As filed with the Securities and Exchange Commission on July 11 , 1996
Registration No. 333-3875
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE BETHLEHEM CORPORATION
(Name of Small Business Issuer in its Charter)
Pennsylvania 3443 24-0525900
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
25th and Lennox Streets
Easton, Pennsylvania 18045
(610) 258-7111
(Address and Telephone Number of Principal Executive Offices)
Alan H. Silverstein
President
25th and Lennox Streets
Easton, Pennsylvania 18045
(610) 258-7111
(Name, Address and Telephone Number of Agent For Service)
---------------
Copy to:
David J. Adler, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
(212) 755-1467 (telecopier)
Approximate date of proposed sale to the public: As soon as practicable after
this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a) may determine.
<PAGE>
The Bethlehem Corporation
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM SB-2 REGISTRATION STATEMENT CAPTION OR LOCATION IN PROSPECTUS
<S> <C> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus..................................... Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................................... Inside Front and Outside Back Cover
Pages of Prospectus; Available
Information
3. Summary Information and Risk Factors.................... Prospectus Summary; Risk Factors
4. Use of Proceeds......................................... Use of Proceeds
5. Determination of Offering Price......................... Determination of Subscription Price
6. Dilution................................................ Dilution
7. Selling Security Holders................................ *
8. Plan of Distribution.................................... Outside Front Cover Page of
Prospectus; The Rights Offering;
Subscription Agent; Information
Agent
9. Legal Proceedings....................................... Business of the Company
10. Directors, Executive Officers, Promoters
and Control Persons................................... Management
11. Security Ownership of Certain Beneficial
Owners and Management................................. Principal Shareholders; Shares
Eligible for Future Sale
12. Description of Securities............................... Description of Capital Stock
13. Interests of Named Experts and Counsel.................. Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................................... Indemnification For Securities Act
Liabilities
15. Organization Within Last Five Years................... ..... *
16. Description of Business............................... Capitalization; Selected Consolidated
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business of the Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
17. Management's Discussion and Analysis or
Plan of Operation.................................... Management's Discussion and
Analysis of Financial Condition and
Results of Operations
18. Description of Property.............................. Business of the Company
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters.................................. Price Range of Common Stock and
Dividend Policy
21. Executive Compensation............................... Management
22. Financial Statements................................. Consolidated Financial Statements
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure............... *
</TABLE>
__________________
* Not applicable
ii
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JULY 11, 1996
1,356,964 Shares
The Bethlehem Corporation
Common Stock
--------------------
The Bethlehem Corporation, a Pennsylvania corporation (the "Company"), is
distributing to holders of record of shares of its Common Stock, no par value
(the "Common Stock"), transferable subscription rights (the "Rights") to
subscribe for and purchase additional shares of Common Stock for a price of
$______ per share (the "Subscription Price"). Such shareholders will receive
seven Rights for every 10 shares of Common Stock held by them as of the close of
business on __________, 1996 [the effective date of the Registration Statement
of which this Prospectus forms a part] (the "Record Date"). Rights will not be
issued with respect to shares of Common Stock issuable upon exercise of
outstanding options or warrants, whether or not presently exercisable or "in the
money." The Subscription Price represents a 30% discount from the closing price
of the Common Stock on the American Stock Exchange, Inc. (the "AMEX") on the
Record Date. No fractional Rights or cash in lieu thereof will be distributed or
paid by the Company. The number of Rights distributed by the Company to each
record holder of Common Stock (each, a "Holder") will be rounded up to the
nearest whole Right. Rights holders may purchase one share of Common Stock for
each whole Right held. Each Right also carries the right to subscribe (the
"Oversubscription Privilege") at the Subscription Price for shares of Common
Stock that are not otherwise purchased pursuant to the exercise of Rights. See
"The Rights Offering--Subscription Privileges--Oversubscription Privilege." The
Rights will be evidenced by transferable certificates. Once a holder has
exercised any Rights, such exercise may not be revoked. The consummation of the
Rights Offering is not dependent upon the receipt by the Company of any minimum
amount of proceeds of exercise of Rights. There can be no assurance that the
Company will receive any such proceeds .
The Rights will expire at 5:00 p.m., New York City time, on ________,
1996 [30 calendar days after the Record Date] (the "Expiration Date").
Shareholders who do not exercise or sell their Rights will relinquish the value
inherent in the Rights. Accordingly, shareholders are strongly urged to consider
the exercise or sale of their Rights. See "Risk Factors--Dilution."
At June 30, 1996, Universal Process Equipment, Inc. ("UPE"), owned
381,600 shares of Common Stock and, in addition, UPE, its officers, directors
and affiliates held options and warrants to purchase an aggregate of an
additional 1,821,000 shares of Common Stock. Assuming all of such options and
warrants had been exercised at such date, UPE would have beneficially owned
approximately 62% of the outstanding Common Stock. See "Risk Factors--Control by
Principal Shareholder." UPE will receive 267,120 Rights in respect of the shares
of Common Stock it owns, and such Rights represent approximately 20% of the
total Rights to be distributed. UPE has informed the Company that it intends to
exercise the Rights it receives for an aggregate subscription price of
$___________. UPE has also informed the Company that it does not intend to
exercise the Oversubscription Privilege or to acquire Rights through open market
purchases, the exercise of options or otherwise. As a result of the ownership of
27% of the outstanding Common Stock by UPE and its affiliates and the options to
purchase Common Stock that UPE and its affiliates hold, UPE has, and after the
Rights Offering will have, effective control of the Company. In addition,
certain officers and directors of the Company
<PAGE>
unaffiliated with UPE have expressed their intent to exercise up to 285,000 of
the Rights they receive, including Rights received in respect of Common Stock
acquired upon the exercise of options prior to the Record Date. See "Rights
Offering--Intent of UPE and Certain Officers and Directors."
The Company expects that the net proceeds of exercise of the Rights will
be used primarily, and in the following order of priority, (i) to expand the
operations of the Company's wholly owned subsidiary, BAM ($500,000), (ii) to
invest in inventory for the Company's heat transfer, filtration and high
temperature furnace product lines ($750,000), (iii) to renovate the Company's
laboratory and laboratory equipment and to purchase a management information
system/network ($250,000), and (iv) for working capital and general corporate
purposes (remainder). In the event that all of the Rights are not exercised, the
amount of such net proceeds available for working capital and general corporate
purposes will be reduced and, if necessary, the amount available to renovate the
Company's laboratory and laboratory equipment, to purchase a management
information system network and to invest in inventory will be reduced. See "The
Company--Strategy" and "Use of Proceeds."
The principal market for the Common Stock is the AMEX. It is anticipated
that the Rights will trade on the AMEX under the symbol "BETR." There can be no
assurance, however, that a market for the Rights will develop. Rights may also
be sold in over-the-counter and private sales transactions. Orders to sell
Rights must be received by the Subscription Agent (as hereinafter defined) not
later than ____ a.m. on __________, 1996, if a holder wishes to sell Rights
through the Subscription Agent. On May 14, 1996, the last day on which trade
prices were reported prior to the public announcement of the Rights Offering,
the closing sale price of the Common Stock on the AMEX was $2.875 per share. On
July 9, 1996, the closing sale price of the Common Stock on the AMEX was $2.375
per share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN
FULL WILL EXPERIENCE DILUTION IN THEIR RELATIVE
PERCENTAGE OWNERSHIP IN THE COMPANY UPON ISSUANCE
OF THE COMMON STOCK TO SHAREHOLDERS EXERCISING THEIR RIGHTS.
-----------------
BEFORE MAKING AN INVESTMENT DECISION, POTENTIAL INVESTORS
SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH IN "RISK FACTORS"
IMMEDIATELY FOLLOWING THE PROSPECTUS SUMMARY.
Underwriting Discounts Proceeds to the
Price to Public and Commissions Company(1)
---------------- ---------------------- ---------------
Per Share......... $ [ ] N/A $ [ ]
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<PAGE>
Total $ [ ] N/A $ [ ]
- ---------------------
(1) After deduction of estimated expenses of $ payable by the Company,
including registration fees, listing fees, legal and accounting fees,
subscription and information agent fees, printing expenses and other
miscellaneous fees and expenses.
-----------------
The date of this Prospectus is _______, 1996.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can be obtained upon written request addressed to the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Company's Common Stock is listed on the AMEX and such
reports, proxy statements and other information can also be inspected at the
offices of the AMEX, 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on
Form SB-2 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock issuable upon exercise of the Rights. This
Prospectus does not contain all of the information set forth in the Registration
Statement. Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in this Prospectus or
in any document incorporated in this Prospectus by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING MATERIAL IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS
PROSPECTUS DOES NOT GIVE EFFECT TO THE ISSUANCE SUBSEQUENT TO THE RECORD DATE OF
350,000 SHARES OF COMMON STOCK TO UPE IN CONSIDERATION FOR AN OWNERSHIP INTEREST
IN CERTAIN RESALE INVENTORY. SEE "CERTAIN TRANSACTIONS."
THE COMPANY
The Company was founded in 1856 as a foundry and machine shop and
incorporated in 1888. The Company designs, manufactures, sells and services a
product line of capital equipment used to process materials for a variety of
industrial applications. Its proprietary products include the Porcupine
Processor(R), the Thermal Disc(R) Processor, the Tower Filter Press, drum dryers
and flakers, tubular dryers, and calciners. In addition, the Company operates a
production facility that fabricates, machines and assembles equipment to
customers' specifications. The Company has developed expertise in the areas of
thermal processing systems, environmental systems, filtration, specialty
machining, and fabrication and the rebuilding and remanufacture of specialty
process equipment. In addition, the Company, through Bethlehem Advanced
Materials Corporation ("BAM"), a wholly-owned subsidiary formed in September
1995 to acquire certain assets of the American Furnace Division of Third
Millennium Products, Inc., designs and manufactures high-temperature furnaces
for sale and for its own use and processes specialty carbon, graphite and
ceramic materials for semiconductors and aerospace applications. See "Business
of the Company--General."
The Company's principal executive offices are located at 25th and
Lennox Streets, Easton, Pennsylvania 18045.
Summary
Financial and Operating Data
(In thousands, except per
share and weighted average
share data)
<TABLE>
<CAPTION>
Fiscal Five Fiscal Nine Months Ended
Year Months Year ------------------------
Ended Ended Ended February February
May 31, May 31, December 31, 29 28
1995 1994 1993 1996 1995
---------- --------- ------------- ---------- ---------
(Unaudited)
Operating Data:
<S> <C> <C> <C> <C> <C>
Net sales $14,541 $2,898 $8,368 $12,375 $10,877
Gross profit (loss) 2,581 (205) (489) 2,771 1,837
Income (loss) from operations before
provision for income taxes 231 (930) (3,493) 217 144
Net income (loss) 230 (931) (3,403) 217 144
Earnings (loss) per common and common
equivalent share
Primary $.08 $(.49) $(2.13) $.07 $.06
Assuming full dilution .08 (.49) (2.13) .07 .05
Weighted average number of common
and common equivalent shares outstanding
Primary 2,946,423 1,888,520 1,595,929 2,984,280 2,581,530
Fully diluted 3,026,762 1,888,520 1,595,929 3,039,430 2,903,745
</TABLE>
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<PAGE>
At February 29, 1996
--------------------
Actual As Adjusted(2)
----- --------------
Balance Sheet Data: (Unaudited)
Current assets $8,270
Total assets 11,700
Current liabilities 8,855
Long-term liabilities 4,501
Total liabilities 13,356
Stockholders' equity (deficiency) (1,656)
- ----------------------
(1) In April 1994, the Company changed its fiscal year-end from December
31 to May 31 for both financial reporting and income tax purposes.
(2) Gives effect to (a) the sale by the Company of 1,356,964 shares of
Common Stock upon exercise of Rights offered hereby and (b) the
application of the estimated net proceeds therefrom at an assumed
Subscription Price of $ per share.
THE RIGHTS OFFERING
Rights................. Each Holder of Common Stock will receive seven
transferable Rights for every 10 shares of Common
Stock held of record on __________, 1996 [the
effective date of the Registration Statement of which
this Prospectus forms a part] (the "Record Date"). The
number of Rights distributed by the Company to each
Holder will be rounded up to the nearest whole Right.
An aggregate of approximately 1,356,964 Rights will be
distributed pursuant to the Rights Offering. Each
Right will be exercisable for one share of Common
Stock. An aggregate of approximately 1,356,964 shares
of Common Stock (the "Underlying Shares") will be sold
upon exercise of the Rights, assuming exercise of all
Rights. The distribution of the Rights and sale of
Underlying Shares is referred to herein as the "Rights
Offering." See "The Rights Offering--The Rights."
Basic Subscription
Privilege............ Rights holders are entitled to purchase for the
Subscription Price one share of Common Stock for each
whole Right held (the "Basic Subscription Privilege").
See "The Rights Offering--Subscription
Privileges--Basic Subscription Privilege."
Oversubscription
Privilege............ Each holder of Rights who elects to exercise in full
the Basic Subscription Privilege may also subscribe at
the Subscription Price for additional underlying
Shares available as a result of unexercised Rights, if
any (the "Oversubscription Privilege"). If an
insufficient number of Underlying Shares is available
to satisfy fully all elections to exercise the
Oversubscription Privilege, the available Underlying
Shares will be prorated among holders who exercise
their Oversubscription Privilege based on the
respective numbers of Rights exercised by such holders
pursuant to the Basic Subscription Privilege. See "The
Rights Offering--Subscription Privileges--
Oversubscription Privilege."
Subscription Price..... $_________ in cash per share of Common Stock
subscribed for pursuant to the Basic Subscription
Privilege or the Oversubscription Privilege. See "The
Rights Offering-- The Rights."
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<PAGE>
Shares of Common Stock
Outstanding after
Rights Offering...... Approximately 3,295,484 shares, based on the number of
shares outstanding on June 30, 1996 and assuming
exercise of all Rights. See "Risk Factors--Dilution."
Intent of UPE
and Certain Officers
and Directors........ UPE has informed the Company that it intends to
exercise the 267,120 Rights it will receive in respect
of the shares of Common Stock currently owned by UPE
for an aggregate subscription price of $________ and
that it does not intend to exercise the
Oversubscription Privilege or to acquire Rights
through open market purchases, the exercise of options
or otherwise. Certain directors and officers of the
Company not affiliated with UPE have expressed their
intent to exercise up to __________ of the Rights,
including Rights they receive in respect of Common
Stock to be acquired upon exercise of options prior to
the Record Date. See "Rights Offering--Intent of UPE
and Certain Officers and Directors."
Transferability
of Rights............ The Rights are transferable, and it is anticipated
that they will trade on the AMEX under the symbol
"BETR." No assurance can be given, however, that a
market for the Rights will develop or, that if such a
market develops, how long it will continue. The
Subscription Agent will endeavor to sell Rights for
holders who deliver a Subscription Certificate with
the instruction for sale properly executed to the
Subscription Agent prior to _____ a.m., New York City
time, on _________, 1996. See "The Rights
Offering--Method of Transferring Rights."
Record Date............ _____________, 1996. See "The Rights Offering--The
Rights."
Expiration Date........ _____________, 1996, at 5:00 p.m., New York City time
[30 calendar days after the Record Date]. See "The
Rights Offering--The Rights."
Procedure for
Exercising Rights.... Basic Subscription Privileges and Oversubscription
Privileges may be exercised by properly completing and
signing the Subscription Certificate evidencing the
Rights (a "Subscription Certificate") and forwarding
such Subscription Certificate (or following the
Guaranteed Delivery Procedures), with payment of the
Subscription Price for each Underlying Share
subscribed for pursuant to the Basic Subscription
Privilege and the Oversubscription Privilege, to the
Subscription Agent on or prior to the Expiration Date.
If the mail is used to forward Subscription
Certificates, it is recommended that insured,
registered mail be used. No interest will be paid on
funds delivered in payment of the Subscription Price.
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC
SUBSCRIPTION PRIVILEGE OR THE OVERSUBSCRIPTION
PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED. SEE "THE
RIGHTS OFFERING--EXERCISE OF RIGHTS."
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<PAGE>
Persons Holding Shares,
or Wishing to
Exercise Rights,
Through Others....... Persons holding shares of Common Stock and receiving
the Rights distributable with respect thereto, through
a broker, dealer, commercial bank, trust company or
other nominee, as well as persons holding certificates
of Common Stock personally who would prefer to have
such institutions effect transactions relating to the
Rights on their behalf, should contact the appropriate
institution or nominee and request it to effect the
transactions for them. See "The Rights
Offering--Exercise of Rights."
Issuance of Common
Stock................ Certificates representing shares of Common Stock
purchased pursuant to the Basic Subscription Privilege
will be delivered to subscribers as soon as
practicable after the corresponding Rights have been
validly exercised and full payment for shares has been
received and cleared. For shares purchased pursuant to
the Oversubscription Privilege, delivery of
certificates will occur as soon as practicable after
the Expiration Date and after all prorations and
adjustments contemplated by the terms of the Rights
Offering have been effected. See "The Rights
Offering--Subscription Privileges."
Use of Proceeds........ The net cash proceeds received by the Company from the
sale of the shares of Common Stock offered hereby,
after payment of fees and expenses, would be
approximately $___________ million, assuming full
exercise of the Rights. The Rights Offering is,
however, not conditioned upon the receipt by the
Company of any minimum amount of proceeds of exercise
of Rights, and there can be no assurance that the
Company will raise any proceeds from the Rights
Offering. UPE has, however, informed the Company that
it intends to exercise the Rights it receives for an
aggregate subscription price of $____________ and
certain officers and directors of the Company not
affiliated with UPE have expressed their intent to
exercise Rights for an aggregate subscription price of
up to $_______.
The Company expects that such proceeds will be used
primarily, and in the following order of priority, (i)
to expand the operations of the Company's wholly owned
subsidiary, BAM ($500,000), (ii) to invest in
inventory for the Company's heat transfer, filtration
and high temperature furnace product lines ($750,000),
(iii) to renovate the Company's laboratory and
laboratory equipment and to purchase a management
information system/network ($250,000), and (iv) for
working capital and general corporate purposes
(remainder). In the event that all of the Rights are
not exercised, the amount of such net proceeds
available for working capital and general corporate
purposes will be reduced and, if necessary, the amount
available to renovate the Company's laboratory and
laboratory equipment, to purchase a management
information system/network and to invest in inventory
will be reduced. See "The Company--Strategy" and "Use
of Proceeds."
Subscription Agent..... American Stock Transfer & Trust Company. See
"Subscription Agent."
Information Agent...... Morrow & Company. See "Information Agent."
-8-
<PAGE>
Risk Factors........... There are substantial risks in connection with this
offering that should be considered by prospective
purchasers including, but not limited to the
following: i) the Company has incurred losses from
operations in the past and may incur such losses in
the future; (ii) the Company has a substantial deficit
in net tangible book value, a substantial deficit in
stockholders' equity and substantial negative working
capital; (iii) purchasers of Common Stock in the
Rights Offering will experience substantial and
immediate dilution, and (iv) the Company does not
anticipate paying cash dividends on its Common Stock
in the foreseeable future. See "Risk Factors."
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<PAGE>
RISK FACTORS
EACH PROSPECTIVE PURCHASER SHOULD CAREFULLY EXAMINE ALL OF THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND SHOULD GIVE PARTICULAR
CONSIDERATION TO THE FOLLOWING RISK FACTORS:
OPERATING LOSSES; FINANCIAL CONDITION
The Company has incurred losses from operations in the past and may
incur such losses in the future. For the five-month transition period ended May
31, 1994 and for the year ended December 31, 1993, such losses aggregated
$930,870 and $3,403,184, respectively.
At May 31, 1995, the Company had a deficit in net tangible book value
of $2,675,728, a deficit in stockholders' equity of $2,027,159 and negative
working capital of $1,576,442. See "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DILUTION
Holders who do not exercise their Rights will experience a decrease in
their proportionate interest in the equity ownership and voting power of the
Company; such decrease in equity ownership and voting power will be
proportionate to the number of Rights actually exercised by other holders. The
sale of the Rights may not compensate a holder for all or any part of any
reduction in the market value of such shareholder's Common Stock resulting from
the Rights Offering. Shareholders who do not exercise or sell their Rights will
relinquish any value inherent in the Rights. Accordingly, holders are strongly
urged to consider the exercise or sale of their Rights.
At February 29, 1996, there was a deficit in net tangible book value
per share of Common Stock of $1.48. The Subscription Price per share of Common
Stock is $____________. Accordingly, the purchasers of the Common Stock in the
Rights Offering will experience immediate and substantial dilution. See
"Dilution."
UPE has informed the Company that it intends to exercise the Rights it
receives in the Rights Offering which will result in the issuance of at least
267,120 additional shares of Common Stock. Such Rights represent approximately
20% of the total Rights to be distributed.
On the Record Date, there were 1,938,532 shares of Common Stock issued
and outstanding. If all of the Rights were to be exercised, there would be an
increase of 1,356,964 shares in the number of shares of Common Stock
outstanding, resulting in a total of 3,295,484 shares of Common Stock
outstanding after consummation of the Rights Offering.
DIVIDEND POLICY AND RESTRICTIONS
The Company does not anticipate that it will pay cash dividends in the
foreseeable future. The payment of dividends by the Company will depend upon its
earnings and financial condition and such other factors as the Board of
Directors may consider relevant. The Company currently plans to retain any
earnings to provide for the development and growth of the Company. In addition,
certain debt facilities of the Company impose restrictions on the payment of
cash dividends. See "Price Range of Common Stock and Dividend Policy."
INDEFINITE AMOUNT AND USE OF PROCEEDS
The net cash proceeds from the Rights Offering after payment of fees
and expenses would be approximately $_________ million, assuming full exercise
of all Rights. The Rights Offering is, however, not
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<PAGE>
conditioned upon the receipt by the Company of any minimum amount of proceeds
from the exercise of Rights. Consequently, there can be no assurance that the
Company will raise any such proceeds .
The Company expects that such proceeds will be used in the following
order of priority, (i) to expand the operations of BAM, (ii) to invest in
inventory for the Company's heat transfer, filtration and high temperature
furnace product lines, (iii) to renovate the Company's laboratory and laboratory
equipment and to purchase a management information system/network, and (iv) for
working capital and general corporate purposes. Although the proceeds from the
Rights Offering will be utilized as described above, the amount of net proceeds
of the Rights Offering is uncertain. In the event that all of the Rights are not
exercised, the amount of such net proceeds available for working capital and
general corporate purposes will be reduced and, if necessary, the amount
available for renovation of the Company's laboratory and laboratory equipment,
to purchase a management information system/network and to invest in inventory
will be reduced. Pending their utilization for other corporate purposes, the
Company expects to invest the proceeds from the Rights Offering primarily in
Treasury obligations, money market instruments and other similar securities and
in bank deposits. See "Use of Proceeds."
LOSSES ON MAJOR CONTRACTS
Historically, the Company recorded losses on certain major contracts.
These losses primarily resulted because the Company undertook major contracts on
a fixed price basis and therefore had to absorb any cost overruns if the Company
could not demonstrate that the original order had been changed or modified while
production or fabrication was in process. During the fiscal year ended May 31,
1995, management implemented procedures to become more selective in the type of
project undertaken, the product orientation and the terms of sale, thereby more
closely monitoring and controlling profit margins on major contracts. In
addition, the Company's management introduced new procedures so that it could
more effectively monitor the status of major contracts and demonstrate changes
or modifications in orders while production or fabrication is in process.
However, there can be no assurance that such new policies will be successful
and, accordingly, the Company may continue to record losses on certain major
contracts in the future.
PROPRIETARY RIGHTS
The Company depends upon its proprietary technology. It relies
principally upon trade secret and copyright law to protect its proprietary
technology and owns no patents that are material to its business. The Company
regularly enters into confidentiality agreements with its employees, customers
and potential customers and limits access to and distribution of its trade
secrets and other proprietary information. There can be no assurance that these
measures will be adequate to prevent misappropriation of its technology or that
the Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technology. In addition,
the laws of some foreign countries do not protect the Company's proprietary
rights to the same extent as the laws of the United States. The Company also is
subject to the risk of adverse claims and litigation alleging infringement of
intellectual property rights. The Company is not presently engaged in any
litigation or aware of any potential litigation concerning its proprietary
technology. See "Business of the Company--Patents and Trademarks."
EXISTENCE OF SHORT-TERM CONTRACTS RESULTING IN LACK OF ASSURED MARKET
Currently, the major portion of the Company's sales are made under
short-term or one-time contracts for the Company's capital equipment or
high-temperature furnaces, which contracts are not subject to renewal. Although
this may afford the Company flexibility in responding to changing market
conditions, a market for the Company's products and services under such
contracts is not assured. As a result, one or more short-term or one-time
contracts may constitute a high percentage of the Company's total net sales for
any particular
-11-
<PAGE>
quarter or fiscal year. The inability of the Company to obtain such contracts in
the future would likely have a material adverse effect on the Company's
business.
The Company's largest customer accounted for 33% of the Company's net
sales for the nine months ended February 29, 1996 and its four largest customers
accounted for 17%, 13%, 12%, and 12% of the Company's revenues during the year
ended May 31, 1995. General Dynamics accounted for 13% of the Company's revenues
in fiscal 1995, 26% of the Company's revenues in the five months ending May 31,
1994 and 15% of the Company's revenues for the year ending December 31, 1993.
UPE accounted for 17% of the Company's revenues in fiscal 1995 and 12% for the
five months ending May 31, 1994. The Company does not anticipate that either
General Dynamics or UPE will account for 10% of revenues for fiscal 1996.
However, the Company's largest customer in fiscal 1996, Eastman Chemical, will
account for approximately 28% of the Company's net sales for the fiscal year
ended May 31, 1996, and the Company anticipates Eastman Chemical will also be a
significant customer for fiscal year ended May 31, 1997.
HIGHLY COMPETITIVE INDUSTRY; IMPACT OF TECHNOLOGICAL CHANGE
The Company engages in various aspects of the capital equipment and
materials processing industries and certain of the businesses in which it
engages are in highly competitive sectors of these industries. In addition, as a
result of technological, regulatory and other legal developments, the Company
faces the risk of new or increased competition in virtually all businesses in
which it engages. While to date, the Company's research and development efforts
have been limited, the Company's future success will depend in large part upon
its ability to develop and introduce on a timely and cost-effective basis new
processes and applications that keep pace with legal and technological
developments and address increasingly sophisticated customer requirements. There
can be no assurance that the Company will be successful in identifying,
developing and marketing applications and process enhancements, that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of product or process enhancements or
new products, applications or processes, or that its products, applications or
processes will adequately meet the requirements of the marketplace and achieve
market acceptance. See "Business of the Company."
ENVIRONMENTAL CONSIDERATIONS
The Company is subject to certain environmental standards imposed by
Federal, state and local environmental laws and regulations. The Company may be
required to expend in the future significant amounts for installation of
environmental control facilities, remediation of environmental conditions and
other similar matters. The costs of complying with such stringent environmental
standards may cause the Company to be competitively disadvantaged vis-a-vis
foreign competitors who may be subject to less stringent standards. In
particular, the operations at the Company's Knoxville, Tennessee plant utilize
incineration and scrubbing of various exhaust streams, designed to comply with
applicable laws and regulations. The plant produces air emissions that are
regulated and permitted by Knox County, Tennessee, Department of Air Pollution
Control (the "DOAPC"). Management believes that the plant is currently in
compliance with the conditions of its permit. The Company has applied to the
DOAPC for additional permits necessary to expand its operations. There can be no
assurance that these permits will be granted. Historically, environmental
liabilities have not had a material effect upon the Company's capital
expenditure requirements, results of operations or competitive position and] the
Company believes that compliance by its operations with applicable environmental
regulations will not have a material effect upon the Company's future capital
expenditure requirements, results of operations or competitive position. There
can be no assurance, however, as to the effect of future changes in federal,
state and county environmental laws or regulations on the Company's results of
operations or financial condition.
-12-
<PAGE>
The Company unilaterally "opted in" to a group settlement in U.S. vs.
Charles Chrin, et al. ("Charles Chrin"). The proposed consent decree is
undergoing final draft revisions and will be submitted for court approval after
a hearing. The Company paid in a total of $55,000 toward the group settlement in
exchange for a covenant not to sue by the United States pursuant to Section
107(a) of the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, or Section 7003 of the Resource Conservation and Recovery Act of
1976. Apart from Charles Chrin, the Company has not received, nor is it aware of
any threatened submission of, any "potentially responsible party" or similar
notices under federal, state or local environmental laws. See "Business of the
Company--Environmental Impact and Regulation."
CONTROL BY PRINCIPAL SHAREHOLDER
The holders of Common Stock are entitled to one vote per share of
Common Stock on all matters, including the election of directors. As of June 30,
1996, UPE held 381,600 shares of Common Stock, or 19.7% of the total votes of
all outstanding Common Stock and Jan P. Gale and Ronald Gale, who are both
directors of the Company and directors, officers and principal shareholders of
UPE held collectively 142,000 shares of outstanding Common Stock, or 7.3% of the
total votes of all outstanding Common Stock. Accordingly, as of June 30, 1996,
UPE and the Messrs. Gale in the aggregate held 523,600 shares of Common Stock,
or 27% of the total votes of all outstanding Common Stock. In addition, UPE held
options and warrants to purchase 1,800,000 shares of Common Stock and the
Messrs. Gale held options to purchase an aggregate of 21,000 shares of Common
Stock. By reason of the exercise of Rights by UPE, UPE and the Gales will
continue to control at least 19.7% and 5.1%, respectively, of the total votes of
all outstanding shares of Common Stock after the Rights Offering and assuming
that UPE and Messrs. Gales exercise all of their outstanding options and
warrants, UPE and the Gales will, in the aggregate, beneficially own 62% of the
outstanding shares of Common Stock after the Rights Offering. In addition, the
Board of Directors has agreed to issue subsequent to the Record Date 350,000
shares of Common Stock to UPE in consideration for an ownership interest in
certain resale inventory, which consists of unused heat transfer equipment owned
by UPE. Assuming these shares are issued and UPE and the Gales exercise all of
their outstanding options and warrants, UPE and Messrs. Gale will beneficially
own at least 52% of the outstanding Common Stock after the Rights Offering. See
"Principal Shareholders" and "Certain Transactions." Such a concentration of
effective control could serve to perpetuate current management, make it
difficult for unaffiliated shareholders to influence the Company's actions and
make the Company less attractive to potential acquirors.
UNCERTAIN MARKET FOR RIGHTS
It is anticipated that the Rights will trade on the AMEX. No assurance
can be given, however, as to whether a market for the Rights will develop or,
that if one does develop, how long it will continue. The Company is not aware of
any broker-dealer that intends to make a market for the Rights. Further, no
assurance can be given as to the prices at which the Rights will trade from time
to time in relation to the Common Stock. Moreover, because the Rights are new
securities, the trading market, if any, for the Rights may be volatile. There
also can be no assurance that the shares of Common Stock issuable upon exercise
of the Rights will trade at or above the Subscription Price. See "The Rights of
Offering."
OTHER MARKET CONSIDERATIONS
There can be no assurance that the market price of the Common Stock
will not decline during the period the Rights are outstanding or that, following
the issuance of the Rights and the sale of the Underlying Shares upon exercise
of Rights, a subscribing Rights holder will be able to sell shares purchased in
the Rights Offering at a price equal to or greater than the Subscription Price.
Once a holder of Rights has exercised the Basic Subscription Privilege or the
Oversubscription Privilege, such exercise may not be revoked. Moreover, until
certificates are delivered, subscribing Rights holders may not be able to sell
the shares of Common Stock that they have purchased in the Rights Offering.
Certificates representing shares of Common Stock purchased
-13-
<PAGE>
pursuant to the Basic Subscription Privilege will be delivered as soon as
practicable after the corresponding Rights have been validly exercised and full
payment for the shares has been received and cleared. For shares purchased
pursuant to the Oversubscription Privilege, delivery of certificates will occur
as soon as practicable after the Expiration Date and after all prorations and
adjustments contemplated by the terms of the Rights Offering have been effected.
See "Price Range of Common Stock and Dividend Policy."
No interest will be paid to Rights holders on funds delivered to the
Subscription Agent pursuant to the exercise of Rights pending delivery of
Underlying Shares.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK
The Company's Amended and Restated Articles of Incorporation authorizes
the issuance of up to 5,000,000 shares of "blank check" preferred stock with
such designations, rights, and preferences as may be determined from time to
time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights that could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying, or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the Company
will not do so in the future. See "Description of Capital Stock."
DILUTIVE EFFECT OF OUTSTANDING WARRANTS AND OPTIONS; REGISTRATION RIGHTS
The Company presently has outstanding options and warrants to purchase
an aggregate of 2,748,000 shares of Common Stock at prices ranging from $.333 to
$3.150 per share. All of the foregoing securities represent the right to acquire
Common Stock of the Company during various periods of time and at various
prices. Holders of these securities are given the opportunity to profit from a
rise in the market price of the Common Stock and are likely to exercise its
securities at a time when the Company would be able to obtain additional equity
capital on more favorable terms. The exercise of outstanding options and
warrants will likely have a dilutive effect on the Company's stockholders and
may have an adverse effect on the market price of the Common Stock.
In addition, certain anti-dilution and piggyback registration rights
may be triggered by the Rights Offering under certain warrants and options of
the Company. See "Description of Capital Stock."
PENNSYLVANIA ANTITAKEOVER LAWS
Various provisions of the Pennsylvania Business Corporation Law (the
"BCL"), under which the Company was organized, generally make "hostile"
takeovers of Pennsylvania corporations more difficult by granting certain rights
to non-interested shareholders in certain "change of control" situations
permitting such shareholders to demand payment from a 20% controlling
shareholder of the "fair value" of such demanding shareholders' shares in cash.
Such provisions may make more difficult the removal of management. In addition,
such provisions may be perceived by certain investors, such as institutions, as
making the Company's securities less attractive investment. The Company did not
elect, within the prescribed time period of the statute, to "opt-out" of these
provisions. See "Description of Capital Stock."
CAPITALIZATION
The following table sets forth the capitalization of the Company at
February 29, 1996 and as adjusted to reflect the sale by the Company of
1,356,964 shares of the Common Stock offered hereby at an assumed
-14-
<PAGE>
Subscription Price of $_____ per share. This table should be read in conjunction
with the Consolidated Financial Statements, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
February 29, 1996
-------------------------------------
Actual As Adjusted
------ -----------
(Unaudited)
<S> <C>
Current maturities of long-term debt.................................................. $ 1,285,000
=========
Long-term debt - net of current maturities............................................ 3,285,000
---------
Stockholders' Equity:
Preferred stock - authorized, 5,000,000 shares without par value; none
issued or outstanding.......................................................... 0
Common stock - authorized, 20,000,000 shares without par value, stated
value of $.50 per share; issued 1,938,532 shares............................... 969,000
Additional paid-in capital........................................................ 4,724,000
Accumulated deficit................................................................ (7,349,000)
Less treasury stock, at cost, 12 shares............................................ 0
---------
Total Stockholders' Equity (Deficiency)........................................ (1,656,000)
-----------
Total Capitalization.................................................................. $1,629,000
==========
</TABLE>
USE OF PROCEEDS
The net cash proceeds from the Rights Offering after payment of fees
and expenses would be approximately $_______ million, assuming full exercise of
all Rights. However, the Rights Offering is not conditioned upon the receipt by
the Company of any minimum amount of proceeds of exercise of Rights and there
can be no assurance that the Company will receive any such proceeds . UPE,
however, has informed the Company that it intends to exercise the Rights it
receives for an aggregate subscription price of $__________ and certain officers
and directors of the Company not affiliated with UPE have expressed their intent
to exercise the Rights they receive for an aggregate subscription price of up to
$______________.
The net proceeds, if any, from the Rights Offering will be applied in
the following order of priority: (i) to expand the operations of BAM ($500,000),
(ii) to invest in inventory for the Company's heat transfer, filtration and high
temperature furnace product lines ($750,000; (iii) to renovate the Company's
laboratory and laboratory equipment and to purchase a management information
system/network ($250,000), and (iv) for working capital and general corporate
purposes (remainder). Although the proceeds from the Rights Offering will be
utilized as described above, the amount of net proceeds of the Rights Offering
is uncertain. In the event that all of the Rights are not exercised, the amount
of such net proceeds available for working capital and general corporate
purposes will be reduced and, if necessary, the amount available to renovate the
Company's laboratory and laboratory equipment, to purchase a management
information system/network and to invest in inventory will be reduced. Pending
their utilization for other corporate purposes, the Company expects to invest
the net proceeds from the Rights Offering primarily in Treasury obligations,
money market instruments and other similar securities and in bank deposits. See
"The Company--Strategy ."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on AMEX under the symbol "BET ." The
following table sets forth the high and low sales prices for the Common Stock,
for the periods indicated, as reported by the AMEX.
Low ($) High ($)
------- --------
1995 Fiscal Year
----------------
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<PAGE>
Low ($) High ($)
------- --------
First Quarter .75 1.50
Second Quarter .81 1.44
Third Quarter .75 5.63
Fourth Quarter 2.00 3.44
1996 Fiscal Year
- ----------------
First Quarter 1.88 3.73
Second Quarter 2.50 3.94
Third Quarter 2.00 3.00
Fourth Quarter 1.75 3.31
1997 Fiscal Year
- ----------------
First Quarter
As of June 30, 1996, there were approximately 945 holders of record of
the Company's Common Stock.
The Company did not declare any cash dividends on its Common Stock
during fiscal 1993, the 1994 transition period, fiscal 1995 or fiscal 1996 . A
$1.5 million five year first mortgage loan from Sterling Commercial Capital,
Inc., First Wall Street SBIC, L.P., and Interequity Capital Partners, L.P.
(collectively, "Sterling") imposes certain limitations on the Company with
respect to the payment of cash dividends. In addition, a three year $5 million
maximum line of credit and term loan facility from the CIT Group/Credit Finance,
Inc. ("CIT"), contains certain restrictions on the payment of cash dividends.
The Company does not anticipate that it will pay cash dividends in the
foreseeable future. The payment of dividends by the Company will depend upon its
earnings and financial condition and such other factors as the Board of
Directors may consider relevant. The Company currently plans to retain any
earnings to provide for the development and growth of the Company.
DILUTION
At February 29, 1996, there was a deficit in net tangible book value of
approximately $2,864,000 , or $1.48 per share. See "Consolidated Financial
Statements." The deficit in net tangible book value per share represents the
amount of total tangible assets (total assets less intangible assets) less total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale by the Company of the 1,356,964 shares of Common Stock
offered hereby (assuming full exercise of the Rights) and after deducting the
estimated offering expenses, the pro forma net tangible book value of the
Company as of at February 29, 1996 would have been approximately $_______, or
$____ per share, representing an immediate and substantial dilution of $____ per
share or ___% in respect of shares of Common Stock purchased pursuant to this
Rights Offering. The following table illustrates this per share dilution:
Subscription Price $______
Deficit in net tangible book value per share
before offering........................................ ($1.48)
Increase per share attributable to shareholders
exercising Rights...................................... ______
Pro forma net tangible book value
per share after offering............................... $______
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<PAGE>
Dilution to shareholders exercising Rights(1)............ $_________
=========
- -------------
(1) Dilution is determined by subtracting the deficit in pro forma net
tangible book value per share from the Subscription Price paid by an
investor for a share of Common Stock in the Rights Offering.
The foregoing assumes no exercise of the options issued to employees of
the Company under its stock option plan or the exercise of outstanding warrants.
At May 31, 1996, options and warrants to purchase an aggregate of 2,748,000
shares of Common Stock were outstanding with a weighted average exercise price
of $1.118 per share.
As of July 9, 1996, the closing sale price of the Company's Common
Stock was $2.375 per share. As of such date, there was a total of 2,223,000
options and warrants which were presently exercisable and "in the money." The
exercise prices of such options and warrants ranged from $.3333 to $2.1875. In
addition, the exercise price of warrants to purchase an aggregate of 1,540,000
shares of Common Stock, at exercise prices ranging from $.3333 to $2.1875 will
be adjusted by this Rights Offering, due to the anti-dilution provisions of such
warrants. Certain warrant holders also have "piggyback" registration rights
which either do not apply to this Rights Offering or have been waived by such
holders. See "Description of Capital Stock."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere herein. The consolidated financial statement data as of and
for the fiscal year ended December 31, 1993, the five months ended May 31, 1994
and the fiscal year ended May 31, 1995 are derived from the audited Consolidated
Financial Statements, and the consolidated financial statement data as of and
for the nine months ended February 28, 1995 and February 29, 1996 are derived
from the unaudited Consolidated Financial Statements, included elsewhere in this
Prospectus and should be read in conjunction with those Consolidated Financial
Statements and the notes thereto. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Fiscal Year Five Months Fiscal Year Nine Months Ended
Ended Ended Ended --------------------------
May 31, May 31, December 31, February 29, February 28,
1995 1994(1) 1993 1996 1995
---- ------ ---- ---- ----
(Unaudited)
(In thousands, except per share and weighted average share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales ............................................... $ 14,541 $ 2,898 $ 8,368 $ 12,375 $ 10,877
Cost of goods sold .................................... 11,959 3,103 8,857 9,604 9,040
----------- ----------- ----------- ----------- -----------
Gross profit (loss) ................................... 2,581 (205) (489) 2,771 1,837
Selling and administrative expenses ................... 2,232 635 1,119 2,212 1,529
Other income/(expenses) - net ........................ (118) (90) (1,885) (342) (164)
----------- ----------- ----------- ----------- -----------
Income (loss) from operations before provision
for income taxes ..................................... 231 (930) (3,493) 217 144
(Provision) benefit for income taxes .............. (1) (1) 90 0 0
----------- ----------- ----------- ----------- -----------
Net income (loss) ................................... 230 (931) (3,403) 217 144
Earnings (loss) per common and common
equivalent share
Primary ........................................... $ .08 $ (.49) $ (2.13) $ .07 $ .06
Assuming full dilution ............................ .08 (.49) (2.13) .07 .05
Weighted average number of common and
common equivalent shares outstanding
Primary ............................................... 2,946,423 1,888,520 1,595,929 2,984,280 2,581,530
Fully diluted ....................................... 3,026,762 1,888,520 1,595,929 3,039,430 2,903,745
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
At
--------------------------------------------------------
February 28, February 29,
May 31, 1995 1995 1996
_------------ ------------ -------------
(In thousands)
(Unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Current assets......................................... $5,017 $3,846 $8,270
Total assets........................................... 7,669 6,605 11,700
Current liabilities.................................... 6,593 5,379 8,855
Long-term liabilities.................................. 3,103 3,397 4,501
Total liabilities...................................... 9,696 8,776 13,356
Stockholders' equity (deficiency)...................... (2,027) (2,171) (1,656)
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPANY OVERVIEW
The Company was founded in 1856 as a foundry and machine shop and
incorporated in 1888. The Company designs, manufactures, sells and services a
product line of capital equipment used to process materials for a variety of
industrial applications. Its proprietary products include the Porcupine
Processor(R), the Thermal Disc(R) Processor, the Tower Filter Press, drum dryers
and flakers, tubular dryers, and calciners. In addition, the Company operates a
production facility that fabricates, machines and assembles equipment to
customers' specifications. The Company has developed expertise in the areas of
thermal processing systems, environmental systems, filtration, specialty
machining, and fabrication and the rebuilding and remanufacture of specialty
process equipment. In addition, the Company, through Bethlehem Advanced
Materials Corporation ("BAM"), a wholly-owned subsidiary formed in September
1995 to acquire certain assets of the American Furnace Division of Third
Millennium Products, Inc., designs and manufactures high-temperature furnaces
for sale and for its own use and processes specialty carbon, graphite and
ceramic materials for semiconductors and aerospace applications.
Four of the Company's five main business units, namely the Heat
Transfer Process Equipment Unit, the Environmental Systems Unit, the Filtration
Process Equipment Unit and the Specialty Heavy Machining and Fabrication
Services Unit each serve several billion dollar worldwide markets. The Company
expects the future size of each of these markets to remain in the billions of
dollars. However, the Company's ability to sell its products is limited by its
marketing and manufacturing ability. To the extent that the Company's marketing
and manufacturing capability increase, the Company's ability to exploit
opportunities in these markets should improve. The market size serviced by the
Company's fifth main business unit, the Rebuild/Remanufactures Equipment Unit,
is considerably more limited. The Company expects the future size of this market
to vary in relation to factors influencing cost of capital such as interest
rates, export/import duties, manufacturing capacity and utilization.
The Company would characterize the markets for each of its business
units as follows:
(1) Heat Transfer and Filtration Units
o Markets are relatively concentrated in mature
industries such as chemicals, plastics, foods,
pharmaceuticals, refineries, waste treatment and mining
and minerals.
o Technology barrier is medium.
o Competition is worldwide, except that there are certain
prohibitions against foreign companies in Japan.
(2) Environmental Systems Unit
o Markets are concentrated.
o Technology barrier is low.
o Competition is domestic in North America and Western
Europe.
(3) Specialty Heavy Machining and Fabrication Services Unit
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<PAGE>
o Market is highly concentrated.
o Technology barrier is low.
o Competition is domestic and often regional.
(4) REBUILD/REMANUFACTURE UNIT
o Market is diffuse.
o Technology Barrier is low.
o Competition is domestic.
The Company's customer concentration has historically been limited to
segments such as military, chemical process, power generating or ferrous and
nonferrous producers. More recently, the Company has sought to broaden its
customer base to include customers in such markets as environmental and mining
and precious metals. The Company has also added new products such as high
temperature furnaces through BAM which services newer growth markets such as the
semiconductor industry. To the degree the Company is able to add to and
diversify its products and the markets it serves, the Company will insulate
itself from potential volatility due to declines in any particular market served
by the Company's products.
