) If to Sel-Drum Sel-Drum International, Inc.
or SDIC: 1370 Artisans Court
Burlington, Ontario L7L 5Y2
Attention: Raymond C. Sparks,
President
with copies to: Ross & McBride
Barrister & Solicitors
P.O. Box 907
Hamilton, Ontario L8N 3P6
Attention: Messrs. Peter R.
Tice/Paul D. Paradi
Harter, Secrest & Emery LLP
700 Midtown Tower
Rochester, New York 14604-2070
Attn.: James M. Jenkins, Esq.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date above first written.
----------------------------------------
Robert Asseltine, Seller
----------------------------------------
Geraldine Asseltine
Consenting Party
SEL-DRUM INTERNATIONAL, INC.
By:
----------------------------------------
Raymond C. Sparks, President
SEL-DRUM IMAGING CORPORATION
By:
----------------------------------------
Raymond C. Sparks
President
- 5 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's January 31, 1998 Form 10-QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 553,716
<SECURITIES> 0
<RECEIVABLES> 2,003,155
<ALLOWANCES> 102,525
<INVENTORY> 3,050,697
<CURRENT-ASSETS> 5,646,239
<PP&E> 1,781,741
<DEPRECIATION> 963,461
<TOTAL-ASSETS> 6,761,547
<CURRENT-LIABILITIES> 1,410,335
<BONDS> 0
0
4,624,901
<COMMON> 771,356
<OTHER-SE> (180,327)
<TOTAL-LIABILITY-AND-EQUITY> 6,761,547
<SALES> 7,177,077
<TOTAL-REVENUES> 7,117,077
<CGS> 4,673,496
<TOTAL-COSTS> 4,673,496
<OTHER-EXPENSES> 1,901,510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (35,124)
<INCOME-PRETAX> 469,182
<INCOME-TAX> 206,765
<INCOME-CONTINUING> 262,417
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,417
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