Historically, the sale of the Company's products has primarily been
limited to North America and Europe. The Company has been increasing its
international sales because it believes demand and opportunity for its products
are increasing in direct proportion to the development of process industries
such as chemical, food and pharmaceutical in countries outside of the North
American and Western European markets. The Company's ability to compete in
certain countries, particularly Japan, is restricted by trade laws in such
countries. Further, the Company's ability to sell its products internationally
is limited by its marketing and manufacturing ability. The Company estimates
that approximately $750,000 for new inventory and $150,000 for additional sales
and marketing expenditures is required to support international market expansion
and sales growth. The Company enjoys access to customers through UPE's worldwide
customer base and occasionally utilizes UPE's network of company owned offices
and personnel around the world. The Company believes this relationship will help
the Company increase its sales. The Company does not believe, however, that the
termination of this relationship, which is not anticipated, would have a
significant material adverse effect on the Company's results of operations.
The Company's capital equipment products and technologies were
developed throughout the 20th century. Historically, the Company's products life
cycles have been relatively long term. There can be no assurance, however, that
such products will continue to be viable in the future. The Company has over the
past eighteen months introduced a new product, the Tower Filter Press, and
acquired a new product line, high temperature furnaces through BAM. The Company
continues to evaluate other products and companies that have the potential to
complement the Company's existing products and business. More recently, the
Company has begun to purchase and sell used process and environmental equipment
as an adjunct to its new equipment capabilities and its rebuild capabilities.
The Company has been able to enter this market in the last year through
financing obtained from The CIT Group. The Company has also utilized UPE's
expertise to advise it on certain purchases and UPE and the Company have jointly
purchased certain pieces of equipment. The Company believes this venture could
improve its financial condition and results of operations. The Company believes
this business activity complements its other activities and permits it to serve
customers who either cannot afford the cost or lead time for new equipment.
-21-
<PAGE>
In the future, the Company intends to continue to enhance existing
products, explore new opportunities, and to explore the possibility of strategic
partnerships with existing and new customers. The Company will also seek to
develop joint ventures with several of its customers to develop new processes.
There can be no assurance, however, that the Company will be able to
successfully implement any of these strategies or that, if implemented, these
strategies will improve the Company's financial position as results of
operations.
RESULTS OF OPERATIONS
These comments are presented in a format which first compares fiscal
year ending December 31, 1993 (a twelve month period) with fiscal year ending
May 31, 1995 (also a twelve month period) and second, compares the first five
months of the fiscal year ending December 31, 1993 (January through May) with
the five month transition period ending May 31, 1994 and compares the three
months and nine months ended February 29, 1996 to the three months and nine
months ended February 28, 1995.
FISCAL YEAR ENDED MAY 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1993.
Revenues of $14,541,000 for the fiscal year ended May 31, 1995
represent an increase of 74% over the fiscal year ended December 31, 1993 level
of $8,368,000. The principal factors for the increase in revenues were (1)
increased sales in the Company's proprietary product lines due to worldwide
expansion in the chemical process industry (2) initiation of a sales and
marketing plan and (3) resolution of litigation which allowed management to
direct its time and attention to sales and operations.
Gross profit equaled $2,581,000 for the fiscal year ended May 31, 1995
compared to a gross loss of $489,000 for the fiscal year ended December 31,
1993. The increased gross profit was primarily attributable to (1) increased
sales in the Company's proprietary product lines which produce higher profit
margins than historically experienced in the Specialty Heavy Machining and
Fabrication Services unit, (2) increased manufacturing hours due to increased
sales volume which had a positive impact on manufacturing overhead absorption,
(3) decreased manufacturing expenses mainly due to reduced health care expenses
and (4) management's implementation of a timely method of reviewing and revising
all major quotations, cost estimates and work in process.
In addition to the above, the Company successfully negotiated a new
labor contract with The Bethlehem Employees Association. The current labor
agreement became effective on July 23, 1994 and expires on July 22, 1997 . Under
the terms of the Company's new labor agreement, the existing pension plans were
frozen as of December 31, 1994, i.e. no new employees will be entering the
pension plans. The Company intends to fund the pension plans over a projected
eight to ten year period until they are fully funded. The new labor agreement
also allowed the Company to reduce its annual expense for health care and
retiree health care considerably.
On January 1, 1995, the Company established two 401K plans for all
employees. The Company contributes a base amount annually which matches 25% of
employee contributions up to 6% of salary and also agreed to consider
contributions of additional funds as profits permit.
One major factor that affected the gross loss in fiscal year ended
December 31, 1993 was that the Company restated the value of its inventory to
reflect its current net realizable value. This resulted in a write-down of the
Company's inventory in the amount of $436,000.
Backlog as of May 31, 1995 was $3,443,000 compared to backlog at
December 31, 1993 of $5,113,000. Seventy percent of the total new orders
received by the Company in fiscal year ended May 31, 1995 were shipped in fiscal
1995. This is the main reason for the decrease in backlog at May 31, 1995
compared to December 31, 1993. New orders received by the Company were
$11,519,000 for fiscal 1995
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compared to new orders of $6,352,000 for fiscal 1993 , including related parties
of $2,015,000 and $43,000 respectively.
The Company reported operating income of $349,000 for the fiscal year
ended May 31, 1995 as compared to operating loss of $1,608,000 for the fiscal
year ended December 31, 1993. Selling and Administrative expenses increased for
the year ended May 31, 1995 to $2,232,000 (15% of net revenues) as compared to
$1,119,000 (13% of net revenues) for the fiscal year ended December 31, 1993.
The implementation of the Company's sales and marketing programs called for an
increased sales force as well as increased advertising expenditures to expand
entry into potential foreign markets and support product sales. Reflected in
administrative expenses for the period ended December 31, 1993 was a one-time
favorable settlement the Company reached with an outside law firm in the amount
of $552,000 which reduced the amount of administrative expense for the year. The
Company anticipates that additional selling and administrative expenses will be
required to maintain its competitive position, including expanded domestic and
international sales activities and expects that expenses will remain stable as a
percentage of net revenues.
Other expenses equaled $118,000 for the year ended May 31, 1995
compared to $1,885,000 for the year ended December 31, 1993. The Company
recorded expense during 1993 in the amount of $1,395,000 relating to the
settlement of the lawsuit brought against the Company by the Harrisburg
Authority, as well as expenses relating to the settlement of other lawsuits in
the amount of $295,000. These occurrences were major contributing factors to the
net loss for fiscal year ended December 31, 1993. Net income for the year ended
May 31, 1995 equaled $230,000 as compared to a net loss of $3,403,000 for the
year ended December 31, 1993.
In summary, the Company has produced an improvement in the results of
operation due to the following factors:
- Increased sales and marketing efforts on an international basis;
- Leadership of a new management team;
- Reduction of overhead in manufacturing operations;
- Increased production efficiency; and
- Sales to and joint marketing efforts with UPE, the Company's
major shareholder.
The Company has begun to purchase and sell used process and
environmental equipment as an adjunct to its new equipment and rebuild
capabilities. The Company has been able to enter the environmental market in the
last year through the additional sources of financing obtained from The CIT
Group. The Company has utilized UPE's expertise in this area to advise it on
certain purchases and has purchased certain pieces of equipment jointly with
UPE. The Company believes this venture can have a positive impact on revenues,
profits and cash flow because used equipment sales generally do not require
significant labor costs. As a result, the Company can recover its investment in
the equipment more quickly.
FIVE MONTHS ENDED MAY 31, 1994 AS COMPARED TO FIVE MONTHS ENDED MAY 31, 1993.
(ALL REFERENCES TO FIVE MONTHS ENDED MAY 31, 1993 ARE UNAUDITED).
Net revenues of $2,898,000 for the five months of 1994 represents a
decrease of $82,000 over the 1993 level of $2,980,000. The gross loss for the
five months of 1994 equaled $205,000 compared to a gross loss for the same
period in 1993 of $152,000. The gross loss in both years was attributable to
losses recorded on major contracts. These losses occurred because the Company
relied on inaccurate cost estimates when quoting major contracts. In addition,
during these periods "change orders" or modifications to contracts were not
always pursued by previous management. As a result, the Company recorded losses
on certain major contracts. During the fiscal year ended May 31, 1995,
management implemented procedures to become more selective in the type of
project undertaken, the product orientation and the terms of sale, thereby more
closely monitoring and controlling profit margins on major contracts. In
addition, the Company's management introduced new
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procedures so that it could more effectively monitor the status of major
contracts and demonstrate changes or modifications in orders while production or
fabrication is in process. However, there can be no assurance that such new
policies will be successful and, accordingly, the Company may continue to record
losses on certain major contracts in the future.
Backlog as of May 31, 1994 was $6,502,000 as compared to a backlog of
$6,511,000 on May 31, 1993. Orders received for the five months of 1994 equaled
$4,380,000 compared to $2,361,000 for the same period in 1993.
A change in management combined with worldwide growth in the chemical
process industry were the main factors for the increased orders recorded in the
year ended May 31, 1994.
Selling and Administrative expenses decreased from $747,000 for the
five months of 1993 to $635,000 for the five months in 1994. The decreases were
attributable to decreased retiree health costs which also reduced post
retirement health expenses.
The net loss for the five months of 1994 equaled $931,000 compared to
the net loss of $980,000 for the same period in 1993. The net loss was due to
losses incurred on percentage of completion contracts which were placed in prior
periods.
The Company elected to change its fiscal year from December 31 to May
31 in order to better track the Company's business activity. This change was
consistent with changes in the management and business focus of the Company.
THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 29, 1996
COMPARED TO THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
Sales of $5,503,000 for the third quarter fiscal 1996 represent an
increase of $1,623,000 over the third quarter 1995 level of $3,880,000. Gross
profit for the third quarter fiscal 1996 was $1,192,000, compared to gross
profit of $576,000 for the same period last year. Sales of $12,375,000 for the
nine month period ending February 1996 represents an increase of $1,498,000 over
the nine month period ending February 1995 level of $10,877,000. Gross profit
for the nine month period ending February 1996 equalled $2,771,000 or 22% of
sales compared to gross profit of $1,837,000 or 17% of sales for the same period
in 1995. Increased sales and gross profits in both the Company's industrial and
process sales divisions were due to the booking of several major long term
contracts with higher profit margins than historically experienced in these
divisions. Reflected in the sales for the nine months ended February 29, 1996
were sales from one customer equaling approximately 33% of the Company's net
sales. The customer has been a customer of the Company for the last 20 years and
during that time the customer usually accounted for substantially less than 33%
of the Company's net sales in any fiscal year. The sales related to a contract
for multiple Porcupine Processors intended for a major capital plant expansion
at the customer's site. The first unit will be shipped in July 1996 and the last
unit will be shipped in April 1997. The Company anticipates that it will
continue to receive orders from this customer but that such sales should be
significantly less beginning in the fiscal year ending May 31, 1998.
The operating profit for the third quarter fiscal 1996 equalled
$355,000 compared to $58,000 for the same period last year. Operating profit
equalled $559,000 for the nine month period ending February 1996 compared to
operating profit of $308,000 for the same period last year. Selling and
administrative expenses increased from $518,000 or 13% of sales for the third
quarter fiscal 1995 to $837,000 or 15% of sales for the third quarter fiscal
1996. Selling and administrative expenses increased from $1,529,000 or 14% of
sales for the nine month period ending February 1995 to $2,212,000 or 18% of
sales for the same period in 1996. The primary factors for the increase in
selling and administrative expenses were: 1) additional sales and administrative
personnel; 2) increased advertising expenditures; and 3) increased travel
expenses. These
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resources are needed to continue the Company's entry into the international
market as well as to pursue sales and purchases of used process and
environmental equipment.
Other expenses equalled $227,000 compared to other expenses of $34,000
for the same period in fiscal 1995. Net income for the third quarter of fiscal
1996 equalled $128,000, compared to net income of $24,000 for the same period in
fiscal 1995. Other expenses were $342,000 for the nine month period ending
February 1996, compared to other expenses of $164,000 for the same period last
year. Increased interest expense combined with the amortization of financing
fees from the loans secured by the Company in the first quarter of fiscal 1996
were the main factors for the increase in other expenses. Net income for the
nine month period ending February 1996 equalled $217,000 compared to $144,000
for the same period in fiscal 1995.
Backlog was $9,093,000 at February 29, 1996 compared to backlog of
$4,758,000 at February 28, 1995. Orders received for the third quarter of fiscal
1996 equalled $3,594,000 compared to orders received for the third quarter of
fiscal 1995 of $2,101,000. The Company's backlog as of May 31, 1996 is
approximately $10,656,000 and orders comprising such backlog are expected to be
filled during the fiscal year ended May 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operations increased to $909,000 for fiscal
year ended May 31, 1995 compared to $207,000 for the year ended December 31,
1993, an increase of $702,000 due to additional sales.
Progress billings by the Company in connection with orders received and
anticipated during the first half of fiscal 1996 are expected to have a positive
impact on the Company's cash flow.
On July 14, 1995, the Company prepaid its note payable to G.E. Capital
and paid relevant closing costs with proceeds from advances against a $6.5
million total credit facility available from a group of lenders as follows:
(1) A $1.5 million five year first mortgage loan from Sterling
Commercial Capital, Inc., First Wall Street SBIC, L.P., and
Interequity Capital Partners, L.P. The loan is collateralized by a
first mortgage lien on real estate owned by the Company and a second
lien on all other Company owned assets. The loan bears interest at
14.25% per annum. The outstanding principal and interest is payable
in 59 consecutive equal monthly payments calculated to fully
amortize over a 15 year period with a final payment of all then
outstanding principal and interest. As of June 24, 1996, the amount
outstanding under the loan was $1,474,504. The loan agreement
contains a number of covenants which among other things will require
the Company to maintain specified levels of net worth and working
capital and will impose certain limitations on the Company with
respect to (I) the incurrence of additional indebtedness; (II) the
incurrence of additional liens; (III) the payment of cash dividends
and (IV) mergers and investments. UPE agreed to provide a limited
guarantee for up to $350,000 of the mortgage payable and subordinate
all of its outstanding receivables or other extensions of credit due
from the Company to the mortgage. The Company granted warrants to
the three-party lending group to purchase up to 40,000 shares of the
Company's stock. The purpose of this loan was to pay off the
existing mortgage loan.
(2) A three year $5 million maximum line of credit and term loan
facility from The CIT Group/Credit Finance, Inc., secured by a third
lien position (behind the three party lending group referenced above
and the Harrisburg Authority) on Company owned real estate and a
first lien on substantially all other owned assets of the Company.
This credit facility includes: (a) an $800,000 term loan requiring
$13,333 monthly principal payments plus interest at prime rate
(Chemical Bank, New York) plus 3% and (b) advances against a
percentage of eligible inventory not to exceed $4,000,000
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in the aggregate. Initial proceeds of this credit facility were used
to fund working capital. The amount outstanding as of June 24, 1996
was $653,000 on the term loan and $1,654,000 on the secured credit
line. As of June 24, 1996, the interest rate on both the term loan
and the secured credit line was 11.25%. Additional advances will be
for the purpose of acquiring eligible inventory. The loan agreement
contains certain restrictions among other things on the making of
investments, loans and capital expenditures, on borrowings, on the
sale of assets and on the payment of dividends. The loan agreement
contains customary events of default including material
misrepresentations, payment defaults and default in the performance
of other covenants. An additional condition of the loan agreement is
that UPE will purchase all of the Company's used resale inventory in
the event of default. The term of the agreement is for three years
and automatically renewable for successive terms of two years
thereafter unless terminated by either party at the end of the
initial or any renewal term. Notwithstanding the foregoing, the
agreement shall terminate automatically upon termination or
non-renewal of The CIT Group/Credit Finance Inc.'s financing
agreements with UPE. The Company granted warrants to The CIT
Group/Credit Finance, Inc. to purchase 50,000 shares of the
Company's stock.
By securing this funding, the Company expanded working capital, made
available additional capital for inventory acquisition and increased liquidity.
Capital expenditures were $133,000 during fiscal 1995 versus $32,000 in
1993. The Company expects to fund the majority of capital expenditures through
cash flow generated through operations and to utilize third party financing when
cost effective or appropriate.
Management believes that any inflationary increase arising from the
Company's raw material costs and certain overhead expenses have generally been
reflected in pricing to its customers.
Net cash used for operating activities was $1,550,000 for the first
nine months of fiscal 1996 compared to net cash provided by operating activities
for the first nine months of fiscal 1995 of $707,000. The Company's purchase of
approximately $600,000 in used equipment inventory coupled with increased
accounts receivable accounted for the cash used for operating activities.
During the fiscal year ended May 31, 1995 and the nine months ended
February 29, 1996, the Company's accounts receivable, inventory and accounts
payable increased. The increased accounts receivable in fiscal 1995 and interim
1996 was due to increased sales volume in both periods. The increased inventory
in fiscal 1995 and interim 1996 was due to increased sales volume which resulted
in increased production in the Company's new equipment product lines and the
Company's ability to purchase equipment through the additional financing
obtained from the CIT Group. The significant increase in accounts payable is due
to the increased sales volume which required major material purchases. The
Company believes that the related reserves were adequate at February 29, 1996.
In addition, accounts payable in the interim statement included those of BAM
which was formed in September 1995 and acquired the assets of the American
Furnace Division of Third Millennium Products in November 1995. Currently the
Company is delinquent with respect to certain accounts payable. In some
instances the Company has negotiated new payment terms. If the Company's working
capital position does not improve, the Company's delinquencies with its accounts
payable could adversely effect the Company's future ability to structure
favorable terms in the purchase of materials and services.
Capital expenditures were $288,000 for the first nine months of fiscal
1996 versus $111,000 for the first nine months of fiscal 1995. The majority of
the Company's cash used for investing activities was expended on acquisition
costs and capital equipment for materials processing at BAM, the Company's
wholly owned subsidiary in Knoxville, Tennessee.
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Cash provided by financing activities equalled $2,244,000 for the first
nine months of fiscal 1996 compared to cash used for financing activities for
the same period last year in the amount of $588,000. On July 14, 1995, the
Company prepaid its note payable to G.E. Capital and paid relevant closing costs
with proceeds from advances against a $6.5 million total credit facility
available from a group of lenders.
As of February 29, 1996, the Company had a working capital deficiency
of $585,000. The Company's working capital deficiency is due to, 1) recurring
operating losses from previous periods, 2) utilization of working capital to
finance the start-up of and the acquisition of assets for BAM, and 3) the use of
working capital for renovation and upgrading of several building facilities. The
Company's current commitment for capital expenditures is less than $50,000. If
the Company receives sufficient net proceeds in this Rights Offering, the
Company intends to continue to renovate its one-story office building and
laboratory and upgrade roofs on several of its manufacturing facilities. See
"Use of Proceeds" and "Business -- Properties." The Company also intends to
purchase laboratory and laboratory equipment and a management information
system/network. Additional capital expenditures will be dependent upon whether
the Company engages in significant expansion opportunities.
The Company believes that cash generated from existing business, new
orders and sales of used equipment, together with the net proceeds of the Rights
Offering, will be sufficient to meet operating requirements through the fiscal
year ending May 31, 1997. In the event that the Company's operations were to
expand significantly or the Company were to desire to make further acquisitions,
further external sources of financing would be required. While the Company
believes that such financing would be available to it, there can be no assurance
in this regard.
NET OPERATING LOSS CARRYFORWARD
At May 31, 1995 the Company had approximately $5.2 million of unused
federal net operating losses and $120,000 of unused federal investment and
research tax credit carryforwards. The Company has determined that the Rights
Offering will not effect a change of control of the Company, which would result
in material limitations on the use of such carryforwards to offset future
taxable income.
FORWARD LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Exchange
Act which are intended to be covered by the safe harbors created thereby.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this Prospectus will prove to be
accurate. Factors that could cause actual results to differ from the results
discussed in the forward-looking statements include, but not limited to, those
discussed in "Risk Factors." In light of the significant uncertainties inherent
in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
BUSINESS OF THE COMPANY
GENERAL
The Company was founded in 1856 as a foundry and machine shop and
incorporated in 1888. The Company designs, manufactures, sells and services a
product line of capital equipment used to process materials for a variety of
industrial applications. Its proprietary products include the Porcupine
Processor(R), the Thermal Disc(R) Processor, the Tower Filter Press, drum dryers
and flakers, tubular dryers, and calciners. In addition,
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the Company operates a production facility that fabricates, machines and
assembles equipment to customers' specifications. The Company has developed
expertise in the areas of thermal processing systems, environmental systems,
filtration, specialty machining, and fabrication and the rebuilding and
remanufacture of specialty process equipment. In addition, the Company, through
BAM, a wholly-owned subsidiary formed in September 1995 to acquire certain
assets of the American Furnace Division of Third Millennium Products, Inc.,
designs and manufactures high-temperature furnaces for sale and for its own use
and processes specialty carbon, graphite and ceramic materials for
semiconductors and aerospace applications.
CAPITAL EQUIPMENT, MACHINING AND FABRICATION
The Company's customers for its capital equipment, sales and machining
and fabrication services include the primary ferrous and non-ferrous metals
industries, cement and ship building companies, refineries, chemical, food,
pharmaceutical and petrochemical firms. Its products include the Porcupine
Processor(R), the Thermal Disc(R) Processor, the Tower Filter Press, filtration
equipment, drum dryers and flakers, tubular dryers, calciners, vapor recovery
systems and boilers. The Porcupine Processor(R) dries, heats or cools various
chemicals, solids, or slurries. It reduces operating and installation costs and
provides a free-flowing end product. The Company has recently introduced a new
product in filtration equipment--the Tower Filter Press. The Tower Filter Press
filters a wide range of slurries, operating automatically and uses a
programmable logic control system. The Company operates a production facility
that includes a full service laboratory equipped to test a broad range of
materials and processes for filtration and thermal processing applications. The
Company also has thermal processing and filtration pilot units available for use
at customer sites for test processing. In conjunction with sales of capital
equipment, the Company provides engineering and design services and conducts an
aftermarket business consisting primarily of remanufacture, repair,
refurbishment and equipment upgrade services and spare parts sales. The Company
markets its products through an international sales network covering markets in
North and South America, Asia and Europe.
The Company serves these markets through five main business units:
o The Heat Transfer Process Equipment unit markets core technology
equipment, which includes dryers, coolers, and flakers, and which
are fabricated to specific customer needs. The Porcupine
Processor(R), an indirectly heated dryer developed by the Company,
is an example of this unit's products. Some of the markets for these
products include the chemical, plastics, food, pharmaceuticals,
refineries, waste treatment and mining industries. These industries
use the Company's equipment to recover valuable solvents from
chemical intermediates or final products.
o The Environmental Systems unit markets Thermal Desorption Systems
for sale and rental. These systems, which usually include a
Porcupine Processor(R), are used for treating both hazardous and
nonhazardous sludges and contaminated soil. The market for these
systems is currently driven by environmental regulations and is
expected to grow.
o The Filtration Process Equipment unit designs, manufactures and
markets coarse to fine filtration systems used in solid/liquid
separation. The target markets are fine and specialty chemicals,
mining, food, precious metal recovery and pharmaceutical. The Tower
Filter Press is an example of this unit's products.
o The Specialty Heavy Machining and Fabrication Services unit provides
high quality heavy equipment machining and fabrication services to
the U.S. Government, heavy industry, including ferrous and
nonferrous producers, the aggregates industry and suppliers of
specialty heavy equipment that serve those industries.
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o The Rebuild/Remanufacture Equipment unit upgrades used equipment and
remanufactures a broad range of process equipment. This unit markets
these products based on two primary advantages: reduced capital
expenditure and shorter lead time on delivery to the pharmaceutical,
chemical and environmental remediation industries..
BETHLEHEM ADVANCED MATERIALS CORPORATION (BAM)
BAM designs and manufactures specialty high-temperature furnaces that
are used for the processing and manufacturing of a wide variety of advanced
materials, such as carbon and graphite fiber, carbon graphite composites, carbon
and graphite structures, ceramic powders and ceramic composites. In addition,
BAM processes specialty carbon, graphite and ceramic materials for semiconductor
and aerospace, primarily for use in commercial aircraft braking systems
applications. BAM is also involved in commercial process and product development
of advanced materials.
BAM is engaged in three primary lines of business involving high
temperature furnaces and the processing of advanced specialty materials:
o Furnace Manufacturing--design/engineering, manufacturing and
installation of specialty high temperature furnace systems.
o Toll Processing--contract heat treating and thermal processing of
specialty materials.
o Commercial Product and Process Development--utilization of the
Company's own furnaces, technology and expertise to commercialize new
applications and products for its own use and in conjunction with
customers in order to enhance their processes and applications.
BAM designs and manufactures custom high-temperature furnace systems
for customer sales and for its own use at the Company's Knoxville, Tennessee
facility. BAM's furnaces typically have custom design components, such as
continuous and batch loading systems, parallel plate heating systems and
advanced temperature control features. Management believes that, as such, BAM's
furnaces have the potential to provide added value to its customers, which may
result in higher product yield, more throughput due to more efficient heating
and cooling cycles and enhanced energy savings. A BAM furnace is designed in
accordance with an individual customer's materials processing requirements,
rather than according to fixed designs, and with a view to minimizing the need
for the customer to modify its process in order to match the furnace design.
In addition to selling furnaces to customers, BAM uses its furnaces to
provide toll firing services for its customers. Customers of BAM, whether a
furnace purchaser or on a tolling basis, are typically manufacturers of carbon
graphite structures, composites, powders and fibers, as well as manufacturers of
non- oxide ceramics, such as silicon carbide or silicon nitride or other
advanced ceramic structures.
Composite materials are suited to a diverse range of applications based
on their distinctive combination of physical and chemical properties. Carbon
fiber composites are attractive because of their specific properties, including
high strength, low weight, stiffness, resistance to corrosion, resistance to
fatigue, capacity to dissipate heat and electrical conductivity. In order to
process these carbon and carbon graphite products, a typical customer will
utilize a multi-step process to convert precursor materials such as petroleum
pitch, coal tar pitch, and acrylic materials, such as polyacrylonitrile ("PAN"),
into carbon fibers. All of these carbon precursors require thermal processing in
furnaces for oxidation, stabilization and carbonization.
Overall, aerospace applications are the largest users of carbon fibers
and other advanced materials. However, the semiconductor industry, which uses
many materials requiring purified carbon, ceramic, and other
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advanced material structures, also provides a potentially significant and high
growth market for these products. BAM currently serves specialty markets which
include carbonization and graphitization of carbon aircraft brakes, halogen
purification of semiconductor grade graphite materials as well as special
ceramic coating systems for semiconductor processing.
Carbonization of Aircraft Brakes. Carbon-carbon, which consists of
carbon fibers fused in a carbon matrix, is used in aircraft brakes because its
utility is enhanced by high heat and friction. Whereas other brake materials
such as metal soften under rising temperatures, carbon-carbon grows stronger.
Composites such as carbon-carbon combine the inertness of carbon and the
strength of carbon fiber and are replacing steel and metal linings as the
friction braking material of choice for large commercial aircraft. There is a
growing replacement market for composite brakes with the retirement of older
aircraft utilizing metal brakes and their replacement by newer model aircraft,
which utilize carbon-carbon brakes. Composite brake pads wear out and must be
replaced at regular intervals, on the average about once a year and typically at
intervals of 759 to 2,000 landings depending upon aircraft type, size and use.
As the relative proportion of newer aircraft to older aircraft increases, the
demand for carbon-carbon brakes appears to be increasing proportionately.
Currently, industry figures show that carbon-carbon brakes have about 25 percent
of the commercial market and could double that amount to match metal by the year
2000. By way of example, the new Boeing 777 aircraft relies on carbon- carbon
brakes. BAM has built and currently operates for a customer a furnace for
carbonization of carbon- carbon brake materials for several aircraft programs
including the Boeing 777.
Purification of Semiconductor Quality Graphite. The heart of the
semiconductor industry revolves around the production of the silicon wafer. The
wafers are "grown" from a melted pool of silicon that is held in a graphite
crucible. As minute impurities cause significant degradation of the silicon
quality, it is imperative that the graphite crucible have fewer than 10 parts
per million total impurity. The manner in which this is accomplished is to
subject the graphite crucible to a purge of halogen gas while heating to a
temperature near 2,000(degree)C. The Company's furnaces are utilized during this
purification step.
STRATEGY
The Company's business strategy is to continue the technological
development and marketing of its core capital equipment products and, at the
same time, to expand on the manufacture and marketing of specialty high
temperature furnace systems, toll processing services for the advanced materials
markets and the commercialization of new products and processes in advanced
materials by BAM.
The Company intends to strengthen its position in markets inside and
outside the United States to reduce the manufacturing costs of its products and
to pursue new sales opportunities as they develop, in new, rebuilt and used
equipment. In addition, the Company intends to identify and evaluate
opportunities to extend current market applications, identify new potential
applications and establish plans for developing such applications for high
temperature furnaces.
As part of its efforts to expand its current range of market
applications, the Company is engaged in exploring strategic partnerships with
specific customers to use Company technology and expertise in the areas of
semiconductor purification and the carbonization of PAN for use in aircraft
brakes.
CUSTOMERS; EXISTENCE OF SHORT-TERM CONTRACTS
The Company's principal customers for its capital equipment are
domestic and foreign manufacturers of chemicals, pharmaceuticals, foods,
plastics and petrochemicals and environmental remediation firms. The Company's
principal customers for its high temperature furnaces and related tolling
services are domestic and foreign manufacturers of carbon and graphite
structures, fiber powder and shapes, silicon carbide powder and shapes, silicon
nitride shapes and other advanced ceramic composite structures.
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Currently, the major portion of the Company's sales are made under
short-term or one-time contracts for the Company's capital equipment or
high-temperature furnaces, which contracts are not subject to renewal. Although
this may afford the Company flexibility in responding to changing market
conditions, a market for the Company's products and services under such
contracts is not assured. As a result, one or more short-term or one-time
contracts may constitute a high percentage of the Company's total net sales for
any particular quarter or fiscal year. The inability of the Company to obtain
such contracts in the future could have a material adverse effect on the
Company's business.
The Company's largest customer accounted for 33% of the Company's net
sales for the nine months ended February 29, 1996 and its four largest customers
during the year ended May 31, 1995 accounted for 17%, 13%, 12% and 12% of the
Company's net sales. General Dynamics accounted for 13% of the Company's
revenues in fiscal 1995, 26% of the Company's revenues in the five months ending
May 31, 1994 and 15% of the Company's revenues for the year ending December 31,
1993. UPE accounted for 17% of the Company's revenues in fiscal 1995 and 12% for
the five months ending May 31, 1994. The Company does not anticipate that either
General Dynamics or UPE will account for 10% of revenues for fiscal 1996.
However, the Company's largest customer in fiscal 1996, Eastman Chemical, will
account for approximately 28% of the Company's net sales for the fiscal year
ended May 31, 1996, and the Company anticipates Eastman Chemical will also be a
significant customer for fiscal year ended May 31, 1997.
The Company's active customers for capital equipment include Eastman
Chemical, Mallinckrodt, Vulcan Chemicals, PPG Industries, Great Lakes Chemical
and Cargill. Sales to related parties were equal to 17% of total sales in fiscal
1995 and are estimated to be 6% of total sales in fiscal 1996. The Company's
active customers for high temperature furnaces and tolling services are Allied
Signal, Mitsubishi Chemical, Norton Industrial Ceramic/Saint Gobain, UCAR
Carbon, Hughes Missile Systems and Manufacturing Sciences Corporation. Purchases
by any single customer vary significantly from year to year according to such
customer's capital equipment needs. The composition of the Company's customers
may also vary from year to year.
SALES AND MARKETING
The Company markets its products to customers in North and South
America, Asia and Europe, primarily by a direct sales and support staff based at
its facilities in Easton, Pennsylvania for its capital equipment products and
services and Knoxville, Tennessee for its high temperature furnace products and
tolling services. The Company also relies on product sales representatives in
some regions of North America and in certain geographic areas outside the United
States, sales are made by independent representatives who are assisted and
supported by Company employees.
The margins received on sales by independent representatives exceed
those received on direct sales by Company personnel. The Company's commission
program with respect to such independent representatives varies depending on the
type of product sold and the volume of sales over the course of a year. The
percentage of sales generated from such independents equaled approximately 20%
of total sales for the fiscal year ended May 31, 1995 and the nine months ended
February 29, 1996 and it is anticipated that the percentage of sales in the
future will also be approximately 20%.
BACKLOG
As of May 31, 1996, the Company had a backlog of orders equaling
$10,656,000. The Company had a backlog of $3,443,000 and $6,502,000 as of May
31, 1995 and 1994, respectively. Orders comprising current backlog are expected
to be filled during the fiscal year ending May 31, 1997.
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RAW MATERIALS
The basic raw materials used in the Company's products are steel plate,
bars and castings and in addition, in the high temperature furnace business,
graphite, and copper. Raw materials are available from a number of sources on
comparable terms. The Company is not dependent on any supplier that cannot be
replaced in the normal course of business. Principal suppliers to the Company at
fiscal year end May 1995 were: Washington Steel, Universal Process Equipment
(see "Certain Transactions"), Bush Miller, Thypin Steel, Ryerson Steel and, in
connection with the high temperature furnace business, UCAR, Hajoka, and Graybar
Electric.
DEVELOPMENT OF LITHIUM-ION RECHARGEABLE BATTERIES
BAM executed a License Agreement on December 20, 1995 (the "License
Agreement") with Sandia Corporation ("Sandia"), a multi-program laboratory
operated by a subsidiary of Lockheed Martin Corp. for the U.S. Department of
Energy. With main facilities in Albuquerque, New Mexico and Livermore,
California, Sandia has major research and development responsibilities in
national defense, energy, environmental technologies and economic
competitiveness. Under the License Agreement, the Company has acquired a limited
exclusive license to make, use and sell a formula developed by Sandia for carbon
powder impregnated with lithium ions to be used to make anodes for use in
lithium ion rechargeable batteries. Under the License Agreement, BAM has
exclusive rights in two fields: computers and camcorders. If the process proves
commercially feasible, consumer electronics, aerospace and defense applications
could all potentially use the technology to create longer lasting, less
expensive, safer, lighter batteries, particularly for use in power-hungry
applications such as laptop computers, cellular telephones, camcorders and
cordless power tools. The Company is currently endeavoring to produce along with
Sandia scientists the first scale-up of the product to commercial quantities.
Sandia developed the product at its facilities and has been able to produce only
laboratory quantities to date. There can be no assurance that this process will
prove commercially feasible or that the Company will derive any revenue from the
License Agreement. In the event that the process described herein does prove to
be commercially feasible, the License Agreement provides for certain royalty fee
payments to be made to Sandia.
PATENTS AND TRADEMARKS
The Company depends upon its proprietary technology and expertise. The
Company relies principally upon trade secret and copyright law to protect its
proprietary technology and owns no patents which are material to its business.
The Company regularly enters into confidentiality agreements with its employees,
consultants, customers and potential customers and limits access to and
distribution of its trade secrets and other proprietary information. There can
be no assurance that these measures will be adequate to prevent misappropriation
of its technology or that the Company's competitors have not and will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology.
COMPETITION
The Company's products are sold in highly competitive worldwide
markets. A number of companies compete directly with the Company in the
chemical, pharmaceutical, food, plastic and petrochemical processing markets and
the Company competes with various other furnace manufacturers and toll
processors. Numerous competitors of varying sizes compete with the Company in
one or more of its product lines and its Specialty Heavy Machining and
Fabrication Services unit. A number of the Company's competitors are divisions
or subsidiaries of larger companies with significantly greater financial,
marketing, managerial and other resources than those of the Company. The Company
believes that the principal competitive factors affecting its core proprietary
equipment business are price, performance, delivery, breadth of product line,
product availability, experience and customer support. The Company believes that
the principal areas of competition for its high
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temperature furnace sales segment are price, quality, delivery, skill and
experience in developing specialized equipment aimed at a customer's specific
materials requirement. The Company believes that the principal areas of
competition for its toll processing operations are the ability to reliably meet
the customer's quality specification and program requirements, including volume
and price considerations.
The Company's direct competitors that manufacture high temperature
furnaces include Consarc, Seco/Warwick, Chugai Ro, Ipsen GMBH, AVS, Inc., FCT,
Fujidempa, Abar Ipsen, Harper International Corp., and Textron. The Company's
competitors in providing toll processing services include Zoltek Companies, Inc.
There can be no assurance that developments by existing or future
competitors will not render the Company's products or technologies
noncompetitive or that the Company will be able to keep pace with new
technological developments. In addition, the Company's customers could decide to
vertically integrate their operations and perform for themselves some or all of
the functions performed by the Company.
EMPLOYEES
As of June 30, 1996, the Company had 140 full-time employees, including
19 employees of BAM. Of these, 124 are engaged in manufacturing and technical
services, 9 in marketing and sales and 17 in administrative functions.
The production employees at the Easton, Pennsylvania facility (79
persons) are represented by their own bargaining unit called The Bethlehem
Corporation Employees Association. A three-year labor contract was ratified with
this Association on July 23, 1994 and expires on July 22, 1997. The employees at
the Knoxville, Tennessee facility are not represented by any collective
bargaining organization. The Company believes that its relations with its
employees are good.
ENVIRONMENTAL IMPACT AND REGULATION
The operations at the Company's Knoxville, Tennessee plant utilize fume
destruction and scrubbing of various exhaust streams, designed to comply with
applicable laws and regulations. The plant produces air emissions that are
regulated and permitted by Knox County, Tennessee, Department of Air Pollution
Control (the "DOAPC"). Management believes that the plant is currently in
compliance with its permit and the conditions set forth therein. The Company has
applied to the DOAPC for additional permits necessary to expand its operations
to allow increased carbon processing, chlorine purification and the operation of
a second afterburner. These permits are currently pending with the DOAPC.
The Company believes that compliance by its operations with applicable
environmental regulations will not have a material effect upon the Company's
future capital expenditure requirements, results of operations or competitive
position. There can be no assurance, however, as to the effect of future changes
in federal, state and county environmental laws or regulations on the Company's
results of operations or financial condition.
The Company unilaterally "opted in" to a group settlement in U.S. vs.
Charles Chrin, et al. ("Charles Chrin"). The proposed consent decree in this
matter is undergoing final draft revisions and will be submitted for court
approval after a hearing. The Company paid in a total of $55,000 toward the
group settlement in exchange for a covenant not to sue by the United States
pursuant to Section 107(a) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, or Section 7003 of the Resource
Conservation and Recovery Act of 1976. Apart from Charles Chrin, the Company has
not received, or is aware of any threatened submission of, any "potentially
responsible party" or similar notices under federal, state or local law with
respect to environmental damages. See "Business of the Company--Environmental
Impact and Regulation."
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GOVERNMENT REGULATION
The Company is not aware of a need for government approval of any
principal products. Existing governmental regulations do not have a significant
effect on the business of the Company. In addition, government regulations that
are probable of enactment are not anticipated to have any material effect.
PROPERTIES
The Company operates from two properties, one in Easton, Pennsylvania
and one in Knoxville, Tennessee.
The Company owns a complex on 29 acres consisting of four major heavy
manufacturing buildings, a laboratory, a two-story office building,
miscellaneous storage and service buildings and a one-story office building
located near the City of Easton in Palmer Township, Northampton County,
Pennsylvania. The facility is a totally integrated production facility,
conducting engineering, fabrication, forming, machining, assembly, heat
treating, finishing and testing. The machine and assembly floor area is 100,000
square feet and is serviced by a 70 ton lifting capacity crane. Complete
shipping facilities are available by truck with easy access to major interstate
systems. The Company is currently in the process of completing plans for
renovation . Once that renovation is complete, management believes that its
Easton facilities will be in satisfactory condition and adequate for its present
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
As of July 8, 1996, the Company's Easton facilities were subject to a
first mortgage loan, a second lien created as a result of a legal settlement,
and a third lien securing a line of credit and term loan facility.
BAM leases a 33,600 square foot manufacturing and office building in
Knoxville, Tennessee for capital equipment manufacturing, toll processing and
related administrative services and marketing. The facility is equipped with
several furnace systems with capabilities of firing in excess of 3000(degree)C.
It is located in an industrial park with excellent access to major interstate
highways and a modern airport. The lease expires September 30, 2000, unless two
options, each for an additional three-year term, are exercised by BAM. The
Knoxville lease has a monthly base rent of $8,317.46. The Company believes this
facility is suitable and adequate for its present operations there. The Company
is a guarantor of payment on this lease.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings, nor to
the knowledge of the Company, are any material legal proceedings threatened.
DETERMINATION OF SUBSCRIPTION PRICE
The Company's objective in establishing the Subscription Price was the
realization of the desired proceeds from the Rights Offering while providing
holders of the Company's Common Stock with the opportunity to make an additional
investment in the Company and to avoid involuntary dilution of their
proportionate ownership interest in the Company. In establishing the
Subscription Price, the Board of Directors considered such factors as the
intended use of proceeds of the Rights Offering, alternative financing sources
available to the Company, market prices of the Common Stock over the preceding
two-year period, the general condition of the securities markets and pricings in
offerings that the Board considered similar to the Rights Offering. The Board
has not commissioned any report or solicited any person or entity to provide
advice or guidance with respect to the establishment of the Subscription Price.
The Board's determination does not constitute a recommendation to shareholders
as to the advisability of selling or exercising Rights in the Rights Offering.
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THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing transferable Rights at no cost to the
record holders ("Holders") of outstanding shares of Common Stock as of
____________, 1996 [the effective date of the Registration Statement of which
this Prospectus forms a part] (the "Record Date"). The Company will distribute
seven Rights for every 10 shares of Common Stock held on the Record Date. No
fractional Rights or cash in lieu thereof will be distributed or paid by the
Company. The number of Rights distributed by the Company to each Holder will be
rounded up to the nearest whole Right. The Rights will be evidenced by
transferable subscription certificates (the "Subscription Certificates") and
each such Right entitles the holder thereof to subscribe for one share of Common
Stock.
The Subscription Price of $______ per share of Common Stock represents
a discount of 30% from the closing price of $_______ for the Common Stock as
quoted on the AMEX on _________, 1996, the date of the commencement of the
Rights Offering. There can be no assurance that the Common Stock will trade at
prices above the Subscription Price. See "Risk Factors--Uncertain Market for
Rights."
The issuance by the Company of shares of Common Stock pursuant to the
Rights Offering is not conditioned upon the subscription of any minimum number
of shares of Common Stock by holders of the Rights, and no assurance can be
given that the Company will receive any proceeds from the Rights Offering. UPE
however, has, informed the Company that it intends to exercise the Rights it
receives for an aggregate subscription price of $__________ and that it does not
intend to exercise the Oversubscription Privilege or to purchase any additional
Rights through open market purchases or otherwise. In addition, certain officers
and directors of the Company not affiliated with UPE have expressed their intent
to exercise up to 285,000 of the Rights, including Rights they receive in
respect of Common Stock to be acquired upon exercise of options prior to the
Record Date.
BEFORE EXERCISING OR SELLING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED
TO READ CAREFULLY THE INFORMATION SET FORTH UNDER "RISK FACTORS."
EXPIRATION DATE
The Rights will expire at 5:00 p.m., New York City time, on _________,
1996 [30 calendar days after the Record Date] (the "Expiration Date"). After
such time, unexercised Rights will be null and void. The Company will not be
obligated to honor any purported exercise of Rights received by the Subscription
Agent after 5:00 p.m., New York City time, on the Expiration Date, regardless of
when the documents relating to such exercise were sent, except pursuant to the
Guaranteed Delivery Procedures described below.
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege. Each whole Right will entitle the holder
thereof to receive, upon payment of the Subscription Price, one share of Common
Stock (the "Basic Subscription Privilege"). Certificates representing shares of
Common Stock purchased pursuant to the Basic Subscription Privilege will be
delivered to subscribers as soon as practicable after the corresponding Rights
have been validly exercised and full payment for shares has been received and
cleared.
Oversubscription Privilege. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for
additional shares of Common Stock (the "Oversubscription Privilege") up to the
amount offered hereby. All beneficial Holders who exercise the Basic
Subscription Privilege in full will be entitled to exercise the Oversubscription
Privilege.
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<PAGE>
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are not
subscribed for through the Basic Subscription Privilege. If the Underlying
Shares not subscribed for through the Basic Subscription Privilege (the "Excess
Shares") are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those holders of Rights
exercising the Oversubscription Privilege, in proportion, not to the number of
shares requested pursuant to the Oversubscription Privilege, but to the number
of shares each beneficial holder exercising the Oversubscription Privilege has
purchased pursuant to the Basic Subscription Privilege; provided, however, that
if such pro rata allocation results in any Rights holder being allocated a
greater number of Excess Shares than such holder subscribed for pursuant to the
exercise of such holder's Oversubscription Privilege, then such holder will be
allocated only such number of Excess Shares as such holder subscribed for and
the remaining Excess Shares will be allocated among all other holders exercising
the Oversubscription Privilege. Certificates representing shares of Common Stock
purchased pursuant to the Oversubscription Privilege will be delivered to
subscribers as soon as practicable after the Expiration Date and after all
prorations and adjustments contemplated by the terms of the Rights Offering have
been effected.
Banks, brokers and other nominee holders of Rights who exercise the
Basic Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company, in connection with the exercise of the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised and the
number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to American Stock Transfer &
Trust Company (the "Subscription Agent"), at or prior to 5:00 p.m., New York
City time, on the Expiration Date, the properly completed and executed
Subscription Certificate evidencing such Rights with any signatures required to
be guaranteed so guaranteed, together with payment in full of the Subscription
Price for each Underlying Share subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege. All payments must be
by (a) check or bank draft drawn upon a U.S. bank or postal or express money
order payable to The American Stock Transfer Trust Company, as Subscription
Agent, or (b) by wire transfer of same-day funds, in which case please contact
the Subscription Agent at (800) 937-5449 for such information. Payments will be
deemed to have been received by the Subscription Agent only upon (i) clearance
of any uncertified check, (ii) receipt by the Subscription Agent of any
certified check or bank draft upon a U.S. bank or of any postal or express money
order or (iii) receipt of good funds in the Subscription Agent's account
designated above. If paying by uncertified personal check, please note that the
funds paid thereby may take at least five business days to clear. Accordingly,
holders of Rights who wish to pay the Subscription Price by means of uncertified
personal check are urged to make payment sufficiently in advance of the
Expiration Date to ensure that such payment is received and clears by such date
and are urged to consider payment by means of certified or cashier's check,
money order or wire transfer of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price or, if applicable, the Notice of Guaranteed Delivery, should
be delivered by mail, by hand or by overnight carrier is:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone Number: (800) 957-5449
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<PAGE>
If a Rights holder wishes to exercise Rights, but time will not permit
such holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the
Subscription Price for each Underlying Share being subscribed
for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege (subject to the right of the
Company to waive advance payment in respect of the
Oversubscription Privilege as described above) to be received
(in the manner set forth above) by the Subscription Agent on
or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to
the Expiration Date, a guarantee notice ("Notice of Guaranteed
Delivery"), substantially in the form provided in the
instructions (the "instructions") distributed with the
Subscription Certificates, from a member firm of a registered
national securities exchange or a member of the National
Association of Securities Dealers, Inc. ("NASD"), or from a
commercial bank or trust company having an office or
correspondent in the United States or from a bank,
stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion
program, pursuant to Rule 17Ad-15 of the Exchange Act (each,
an "Eligible Institution"), stating the name of the exercising
Rights holder, the number of Rights represented by the
Subscription Certificate or Subscription Certificates held by
such exercising Rights holder, the number of Underlying Shares
being subscribed for pursuant to the Basic Subscription
Privilege and the number of Underlying Shares, if any, being
subscribed for pursuant to the Oversubscription Privilege, and
guaranteeing the delivery to the Subscription Agent of any
Subscription Certificate evidencing such Rights within three
AMEX trading days following the Expiration Date; and
(iii) the properly completed Subscription Certificate
evidencing the Rights being exercised, with any signatures
required to be guaranteed so guaranteed, is received by the
Subscription Agent within three AMEX trading days following
the Expiration Date. The Notice of Guaranteed Delivery may be
delivered to the Subscription Agent in the same manner as
Subscription Certificates at the address set forth above, or
may be transmitted to the Subscription Agent by facsimile
transmission (Facsimile no. (718) 236-4588. Additional copies
of the form of Notice of Guaranteed Delivery are available
upon request from the Information Agent whose address and
telephone numbers are set forth under "Information Agent."
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Rights holder
exercising the Oversubscription Privilege is allocated less than all of the
shares of Common Stock which such holder subscribed for pursuant to the
Oversubscription Privilege, the excess funds paid by such holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date and after
all prorations and adjustments contemplated by the terms of the Rights Offering
have been effected.
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<PAGE>
Unless a Subscription Certificate (i) provides that the shares of
Common Stock to be issued pursuant to the exercise of Rights represented thereby
are to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription
Certificate must be guaranteed by an Eligible Institution or other eligible
guarantor institution that is a member of or a participant in a medallion
guarantee program acceptable to the Subscription Agent.
Holders who hold shares of Common Stock for the account of others, such
as brokers, trustees or depositories for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through a record holder should contact the holder
and request the holder to effect transactions in accordance with such beneficial
owner's instructions.
The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
THE COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE
AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE
FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE
TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company in its sole discretion may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company, nor the
Subscription Agent, nor the Information Agent will be under any duty to give
notification of any defect or irregularity in connection with the submission of
Subscription Certificates or incur any liability for failure to give such
notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent whose address and telephone number are set forth under
"Information Agent."
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
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<PAGE>
METHOD OF TRANSFERRING RIGHTS
Rights may be purchased or sold through usual investment channels,
including banks and brokers. It is anticipated that the Rights will be traded on
the AMEX under the symbol "BETR." Rights also may be sold in over-the-counter
and private sales transactions. No assurance can be given, however, that a
market for the Rights will develop or, that if such a market develops, as to how
long it will continue.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the instructions accompanying the Subscription Certificate. A
portion of the Rights evidenced by a single Subscription Certificate (but not
fractional Rights) may be transferred by delivering to the Subscription Agent a
Subscription Certificate properly endorsed for transfer, with instructions to
register such portion of the Rights evidenced thereby in the name of the
transferee (and to issue a new Subscription Certificate to the transferee
evidencing such transferred Rights). In such event, a new Subscription
Certificate evidencing the balance of the Rights will be issued to the Rights
holder or, if the Rights holder so instructs, to an additional transferee.
The Rights evidenced by a Subscription Certificate also may be sold, in
whole or in part, through the Subscription Agent by delivering to the
Subscription Agent such Subscription Certificate properly executed for sale by
the Subscription Agent. If only a portion of the Rights evidenced by a single
Subscription Certificate are to be sold by the Subscription Agent, such
Subscription Certificate must be accompanied by instructions setting forth the
action to be taken with respect to the Rights that are not to be sold. If the
Rights can be sold, sales of such Rights will be deemed to have been effected at
the weighted average price received by the Subscription Agent on the day such
Rights are sold, less any applicable brokerage commissions, taxes and other
direct expenses of sale. Promptly following the settlement of such sale, the
Subscription Agent will send the Rights holder a check for the net proceeds
(after deduction of any applicable brokerage commissions, taxes and other direct
expenses of the sale) from the sale of any Rights sold. The Company will pay the
fees charged by the Subscription Agent for effecting such sales. Orders to sell
Rights must be received by the Subscription Agent prior to _____ a.m., New York
City time, on ______________, 1996 and the Subscription Agent's obligation to
execute orders is subject to its ability to find buyers.
Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow a sufficient amount of time prior to the
Expiration Date for (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or transferees with respect to transferred Rights,
and to the transferor with respect to retained Rights, if any, and (iii) the
Rights evidenced by such new Subscription Certificates to be exercised or sold
by the recipients thereof. Neither the Company, nor the Subscription Agent, nor
the Information Agent shall have any liability to a transferee or transferor of
Rights if Subscription Certificates are not received in time for exercise or
sale prior to the Expiration Date.
Except for the fees charged by the Subscription Agent (which will be
paid by the Company as described above), all commissions, fees and other
expenses (including brokerage commissions and transfer taxes) incurred in
connection with the purchase, sale or exercise of Rights will be for the account
of the transferor of the Rights, and none of such commissions, fees or expenses
will be paid by the Company or the Subscription Agent.
PROCEDURES FOR BOOK ENTRY TRANSFER FACILITY PARTICIPANTS
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Basic Subscription Privilege (but not the
Oversubscription Privilege) may be effected through, the facilities of the
Depository Trust Company, Midwest Securities Trust Company and Philadelphia
Depository Trust Company (collectively, the "Book Entry Facilities"; Rights
exercised through any such facility are referred to as "Book Entry Exercised
Rights"). The holder of a Book Entry Exercised Right may exercise the
<PAGE>
Oversubscription Privilege in respect of such Book Entry Exercised Right by
properly executing and delivering to the Subscription Agent, at or prior to 5:00
p.m., New York City time, on the Expiration Date, a Nominee Holder
Oversubscription Form, together with payment of the Subscription Price for the
number of Underlying Shares for which the Oversubscription Privilege is to be
exercised. Any Rights holder subscribing for an aggregate of more than 25,000
Underlying Shares pursuant to the Oversubscription Privilege prior to the
Expiration Date shall not be required to deliver payment for such number of
Underlying Shares in excess of 25,000 until the Expiration Date. The Company, in
its sole discretion, may determine to waive payment for such excess number of
Underlying Shares until after the Expiration Date and after all prorations and
adjustments contemplated by the terms of the Rights Offering have been effected.
Copies of the Nominee Holder Oversubscription Form may be obtained from the
Subscription Agent.
EFFECT OF RIGHTS OFFERING ON OTHER SECURITIES
AND STOCK OPTIONS OF THE COMPANY AND COMPANY PLANS
The number of shares covered by certain stock options and the option
prices thereunder and by certain warrants and the exercise price thereof are
subject to adjustment in accordance with the provisions thereof. The Company's
stock option plan or, in certain cases, the stock option agreements evidencing
awards made thereunder, require the Compensation Committee of the Board of
Directors (the "Committee") and such warrants require the Board of Directors to
make appropriate adjustments to the outstanding options or other awards in the
event of any split-ups, stock dividends, recapitalizations, mergers,
consolidations, combinations, exchanges of shares and the like (each an
"adjustment event"). The Committee and the Board, whose determination shall be
conclusive, has discretion to determine the nature and extent of the adjustments
to be made in order to make the outstanding options or warrants, immediately
after such adjustment event, equivalent to such options warrants awards
immediately prior to such adjustment event.
The Committee and the Board will meet to determine whether the Rights
Offering is an adjustment event and if so, what adjustment to make.
As of July 9, 1996, the closing sale price of the Company's Common
Stock was $2.375 per share. As of such date, there was a total of 2,223,000
options and warrants which were presently exercisable and "in the money." The
exercise prices of such options and warrants ranged from $.3333 to $2.1875. In
addition, the exercise price of warrants to purchase an aggregate of 1,540,000
shares of Common Stock, at exercise prices ranging from $.3333 to $2.1875 will
be adjusted by this Rights Offering, due to the anti-dilution provisions of such
warrants. The holders of the Company's warrants also have "piggy-back"
registration rights which do not apply to this Rights Offering or have been
waived by such holders. See "Description of Capital Stock."
INTENT OF UPE AND CERTAIN OFFICERS AND DIRECTORS
UPE will receive 276,120 Rights in respect of the shares of Common
Stock it owns, and such Rights represent approximately 20% of the total Rights
to be distributed. UPE has informed the Company that it intends to exercise the
Rights it receives for an aggregate subscription price of $___________ and that
it does not intend to exercise the Oversubscription Privilege or to acquire any
additional Rights through open market purchases, the exercise of options or
otherwise. Certain directors and officers of the Company unaffiliated with UPE
have expressed their intent to exercise up to 285,000 Rights they receive,
including Rights they receive in respect of Common Stock to be acquired upon
exercise of options prior to the Record Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income
tax considerations applicable to U.S. Holders who hold Common Stock as a capital
asset and who receive Rights in respect of such Common Stock
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<PAGE>
in Rights Offering. This summary is based upon laws, regulations, rulings and
decisions currently in effect. This summary does not discuss all aspects of
federal income taxation that may be relevant to a particular investor or to
certain types of investors subject to special treatment under the federal income
tax laws (for example, banks, dealers in securities, life insurance companies,
tax exempt organizations and foreign taxpayers), nor does it discuss any aspect
of state, local or foreign tax laws.
ISSUANCE OF THE RIGHTS
Holders of Common Stock will not recognize taxable income in connection
with the receipt or exercise of the Rights.
BASIS AND HOLDING PERIOD OF THE RIGHTS
Except as provided in the following sentence, the basis of the Rights
received by a shareholder as a distribution with respect to such shareholder's
Common Stock will be zero. If either (i) the fair market value of the Rights on
the date of commencement of the Rights Offering (the "Commencement Date") is 15%
or more of the fair market value (on the Commencement Date) of the Common Stock
with respect to which they are received or (ii) the shareholder elects, in his
or her federal income tax return for the taxable year in which the Rights are
received, to allocate part of the basis of such Common Stock to the Rights, then
upon exercise or transfer of the Rights, the shareholder's basis in such Common
Stock will be allocated between the Common Stock and the Rights in proportion to
the fair market values of each on the Commencement Date. The holding period of a
shareholder with respect to the Rights received as a distribution on such
shareholder's Common Stock will include the shareholder's holding period for the
Common Stock with respect to which the Rights were issued.
TRANSFER OF THE RIGHTS
A shareholder who sells Rights received in the Rights Offering prior to
exercise will recognize gain or loss equal to the difference between the sale
proceeds and such shareholder's basis (if any) in the Rights sold. Such gain or
loss will be long-term capital gain or loss if such shareholder's holding period
in the Rights (as discussed above) exceeds one year. The excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain non-corporate taxpayers. The distinction between
capital gain or loss and ordinary income is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
LAPSE OF THE RIGHTS
Shareholders who allow the Rights received by them in the Rights
Offering to lapse will not recognize any gain or loss, and no adjustment will be
made to the basis of the Common Stock, if any, owned by such holders of the
Rights.
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF COMMON STOCK
Holders of Rights will not recognize any gain or loss upon the exercise
of such Rights. The basis of the Common Stock acquired through exercise of the
Rights will be equal to the sum of the Subscription Price therefor and the
Rights holder's basis in such Rights (if any) as described above. The holding
period for the Common Stock acquired through exercise of the Rights will begin
on the date the Rights are exercised.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING
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<PAGE>
ON HIS OR HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT
OF STATE AND LOCAL INCOME AND OTHER TAX LAWS.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and paragraphs below identify the directors and
executive officers of the Company and set forth their ages, positions with the
Company and their principal occupations during the preceding five years:
Name Age Position(s)
Salvatore J. Zizza 50 Chairman of the Board
Alan H. Silverstein 47 President, Chief Executive Officer
and Director
Antoinette L. Martin 38 Vice President and Chief Financial
and Chief Accounting Officer
Anthony Chiarella 47 Vice President of Manufacturing
Clarence T. Lind 59 Vice President of Sales, Marketing
& Technology
Linda J. Wright 46 Vice President of Administration
Harold Bogatz 57 Director and Secretary
Ronald H. Gale 45 Director
Jan P. Gale 41 Director
James L. Leuthe 54 Director
O. Karl Dieckman 82 Director
B. Ord Houston 82 Director
Robert F. Bacigalupo 65 Honorary Director
SALVATORE J. ZIZZA has served as Chairman of the Board of the Company
since December 1995. Mr. Zizza is also Chairman of The Lehigh Group, a public
company that is listed on the New York Stock Exchange, which has a subsidiary
engaged in the distribution of electrical products and until 1991 included major
interior construction, asbestos abatement and heavy equipment manufacturing.
ALAN H. SILVERSTEIN has served as President and Chief Executive Officer
of the Company since December 1995. Mr. Silverstein served as President and
Chief Operating Officer of the Company from February 1994 to November 1995. From
1991 to present, Mr. Silverstein has served as President of Earth Environmental
Services, Inc., a presently inactive solid waste remediation firm and developer
of solid waste co- generation projects. From July 1992 to February 1994, Mr.
Silverstein served as President of Universal Envirogenics, Inc., a rebuilder of
industrial gas plants.
ANTOINETTE L. MARTIN has served as Vice President and Chief Financial
Officer of the Company since October 1994.
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<PAGE>
Ms. Martin served as Acting Treasurer of the Company from January to September
1994; Accounting Manager of the Company from June 1988 to February 1992 and
Controller of the Company since February 1992.
ANTHONY CHIARELLA has served as Vice President of Manufacturing of the
Company since October 1994. Mr. Chiarella served as Plant Manager of the Company
from January 1994 to September 1994 and was consultant to the Company from
November to December 1993. Formerly, Mr. Chiarella was employed by DeDietrich
USA Inc., from June 1987 to September 1993 as operations manager, plant manager
and Vice President of Operations.
CLARENCE T. LIND has served as Vice President of Sales, Marketing and
Technology of the Company since December 1995. Mr. Lind served as manager of
sales and marketing of the Company from June to December 1995. Formerly, Mr.
Lind was employed by Hull Corporation from 1986 to 1995 as Vice President of
Sales and Marketing.
LINDA J. WRIGHT has served as Vice President of Administration of the
Company since December 1995. Ms. Wright served as an executive of the Company
with responsibility for administration and acquisitions from June 1995 to
December 1995. Formerly, Ms. Wright was employed by Ryan McGinn, Inc., a
Washington, D.C. public affairs firm, from 1991 to June 1995 as Vice President
and by Bankstar, NA as President and CEO from 1988 to 1990.
HAROLD BOGATZ has served as Director of the Company since December
1995. Mr. Bogatz has been principally employed as Vice President and General
Counsel of UPE since 1987.
RONALD H. GALE has served as Director of the Company since 1990. Mr.
Gale has been principally employed as President and Chief Executive Officer of
UPE, an international supplier of complete process plants and equipment and
manufacturer of new equipment in the United States and Europe, since 1978.
Ronald H. Gale and Jan P. Gale are brothers.
JAN P. GALE has served as Director of the Company since 1991. Mr. Gale
has been principally employed since 1978 as Vice President of UPE. Ronald H.
Gale and Jan P. Gale are brothers.
JAMES L. LEUTHE served as Chairman of the Board of Directors from 1977
until 1995; President and Chief Executive Officer of the Company from February
1979 to November 1983; Chief Executive Officer from November 1983 to December
1995, and has served as Director since 1976. Mr. Leuthe has served as Chairman
of the Board of First Lehigh Corporation, a bank holding company, since 1982.
O. KARL DIECKMANN has served as Director of the Company since 1960.
Formerly, Mr. Dieckmann was an investment manager and consultant, and has been
retired for longer than the past five years.
B. ORD HOUSTON has served as Director of the Company since 1976 and
served as Secretary of the Company from June 1983 until 1995. Mr. Houston has
been retired for longer than the last five years. Previously, Mr. Houston held
various positions with the Company since 1966, most recently as Executive Vice
President.
ROBERT F. BACIGALUPO served as a Director of the Company from 1984 to
1995. Following his resignation as Director, the Executive Committee of the
Board of Directors designated Mr. Bacigalupo Honorary Director in recognition of
his many years of service as a director. Mr. Bacigalupo will serve in such
capacity as an advisor to the Board of Directors. He has been the owner of West
Town Mortuary, a funeral home, since 1949 and a director of Maywood Proviso
State Bank since 1953.
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<PAGE>
COMPENSATION OF DIRECTORS
Directors are not compensated for their services as a director but are
entitled to reimbursement of expenses incurred in connection with their
attendance at all meetings.
The Company maintains the Directors Option Plan for directors. Under
the Directors Option Plan: (i) each person who was a director of the Company on
March 21, 1991 received an option for 10,000 shares under the Directors Option
Plan and (ii) each individual who became a director of the Company after March
21, 1991 and prior to December 12, 1995 was granted an option for 10,000 shares.
The exercise price of each option granted under the Directors Option Plan is the
greater of $3.15 per share or 100% of the fair market value of a share of the
Company's Common Stock on the date the option is granted. No option granted
under the Directors Option Plan may be exercised during the six months after its
grant; thereafter, the option becomes exercisable in full. Options are not
assignable. No option may be exercised after six years from the date of grant.
EXECUTIVE COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years ended December 31, 1992 and 1993,
during the five-month transition period ended May 31, 1994 and during the fiscal
year ended May 31, 1995 to the Company's Chief Executive Officer and to each of
the Company's executive officers whose total salary and bonus exceeded $100,000
during the fiscal year ended May 31, 1995 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------- ------------------------------
Name and Other Annual Stock Option All Other
Principal Position Year Salary Bonus Compensation(s) Awards Compensation(1)
- --------------------- -------- -------- --------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James L. Leuthe 1995 -- -- -- -- $672
Chairman and Chief 1994(3) -- -- -- -- 280
Executive Officer(2) 1993 -- -- -- -- 672
1992 $2,616 -- $8,387(4) -- 672
Alan H. Silverstein 1995 110,000 30,000 5,472(4) 250,000 11,925
President and Chief 1994(3) 36,667 - 1,824(4) 10,000 224
Executive Officer(5)
</TABLE>
- ----------------------------
(1) Represents life insurance premiums paid by the Company.
(2) Mr. Leuthe was not compensated for his services during the Company's
fiscal year ended December 31, 1993, the transition period ended May
31, 1994 or the fiscal year ended May 31, 1995. Mr. Leuthe resigned as
Chairman of the Board and Chief Executive Officer on December 12, 1995.
(3) Includes compensation received during the transition period January 1
to May 31, 1994.
(4) Includes lease and insurance costs paid by the Company with respect to
use of an automobile.
(5) Mr. Silverstein was elected President and Chief Operating Officer of
the Company in February 1994. Prior to that time, Mr. Silverstein
served as a consultant to the Company. Mr. Silverstein was appointed
Chief Executive Officer of the Company on December 12, 1995.
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<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
Mr. Alan Silverstein, President and Chief Executive Officer of the
Company is employed pursuant to an agreement (the "Employment Agreement") dated
February 1, 1994. The Employment Agreement provides for a five year term, with
automatic renewal for successive terms of two years, subject to a mutual right,
exercisable within 120 days prior to the expiration of any term, not to renew
the Employment Agreement. The salary paid to Mr. Silverstein for the first year
under the Employment Agreement is $110,000, increasing to $165,000 in the fifth
year. Mr. Silverstein is entitled to a quarterly bonus based on the earnings of
the Company, with a minimum guaranteed bonus for the first 18 months of $30,000.
The Company and Salvatore J. Zizza, Chairman of the Board of the
Company, are parties to an agreement under which Mr. Zizza renders certain
financial advisory services, including those relating to proposed mergers and
acquisitions and equity and debt financing, and relations with the financial
community and investors. Mr. Zizza receives compensation in the amount of
$60,000 per annum.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission. Officers, directors and
greater then 10% shareholders are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms they file.
The Form 3 Initial Statement of Beneficial Ownership of Securities for
each of Anthony Chiarella and Antoinette L. Martin was filed late. Both Mr.
Chiarella and Ms. Martin became Reporting Persons on September 29, 1994 and the
Form 3 for each of them was filed on January 10, 1996.
One Form 4 Statement of Change in Beneficial Ownership of Securities
for Alan H. Silverstein relating to the grant of options to purchase 10,000
shares to Mr. Silverstein pursuant to the Directors Stock Option Plan was filed
late. Mr. Silverstein was granted the options on April 12, 1994 and the Form 4
was filed on January 10, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the fiscal year ended May 31, 1995 to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of
Securities Percentage of Total
Underlying Options Granted to Per Share
Name Options Granted Employees Exercise Price Expiration Date
- ----------------------------- ----------------- -------------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Alan H. Silverstein 250,000 100.0% $0.9375 December 29, 2004
</TABLE>
On January 27, 1994, the Executive Committee of the Board of Directors
(the "Committee") of the Company approved the terms of the employment agreement
with Mr. Silverstein. The Committee consisted of James Leuthe, Ron Gale, Jan
Gale, Joseph Posh and B. Ord Houston. The Employment Agreement provided that Mr.
Silverstein would be granted 250,000 options in accordance with the terms of the
1994 Plan. See "Management -- Executive Compensation -- Stock Option Plans."
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<PAGE>
AGGREGATED FISCAL YEAR-END OPTIONS
The following table sets forth certain information regarding
unexercised stock options held by each of the Named Executive Officers as of May
31, 1995. No stock options were exercised by any such officer during the fiscal
year ended May 31, 1995.
AGGREGATED FISCAL YEAR-END OPTION VALUES
Number of
Unexercised Options at Value of Unexercised in-
May 31, 1995 the-Money Options at
May 31, 1995 ($)
Exercisable/
Unexercisable Exercisable/ Unexercisable
Name --------------------- ------------------------
- ----
James L. Leuthe 10,000/0 0/0
Alan H. Silverstein 10,000/250,000 0/296,875
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or defined benefit
pension plans in which directors or executive officers participate.
STOCK OPTION PLANS
1989 EQUITY INCENTIVE OPTION PLAN
The Company's 1989 Equity Incentive Plan (the "1989 Equity Incentive
Plan") provides for the granting of non-qualified and incentive stock options
for up to 150,000 shares of the Common Stock (or the number and kind of shares
of stock or other securities which are substituted for those shares or to which
those shares are adjusted by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants or rights, stock
dividend, stock split or reverse stock split, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise) to certain
employees and consultants (together, the "Employees") of the Company and its
subsidiaries. Incentive options are intended to qualify as options described in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Equity Incentive Plan is administered by the Board of Directors or a committee
thereof. All Employees, as identified by the Board of Directors, are eligible to
participate in the Equity Incentive Plan. The Board of Directors discontinued
the grants of options under the Equity Incentive Plan upon adoption of the 1994
Stock Option Plan (as defined below). As of the date hereof, options to purchase
an aggregate of 25,000 shares of Common Stock were still exercisable pursuant to
the Equity Incentive Plan.
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<PAGE>
DIRECTORS OPTION PLAN
Pursuant to the Company's Directors Option Plan (the "Directors Option
Plan"), options may be granted to directors and consultants of the Company or
any subsidiary of the Company. As of February 29, 1996, options to purchase
100,000 shares of Common Stock were outstanding under the Directors Option Plan
and no options had been exercised. The Directors Option Plan is administered by
a committee of outside directors appointed by the Board of Directors (the
"Committee"). The Committee has the power to interpret the Directors Option
Plan, the options granted thereunder and to adopt rules for the administration,
interpretation and application of the Directors Option Plan as are consistent
therewith and to interpret, amend or revoke any such rules. The Committee does
not have any discretion to determine who will be granted options or to determine
the number of options, the exercise price of options or the timing of the grant
of options to be granted to any Director. Members of the Committee shall not
receive any compensation for their services as members, but all expenses and
liabilities they incur in connection with the administration of the Directors
Option Plan shall be borne by the Company.
Each director as of March 21, 1991 and each person who became a
director after March 21, 1991 and before December 12, 1995 was granted an option
to purchase 10,000 shares of Common Stock at an exercise price of $3.15 per
share. No option is exercisable in whole or in part during the six months after
the option is granted. Each Option shall terminate upon the expiration of six
years from the date the Option was granted; except that, a Director's Option
shall terminate immediately if said Director is removed from the Board (A) by
action of the shareholders of the Company or the Board in accordance with the
Company's By-laws or applicable law, (B) by a court of competent jurisdiction,
or (C) by operation of law, in any such case where "cause" is the express reason
for such removal.
1994 STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "1994 Stock Option Plan")
provides for the granting of non-qualified and incentive stock options and stock
appreciation rights for up to 400,000 shares of the Common Stock (or the number
and kind of shares of stock or other securities which are substituted for those
shares or to which those shares are adjusted by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, issuance of warrants or
rights, stock dividend, stock split or reverse stock split, combination or
exchange of shares, repurchase of shares, change in corporate structure or
otherwise) to certain officers, non-employee directors and key employees
(collectively, the "Key Employees") of the Company and its subsidiaries whose
substantial contributions are essential to the continued growth and success of
the Company's business. Incentive options are intended to qualify as options
described in Section 422 of the Code. The 1994 Stock Option Plan is administered
by the Committee. All Key Employees, as determined by the Committee, are
eligible to participate in the 1994 Stock Option Plan, subject to the
Committee's discretion to designate Key Employees who are to receive Options.
The Committee makes its determination as to whether an employee is a Key
Employee based on such factors as whether such employee is serving in a
managerial capacity and its assessment of the employee's overall contribution to
the Company. As of the date hereof, approximately 15 Key Employees are eligible
to participate in the 1994 Stock Option Plan. As of May 31, 1996, options to
purchase an aggregate of 400,000 shares of Common Stock had been granted to Key
Employees of the Company. The range of exercises prices for the options
currently outstanding under the 1994 Stock Option Plan is from $0.9375 to
$2.875.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 30, 1996 by (i)
each person who is known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock, (ii) each Named Executive Officer and each
director and (iii) all directors, and executive officers as a group. Except as
otherwise noted, each person maintains a
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<PAGE>
business address at the Company's address and has sole voting and investment
power over the shares shown as beneficially owned.
<TABLE>
<CAPTION>
Percent of
Name and Address of Beneficial Owner Shares Owned Beneficially Outstanding Shares
- ---------------------------------------------- --------------------------------- ------------------------
<S> <C> <C>
James L. Leuthe 224,098(1) 11.5%
Universal Process 1,831,600(2)(3)(4)(5) 53.7
Equipment, Inc.
P.O. Box 338
Roosevelt, NJ 08555
Alan H. Silverstein 93,334 (7) 4.6
Salvatore J. Zizza 3,334 (8) *
O. Karl Dieckmann 42,853 (6) 2.2
Ronald H. Gale 1,913,767 (6)(9) 56.3
Jan Gale 1,911,767 (6)(9) 56.2
B. Ord Houston 20,031 (6) *
Harold Bogatz 3,334 (8) *
Antoinette L. Martin --- *
Anthony Chiarella --- *
Clarence T. Lind 4,000 *
Linda J. Wright --- *
All directors and executive officers as a 2,384,918 67.4%
group (12 persons)
</TABLE>
- ---------------------
(1) Of this total, 52,281 shares are owned by Nikki, Inc., a corporation in
which Mr. Leuthe is an officer, director and the sole stockholder,
161,343 shares are owned by Mr. Leuthe, 10,000 shares are purchasable
by Mr. Leuthe upon exercise of options granted under the 1991 Directors
Option Plan and 167 are purchasable upon exercise of options granted
under the 1994 Stock Option Plan. This total does not include 640
shares owned by Mr. Leuthe's children, of which he disclaims beneficial
ownership.
(2) Includes 1,450,000 shares issuable pursuant to an option granted to
Universal Process Equipment, Inc. by the Company on December 22, 1993.
(3) According to information provided to the Company by UPE, Ronald H. Gale
and Jan Gale are officers, directors and principal stockholders of UPE,
and may be deemed to beneficially own the shares owned by UPE. In
addition to shares they beneficially own through UPE, (i) Ronald H.
Gale individually owns 72,000 shares of Common Stock and has the right
to purchase 10,000 shares upon the exercise of options granted under
the Directors Option Plan and options to purchase 167 shares granted
pursuant to the 1994 Stock Option Plan and (ii) Jan Gale individually
owns 70,000 shares and has the right to
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<PAGE>
purchase 10,000 shares upon the exercise of options granted under the
1991 Directors Option Plan and options to purchase 167 shares granted
pursuant to the 1994 Stock Option Plan.
(4) In addition to the Common Stock currently owned by UPE, the Board of
Directors agreed to issue 350,000 shares of Common Stock to UPE
subsequent to the Record Date in consideration for an ownership
interest in certain resale inventory. These shares will not be issued
prior to the Record Date.
(5) Information obtained from Amendment No. 1 to Schedule 13D which was
filed with the Securities and Exchange Commission on or about December
23, 1993.
(6) Includes 10,000 shares issuable pursuant to options exercisable within
60 days of the date hereof pursuant to the terms of the 1991 Directors
Option Plan and options to purchase 167 shares granted pursuant to the
1994 Stock Option Plan.
(7) Consists of 83,334 shares issuable pursuant to options granted under
the terms of the 1994 Stock Option Plan and 10,000 shares issuable to
options granted under the Directors Option Plan exercisable within 60
days of the date hereof .
(8) Consists of shares issuable pursuant to options exercisable within 60
days of the date hereof pursuant to the terms of the 1994 Stock Option
Plan. (9) Includes 1,831,600 shares beneficially owned by UPE, in which
the individual is an officer, director and principal shareholder.
CERTAIN TRANSACTIONS
Ronald H. Gale and Jan Gale are directors and stockholders of the
Company and are officers, directors and principal stockholders of UPE, a
corporation which is a stockholder of the Company. UPE and/or Ronald H. Gale
and/or Jan Gale are also majority stockholders or otherwise affiliated with
other companies that engage in transactions with the Company. UPE and related
entities purchased processing equipment manufactured by the Company as well as
utilized the Company's remanufacturing services. The approximate total revenues
derived from sales to UPE and related parties were $368,000 for the nine month
period ended February 1996, $2.4 million for the fiscal year ended May 31, 1995,
$290,000 for the transition period from January to May 1994 and $740,000 for the
fiscal year ended December 31, 1993. The terms of such sales were at least as
favorable to the Company as could have been obtained from unaffiliated third
parties.
On December 22, 1993, UPE was granted 300,000 shares of the Company's
Common Stock and an option to purchase an additional 1,450,000 shares pursuant
to an agreement (the "UPE Agreement") between the Company and UPE. Such stock
was granted in consideration of UPE's (i) services in structuring and
negotiating a settlement agreement among The Harrisburg Authority
("Harrisburg"), the Company and UPE with respect to a judgment in the amount of
$2,127,071 which Harrisburg had obtained against the Company; (ii) payments on
behalf of the Company to Harrisburg under the settlement agreement; (iii)
providing a guaranty of and surety for the Company's full and timely payment to
Harrisburg of $650,000 in specified installments; and (iv) granting to
Harrisburg security interests in certain equipment held for sale by UPE and in a
percentage of the proceeds from the sale of such equipment in the ordinary
course of UPE's business. The 300,000 shares issued to UPE were valued by the
Company at $.75 per share, or a total of $225,000. Such shares were issued
because it was the belief of UPE and the Company that, without such settlement,
the Company would be forced to declare bankruptcy, particularly since UPE and
the Company did not believe that the Company could receive financing from
another entity. The Company and UPE also considered the cost of a bankruptcy
proceeding and the likelihood that the Company would survive a Chapter 11
proceeding.
The options to purchase 1,450,000 shares were granted in exchange for
payments made by UPE on behalf of the Company to Harrisburg under the settlement
agreement instead of reimbursing UPE in cash. The rates of exchange are as
follows: three (3) shares issued for each $1.00 in payment made by UPE, up to a
total of option to purchase 450,000 shares in exchange for a total of $150,000
in payments, and after such total of $450,000 shares has been reached, two (2)
shares issued for each additional $1.50 in payment made by UPE
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<PAGE>
up to a total of options to purchase 1,000,000 additional shares in exchange for
a total of $750,000 in additional payments.
Beginning in July, 1993 through January, 1994, Alan H. Silverstein was
retained as a consultant to the Company. In that capacity he played a key
advisory role in the structure and negotiation of the final settlement agreement
with the Harrisburg Authority and the resolution of several other potential
litigation matters. Mr. Silverstein was paid $69,939 in consulting fees and
expenses for services during that time.
On March 26, 1996, the Company issued an option to purchase 350,000
shares of Common Stock to UPE. The option is exercisable beginning October 1,
1996 for a period of ten years from the date of the grant at an exercise price
of $1.8125. Such option was issued in consideration of guarantees of new sources
of financing from the CIT Group and Sterling Commercial Capital in July 1995.
The Board of Directors has agreed to issue 350,000 shares of Common
Stock to UPE in consideration for a fifty percent interest in $1,400,000 of
certain resale inventory from UPE to the Company, which consists of unused heat
transfer equipment owned by UPE. The terms of this transaction are currently
being finalized. These shares will not be issued prior to the Record Date.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company
does not purport to be complete and is qualified in its entirety by reference to
the Company's Amended and Restated Articles of Incorporation, a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part and Pennsylvania corporate law.
AUTHORIZED AND OUTSTANDING STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, no par value and 5,000,000 shares of preferred stock, no par value
("Preferred Stock"). As of April 30, 1996, there were 1,938,520 shares of Common
Stock outstanding and no shares of Preferred Stock were outstanding. In
addition, options and warrants to purchase 2,748,000 shares were outstanding as
of that date.
COMMON STOCK
Subject to the prior rights of any series of Preferred Stock that may
from time to time be authorized and outstanding, holders of Common Stock are
entitled to receive dividends out of funds legally available therefor when, as
and if declared by the Board of Directors and to receive pro rata the net assets
of the Company legally available for distribution upon liquidation or
dissolution. Holders of Common Stock are entitled to one vote for each share of
Common Stock held on each matter submitted to a vote of shareholders, including
the election of directors. All outstanding shares of Common Stock are fully paid
and nonassessable. Neither the Common Stock, nor any other class of securities
of the Company, has any preemptive rights.
PREFERRED STOCK
The Board of Directors has the authority to issue the Preferred Stock
in one or more classes or series and to fix the voting powers, preferences and
relative participating, optional or other special rights, without any further
vote or action by the shareholders. The ability of the Board of Directors to
issue Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a
-50-
<PAGE>
majority of the outstanding voting stock of the Company. The Company has no
current plans to issue any of the Preferred Stock.
COMMON STOCK OUTSTANDING AFTER RIGHTS OFFERING
Approximately 1,356,964 shares of Common Stock will be issued in
connection with the Rights Offering assuming exercise of all Rights. Based on
the 1,938,520 shares of Common Stock outstanding as of April 30, 1996 the
issuance of such shares pursuant to the Rights Offering would result (on a pro
forma basis as of such date) in a 70% increase in the amount of outstanding
Common Shares.
The outstanding shares of the Common Stock are listed on the AMEX under
the symbol "BET."
WARRANTS AND OPTIONS
In addition to options to purchase Common Stock issued pursuant to the
1989 Equity Incentive Plan, the Directors Stock Option Plan and the 1994 Stock
Option Plan, as of April 30, 1996, there were outstanding warrants and options
to purchase 2,223,000 shares of Common Stock. The warrants and options are
exercisable as follows:
Warrants or Per Share
Options Exercisable Price Expiration Date
- --------------- ----------------- ---------------
450,000 $.3333 11/01/99
1,000,000 .7500 11/01/99
350,000 1.8125 03/25/06
50,000 1.8700 07/14/99
40,000 1.8700 07/12/02
178,000 1.8125 03/25/06
125,000 1.8125 03/25/06
25,000 2.1875 02/20/06
5,000 2.1875 02/20/06
Included in the foregoing are warrants and options issued to members of
the Board of Directors of the Company. An aggregate of 2,223,000 shares of
Common Stock is issuable upon the exercise of such warrants and options, with
exercise prices ranging from $.333 to $2.1875 per share.
REGISTRATION AND ANTI-DILUTION RIGHTS
Following this offering, the holders of 50,000 shares of Common Stock
and the holders of warrants and options to purchase 1,890,000 shares of Common
Stock, upon the exercise of such warrants or options (collectively, the
"Registrable Shares") will have certain "piggy-back" registration rights to
register those shares for sale to the public under the Securities Act. In the
event the Company proposes to register any of its shares of Common Stock under
the Securities Act, the holders of Registrable Shares are entitled to require
the
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<PAGE>
Company to include all or a portion of their Registrable Shares in such
registration. The registration rights of the holders of the Registrable Shares
either do not apply to this Rights Offering or have been waived. In addition, in
connection with this Offering the exercise price of warrants to purchase
1,540,000 Registrable Shares held by each of Sterling, CIT and UPE will be
adjusted due to the anti-dilution provisions of such warrants.
PENNSYLVANIA ANTITAKEOVER LAWS
Various provisions of the Pennsylvania Business Corporation Law (the
"BCL"), under which the Company was organized, generally make "hostile"
takeovers of Pennsylvania corporation more difficult by granting certain rights
to non-interested shareholders in certain "change of control" situations by
permitting such shareholders to demand payment from a 20% controlling
shareholder of the "fair value" of such demanding shareholders' shares in cash.
Such provisions may make more difficult the removal of management. The BCL also,
in certain circumstances, prohibits mergers and other "business combinations"
between the Company and an "interested shareholder" (or its affiliate) unless,
among other things, (i) either acquisition of such person's 20% interest or the
business combination is approved by the Company's Board of Directors prior to
the date such "interested shareholder" acquired its 20% interest or (ii) if,
among other requirements, the business combination is approved by a majority of
non-interested shareholders at least three months after such person acquired 80%
of the outstanding voting stock and the consideration paid to the non-interested
shareholders in such a transaction meets certain minimum conditions.
Effective April 27, 1990, certain additional subchapters to the BCL
were adopted. Generally, these new subchapters make hostile takeovers even more
difficult by providing that under certain circumstances, (i) "control shares"
lose their voting rights until such rights are restored by a majority vote of
all "disinterested shares" and "voting shares," and (ii) "control shares" may be
redeemed by the target corporation within 24 months after the "control share
acquisition" if, among other things, the acquiring person has not timely
requested a shareholder vote on whether the "control shares" should be accorded
voting rights. Further, an anti-greenmail provision provides, among other
things, that any profits earned from any sale of shares within two years before
or 18 months after a person has acquired or expressed the intent to acquire 20%
of the voting shares or an intention to acquire control (a "controlling person")
are recoverable by the corporation if the shares were acquired within two years
before or 18 months after the acquirer became a controlling person.
The additional subchapters, in certain circumstances, also provide for
severance compensation to employees terminated by a new controlling person, as
well as mandatory preservation of certain labor agreements. They also give the
Board of Directors wider discretion in dealing with hostile takeover attempts.
In addition, Section 1721 of the BCL has been amended through the
addition of provisions that entitle the directors of a corporation, in making
decisions concerning takeovers or any other matters, to the extent they deem
appropriate, to consider, among other things, (i) the effects of any proposed
transaction upon any or all groups affected by such action, including, among
others, shareholders, employees, suppliers, customers and creditors, (ii) the
short-term and long-term interest of such corporation, and (iii) the resources,
intent and conduct of the person seeking control.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
American Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
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<PAGE>
Upon completion of this offering, the Company will have 3,295,484
shares of Common Stock outstanding, assuming exercise in full of the Rights. All
of the 1,356,964 shares offered hereby will be freely tradeable unless acquired
by "affiliates" of the Company as defined in Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). Of the remaining
outstanding shares, 532,500 shares will be "restricted" securities as defined in
Rule 144 and may not be sold unless they are registered under the Securities Act
or are sold pursuant to an exemption from registration, including an exemption
contained in Rule 144. Of such shares [ ] are eligible for sale or will be
eligible for sale within 90 days after the date of this Prospectus.
In general, under Rule 144 as currently in effect, any person (or
persons whose shares are aggregated) who has beneficially owned shares for at
least two years or, except for an affiliate, who beneficially owns shares as to
which a minimum of two years has elapsed since the date of acquisition thereof
from the Company or an affiliate of the Company, is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
1% of the then outstanding shares of the Company's Common Stock or the average
weekly trading volume in the Company's Common Stock during the four calendar
weeks preceding such sale. A person (or persons whose shares are aggregated) who
is not deemed an affiliate of the Company at the time of sale or during the
preceding three months and who beneficially owns shares as to which a minimum of
three years has elapsed since the date of acquisition thereof from the Company
or an affiliate of the Company is entitled to sell such shares under Rule 144
without regard to the limitations described above.
In addition, the holders of 50,000 shares of Common Stock and the
holders of 1,890,000 warrants and options to purchase Common Stock, upon the
exercise of such warrants or options have certain rights to require the Company
to register the sale of such shares under the Securities Act. No assurance can
be given as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital through the sale of its equity securities. See "Description of
Capital Stock--Registration Rights."
SUBSCRIPTION AGENT
The Company has appointed American Stock Transfer & Trust Company as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price (other than wire transfers) should be delivered, as well as
the address to which any Notice of Guaranteed Delivery must be delivered, is:
American Stock Transfer
& Trust Company
40 Wall Street
New York, New York 10005
Telephone: (800) 937-5449
The Company will pay the fees and expenses of the Subscription Agent,
and has also agreed to indemnify the Subscription Agent from certain liabilities
in connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed Morrow & Company as Information Agent for the
Rights Offering. Any questions or requests for additional copies of this
Prospectus, the Instructions or the Notice of Guaranteed Delivery may be
directed to the Information Agent at the telephone number and address below.
-53-
<PAGE>
Morrow & Company
909 Third Avenue
New York, New York 10022
Telephone: (212) 754-8000
The Company will pay the fees and expenses of the Information Agent and
has also agreed to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities
offered hereby is being passed upon by Olshan Grundman Frome & Rosenzweig LLP,
counsel to the Company.
EXPERTS
The Company's consolidated balance sheets for the year ended May 31,
1995 and the consolidated statements of operations, common shareholders' equity,
and cash flows for the year ended May 31, 1995, the five months ended May 31,
1994 and for the year ended December 31, 1993 included in this Prospectus, have
been incorporated herein in reliance on the report of Sobel & Co. independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Amended and Restated Articles of Incorporation and Bylaws of the
Company provide that the Company may indemnify to the fullest extent permitted
by Pennsylvania law any person whom it may indemnify thereunder, including
directors, officers, employees and agents of the Company.
The Company has also agreed to indemnify each director and executive
officer pursuant to an Indemnification Agreement with each such director and
executive officer from and against any and all expenses, losses, claims, damages
and liability incurred by such director or executive officer for or as a result
of action taken or not taken while such director or executive officer was acting
in his capacity as a director, officer, employee or agent of the Company, to the
fullest extent permitted under Federal and Pennsylvania law.
The Company has obtained a directors and officers insurance and company
reimbursement policy in the amount of $1,000,000. The policy insures directors
and officers against unindemnified loss arising from certain wrongful acts in
their capacities and would reimburse the Company for such loss for which the
Company has lawfully indemnified the directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
-54-
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
- ------------------------------------------
INDEX TO FINANCIAL STATEMENTS
CONTENTS
- --------
Page
----
Independent Auditors' Report......................................... F-3
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheet
May 31, 1995...................................................F-4 - F-5
Statement of Operations
for the Year Ended May 31, 1995,
the Five Months Ended May 31, 1994,
and the Year Ended December 31, 1993........................... F-6
Statement of Stockholders' Equity (Deficiency)
for the Year Ended May 31, 1995,
the Five Months Ended May 31, 1994,
and the Year Ended December 31, 1993........................... F-7
Statement of Cash Flows
for the Year Ended May 31, 1995,
the Five Months Ended May 31, 1994,
and the Year Ended December 31, 1993........................... F-8
Notes to Financial Statements....................................F-9 - F-30
Consolidated Balance Sheet February 29, 1996 (Unaudited)......... F-31
Consolidated Statement of Operations
for the Nine Months Ended February 29, 1996
and February 28, 1995 (Unaudited)............................. F-33
Consolidated Statement of Cash Flows
for the Nine Months Ended February 29, 1996
and February 28, 1995 (Unaudited)............................. F-35
Notes to Consolidated Interim Financial Statements............. F-36
================================================================================
F-1
================================================================================
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED MAY 31, 1995
THE FIVE MONTHS ENDED MAY 31, 1994
THE TWELVE MONTHS ENDED DECEMBER 31, 1993
INCLUDING REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To The Board of Directors and Stockholders
The Bethlehem Corporation
We have audited the accompanying consolidated balance sheet of The Bethlehem
Corporation and Subsidiaries as of May 31, 1995, and the consolidated statements
of operations, stockholders' equity (deficiency), and cash flows for the year
ended May 31, 1995, the five months ended May 31, 1994 and the year ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Bethlehem Corporation and Subsidiaries as of May 31, 1995, and the consolidated
results of their operations and their cash flows for the year ended May 31,
1995, the five months ended May 31, 1994 and the year ended December 31, 1993,
in conformity with generally accepted accounting principles.
SOBEL & CO.
Certified Public Accountants
Livingston, New Jersey
August 18, 1995
F-3
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MAY 31, 1995
================================================================================
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 150,859
Accounts receivable (Net of allowance for doubtful
accounts of $203,540) 2,178,612
Accounts receivable - related parties 1,028,857
Inventories 1,502,803
Prepaid expenses and other current assets 155,711
-----------------
Total Current Assets 5,016,842
-----------------
PROPERTY, PLANT AND EQUIPMENT, At cost 8,538,631
Less accumulated depreciation and amortization (6,643,283)
-----------------
Property, Plant and Equipment, Net 1,895,348
-----------------
OTHER ASSETS:
Intangible pension and deferred compensation plan assets 523,569
Intangibles (net of $-0- of accumulated amortization) 125,000
Deferred financing costs 25,000
Other 83,052
-----------------
Total Other Assets 756,621
-----------------
$7,668,811
=================
</TABLE>
================================================================================
See notes to consolidated financial statements. F-4
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEET (Continued)
================================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
<S> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 636,411
Accounts payable 2,589,023
Accounts payable - related parties 1,365,868
Accrued liabilities 694,142
Contract billings in excess of costs and accumulated gross profit 348,477
Commissions payable 240,198
Payroll taxes payable 615,261
State income taxes payable 103,904
--------------------
Total Current Liabilities 6,593,284
--------------------
OTHER LIABILITIES:
Long-term debt, net of current maturities 1,843,793
Deferred compensation and other pension liabilities 1,258,893
--------------------
Total Long-Term Liabilities 3,102,686
--------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock - authorized, 1,000,000 shares
without par value, none issued or outstanding -
Common stock - authorized, 4,000,000 shares
without par value, stated value of $.50 per share;
1,888,532 shares issued; 1,888,520 shares outstanding 944,266
Additional paid-in capital 4,594,630
Accumulated deficit (7,566,045)
--------------------
(2,027,149)
Less - treasury stock, at cost, 12 shares 10
--------------------
Total Stockholders' Equity (Deficiency) (2,027,159)
--------------------
$7,668,811
====================
</TABLE>
================================================================================
See notes to consolidated financial statements. F-5
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS YEAR ENDED
MAY 31, ENDED DECEMBER 31,
1995 MAY 31, 1994 1993
----------------- ------------------- -------------------
<S> <C> <C> <C>
NET SALES $14,540,591 $2,898,040 $ 8,368,367
COST OF GOODS SOLD 11,959,486 3,102,806 8,857,078
----------------- ------------------- -------------------
GROSS PROFIT (LOSS) 2,581,105 (204,766) (488,711)
----------------- ------------------- -------------------
SELLING AND ADMINISTRATIVE EXPENSES:
Selling 677,055 154,868 287,836
Administrative 1,554,818 480,365 831,269
----------------- ------------------- -------------------
2,231,873 635,233 1,119,105
----------------- ------------------- -------------------
Income (Loss) Before Other Income
(Expenses) and Income Taxes 349,232 (839,999) (1,607,816)
----------------- ------------------- -------------------
OTHER INCOME (EXPENSES):
Interest expense (253,940) (90,292) (235,714)
Gains on sales of equipment 72,092 - -
Royalty income - related party 35,500 - -
Other income - (expense) 19,709 (77) 31,515
Interest income 8,166 668 8,963
Settlement of Harrisburg Authority lawsuit - - (1,394,694)
Provision for legal settlements - - (295,000)
----------------- ------------------- -------------------
(118,473) (89,701) (1,884,930)
----------------- ------------------- -------------------
Income (loss) from operations before
provision for income taxes 230,759 (929,700) (3,492,746)
(PROVISION) BENEFIT FOR INCOME TAXES (1,105) (1,170) 89,562
----------------- ------------------- -------------------
NET INCOME (LOSS) $ 229,654 $ (930,870) $(3,403,184)
================= =================== ===================
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $.08 $(.49) $(2.13)
================= =================== ===================
Assuming full dilution $.08 $(.49) $(2.13)
================= =================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING
Primary 2,946,423 1,888,520 1,595,929
================= =================== ===================
Fully diluted 3,026,762 1,888,520 1,595,929
================= =================== ===================
</TABLE>
================================================================================
See notes to consolidated financial statements. F-6
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
================================================================================
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------------- PAID-IN ACCUMULATED ----------------------
SHARES AMOUNT CAPITAL EQUITY (DEFICIT) SHARES AMOUNT TOTAL
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 1,588,532 $ 794,266 $ 4,519,630 $(3,461,645) 12 $ (10) $ 1,852,241
Issuance of Common Stock 300,000 150,000 75,000 -- -- -- 225,000
Net Loss for the Year Ended
December 31, 1993 -- -- -- (3,403,184) -- -- (3,403,184)
-------------------------------------------------------------------------------------------------
Balance at December 31, 1993 1,888,532 944,266 4,594,630 (6,864,829) 12 (10) (1,325,943)
Net Loss for the Five Months
Ended May 31, 1994 -- -- -- (930,870) -- -- (930,870)
-------------------------------------------------------------------------------------------------
Balance at May 31, 1994 1,888,532 944,266 4,594,630 (7,795,699) 12 (10) (2,256,813)
Net Income for the Year Ended
May 31, 1995 -- -- -- 229,654 -- -- 229,654
-------------------------------------------------------------------------------------------------
Balance at May 31, 1995 1,888,532 $ 944,266 $ 4,594,630 $(7,566,045) 12 $ (10) $(2,027,159)
=================================================================================================
</TABLE>
================================================================================
See notes to consolidated financial statements. F-7
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS YEAR ENDED
MAY 31, ENDED DECEMBER 31,
1995 MAY 31, 1994 1993
----------------- ----------------- ----------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
Net income (loss) $ 229,654 $ (930,870) $(3,403,184)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 287,768 116,715 303,029
Gains on sales of equipment (72,092) -- --
Accrued loss on contracts and obsolete inventory 88,459 231,950 558,610
write-offs
Gain on settlement with former legal counsel -- -- (551,784)
Loss on Harrisburg Authority settlement -- -- 1,394,694
(Increase) decrease in assets:
Accounts receivable (640,256) (222,980) 388,610
Accounts receivable - related parties (767,652) (34,493) 675,297
Inventories (426,033) (219,255) 105,578
Prepaid expenses and other current assets (40,622) (2,643) 96,288
Other assets 30,590 361 7,019
Increase (decrease) in liabilities:
Accounts payable 1,301,330 674,935 798,063
Accounts payable - related parties 1,102,321 121,353 (560,885)
Accrued liabilities (54,784) (451,091) 587,858
Billings in excess of costs (772,743) 599,105 (184,301)
Commissions payable (16,790) 165,270 7,053
Payroll taxes payable 601,183 (1,293) 12,944
State income taxes payable 1,897 -- (97,415)
Deferred compensation and pension liabilities 57,009 31,502 69,589
----------- ----------- -----------
Net Cash Provided by Operating Activities 909,239 78,566 207,063
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (133,385) (23,972) (32,442)
Capitalization of intangible assets (125,000) -- --
Proceeds from the sales of equipment 77,792 -- --
Increase in deferred financing costs (25,000) -- --
Principal receipts on note receivable -- -- 9,052
Net decrease in certificates of deposit -- -- 55,369
----------- ----------- -----------
Net Cash Provided by (Used For) Investing Activities (205,593) (23,972) 31,979
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 168,000 --
Principal payments on long-term debt (612,912) (231,973) (520,341)
----------- ----------- -----------
Net Cash Used for Financing Activities (612,912) (63,973) (520,341)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 90,734 (9,379) (281,299)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 60,125 69,504 350,803
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 150,859 $ 60,125 $ 69,504
=========== =========== ===========
</TABLE>
================================================================================
See notes to consolidated financial statements. F-8
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES:
- --------------------------------------------------------------------------------
The following is a summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statements:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of The Bethlehem
Corporation and its subsidiaries (the "Company"). All intercompany transactions
and balances have been eliminated.
CHANGE IN FISCAL YEAR:
On January 1, 1994, the Company changed its fiscal year from December 31 to May
31. The Company notified the Internal Revenue Service and the Securities and
Exchange Commission of this change in advance of the May 31, 1994 year-end. As a
result, the period ended May 31, 1994 results in a short period of five months.
REVENUE RECOGNITION:
Profits on long-term contracts are recognized on the percentage-of-completion
method of accounting. Under this method, sales and profits are recorded
throughout the contract term based upon the percentage of costs incurred to date
to total estimated costs of the contract.
The liability, "Contract billings in excess of costs and accumulated gross
profit" represents billings in excess of revenues recognized.
Short-term contracts are accounted for using the completed contract method.
Profits on short-term contracts are recorded when a contract is substantially
complete. Generally, a contract is deemed to be substantially complete when it
is shipped to a customer.
Losses on long-term and short-term contracts are recorded at the time the losses
are determined to be probable and can be reasonably estimated.
INVENTORIES:
Inventories are stated at the lower of cost (principally first-in, first-out) or
market. Inventoried costs relating to any applicable contracts are stated at the
actual production cost, including factory overhead incurred to date, reduced by
any applicable progress billings. Inventoried costs are reduced to the lower of
cost or market by charging costs in excess of estimated realizable value to cost
of goods sold.
PROPERTY, PLANT AND EQUIPMENT:
Depreciation, and amortization are provided in amounts sufficient to amortize
the cost of depreciable assets over their estimated useful lives on a
straight-line basis.
The estimated useful lives of the principal classes of assets are as follows:
Buildings 10 to 40 years
Machinery and
equipment 3 to 20 years
EARNINGS (LOSS) PER COMMON SHARE:
The computation of earnings or loss per share in each period is computed by
dividing earnings (loss) by the weighted average number of common shares
outstanding during each period. When dilutive, stock options and warrants are
included as common share equivalents using the treasury stock method. For
primary earnings per share, the Company is using the average market price for
its common stock. For fully diluted earnings per share, the Company is using the
market price at May 31, 1995 because the price was higher than the average.
Because the periods ending May 31, 1994 and December 31, 1993 reflect losses,
the Company did not assume the exercise of any options since this would result
in anti-dilution.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
===============================================================================
F-9
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES: (Continued)
- --------------------------------------------------------------------------------
INCOME TAXES:
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes" and changed its method of
accounting for income taxes from the deferred method required under APB 11 to
the asset and liability method required under SFAS No. 109. SFAS No. 109
requires the recognition of deferred tax assets and liabilities for both the
expected future tax impact of differences between the financial statement and
tax basis of assets and liabilities, and for the expected future tax benefit to
be derived from tax loss and tax credit carryforwards. SFAS No. 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets.
Temporary differences result from different book and tax methods of accounting
for contracts, depreciation, and tax deductibility differences related to
accrued bad debts, vacation, payroll, deferred compensation and legal
settlements.
CASH EQUIVALENTS:
The Company considers investments with original maturities of three months or
less to be cash equivalents.
RECLASSIFICATIONS:
Certain reclassifications have been made to the December 31, 1993 financial
statements to conform to the May 31, 1995 presentation.
ENVIRONMENTAL COSTS:
The Company is subject to certain environmental laws and regulations.
Environmental costs that relate to past or present operations are charged to
operations in the year identified.
INTANGIBLES:
The Company capitalized legal fees during the year ended May 31, 1995 related to
securing employment and non-compete agreements from persons formerly employed by
a competitor of the Company. The Company will amortize these costs over the term
of the agreements.
DEFERRED FINANCING COSTS:
The Company capitalized certain costs during the year ended May 31, 1995
relating to new financing which was secured July 1995. The Company will amortize
these costs over the term of the applicable financing.
================================================================================
NOTE 2 - ACCOUNTS RECEIVABLE AND OVER/UNDER BILLINGS ON UNCOMPLETED CONTRACTS:
================================================================================
Accounts receivable are comprised of the following at May 31, 1995:
Billed (net of allowance
for doubtful accounts of $203,540) $1,320,374
Costs in excess of billings and
accumulated gross profit 738,720
Retention on contracts 119,518
-------
$2,178,612
==========
Costs in excess of billings and accumulated gross profit result from differences
between the method of financial statement revenue recognition and the actual
billing per thecontracts terms. The three most common contract billing methods
are as follows:
================================================================================
F-10
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. Actual progress billings based on pre-established milestones,
2. Actual billings based on the Company's agreement with the respective
customer,
3. Billing when the job is shipped (completed contract method).
The accounts receivable retention balances are pursuant to the retention
provisions in long-term contracts and are due and payable to the Company upon
contract completion and/or customer acceptance of merchandise.
Costs, estimated earnings, and billings on uncompleted contracts are summarized
as follows:
Costs incurred on uncompleted
contracts $4,498,721
Estimated earnings 781,588
----------------
5,280,309
Billings to date 4,890,066
================
$ 390,243
================
Included in the accompanying balance
sheet under the following captions:
Contract costs in excess of billings
and accumulated gross profit 738,720
Billings in excess of costs and
accumulated gross profit 348,477
================
$ 390,243
================
================================================================================
F-11
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 3 - INVENTORIES:
- --------------------------------------------------------------------------------
Inventories are comprised of the following at May 31, 1995:
Finished goods $ 438,438
Raw materials
and components 301,945
Work in process 762,420
$1,502,803
At May 31, 1995, the Company's finished goods inventories consist of
approximately twenty items. The Company is in the process of attempting to sell
these items and management believes no loss will be incurred upon the
disposition or sale of the finished goods inventories. While management believes
the Company is carrying the finished goods inventories at net realizable value,
no estimate can be made of a range of possible loss that is reasonably possible
should the Company be unable to sell the finished goods inventories.
Work in process is shown net of progress billings of approximately $140,000 at
May 31, 1995.
The Company provides for the write-down of specific raw material inventory to
net realizable value. Such write-downs approximated $88,000 for the year ended
May 31, 1995, $38,000 for the five months ended May 31, 1994 and $436,000 for
the year ended December 31, 1993.
- --------------------------------------------------------------------------------
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
- --------------------------------------------------------------------------------
At May 31, 1995, property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Land $ 348,250
Buildings 1,170,037
Machinery and equipment 6,971,543
Equipment under capital lease 48,801
-------------
8,538,631
Less accumulated depreciation and amortization 6,643,283
$1,895,348
</TABLE>
<TABLE>
<CAPTION>
Depreciation and amortization expense is as follows:
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation of buildings, machinery
and equipment $282,965 $115,074 $282,531
Amortization of equipment
under capital leases 4,803 1,641 20,498
------------------------------------------------------------------
$287,768 $116,715 $303,029
==================================================================
</TABLE>
===============================================================================
F-12
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 5 - LAND AND BUILDING HELD FOR SALE:
- --------------------------------------------------------------------------------
For the past two years, the Company attempted to sell an idle office building
with a cost of $361,375 and accumulated depreciation of $158,102. The office
building is located on land with a cost of $25,350. Subsequent to May 31, 1995,
the building was occupied by employees of corporate subsidiaries and other
tenants renting on month to month terms. As a result, the cost of the land and
building have been reclassified to property, plant and equipment.
- --------------------------------------------------------------------------------
NOTE 6 - ACCRUED LIABILITIES:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At May 31, 1995, accrued liabilities consist of the following:
<S> <C>
Salaries and wages $290,983
Current portion of deferred compensation
and pension liabilities 222,607
Postretirement obligation (health insurance) 50,742
Provision for legal settlements 55,000
Other 74,810
--------
$694,142
========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7 - LEASE COMMITMENTS:
- --------------------------------------------------------------------------------
The Company leases certain equipment and automobiles which have been classified
as operating leases for financial statement purposes. The following table
represents expenses under these operating leases for the respective periods:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
Lease payments $11,154 $7,363 $26,535
========================================================================
</TABLE>
The future minimum lease payments on these operating leases are as follows:
YEAR ENDED MAY 31,
------------------
1996 $31,572
1997 23,287
1998 15,525
1999 7,580
2,000 3,790
-----
$81,754
=======
================================================================================
F-13
<PAGE>
================================================================================
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 8 - LONG-TERM DEBT:
- --------------------------------------------------------------------------------
At May 31, 1995, long-term debt consists of the following:
Note payable - G.E. Capital (formerly ITT Commercial) $1,439,732
Note payable - Harrisburg Authority 914,288
Note payable - former corporate legal counsel 95,538
Capital lease obligations 30,646
----------
2,480,204
Less current maturities (636,411)
-----------
$1,843,793
==========
NOTE PAYABLE - G.E. CAPITAL:
The Company signed a note payable with G.E. Capital (formerly ITT) in May 1990
for $3,750,000 payable over a 60 month term with monthly principal payments of
$62,500, and a final payment due May 25, 1995. Under the agreement, interest is
payable monthly at 2 7/8% over the lender's prime rate but never less than 10.5%
simple interest per annum.
Substantially all of the Company's assets are pledged as collateral for this
loan.
On August 29, 1991, the Company modified its loan agreement to repay the
remaining principal balance over a revised 84 month term with monthly principal
payments of $33,482. With the exception of this modification, the provisions of
the original agreement were continued.
At May 31, 1995, the Company was four months delinquent on its payments
according to the loan agreement and in non-compliance of certain restrictive
covenants associated with its term note. However, on July 16, 1995 the Company
secured new financing and repaid the term loan which effectively eliminated the
non-compliance. (See Note 25)
NOTE PAYABLE - FORMER CORPORATE
LEGAL COUNSEL:
The Company's former legal counsel agreed during 1993 to settle obligations owed
to them by the Company for a down payment of $6,518 and a $175,000 non-interest
bearing note from the Company. The Company discounted this obligation using its
incremental borrowing rate of 10.5%. The remaining obligation on the note is
payable in 21 monthly installments of $5,000, which includes principal and
interest, through October 15, 1996. At May 31, 1995, the Company is four months
delinquent on its payments.
NOTE PAYABLE - HARRISBURG AUTHORITY:
As part of a settlement agreement between the Company and The Harrisburg
Authority (see Note 15), the Company executed a $1,200,000 note payable to the
Harrisburg Authority. The Harrisburg Authority has a second lien on the
Company's owned real estate. The note's remaining principal payment provisions
at May 31, 1995 are as follows:
1) Payable in fifty-four equal, consecutive monthly installments of $7,258,
including interest discounted at 10.5% due the first day of each month and
continuing through November 1, 1999.
2) The balance of $603,000 will be paid from 50% of the proceeds from the sale
of certain machinery or equipment included in U.P.E.'s inventory and
certain equipment co-owned by U.P.E. and the Company. U.P.E. is a related
party of the Company and agreed to serve as guarantor and surety for the
Company on this obligation. (See Note 18)
3) The settlement agreement requires principal balances referenced in 1 and 2
above which are unpaid on March 1, 1998 to accrue 3% simple interest
compounded annually through February 28, 1999. Principal balances unpaid on
March 1, 1999 through November 1, 1999 accrue 6% simple interest compounded
annually. On November 1, 1999, all unpaid balances of principal and accrued
interest are due and payable to the Harrisburg Authority.
At May 31, 1995 long-term debt maturities are as follows:
YEAR ENDED MAY 31,
- ------------------
1996 $ 636,411
1997 496,629
1998 480,554
1999 821,354
2000 45,256
-----------
$2,480,204
==========
================================================================================
F-14
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES:
- --------------------------------------------------------------------------------
As of May 31, 1995, the Company had approximate deferred tax liabilities of
$140,000 and approximate deferred tax assets of $1.4 million (assuming federal
tax rates of 15%). However, the Company has recorded a valuation allowance for
the amount by which deferred tax assets exceed deferred tax liabilities and, as
a result, the Company has not recorded any liability or asset for deferred taxes
as of May 31, 1995. For the year ended May 31, 1995, the Company has a loss for
income tax purposes of approximately $80,000. For the five months ended May 31,
1994, the Company had a loss for income tax purposes of approximately $880,000.
For the year ended December 31, 1993, the Company had a loss for income tax
purposes of approximately $1,607,000. The tax expense for the year ended May 31,
1995 and the five months ended May 31, 1994 relates to minimum taxes for the
Company and its' subsidiaries.
The Company recognized an income tax benefit for the year ended December 31,
1993 relating to a favorable settlement which reduced a 1990 tax assessment from
the State of Pennsylvania.
At May 31, 1995, the Company has approximately $5.2 million of unused federal
net operating losses and $120,000 of unused federal investment and research tax
credit carryforwards. If the net operating loss carryforwards remain unused,
they will expire during the years 2004 through 2010. If the investment and
research tax credit carryforwards remain unused, they will expire during the
years ended May 31, 1996 through 2002.
The provision for (benefit from) domestic income tax is as follows:
(IN THOUSANDS)
------------------------------------------
YEAR ENDED FIVE MONTHS YEAR ENDED
MAY 31, 1995 ENDED DECEMBER
MAY 31, 1994 31, 1993
------------- --------------- ------------
Current
Federal $ - $ - $ -
State 1 1 (90)
------------- --------------- ------------
1 1 (90)
------------- --------------- ------------
Deferred
Federal - - -
State - - -
------------- --------------- ------------
- - -
------------- --------------- ------------
Total $ 1 $ 1 $ (90)
============= =============== ============
The components of the Company's deferred tax assets and liabilities are as
follows:
May 31, 1995
Deferred Tax Assets:
Bad debt reserve $ 31,000
Inventory basis difference 215,000
Net operating loss carryforwards 771,000
Investment tax credits 82,000
Lawsuit settlement 145,000
Deferred compensation 80,000
Other 66,000
Valuation allowance (1,260,000)
----------------
Total Deferred Tax Asset 140,000
Deferred Tax Liability:
Property, plant and equipment (140,000)
================
Net Deferred Tax Asset (Liability) $ -
================
The statutory federal income tax rate is reconciled to the Company's effective
income tax rate as follows:
Year Ended
May 31, 1995
------------
Statutory federal income tax rate 15%
================
Change in deferred asset valuation
reserve (15%)
================
Effective income tax rate 0%
================
===============================================================================
F-15
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 10 - DEFERRED COMPENSATION PLAN:
- --------------------------------------------------------------------------------
The Company has two unfunded nonqualified deferred compensation plans for
certain employees which provide for 10-15 year payouts of annual retirement
benefits equal to 20% of the pre-retirement salary of employees. The benefits
become fully vested upon the employees' retirement from the Company. The plans
provide for benefits to be paid to beneficiaries of retirees who have passed
away and had unpaid vested benefits at the time of their death. The Company
funds the plans' annual benefit payments with proceeds from life insurance
contracts and operating cash.
PLAN 1:
The "Professional Executive Incentive Plan" is accounted for in accordance with
Accounting Principles Board (APB) Statement No. 12 at May 31, 1995. At May 31,
1995, the Company accrued $143,799 relating to its unfunded obligations. Net
periodic expense (income) related to this deferred compensation plan was as
follows:
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, MAY 31, 1994 31, 1993
1995
----------------- ----------------- ---------------
$(4,259) $19,414 $ 36,650
================= ================= ===============
The unfunded obligations were discounted using the following discount rates:
YEAR ENDED FIVE MONTHS YEAR ENDED
MAY 31, ENDED DECEMBER
1995 MAY 31, 1994 31, 1993
----------------- ----------------- ---------------
7% 7% 7%
================= ================= ===============
PLAN 2:
The "Retirement Income Security Plan" is a noncontributory plan and covers
eligible plan participants not covered by Plan 1. During the year ended May 31,
1995, the Company notified all active employees covered by this plan that they
will no longer be eligible for the plan. Instead, the Company has agreed to fund
a portion of the employees benefit obligation through a 401(k) plan.
During 1993, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 106 which requires deferred compensation agreements to
be accounted for in accordance with FAS No. 87 when these agreements taken
together are equivalent to a postretirement income plan. Accordingly, the
Company changed its method of accounting for these agreements from APB No. 12 to
FAS No. 87 during 1993. Net periodic expense for the "Retirement Income Security
Plan" in accordance with FAS No. 87 is as follows:
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
-------------- -------------- --------------
Service cost $ 7,126 $ 4,870 $ 36,937
Interest
expense 70,832 30,736 62,266
Transition
obligation
amortization 33,378 13,907 31,152
Prior service
cost and
amortization
of loss (9,490) - -
-------------- -------------- --------------
$101,846 $49,513 $130,355
============== ============== ==============
Weighted
average
discount rate 8% 8% 7%
============== ============== ==============
The following table sets forth the funded status and amounts recognized for the
"Retirement Income Security Plan" in the Company's consolidated balance sheet at
May 31, 1995.
<TABLE>
<CAPTION>
Actuarial present value of benefit obligations:
<S> <C>
Accumulated benefit obligation $771,604
==============
Projected benefit obligations $771,604
Plan assets at estimated fair value -
--------------
Excess of projected benefit obligation over plan assets 771,604
Unrecognized prior service cost 104,731
Unrecognized gain 54,127
Unamortized net obligation at adoption which is being amortized over 15 years (420,002)
--------------
Accrued pension expense $510,460
==============
</TABLE>
================================================================================
F-16
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 11 - PENSION AND RETIREMENT PLANS:
- --------------------------------------------------------------------------------
The Company maintains two noncontributory defined benefit retirement plans,
covering substantially all hourly employees subject to a collective bargaining
agreement. The plans require benefits to be paid to eligible employees at
retirement based primarily on years of service and a fixed compensation formula.
The transition obligations are being amortized over a twelve year term for one
plan and a thirty year term for the other plan. The Company funds the plan, at a
minimum, based upon the statutory amounts required under ERISA.
Net periodic pension expense includes the following components:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
--------------------- -------------------- -------------------
<S> <C> <C> <C>
Service cost $ 17,543 $12,083 $ 39,701
Interest cost on projected benefit obligation 216,629 98,031 218,932
Actual return on plan assets (240,995) 12,428 (258,261)
Amortization of transition obligation 54,901 22,875 54,901
Net amortization of deferred (gain) loss 64,059 (93,615) -
Net amortization of prior service cost
and net gain 11,313 4,412 101,062
--------------------------------------------------------------
$123,450 $56,214 $156,335
==============================================================
Weighted average discount rate assumed
in determining the actuarial present value
of the projected benefit obligation 8% 8% 7.0%
==============================================================
Expected long-term return on plan assets 8% 8% 7.5%
==============================================================
</TABLE>
The following table sets forth the Plan's funded status and amounts recognized
in the Company's consolidated balance sheet for its defined benefit plans. Plan
assets are stated at fair value and are comprised primarily of common stock and
corporate bonds.
<TABLE>
<CAPTION>
MAY 31, 1995
-------------------
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $2,860,528
===================
Accumulated benefit obligation $2,860,528
===================
Projected benefit obligations $2,860,528
Plan assets at estimated fair value 2,295,745
-------------------
Excess of projected benefit obligation over plan assets 564,783
Unrecognized net gain and prior service cost 192,109
Unamortized net obligation at adoption (454,534)
-------------------
Accrued pension expense $ 302,358
===================
</TABLE>
401(K) PLAN:
During the year ended May 31, 1995, the Company adopted a 401(k) plan for all
eligible employees. Employees can contribute at their discretion up to 15% of
compensation. The Company matches 25% of the employees contribution to a maximum
of 1 1/4% of compensation. The plan is funded at the end of the calendar year.
At May 31, 1995 approximately $15,000 of employer contributions were due to the
plan.
================================================================================
F-17
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12 - POSTRETIREMENT BENEFIT PLANS:
The Company provides certain employees postretirement health care and life
insurance benefits. Postretirement health care and life insurance benefits are
provided to salaried employees who retired prior to August 1, 1992. The Company
provides postretirement health care benefits upon retirement to eligible hourly
employees in accordance with the Company's collective bargaining agreement.
Postretirement life insurance benefits are available to eligible hourly
employees. Employees are eligible for postretirement benefits upon reaching
certain ages or completing certain years of service. The Company does not fund
its future obligations for postretirement benefits in advance.
Medical Benefits:
- -----------------
The Company adopted Financial Accounting Standard No. 106 (SFAS No. 106),
"Employers' Accounting for Postretirement Benefits Other Than Pensions", during
1993. SFAS No. 106 requires the accrual of the expected future cost of providing
these benefits during the years the employees render the necessary service. The
Company elected to recognize the transition obligation associated with unfunded
health insurance benefits over a 20-year period. The following table presents
the Company's postretirement medical benefit expense:
FIVE
YEAR MONTHS YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, DECEMBER
1995 1994 31,1993
-----------------------------------
Service cost $ 5,702 $ 2,376 $ 5,224
Interest cost 83,993 34,005 136,675
Amortization
of transition
obligation 58,295 24,290 91,116
Expected
contributions
from retirees (97,248) (40,520) -
----------------------------------
$ 50,742 $ 20,151 $233,015
==================================
Discount rate 7% 7% 7%
==================================
Medical trend rate 13.5% 13.5% 15%
==================================
The Company's accumulated postretirement medical benefit obligation at May 31,
1995 is as follows:
Active plan participants $ 125,103
Retirees 1,074,794
-----------
$ 1,199,897
Plan assets -
-----------
Accumulated postretirement benefit
obligation in excess of plan assets $ 1,199,897
Unrecognized transition obligation
and net gain 1,149,155
-----------
Accrued medical postretirement liability $ 50,742
===========
The effect of raising health care cost trend rates 1% results in a future annual
liability increase of approximately $23,000.
Life Insurance:
- ---------------
Term life insurance in the face amount of $3,000 is provided to salaried
retirees. Term life insurance in the face amount of $10,000 is provided to
salaried executive retirees. Salaried employees and executives retired
subsequent to August 1992 are not eligible for these postretirement life
insurance benefits. Term life insurance in face amounts ranging from $1,250 to
$2,500 is provided to retired hourly employees.
The Company's actuary calculated the net present value of unfunded
postretirement life insurance obligations to be provided in the future to
approximately 160 active and retired employees at May 31, 1995. The following
table presents accumulated postretirement life insurance benefit obligations at
May 31, 1995:
Active hourly employees $ 7,883
Inactive hourly & salaried
employees 101,970
-------
$109,853
--------
Accumulated postretirement
benefit obligation in excess
of plan assets $109,853
Unrecognized transition obligation (98,453)
-------
Accrued life insurance post-
retirement liability $ 11,400
--------
Net periodic postretirement life insurance expense for premiums paid for hourly
and salaried retirees is as follows.
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
- ----------------------------------------------------------
$2,284 $1,127 $2,400
==========================================================
===============================================================================
F-18
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 13 - PREFERRED STOCK:
- --------------------------------------------------------------------------------
The preferred stock is issuable in one or more series. The Board of Directors
has the power to determine for each series the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price and any other powers, preferences and
other special rights of the series, and any qualifications,
limitations or restrictions on any of the rights of the series, and the number
of shares constituting the series.
The Company has no specific plans, understandings or arrangements to issue
authorized preferred stock as of May 31, 1995.
- --------------------------------------------------------------------------------
NOTE 14 - EMPLOYEE STOCK OPTIONS:
- --------------------------------------------------------------------------------
PLAN 1:
On June 2, 1989, the Board of Directors of the Company adopted The Bethlehem
Corporation "1989 Equity Incentive Plan" which was approved by the stockholders
on May 11, 1990. The plan provides that the Board of Directors may grant
incentive or nonqualified common stock options to officers, directors,
consultants and employees of the Company for the purchase of up to 150,000
shares of the Company's common stock. Incentive stock options may be granted
only to employees pursuant to the plan and Board established performance
criteria. Options expire one month after employees terminate employment but in
no case later than ten years after the date of grant.
The Company's Board of Directors granted options to officers and key employees
with an exercise price of $2.50 per share. The following table summarizes
certain key points of the plan at:
MAY 31, MAY 31, DEC. 31,
1995 1994 1993
-------------------------------
a) Options outstanding 42,500 47,500 47,500
b) Options available
for granting 107,500 102,500 102,500
c) Persons holding
options 7 8 8
PLAN 2:
During 1991, the "Equity Incentive Plan" for Directors was approved and provides
that each of the Company's directors receive nonqualified stock options to
purchase 10,000 shares of common stock of the Company.
The Company's common shares subject to options under the "Equity Incentive Plan"
(the Plan) may not exceed 130,000 shares in the aggregate and 10,000 shares for
any one director. The Plan provided the following: (i) each director of the
Company on March 21, 1991 receive common stock options for 10,000 shares, and
(ii) each director elected after March 21, 1991 be granted common options for
10,000 shares under the Plan. The exercise price of each option granted under
the Plan shall be the greater of $3.15 per share or 100% of the fair market
value of a share of the Company's common stock on the date the option is
granted. The Plan is not limited in duration. The following table summarizes
certain key points of the plan at:
MAY 31, MAY 31, DEC. 31,
1995 1994 1993
------------------------------
a) Options outstanding 100,000 100,000 100,000
b) Options available
for granting 30,000 30,000 30,000
c) Directors holding
options 10 10 10
===============================================================================
F-19
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 14 - EMPLOYEE STOCK OPTIONS: (Continued)
- --------------------------------------------------------------------------------
PLAN 3:
On November 22, 1993, pursuant to a settlement agreement reached between the
Company, U.P.E. (a related party), and the Harrisburg Authority, the Company
granted stock options to U.P.E., at U.P.E.'s option, the Company will issue
additional shares of common stock to U.P.E. in exchange for payments made by
U.P.E. on behalf of the Company to Harrisburg under the settlement agreement
(see Note 15) instead of reimbursing U.P.E. in cash. U.P.E. may make payments
(without prior approval of the Company) on the outstanding amounts due to
Harrisburg and thereby be entitled to exercise its options or accept
reimbursement for payments it advanced on behalf of the Company. Provided
however, for any such payment made by U.P.E. the Company will not be obligated
to issue more than 1,450,000 shares to U.P.E. for such payments. The ratio of
exchange shall be as follows: three (3) shares issued for each $1.00 in payment
made by U.P.E., up to a total of 450,000 shares in exchange for a total of
$150,000 in payments; and after such total of 450,000 shares has been reached,
two (2) shares issued for each additional $1.50 in payment made by U.P.E., up to
a total of 1,000,000 additional shares in exchange for a total of $750,000 in
additional payments. No options have been exercised by U.P.E. under this plan as
of May 31, 1995. See notes 15 and 18c.
PLAN 4:
The Board of Directors of the Company approved the "1994 Stock Option Plan"
which is subject to stockholders approval. The Plan provides for the granting of
non-
qualified and incentive stock options and stock appreciation rights equal to the
greater of 400,000 shares or 8% of common stock issued and outstanding, to
certain officers, non-employee directors and key employees of the Company and
its subsidiaries. The board of directors may at its discretion determine the key
employees eligible to participate in the plan. At May 31, 1995, the board
determined fifteen employees to be key employees eligible to participate in the
plan and granted 200,000 options at an exercise price of approximately $.94 per
share. to one of these employees. The maximum number of shares that may be
granted to one person pursuant to the Plan is 250,000 shares. The 1994 Stock
Option Plan provides that options are to be granted at an exercise price of at
least fair market value at the date of the grant. Options covered by Plan 4,
vest ratably over a three year period, however, if there is a change in control,
the options become fully vested. The Plan provides for directors of the Company,
elected after December 1, 1994 to receive 10,000 options if they do not receive
options under Plan 2. Also, continuing directors of the Company are entitled to
options to acquire 500 shares annually. Also, the aggregate fair market value
(determined as of the date an option is granted) of the shares with respect to
which incentive stock options are exercisable by any single employee during any
calendar year cannot exceed $100,000. The options are nontransferable and the
Plan expires December 23, 2004.
- --------------------------------------------------------------------------------
NOTE 15 - LAWSUIT SETTLEMENT - HARRISBURG SEWAGE AUTHORITY:
- --------------------------------------------------------------------------------
In 1985, the Harrisburg Sewage Authority filed suit against the Company and four
other defendants. The suit is a result of purported deficiencies, and defects in
certain modifications and improvements at a Harrisburg facility. On November 22,
1993, the Company and Harrisburg Authority settled the lawsuit for $1,300,000
based upon negotiations between the Company, U.P.E. and the Harrisburg
Authority.
In consideration for U.P.E.'s assistance in the negotiation of the settlement
and for pledging collateral and guaranteeing the promissory note, the Company
issued 300,000 shares of common stock to U.P.E (valued at $225,000). The value
of the $225,000 was determined using the fair market value of the stock on
November 22, 1993. This amount is included in the caption Settlement of
Harrisburg lawsuit on the consolidated statement of operations.
Included in the caption Settlement of Harrisburg lawsuits in other expenses are
the following:
Verdict, net of verdict reduction $ 754,823
Interest accrued 545,177
Discount of note payable to Harrisburg (130,306)
Issuance of stock to U.P.E. 225,000
$1,394,694
In addition, U.P.E. has been granted stock options to purchase an additional
1,450,000 shares of common stock after satisfying certain obligations.. See
notes 14 and 18c.
===============================================================================
F-20
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 16 - LOSS ON CONTRACT IN PROCESS:
- --------------------------------------------------------------------------------
The Company accrued losses on contracts in progress for the respective periods
as follows:
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
MAY 31, 1995 MAY 31, 1994 DEC. 31, 1993
--------------------------------------------------
$ - $195,100 $122,348
==================================================
================================================================================
F-21
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 17 - COMMITMENTS AND CONTINGENCIES:
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A. The Company initiated a lawsuit against two competitors and certain of the
competitors' employees. The suit alleges certain corporate trade secrets
were misappropriated by the competitors. The Company reached a settlement
with one of the competitors and as a result the Company employed certain
key employees of this competitor. The employment is subject to a contract
which includes non-compete agreements. The Company is continuing its'
lawsuit against the remaining competitor, Denver Equipment Company, Inc.
and its successor Svedala Industries, Inc. ("Denver"). The hearing on the
preliminary injunction which began in September 1994 and was continued to
accommodate settlement discussions, resumed and was completed in July 1995
after four additional days of testimony. The matter is currently sub
judice.
Denver also filed an Answer, New Matter and Counterclaim against the
Company in July 1995. The Counterclaim alleges that the Company initiated
and has continued the litigation against Denver for the purpose of
suppressing lawful competition which has resulted in expenses incurred by
Denver of not less than $20,000 and asks the Court for an award in favor of
Denver in an amount not less than $20,000. The Company immediately filed
its Preliminary Objections to the Counterclaim along with a Motion to
Dismiss. Although the Company considers the Counterclaim frivolous, it
intends to fully defend this matter.
B. The Company has a wholly owned subsidiary which is currently inactive that
is named Federal Boiler Company (FBC). FBC was named as a defendant in
fifty-one lawsuits in which it was sued for asbestos related reasons
stemming from FBC's sales of the boilers it manufactured for use in
industry and government. The Company successfully obtained summary
judgements in nineteen of the fifty-one cases, and legal counsel is filing
summary judgement motions for the remaining cases. The judgement motions
are pending as they are not addressed by the court until the cases are
scheduled for court hearings. Numerous other defendants are named in the
remaining cases and any judgements are expected to be spread among those
defendants. The Company's legal counsel believes the courts will grant FBC
summary judgements on these cases on the following grounds:
1. The lawsuits were wrongfully asserted against FBC as FBC did not
manufacture the boilers in question.
2. FBC did not use asbestos in the manufacture of its products.
3. None of the plaintiffs were exposed to FBC's products or, if they were
exposed to an FBC product, then FBC's product legally could not have
caused their injuries.
The Company's legal counsel believes that even if summary judgements are
not granted in favor of the Company, the Company does not appear to be
exposed to a risk of significant damage awards. The Company is uncertain as
to the ultimate outcome of these lawsuits and cannot estimate its'
liability, if any, related to these claims. Accordingly, no provision has
been made for any loss from these lawsuits in the accompanying financial
statements.
C. The Company was one of several defendants, in litigation instituted during
1993 by John Irwin, Sr. and Donna Irwin. The plaintiffs sought damages for
alleged personal injuries to Mr. Irwin resulting from an explosion during
maintenance repairs being made by him to a boiler manufactured by the
Company. The plaintiff's allegations made against the Company were based on
theories of product liability and negligence. The Company reached a
settlement with the plaintiff that involved two additional defendants. The
Company's contribution to the settlement was $168,000 and was paid in full.
D. During 1993, the Company settled a claim for $5,000 with OSHA, however the
Company has not paid the settlement amount which is accrued at May 31,
1995.
E. The Company is a party to a proposed settlement in United States v. Charles
Chrin et. al. The matter involved an action to obtain site cleanup and
reimbursement of costs at the Industrial Lane Landfill Superfund site. The
Company elected to join the proposed settlement in order to eliminate the
possibility of any future potential liability connected with this site. The
settlement is under review by the court. While the Company does not believe
that it is responsible for any of the problems or costs associated with the
cleanup, it has disposed of waste at the site. The Company accrued $55,000
at May 31, 1995 to provide for the proposed settlement. The Company is
uncertain of its ultimate liability, if any, relating to this case.
F. At May 31, 1995, the Company is not aware of any other pending or
threatened litigation or other environmental claims which have not been
remedied, disclosed or accrued at May 31, 1995.
================================================================================
F-22
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 18 - RELATED PARTY TRANSACTIONS:
- --------------------------------------------------------------------------------
A. A former director (who was not a shareholder) of the Company was a partner
in a law firm that served as legal
counsel for which $96,000 of legal services was incurred during 1993. On
November 23, 1993 this law firm agreed to accept $181,518 in full
settlement of $734,354 of its outstanding receivables due from the Company
which resulted in an accounts payable and administrative expense decrease
totalling approximately $552,000 during the year ended December 31, 1993.
B. The Company purchases x-ray and related services from a company which is
50% owned by a corporate officer. The Company's approximate purchases are
as follows:
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
---------------- ----------------- ----------------
$6,000 $800 $26,000
================ ================= ================
C. Ronald Gale and Jan Gale are directors and stockholders of the Company and
are officers, directors and principal stockholders of Universal Process
Equipment (U.P.E.), a corporation which is a stockholder of the Company.
U.P.E. and or Ronald and Jan Gale are also majority stockholders or
otherwise affiliated with other companies that engage in transactions with
the Company.
On December 22, 1993, pursuant to a settlement agreement among the Company
(see notes 14 and 15), U.P.E. and the Harrisburg Authority, the Company's
Board of Directors approved the issuance of 300,000 shares of the Company's
common stock and options to acquire an additional 1,450,000 shares of the
Company's common stock to U.P.E. in exchange for:
1. U.P.E.'s consulting services provided during 1993 in negotiating and
restructuring the Harrisburg Authority's lawsuit settlement,
2. U.P.E. agreeing to the payment of obligations to the Harrisburg
Authority as a secondary guarantor for the Company pursuant to the
Harrisburg settlement agreement,
3. U.P.E. pledging certain of its assets as security for such settlement
agreement, and
4. U.P.E. agreeing to remit part of the proceeds from sales of certain
assets owned jointly with the Company as payments on the liability to
the Harrisburg Authority. During the year ended May 31, 1995, proceeds
from sales under this agreement of $47,000 were used to reduce the
payable to Harrisburg. U.P.E. did not exercise its options (see note
14) and the amount is included in accounts payable - related parties.
On September 9, 1992, the Company and U.P.E. entered into an agreement for
the foreign production of the Company's dryer equipment. This agreement
provides for payment to the Company of fees for design drawings and a
license fee for sales of equipment manufactured in the Eastern Block
countries of Europe. The Company accrued a $35,500 royalty receivable at
May 31, 1995 related to sales of products covered by the agreement.
The related party receivables and payables are derived in the normal course
of business activites and are included in the accompanying balance sheet as
follows:
MAY 31, 1995
-------------------------------
ACCOUNTS ACCOUNTS
RECEIVABLE PAYABLE
(RELATED (RELATED
PARTIES) PARTIES)
-------------------------------
a. U.P.E. (Owned by Ronald
& Jan Gale through
Universal Baling &
Processing, Inc.
U.P.E'.s parent) $ 957,902 $1,024,075
b. Universal Envirogenics, Inc.
(U.E.I.) (80% owned by
U.P.E.) 70,955 127,695
c. Universal Industrial
Refrigeration, Inc. (U.I.R.)
(80% owned by Ronald &
Jan Gale) - 61,306
d. R. Simon Dryers, Ltd.
(Directors are Ronald &
Jan Gale) - 30
e. Employees, Directors and
Other Affiliates - 152,762
-----------------------------
$1,028,857 $1,365,868
-----------------------------
Since the amounts are in the ordinary course of business, management expects to
collect and repay the amounts within one year.
===============================================================================
F-23
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The approximate total revenues derived from related party sales were as follows:
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
- ------------ -------------- ------------- --------------
U.P.E. $2,450,000 $290,000 $740,000
U.E.I. - - -
U.I.R. - - -
R, Simon
Dryers - - -
-------------- ------------- --------------
$2,450,000 $290,000 $740,000
============== ============= ==============
The Company purchases equipment and services from U.P.E. and its affiliates.
These purchases total approximately ten percent of the total cost of goods sold
for the year ended May 31, 1995. In the opinion of management, purchases from
related parties for the five months ended May 31, 1994 and the year ended
December 31, 1993 are immaterial.
- --------------------------------------------------------------------------------
NOTE 19 - CONCENTRATION OF CREDIT RISK:
- --------------------------------------------------------------------------------
Trade accounts receivable:
- --------------------------
The Company is a supplier of equipment for environmental, energy and continuous
processing applications primarily in the United States. In addition, the Company
also provides subcontracting services for United States military equipment with
two general contractors. In connection with these activities, the Company grants
credit to its customers. At May 31,
1995, the Company's accounts receivable (excluding related parties) include a
concentration of seven customer balances which represent 43% of the accounts
receivable outstanding (excluding related parties).
Cash and Cash Equivalents:
- --------------------------
The cash balances in banks exceed federally insured limits at times during the
year.
- --------------------------------------------------------------------------------
NOTE 20 - EMPLOYMENT CONTRACTS:
- --------------------------------------------------------------------------------
The Company entered into employment contracts with several members of its
management team resulting in future purchase commitments for services as
follows:
YEAR ENDED MAY 31,
------------------
1996 $439,583
1997 253,750
1998 155,000
1999 110,000
--------
$958,333
--------
- --------------------------------------------------------------------------------
NOTE 21 - MAJOR CUSTOMERS AND EXPORT SALES:
- --------------------------------------------------------------------------------
Comparison of the Company's four largest customers for each period is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED YEAR ENDED
CUSTOMER MAY 31, 1995 MAY 31, 1994 DECEMBER 31, 1993
- --------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
A 13% 26% 13%
B 10% 8% -
C 12% - -
D 12% - -
E - 16% -
F - 6% 11%
G - - 14%
H - - 15%
</TABLE>
===============================================================================
F-24
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 21 - MAJOR CUSTOMERS AND EXPORT SALES: (Continued)
- --------------------------------------------------------------------------------
The Company's export sales by geographic area were as follows:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
GEOGRAPHIC AREA MAY 31, 1995 MAY 31, 1994 31, 1993
---------------
------------------------------------------------------------
<S> <C> <C> <C>
Indonesia/Korea $2,620,040 $ - $ 5,534
Canada 2,030,500 - 12,631
Europe 36,888 - 115,868
Africa - - 5,562
South America - 100,000 8,576
------------------------------------------------------------
$4,687,428 $100,000 $148,171
============================================================
</TABLE>
===============================================================================
F-25
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 22 - GOING CONCERN:
- --------------------------------------------------------------------------------
As reflected in the accompanying financial statements, the Company has a working
capital deficiency of approximately $1.6 million and assets exceed liabilities
by approximately $2 million at May 31, 1995. In addition, at May 31, 1995, the
Company was four months delinquent on its term loan with a commercial lender and
in violation of certain restrictive covenants. Furthermore, prior to the year
ended May 31, 1995, the Company experienced several years of recurring losses
from operations.
On July 16, 1995, the Company obtained new financing that replaced its term loan
with G.E. Capital and provided immediate additional financing of approximately
$1.2 million plus the ability to borrow additional amounts up to $2.8 million if
the Company achieves a sufficient collateral base. During the year ended May 31,
1995, the Company initiated an intensive marketing and sales program which has
increased sales orders for all sales divisions and generated net income for the
year. In addition, Management's 1996 forecast indicates positive trends for
sales, earnings and cash flows.
In view of the matters discussed above and recent actions and actions presently
being taken, the issue of the Company being able to continue as a going concern
has been alleviated.
- --------------------------------------------------------------------------------
NOTE 23 - CASH FLOW STATEMENT DISCLOSURES:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
MAY 31, 1995 MAY 31, 1994 31, 1993
------------------ ----------------- ------------------
<S> <C> <C> <C>
A. Cash paid for interest $256,285 $86,448 $ 237,618
================== ================= ==================
B. Cash paid for income taxes $ - $ - $ 7,853
================== ================= ==================
C. Non Cash Financing Activities:
1. Equipment capitalized with
corresponding increase to long-term
debt; capital leases $ 33,009 $ - $ -
================== ================= ==================
2. Net present value of long-term debt
issued in connection with lawsuit
settlement to Harrisburg Authority $ - $ - $1,169,694
================== ================= ==================
3. Common stock issued to U.P.E. in
exchange for consulting services
related to the reduced lawsuit
settlement amount $ - $ - $ 225,000
================== ================= ==================
4. Net present value of long-term debt
issued in connection with reduction of
liability due to former legal counsel $ - $ - $ 157,060
================== ================= ==================
</TABLE>
===============================================================================
F-26
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 24 - SUBSEQUENT EVENTS:
- --------------------------------------------------------------------------------
A. LONG-TERM DEBT:
On July 14, 1995, the Company prepaid its note payable to G.E. Capital and
paid relevant closing costs (totaling approximately $ ) with proceeds from
advances against a $6.5 million total credit facility available from a
group of lenders as follows:
1. A $1.5 million five year first mortgage loan (the mortgage) from
Sterling Commercial Capital, Inc., First Wall Street SBIC, L.P., and
Interequity Capital Partners, L.P. The mortgage is payable in fifty-nine
equal monthly principal installments of $20,229 plus interest at 14.25%
commencing September 1, 1995 with a final principal balloon payment due
August 1, 2000. The loan is collateralized by a first mortgage lien on real
estate owned by the Company and substantially all other company owned
assets, subject only to a first lien on the assets (excluding real estate)
in favor of CIT Group/Credit Finance, Inc. All debts owed by the Company to
the directors and executive officers are subordinated to the repayment of
the loan. U.P.E., Inc. agreed to:
a. Provide a limited guarantee for up to $350,000 of the mortgage
payable.
b. Subordinate all of its outstanding receivables or other extensions of
credit due from the Company to the mortgage.
The Company granted warrants to the three-party lending group to purchase
up to 40,000 shares (2.12%) of the Company's stock at $1.87 per share.
2. A five year, $5 million maximum line of credit including an $800,000
term loan from CIT Group/Credit Finance, Inc. secured by a third lien
position (behind the three party lending group referenced above and the
Harrisburg Sewerage Authority Judgement) on company owned real estate and a
first lien on substantially all other owned assets of the Company. In
addition, U.P.E. has agreed to purchase certain of the Company's used
equipment inventory in the event the Company defaults on the loan or
certain other specified events occur. The line of credit is for three years
and is automatically renewed for an additional two years so long as it is
not terminated by either party. The line of credit includes:
a. An $800,000 term loan requiring $13,333 monthly principal plus
interest at prime plus 3% from August 1, 1995 through July 1, 2000.
b. Advances against a percentage of eligible inventory (liquidation
value) not to exceed $4,000,000 in the aggregate. At the closing of
the loan, the Company had the availability to obtain approximately
$480,000 of advances in excess of the $800,000 term loan.
c. Advances against other eligible collateral not to exceed the unused
balance of the line of credit.
The Company granted warrants to the CIT Group/Credit Finance, Inc. to
purchase 50,000 (2.65%) shares of the Company's stock at $1.87 per share.
At July 14, 1995, the long-term debt, as revised, matures as follows:
Year Ended May 31,
------------------
1996 $ 290,320
1997 289,279
1998 278,444
1999 893,141
2000 257,928
Thereafter 1,331,360
$3,340,472
================================================================================
F-27
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
B. OPERATING LEASES:
Subsequent to year-end, the Company entered into various operating leases.
Future minimum payments on these leases are as follows:
YEAR ENDED MAY 31,
------------------
1996 $18,584
1997 22,766
1998 7,356
1999 5,880
2000 5,880
Thereafter 1,470
---------
$61,936
=======
===============================================================================
F-28
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
- --------------------------------------------------------------------------------
NOTE 26 - PRIOR PERIOD ADJUSTMENTS:
- --------------------------------------------------------------------------------
The previously issued, unaudited five months ended May 31, 1994 statements of
operations and cash flows and stockholders' deficiency were revised due to
corrections of errors. The errors consisted of, the May 31, 1994 inventory being
overstated by approximately $195,000 and the pension and deferred compensation
liabilities being overstated by approximately $245,000.
The accompanying financial statements reflect the correction of the errors
which, when considered together, reduce the previously reported net loss for the
five months ended May 31, 1994 by approximately $58,000 ($.03 per share).
- --------------------------------------------------------------------------------
NOTE 27 - PENDING ACQUISITION:
- --------------------------------------------------------------------------------
The Company signed a letter of intent on May 24, 1995 to purchase the assets of
an operating division of Third Millennium Products, Inc., known as American
Furnace. The terms and conditions of that acquisition are currently in
negotiation. It is the intention of the Company to go forward with the
acquisition as soon as a satisfactory agreement is reached and appropriate due
diligence is completed. In the opinion of management, the acquisition of the
division does not qualify as a significant subsidiary under the Securities and
Exchange Commission rules.
================================================================================
F-29
<PAGE>
THE BETHLEHEM CORPORATION -- CONSOLIDATED BALANCE SHEET
February 29, 1996
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 67
Accounts receivable (Net of allowance for
doubtful accounts of $42) .............................. 5,435
Inventories* ............................................. 2,602
Prepaid expenses and other current assets ................ 166
-------
Total Current Assets ............................ 8,270
PROPERTY, PLANT AND EQUIPMENT:
At cost .................................................. 9,074
Less accumulated depreciation ............................ 6,896
-------
Net Property, Plant and Equipment .............. 2,178
OTHER ASSETS:
Intangible pension and deferred compensation plan
assets ................................................. 524
Intangibles .............................................. 684
Other .................................................... 44
-------
Total Other Assets .............................. 1,252
TOTAL ASSETS .......................... $11,700
*Inventories consist of the following:
Finished goods ........................................... 1,028
Raw materials & components ............................... 541
Work in process (Net of $196 advanced from
customers) ............................................... 1,056
Less allowance for write down to estimated net
realizable value ......................................... (23)
-------
See accompanying notes to consolidated interim financial statements.
F-30
<PAGE>
THE BETHLEHEM CORPORATION -- CONSOLIDATED BALANCE SHEET
February 29, 1996
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ..................... $ 1,285
Accounts payable ......................................... 5,094
Accrued liabilities ...................................... 1,494
Advances on contracts in excess of costs ................. 982
Total Current Liabilities ....................... 8,855
Other Liabilities:
Long-term debt - net of current maturities ............... 3,285
Deferred compensation and other pension .................. 1,216
liabilities
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 5,000,000 shares
without par value; none issued or
outstanding ..................................... 0
Common stock - authorized, 20,000,000 shares
without par value, stated value of $.50 per
share; issued 1,938,532 shares .................. 969
Additional paid-in capital ............................... 4,724
Accumulated deficit ...................................... (7,349)
Less treasury stock, at cost, 12 shares .................. 0
TOTAL STOCKHOLDERS' EQUITY ........................................ (1,656)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $ 11,700
See accompanying notes to consolidated interim financial statements.
F-31
<PAGE>
THE BETHLEHEM CORPORATION -- CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
February February
29, 1996 28, 1995
------------- -----------
NET REVENUES
Cost of Goods Sold .................. $5,503 $3,880
Gross Profit ........................ 4,311 3,304
----- -----
1,192 576
Selling and administrative expenses:
Selling ............................. 284 162
Administrative ...................... 553 356
--- ---
837 518
Operating profit ............................. 355 58
Other income/(Expenses):
Interest expense .................... (167) (61)
Other Income ........................ (64) 20
Interest Income ..................... 4 7
---- ---
(227) (34)
Income from operations before provision
for income taxes ........................... 128 24
(Provision) Benefit for income taxes ......... 0 0
NET INCOME ................................... $128 $24
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary ............................. .04 .01
Assuming Full Dilution .............. .04 .01
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING:
Primary ............................. 3,122,635 2,987,881
Fully Diluted ....................... 3,122,635 2,987,881
See accompanying notes to consolidated interim financial statements.
F-32
<PAGE>
THE BETHLEHEM CORPORATION -- CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
February February
29, 1996 28, 1995
----------- -----------
NET REVENUES .................................. $ 12,375 $ 10,877
Cost of Goods Sold .................. 9,604 9,040
----------- -----------
Gross Profit ......................... 2,771 1,837
----------- -----------
Selling and administrative expenses:
Selling .............................. 782 450
Administrative ....................... 1,430 1,079
----------- -----------
2,212 1,529
Operating profit .............................. 559 308
Other income/(Expenses):
Interest expense ..................... (287) (193)
Other Income ......................... (62) 8
Interest Income ...................... 7 21
----------- -----------
(342) (164)
Income from operations before provision
for income taxes ............................ 217 144
(Provision) Benefit for income taxes .......... 0 0
NET INCOME .................................... $ 217 $ 144
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary .............................. .07 .06
Assuming Full Dilution ............... .07 .05
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING:
Primary .............................. 2,984,280 2,581,530
Fully Diluted ........................ 3,039,430 2,903,745
See accompanying notes to consolidated interim financial statements.
F-33
<PAGE>
THE BETHLEHEM CORPORATION -- CONSOLIDATED STATEMENT OF CASH FLOW
Nine months ended
(in thousands)
(UNAUDITED)
-------------------------------------------------------------------------------
February February
29, 1996 28, 1995
-------- -------
Cash flows provided by (used for)
operating activities ..................................... $(1,550) $ (707
------- -------
Cash flows used for investing activities :
(Increase) in property, plant &
equipment ................................................ (283) (111)
(Increase) in deferred financing costs ................... (124) 0
Goodwill-Bethlehem Advance Materials .................... (371) 0
------- -------
Net cash provided by (used in)
investment activities .................................... (778) (111)
------- -------
Cash flows provided by (used for) financing activities:
(Decrease)/Increase in long term debt .................... 2,090 (588)
Issuance of stock ........................................ 150 0
------- -------
Net cash provided by (used in)
financing activities ..................................... 2,244 (588)
------- -------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS ......................................... (84) 8
Cash and cash equivalents, beginning of
period ................................................... 151 60
------- -------
Cash and cash equivalents, at end of
period ................................................... $ 67 $ 68
======= =======
See accompanying notes to consolidated interim financial statements.
F-34
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FINANCIAL STATEMENT PRESENTATION:
1. The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to Form
10-QSB. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures made
herein are adequate to make the information not misleading. It is suggested
that these interim financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-KSB.
2. Interim statements are subject to possible adjustments in connection with
the annual audit of the Company's accounts for the full fiscal year 1996.
In the Company's opinion, all adjustments necessary for a fair presentation
of the information shown have been included.
3. The results of operations for the interim periods presented are not
necessarily indicative of the results expected for the year ending May 31,
1996.
4. Inventories, other than inventoried costs relating to long-term contracts,
are valued at the lower of first-in, first-out cost or market. Inventoried
costs relating to long-term contracts are stated at the actual production
cost, including factory overhead, incurred to date reduced by amounts
identified with revenue recognized on units delivered or progress
completed.
5. Net income/(loss) per share was determined on the basis of the weighted
average number of shares of common stock including, when applicable,
dilutive stock options using the treasury stock method.
6. On November 28, 1995 the Company completed its acquisition of certain
assets of the American Furnace division of Third Millennium Products, Inc.
pursuant to the terms of an Asset Purchase Agreement by and among the
Company, Bethlehem Advanced Materials Corporation (a wholly owned
subsidiary of the Company), Third Millennium Products Inc. and North
American Advanced Materials Corporation. Pursuant to the agreement, the
Company purchased certain Accounts
F-35
<PAGE>
Receivable, Customer Contracts, Machinery and Equipment and Goodwill. The
purchase price was $420,000 which comprised the issuance of 50,000 shares
of the Company's Common Stock valued at approximately $3.00 per share and
the assumption of certain liabilities.
The business combination is being accounted for utilizing the purchase
method of accounting. Goodwill will be amortized over twenty (20) years.
Results of operations of the acquired enterprise are included in the
accompanying statements of operations as of November 28, 1995. This
acquisition did not meet the significant subsidiary that set forth in SEC
regulations.
7. On July 14, 1995, the Company prepaid its note payable to G.E. Capital and
paid relevant closing costs with proceeds from advances against $6.5
million total credit facility available from a group of lenders as follows:
(1) A $1.5 million five year first mortgage loan from Sterling Commercial
Capital, Inc., First Wall Street SBIC, L.P., and Interequity Capital
Partners, L.P. The loan is collateralized by a first mortgage lien on
real estate owned by the Company and a second lien on all other
Company owned assets. The loan will bear interest at 14.25% per annum.
The outstanding principal and interest will be payable in 59
consecutive equal monthly payments calculated to fully amortize over a
15 year period with a final payment of all then outstanding principal
and interest. The loan agreement contains a number of covenants which
among other things will require the Company to maintain specified
levels of net worth and working capital and will impose certain
limitations on the Company with respect to (I) the incurrence of
additional indebtedness; (II) the incurrence of additional liens;
(III) the payment of cash dividends and (IV) mergers and investments.
Universal Process Equipment ("UPE") agreed to provide a limited
guarantee for up to $350,000 of the mortgage payable and subordinate
all of its outstanding receivable or other extensions of credit due
from the Company to the mortgage. The Company granted warrants to the
three-party lending group to purchase up to 40,000 shares (2.12%) of
the Company's stock.
(2) A three year $5 million maximum line of credit and term loan facility
from The CIT Group/Credit Finance, Inc., secured by a third lien
position (behind the three party lending group referenced above and
the Harrisburg Authority) on Company owned real estate and a first
lien on substantially all other owned assets of the
F-36
<PAGE>
Company. This credit facility includes: (a) an $800,000 term loan
requiring $13,333 monthly principal payments plus interest at prime
rate (Chemical Bank, New York) plus 3% and (b) advances against a
percentage of eligible inventory not to exceed $4 million in the
aggregate. The amount outstanding as of February 29, 1996 is $706,667
on the term loan and $1,424,801 on the secured credit line. The loan
agreement contains certain restrictions among other things on the
making of investments, loans and capital expenditures, on borrowings,
on the sale of assets and on the payment of dividends. An additional
condition of the loan agreements is that UPE will purchase all of the
Company's used resale inventory in the event of default. The term of
the agreements is for three years and automatically renewable for
successive terms of two years thereafter unless terminated by either
party at the end of the initial or renewal term. UPE, in a separate
financing agreement, on its own behalf, arranged for financing with
The CIT Group/Credit Finance, Inc. In the event that UPE's separate
financing agreement is terminated then the Company's term loan line of
credit will automatically terminate. The Company granted warrants to
The CIT Group/Credit Finance, Inc. to purchase 50,000 (2.65%) shares
of the Company's stock.
8. Related Party Transactions - UPE, a 20% stockholder of the Company whose
officers, directors and principal stockholders, Ronald and Jan Gale, are
also stockholders and directors of the Company, engaged in various
transactions during the nine month period ended February 29, 1996. The
Company's sales to UPE were $368,000 for the nine month period ended
February 29, 1996.
At February 29, 1996, the Company's accounts receivable with UPE equalled
approximately $956,000 and the Company's accounts payable with UPE equalled
approximately $1,381,000.
9. On March 26, 1996, the Company issued an option to purchase 350,000 shares
of common stock to UPE. The option is exercisable beginning October 1, 1996
for a period of ten years from the date of the grant at an exercise price
of $1.8125, which is equal to the fair market value of the Company's stock
on the date of the grant. Such option was issued in consideration of
guarantees of new sources of financing from the CIT Group and Sterling
Commercial Capital in July 1995.
10. UPE Holdings - On March 26, 1996, the Company agreed to issue to UPE
350,000 shares of the Company's stock. The shares are being granted in
exchange for a fifty percent
F-37
<PAGE>
(50%) interest in One Million Four Hundred Thousand Dollars ($1,400,000.00)
worth of unused Bethlehem type heat transfer equipment owned by UPE. The
Bethlehem stock price closed at 1.8125 per share on March 26, 1996. The
shares will not be issued until after the effective date of the rights
offering in order to allow sufficient transaction time for the shares for
inventory to be worked, documented and in order to change any financing
statements.
RESULTS OF OPERATIONS
Sales of $5,503,000 for the third quarter fiscal 1996 represent an
increase of $1,623,000 over the third quarter 1995 level of $3,880,000. Gross
profit for the third quarter fiscal 1996 was $1,192,000, compared to gross
profit of $576,000 for the same period last year. Sales of $12,375,000 for the
nine month period ending February 1996 represents an increase of $1,498,000 over
the nine month period ending February 1995 level of $10,877,000. Gross profit
for the nine month period ending February 1996 equalled $2,771,000 or 22% of
sales compared to gross profit of $1,837,000 or 17% of sales for the same period
in 1995. Increased sales and gross profits in both the Company's industrial and
process sales divisions were due to the booking of several major long term
contracts with higher profit margins than historically experienced in these
divisions. Reflected in the sales for the nine months ended February 29, 1996
were sales from one customer equaling approximately 33% of the Company's net
sales. The customer has been a customer of the Company for the last 20 years and
during that time the customer usually accounted for substantially less than 33%
of the Company's net sales in any fiscal year. The sales related to a contract
for multiple Porcupine Processors intended for a major capital plant expansion
at the customer's site. The first unit will be shipped in July 1996 and the last
unit will be shipped in April 1997. The Company anticipates that it will
continue to receive orders from this customer but that such sales should be
significantly less beginning in the fiscal year ending May 31, 1998.
The operating profit for the third quarter fiscal 1996 equalled
$355,000 compared to $58,000 for the same period last year. Operating profit
equalled $559,000 for the nine month period ending February 1996 compared to
operating profit of $308,000 for the same period last year. Selling and
administrative expenses increased from $518,000 or 13% of sales for the third
quarter fiscal 1995 to $837,000 or 15% of sales for the third quarter fiscal
1996. Selling and administrative expenses increased from $1,529,000 or 14% of
sales for the nine month period ending February 1995 to $2,212,000 or 18% of
sales for the same period in 1996. The primary factors for the increase in
selling and administrative expenses were: 1) additional sales and administrative
personnel; 2) increased advertising expenditures; and 3) increased travel
expenses.
F-38
<PAGE>
These resources are needed to continue the Company's entry into the
international market as well as to pursue sales and purchases of used process
and environmental equipment.
Other expenses equalled $227,000 compared to other expenses of $34,000
for the same period in fiscal 1995. Net income for the third quarter of fiscal
1996 equalled $128,000, compared to net income of $24,000 for the same period in
fiscal 1995. Other expenses were $342,000 for the nine month period ending
February 1996, compared to other expenses of $164,000 for the same period last
year. Increased interest expense combined with the amortization of financing
fees from the loans secured by the Company in the first quarter of fiscal 1996
were the main factors for the increase in other expenses. Net income for the
nine month period ending February 1996 equalled $217,000 compared to $144,000
for the same period in fiscal 1995.
Backlog was $9,093,000 at February 29, 1996 compared to backlog of
$4,758,000 at February 28, 1995. Orders received for the third quarter of fiscal
1996 equalled $3,594,000 compared to orders received for the third quarter of
fiscal 1995 of $2,101,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $1,550,000 for the first
nine months of fiscal 1996 compared to net cash provided by operating activities
for the first nine months of fiscal 1995 of $707,000. The Company's purchase of
approximately $600,000 in used equipment inventory coupled with increased
accounts receivable accounted for the cash used for operating activities.
Capital expenditures were $283,000 for the first nine months of fiscal
1996 versus $111,000 for the first nine months of fiscal 1995. The majority of
the Company's cash used for investing activities was expended on acquisition
costs and capital equipment for materials processing at Bethlehem Advanced
Materials Corporation, the Company's wholly owned subsidiary in Knoxville,
Tennessee.
Cash provided by financing activities equalled $2,244,000 for the first
nine months of fiscal 1996 compared to cash used for financing activities for
the same period last year in the amount of $588,000. On July 14, 1995, the
Company prepaid its note payable to G.E. Capital and paid relevant closing costs
with proceeds from advances against a $6.5 million total credit facility
available from a group of lenders. (See Note 7.)
Assuming continuing profitability, the Company believes that cash
generated from existing business, new orders and sales of
F-39
<PAGE>
used equipment will be sufficient to meet the Company's cash requirements. In
the event that the Company's operations were to expand significantly or the
Company were to desire to make further acquisitions, external sources of
financing would be required. While the Company believes that such financing
would be available to it, there can be no assurance in this regard. The Company
believes that any inflationary increase arising from its raw material costs and
certain overhead expenses have generally been reflected in pricing to its
customers.
F-40
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, the Selling
Shareholders or the Underwriters. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy to any person in any jurisdiction
in which such offer or solicitation would be unlawful or to any person to whom
it is unlawful. Neither the delivery of this Prospectus nor any offer or sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company or that information contained
herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Available Information................................
Prospectus Summary...................................
Risk Factors.........................................
Capitalization ......................................
Use of Proceeds......................................
Price Range of Common Stock and Dividend
Policy.............................................
Dilution.............................................
Selected Consolidated Financial Data.................
Management's Discussion and Analysis of
Financial Condition and Results of Operations .....
Determination of Subscription Price..................
The Rights Offering..................................
Certain Federal Income Tax Consequences..............
Business of the Company..............................
Management...........................................
Principal Shareholders...............................
Certain Transactions.................................
Description of Capital Stock.........................
Shares Eligible for Future Sale......................
Subscription Agent...................................
Information Agent....................................
Legal Matters........................................
Experts..............................................
Indemnification for Securities Act Liabilities.......
Index to Financial Statements........................ F-1
1,356,964 SHARES
THE BETHLEHEM CORPORATION
Common Stock
PROSPECTUS
___________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Sections 1741 and 1742 of the Business Corporation
Law of the Commonwealth of Pennsylvania, which provide for indemnification of
directors and officers in certain circumstances. In addition, Article 25 of the
Bylaws of The Bethlehem Corporation provides as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section 25.1 The Corporation shall indemnify any director or officer,
and may indemnify any other employee or agent, who was or is a party to, or is
threatened to be made a party to, or who is called as a witness in connection
with, any threatened, pending, or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation, by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another domestic or foreign corporation, for profit or not-for-profit,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such action, suit or
proceeding unless the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
Section 25.2. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article 25 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any Bylaw, agreement, contract, vote of shareholders or
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. It is the policy of the
Corporation that indemnification of, and advancement of expenses to, directors
and officers of the Corporation shall be made to the fullest extent permitted by
law. To this end, the provisions of this Article 25 shall be deemed to have been
amended for the benefit of directors and officers of the Corporation effective
immediately upon any modification of the BCL or any modification, or adoption of
any other law that expands or enlarges the power or obligation of corporations
organized under the BCL to indemnify, or advance expenses to, directors and
officers of corporations.
Section 25.3. The Corporation shall pay expenses incurred by an officer
or director, and may pay expenses incurred by any other employee or agent, in
defending an action, or proceeding referred to in this Article 25 in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation.
Section 25.4. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article 25 shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 25.5. The Corporation shall have the authority to create a fund
of any nature, which may, but need not, be under the control of a trustee, or
otherwise secure or insure in any manner, its indemnification obligations,
whether arising under these Bylaws or otherwise. This authority shall include,
without limitation, the authority to: (a) deposit funds in trust or in escrow;
(b) establish any form of self-insurance; (c) secure its indemnity obligation by
grant of a security interest, mortgage or other lien on the assets of the
Corporation; or (d) establish a letter of credit, guaranty or surety arrangement
for the
II-1
<PAGE>
benefit of such persons in connection with the anticipated indemnification or
advancement of expenses contemplated by this Article 25. The provisions of this
Article 25 shall not be deemed to preclude the indemnification of, or
advancement of expenses to, any person who is not specified in Section 25.1 of
this Article 25 but whom the Corporation has the power or obligation to
indemnify, or to advance expenses for, under the provisions of the BCL or
otherwise. The authority granted by this Section 25.5 shall be exercised by the
Board of Directors of the Corporation.
Section 25.6. The Corporation shall have the authority to enter into a
separate indemnification agreement with any officer, director, employee or agent
of the Corporation or any subsidiary providing for such indemnification of such
person as the Board of Directors shall determine up to the fullest extent
permitted by law.
Section 25.7. As soon as practicable after receipt by any person
specified in Section 25.1 of this Article 25 of notice of the commencement of
any action, suit or proceeding specified in Section 25.1 of this Article 25,
such person shall, if a claim with respect thereto may be made against the
Corporation under Article 25 of these Bylaws, notify the Corporation in writing
of the commencement or threat thereof; however, the omission so to notify the
Corporation shall not relieve the Corporation from any liability under Article
25 of these Bylaws unless the Corporation shall have been prejudiced thereby or
from any other liability which it may have to such person other than under
Article 25 of these Bylaws. With respect to any such action as to which such
person notifies the Corporation of the commencement or threat thereof, the
Corporation may participate therein at its own expense and, except as otherwise
provided herein, to the extent that it desires, the Corporation, jointly with
any other indemnifying party similarly notified, shall be entitled to assume the
defense thereof, with counsel selected by the Corporation to the reasonable
satisfaction of such person. After notice from the Corporation to such person of
its election to assume the defense thereof, the Corporation shall not be liable
to such person under Article 25 of these Bylaws for any legal or other expenses
subsequently incurred by such person in connection with the defense thereof
other than as otherwise provided herein. Such person shall have the right to
employ his own counsel in such action, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assump- tion of the defense
thereof shall be at the expense of such person unless: (a) the employment of
counsel by such person shall have been authorized by the Corporation; (b) such
person shall have reasonably concluded that there may be a conflict of interest
between the Corporation and such person in the conduct of the defense of such
proceeding; or (c) the Corporation shall not in fact have employed counsel to
assume the defense of such action. The Corporation shall not be entitled to
assume the defense of any proceeding brought by or on behalf of the Corporation
or as to which such person shall have reasonably concluded that there may be a
conflict of interest. If indemnification under Article 25 of these Bylaws or
advancement of expenses are not paid or made by the Corporation, or on its
behalf, within 90 days after a written claim for indemnification or a request
for an advancement of expenses has been received by the Corporation, such person
may, at any time thereafter, bring suit against the Corporation to recover the
unpaid amount of the claim or the advancement of expenses. The right to
indemnification and advancements of expenses provided hereunder shall be
enforceable by such person in any court of competent jurisdiction. The burden of
proving that indemnification is not appropriate shall be on the Corporation.
Expenses reasonably incurred by such person in connection with successfully
establishing the right to indemnification or advancement of expenses, in whole
or in part, shall also be indemnified by the Corporation.
Section 25.8. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article 25.
II-2
<PAGE>
Section 25.9. Notwithstanding any other provisions of these Bylaws, the
approval of shareholders shall be required to amend, repeal or adopt any
provision as part of these Bylaws that is inconsistent with the purpose or
intent of this Article 25, and, if any such action shall be taken, it shall
become effective only on a prospective basis from and after the date of such
shareholder approval. The provisions of this Article 25 were adopted by the
shareholders of the Corporation on May 29, 1987.
For the undertaking with respect to indemnification, see Item 28
herein.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses to be
borne by the Company in connection with the offering described in the
Registration Statement, other than underwriting commissions and discounts.
SEC Registration Fee...................................... $931.44
AMEX Listing Fee*.........................................
Legal Fees and Expenses*..................................
Accounting Fees and Expenses*.............................
Printing and Engraving Expenses*..........................
Blue Sky Fees and Expenses*...............................
Transfer Agent's and Registrar's Fees*....................
Information Agent Fees*...................................
Miscellaneous Expenses*..................................
Total*............................................ $
==============
- ---------------
* To be provided by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following securities were sold by the
Company without registration under the Securities Act of 1933, as amended (the
"Act"). In every case the securities were sold by the Company in reliance upon
the exemption provided by Section 4(2) of the Act and no discounts or
commissions were paid.
(i) On December 22, 1993, UPE was issued 300,000 shares of Common Stock pursuant
to the UPE Agreement and in consideration of certain services rendered by UPE
for the Company.
(ii) On October 9, 1995, Albert Sidney Bowers III and Gary W. Scott, Trustee
were issued 12,500 and 37,500 shares of Common Stock, respectively, in
connection with the acquisition by the Company of certain assets of the American
Furnace Division of Third-Millennium Products, Inc.
ITEM 27. EXHIBITS
3(i) Amended And Restated Articles of Incorporation approved at the December
12, 1995 Annual Meeting of the Registrant
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<PAGE>
3(ii) Amended and Restated Bylaws approved at the December 12, 1995 Annual
Meeting of the Registrant (incorporated by reference to Exhibit 3(ii)
to the Registrant's 10-QSB for the quarterly period ended November 30,
1995 (the "November 1995 10-QSB"))
*5 Opinion of Olshan Grundman Frome & Rosenzweig LLP as to the legality of
the securities being registered
10(a) 1994 Stock Option Plan of the Registrant as amended (incorporated by
reference to Exhibit 10(a) to the Registrant's November 1995 10-QSB)
10(b) Equity Incentive Plan for Directors of the Registrant as amended
(incorporated by reference to Exhibit 10(b) to the Registrant's
November 1995 10-QSB)
10(c) Agreement, dated July 23, 1994, between the Registrant and The
Bethlehem Corporation Employees Association
10(d) Net Commercial Lease Contract, dated January 30, 1996, by and between
Knoxville Industrial Group, Ltd., Bethlehem Advanced Materials
Corporation, The Stanfield York Company and the Registrant
*11 Statement Re Computation of Per Share Earnings
*21 Subsidiaries of the Registrant
23(a) Consent of Sobel & Co.
23(b) Consent of Olshan Grundman Frome & Rosenzweig LLP (included in Exhibit
5)
24 Power of Attorney (included in the signature page to the Registration
Statement).
99(a) Form of Subscription Certificate, Form of Instructions for Subscription
Certificates and Form of Notice of Guaranteed Delivery.
*99(b) Form of Subscription Agency Agreement .
---------------------
*To be provided by amendment.
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
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<PAGE>
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned small business issuer will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and the offering of the securities at
that time as the initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Easton, Pennsylvania, on the 11th day of July,
1996.
THE BETHLEHEM CORPORATION
By: /s/ Alan H. Silverstein
------------------------
Name: Alan H. Silverstein
Title: President, Director and Chief
Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed on July 11, 1996 by the following persons in the
capacities and on the dates indicated.
Name Title
---- -----
/s/ Alan H. Silverstein President, Director and Chief Executive
- ----------------------------- Officer (Principal Executive Officer)
Alan H. Silverstein
* Chief Financial Officer (Principal
- -----------------------------
Antoinette L. Martin Financial Officer and Principal
Accounting Officer)
* Chairman of the Board
- -----------------------------
Salvatore J. Zizza
* Director
- -----------------------------
Ronald H. Gale
* Director
- -----------------------------
Jan P. Gale
* Director
- -----------------------------
James L. Leuthe
* Director
- -----------------------------
Harold Bogatz
II-6
<PAGE>
* Director
- -----------------------------
B. Ord Houston
* Director
- -----------------------------
O. Karl Dieckman
- -----------------------
*Alan Silverstein
Power-of-Attorney
II-7
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
3(i) Amended And Restated Articles of Incorporation approved
at the December 12, 1995 Annual Meeting of the
Registrant
10(c) Agreement, dated July 23, 1994, between the Registrant
and The Bethlehem Corporation Employees Association
10(d) Net Commercial Lease Contract, dated January 30, 1996,
by and between Knoxville Industrial Group, Ltd.,
Bethlehem Advanced Materials Corporation, The Stanfield
York Company and the Registrant
23(a) Consent of Sobel & Co.
99(a) Form of Subscription Certificate, Form of Instructions
for Subscription Certificates and Form of Notice of
Guaranteed Delivery.
II-8
Microfilm Number --------- Filed with the Department of State on May 30, 1996
Entity Number 35431
----- Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DCSB 15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Sec. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
is Articles, hereby states that:
1. The name of the corporation is: The Bethlehem Corporation
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to confrom to the records of the Department):
(a) 25th and Lennox Streets Easton Pennsylvania 18042 Northampton
--------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
-----------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which is was incorporated is: Act of April 29, 1874
---------------------
4. The date of its incorporation is: April 24, 1888
-------------------------------------------
5. (Check, and if appropriate, complete, one of the following):
X The amendment shall be effective upon filing these articles of Amendment in
_ the Department of State.
The amendment shall be effective on: at
- - Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to 15
- - Pa.C.S. Sec. 1914(a) and (b).
The amendment was adopted by the board of directors pursuant of 15 Pa.C.S.
- - Sec 1914(c).
7. (Check, and if appropriate complete, one of the following):
- - The amendment adopted by the corporation, set forth in full is as follows:
X The amendment adopted by the corporation as set forth in full in exhibit A
- - attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2
8. (Check if the amendment restates the Articles):
X The restated Articles of Incorporation supersede the original articles and
_ all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this day of May,
1996.
THE BETHLEHEM CORPORATION
-----------------------------
(Name of Corporation)
BY: /s/ Alan Silverstein
--------------------------
Alan Silverstein (Signature)
TITLE: President
-----------------------
<PAGE>
Exhibit A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
THE BETHLEHEM CORPORATION
1. The name of the corporation is:
The Bethlehem Corporation
2. The location and post office address of the registered
office of the corporation in this Commonwealth is:
25th and Lennox Street
Easton, Pennsylvania 18042, Northampton County
3. The corporation was incorporated under the Act of April 29,
1874 of the Commonwealth of Pennsylvania.
4. The name(s) and post office address(es) of each
incorporator(s) and the number and class of shares
subscribed by such incorporator(s) is (are):
Number
and Class
Name Address of Shares
- ---- ------- ---------
Brian G. Bellerose c/o Olshan Grundman Frome 0
& Rosenzweig LLP
505 Park Avenue
New York, NY 10022-1170
5. The term for which the corporation is to exist is:
perpetual
6. The corporation is organized on a stock basis, the
provisions of which are as follows:
The aggregate number of shares which the Corporation shall have
authority to issue is Twenty-Five Million (25,000,000) shares, consisting of
Twenty Million (20,000,000) shares of Common Stock, no par value (the "Common
Stock") and Five Million (5,000,000) shares of Series Preferred Stock, no par
value (the "Preferred Stock").
<PAGE>
I. The Common Stock.
-----------------
A. Voting. Each holder of Common Stock shall be entitled to one vote
for each share of Common Stock held on all matters submitted to the shareholders
of the Corporation for a vote. The holders of the Common Stock shall vote as a
single class with the holders of each series of Preferred Stock to which voting
rights are granted pursuant to the certificate filed pursuant to law with
respect to such series of Preferred Stock, except for those matters with respect
to which one or more series of the Preferred Stock shall have exclusive or
special voting rights as specifically provided in the certificate filed pursuant
to law with respect to such series of the Preferred Stock or as otherwise
provided by law.
B. Other Rights. Each share of Common Stock issued and outstanding
shall be identical and in all respects one with the other, and no dividends
shall be paid on any shares of Common Stock unless the same dividend is paid on
all shares of Common Stock outstanding at the time of such payment. Except for
and subject to those rights expressly granted herein to the holders of the
Preferred Stock, or except as may be provided by the laws of the Commonwealth of
Pennsylvania, the holders of Common Stock shall have exclusively all other
rights of shareholders including, but not by way of limitation, (i) the right to
receive dividends, when and as declared by the Board of Directors out of assets
lawfully available therefor, and (ii) in the event of any distribution of assets
upon liquidation, dissolution or winding up of the Corporation or otherwise, the
right to receive ratably and equally all the assets and funds of the Corporation
remaining after the payment to the holders of the Preferred Stock of the
specific amounts which they are entitled to receive upon such liquidation,
dissolution or winding up of the Corporation as herein provided.
II. The Preferred Stock.
--------------------
A. Issuance in Series. The Preferred Stock may be issued from time to
time by the Board of Directors as herein provided in one or more series. The
designations, relative rights, preferences and limitations of the Preferred
Stock, and particularly of the shares of each series thereof, may, to the extent
permitted by law, be similar to or may differ from those of any other series.
The Board of Directors of the Corporation is hereby expressly granted authority,
subject to the provisions of this Article 6, to issue from time to time
Preferred Stock in one or more series and to fix from time to time before
issuance thereof, by filing a certificate pursuant to the Business Corporation
Law, the number of shares in each such series of such class and all
designations, relative rights (including the right, to the extent permitted by
law, to convert into shares of any class or into share of any series of any
class), preferences and limitations of the shares in each such series,
including, but without limiting the generality of the foregoing, the following:
-2-
<PAGE>
(a) Number of Shares in Series. The number of shares to
constitute such series (which number may at any time, or from time to time, be
increased or decreased by the Board of Directors, notwithstanding that shares of
the series may be outstanding at the time of such increase or decrease, unless
the Board of Directors shall have otherwise provided in creating such series)
and the distinctive designation thereof;
(b) Dividend Rate. The dividend rate on the shares of
such series, whether or not dividends on the shares of such
series shall be cumulative, and the date or dates, if any, from
which dividends thereon shall be cumulative;
(c) Redemption. Whether the shares of such series shall be
redeemable, and, if redeemable, the date or dates upon or after which they shall
be redeemable and the amount or amounts per share (which shall be, in the case
of each share, not less than its preference upon involuntary liquidation, plus
an amount equal to all dividends thereon accrued and unpaid, whether or not
earned or declared) payable thereon in the case of the redemption thereof, which
amount may vary at different redemption dates or otherwise as permitted by law;
(d) Conversion.. The right, if any, of holders of shares of
such series to convert the same into, or exchange the same for, Common Stock or
other stock as permitted by law, and the terms and conditions of such conversion
or exchange, as well as provisions for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(e) Liquidation Preference. The amount per share
payable on the shares of such series upon the voluntary and
involuntary liquidation, dissolution or winding up of the
Corporation;
(f) Voting Power. Whether the holders of shares of
such series shall have voting powers, full or limited, in
addition to the voting powers provided by law, and, in case
additional voting powers are accorded, to fix the extent thereof;
and
(g) General. Generally to fix the other rights and privileges
and any qualifications, limitations or restrictions of such rights and
privileges of such series, provided, however, that no such rights, privileges,
qualifications, limitations or restrictions shall be in conflict with the
Articles of Incorporation of the Corporation or with the resolution or
resolutions adopted by the Board of Directors providing for the issue of any
series of which there are shares then outstanding.
B. Shares of the Respective Series. All shares of
Preferred Stock of the same series shall be identical in all
respects, except that shares of any one series issued at
different times may differ as to dates, if any, from which
-3-
<PAGE>
dividends thereon may accumulate. All shares of Preferred Stock of all series
shall be of equal rank and shall be identical in all respects, except that, to
the extent not otherwise limited in this Article 6, any series may differ from
any other series with respect to any one or more of the designations, relative
rights, preferences and limitations described or referred to in subparagraphs
II(A)(a) through II(A)(g) of this Article 6.
C. Payment of Dividends. Dividends on the outstanding Preferred Stock
of each series shall be declared and paid or set apart for payment before any
dividends shall be declared and paid or set apart for payment on the Common
Stock with respect to the same quarterly dividend period. Dividends on any
shares of Preferred Stock shall be cumulative only if and to the extent set
forth in a certificate filed pursuant to law. After dividends on all shares of
Preferred Stock (including cumulative dividends if and to the extent any such
shares shall be entitled thereto) shall have been declared and paid or set apart
for payment with respect to any quarterly dividend period, then and not
otherwise as long as any shares of Preferred Stock shall remain outstanding,
dividends may be declared and paid or set apart for payment with respect to the
same quarterly dividend period on the Common Stock out of the assets or funds of
the Corporation legally available therefor.
D. Equal Rank as to Dividends. Except as otherwise specifically
provided in the certificate filed pursuant to law with respect to any series of
the Preferred Stock, all shares of Preferred Stock of all series shall be of
equal rank, preference and priority as to dividends irrespective of whether the
rates of dividends to which the particular series of Preferred Stock shall be
entitled shall be the same, and, when the stated dividends are not paid in full,
the shares of all series of Preferred Stock shall share ratably in the payment
thereof in accordance with the sums that would be payable on such shares if all
dividends were paid in full, provided, however, that any two or more series of
Preferred Stock may differ from each other as to the existence and extend of the
right to cumulative dividends, as aforesaid.
E. Voting. Except as otherwise specifically provided in the certificate
filed pursuant to law with respect to any series of the Preferred Stock or as
otherwise provided by law, the holders of the Preferred Stock shall not have any
right to vote for the election of directors or for any other purpose and the
holders of Common Stock shall have the exclusive right to vote for the election
of directors and for all other purposes. In all instances in which voting rights
are granted to the holders of the Preferred Stock or any series thereof, the
holders of such Preferred Stock or series shall vote with the holders of the
Common Stock as a single class, except as otherwise provided in the certificate
filed pursuant to law with respect to any series of the Preferred Stock or as
otherwise provided by law.
-4-
<PAGE>
F. Liquidation. In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, each series of
Preferred Stock shall have preference and priority over the Common Stock for
payment of the amount to which each outstanding series of Preferred Stock shall
be entitled in accordance with the provisions thereof, and each holder of
Preferred Stock shall be entitled to be paid in full such amount, or have a sum
sufficient for the payment in full set aside, before any payments shall be made
to the holders of the Common Stock. If, upon liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation or the proceeds thereof
distributable among the holders of the shares of all series of Preferred Stock
shall be insufficient to pay in full the preferential amount aforesaid, then
such assets, or the proceeds thereof, shall be distributed among such holders
ratably in accordance with the respective amounts that would be payable if all
amounts payable thereon were paid in full. After the holders of the Preferred
Stock of each series shall have been paid in full the amounts to which they
respectively shall be entitled, or a sum sufficient for the payment in full set
aside, the remaining net assets of the Corporation shall be distributed pro rata
to the holders of the Common Stock in accordance with their respective rights
and interests, to the exclusion of the holders of the Preferred Stock. A
consolidation or merger of the Corporation with or into another corporation or
corporations, or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all of the assets of the Corporation, shall
not be deemed or construed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Article 6.
G. Redemption. In the event that the Preferred Stock of any series
shall be made redeemable as provided in subparagraph II(A)(c) of this Article 7,
the Corporation, at the option of the Board of Directors, may redeem at any time
or times, and from time to time, all or any part of any one or more series of
Preferred Stock outstanding by paying for each share the then applicable
redemption price fixed by the Board of Directors as provided herein, plus an
amount equal to accrued and unpaid dividends to the date fixed for redemption,
upon such notice and terms as may be specifically provided in the certificate
filed pursuant to law with respect to such series of Preferred Stock.
-5-
AGREEMENT BETWEEN
THE BETHLEHEM CORPORATION
and
THE BETHLEHEM CORPORATION EMPLOYEES ASSOCIATION
Effective Dates:
July 23, 1994 to July 22, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Article Page
- ------- ----
I Intent and Purpose 1
II Recognition, Association Membership and Check-off 1
III Management 2
IV Wages 3
V Hours of Work 4
VI Travel Time and Expenses 8
VII Holidays 9
VIII Paid Vacations 10
IX Seniority 13
X Promotion Outside Bargaining Unit 20
XI Adjustments and Grievances 20
XII Suspension and Discharge 23
XIII Safety and Health 23
XIV Funeral Leave 24
XV Miscellaneous 25
XVI Insurance and Pensions 25
XVII Association Responsibility 29
XVIII Saving Clause 30
XIX Termination Date 30
-1-
<PAGE>
THIS AGREEMENT executed and effective as of July 23, 1994, by THE BETHLEHEM
CORPORATION, its successors or assigns, hereinafter referred to as the
CORPORATION, and THE BETHLEHEM CORPORATION EMPLOYEE ASSOCIATION, hereinafter
referred to as the ASSOCIATION, as the agent for and acting on behalf of the
Corporation's "employees" as the term is defined in Article I hereof, witnesseth
that the parties have agreed as follows:
Article I
---------
INTENT AND PURPOSE
------------------
Section A. It is the intent and purpose of the parties hereto to promote
and improve industrial and economic relationships and to set forth herein the
basic agreement covering rates of pay, hours of work and conditions of
employment to be observed between the parties hereto. It is understood and
agreed that the term "employees" for the purpose of this Agreement shall include
the full time and regular part-time production and maintenance employees of The
Bethlehem Corporation fabrication and machining operations at its Easton,
Pennsylvania facility, including truck drivers, store clerks, shipping and
receiving clerks and inspectors; but excluding dispatchers, timekeepers, office
clerical employees, guards and supervisors as defined in the Act.
Section B. It is the continuing policy of the Corporation and the
Association that the provisions of this Agreement shall be applied to all
employees in accordance with its terms without regard to race, sex, color,
religious creed or national origin.
Article II
----------
RECOGNITION ASSOCIATION MEMBERSHIP AND CHECK-OFF
------------------------------------------------
Section A. RECOGNITION. The Corporation recognizes the Association as the
sole collective bargaining agency for all of its employees as defined in Article
I of this Agreement at the Corporation's Easton plant. During work hours, the
Association will not conduct any business which is not specifically identified
with the joint administration of the Labor Agreement.
Section B. ASSOCIATION MEMBERSHIP. Each employee who on July 23, 1994 is a
member of the Association in good standing and each employee who becomes a
member after that date shall, as a condition of employment, maintain the
employee's membership in the Association for the duration of this Agreement. All
applicants for employment who are hired and qualify as "employees" under Article
I, Section A, shall become a member of the Association not later
-1-
<PAGE>
than thirty working days following the beginning of the employee's employment.
The foregoing provisions shall be effective in accordance and consistent with
the applicable provisions of federal and state law.
(a) At the time of an employee's employment the Corporation will suggest
that each new employee voluntarily execute an authorization for the check-off of
Association dues in the form agreed upon. A copy of such authorization card for
the check-off of Association dues shall be forwarded to the Treasurer of the
Association.
(b) For the purpose of this Section, employees shall not be deemed to have
lost their membership in the Association in good standing until the Treasurer of
the Association shall have determined that the membership of such employee in
the Association is not in good standing as provided for in this Article, and
shall have given the Corporation notice in writing of that fact.
Article III
-----------
MANAGEMENT
----------
Section A. Subject to the provisions of this Agreement, the management of
the shops and the direction of the working forces, including the right to hire,
suspend, or discharge for proper cause, or to transfer, classify, assign work to
employees, the right to relieve employees from duty because of lack of work, to
maintain order and efficiency in its plants and operations, to control the use
of all equipment and other property of the Corporation, and to determine
manufacturing methods, processes and products, and to contract out work
presently being performed by employees, shall vest exclusively in the
Corporation.
Section B. The Corporation shall have the right to establish, maintain and
enforce reasonable rules and regulations to insure orderly plant operations, it
being understood and agreed that such rules and regulations shall not be
inconsistent or in conflict with the provisions of this Agreement. The
Corporation shall furnish the Association with a copy of all such rules and
regulations as well as all changes therein. The Corporation shall meet and
discuss any proposed rules and regulations with the Committee of the Association
in advance of adoption. Discipline shall be uniformly administered to all
employees subject to discipline.
-2-
<PAGE>
Article IV
----------
WAGES
-----
Section A. The basic hourly rates for the term of this Agreement shall be
as follows:
Hourly Rate Hourly Rate Hourly Rate
Monday Monday Monday
Labor Grade July 25, 1994 July 24, 1995 July 22, 1996
----------- ------------- ------------- -------------
1 $ 8.52 $ 8.82 $ 9.17
2 8.73 9.03 9.38
3 9.26 9.56 9.91
4 9.96 10.26 10.61
5 10.29 10.64 11.08
6 10.82 11.17 11.61
7 11.60 11.95 12.39
8 12.08 12.43 12.87
9 12.95 13.39 13.84
10 13.58 14.02 14.47
11 13.86 14.30 14.75
12 14.14 14.58 15.03
The rate range in each labor grade is provided pursuant to the Job
Evaluation Program.
Section B. The Corporation and Association agree to review and refine our
Job Evaluation Program. Any monetary changes will be implemented in a manner so
that neither party will be subjected to any financial hardship. A joint team
will be formed within 90 days from the date of this Agreement in order to
initiate this goal.
Section C. In the event an individual employee's regular wage rate is
changed, other than a temporary rate change, the chief shop steward and the
recording secretary must be notified in writing by the Corporation of such
change.
Section D. SHIFT DIFFERENTIAL. The shift differential for the second shift
is thirty-five Cents ($.35) per hour and Forty Cents ($.40) per hour for the
third shift.
(a) Any employee regularly scheduled to commence work between 12:00 noon
and 9:59 p.m. shall be considered an employee of the second shift. Any employee
regularly scheduled to commence work between 10:00 p.m. and 4:49 a.m. shall be
considered an employee of the third shift.
(b) In computing overtime on a daily and weekly basis, the wage allowances
described hereinabove, respectively, shall be used
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<PAGE>
in addition to the regular hourly basic rate, and such wage allowances shall
also be used in computing the vacation pay of employees.
Section E. ALLOWANCE FOR JURY SERVICE. An employee who is called for jury
service shall be excused from work for the days on which he or she serves, and
the employee shall receive, for each such day of jury service on which the
employee otherwise would have worked, the difference between eight (8) times the
employee's regular straight-time hourly day-rate (as computed for holiday
allowance) and the payment the employee receives for jury service. The employee
will present proof of service and the amount of pay received therefor.
Article V
---------
HOURS OF WORK
-------------
Section A. (a) A normal work day shall consist of eight (8) consecutive
hours, exclusive of lunch period, within a calendar day or twenty-four (24) hour
period. The normal hours of work are:
Manufacturing Shops Lunch Break Coffee Break
- ------------------- ----------- ------------
7:00 a.m. - 3:30 p.m 12:00 - 12:30 p.m. 9:00 - 9:10 a.m.
(30 min. unpaid)
3:30 a.m. - 11:30 p.m 8:30 - 8:40 p.m. 5:30 - 5:40 p.m.
(10 min. paid)
11:30 a.m. - 7:00 a.m 3:30 - 3:40 a.m. 2:00 - 2:10 a.m.
(10 min. paid)
(8 hrs. Monday through Friday)
Normal hours of work can be changed by mutual agreement between the
Corporation and the Association. The Corporation reserves the right to increase
the hours on any shift and adjust the starting times of the shifts to meet
production needs. The Association must be notified of these changes.
(b) A normal work week shall consist of five (5) consecutive work days
beginning on Monday and ending on Friday.
(c) The foregoing provisions of this Section A shall not be construed as
guaranteeing to any employee any number of hours of work per day or per week.
Section B. There shall be a recognized and controlled ten (10) minute
coffee break on each shift. The shop whistle will signal the start and stop of
the break period.
-4-
<PAGE>
No other coffee break other than this ten (10) minute period will be permitted.
Section C. The last ten (10) minutes of each shift shall be designated as
wash-up time, and during this period each employee is to straighten up his or
her work area, put tools away and wash up. Additional time will be granted to
those employees, only by the direction of their immediate supervisor, where it
is necessary for them to take care of cleaning up work areas and equipment and
returning large quantities of tools either to the tool room or their tool boxes.
This additional time will be completely at the discretion and direction of the
employee's immediate supervisor.
Section D. (a) Time and one-half shall be paid for all time worked by an
employee:
(i) in excess of eight (8) hours in any one day, exclusive of lunch
period, commencing when the employee starts to work.
(ii) in excess of forty (40) hours within any one week.
(iii) for all work performed on shifts starting on Saturday including
the third shift which begins at 11:30 p.m. Friday.
(iv) during scheduled lunch periods. Unscheduled lunch periods taken
by employees who have performed work during scheduled lunch periods, shall
not be paid for by the Corporation, unless mutually agreed upon.
(b) Double time shall be paid for all time worked by an employee:
(i) on shifts starting on Sunday including the third shift which
begins at 11:30 p.m. Saturday night, but excluding the third shift which
begins at 11:30 p.m. Sunday night.
(ii) in excess of twelve (12) consecutive hours in any one day
provided the employee is not already on double time. For the purposes of
this subsection (ii), an employee will be considered as having worked in
excess of twelve (12) consecutive hours even though he or she has taken a
break of two (2) hours or less with the approval of the employee's foreman.
Section E. REPORTING PAY. (a) In the event an employee is not notified
not to report for work and does report for work and upon reporting finds
there is no work to be performed, he or she shall receive four (4) hours
pay at the employee's regular hourly rate, except where the employee was
absent from work on the previously scheduled working day, unless on that
previously scheduled working day the employee notified the Corporation that
he or she would be available for work on the next scheduled work day.
-5-
<PAGE>
In the event an employee reports for work and actually begins work and works
less than four (4) hours because of lack of work, he or she shall receive four
(4) hours pay at the employee's regular hourly rate, except in cases of
emergency, fire, flood, strikes, acts of God or other similar causes beyond the
control of the Corporation. This exception applies to this entire paragraph.
Such employees, however, have the option to perform such work as they may be
reasonably expected to perform when offered to them by the Corporation, or they
may conclude their shift and be paid for actual hours worked only.
(b) An employee who is scheduled to work for a specified number of hours on
either a Saturday or Sunday shall be entitled to work for the number of hours so
scheduled. The Corporation reserves the right to assign other work which the
employee is capable of performing in order to provide sufficient work for the
scheduled hours. The employee has the option of performing these work duties to
which assigned or concluding the employee's shift and being paid for actual
hours worked only.
Section F. CALL-IN PAY. In cases of emergency, when an employee has left
the plant and is called back to work at times other than the employee's
scheduled shift, he or she shall receive the greater amount of either four (4)
hours at the employee's regular straight time rate, or time and one-half for
hours actually worked. In the event the call-out runs into the employee's
scheduled shift, he or she shall receive the applicable overtime rate from the
time employee begins work until the beginning of employee's scheduled shift.
Section G. (a) Overtime work shall be divided as equally as practicable
among the employees in their respective departments who perform similar work.
A record of all such weekly overtime worked by the employees will be kept
by the Corporation and shall be available for inspection by the shop employees.
An employee who is requested to work overtime in accordance with the
"notice-in-advance" provision outlined in paragraph (b), and who refuses to
work, will be charged with the amount of overtime worked by the employee
accepting the overtime assignment. An employee requested to work overtime but
not provided with "notice-in-advance", and who refuses to work will not be
charged with any overtime for that particular day.
Overtime worked out of an employee's regular classification shall be
charged against the employee's regular classification.
Employees working on jobs during regular hours shall have preference for
overtime occurring during the normal work day on the same jobs.
-6-
<PAGE>
(b) The parties recognize that the needs of the operation of the business
and plant of the Corporation from time to time require work in excess of the
scheduled hours; therefore, the parties agree to cooperate in such instances
giving due recognition to the needs of the Corporation, and the employees agree
to perform such overtime work unless the employees so requested to work overtime
would be inconvenienced. The Corporation will, whenever practicable give
employees asked to work beyond the end of their scheduled hours, two (2) hours'
notice in advance of the end of their scheduled hours. An employee not regularly
scheduled for Saturday work will, whenever practicable, when asked to work
Saturday, be notified before the end of the employee's scheduled hours on the
preceding Thursday. An employee not regularly scheduled for Sunday or holiday
work will, whenever practicable, be notified forty-eight (48) hours in advance
of any Sunday or holiday to be worked.
(c) Overtime payments shall not be duplicated, and the employee shall not
be paid twice for the same hours worked.
Section H. When an employee has worked in excess of ten (10) hours on any
shift, the Corporation will provide the employee with food at a cost not in
excess of Five Dollars ($5.00) together with any tax imposed thereon provided
the employee has not been given a reasonable opportunity to arrange in advance
for the food. In the event the Corporation does not provide food for the
employee, the Corporation will pay the employee Five Dollars ($5.00).
Section I. To insure orderly operation of the plant, the Association
recognizes the responsibility of all employees to report regularly for work
unless prevented by illness or other justifiable reasons. Employees who are
expected to report for work on Saturday and/or Sunday shall also be required to
report off.
Employees are required to notify the shop in which they work by telephone
of their absence and the reason therefor on the first day thereof, except in
case of an emergency when this is not possible. Employees should call in to
Telephone Number (610) 2587111 or send a telegram stating that they cannot
report for work to The Bethlehem Corporation, 25th and Lennox Streets, Easton,
PA 18045.
Section J. Any employee who is scheduled to or actually works twelve (12)
hours or more in any day shall receive a thirty (30) minute paid lunch period.
Section K. Pay days will be on alternate Thursdays. Such pay days may be
changed by the Corporation for reasons beyond its control including, but not
limited to, machine breakdown or one or more holidays occurring during the work
week.
-7-
<PAGE>
Article VI
TRAVEL TIME AND EXPENSES
Section A. Employees who are required by the Corporation to travel on
Corporation assignments shall be compensated for actual time spent on such
travel at the employees' regular straight time rate of pay. Such compensation
shall be paid for the hours an employee is traveling during the period when the
employee is normally scheduled to work. The time and method of travel shall be
subject to instructions by the Corporation.
Section B. When an employee is required to be away from home overnight on
Corporation assignments, he or she shall be compensated for all hours worked and
travel time subject to the provisions of Section A of this Article VI. In no
event shall such employee receive less pay than if that employee had worked at
the Corporation's plant where he or she is regularly assigned. Beginning on the
third consecutive day that an employee has been away from the plant the employee
shall receive an additional Ten Per Cent (10%) of his or her regular straight
time rate for all hours worked and travel time until the employee returns to the
plant. No percentage will be applied to the first two days. If an employee is
away from the plant on a Saturday or a Sunday and does not either work or travel
on such days, he or she shall receive eight (8) hours pay at the employee's
regular straight time rate of pay.
Section C. The Corporation shall reimburse all pre-approved living expenses
incurred by the employee while away from the plant to which the employee is
regularly assigned, provided that no such reimbursement shall be made for any
particular day unless the employee is required to use a hotel or a motel because
the distance between the employee's work at the end of the day and the
employee's home prohibits the employee's return.
-8-
<PAGE>
Article VII
HOLIDAYS
Section A. The following shall be recognized as paid holidays:
1. New Year's Day
2. Good Friday
3. Memorial Day
4. Independence Day
5. Labor Day
6. Thanksgiving Day
7. The day after Thanksgiving
8. December 24th
9. Christmas
10. December 31st
11. One (1) Floating Holiday each Contract Year
The one (1) additional floating holiday each contract year shall be chosen
by each employee upon at least twenty-four (24) hours advance notice to the
Corporation. It is further agreed that the scheduling of the holiday is subject
to the operating requirements of the Corporation.
Section B. When a paid holiday falls on a Sunday, then the following Monday
shall be recognized as the legal paid holiday unless the State or Nation
proclaims another date, in which event that date shall be observed. When a paid
holiday falls on a Saturday, then the previous Friday shall be recognized as the
legal holiday, unless the State or Nation proclaims another date, in which event
that date shall be observed.
Section C. PAID HOLIDAYS. (a) Each employee who qualified as provided in
(c) who does not work on the holiday, will be paid eight (8) hours at the
employee's straight time hourly rate for each of the holidays enumerated in
Section A hereof, unless the employee has voluntarily quit or has been
discharged prior to observance of such holiday.
(b) Each employee who qualified as hereinafter provided in (c) who performs
work on a shift starting on any holiday enumerated in Section A, will be paid
double time for work performed on the holiday shift, and in addition will be
paid eight (8) hours' holiday pay at his regular straight time rate.
(c) In order for an employee to qualify for the holiday pay:
(i) The employee must have no less than thirty (30) working days'
seniority to his or her credit as of the date of the occurrence of the
holiday.
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(ii) The employee must be actively employed and not in a state of
lay-off, leave of absence, or other condition which makes his or her
service unavailable (except for compensable injury under Pennsylvania
Workmen's Compensation Law) to the Corporation.
(iii) The employee must have worked or have an approved absence in the
pay period in which the holiday is observed, except those employees who
have been recalled from lay-off after having been laid off more than
twenty-eight (28) days unless recalled to work prior to the day on which
the holiday is observed.
(iv) An employee who has been laid off because of lack of work shall
be eligible for holiday pay provided the employee worked within
twenty-eight (28) days prior to the date on which the holiday occurred.
(v) Employees who are scheduled to work on a holiday and who have been
notified of such scheduling in accordance with Article V, Section G, and
who agree to work on a holiday, but who fail to work as scheduled and
agreed, shall not receive holiday pay for said holiday. However, failure to
work as agreed because of an unforeseen situation beyond the control of the
employee, will not result in loss of holiday pay.
(vi) The Corporation and the Association must mutually agree to change
the date on which a holiday is to be observed.
(d) A holiday for which the employee receives pay will be considered
as a day worked when computing vacation and pension benefits only.
Article VIII
------------
PAID VACATIONS
--------------
Section A. The Corporation agrees that during each vacation year June
1 to May 31 of this Agreement such employees as qualify in accordance with
the following requirements shall receive a vacation of either one (1), two
(2), three (3), four (4), or five (5) weeks depending upon length of
continuous service completed prior to June 1st of each calendar year. A
week's vacation shall consist of seven (7) consecutive days.
Section B. Effective with the June 1, 1994 vacation period, all
currently active employees as of July 23, 1994 will have the option of
being grand-fathered into the existing Vacation Schedule which is
designated "Schedule A." All employees hired after July 23, 1994 will be
governed by "Schedule B" for vacation purposes.
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"Schedule A"
------------
Years of Continuous Service Vacation Time
on or before 5/31/94 Off with Pay
- ------------------------------------------------------ ------------
Less than 6 months 0
6 mos. but less than 1 yr. 3 days
1 yr. but less than 2 yrs. 1 week
2 yrs. but less than 3 yrs. 1 week & 1 day
3 yrs. but less than 4 yrs. 1 week & 2 days
4 yrs. but less than 5 yrs. 1 week & 3 days
5 yrs. but less than 6 yrs. 2 weeks
6 yrs. but less than 7 yrs. 2 weeks & 1 day
7 yrs. but less than 8 yrs. 2 weeks & 2 days
8 yrs. but less than 9 yrs. 2 weeks & 3 days
9 yrs. but less than 10 yrs. 2 weeks & 4 days
10 yrs. but less than 15 yrs. 3 weeks
15 yrs. but less than 25 yrs. 4 weeks
25 yrs. and over 5 weeks
"Schedule B"
Years of Continuous Service Vacation Time
on or before 5/31/94 Off with Pay
- ------------------------------------------------------ ------------
Less than 6 months 0 days
6 mos. but less than 1 yr. 1 week
1 yr. but less than 7 yrs. 2 weeks
7 yrs. but less than 15 yrs. 3 weeks
After 15 years 4 weeks
Any employee currently governed by "Schedule A" may elect to change to "Schedule
B" by informing the Company's personnel administrator within sixty (60) days of
the effective date of this Agreement. However, once employees have made such an
election, they give up their right to have their vacation governed by "Schedule
A."
Section C. Vacation pay will be computed once each year for each employee.
The Corporation will use the following two methods to compute vacation pay, and
the employee will be paid the greater amount:
(1) Vacation pay for the entire vacation period June 1 to May 31 shall be a
percentage of the individual employee's earnings for the full year ending with
the pay period immediately preceding June 1st of each calendar year, subject to
Section D of Article VIII.
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Vacation Time Percentage Amount
Off With Pay of Vacation pay
- ------------ ---------------
3 days 1.2%
1 week 2.0%
- ------ ----
1 week & 1 day 2.4%
1 week & 2 days 2.8%
1 week & 3 days 3.2%
2 weeks 4.0%
- ------- ----
2 weeks & 1 day 4.4%
2 weeks & 2 days 4.8%
2 weeks & 3 days 5.2%
2 weeks & 4 days 5.6%
3 weeks 6.0%
- ------- ----
4 weeks 8.0%
- ------- ----
5 weeks 10.0%
or,
(2) Vacation pay shall be based upon the employee's hourly rate on May
31st. Vacation pay is computed on basis of eight (8) straight time hours equals
one day and forty (40) straight time hours equals one week. To be eligible for a
full vacation in any vacation year during the term of this Agreement, an
employee must (a) have six (6) months of continuous service prior to May 31st of
any calendar year; (b) have worked at least 1,500 hours in the twelve (12) month
period from June 1st to May 31st. If an employee works in excess of 1,000 hours
but less than 1,500 hours in the twelve (12) month period from June 1st to May
31st, the employee shall be entitled to a pro rata vacation based upon the ratio
that the employee's hours worked bear to 2,000 multiplied by the applicable
vacation entitlement set forth.
An employee who works less than 1,000 hours from June 1st to May 31st shall
not be entitled to a vacation. For the purpose of determining hours worked, time
lost for sickness or compensable accidents shall be counted as hours worked up
to eight (8) hours per day.
Vacation time for which the employee receives pay will be considered as
time worked when computing vacation and pension benefits only.
Employees may use up to a maximum of five (5) of his or her vacation days
per year as sick days without prior approval, as normally required for vacation
purposes.
Section D. (a) All vacations must be taken between June 1st and May 31st of
the following year, and whenever possible the employee shall have the privilege
of selecting the time within said period which the employee desires for his or
her vacation, but the final selection rests with the Corporation in order to
insure an
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orderly operation of the plant, and in the event of a temporary shutdown of the
plant or any department thereof between June 15th and September 15th of any
year, the Corporation may designate upon sixty (60) calendar days' posted
notice, such period of shutdown as comprising the vacation period for any
employees who are qualified to receive a vacation.
(b) The Corporation will limit vacation shutdown to a one week period
falling between Christmas and New Year's holiday.
Section E. (a) Employees who prior to June 1st of any year quit, take a
leave of absence or are discharged and have not worked in excess of 1,000 hours
in the twelve (12) month period June 1st to May 31st shall not be eligible to
receive any benefits under this article.
(b) Employees who are otherwise eligible for a vacation but are laid off
shall receive such vacation pay as is due them.
(c) Employees who retire or die prior to June 1st of any year shall be
entitled to vacation pay prorated as of the date of retirement or death, and
paid at the next available pay period or reasonable time period thereafter.
(d) Retired employees shall be paid at the time of retirement for any
vacation to which they may then be entitled, and paid at the next available or
reasonable pay period.
Should an employee die at the time the employee has not taken his or her
full vacation or when the employee is otherwise entitled to vacation pay, the
employee's beneficiary shall receive the balance of the vacation pay to which
the deceased employee was entitled, the judgment of the Corporation as to the
person or persons to be paid to be conclusive.
Section F. Holidays falling within an employee's vacation period are to be
counted as vacation days. Paid holidays as listed in Article VII of this
Agreement falling within an employee's vacation period are also to be counted as
vacation days for which the employee shall receive payment in accordance with
the provisions of said Article VII.
Article IX
----------
SENIORITY
---------
Section A. (a) Seniority shall be based upon and defined as the length of
service of the employees employed by the Corporation, beginning with the last
hiring date of the employee involved. The "last hiring date" as herein provided
shall be defined to mean the period of time since such date, during which any
such employee's
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seniority has not been canceled as provided and defined in Section 1 of this
Article IX or any other applicable collective bargaining agreement entered into
by the Corporation and any collective bargaining representative. Seniority shall
be maintained and applied as to layoffs, increase of forces, transfer and
promotion to non-supervisory jobs on a plant-wide basis as herein and
hereinafter provided.
(b) Employees shall have a preference as to shift assignment according to
their seniority within their job classification. However, nothing in this
section shall limit the right of the Corporation to assign employees to any
shift in order to maintain efficiency through a balance of necessary skills and
experience, provided that any assignment not filled after applying the seniority
provision in the normal manner, shall then be filled by applying seniority in
reverse order, i.e. the least senior employee within the job classification to
be assigned.
Section B. LAYOFFS AND RECALLS. (a) It is understood and agreed between the
parties hereto that in all cases of increases and decreases of the working
forces length of continuous service shall be the determining factor, providing
the employee involved has the ability to perform the work required.
However, any employee before being laid off may bump back to any equal or
lower rated job within any occupation which the employee had previously held or
to any other equal or lower rated job which the employee is capable of
performing within any occupation providing his or her seniority is greater than
the employee on that particular job.
(b) DIVISION OF WORK. When work becomes unavailable for one or more
employees performing the same type of work, on any calendar day of the week, the
senior employee or employees shall be retained unless they are reassigned to
other duties by the Corporation. If they are not reassigned, and provided they
are competent to do the work, said employees may exercise their seniority in a
bump fashion by bumping junior employees in the same or lower labor grade.
If an error is made in administering the bumping procedure, or if there is
not sufficient time to contact and assign each employee affected in a one-day
bump, the Corporation and Association will then meet for the purpose of
attempting to provide a solution for any problem which might have arisen.
(c) If, as a result of a decrease in work other than decreases which may
occur from day to day, the average scheduled hours of work of the employees
throughout the plant shall be reduced for a period of two (2) consecutive weeks
to thirty-two (32) hours per week and if, in the judgment of the Management,
that level of work will continue for an extended period of time, the plant
manager will discuss with the appropriate Association
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officials the question whether a decrease of the working force shall be effected
in accordance with the provisions of this article or whether the available hours
of work shall be distributed among the employees in such unit so far as shall be
practicable with due regard for the particular skills and abilities required to
perform the work available there. If the plant manager and such Association
officials shall fail to agree, the working force shall be reduced to an extent
which shall be sufficient to enable the remaining employees to average-forty
(40) hours of work per week.
(d) An employee shall not be reassigned to perform the same type of work on
a different shift until at least twenty-four (24) hours have elapsed since the
regularly scheduled starting time of the said employee on the last shift worked
by him; provided, however, that in the interest of maintaining uninterrupted and
economic production, the Corporation may so schedule an employee. An employee
can be reassigned to perform the same type of work on the same shift on which
the employee was regularly scheduled despite the fact that twenty-four (24)
hours have not elapsed since the regularly scheduled starting time of said
employee on the last shift worked by the employee and that by so doing the
Corporation would be obliged to pay overtime under the terms of this Agreement.
(e) When plant operations resume on a normal or increased schedule, the
employees affected shall be restored to their previous or normal status or
recalled in the reverse order in which they were laid off. An employee will have
the option to refuse recall if the job to which the employee is being recalled
is not his or her regular job.
When reasonably possible; the Corporation will notify the Chief Shop
Steward about an employee who is being recalled from lay-off, on the same day
that the Corporation notifies the Employee.
(f) In all cases of increase or decrease of the working forces the
following local Association officers: President, Vice President, Chief Shop
Steward, Recording Secretary and Treasurer, the members of the Grievance
Committee and the Shop Stewards, not to exceed a total of twenty-four (24) such
Officers, Grievance Committeemen and Shop Stewards, shall be given preference
without regard for seniority, provided there is work available in the plant
which they are capable of doing. Such preferential seniority for Shop Stewards
shall be confined to the departments in which they function as Shop Stewards.
(g) TEMPORARY EMERGENCY LAY-OFF. The term "Temporary Emergency Lay-off"
when used under the terms of this Agreement shall mean the relieving of any
employee from duty or the temporary laying off of an employee because of a
temporary emergency brought about by reason of power breakdown, flood, fire, or
other problems beyond the reasonable control of the Corporation which require
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<PAGE>
temporary cessation of one or more operations.
In the interest of maintaining uninterrupted and economic production, the
Corporation shall not be obligated to lay off the employees in the strict order
of their seniority, but it must make a reasonable effort to lay off the
employees in the strict order of their seniority. No such temporary emergency
lay-off shall be extended beyond a period of three (3) work days.
(h) Laid-off employees must be given a temporary lay-off slip in order to
entitle them to Unemployment Compensation Insurance.
(i) An employee shall be given two (2) work days' notice before being laid
off out of the plant.
(j) An employee who requests an out-of-turn lay-off, and providing the
Corporation grants such request, must sign a statement in which the employee
waives employee's recall rights to all jobs except the employee's regular job.
Section C. INCAPACITATED EMPLOYEES. In order to protect the senior employee
in employee's right to work where work is available which the employee is able,
willing and qualified to perform within the scope of the bargaining unit, if the
employees become incapable of doing their regular work through no fault of their
own, the employee so affected shall be entitled to other work in the plant in
accordance with their seniority status, provided they have the necessary ability
required to perform such work, and do not displace any other employee.
Section D. TRANSFER AND PROMOTIONS. Seniority as it shall be maintained and
applied to promotions, transfer and promotional transfers: (a)(i) In the event a
vacancy occurs on any permanent job, or should a new job be established within
the scope of the bargaining unit, notification of such vacancy or establishment
of such new job shall be posted on the department bulletin board for a period of
three (3) days. Upon request from the Association, the Corporation will extend
the job posting for two (2) additional days to provide time for the Association
to contact an employee who is absent from work or laid off. A vacancy will not
be deemed to exist if there is an employee either on lay-off or in a lower rated
job who formerly held the job now open and who lost it by reason of a shortage
of work. The notification shall contain the job title, the grading and the shift
to which the job is presently assigned.
Such jobs shall be filled by employees throughout the plant whenever
possible. In all such cases, the length of service (seniority rank) shall be the
determining factor providing the employee involved has the necessary ability
required to perform the work. Transfers under this provision shall represent a
promotional opportunity for the employee involved.
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<PAGE>
Notwithstanding any provision of this Section D (a)(i) to the contrary, an
employee having in excess of ten (10) years' seniority shall be entitled to bid
upon a vacancy that occurs in any permanent job or newly established job of
equal or lower rank in the plant. Such employee shall be awarded the job if (1)
the employee's seniority in the plant is greater than the other employees under
consideration for the job and (2) the employee's fitness and ability are
substantially equal to such other employees. If such employee is awarded the
job, the employee shall not be eligible again for promotion under this Section D
and shall remain in the job for twelve (12) full months before he or she may bid
on another job vacancy.
(ii) Eligible employees not claiming such posted jobs within the
agreed upon time shall forfeit their right in such cases and wait until the
next job posting occurs.
(iii) In the event of disputes, the job in question shall be
considered only temporarily filled until the matter is properly disposed of
through the established grievance procedure. In no case shall this
provision involve back pay beyond the date on which the grievance was
filed.
(b) The Corporation for its convenience may from time to time make
transfers of employees from one job classification to another in accordance with
the rules set forth in Paragraph 5 of the Supplemental Agreement of July 23,
1994. The reasons for such transfer may include but are not limited to the
following:
(i) To fill vacancies on a temporary basis pending permanent filling
of such vacancies under the job posting procedure;
(ii) To replace the employees who are absent or on vacation or who
have failed to-report for work as scheduled;
(iii) To provide for the remainder of the employee's shift for an
employee who has no work remaining in the employee's regular job
classification. The employee has the option of performing assigned work
duties or concluding his or her shift and being paid for actual hours
worked only.
(iv) To fill a job pending the recall of an employee from lay-off;
(v) To provide additional workers needed for particular work. Such
workers shall be selected from among the employees in equal or lower-rated
job classifications from the job classification usually performing such
work.
(vi) To perform work of an intermittent nature not requiring an
employee for a full shift.
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(vii) A temporary transfer is defined as being forty-five (45) work
days. The parties, by mutual consent, can extend the 45-work day limit.
Section E. NEW EMPLOYEES. New employees must have accumulated
forty-five (45) working days of service before they have seniority rights.
Upon completion of such forty-five (45) working days, their seniority shall
date from the original date of employment. During such forty-five (45)
working-day period, a new employee may be transferred, laid off or
discharged as the Corporation may determine but not in any manner that will
deprive any other employee of his or her rights under this Agreement.
The Corporation shall furnish to the Recording Secretary of the
Association each month a list of the employees hired within the preceding
month.
Section F. SENIORITY LISTS. (a) Seniority lists showing the proper
seniority dates of the employees must be posted on April 1st and October
1st of each year in the appropriate departments, and shall be changed by
the Corporation semi-annually so as to include the names of new employees
who have attained seniority status, or corrections that have been noted,
since the date of last semiannual posting.
The Corporation will provide the Association's Secretary with an
expanded cop of the Seniority List, which will contain the Employee's
Department, Seniority Date, Job Title, Labor Grade, Birthday, and when
applicable, the date and reason for termination.
Section G. LEAVES OF ABSENCE. Leaves of absence shall be permitted in
cases mutually agreed to be worthy, and in such cases the employee's
seniority shall continue to accumulate.
Section H. MILITARY SERVICE. Employees, other than temporary
employees, who enter the armed forces of the United States or who have left
or who subsequent to the date hereof leave their positions for the purpose
of being inducted into, enlisting in, determining their physical fitness to
enter or to perform training duty in said armed forces, shall be reinstated
in accordance with the applicable Federal statutes.
Except as may be otherwise provided in the applicable Federal
statutes, any employee who voluntarily re-enlists for additional service at
the end of the employee's initial term of active service shall not have any
seniority or other rights under this employee shall be canceled under any
of the following circumstances: if the employee
Section I. CANCELLATION OF SENIORITY. The seniority of an employee
shall be canceled under any of the following circumstances: if the employee
(a) Is justifiably discharged;
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(b) Voluntarily quits;
(c) Is absent for any reason, which absence continues for more than
two (2) years. In cases where sickness and accident, or Workman's
Compensation is involved, then the two (2) years shall start after coverage
has been exhausted;
(d) Does not return to work within five (5) working days after written
notice by the Corporation to the employee's last address appearing on the
Corporation's records. The Corporation shall notify the Association in writing
at the same time the employee is notified to return to work;
(e) Fails to return to work at the proper time after leave of absence;
(f) Is absent from work for five (5) consecutive working days without
giving notice to the Corporation;
Section J. The Corporation shall give written notification to the
Association of all promotions to non-supervisory jobs, layoffs, transfers,
recalls, discharges or disciplinary actions. If no written protest is received
by the Corporation from the Association or from the individuals involved within
five (5) working days from the date such notification is received by the
Association, no further grievance relative thereto shall be valid. Retroactive
pay in such cases shall not be for a period greater than the day on which the
written grievance was filed.
Section K. The seniority provisions of this Article IX shall be applied to
Working Leaders as follows:
(a) For purposes of lay-offs and recalls, a Working Leader's seniority
shall be based upon and defined as the length of service.
(b) For purposes of lay-offs and recalls, a Working Leader will be
considered to be an occupant of the job classification which the employee held
immediately prior to the employee's promotion to Working Leader.
(c) Each Working Leader will participate in overtime opportunities in
accordance with the employee's departmental seniority.
(d) Working Leaders are not employed to supervise, but in addition to
working are asked to convey the foremen's instructions to their group, and to
make such reports as to the progress of the job and maintenance as are required
by the foreman. Working Leaders are not to discipline any employee.
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Article X
---------
PROMOTION OUTSIDE BARGAINING UNIT
---------------------------------
Whenever possible, Management will consider bargaining unit members for
promotion to positions outside the bargaining unit.
To allow such employees some measure of seniority security in accepting
promotion outside the bargaining unit, it is agreed that an employee accepting a
promotion will retain his or her seniority which the employee accumulated as a
bargaining unit member for a period of one (1) year from the date of such
promotion.
At the expiration of such one-year period the employee will lose his or her
seniority unless the Corporation and Association mutually agree to continue the
employee's seniority.
Employees who accepted a position outside the bargaining unit prior to the
date of this Agreement shall retain their seniority in accordance with the
provisions of the collective bargaining agreement in effect at the time of their
promotion.
A non-bargaining unit employee who returns to the bargaining unit cannot
upon the employee's return to the unit displace any bargaining unit employee
currently at work. Conditions of the employee's return to the bargaining unit
will be mutually agreed to by the Corporation and Association.
Article XI
----------
ADJUSTMENTS AND GRIEVANCES
--------------------------
Section A. Should any differences arise between the Corporation and the
Association as to the meaning and application of the provisions of this
Agreement or as to any question relating to wages, hours of work and other
conditions of employment of any employee, there shall not be any suspension of
work because of such differences, but an earnest effort shall be made to settle
them promptly and in accordance with the provisions of this Agreement in the
manner hereinafter set forth.
If an employee shall believe that the employee has a justifiable request or
complaint, the employee must discuss such request or complaint with his or her
foreman within twenty-four (24) hours after the incident occurs, with the
steward of employee's department being present, in an attempt to satisfactorily
settle the request or complaint. Any such request or complaint which shall not
be disposed of within two (2) work days and which shall be presented in writing,
as hereinafter provided, shall constitute a grievance and shall be handled under
the procedure set forth in this Article.
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Step No. 1. Such grievance shall be stated in writing on a form to be
furnished by the Corporation, which shall be dated and signed by the employee
involved, and two (2) copies of such grievance shall be delivered by the steward
of such shop to the foreman involved. Such foreman shall note in the appropriate
place on such form the employee's disposition of such grievance and shall sign
and date the notation and return one (1) copy of such grievance to the steward
and deliver or send one (1) copy thereof to the Personnel Manager. Any grievance
which shall not be disposed of within one (1) work day after it shall have been
so presented to the foreman may be appealed to Step No. 2 of the grievance
procedure.
Step No. 2. Unless such grievance shall be appealed to the General Foreman
for such shop or other designated Corporation representative within three (3)
work days after such disposition thereof by such foreman, such grievance shall
be deemed to have been settled in accordance with such disposition and no appeal
therefrom shall thereafter be taken.
If such grievance shall be so appealed, it shall be discussed by the
General Foreman for such shop and Personnel Manager, or other designated
representative, and the Chief Steward and Departmental Steward thereof in an
effort to settle such grievance. The discussion shall be held, and such General
Foreman and Personnel Manager, or other designated representative, shall dispose
of such grievance within not more than five (5) work days after the date on
which such grievance shall have been so appealed. If the General Foreman and
Personnel Manager, or other designated representative, shall fail to provide an
opportunity for discussion or fail to dispose of such grievance within the five
(5) work days, such grievance may be appealed to Step No. 3 of the grievance
procedure.
Step No. 3. Unless such grievance shall be appealed to Step No. 3 within
five (5) work days of such disposition in Step No. 2, such grievance shall. be
deemed to have been settled in accordance with such disposition and no appeal
therefrom shall thereafter be taken.
If such grievance shall be so appealed, a meeting between the Personnel
Manager and Plant Manager, or other designated representative, and the
designated Grievance Committee of the Association shall be held within five (5)
work days of such appeal in an effort to settle such grievance. If such
grievance shall not have been disposed of within eight (8) work days of such
appeal to Step No. 3, such grievance may be appealed to Step No. 4 of this
grievance procedure.
Step No. 4. Unless such grievance shall be appealed within five (5) work
days of such disposition in Step No. 3, it shall be deemed to be settled in
accordance with such disposition, and no
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appeal therefrom shall thereafter be taken.
If agreement cannot be reached in the manner set forth above on such
grievance, the matter shall then be immediately referred to arbitration in the
following manner:
(a) If the Corporation and the Association cannot agree upon an impartial
arbitrator, on demand of either of the parties to this Agreement, the American
Arbitration Association shall appoint an impartial arbitrator who shall
arbitrate the disputed matter in accordance with its rules and regulations. Once
a disputed matter has been so appealed, such appointment and the decision of the
arbitrator so made shall be final and binding on each of the parties hereto
including the aggrieved employee or employees.
The Arbitrator shall have the power to interpret the terms and provisions
of this Agreement and to render decisions on disputes thereunder, except,
however, no Arbitrator shall have the power to render decisions that would
expand or nullify any of the terms and provisions of this Agreement.
(b) The cost of the impartial Arbitrator shall be shared equally by both
parties. All other costs incidental to the arbitration proceedings shall be
borne by the party incurring the cost.
(c) No post hearing brief will be filed by either party.
Section B. The time elements in the preceding grievance procedure shall
have meant to exclude Saturdays, Sundays and holidays. Any extension of time in
any step of this procedure must be by mutual agreement. For purposes of counting
days, the day of disposition shall be excluded, but the last day for filing an
appeal shall be included.
Section C. An employee who claims to have a grievance shall present such
grievance orally to the foreman involved within twenty-four (24) hours after the
event has occurred giving rise to the grievance. If the employee could not
reasonably have known of such event due to his or her absence from the plant,
the employee shall file the grievance within twenty-four (24) hours after his or
her return to the plant.
No grievance shall be made retroactive prior to five (5) work days prior to
the date such grievance was first submitted in written form in Step No. 1.
Section D. The Grievance Committee shall consist of the President of the
Association, the Chief Shop Steward and three (3) elected members of the
Association who will be elected according to the by-laws of the Association. The
President or the Chief Shop Steward shall have the right to go from one shop to
another on
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grievances without loss of pay upon approval of their respective foremen. A
reasonable effort shall be made to conduct this business during the normal lunch
period.
Section E. Members of the Grievance Committee will not be paid by the
Corporation for attending grievance meetings. No grievance meeting will' be
scheduled to begin after 1:00 p.m.
Article XII
-----------
SUSPENSION AND DISCHARGE
------------------------
In the event an employee is suspended or discharged and the employee
believes he or she has been unjustly dealt with, the employee may file a
grievance and such grievance shall be processed under Article XI of this
Agreement, beginning with the third step thereof.
The grievance shall contain the date and nature of the suspension or
discharge, and the employee shall have five (5) work days from the date of such
suspension or discharge to file the grievance. In no case following the
expiration of five (5) work days referred to herein may a grievance regarding
suspension or discharge be presented. The Corporation will meet with the
Grievance Committee before it discharges any employee.
The Corporation will disregard any disciplinary record in an employee's
personnel file after twelve (12) months have elapsed from the date of the
employee's most recent disciplinary infraction.
Article XIII
------------
SAFETY AND HEALTH
-----------------
The Corporation shall continue to make such provisions that are required
for the safety and health of its employees during the hours of employment.
A plant safety team shall be established consisting of two (2) members of
Management and three (3) members appointed by the Association. This safety team
must meet at least once each thirty (30) days for the purpose of reviewing and
resolving the problems and conditions which involve the safety of the employees.
The safety team shall send a report, signed by all of the members present, to
the Plant Manager, the Vice President of Manufacturing, the Personnel Manager
and the Association's Secretary.
The minutes of each monthly Safety Committee Meeting shall be
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<PAGE>
posted not later than seven (7) working days after each meeting.
If reasonable action is not taken to an unsafe condition, the Association
has the right to present a grievance starting in Step No. 3 of the grievance
procedure.
No employee shall be required to work on any job which, in the opinion of
the majority of the safety committee, is unsafe, nor shall any employee be
penalized for failure to work under such conditions. Notice of such unsafe
conditions shall be given to the Corporation immediately upon its discovery by
the safety committee.
An employee who uses prescription glasses in the performance of employee's
job duties will be reimbursed Twenty-five ($25.00) Dollars by the Corporation
once each twelve (12) months upon presenting verification of purchase of safety
prescription glasses which meet or exceed the standard set forth in Z-87.1-1989
of the American National Standards Institute.
Article XIV
-----------
FUNERAL LEAVE
-------------
Section A. When a death occurs in the immediate family, the employee shall
be permitted three (3) days' absence without loss of pay. Reimbursement of pay
shall be twenty-four (24) hours at the employee's straight time hourly rate. The
immediate family shall constitute a husband, wife, father, mother, sister,
brother, son, daughter, father-in-law, mother-in-law and grandparents of the
employee. One (1) day's paid absence shall be permitted for stepmother and
step-father funeral leave.
An employee who attends the funeral of an aunt or uncle (or spouse's aunt
or uncle) will be granted a one (1) day unpaid excused absence.
Saturday and Sunday shall not be considered as working days. Proof of time
of death and burial must be submitted to the Accounting Department in order to
be compensated for the lost time outlined above.
If an employee is on vacation and a death occurs in employee's immediate
family, his or her vacation will be extended by the number of week days lost,
due to the above incident, not to exceed three (3) days.
If during a normal work week as defined in Article V, a paid holiday is
observed not earlier than the date of death nor later than the date of burial,
the employee can extend the employee's funeral leave by eight (8) working hours
for each paid holiday observed, beginning on date of death to and including date
of burial.
-24-
<PAGE>
Article XV
----------
MISCELLANEOUS
-------------
Section A. One special bulletin board for the use of the Association shall
be erected in each Department at such places as shall be agreed upon by the
President of the Association and the designated representative of the
Corporation. Said bulletin board may be used only to notify Association members
of official Association business, except that notices of a non-partisan civic
nature may be posted if first submitted to the designated Corporation
representative and approved by him. The decision of the Corporation shall be
final and binding. All notices of official Association business-shall be signed
by the President, Secretary or Chief Shop Steward of the Association.
Section B. FOREMEN AND OTHER SUPERVISORS. The primary function of a foreman
and other supervisors is supervision. Foreman and other supervisors shall not
perform work customarily assigned to members of the bargaining unit when their
performance of such work will cause members of the bargaining unit to be sent
home or prevent the recall of laid-off members or the hiring of new employees.
Section C. The Corporation will provide, and split the cost with the
Employee Association, for copies of this contract in mini-booklet form to all
existing employees and new hires during the contract period.
Article XVI
-----------
INSURANCE AND PENSIONS
----------------------
Section A. The Corporation agrees to provide life insurance coverage for
each employee as follows:
August 1, 1994 $15,000
Each new employee shall not be eligible for such life insurance until the
first of the month following thirty (30) days' employment with the Corporation.
Each employee shall be required to pass a pre-employment physical
examination. Employees who are re-hired or laid off for more than a thirty-day
(30) period may also be required to take a physical examination.
Upon death for any cause, whether on or off the job, the
-25-
<PAGE>
beneficiary named on the employee's policy shall receive the amount of insurance
stated on such employee's policy.
An employee who completes at least twenty (20) years of employment and has
attained the age of at least sixty-five (65) years may retire with a paid-up
life insurance policy in the amount of Two Thousand Five Hundred Dollars
($2,500.00).
An hourly employee who has completed at least twenty-five (25) years of
credited service and- has attained the age of at least sixty-two (62) years may
retire with a paid-up life insurance policy in the amount of One Thousand Two
Hundred Fifty Dollars ($1,250.00).
In case of a temporary lay-off of thirty (30) days or less, the Corporation
shall keep the employee's life insurance in effect. All insurance's shall cease
at termination of employment, except for employees under eligible retirement as
defined hereinbefore.
Section B. The Corporation agrees to provide insurance for each employee
for accidents or sickness off the job that prevents the employee from working.
Employees shall receive weekly payments for a maximum of twenty-six (26) weeks
beginning on the day of the accident or on the eighth day of illness. For new
cases only, on each one of the three following effective dates the Corporation
will pay:
August 1, 1994 $225.00 per week
August 1, 1995 $250.00 per week
August 1, 1996 $275.00 per week
In cases of illness or accident off the job, the employee must report
employee's absence from work to the Personnel Manager and request the proper
report form, provided by the insurance company, be mailed to him. The employee's
doctor shall fill out what is required on such form. The form shall be returned
to the Corporation for completion and forwarding to the insurance company.
Upon release by employee's physician, the employee shall report to the
Dispensary before employee may return to work. The Corporation may require the
employee to be examined by the Corporation's physician. The above insurance
ceases upon termination of employment.
Section C. Effective August 1, 1994, the Corporation will absorb the entire
cost of providing U. S. Health Care for the duration of this Agreement. An
employee may elect to be covered under either of two (2) U. S. Health Care Plans
as follows:
1. Premiere
2. Patriot XV Liberty D
-26-
<PAGE>
(1) The limitation on the amount of benefits provided under the Major
Medical Plan is One Million Dollars ($1,000,000.00).
(2) In the event an employee wishes to continue medical coverage under Blue
Cross/Blue Shield/Major Medical, the employee will be responsible for
contributing on a monthly basis the following amounts by the category under
which the employee is covered as follows:
Category Employee Contribution
- -------- ---------------------
Single $25.00/month
Employee & Child $50.00/month
Employee & Spouse $60.00/month
Family $75.00/month
These contribution levels are based on rates which are good through
February 1995 at which time the rates may increase by 20% 25% per year each
February 1, 1995. All rate increases by Blue Cross/Blue Shield will be passed
through to the employee.
Additionally, in order for Blue Cross/Blue Shield to be available, 75% of
the employees covered under the current plan must select to continue coverage
per Blue Cross requirements.
(3) For employees who retire on early retirement on or after August l,
1994, the Corporation agrees to purchase for such retired employees U. S. Health
Care coverage under one of the Corporation's approved plans where the
Corporation's contribution shall be limited to $115.00 per month if married and
$58.00 per month if single.
(4) The Corporation agrees to purchase for employees age 65 or older who
retire on or after August 1, 1994 coverage under ITT/Hartford-Plan B or
equivalent. In either case, the Corporation's contribution shall not exceed
$115.00 per month if an employee is married and $58.00 per month if single. Any
subsequent increase in the cost of the retiree's medical insurance plan will be
paid in total by the retiree.
(5) In the event an employee is out on leave which is covered by the
Corporation's accident and sickness policy, the Corporation will continue to
provide medical coverage on the following basis:
(a) After one (l) year of service -- 50% of the premium cost that the
Corporation was contributing prior to the leave.
(b) After two (2) years of service or more -- 100% of the premium cost that
the Corporation was contributing prior to the leave.
If the employee remains on sickness and accident leave beyond
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<PAGE>
the twenty-six (26) week maximum coverage period, the Corporation will continue
to provide medical coverage in accordance with the above standards for a period
not to exceed two (2) years provided the employee's seniority has not been
canceled and that the employee elects medical coverage under the U. S. Health
Care "Premier Plan" on the earliest date that such employee may elect to
transfer to the Premier Plan. In the event the employee was already enrolled in
the Premier Plan, the employee must remain in the Premier Plan or lose the right
to the Corporation's contribution.
Section D. The insurance coverage provided for in Section C above shall be
made effective in accordance with the terms and conditions specified in the
Agreements entered into by the Corporation with any insurance carrier, or with
U. S. Health Care or with Capital Blue Cross.
The foregoing program of social insurance benefits provided in Sections A,
B and C shall be in substitution for any and all other plans providing for
insurance benefits to covered employees for sickness and accident and
hospitalization benefits. It is intended that the provisions for sickness and
accident benefits which shall be included in such program of social insurance
benefits shall comply with and be in substitution for provisions for similar
benefits which shall be provided for under such law or laws, the cost to the
Corporation of such benefits under such law or laws, shall be deducted from the
amount which the Corporation is required to contribute to the program of social
insurance benefits as provided for herein and an appropriate readjustment shall
be made in the benefits provided for under such program.
Section E. (1) The Corporation and the Association have entered into two
pension Agreements. One pension agreement (The Bethlehem Corporation Retirement
Income Plan, commonly referred to as the Easton Hourly Pension Plan) dated as of
June 8, 1964 and as amended as of June 15, 1967, June 15, 1970, June 22, 1974,
November 16, 1975, June 23, 1977, June 15, 1979, July 21, 1980, June 12, 1984,
August 12, 1987, July 23, 1991 and July 23, 1994.
and
one pension agreement (The Bethlehem Corporation Employees' Association Pension
Plan, commonly referred to as The Bethlehem Hourly Pension Plan) dated as of
January 2, 1970 and amended as of October 1, 1970, October 1, 1974, June 23,
1977, June 15, 1979, July 21, 1980, June 12, 1984, August 12, 1987, July 23,
1991 and July 23, 1994.
References therein to the "Existing Agreement" shall be taken as reference
to this Agreement dated July 23, 1994. Each pension agreement, as amended, shall
become effective as of that date and remain in effect in accordance with its
terms.
-28-
<PAGE>
(2) The pension agreements shall be amended so that no further benefits
will accrue after December 31, 1994 and the retirement benefits accrued as of
that date will be fully protected. Beginning in 1995, the Corporation agrees to
fund the following amounts per pension plan year-by-year until said plans are
fully funded:
Easton Hourly Pension Plan $ 7,384.00
The Bethlehem Corporation Employees'
Association Pension Plan 45,032.00
---------
$52,416.00
(3) Effective January 1, 1995, the Corporation will have established a
401(k) plan which will have provisions in accordance with the Plan Summary dated
July 18, 1994 which is attached hereto and made a part hereof as Exhibit B.
Article XVII
ASSOCIATION RESPONSIBILITY
--------------------------
The parties hereto agree that this Agreement provides an orderly and
expeditious method for the adjustment of differences that might arise between
them during the tenure of this Agreement; therefore, the Association agrees it
will not authorize any strikes of the employees at the Plants of the Corporation
for its duration.
In the event of an unauthorized strike, work stoppage or interruption or
impeding of work on the part of any employee or employees during the life of
this Agreement, the Association agrees that it will immediately (within
twenty-four [24] hours after notification by the Corporation, by registered mail
or personal messenger, that a strike is in progress) disavow responsibility for
the strike and order the striking employee or employees to return to work
promptly. Therefore, consistent with the above, the Corporation agrees that it
will not bring legal action against the Association or any of its officers,
agents, or members to establish responsibility for such unauthorized strike or
any damage resultant therefrom. The sole recourse and exclusive remedy for the
Corporation in such an event shall be to impose disciplinary measures upon the
employees involved, in accordance with the provisions of this Agreement.
In the event that any employee fails to return to work promptly after such
disavowal and order to return to work, the Corporation will be free to discharge
or otherwise discipline employee without necessarily discharging or disciplining
all employees so involved and such action shall not be held to be
discriminatory. Any arbitration case shall be limited only to the
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<PAGE>
question of whether the employee did or did not encourage or participate in the
strike and the extent of the disciplinary penalty cannot be questioned.
Article XVIII
-------------
SAVINGS CLAUSE
--------------
If any Article, Section or Paragraph of this Agreement shall be rendered
null and void as a result of any Federal, State, County or Municipal
legislation, only that Article, Section or Paragraph so affected shall be
re-negotiated to conform to said State or Federal laws, and the other provisions
of this Agreement shall not be affected.
Article XIX
-----------
TERMINATION DATE
----------------
Section A. This Agreement and the two Pension Agreements dated January 2,
1970, as amended, and June 22, 1964, as amended, shall constitute the entire
agreement between the Corporation and the Association. This Agreement shall
remain in full force and effect until 11:59 p.m. July 22, 1997, and shall
thereafter be continued for one (1) year and from year to year thereafter unless
notice of termination in writing via registered mail is given by either party at
least sixty (60) days before the next annual expiration date.
Section B. TO CHANGE, AMEND OR SUPPLEMENT. Should either party desire to
change, amend, or supplement this Agreement of July 23, 1994 as of July 22,
1997, or as of any subsequent date thereto, such party may do so by giving the
other party written notice of at least sixty (60) calendar days prior to the
date upon which it desires to do so, and such party shall state in such notice
the specific Article, Section or Sub-Section thereof it desires to change, amend
or supplement. Within thirty (30) days after the receipt of such notice by
either of the parties hereto, a conference date shall be mutually agreed upon.
-30-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
by its duly authorized agents and said Association has caused these presents to
be executed by the signatures of its duly authorized agents this twenty-third
day of July, 1994.
THE BETHLEHEM CORPORATION THE BETHLEHEM CORPORATION
EMPLOYEES ASSOCIATION
/s/ Fred B. Coombs /s/ Anthony Chiarella
______________________________ _____________________________
Fred B. Coombs Anthony Chiarella
/s/ Richard Freeman /s/ Alan H. Silverstein
______________________________ _____________________________
Richard Freeman Alan H. Silverstein
/s/ Clark Gable
______________________________
Clark Gable
/s/ Stephen Kiefer
______________________________
Stephen Kiefer
/s/ David King
______________________________
David King
/s/ Scott Molnar
______________________________
Scott Molnar
/s/ Dennis Pfeiffer
______________________________
Dennis Pfeiffer
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<PAGE>
Addendum
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement dated as of July 23, 1994 is entered into between
The Bethlehem Corporation, Easton, PA (hereinafter referred to as the
"Corporation") and The Bethlehem Corporation Employees' Association (hereinafter
referred to as the "Association") on behalf of itself and its members who are
employees of the Corporation.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
1. Effective as of July 23, 1994 the minimum hiring-in rate for trainees
will be Labor Grade 1 for the first four months. Trainees shall progress in
accordance with the following progression schedule and subject to the following
regulations:
A. The parties recognize the need for a clearly defined Trainee Progression
Schedule under which an inexperienced employee may advance as he increases
his knowledge of the job until he attains the rate of the grade in which
his job is classified. The method of selection of trainees is as follows:
Whenever a TRAINEE opening is available, the Corporation will not post such
opening in the traditional sense, but rather will post a notice inviting
all interested employees to apply for such opening.
The General Foreman of the department involved and the Plant Manager,
together with the Personnel Manager, will compare the qualifications of all
the interested applicants. The final selection of candidates will be made
based on the capability each candidate is considered to have for eventually
acquiring the skill of the particular job.
<TABLE>
<CAPTION>
TRAINEE PROGRESSION SCHEDULE
Automatic Progression Merit Progression
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hire 4 8 12 18 24 30 36 42 48 54 60 66
Gr. Gr. Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos.
LABOR GRADE
1 1
2 1 2
3 1 2 3
4 1 2 3 4
5 1 2 3 4 5
6 1 2 3 4 5 6
7 1 2 3 4 5 6 7
8 1 2 3 4 5 6 7 8
9 1 2 3 4 5 6 7 8 9
10 1 2 3 4 5 6 7 8 9 10
11 1 2 3 4 5 6 7 8 9 10 11
12 1 2 3 4 5 6 7 8 9 10 11 12
13 1 2 3 4 5 6 7 8 9 10 11 12 13
</TABLE>
NOTE: Advancement of a Trainee shall be by automatic progression in
any grade up to and including Grade 4. Thereafter, such
advancement shall be on a merit basis.
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<PAGE>
If there are no applicants indicating interest in the TRAINEE opportunity
or if no applicants are deemed sufficiently qualified for such TRAINEE job,
the Corporation may fill such opening by assigning or hire new employees at
its discretion.
While in training, all TRAINEES will be considered to hold the job
classification of the job for which they are being trained, and such job
classification will determine a trainee's rights as to transfer and
promotion, layoffs and recalls.
B. Within the limitations of the Trainee Progression Schedule the Corporation
may:
(i) hire a new employee at any rate at or between the Hire Rate and
the Job Rate for the grade in which the employee's job is
classified according to the employee's previous experience.
(ii) progress trainees in Grades 2, 3 and 4 on an automatic basis in
accordance with the intervals and increases specified in the
Trainee Progression Schedule.
(iii) progress trainees in the first four steps of Grades 5 to 13 that
is up to and including a basic rate of Labor Grade 4 or an
automatic basis in accordance with the intervals and increases
specified in the Trainee Progression Schedule.
(iv) progress trainees in all steps subsequent to the fourth step of
Grades 5 to 13 that is after attainment of a basic rate of Labor
Grade 4 on a merit basis in accordance with the intervals and
increases specified in the Trainee Progression Schedule.
(v) progress a trainee at a faster rate, if such trainee's
performance warrants it.
C. The Corporation may, at its discretion, withhold an automatic progression
increase if, in its judgment, a trainee's progress does not warrant such
increase, provided the Corporation does not require the trainee to continue
as a trainee on the job on which he was previously being trained and in
connection with which he was being considered for a progression increase.
D. Whenever a merit progression increase is withheld under the Trainee
Progression Schedule, the Plant Manager shall submit his reasons therefor
in writing to the Personnel Manager of the Corporation, who shall within
ten (10) days thereafter advise the President of the Association of the
name of the trainee and the reasons why the merit progression increase was
withheld. In such cases, the trainee's progress shall be reviewed three
months thereafter to determine whether he shall be given the merit
progression increase previously withheld.
E. The determination as to whether a trainee shall receive a merit progression
increase shall not be subject to the Grievance Procedure unless such merit
progression increase has been withheld after being reviewed at the end of
two regular six-month review periods.
F. If a trainee has progressed through the first four steps of any grade and
is receiving a rate of Labor Grade 4 or more on the job for which he is
being trained and he is subsequently taken off such a job because of lack
of work and transferred to another job which carries a basic rate of more
than Labor Grade 4 he shall begin work as a trainee on the job to which he
is transferred at a rate of Labor Grade 4. If the basic rate for the job to
which he is transferred is Labor Grade 4 or less, he shall begin work at
the basic rate for the job.
2. The Corporation and the Association have agreed on the classification of all
existing jobs in the Corporation into thirteen (13) labor grades.
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<PAGE>
3. The Corporation and the Association have copies of job descriptions for all
jobs in the Corporation as of July 21, 1980. The job descriptions are not
intended to describe or set out in complete detail all the duties and
responsibilities which go with any job. The job descriptions set forth the
general duties considered necessary to evaluate the job in the factors of skill,
effort, responsibility and job conditions and shall not be construed as a
detailed description or statement of all the work requirements that may be
inherent in the job. No grievance may be filed in connection with approved job
descriptions. Jobs referred to herein as "craft jobs" have been designated as
such on the job description.
(a) The association will submit a list of jobs to the Corporation. These
jobs are to be reviewed and approved by the parties within a mutually agreed
time period.
4. No employee who prior to July 21, 1980 has a personal rate above the basic
rate established for his job will be reduced unless reclassified into a
different job through the operation of the "Seniority" section of the present
Agreement. An employee reclassified in accordance with these provisions upon
being transferred back into the job in which he had a personal rate shall have
it restored. An employee whose connection with the Corporation is terminated
under conditions whereby his seniority is canceled in accordance with the
"Seniority" section of the present Agreement will not have his personal rate
restored on re-hire.
5. Transfers of employees from one job classification to another may be made
from time to time for the convenience of the Corporation. These transfers can be
made during any scheduled shift including Saturdays and Sundays. An employee who
is temporarily transferred for the convenience of the Corporation shall receive
the rate of the job to which he is transferred or the rate of the job on which
he has been working, whichever is higher. An employee who is transferred in lieu
of lay-off shall receive the rate of the job to which he is transferred.
6. The Corporation may establish a new job or change the work assignment of an
existing job so as to require a change in grade. In such event, the following
procedure shall apply:
A. As promptly as practicable but not later than sixty (60) days after the new
or changed job goes into operation, the Corporation will prepare a job
description and a proposed classification by grade and submit them to the
Association.
B. Within seven (7) calendar days thereafter, the Association shall return
said description and classification by grade with his approval noted
thereon or with its disapproval noted thereon and accompanied by a request
for a conference.
C. If the Association approved said description and classification by grade or
fails to return them in seven (7) calendar days, said description and
classification by grade shall become effective as of the day the new job is
filled or the change made.
D. If after the conference called for in paragraph B above, the Corporation
and the Association are unable to agree, the description and classification
by grade shall be put into effect subject to paragraph E below.
E. Any employee or employees, affected by the establishment of a new job or a
change in the description or an existing job and the classification by
grade of such new or changed job, may file a grievance through a member of
the Association's Grievance Committee as provided in the Third Step
procedure established by the Grievance Section of the present Agreement,
unless prior to its filing said description and classification by grade
have been accepted by the Association.
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<PAGE>
F. Any revised job description and classification by grade resulting from a
conference between the Corporation and the Association shall be retroactive
to the date the new job is filled or the change made, except that such
retro- activity shall not extend back for more than ninety (90) days prior
to the date of the Corporation's submission of the job description and
proposed classification by grade. Any revised job description and
classification by grade resulting from the filing and processing of a
grievance shall be retroactive to the date the new job is filled or the
change made, except that such retro- actively shall not extend back for
more than ninety (90) days prior to the date of the filing of the
grievance.
7. The job description and labor grades established by this Supplemental
Agreement, except as modified pursuant to Section 6 above, shall continue in
full force and effect unless the Corporation terminates any job or such job
remains continuously unfilled for the period of a calendar year.
8. The Corporation shall have the sole right to determine the number of
employees required in each and every job classification throughout the plant.
9. For the purposes of training employees for higher rated job classifications,
an employee in a lower rated job classification shall accept temporary
assignments of work normally performed by employees in a higher rated job
classification. While performing such work, the employee shall receive the rate
of pay for his regular job classification or a higher rate of pay based upon the
efficiency and ability of the employee to perform the work temporarily assigned.
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<PAGE>
EXHIBIT A
INDEX OF JOBS
MACHINE SHOP JOB DESCRIPTIONS
-----------------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
M-5 Boring Mill Operator, Horizontal Floor "A" 8
M-6 Boring Mill Operator, Horizontal Table Type 8
M-8 Boring Mill Operator, Vertical "A" (20') 8
N-9 Boring Mill Operator, Vertical "B" 8
M-11 Chainman - Main Floor 4
M-12A Chainman - Pendant Control 4
M-13 Chipper 5
M-14 Drill Press Operator - Radial 7
M-16 Helper Production 2
M-18 Keyseater Operator 4
M-19 Lathe Operator (L-68 & L-104) 10
M-21 Lathe Operator - Engine "A" 8
M-22 Lathe Operator - Engine "B" 7
M-24 Lathe Operator - Engine "D" 5
M-25 Lathe Operator - Turret "A" 8
M-26 Lathe Operator - Turret "B" 6
M-27 Lathe Operator - Vertical Turret 8
M-28 Layout Man "A" 9
M-31 Milling Machine Operator 8
M-33 Move Man 2
M-35 Planer Operator 8
M-38 Shaper Operator 8
M-39 Shaper Operator "B" 5
M-40 Blacksmith 7
M-41 Sweeper 1
M-42 Tool Crib Attendant 4
M-45 Tool Maintenance Man 9
M-48 Marval Saw Operator 3
M-50 Horizontal Boring Mill Operator "A" 12
M-51 Vertical Boring Mill Operator "A" 12
M-52 Lathe-Milling-Shaper Operator "A" 10
M-53 Planer 11
M-54 Layout Man & Layout Machine Operator 12
M-55-R Crane Operator 5
M-56 Precision Hand Fitter 7
M-59 Painter "A" 7
M-60 Painter "B" 5
M-61 Planer-Miller Operator 11
M-62 N.C. Milling Machine Operator 10
M-63 Plastic Saw Operator 3
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<PAGE>
ASSEMBLY FLOOR JOB DESCRIPTIONS
-------------------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
AF-1 Assembler Erector 10
AF-2 Assembler "B" 7
AF-3 Assembler "C" 5
AF-3A Riveter 8
AF-11 Chainman - Main Floor 4
AF-12A Chainman - Pendant Control 4
AF-12N Chainman - Tool Crib Attendant Night Shift 4
AF-16 Helper Production 2
AF-41 Sweeper 1
AF-46 Welder - Arc & Acetylene 9
AF-47 Electrician - Production 11
WELD SHOP JOB DESCRIPTIONS
--------------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
W-1 Fitter 10
W-2A Welder - "A" 9
W-2B Welder - "B" 8
W-2C Welder - "C" 7
W-3 Burner 7
W-4 Layout 11
W-5 Production Helper 4
W-6 Fitter Helper 6
W-7 Material Handler 5
W-8 Furnace Tender 7
W-9 Roll Former Operator 9
W-10 Press Brake Operator 8
W-11 Drill Press - Radial 7
W-12 Plate Inventory Handler 6
W-13 Shotblast Operator 5
W-14 Craneman 5
W-15 Chainman 4
W-16 Tool Crib Attendant 3
W-17 Laborer 1
W-18 Multi-Flame Cutter 8
W-19 Welder, Precision 10
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<PAGE>
WATER SCREW PUMP
----------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
SP-1 Fitter Leader - Water Screw Pump 11
SP-2 Fitter - Water Screw Pump 10
SP-3 Fitter Helper - Water Screw Pump 8
SHIPPING AND RECEIVING JOB DESCRIPTIONS
---------------------------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
S-1 Chainman 4
S-4R Crane Operator 5
S-7 Laborer 2
S-13R Truck Driver "A" 6
S-14 Truck Driver "B" 3
S-15 Fork Lift Operator 3
S-20R Carpenter Plocker 7
S-33 Move Man 2
S-34 Shipper - Receiver 7
MAINTENANCE JOB DESCRIPTIONS
----------------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
MN-3 Crane Operator "A" 7
MN-4 Crane Operator "B" 5
MN- Laborer 2
MN-8 Maint. Mechanic - Mech. & Elec. 10
MN-9 Maint. Mechanic - Mech. & Elec. 7
MN-10 Maint. Mechanic - Piping & Powerhouse 8
MN-11 Maint. Mechanic - Steel & Woodworking 9
MN-16 Truck Operator - Scoop Type 4
MN- Project Mechanic 10
19R
MN- Carpenter Blocker 7
20R
MN-31 Millwright "A" 7
MN-32 Millwright Handyman 6
MN- Oiler 2
33R
MN-34 Maint. Mechanic - Handyman 9
MN-35 Technician & Electrician Leader 12
-38-
<PAGE>
TRAFFIC AND STORES
------------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
Shipping & Receiving Clerk A 4
Shipping & Receiving Clerk B 2
QUALITY CONTROL
---------------
Job Number Job Title Labor Grade
- ---------- --------- -----------
Inspector A 11
Inspector B 9
Inspector C 7
-39-
NET COMMERCIAL LEASE CONTRACT
THIS LEASE, made this 30th day of January, 1996, by and between KNOXVILLE
INDUSTRIAL GROUP, LTD., A TENNESSEE LIMITED PARTNERSHIP (hereinafter called
"Landlord); BETHLEHEM ADVANCED MATERIALS CORPORATION, A PENNSYLVANIA CORPORATION
(hereinafter called "Tenant"); THE STANFIELD YORK COMPANY, (hereinafter called
"Agent"); and THE BETHLEHEM CORPORATION, A PENNSYLVANIA CORPORATION (hereinafter
called "Guarantor").
WITNESSETH:
1. PREMISES: The Landlord, for and in consideration of the rents, covenants and
stipulations hereinafter mentioned, provided for and contained, to be paid, dept
and performed by the Tenant, has leased and rented, and by these presents leases
and rents, unto the said Tenant, and said Tenant hereby leases and takes upon
the terms and conditions which hereinafter appear, the following described
property (hereinafter called "Premises), to wit:
A 33,600 square foot office/warehouse situated on approximately 2.36 acres and
being known as 10536 Lexington Drive, Knoxville, Tennessee 37932, and more
particularly shown on collective Exhibit "A" marked "Legal Description" and
"Plat".
No easement for light or air is included in the Premises. This Lease is
conditioned on and subject to the termination of the existing Net Commercial
Lease dated July 21, 1993, from Landlord to Third Millennium Technologies, Inc.,
as assigned on March 17, 1995, to AlliedSignal, Inc., Aircraft Landing Systems
("Prior Lease").
2. TERM: The Tenant shall have and hold the Premises for an initial term of
sixty (60) months beginning as of October 1, 1995, and ending on September 30,
2000, at midnight, unless sooner terminated as hereinafter provided. Tenant
shall further have two (2) option terms of three (3) years each. Said option
terms shall be upon the terms and conditions hereof, including the annual rent
increase hereafter specified. Tenant shall give Landlord written notice of the
exercise of any option term at least ninety (90) days prior to the expiration of
the then applicable term, with time being of the essence. "Term," as used
herein, shall refer to said initial term and, to the extent properly exercised,
any option terms.
3. RENTAL: Tenant agrees to pay Landlord, by payments to The Stanfield York
Company, Agent of Landlord, who negotiated this lease, at office of Agent in
Atlanta, Georgia, an annual rental of $99,809.52, payable in monthly payments of
$8,317.46, promptly on the first day of each month, in advance, without demand,
during the term of this lease. The parties acknowledge that the October,
November, and December, 1995, and January, 1996, rents have been paid prior to
the execution hereof; the first payment shall therefore be due and payable on
February 1, 1996. Said annual rent shall increase each year by three percent
(3%) over the prior year's rent hereunder. All other amounts and payments
required to be made by Tenant hereunder, whether to Landlord or a third party,
shall also be deemed rent due hereunder.
4. SECURITY DEPOSIT: Tenant agrees to deposit the sum of SEVEN THOUSAND EIGHT
HUNDRED FORTY AND No/100 DOLLARS ($7,840.00) with Landlord, which sum shall be
retained by Landlord as security for the payment by Tenant of the rents and
other expenses herein agreed to be paid by Tenant and for the faithful
performance by Tenant of Tenant's other obligations under this Lease. It is
agreed that Landlord, at Landlord's option, may at any time apply said sum or
only part thereof towards the payment of the rents and all other sums payable by
Tenant under this Lease, and towards the performance of each and every of
Tenant's obligations under this Lease, but such obligations and Tenant's
liability shall be
<PAGE>
discharged only to that extent, and T Tenant shall remain liable for any amounts
that such sum shall be insufficient to pay; that Landlord may exhaust any and
all rights and remedies against Tenant bet`ore resorting to said sum, but
nothing herein contained shall be deemed to require Landlord so to do That, in
the event this deposit shall not be utilized for any such purposes, then such
deposit shall be returned by Landlord to Tenant within 30 days after the
expiration of the term of this Lease, or when Tenant vacates the Premises,
whichever shall later occur
5. AGENT'S COMMISSION: Agent has rendered Landlord a valuable service by
assisting in the creation of the Landlord-Tenant relationship hereunder For this
reason, Agent is made a party to this Lease and is given a special lien on the
interest of the Landlord in the Premises in order to enable Agent to enforce its
commission rights against the Premises The commission to be paid in conjunction
with the creation of the aforesaid Landlord-Tenant relationship by this Lease
has been negotiated between Landlord and Agent, and Landlord hereby agrees to
pay Agent, as compensation t`or Agent's services in procuring this L,case and
creating the aforesaid Landlord-Tenant relationship, as follows five percent
(5%) of rents as collected
If the Tenant becomes a tenant at will or at sufferance pursuant to Paragraph 26
hereof, or if the term of the Lease is extended or if this Lease is renewed or
if a new lease is entered into between Landlord and Tenant covering either the
Premises or any part thereof, or covering any other premises as an expansion of,
addition to, or substitution for the Premises, regardless of whether such
Premises are located adjacent to, or in the vicinity of, the Premises, Landlord,
in consideration of Agent's having assisted in the creation of the
Landlord-Tenant relationship, agrees to pay Agent Additional Commissions, as set
forth below; it being the intention of the parties that Agent shall continue to
be compensated so long as the parties hereto, their successors and/or assigns
continue the relationship of Landlord and Tenant which initially resulted from
the efforts of Agent, whether relative to the Premises or any expansion thereof,
or addition thereto or substitution therefore, or relative to any other premises
leased by Landlord to Tenant from time to time, whether the rental therefore is
paid under this Lease or otherwise five percent (5%) of rents collected
Landlord, with the consent of Tenant, hereby authorizes Agent to deduct its
commission from each rental payment it collects from Tenant.
Agent agrees that, in the event Landlord sells the Premises, and upon Landlord's
furnishing Agent with an agreement signed by Purchaser assuring Landlord's
obligations to Agent under this Lease, Agent will release original Landlord from
any further obligations to Agent hereunder. Tenant agrees that if this Lease is
assigned by him, he will secure from assignee an agreement in writing
recognizing the assignment of the commissions owed to Agent and agreeing to pay
rental to Agent during the continuation of the Landlord-Tenant relationship
between or among said assignee, its successors and/or assigns, and Landlord, its
successors and/or assigns, whether relative to the Premises or any expansion
thereof or substitution therefore, or relative to any other property leased by
Landlord to Tenant from time to time, whether rental therefore is paid under
this Lease or otherwise. In the event that the Premises are condemned, or sold
under threat of and in lieu of condemnation, Agent shall, on the dale of receipt
by Landlord of the condemnation award or sale proceeds, be paid Agent's
commission, reduced to its present cash value at the then existing legal rate of
interest, which would otherwise be due to the end of the term contracted for
under Paragraph 2 above. Nothing in this paragraph shall be deemed to create a
direct obligation from Tenant to Agent nor shall Tenant have any liability or
responsibility whatsoever to Agent for payment of commissions or otherwise,
other than to pay the monthly rent (to which Agent is entitled to a share
-2-
<PAGE>
or portion), with said rent to be paid pursuant to Paragraph 3 of this Lease
Agreement.
6. PURCHASE OF PROPERTY BY TENANT: In the event that Tenant acquires title to
the Premises or any part thereof, or any other premises as an expansion of,
addition to, or substitution for the Premises, at any time during the term of
this Lease or any extension or renewal thereof, or within six months after the
expiration of the term hereof or the extended term hereof, the Landlord shall
pay Agent a commission on the sale of the Premises in lieu of any further
commissions which otherwise would have been due under this l ease. Such
commission, as negotiated between parties, is to be six percent (6%) of the
purchase price. Nothing in this paragraph shall be deemed to create a direct
obligation from Tenant to Agent nor shall Tenant have any liability or
responsibility whatsoever to Agent for payment of commissions or otherwise,
other than to pay the monthly rent (to which Agent is entitled to a share or
portion), with said rent to be paid pursuant to Paragraph 3 of this Lease
Agreement.
7. UTILITY BILLS: Tenant shall pay all utility bills, including, but not limited
to, water, sewer, gas, electricity, fuel, light, and heat bills, for the
Premises, and Tenant shall pay all charges for garbage collection services or
other sanitary services rendered to the Premises or used by Tenant in connection
therewith. If Tenant fails to pay any of said utility bills or charges for
garbage collection or other sanitary services, Landlord may pay the same, and
such payment shall be added to and become part of the next rental payment due
under this Lease.
8. USE OF PREMISES: The Premises shall be used to design, manufacture,
demonstrate, and distribute high temperature industrial furnaces or other
products/services of Tenant purposes and no other. The Premises shall not be
used for any illegal purposes, nor in any manner to create any nuisance or
trespass, nor in any manner to vitiate the insurance or increase the rate of
insurance on Premises. Tenant further agrees that its use and occupancy of the
Premises will be in full conformity with all applicable federal, state and local
laws, regulations and ordinances. Tenant expressly covenants and agrees not to
manufacture, store, use, sell or dispose of any hazardous or toxic substances on
the Premises, into any septic tank, sanitary sewer, or storm drain which serves
the Premises, or into any swale or drainage ditch on or bordering the Premises,
except that materials (i) for which Tenant has all applicable and required
governmental permits and approvals and (ii) which are consistent with and
normally used in the business of Tenant described above, may be stored and used
on the Premises by Tenant in the ordinary course of its business; copies of such
permits and approvals shall be provided to Landlord prior to any storage or use
thereof. Tenant further expressly covenants that all of its activities will be
in strict conformity with all environmental laws. "Environmental laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders, or
determinations of any governmental authority pertaining to health or the
environment in effect for the Premises, including, without limitation, the Clean
Air Act, the Comprehensive Environment Response Compensation and Liability Act
of 1980 ("CERCLA"), the Federal Water Pollution Control Act of 1970, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the Sat`e Drinking
Water Act, the Toxic Substances Control Act, and the Reauthorization Act of
1986, all as amended. Tenant agrees to indemnify and hold Landlord harmless from
any notice, claim, demand, or suit seeking remediation of any claimed
environmental damage, or seeking any form of damages or penalty, arising out of
or resulting from or in any way relating to Tenant's use of the Premises,
including the cost, expenses and attorney's tees which Landlord may incur in the
investigation and defense of any such claim. The Indemnity Agreement set forth
in this Paragraph shall survive the expiration, termination, or cancellation of
this Lease. Tenant expressly waives any statute of limitations which might
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<PAGE>
otherwise be applicable to any claim for indemnification arising under this
Paragraph.
9. ABANDONMENT OF THE PREMISES: Tenant agrees not to abandon or vacate the
Premises during the period of this Lease and agrees to use the Premises for the
purposes herein leased until the expiration hereof.
10. LANDLORD'S RESPONSIBILITY FOR MAINTENANCE AND REPAIRS: Tenant acknowledges
that Landlord replaced the roof to the building portion of the Premises. It
shall be Landlord's responsibility to maintain the exterior roof, the structural
integrity of the exterior walls, and the structural foundation of said building,
except that any maintenance or corrective work caused by any modification or
alteration performed by Tenant shall be Tenant's responsibility. Landlord agrees
pursuant to the Americans with Disabilities Act of 1990 ("ADA") to eliminate on
an as needed basis architectural and communications barriers that are structural
in nature in the said building where such removal is readily achievable.
Landlord further agrees at its expense to perform any structural work to the
roof, exterior walls and/or foundation that is required by any federal, state or
local governmental agency or authority and which does not result from the
actions of the tenants under the Prior Lease or the actions of Tenant or
Tenants' business and the conduct thereof. Landlord shall not be liable for any
damages or loss resulting from any failure to comply with the provisions of this
paragraph until after written notice to Landlord of any breach hereof and a
reasonable period of time for Landlord to cure any such breach.
11. TENANT'S RESPONSIBILITIES FOR REPAIR, ALTERATION, AND MAINTENANCE: The
parties acknowledge that Tenant's predecessor made certain alterations to the
Premises, including the construction of a high temperature industrial electric
furnace on the Premises, which required elevating the roof above one bay some 20
feet above the existing roof of the building, and removing a portion of the
flooring in the building and constructed a basement or pit for the furnace.
Tenant agrees to obtain all permits and to fully comply with all federal, state,
and local governmental requirements relating to the operation and use of the
Premises, including OSHA regulations, and all applicable environmental laws and
regulations. Tenant accepts responsibility for complying with ADA standards
applicable as a result of any government funds used by Tenant, or as a result of
any sales made by Tenant to the government (whether directly or indirectly), or
as a result of Tenant or Sub-Tenant using the Premises, or any part subject to
ADA or in a manner which causes it to be deemed thereof, in a manner which
causes it to be deemed a public accommodation within the meaning of ADA. Tenant
will make no alterations, additions or improvements in or to the Premises
without the written consent of Landlord. At the expiration of the term of this
Lease, and any extension thereto, or Upon the termination of this Lease, Tenant
agrees to remove the high temperature industrial furnace and restore the
Premises to their condition as of July, 1993, including the removal of the pit,
and the restoration of the roof, floor, walls, ceiling, fixtures, and utilities.
Tenant shall have no authority, express or implied, to create or place any lien
or encumbrance of any kind or nature whatsoever upon the Premises, or to bind in
any manner, the interest of Landlord in the Premises and the Tenant covenants
and agrees that it will pay or cause to be paid all sums legally due and payable
by it on account of any labor performed or materials furnished in connection
with any work performed on the Premises for which any lien is or can be validly
and legally asserted, and that it will save and hold Landlord harmless from any
and all loss, cost or expense, including attorney's fees and court costs, based
upon or arising out of asserted claims or liens against the rights, title and
interest of the Landlord in the Premises or under the terms of this Lease.
Tenant further agrees to bond or pay every such lien asserted against the
Premises, or Landlord's interest therein, within 30
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<PAGE>
days of the date said lien attaches to the premises and/or Landlord's property.
Within sixty (60) days of the date hereof, Tenant agrees to paint the exterior
of the building, replace the carpet in the interior office space with new
carpet, tile or linoleum, and pump the septic tank which serves the building.
The color, design, and quality of the materials to be approved by Landlord.
Tenant agrees to maintain the HVAC system and all other systems and portions of
the building including windows, screens, awnings, doors, walls, pipes, plumbing,
electrical wiring and systems, fixtures, appurtenances, and grounds around the
building including the grass, shrubs and landscaping. All glass, both interior
and exterior, is at the sole risk of Tenant and Tenant agrees to replace, at
Tenant's own expense, any glass broken during the teem of this Lease. Provided,
however, that Tenant shall not be obligated to bond or to pay any lien asserted
against it, unless said lien constitutes a cloud on the title to and/or
encumbrance against the Premises. Any general lien against tenant, whether
consensual or otherwise, shall not constitute a violation of this Paragraph 11,
and Tenant shall be free to place liens, or permit liens to be placed, against
its personal property, furnaces, machinery, equipment and other personal
property located at the Premises, and Tenant shall not, in connection with any
such liens, be required to bond off any such lien or satisfy it, as Tenant would
otherwise be required under Paragraph 11 in connection with any lien or
encumbrance created by Tenant against the Premises.
12. PROPERTY TAXES: Tenant shall pay upon demand as additional rental during the
term of this Lease or any extension or renewal thereof, all taxes (including,
but not limited to, ad valorem taxes, special assessments and any other
governmental charges) on the Premises for each tax year. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on an equitable basis according to the ratio the value
the leased property and improvements bears to the total value of the assessed
tax parcel or parcels of which the Premises are a part. If the final year of the
lease term fails to coincide with the tax year, then any taxes for the tax year
during which the term ends shall be reduced by the prorata part of such tax year
beyond the lease term. If such taxes for the year in which the Lease terminates
are not ascertainable before payment of the last month's rental, then the amount
of such taxes assessed against the property for the previous tax year shall be
used as a basis of determining the prorata share to be paid by Tenant for that
portion of the last lease year. Tenant's portion of taxes, as provided herein,
shall be payable within fifteen (15) days after receipt of notice from Landlord
or Agent as to the amount due, plus copies of the pertinent tax bills. The
Agent's commission shall not apply to any such additional rental resulting from
the provisions of this Paragraph unless billing and collection thereof is
handled by Agent at the request of the Landlord.
13. PROPERTY INSURANCE: Tenant covenants and agrees that it will at all times
during the term of this Lease and at its own cost and expense keep, or cause to
be kept, the Premises insured by good and responsible insurance companies, which
companies shall be acceptable to Landlord and to the holder to any mortgage or
deed of trust affecting the Premises to which Landlord is a party, for
protection against damage or destruction by fire and other perils embraced
within the term "extended coverage" in an amount not less than the full
insurable value for the improvements, but in no event less than Seven Hundred
Fifty Thousand and No/100 Dollars ($750,000.00) with replacement cost
endorsement. The Tenant will promptly pay or cause to be paid the premiums on
all such insurance on or before the due date thereof; and Tenant shall provide
Landlord with paid receipts or such other proof of payment as Tenant shall
require. Certificates representing all policies and renewals and replacements
thereof shall be deposited with and held by Landlord. Each such policy shall
name Landlord, Landlord's mortgagee, or Landlord's agent, if any, as an
additional insured
-5-
<PAGE>
party as their respective interests may appear, and shall contain an agreement
by the issuer thereof providing that such policy shall not be modified, amended
or canceled without at least thirty (30) days prior written notice to Landlord.
Said policy of insurance may be in the form of general coverage or floater
policy covering these and other premises provided that Landlord or Landlord's
mortgagee, if any, is therein specifically covered. Landlord shall not be liable
for any damage to fixtures or merchandise of Tenant caused by fire or other
insurable hazards, and Tenant does hereby expressly release Landlord of and from
all liability for such damages unless caused by Landlord's negligence or willful
conduct. In the event Tenant fails to maintain the insurance in full force and
effect, Landlord, at its option, may obtain insurance coverage in which event
Tenant agrees to promptly reimburse the cost of said coverage as additional
rent.
14. DESTRUCTION OF OR DAMAGE TO PREMISES: If the Premises are totally destroyed
by storm, fire, lightning, earthquake or other casualty, this Lease shall
terminate as of the date of such destruction, and rental shall, unless the loss
is caused by Tenant, terminate as of that date. If the Premises are damaged but
not wholly destroyed by any such casualties, rent shall abate in such proportion
as use of the Premises has been destroyed, and, provided sufficient insurance
proceeds are available, Landlord shall restore the Premises to substantially the
same condition as before damage as speedily as is practicable, whereupon full
rental shall recommence, provided, however, that within thirty (30) days of the
occurrence of any such casualty, Landlord shall provide Tenant with written
notification of its intent to either restore the Premises, or to not do so (due
to insufficiency of insurance proceeds) whereupon Tenant shall have the right,
to be exercised at its option and discretion, to terminate the Lease on written
notice to the Landlord.
15. INDEMNITY: Tenant agrees to indemnify and hold Landlord and Landlord's agent
harmless from all claims for damages to persons or property (including claims
for wrongful death, and including claims by Tenant's employees and invitees) by
reason of Tenant's use or occupancy of the Premises and all expenses incurred by
Landlord arising out of or resulting therefrom, including attorney's fees and
court costs. Supplementing the foregoing and in addition thereto, Tenant shall,
during the term of this Lease and any extension or renewal thereof, and at
Tenant's expense, maintain in full force and effect comprehensive general
liability insurance with limits of $1,000,000.00 per person and $2,000,000.00
per accident, and property damage limits of $500,000.00 which insurance policy
shall name Landlord and agent as additional insureds under the policy, and shall
contain a clause expressly waiving any right of the insurer to subrogate against
Landlord. Prior to the commencement of the term of this Lease, and at each
insurance policy anniversary, Tenant agrees to furnish Landlord with a
certificate of insurance which shall show the waiver of subrogation and the
endorsement required hereby. Such certificate shall provide that Landlord will
be given thirty (30) days written notice prior to cancellation or expiration of
the insurance evidenced thereby. In the event Tenant fails to maintain the
insurance in full force and effect, Landlord, at its option, may obtain
insurance coverage in which event Tenant agrees to promptly reimburse the cost
of said coverage as additional rent.
Landlord shall indemnify and hold Tenant harmless from any claims for damage to
person or property resulting from Landlord's negligent or willful misconduct in
connection with the Premises. Landlord shall carry liability insurance with
regard to the Premises and shall provide certificates thereof t`rom the
insurance company to Tenant upon the execution hereof and upon each renewal
thereof; such certificates shall reflect waiver of subrogation and provide for
thirty (30) days written notice prior to cancellation.
-6-
<PAGE>
16. CONDEMNATION: If the whole of the Premises, or such portion thereof as will
make the Premises unusable for the purposes herein leased, be condemned by any
legally constituted authority for any public use or purpose, then in either of
said events, the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall terminate as of said
date. Otherwise, in the event of such condemnation, rent hereunder shall abate
in such proportion as the use of the Premises has been destroyed. Such
termination, however, shall be without prejudice to the rights of either
Landlord or Tenant to recover compensation and damage caused by condemnation
from the condemner. It is further understood and agreed that neither the Tenant
nor Landlord shall have any rights in any award made to the other by any
condemnation authority notwithstanding the termination of the Lease as herein
provided. Landlord agrees to pay to Agent, from the award made to Landlord under
condemnation, the balance of lease commissions, reduced to then present cash
value, as provided in Paragraph 5 hereof, and Agent may become a party to the
condemnation proceeding for the purpose of enforcing its rights under this
Paragraph. In the event eminent domain or condemnation proceedings take place as
a result of which all of the Premises is taken by public body or authority, or
such that Tenant can no longer utilize the Premises to reasonably conduct its
business activities, then Tenant shall have the right to terminate the Lease on
ninety (90) days' prior written notice to Landlord, so Tenant can vacate the
Premises and move to another location without substantially disrupting its
business. Provided further, Tenant's obligation to pay Rent shall only continue
up until the point in time when the Lease terminates pursuant to this written
notification, and not up until the point in time when the condemning public
authority/agency actually takes possession of the Premises.
17. ASSIGNMENT AND SUBLETTING: Tenant may sublease portions of the Premises to
others provided such sublessee's operation is a part of the general operation of
Tenant and is under the supervision and control of Tenant, and provided such
operation is within the purposes under Paragraph 8 hereof. Except as provided in
the preceding sentence, Tenant shall not, without the prior written consent of
Landlord endorsed hereon, assign this Lease or any interest hereunder, or sublet
the Premises or any part thereof, or permit the use of the Premises by any party
other than Tenant. Said consent shall not be unreasonably withheld. Consent to
any assignment or sublease shall not impair this provision, and all later
assignments or subleases shall be made likewise only on the prior written
consent to Landlord. Assignee of Tenant, at option of Landlord, shall become
directly liable to Landlord for all obligations of Tenant hereunder, but no
sublease or assignment by Tenant shall relieve Tenant of any liability
hereunder.
18. REMOVAL OF FIXTURES: Tenant may, prior to the expiration of this Lease or
any extension or renewal thereof; remove all fixtures and equipment which he has
placed in the Premises, provided Tenant is not in default hereunder and provided
Tenant repairs all damage to the Premises caused by such removal.
19. EVENTS OF DEFAULT: The happening of any one or more of the following events
(hereinafter any one of which may be referred to as an "Event of Default")
during the term of this Lease or any extension or renewal thereof, shall
constitute a breach of this Lease on the part of the Tenant: (a) Tenant fails to
pay the rent as provided for herein; (b) Tenant abandons or vacates the
Premises; (c) Tenant fails to comply with or abide by and perform any other
obligation imposed upon Tenant under this Lease; (d) Tenant is adjudicated
bankrupt; (e) a permanent receiver is appointed for Tenant's property and such
receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; (f) Tenant, either voluntarily or
involuntarily, takes advantage of any debtor relief proceedings under any
present or future law, whereby the rent or any part
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<PAGE>
thereof is, or is proposed to be, reduced or payment thereof deferred; (g)
Tenant makes an assignment for benefit of creditors; or (h) Tenant's effects are
levied upon or attached under process against Tenant, which is not satisfied or
dissolved within thirty (30) days after written notice from Landlord to Tenant
to obtain satisfaction thereof.
20. REMEDIES UPON DEFAULT: Upon the occurrence of any Event of Default, Landlord
may pursue any one or more of the following remedies, separately or
concurrently, with any notice (except as specifically provided hereinafter) and
without prejudice to any other remedy herein provided or provided by law;
(a) If the Event of Default involves nonpayment of rental, and Tenant fails to
cure such default within ten (10) days after receipt of written notice thereof
from Landlord, or (b) if the Event of Default involves a default in performing
any of the terms or provisions of the Lease other than the payment of rental,
and Tenant fails to cure such default within thirty (30) days after the receipt
of written notice thereof from Landlord, or (c) if the Event of Default involves
any matter other than those set forth in items (a) and (b) of this Paragraph 20,
and Tenant fails to cure such default within thirty (30) days after the receipt
of written notice thereof from Landlord, the upon the happening of (a), (b), or
(c) the Landlord may immediately terminate this Lease by giving written notice
to Tenant, and upon such termination, shall be entitled to recover from the
Tenant damages in an amount equal to all rental which is then due and which
would otherwise have become due throughout the remaining term of this Lease, or
any renewal or extension thereof (as if this Lease had not been terminated); or
(d) Upon any Event of Default, Landlord may give to Tenant written notice of
such default and advise Tenant that unless such default is cured within thirty
(30) days after receipt of such notice, the entire amount of the rental for the
reminder of the term of this Lease, or any renewal or extension thereof, shall
immediately become due and payable upon the expiration of the thirty (30) day
period, and thereafter, unless such default is cured within said thirty (30) day
period, the entire amount of said rental shall thereupon become immediately due
and payable without further notice to Tenant; or (e) Upon any Event of Default,
Landlord, as Tenant's agent, without terminating this Lease may enter upon and
rent the Premises, in whole or in part at the best price obtainable by
reasonable effort, without advertisement and by private negotiations and for any
term Landlord deems proper, with Tenant being liable to Landlord for the
deficiency, if any, between tenant's rent hereunder and the price obtained by
Landlord on reletting; provided, however, that Landlord shall not be considered
to be under any duty by reason of this provision to take any action to mitigate
damages by reason of Tenant's default.
21. EXTERIOR SIGNS: Tenant shall place no Signs upon the outside walls or roof
of the Premises except with the written consent of the Landlord. Said consent
shall not be unreasonably withheld. Any and all signs placed on the Premises by
Tenant shall be maintained in compliance with rules and regulations governing
such Signs, and the Tenant shall be responsible to Landlord for any damage
caused by installation, use, or maintenance of said signs. Tenant, Upon the
expiration of this l,ease or any extension or renewal thereof, shall remove said
signs and agrees upon removal of said signs to repair all damage incident to
such removal.
22. ENTRY FOR CARDING, ETC.: Landlord may card the Premises "For Rent" or "For
Sale" ninety (90) days before the termination of this lease. Landlord may enter
the Premises at reasonable hours to exhibit same to prospective purchasers or
tenants and to make repairs to Landlord's adjoining property, if any.
23. EFFECT OF TERMINATION OF LEASE: No termination of this Lease prior to the
normal ending thereof, by lapse of time or otherwise,
-8-
<PAGE>
shall affect Landlord's right to collect rent for the period prior to
termination thereof.
24. MORTGAGEE'S RIGHTS: Tenant's rights shall be subject to any bona fide
mortgage or deed to secure debt which is now, or may hereafter be, placed upon
the Premises by Landlord. Tenant shall, if requested by Landlord, execute a
separate agreement reflecting such subordination and shall execute, upon
request, estoppel certificates in form reasonably satisfactory to such
mortgages. Landlord shall use its best efforts, upon request by Tenant, to
obtain a nondisturbance and attornment agreement between Tenant and any such
mortgagee in form reasonably satisfactory to Tenant. Landlord has undertaken
efforts to attempt to obtain such a subordination/attornment agreement and will
continue those efforts with due diligence.
25. NO ESTATE IN LAND: This Lease shall create the relationship of Landlord and
Tenant between the parties hereto; no estate shall pass out of Landlord. Tenant
has only a usufruct, not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
26. HOLDING OVER: If Tenant remains in possession of the Premises after
expiration of the term hereof, with Landlord's acquiescence and without any
express agreement of parties, Tenant shall be a tenant at will at the rental
rate which is in effect at the end of the Lease; and there shall be no renewal
of the Lease by operation of law. If Tenant remains in possession of the
Premises after expiration of the term hereof without Landlord's acquiescence,
then Tenant shall be a tenant at sufferance and commencing on the date following
the date of such expiration, for each month or fraction thereof during which
Tenant so remains in possession, the monthly rental payable shall be twice the
monthly rental otherwise payable under Paragraph 3 hereof.
27. ATTORNEY'S FEES: If an Event of Default occurs under this Lease Agreement,
and it is not remedied within any of the applicable cure periods, Tenant and
Guarantor agree to pay any reasonable attorneys' fees incurred by Landlord in
connection with any such uncured default.
28. RIGHTS CUMULATIVE: All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative and not restrictive of those given by
law.
29. SERVICE OF NOTICE: All notices required to be given to Landlord hereunder
shall, until contrary instructions are given to the other parties in writing, be
effectively given to Landlord if mailed, by registered or certified mail, return
receipt requested, or delivered or forwarded by nationally recognized overnight
courier service, to Landlord at the following address:
KNOXVILLE INDUSTRIAL GROUP, LTD.
C/O THE STANFIELD YORK COMPANY
5784 LAKE FORREST DRIVE, NW
SUITE 195
ATLANTA, GEORGIA 30328
All notices required to be given to Tenant hereunder shall, until contrary
instructions are given to the other parties in writing, be effectively given to
Tenant if mailed, by registered or certified mail, return receipt requested, or
delivered or forwarded by nationally recognized overnight courier service, to
Tenant at the following address:
BETHLEHEM ADVANCED MATERIALS CORPORATION
25TH AND LENNOX STREETS
EASTON, PENNSYLVANIA 18085
-9-
<PAGE>
All notices required to be given to Agent hereunder shall until contrary
instructions are given to the other parties in writing, be effectively given to
Agent if mailed, by registered or certified mail, return receipt requested, or
delivered or forwarded by nationally recognized overnight courier service, to
Agent at the following address:
THE STANFIELD YORK COMPANY
5784 LAKE FORREST DRIVE, NW
SUITE 195
ATLANTA, GEORGIA 30328
All notices required to be given to Guarantor hereunder shall, until contrary
instructions are given to the other parties in writing, be effectively given to
Guarantor if mailed by registered or certified mail, return receipt requested,
or delivered or forwarded by nationally recognized overnight courier service to
Guarantor to the following address:
THE BETHLEHEM CORPORATION
25TH AND LENNOX STREETS
EASTON, PENNSYLVANIA 18085
In the event of any notice hereunder to Landlord or Guarantor, copies thereof
shall also be given to the following:
KEVIN T. FOGERTY, ATTORNEY
1620 RED POND ROAD, SUITE 102
ALLENTOWN, PA 18104
30. WAIVER OF RIGHTS: No failure of Landlord to exercise any power given
Landlord hereunder, or to insist upon strict compliance by Tenant of his
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof.
31. TIME OF ESSENCE: Time is of the essence of this Lease.
32. DEFINITIONS: "Landlord", as used in this Lease, shall include first party,
his heirs, representatives, assigns and successors in title to the Premises.
"Tenant" shall include second party, his heirs and representatives, and if this
Lease shall be validly assigned or sublet, shall include also Tenant's assignees
or sublessees, as to the Premises covered by such assignment or sublease.
"Agent" shall include third party, his successors, assigns, heirs and
representatives. "Landlord", "Tenant", and "Agent" include male and female,
singular and plural, corporation, partnership or individual, as may fit the
particular parties.
33. LATE RENTAL PAYMENTS: Any rental payments received after the 10th day of
each month will accrue a five percent (5%) late charge. Said late fee will be
divided equally between Landlord and Agent.
34. QUIET POSSESSION: Landlord covenants that Tenant, upon performing and
observing the covenants to be observed and performed by Tenant under this lease,
shall peaceably hold, occupy and enjoy the Premises during the term of this
lease without interference by Landlord or by any other person claiming by,
through and under Landlord.
35. WAIVER OF LANDLORD'S LIEN: Landlord hereby waives its landlord's lien
against any of the personal property of Tenant located on the Premises.
Furthermore, Landlord agrees to promptly execute any such waiver of lien in a
form attached hereto as Exhibit A as reasonably requested by any of Tenant's
lenders or financiers.
-10-
<PAGE>
36. WAIVER OF SUBROGATION: Landlord and Tenant hereby release the other from any
and all liability or responsibility to the other or anyone claiming through or
under them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any extended coverage or supplementary contract casualties,
even if such fire or other casualties shall have been caused by default or
negligence of the other party, or anyone for whom such party may be responsible,
provided, however, that this release shall be applicable and enforced and effect
only with respect to loss or damage fully covered by insurance and occurring
during such time as the releasor's insurance policy shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recovery
thereunder.
37. CONDITION ON PREMISES: Landlord accepts this lease of the Premises and the
Premises as is and further agrees that, in executing this lease, Tenant is
governed by its own inspection of the Premises and its own judgment of their
desirability for its purposes, and has not been governed or influenced by any
representation of Landlord as to the condition or character of the Premises.
38. APPLICABLE LAW: This lease and the provisions hereof shall be governed by
Tennessee law.
39. ENTIRE AGREEMENT: This Lease contains the entire agreement of the parties
hereto and no representations, inducements, promises or agreements, oral or
otherwise, between the parties, not embodied herein, shall be of any force or
effect.
40. GUARANTY: Guarantor hereby guarantees the payment of all amounts due to be
paid by Tenant hereunder and the performance of all obligations to be performed
by Tenant hereunder provided, however, that in the event both of the hereafter
specified conditions are then satisfied, said guaranty and all requirements and
agreements of Guarantor herein shall cease and terminate thirty-six (36) months
from the date hereof ("Termination Date"). Otherwise, said guaranty shall remain
in effect. Said conditions are as follows:
(a) All payments due from or by Tenant hereunder prior to the Termination Date
have been made on a timely basis on or before the same become delinquent; and
(b) No uncured Event of Default, as to which Landlord has provided Tenant with
written notice, is existing at the conclusion of the third year of the initial
five-year term.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, in triplicate, the date and year first above written.
LANDLORD: KNOXVILLE INDUSTRIAL
GROUP, LTD.
WITNESS:
/s/ /s/
- ------------------------------------ By:-------------------------
General Partner
TENANT: BETHLEHEM ADVANCED
MATERIALS CORPORATION
WITNESS:
/s/ /s/
- ------------------------------------ By:------------------------------
Printed Name:--------------------
Title:---------------------------
AGENT: THE STANFIELD YORK
COMPANY
WITNESS:
/s/ /s/
- ------------------------------------ By:------------------------------
Printed Name:--------------------
Title:---------------------------
GUARANTOR: THE BETHLEHEM
CORPORATION
WITNESS:
/s/ /s/
- ------------------------------------ By:------------------------------
Printed Name:--------------------
Title:---------------------------
-12-
CERTIFIED PUBLIC ACCOUNTANTS
293 EISENHOWER PARKWAY, SUITE 290
LIVINGSTON, NEW JERSEY 07039-1711
201-994-9494
FAX: 201-994-1571
================================================================================
Bernard Sobel, CPA SOBEL & CO.,LLC
Kenneth G. Hydock, CPA, J.D.
Michael LaForge, CPA
Alan D. Sobel, CPA
Harold R. Sobel, CPA
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated August 18, 1995 relating
to the consolidated financial statements of The Bethlehem Corporation and
Subsidiaries, which appears in such Prospectus. We also consent to the
references to us under the headings "Experts" in such Prospectus.
SOBEL & CO., LLC
----------------
SOBEL & CO., LLC
Certified Public Accountants
July 11, 1996
THE BETHLEHEM CORPORATION
SUBSCRIPTION CERTIFICATE NO.
CUSIP NO. 087257 11 9
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE
COMPANY'S PROSPECTUS DATED _________, 1996 (THE "PROSPECTUS") AND ARE
INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE
AVAILABLE UPON REQUEST FROM THE SUBSCRIPTION AGENT OR THE
INFORMATION AGENT.
THIS CERTIFICATE OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE SUBSCRIPTION/INFORMATION AGENT WITH PAYMENT IN FULL BY 5:00
P.M., NEW YORK CITY TIME, ON ________, 1996 (THE "EXPIRATION DATE").
The Rights represented by this subscription certificate may be exercised by duly
completing Form 1; and may be transferred, assigned, exercised or sold through a
bank or broker by duly completing Form 2; and may be sold through the
Subscription Agent by duly completing Form 3. Rights holders are advised to
review the Prospectus and instructions, copies of which are available from the
Subscription Agent and the Information Agreement before exercising or selling
their Rights. IMPORTANT: Complete appropriate FORM and, if applicable, delivery
instructions, and SIGN on reverse side.
SUBSCRIPTION PRICE $[ ] PER SHARE RIGHTS TO PURCHASE COMMON SHARES
OF THE BETHLEHEM CORPORATION
[Name and Address of Registered Holder]
The registered owner whose name is inscribed hereon, or assigns, is
entitled to subscribe for shares of Common Stock upon the terms and subject to
the conditions set forth in the Prospectus and instructions relating thereto.
By ______________________________ By ______________________________________
Alan Silverstein Antoinette L. Martin
President Vice President and
Chief Financial Officer
THIS SUBSCRIPTION CERTIFICATE IS TRANSFERABLE AND MAY BE COMBINED OR
DIVIDED (BUT ONLY INTO SUBSCRIPTION CERTIFICATES EVIDENCING A WHOLE
NUMBER OF RIGHTS) AT THE OFFICE OF THE SUBSCRIPTION AGENT.
RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE OR
TRANSFER LESS THAN ALL OF THE RIGHTS EVIDENCED HEREBY, THEY MAY NOT
RECEIVE A NEW SUBSCRIPTION CERTIFICATE IN SUFFICIENT TIME TO EXERCISE
THE REMAINING RIGHTS EVIDENCED THEREBY.
<PAGE>
FORM 1--EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably
exercises one or more Rights to subscribe for shares of Common Stock, as
indicated below, on the terms and subject to the conditions specified in the
Prospectus, receipt of which is hereby acknowledged.
(a) Number of shares subscribed for pursuant to the Basic Subscription
Privilege (one whole Right needed to subscribe for each full share): __________
(b) Number of shares subscribed for pursuant to the Oversubscription
Privilege: __________
(c) Total Subscription Price (total number of shares subscribed
for--pursuant to both the Basic Subscription Privilege and the Oversubscription
Privilege--times the Subscription Price of $[ ]): $___________ (1)
METHOD OF PAYMENT (CHECK ONE)
/ / CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO [ ]
/ / WIRE TRANSFER DIRECTED TO [ ] ABA NO. [ ] (MARKED: "THE BETHLEHEM
CORPORATION SUBSCRIPTION").
(d) If the number of Rights being exercised pursuant to the Basic
Subscription Privilege is less than all of the Rights represented by the
Subscription Certificate (check only one):
/ / DELIVER TO ME A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING
RIGHTS TO WHICH I AM ENTITLED.
/ / DELIVER A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING RIGHTS IN
ACCORDANCE WITH MY FORM 2 INSTRUCTIONS (which include any required
signature guarantees).
/ / SELL THE REMAINING UNEXERCISED RIGHTS IN ACCORDANCE WITH MY FORM 3
INSTRUCTIONS.
/ / CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)
Window Ticket number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution that Guaranteed Delivery
- ----------
(1) If the amount enclosed or transmitted is not sufficient to pay the
Subscription Price for all shares that are stated to be subscribed for, or
if the number of shares being subscribed for is not
-2-
<PAGE>
specified, the number of shares subscribed for will be assumed to be the
maximum number that could be subscribed for upon payment of such amount.
If the number of shares to be subscribed for pursuant to the
Oversubscription Privilege is not specified and the amount enclosed or
transmitted exceeds the Subscription Price for all shares represented by
this Subscription Certificate (the "Subscription Excess"), the person
subscribing pursuant hereto shall be deemed to have exercised the
Oversubscription Privilege to purchase, to the extent available, that
number of whole shares of Common Stock equal to the quotient obtained by
dividing the Subscription Excess by $[ ]. Any amount remaining after such
division shall be returned to the subscriber.
FORM 2--TO TRANSFER YOUR SUBSCRIPTION CERTIFICATE OR SOME OR ALL OF
YOUR RIGHTS OR TO EXERCISE OR SELL RIGHTS THROUGH YOUR BANK OR BROKER:
For value received, __________ Rights represented by this Subscription
Certificate are hereby assigned to (please print name and address and Social
Security No. of transferee in full):
Name____________________________________________
Address__________________________________________
_________________________________________________
Social Security Number_____________________________
/ / FORM 3--CHECK HERE TO SELL YOUR UNEXERCISED RIGHTS THROUGH THE SUBSCRIPTION
AGENT: Check box if the undersigned hereby authorizes the Subscription
Agent to sell any Rights represented by this Subscription Certificate but
not exercised hereby and to deliver to the undersigned a check for the net
proceeds.
FORM 4--DELIVERY INSTRUCTIONS: Name and/or address for mailing any stock
certificates, new Subscription Certificate or cash payment if other than shown
on the reverse hereof:
Name____________________________________________
Address__________________________________________
_________________________________________________
IMPORTANT: RIGHTS HOLDER SIGN HERE AND, IF RIGHTS ARE BEING SOLD OR
EXERCISED, COMPLETE SUBSTITUTE FORM W-9
________________________________
_________________________________
(Signature(s) of Holder(s))
-3-
<PAGE>
Dated _____________________________, 1996
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on this
Subscription Certificate. If signature is by trustee(s), executor(s),
administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a
corporation or another acting in a fiduciary or representative capacity, please
provide the following information. See Instructions.)
Name(s)_______________________________
____________________________________
(Please Print)
Capacity________________________ Address____________________________________
(Including Zip Code)
Area Code and
Telephone Number
(Home)
(Business)
Tax Identification or
Social Security No.
(Complete Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
Note: See Section 5(c) of Instructions
Authorized Signature Name
Title Name of Firm
Address
Area Code and Telephone Number
Dated:
-4-
<PAGE>
INSTRUCTIONS AS TO USE OF THE BETHLEHEM CORPORATION
SUBSCRIPTION CERTIFICATES
--------------------
CONSULT THE SUBSCRIPTION AGENT, THE INFORMATION AGENT, YOUR BANK, ATTORNEY
OR BROKER AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by The Bethlehem Corporation, a Pennsylvania corporation (the
"Company"), to the holders of record of its Common Stock, no par value (the
"Common Stock"), as described in the Company's Prospectus dated __________, 1996
(the "Prospectus"). Holders of record of Common Stock at the close of business
on __________, 1996 (the "Record Date") are receiving seven transferable
subscription rights (the "Rights") for every 10 shares of Common Stock held by
them on the Record Date (fractions of Rights are not being issued). An aggregate
of [1,356,964] Rights exercisable to purchase an aggregate of [1,356,964] shares
of Common Stock (the "Underlying Shares") are being distributed in connection
with the Rights Offering. Each Right is exercisable, upon payment of $[ ] in
cash (the "Subscription Price"), to purchase one share of Common Stock (the
"Basic Subscription Privilege"). In addition, subject to the allocation
described below, each Right also carries the right to subscribe at the
Subscription Price for additional shares of Common Stock available as a result
of unexercised Rights, if any (the "Oversubscription Privilege") up to the
amount offered by the Prospectus. The Company, in its sole discretion, may
determine to waive payment for such excess number of Underlying Shares until
after the Expiration Date and after all prorations and adjustments contemplated
by the terms of the Right Offering have been effected. Underlying Shares will be
available for purchase pursuant to the Oversubscription Privilege only to the
extent that all the Underlying Shares are not subscribed for through the
exercise of the Basic Subscription Privilege by the Expiration Date. If the
Underlying Shares so available (the "Excess Shares") are not sufficient to
satisfy all subscriptions pursuant to the Oversubscription Privilege, the
available Excess Shares will be allocated pro rata (subject to the elimination
of fractional shares) among the holders of Rights who exercise the
Oversubscription Privilege, in proportion, not to the number of shares requested
pursuant to the Oversubscription Privilege, but to the number of shares each
beneficial holder has purchased pursuant to the Basic Subscription Privilege;
provided, however, that if such pro rata allocation results in any holder being
allocated a greater number of Excess Shares than such holder subscribed for
pursuant to the exercise of such holder's Oversubscription Privilege, then such
holder will be allocated only such number of Excess Shares as such holder
subscribed for and the remaining Excess Shares will be allocated among all other
holders exercising the Oversubscription Privilege. See "The Rights Offering-
Subscription Privileges" in the Prospectus.
No fractional Rights or cash in lieu thereof will be issued or paid. The
number of Rights distributed by the Company has been rounded up to the nearest
whole number in order to avoid issuing fractional Rights.
The Rights will expire at 5:00 p.m., New York City time, on the Expiration
Date. The Rights are expected to be quoted on the AMEX under the symbol
"BETR."
<PAGE>
The number of Rights to which you are entitled is printed on the face of
your subscription certificate. You should indicate your wishes with regard to
the exercise or sale of your Rights by completing the appropriate form or forms
on your subscription certificate and returning the certificate to the
Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATES MUST BE RECEIVED BY THE SUBSCRIPTION AGENT,
OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION
CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE,
INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. ONCE A
HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE AND/OR THE
OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
1. Subscription Privilege.
To exercise Rights, complete Form 1 and send your properly completed and
executed subscription certificate, together with payment in full of the
Subscription Price for each Underlying Share subscribed for pursuant to the
Basic Subscription Privilege and the Oversubscription Privilege, to the
Subscription Agent. The Company, in its sole discretion, may determine to waive
payment for such excess number of Underlying Shares until after the Expiration
Date and after all prorations and adjustments contemplated by the terms of the
Rights Offering have been effected. All payments must be made in U.S. dollars
(a) by check or bank draft drawn upon a U.S. bank or postal, telegraphic or
express money order payable to [The American Stock Transfer Trust Company, as
Subscription Agent,] or (b) by wire transfer of funds to the account maintained
by the Subscription Agent for such purpose at [ ], [ ] (referenced: "The
Bethlehem Corporation Subscription"). Payments will be deemed to have been
received by the Subscription Agent only upon (i) the clearance of any
uncertified check, (ii) the receipt by the Subscription Agent of any certified
check or bank draft drawn upon a U.S. bank or any postal, telegraphic or express
money order or (iii) the receipt of good funds in the Subscription Agent's
account designated above. If paying by uncertified personal check, please note
that the funds to which such check relates may take five business days or more
to clear. Accordingly, holders of Rights who wish to pay the Subscription Price
by means of uncertified personal check are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such payment is received and
clears by such date and are urged to consider payment by means of certified or
cashier's check, money order or wire transfer of funds. You may also transfer
your subscription certificate to your bank or broker in accordance with the
procedures specified in Section 3(a) below, make arrangements for the delivery
of funds on your behalf and request such bank or broker to exercise the
subscription certificate on your behalf. Alternatively, you may cause a written
guarantee substantially in the form of Exhibit A to these instructions (the
"Notice of Guaranteed Delivery") from a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or from a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution"), to be received by the Subscription Agent at or prior to the
Expiration Date together with payment in full of the applicable Subscription
Price. Such Notice of Guaranteed Delivery must state your name, the number of
Rights represented by your subscription certificate and the number of Rights
being exercised pursuant to the Basic Subscription Privilege and the number of
Underlying Shares, if any, being subscribed for pursuant to the
-2-
<PAGE>
Oversubscription Privilege, and will guarantee the delivery to the Subscription
Agent of your properly completed and executed subscription certificates within
three AMEX trading days following the date of the Notice of Guaranteed Delivery.
If this procedure is followed, your subscription certificates must be received
by the Subscription Agent within three AMEX trading days of the Notice of
Guaranteed Delivery. Additional copies of the Notice of Guaranteed Delivery may
be obtained upon request from the Subscription Agent as the Information Agent at
the address, or by calling the telephone number, indicated below.
Banks, brokers and other nominee holders of Rights who exercise the Basic
Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company (by delivery to the Subscription Agent of a Nominee Holder
Certification substantially in the form available from the Subscription Agent),
the aggregate number of Rights that have been exercised, and the number of
Underlying Shares that are being subscribed for pursuant to the Oversubscription
Privilege, by each beneficial owner of Rights (including such nominee itself) on
whose behalf such nominee holder is acting. If more Excess Shares are subscribed
for pursuant to the Oversubscription Privilege than are available for sale,
Excess Shares will be allocated, as described above, among beneficial owners
exercising the Oversubscription Privilege in proportion to such owners' exercise
of Rights pursuant to the Basic Subscription Privilege. The address, telephone
number and telecopier number of the Subscription Agent and the Information Agent
are as follows:
Subscription Agreement Information Agreement
- ---------------------- ---------------------
The American Stock Transfer & Trust Company Morrow & Co.
40 Wall Street 909 Third Avenue
New York, New York 10005 New York, New York 10022
Telephone: (800) 937-5449 Telephone: (212) 754-8000
If you exercise less than all of the Rights evidenced by your subscription
certificate by so indicating in Form 1 of your subscription certificate, the
Subscription Agent either (i) will issue to you a new subscription certificate
evidencing the unexercised Rights, (ii) if you so indicate in Form 2 of your
subscription certificate, will transfer the unexercised Rights in accordance
with your instructions or (iii) if you so indicate in Form 3 of your
subscription certificate, will endeavor to sell such unexercised Rights for you.
However, if you choose to have a new subscription certificate sent to you or to
a transferee, you or such transferee may not receive any such new subscription
certificate in sufficient time to permit sale or exercise of the Rights
evidenced thereby. If you have not indicated the number of Rights being
exercised, or if the amount you have forwarded is not sufficient (subject to the
second sentence of Section 1 above) to purchase the number of shares subscribed
for, you will be deemed to have exercised the Basic Subscription Privilege with
respect to the maximum number of whole Rights that may be exercised for the
Subscription Price payment delivered by you, and to the extent that the
Subscription Price payment delivered by you exceeds the product of the
Subscription Price multiplied by the number of Rights evidenced by the
subscription certificates delivered by you (such excess being the "Subscription
Excess"), you will be deemed to have exercised your Oversubscription Privilege
to purchase, to the extent available,
-3-
<PAGE>
that number of whole shares of Common Stock equal to the quotient obtained by
dividing the Subscription Excess by the Subscription Price.
2. Delivery of Stock Certificates, Etc.
The following deliveries and payments will be made to the address shown on
the face of your subscription certificate unless you provide instructions to the
contrary in Form 4.
(a) Basic Subscription Privilege. As soon as practicable after the valid
exercise of Rights, the Subscription Agent will mail to each exercising Rights
holder certificates representing shares of Common Stock purchased pursuant to
the Basic Subscription Privilege.
(b) Oversubscription Privilege. As soon as practicable after the Expiration
Date and after all prorations and adjustments contemplated by the terms of the
Rights Offering have been effected, the Subscription Agent will mail to each
Rights holder who validly exercises the Oversubscription Privilege the number of
shares allocated to such Rights holder pursuant to the Oversubscription
Privilege. See "The Rights Offering-Subscription Privileges-Oversubscription
Privilege" in the Prospectus.
(c) Cash Payments. As soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected, the Subscription Agent will mail to each Rights
holder who exercises the Oversubscription Privilege any excess funds (without
interest thereon) received in payment of the Exercise Price for Excess Shares
that are subscribed for by such Rights holder but not allocated to such Rights
holder pursuant to the Oversubscription Privilege.
Promptly following any sale of the Rights through the Subscription Agent,
the Subscription Agent will mail to the holder of such Rights a check for any
Rights sold, less applicable commissions, taxes and other charges.
3. To Sell or Transfer Rights.
(a) Sale of Rights Through a Bank or Broker. To sell all Rights evidenced
by a subscription certificate through your bank or broker, so indicate in Form 2
and deliver your properly completed and executed subscription certificate to
your bank or broker. If Form 2 is completed without designating a transferee,
the Subscription Agent may thereafter treat the bearer of the subscription
certificate as the absolute owner of all of the Rights evidenced by such
subscription certificate for all purposes, and the Subscription Agent shall not
be affected by any notice to the contrary. Because your bank or broker cannot
issue subscription certificates, if you wish to sell less than all of the Rights
evidenced by a subscription certificate, either you or your bank or broker must
instruct the Subscription Agent as to the action to be taken with respect to the
Rights not sold, or you or your bank or broker must first have your subscription
certificate divided into subscription certificates of appropriate denominations
by following the instructions in Section 4 of these instructions. The
subscription certificates evidencing the number of Rights you intend to sell can
then be transferred by your bank or broker in accordance with the instructions
in this Section 3(a).
(b) Transfer of Rights to a Designated Transferee. To transfer all of your
Rights to a transferee other than a bank or broker, you must complete Form 2 in
its entirety, execute the subscription certificate and have your signature
guaranteed by an Eligible Institution. A subscription certificate that has been
properly transferred in its entirety may be exercised by a new holder without
having a new subscription
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<PAGE>
certificate issued. In order to exercise, or otherwise take action with respect
to, such a transferred subscription certificate, the new holder should deliver
the subscription certificate, together with payment of the applicable
Subscription Price (with respect to the exercise of both the Basic Subscription
Privilege and the Oversubscription Privilege) and complete separate instructions
signed by the new holder, to the Subscription Agent in ample time to permit the
Subscription Agent to take the desired action. Because only the Subscription
Agent can issue subscription certificates, if you wish to transfer less than all
of the Rights evidenced by your subscription certificate to a designated
transferee, you must instruct the Subscription Agent as to the action to be
taken with respect to the Rights not sold or transferred or you must divide your
subscription certificate into subscription certificates of appropriate smaller
denominations by following the instructions in Section 4 below. The subscription
certificate evidencing the number of Rights you intend to transfer can then be
transferred by following the instructions in this Section 3(b).
(c) Sale of Rights Through Subscription Agent. To sell some or all of your
Rights through the Subscription Agent, you must check the box in Form 3 and
deliver the subscription certificate to the Subscription Agent. Your
subscription certificate should be delivered to the Subscription Agent in ample
time for it to be sold and exercised, but in no event later than _____ a.m., New
York City time, on _______, 1996. The Subscription Agent's obligation to execute
orders is subject to its ability to find buyers. If you wish to sell less than
all of your Rights, you or your bank or broker must instruct the Subscription
Agent as to the action to be taken with respect to the Rights not sold. Promptly
following any sale of your Rights through the Subscription Agent, the
Subscription Agent will send you a check for the net proceeds of such sale as
described in the Prospectus. If you wish to sell Rights through the Subscription
Agent, you should also complete the Substitute Form W-9 referred to in Section 8
below.
4. To Have a Subscription Certificate Divided into Smaller Denominations.
To have a subscription certificate divided into smaller denominations, send
your subscription certificate, together with complete separate instructions
(including specification of the denominations into which you wish your Rights to
be divided) signed by you, to the Subscription Agent, allowing a sufficient
amount of time for new subscription certificates to be issued and returned so
that they can be used prior to the Expiration Date. Alternatively, you may ask a
bank or broker to effect such actions on your behalf. Your signature must be
guaranteed by an Eligible Institution if any of the new subscription
certificates are to be issued in a name other than that in which the old
subscription certificate was issued. Subscription certificates may not be
divided into fractional Rights, and any instruction to do so will be rejected.
As a result of delays in the mail, the time of the transmittal, the necessary
proceeding time and other factors, you or your transferee may not receive such
new subscription certificates in time to enable the Rights holder to complete a
sale or exercise by the Expiration Date. Neither the Company nor the
Subscription Agent will be liable to either a transferor or transferee for any
such delays.
5. Execution.
(a) Execution by Registered Holder. The signature on the subscription
certificate must correspond with the name of the registered holder exactly as it
appears on the face of the subscription certificate without any alteration or
change whatsoever. Persons who sign the subscription certificate in a
representative or other fiduciary capacity must indicate their capacity when
signing and, unless waived by the Subscription Agent is its sole and absolute
discretion, must present to the Subscription Agent satisfactory evidence of
their authority to so act.
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<PAGE>
(b) Execution by Person Other than Registered Holder. If the subscription
certificate is executed by a person other than the holder named on the face of
the subscription certificate, proper evidence of authority of the person
executing the subscription certificate must accompany the same unless, for good
cause, the Subscription Agent dispenses with proof of authority.
(c) Signature Guarantees. Your signature must be guaranteed by an Eligible
Institution if you wish to transfer your Rights, as specified in Section 3(b)
above, to a transferee other than a bank or broker, if you wish a new
subscription certificate or certificates to be issued in a name other than that
in which the old subscription certificate was issued, as specified in Section 3
above, or if you specify special payment or delivery instructions pursuant to
Form 4.
6. Method of Delivery.
The method of delivery of subscription certificates and payment of the
Exercise Price to the Subscription Agent will be at the election and risk of the
Rights holder, but, if sent by mail, it is recommended that they be sent by
registered mail, properly insured, with return receipt requested, and that a
sufficient number of days be allowed to ensure delivery to the Subscription
Agent and the clearance of any checks sent in payment of the Exercise Price
prior to 5:00 p.m., New York City time, on the Expiration Date.
7. Special Provisions Relating to the Delivery of Rights Through The
Depository Trust Company.
In the case of holders of Rights that are held of record through The
Depository Trust Company ("DTC"), exercises of the Basic Subscription Privilege
(but not the Oversubscription Privilege) may be effected by instructing DTC to
transfer Rights (such Rights being "DTC Exercised Rights") from the DTC account
of such holder to the DTC account of the Subscription Agent, together with
payment of the Subscription Price for each Underlying Share subscribed for
pursuant to the Basic Subscription Privilege. The Oversubscription Privilege in
respect of DTC Exercised Rights may not be exercised through DTC. The holder of
a DTC Exercised Right may exercise the Oversubscription Privilege in respect of
such DTC Exercised Right by properly executing and delivering to the
Subscription Agent at or prior to 5:00 p.m., New York City time, on the
Expiration Date, a DTC Participant Oversubscription Exercise Form, in the form
available from the Subscription Agent, or a Notice of Guaranteed Delivery,
together with payment of the appropriate Subscription Price for the number of
Underlying Shares for which the Oversubscription Privilege is to be exercised.
The Company, in its sole discretion, may determine to waive payment for such
excess number of Underlying Shares until after the Expiration Date and after all
prorations and adjustments contemplated by the terms of the Rights Offering have
been effected.
If a Notice of Guaranteed Delivery relates to Rights with respect to which
exercise of the Basic Subscription Privilege will be made through DTC and such
Notice of Guaranteed Delivery also relates to the exercise of the
Oversubscription Privilege, a DTC Participant Oversubscription Exercise Form
must also be received by the Subscription Agent in respect of such exercise of
the Oversubscription Privilege within three AMEX trading days of the Notice of
Guaranteed Delivery.
8. Substitute Form W-9.
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<PAGE>
Each Rights holder who elects either to exercise Rights or to have the
Subscription Agent endeavor to sell such holder's Rights should provide the
Subscription Agent with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is included herewith. Additional copies of Substitute
Form W-9 may be obtained upon request from the Subscription Agent at the
address, or by calling the telephone number, indicated above. Failure to provide
the information on the form may subject such holder to a $50.00 penalty and to
__% federal income tax withholding with respect to (i) dividends that may be
paid by the Company on shares of Common Stock purchased upon the exercise of
Rights (for those holders exercising Rights) or (ii) funds to be remitted to
Rights holders in respect of Rights sold by the Subscription Agent (for those
holders electing to have the Subscription Agent sell their Rights).
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<PAGE>
EXHIBIT A NOTICE OF GUARANTEED DELIVERY
for
SUBSCRIPTION CERTIFICATIONS
issued by
THE BETHLEHEM CORPORATION
This form, or one substantially equivalent hereto, must be used to exercise
Rights pursuant to the Basic Subscription Privilege and the Oversubscription
Privilege pursuant to the Rights Offering described in the Prospectus dated
________, 1996 (the "Prospectus") of The Bethlehem Corporation, a Pennsylvania
corporation (the "Company"), if a holder of Rights cannot deliver the
subscription certificate(s) evidencing the Rights (the "Subscription
Certificate(s)"), to the Subscription Agent listed below (the "Subscription
Agent") at or prior to 5:00 p.m. New York City time on ________, 1996 (the
"Expiration Date"). Such form must be delivered by hand or sent by facsimile
transmission or mail to the Subscription Agent and must be received by the
Subscription Agent on or prior to the Expiration Date. See "The Rights Offering-
- -Exercise of Rights" in the Prospectus. Payment of the Subscription Price of $[
] per share for each share of the Company's Common Stock subscribed for upon
exercise of such Rights must be received by the Subscription Agent in the manner
specified in the Prospectus at or prior to 5:00 p.m. New York City time on the
Expiration Date even if the Subscription Certificate evidencing such Rights is
being delivered pursuant to the procedure for guaranteed delivery thereof.
The Subscription Agent is:
The American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (800) 937-5449
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
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<PAGE>
Gentlemen:
The undersigned hereby represents that he or she is the holder of
Subscription Certificate(s) representing ______ Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at or
before 5:00 p.m., New York City time on the Expiration Date. Upon the terms and
subject to the condition set forth in the Prospectus, receipt of which is hereby
acknowledged, the undersigned hereby elects to exercise (i) the Basic
Subscription Privilege to subscribe for one share of Common Stock per Right with
respect to each of _____ Rights represented by such Subscription Certificate and
(ii) the Oversubscription Privilege relating to each such Right, to the extent
that Excess Shares (as defined in the Prospectus) are available therefor, for an
aggregate of up to _____ Excess Shares. The undersigned understands that payment
of the Subscription Price of $[ ] per share for each Common Share subscribed for
pursuant to the Basic Subscription Privilege and Oversubscription Privilege must
be received by the Subscription Agent at or before 5:00 p.m., New York City
time, on the Expiration Date and represents that such payment, in the aggregate
amount of $ ________, either (check appropriate box):
o is delivered herewith or o was delivered separately;
in the manner set forth below (check appropriate box and complete information
relating thereto):
o wire transfer of funds
- - name of transferor institution
- - date of transfer and confirmation number (if available)
/ / uncertified check (Payment by uncertified check will not be deemed to have
been received by the Subscription Agent until such check has cleared.
Holders paying by such means are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such payment clears by such
date.)
/ / certified check
/ / bank draft (cashier's check)
/ / money order
- - name of maker
- - date and number of check, draft or money order number
- - bank on which check is drawn or issuer of money order
- ------------------------------------
Signature(s) and Name(s)
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<PAGE>
Address
Area Code and Tel. No(s).
Please Type or Print
Subscription Certificate
No(s). (if available)
GUARANTEE OF DELIVERY
(Not to be used for Subscription Certificate signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees that the undersigned will deliver to the Subscription Agent
the certificates representing the Rights being exercised hereby, with any
required signature guarantees and any other required documents, all within three
AMEX trading days after the date hereof.
Dated: , 1996
(Name of Firm)
(Address)
(Area Code and Telephone Number)
(Authorized Signature, Name and Title)
The institution which completes this form must communicate the
guarantee to the Subscription Agent and must deliver the Subscription
Certificate(s) to the Subscription Agent within the time period shown herein.
Failure to do so could result in a financial loss to such institution.
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<PAGE>
EXHIBIT B
IMPORTANT TAX INFORMATION
Under the federal income tax law, (i) dividend payments that may be
made by the Company on shares of Common Stock issued upon the exercise of
Rights, and (ii) payments that may be remitted by the Subscription Agent to
Rights holders in respect of Rights sold on such holders' behalf by the
Subscription Agent, may be subject to backup withholding. Generally, such
payments will be subject to backup withholding unless (i) the holder is exempt
from backup withholding or (ii) the holder, in the case of backup withholding of
payments remitted in respect to Rights sold, furnishes the payor with his
correct tax identification number and certifies that the number provided is
correct and, in the case of backup withholding on dividend payments, the holder
further certifies that such holder is not subject to backup withholding due to
prior underreporting of interest or dividend income. Each Rights holder who
either exercises Rights or requests the Subscription Agent to sell Rights and
wishes to avoid backup withholding should provide the Subscription Agent (as the
Company's agent, in respect of exercised Rights, and as payer with respect to
Rights sold by the Subscription Agent) with such Rights holder's correct
taxpayer identification number (or with a certification that such Rights holder
is awaiting a taxpayer identification number) and with a certification that such
Rights holder is not subject to backup withholding by completing Substitute Form
W-9 below.
Exempt Rights holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In general, in order for a foreign individual to qualify
as an exempt recipient, the Rights holder must submit an executed form W-8
(attached hereto). Such statements can be obtained from the Subscription Agent.
Exempt Rights holders, while not required to file, should file Substitute Form
W-9 to avoid possible erroneous backup withholding. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company or the Subscription Agent,
as the case may be, will be required to withhold __ percent of any such payments
made to the Rights holder. Backup withholding is not an additional tax. Rather,
the tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained.
Purpose of Substitute Form W-9
To prevent backup withholding on payments remitted by the Subscription
Agent with respect to Rights sold, the Rights holder is required to notify the
Subscription Agent of his correct taxpayer identification number by completing
the form below certifying that the taxpayer identification number provided on
Substitute Form W-9 is correct (or that such Rights holder is awaiting a
taxpayer identification number). To prevent backup withholding on dividend
payments, the Rights holder must, in addition, certify on Substitute Form W-9
that he is not subject to backup withholding due to prior underreporting of
interest or dividend income.
What Number to Give the Subscription Agent
The Rights holder is required to give the Subscription Agent the
taxpayer identification number of the record owner of the Rights. If such record
owner is an individual, the taxpayer identification number is his social
security number. If the Rights are in more than one name or are
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<PAGE>
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidelines on which number to report. If the Subscription Agent is
not provided with the correct taxpayer identification number in connection with
such payments, the Rights holder may be subject to a $50 penalty imposed by the
Internal Revenue Service.
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<PAGE>
Form W-8(1)
(Rev. November 1992)
Department of the Treasury
Internal Revenue Service
Please print or type
Name of owner (if joint account, also give joint owner's name.) (See Specific
Instructions.)
U.S. taxpayer identification number (if any)
Permanent address (See Specific Instructions.) (Include apt. or suite no.)
City, province or state, postal code, and country
Current mailing address, if different address (include apt. or suite no., or
P.O. box if mail is not delivered to street address.)
City, town or post office, state, and ZIP code (if foreign address, enter city,
province or state, postal code, and country.)
List account information here (Optional, see Specific Instructions.)
Account Account Account Account
type number type
Notice to Change in Status. - To notify the payer, mortgage interest recipient,
broker, or barter exchange that you no longer qualify for exemption, check
here................................................../ /
If you check this box, reporting will begin on the account(s) listed.
PLEASE SIGN HERE
Certification. - (Check applicable box(es)). Under penalties of perjury, I
certify that:
/ / For INTEREST PAYMENTS, I am not a U.S. citizen or resident (or I am
filing for a foreign corporation, partnership, estate, or trust).
/ / For DIVIDENDS, I am not a U.S. citizen or resident (or I am filing for
a foreign corporation, partnership, estate, or trust).
/ / For BROKER TRANSACTIONS or BARTER EXCHANGES, I am an exempt foreign
person as defined in the instructions below.
Signature Date
- ----------------
(1) Please see IRS Form W-8 for the full text of the Instructions.
<PAGE>
Form W-9(1)
(Rev. March 1994)
(Department of the Treasury Internal Revenue Service)
REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER AND CERTIFICATION
Please print or type
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions on page 2 if your name
has changed.)
Business name (Sole proprietors see instructions on page 2.)
Please check appropriate box:
/ / Individual/Sole proprietor / / Corporation / / Partnership / / Other
__________
Address (number, street, and apt. or suite no.)
Requester's name and address (optional)
City, state, and ZIP code
PART I TAXPAYER IDENTIFICATION NUMBER (TIN)
List account number(s) here (optional)
Enter your TIN in the appropriate box. For individuals, this is your social
security number (SSN). For sole proprietors, see the instructions on page 2. For
other entities, it is your employer identification number (EIN). If you do not
have a number, see How To Get a TIN below.
Social Security Number
OR
Employer identification number
Note: If the account is in more than one name, see the chart on page 2 for
guidelines on whose number to enter.
PART II FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE PART II
INSTRUCTIONS ON PAGE 2)
PART III CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
<PAGE>
Certification Instructions. - You must cross item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of undergoing interest or dividends on your tax return. For real estate
transactions, item 2 does not apply. For mortgage interest paid, the acquisition
or abandonment of secured property, cancellation of debt, contributions to an
individual retirement arrangement (IRA), and generally payments other than
interest and dividends, you are not required to sign the Certification, but you
must provide your correct TIN. (Also see Part III instructions on page 2.)
Signature Date
- ----------------
(1) Please see IRS Form W-9 for the full text of the Instructions.
